[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
                            POST-ACUTE CARE

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 16, 2005

                               __________

                           Serial No. 109-30

                               __________

         Printed for the use of the Committee on Ways and Means




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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

E. CLAY SHAW, JR., Florida           CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut        FORTNEY PETE STARK, California
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
ROB PORTMAN, Ohio                    WILLIAM J. JEFFERSON, Louisiana
PHIL ENGLISH, Pennsylvania           JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona               XAVIER BECERRA, California
JERRY WELLER, Illinois               LLOYD DOGGETT, Texas
KENNY C. HULSHOF, Missouri           EARL POMEROY, North Dakota
SCOTT MCINNIS, Colorado              STEPHANIE TUBBS JONES, Ohio
RON LEWIS, Kentucky                  MIKE THOMPSON, California
MARK FOLEY, Florida                  JOHN B. LARSON, Connecticut
KEVIN BRADY, Texas                   RAHM EMANUEL, Illinois
THOMAS M. REYNOLDS, New York
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON HEALTH

                NANCY L. JOHNSON, Connecticut, Chairman

JIM MCCRERY, Louisiana               FORTNEY PETE STARK, California
SAM JOHNSON, Texas                   JOHN LEWIS, Georgia
DAVE CAMP, Michigan                  LLOYD DOGGETT, Texas
JIM RAMSTAD, Minnesota               MIKE THOMPSON, California
PHIL ENGLISH, Pennsylvania           RAHM EMANUEL, Illinois
J.D. HAYWORTH, Arizona
KENNY C. HULSHOF, Missouri

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
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unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
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                            C O N T E N T S

                               __________

                                                                   Page

Advisory of June 9, 2005, announcing the hearing.................     2

                               WITNESSES

Center for Medicare Management, Centers for Medicare & Medicaid 
  Services, Herb Kuhn, Director..................................    22
Medicare Payment Advisory Commission, Glenn M. Hackbarth, 
  Chairman.......................................................     6
U.S. Government Accountability Office, Marjorie Kanof, M.D., 
  Managing Director..............................................    14

                                 ______

Acute Long Term Hospital Association, Select Medical Corporation, 
  Pat Rice.......................................................    61
American Health Care Association, SunBridge Healthcare, Mary 
  Ousley.........................................................    41
Center For Medicare Advocacy, Toby S. Edelman....................    69
National Association of Long Term Hospitals, John Votto..........    55
National Rehabilitation Hospital, Gerben DeJong..................    48
Visiting Nurse Associations of America, Visiting Nurse Service of 
  New York, Carol Raphael........................................    44

                       SUBMISSIONS FOR THE RECORD

American Medical Rehabilitation Providers Association, Felice 
  Loverso, statement.............................................    82
American Occupational Therapy Association, Bethesda, MD, 
  statement......................................................    89
Next Wave, Albany, NY, John D. Shaw, statement...................    90


                            POST-ACUTE CARE

                              ----------                              


                        THURSDAY, JUNE 16, 2005

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 1:08 p.m., in 
room 1100, Longworth House Office Building, Hon. Nancy L. 
Johnson (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
June 09, 2005
HL-6

              Johnson Announces Hearing on Post-Acute Care

    Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on 
Health of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on post-acute care. The hearing will 
take place on Thursday, June 16, 2005, in the main Committee hearing 
room, 1100 Longworth House Office Building, beginning at 1:00 p.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    Medicare currently pays for post-acute care in four separate 
settings: long term acute care hospitals (LTCHs), inpatient 
rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), 
and in the home. Medicare is currently spending more than $30 billion 
annually in these four settings, with spending in SNFs and home health 
making up the largest portion.
      
    Medicare reimburses for these services in these settings according 
to four separate payment methodologies. In addition, each setting uses 
a different patient assessment instrument to evaluate the level of care 
a patient requires (or, in the case of LTCHs, no patient assessment 
tool at all). Each assessment instrument and payment system was 
developed separately and the payment rates and tools have evolved over 
time into separate silos of care. As a result of these separate 
systems, the current payment methods differ based on the setting in 
which a beneficiary receives care.
      
    In its June 2004 report to Congress, the Medicare Payment Advisory 
Commission examined some of the significant payment differentials that 
exist across post-acute care settings for the same or similar services. 
For example, payments for a hip fracture patient in 2004 were $44,633 
per case in an LTCH, $18,487 in an IRF, and $10,618 in a SNF. Because 
there are no common patient assessment tools or outcomes measures 
across settings, it is difficult to know whether patients are being 
treated in the most appropriate setting and whether Medicare dollars 
are being allocated appropriately.
      
    Congress sought to address this problem in the Medicare, Medicaid, 
and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, P.L. 
106-554). The BIPA required the Secretary of the U.S. Department of 
Health and Human Services to submit a report on the development of 
standard instruments for the assessment of the health and functional 
status of Medicare patients in certain settings. This report has not 
yet been received, and the hearing will examine what progress has been 
made in this area.
      
    In announcing the hearing, Chairman Johnson stated, ``The 
development of a common patient assessment tool for post-acute care 
services remains a high priority. In light of the rapid growth in 
payments in post-acute settings, the development of a common patient 
assessment tool and the creation of a more rational post-acute payment 
structure, one that is tied to the services required by the patients 
rather than the institutional setting in which patients are placed, 
should be a high priority for the Congress and the Medicare program.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on current financing for post-acute care 
services in Medicare; the services available across the various post-
acute settings; the patient assessment instruments used in each setting 
and the commonalities between them; and prospects and suggestions for 
moving ahead with a common patient assessment tool and more rational 
payment system based on beneficiary need rather than institutional 
setting.
      

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noted above.

                                 

    Chairman JOHNSON. Good afternoon, everyone. My apologies 
for starting a little bit behind schedule. I am very pleased to 
be chairing this hearing on post-acute care in the Medicare 
program. Medicare currently pays post-acute care in four 
separate settings: Long-Term Care Hospitals (LTCH); Inpatient 
Rehab Facilities (IRF); Skilled Nursing Facilities (SNF); and 
in the home through the home health benefit. Medicare is 
currently spending more than $30 billion annually in these four 
settings, with spending on SNFs and home health making up the 
largest portion. Medicare reimburses for these services, in 
these settings, according to four separate payment 
methodologies. In addition, each setting uses a different 
patient assessment instrument to evaluate the level of care a 
patient requires, or, in the case of LTCHs, no patient 
assessment tool at all. Each assessment instrument and payment 
system was developed separately, and the payment rates and 
tools have evolved over time into separate silos of care. As a 
result of these separate systems, the current payment methods 
differ based on the setting in which a beneficiary receives 
care. In its June 2004 report to Congress, the Medicare Payment 
Advisory Commission (MedPAC) examines some of the significant 
payment differentials that exist across post-acute care 
settings for the same or similar services. For example, 
payments for a hip fracture patient in 2004 were 44,633 per 
cases in an LTCH, 18,487 in an IRF, and 10,618 in an SNF. 
Because there is no common patient assessment tool or 
standardized outcome measurements across settings, it is 
difficult to know whether patients are being treated in the 
most appropriate setting and whether Medicare dollars are being 
allocated appropriately or efficiently.
    We in Congress ought to address the problem. The Medicare, 
Medicaid, SCHIP Benefits Improvement and Protection Act, BIPA, 
of 2000, (P.L. 106-554) required the Secretary of Health and 
Human Services (HHS) to submit a report on the development of 
standard instruments for the assessment of the health and 
functional status of Medicare patients in certain settings. The 
report on this instrument was due on January 1 of this year and 
has not yet been received. Today, I strongly hope that we will 
learn from the Administration what progress has been made in 
this area. I am pleased to have with us today two distinguished 
panels of witnesses to help us explore the issues facing the 
post-acute care system. On our first panel we welcome back 
Glenn Hackbarth, Chairman of MedPAC. Mr. Hackbarth will discuss 
the work that MedPAC has done recently in evaluating patient 
assessment tools used in different post acute settings, as well 
as recommended payment adjustments to post-acute care 
providers. Then we will hear from Marjorie Kanof, a managing 
director for health at the U.S. government Accountability 
Office (GAO). She will discuss GAO's recent report on patient 
criteria for IRFs. Finally on our panel we will hear from Herb 
Kuhn, director of the Centers for Medicare and Medicaid 
Services (CMS). The CMS has done some work, to this point, to 
develop a common patient assessment tool, and Mr. Kuhn will 
report on those efforts by the agency.
    Our second panel is comprised of people working in post-
acute care industries along with a beneficiary representative. 
Through this testimony we will begin to understand the range 
and diversity of services offered in the post-acute care area. 
It is my hope that the witnesses will provide us with greater 
understanding of what different settings have in common along 
with those services that make each setting unique. I am also 
hoping that they will provide us with their ideas as to how we 
can move toward a common patient assessment system and more 
rational payment structure for post acute services in Medicare. 
On this panel we will hear from Carol Raphael, President and 
Chief Executive Officer (chief executive officer) of Visiting 
Nurse Association of New York; Mary Ousley, Executive Vice 
President of Sunbridge Healthcare in Albuquerque, New Mexico; 
Dr. Gerben DeJong, a senior fellow at the National 
Rehabilitation Hospital; Dr. John Votto, President and chief 
executive officer of the Hospital of Special Care in my 
hometown of New Britain; Pat Rice, President and Chief 
Operating officer of Select Medical Corp. in Mechanicsville, 
Pennsylvania; and Toby Edelman, senior policy attorney at the 
Center for Medicare Advocacy.
    In light of the rapid growth in payments in acute care 
settings, it is critical that we carefully examine the patient 
assessment tools and payment policies in each of these settings 
to ensure that taxpayer dollars are being spent appropriately 
and that beneficiaries are receiving the services they need in 
the setting that is right for them. The development of a common 
assessment tool in the creation of a more rational post-acute 
care payment structure, one that is tied to the services 
required by the patient rather than the institutional setting 
in which the patient finds themselves, must be a high priority 
for Congress and the Medicare Program. I look forward to 
hearing from all the witnesses on this important issue. I would 
now like to turn to Mr. Lewis, who will speak for Mr. Stark.
    Mr. LEWIS. Thank you very much, Madam Chair. Madam Chair, I 
would like to thank you for having this hearing. I would like 
to welcome the Members of our two panels and thank them for 
being here today. I am pleased that we are having an oversight 
hearing on some of Medicare's basic obligations, because we 
have not done enough oversight in recent years. It is important 
to review what is happening with post acute services because of 
the amount of money being spent in this area and the number of 
patients affected. However, I can't help but note that there 
are much larger problems that we should be focusing on. Madam 
Chair, I hope that we would have oversight hearings on 
implementation of the Medicare prescription drug program. While 
one-third of hospitalized beneficiaries use post-acute care, 90 
percent of all beneficiaries use outpatient prescription drugs. 
In addition, Medicare spends more than $30 billion annually for 
post-acute care but is projected to spend almost double that in 
the first year of Part D.
    Last week several troubling stories came to light. The CMS 
sent empty envelopes to some low-income beneficiaries. There is 
not enough funding to implement the new drug program. It is 
clear that oversight is needed. I hope that we would devote 
Committee time to real oversight on Medicare Part D. Although 
it is not the most pressing issue Medicare faces, today's topic 
is important; it is very important. I hope this is the first 
small step toward creating a more rational post acute system. I 
look forward to today's testimony, and I thank each and every 
one of the panelists for being here today. Thank you, Madam 
Chair.
    Chairman JOHNSON. Thank you very much, Mr. Lewis. Welcome 
to the Members of the first panel. Mr. Hackbarth will you 
please begin.

  STATEMENT OF GLENN M. HACKBARTH, CHAIRMAN, MEDICARE PAYMENT 
                      ADVISORY COMMISSION

    Mr. HACKBARTH. Thank you, Chairman Johnson and Mr. Lewis 
and other Members of the Subcommittee. About one-third of 
Medicare beneficiaries discharged from acute hospitals receive 
post-acute care within 1 day of their discharge. That is, care 
in a SNF, home health agency, IRF, or LTCH. A little more than 
a third of that group go to SNFs, another third receive home 
health care, and a final third go to either an IRF, a LTCH, or 
a combination of post acute settings. Of course, other 
beneficiaries go to hospice to receive end-of-life care. In 
2004, Medicare spent $43 billion on post acute services plus 
hospice, which represents about 14 percent of total Medicare 
spending. MedPAC is concerned about the post-acute care 
received by Medicare beneficiaries. Let me be clear. There are 
many, many outstanding individual providers of those services. 
We fear, however, that we lack an integrated system that helps 
assure high-quality appropriate care at a reasonable cost. 
MedPAC sees five types of problems with the post-acute care 
system. First of all, we lack clear criteria on which setting 
is most appropriate for a given patient with a particular set 
of needs. This is not an easy problem to solve, especially 
given the varying and changing capabilities of different types 
of providers. Not all SNFs, for example, have the same 
capabilities. Given the wide variation and rates, which 
Chairman Johnson highlighted in her opening statement, to the 
widely different rates we pay different types of post acute 
providers, there is clearly great potential for waste, such as 
if a patient being unnecessarily sent to a high-cost type of 
institution: a LTCH or IRF, for example. On the other hand, 
there is also great potential for harm if a complex patient is 
sent to a facility that lacks the necessary capabilities.
    A second set of problems with the post acute sector is 
that, within a given sector, for example SNFs, payments may not 
be properly adjusted for the mix of patients served at a 
particular institution. This is definitely an issue, we think, 
for SNFs, and quite possibly also an issue in the home health 
Prospective Payment System (PPS) as well. A third issue is that 
we currently don't adjust any of the payments for the quality 
of care provided, which we think is an important thing to do 
across all of the Medicare payment systems.Fourth, we don't 
collect the data necessary to be able to compare performance 
across post acute settings. In some cases we don't even collect 
the data necessary to judge performance within that particular 
setting of post-acute care. Finally, in at least the case of 
home health agencies and SNFs, MedPAC believes that current 
payments are high relative to the costs incurred in treating 
Medicare patients.
    We see three broad potential strategies for improvement. 
One is to continue to refine the individual existing payment 
systems and establish criteria to guide placement of patients; 
in particular, which patients require LTCH services or IRF 
services, the most expensive facilities. A second strategy, 
which may be in addition to the first, would be to give a case 
manager responsibility for guiding the placement decision, 
coupled with performance incentives. This would be a concept 
similar to what is being piloted in the case of disease 
management. Still a third strategy would be to create a post-
acute care capitation payment whereby the dollars are bundled 
together. Unlike option two, here the party assigned 
responsibility would have risk for the utilization of services 
and not just for meeting performance standards. Now, these are 
very crude types, and there may well be other models, and there 
are certainly many variations on the basic themes. To this 
point, MedPAC has been focused on the first model, which is 
refinement of the existing individual payments systems. At 
least some of us are concerned that a rule-based approach to 
proper placement may be simultaneously both too complex and too 
crude.
    The second and third options, which involve someone 
exercising judgment on the scene by introducing human judgment, 
could help deal with decisions since often the decision is 
influenced by the capabilities of the local providers. In some 
communities it may be appropriate to send a particular patient 
to an SNF that has unusual capabilities as opposed to an IRF or 
an LTCH. Having that human judgment involved could be helpful. 
The case manager approach or the capitation approach raises a 
host of complicated issues that MedPAC hasn't begun to explore 
in detail. Whichever path we choose, MedPAC believes that we 
also need to move forward with a common assessment tool. As 
discussed in our June report, the current tools used in home 
health agencies, SNFs, and IRFs do not collect data that can be 
compared across the payment silos and the different types of 
providers. In some instances we are not even collecting the 
data that we need to judge performance within a given sector. 
Thank you very much. I look forward to your questions.
    [The prepared statement of Mr. Hackbarth follows:]

 Statement of Glenn M. Hackbarth, Chairman, Medicare Payment Advisory 
                               Commission

    Chairman Johnson, Ranking Member Stark, distinguished Subcommittee 
members. I am Glenn Hackbarth, chairman of the Medicare Payment 
Advisory Commission (MedPAC). I appreciate the opportunity to be here 
with you this afternoon to discuss post-acute care (PAC) payment issues 
in Medicare.

Introduction
    Medicare beneficiaries can seek care after a hospitalization in 
four different post-acute settings: skilled nursing facilities (SNFs), 
home health agencies (HHAs), long-term care hospitals (LTCHs), and 
inpatient rehabilitation facilities (IRFs). Many factors influence 
Medicare beneficiaries' use of these services. For example, use of home 
health and SNF services grew rapidly after the introduction of the 
inpatient prospective payment system (PPS) in 1982. That payment system 
created an incentive for hospitals to discharge patients earlier. One 
strategy for doing so was to provide in a separate setting some of the 
recuperation and rehabilitation services that may have been formerly 
provided within the hospital stay. In the ensuing years, the four 
different post-acute settings have emerged to provide those 
recuperation and rehabilitation services. (A fifth type of service, 
hospice, overlaps somewhat with post-acute services in terms of 
patients and some services, although the goal is not recovery or 
rehabilitation.)
    The overarching issue in PAC is that there are no clear and 
comprehensive criteria for which of these settings are best for 
patients with particular characteristics or needs. The recuperation and 
rehabilitation services provided are important for Medicare 
beneficiaries. Yet, these settings and their payment systems have 
developed separately over the years, and it is not clear that together 
they form an integrated whole that provides the highest quality, most 
appropriate care for beneficiaries or the best value for the Medicare 
program and the taxpayers who support it. Indeed, some parts of the 
country do not have all of these settings, yet Medicare patients are 
still receiving PAC services in those areas. A second issue is that 
within the SNF and home health settings payments are not well 
calibrated to patients and their conditions.
    The Commission maintains that in the post-acute care sector, just 
as for the other sectors of Medicare, the services provided should meet 
the needs of the beneficiaries, Medicare payments should cover the 
costs of an efficient provider of those services, and higher quality 
services should be rewarded. Currently in post-acute care, none of 
these conditions is fully satisfied. The Commission has made 
recommendations for improving the payment systems for several of these 
sectors. It has recommended:

      Reforming the PPS for SNFs because the current system 
does not pay accurately for all of its patients and encourages 
providing rehabilitation services at the expense of caring for patients 
who have medically complex conditions.
      Reexamining the home health PPS because the services now 
provided are different than those provided when the system was created 
and payments may not be accurate.
      Creating facility level criteria to better define LTCHs, 
and patient level criteria to better define who should go to those 
facilities.
      Instituting a pay for quality performance program for 
home health, and creating quality measures for SNFs.

    Finally, the Commission has recommended zero updates for both SNF 
and home health because Medicare overpays these sectors overall. Over 
payment makes it even more difficult to determine where cost effective 
services are available, in addition to placing unnecessary burdens on 
taxpayers and beneficiaries.
    However, even if the payment systems were improved as we have 
recommended, there would still be a need to evaluate outcomes and the 
quality of care and to ensure that beneficiaries are sent to the most 
clinically appropriate and cost effective setting. We discuss later in 
this testimony patient assessment instruments, which could contribute 
to evaluating outcomes and quality. Further efforts will be needed to 
assure that payments are balanced across and within settings and, more 
importantly, that patients go to the best setting for their conditions. 
In the longer term, a seamless PAC sector--with uniform assessments and 
payment tied to patients, their conditions, and their outcomes--could 
provide better care for beneficiaries and better value for the Medicare 
program.

Background
    Altogether, Medicare spending on PAC services and hospice totaled 
about $43 billion in 2004, accounting for about 14 percent of total 
Medicare spending. As shown in figure 1, spending has been growing 
rapidly in the last few years. Overall spending has increased by over 
50 percent since 2000, with hospice spending increasing by 150 percent 
and long-term care hospitals spending by about 80 percent. The number 
of providers has grown as well. Home health agencies increased by 10 
percent in the last year alone, and there were over 50 percent more 
LTCHs in 2005 than in 2000. The increase in spending is the result of 
both higher payments and greater use. For example, SNF admissions and 
days increased by about 14 percent in 2002.

[GRAPHIC] [TIFF OMITTED] T3928A.001


    In 2002, about one third of Medicare beneficiaries discharged from 
PPS hospitals went to a post-acute care setting. About one third of 
those went to a SNF, one third to home health, and the remainder either 
to other or multiple settings. PAC use is not uniform either across or 
within diagnoses groups. For some conditions, few beneficiaries use PAC 
services. For other conditions, where beneficiaries commonly do use PAC 
services, some beneficiaries will not. This lack of uniformity 
complicates analyses of this sector.
    During the last era of rapid growth in post-acute care, the 
Congress passed the Balanced Budget Act of 1997. That act required the 
establishment of prospective payment systems (PPSs) for most PAC 
settings in the hope of curbing the rapid increase in Medicare spending 
for post-acute services. Figure 2 shows the implementation dates for 
each of the new PPSs.

[GRAPHIC] [TIFF OMITTED] T3928A.002


    As these payment systems have been implemented, and as providers 
have in turn reacted to the payment systems, some of the strengths and 
weaknesses of the PPSs have become apparent. MedPAC's key findings and 
recommendations for three of the individual systems are discussed 
below, followed by a discussion of a cross-setting issue--the lack of 
comparable patient assessment instruments.

Skilled nursing facilities
    Medicare payment levels for SNFs have been favorable. SNFs have 
received a full market basket update in both FY 2004 and 2005. In 
addition, SNFs received an additional update in FY 2004 to correct for 
past market basket projection errors since the implementation of the 
PPS. In the past two years, for the 90 percent of SNFs that are 
freestanding, margins have been in the double digits. This finding in 
conjunction with other factors such as access and growth in use of 
services have led the Commission to recommend zero updates for 2003, 
2004, 2005, and 2006.

Problems with the SNF case mix system
     MedPAC has recommended that the SNF PPS should be reformed for two 
reasons: First, the case mix system does not adjust payments for the 
costs of certain services that tend to be higher for medically complex 
SNF patients. Second, the payment rate is determined, in part, by the 
amount of therapy provided rather than by patient characteristics that 
predict therapy needs.

Case mix adjustment
    Medicare pays SNFs a set amount for each day of care adjusted for 
the case mix of the patients. The SNF PPS case mix system, the resource 
utilization groups (RUG-III) system, adjusts payments for the services 
provided. However it does not properly adjust payments for one category 
of services--nontherapy ancillary services (NTAs), such as prescription 
drugs and respiratory therapy--that are more heavily used by medically 
complex SNF patients. The BBA required that Medicare's prospective 
payment for SNFs include payment for NTAs. In compliance with this 
mandate, CMS included the cost of NTAs as part of the total costs used 
to develop Medicare's SNF base payment rates. However, NTA costs were 
not used to develop the RUG--III case-mix indexes that adjust the base 
payment rates according to patients' resource use. Instead, the payment 
system distributes payments for NTAs using the weights that are used to 
allocate payment for nursing care. As a result, the payment system does 
not distribute payments for NTAs according to variation in expected NTA 
costs across different patient types and thus pays relatively too much 
for patients receiving therapy and relatively too little for medically 
complex patients.

Payment based on therapy to be provided
    Another problem is that the SNF PPS is overly oriented to therapy 
and that it determines the payment rate based on the amount of therapy 
services the patient uses--or is expected to use--rather than on 
patient characteristics and clinical appropriateness. (Therapy includes 
physical therapy, speech therapy, and occupational therapy.) The system 
pays based on the number of therapy minutes per week. It pays a fixed 
rate for ranges of therapy minutes--45 to 149 minutes (low), 150 to 324 
minutes (medium), 325 to 499 minutes (high), 500 to 719 minutes (very 
high), and more than 720 minutes (ultra high). A SNF simply has to 
estimate the amount of therapy a patient will receive to get payments 
for the first three categories for the first 14 days. Payments for the 
two highest categories require the therapy actually be provided.
    This system creates two incentives: The first is to classify 
patients into a higher payment category even though the patient may not 
benefit from additional therapy. The second is to provide the fewest 
number of minutes in the highest achievable payment category because 
therapy times at the bottom of the categories have the lowest cost 
relative to revenue.
    Several studies suggest that SNFs have responded to these two 
incentives. First, studies found that the proportion of residents 
receiving no rehabilitation therapy declined between 1997 and 2000. 
Second, at initial assessment, fewer patients were categorized into the 
low group where payments are lowest. More patients were grouped into 
the medium and high groups where payments are higher and estimated, not 
actual, therapy minutes are sufficient for categorization. (According 
to the GAO, providers report payments for these medium and high 
rehabilitation groups also had the highest payment relative to costs.) 
Fewer patients were grouped into the very high and ultra high groups in 
which therapy must be provided for payment to be received. Finally, 
consistent with incentives to provide minutes of therapy at the low end 
of the range for a given payment category, patients in the medium and 
high rehabilitation categories received at least 30 fewer minutes of 
therapy per week in 2001 than in 1999; half of the patients initially 
categorized into these two groups did not actually receive the minimum 
minutes to be classified into these groups.
    As a result of this orientation of the payment system towards 
therapy, beneficiaries who do not need rehabilitation services but do 
need certain nontherapy ancillary services may experience delays in 
accessing SNF care because the Medicare payment rates for these 
services may not be aligned with their costs. MedPAC and the GAO have 
pointed out that the RUG--III classification system may not pay enough 
to cover the costs of patients who require nontherapy ancillary 
services, such as expensive drugs and ventilator care services. There 
is enough money in the payment system to pay more for the care of these 
medically complex patients; the money must be redistributed from the 
therapy categories, which requires that the case mix system be 
reformed, as we have recommended for the past two years. We have also 
recommended that CMS focus on developing and improving quality 
measures, including collecting necessary information, for skilled 
nursing facility patients, and that patients be assessed at discharge 
from SNFs.
    CMS has described its reform of the SNF PPS in its proposed rule 
for the system issued in May. We are studying the proposed rule and 
will provide CMS and the Congress with our comments. We will be looking 
for reforms that will reorient the payment system as we have described, 
and thus provide accurate payment and ensure access to SNF care for 
medically complex patients.

Home health
    The number of home health users and the amount of services they 
used grew rapidly in the early 1990s, prompting the creation of the 
home health PPS and other actions by the Secretary and Congress on 
integrity standards and eligibility. Margins for home health providers 
have been consistently high since the implementation of the PPS. 
Initially, agencies were slow to enter the market; however, in the past 
12 months, the number of agencies grew by more than 10 percent. CBO 
projects annual double-digit growth in spending in the next five years. 
In recognition of the high margins and other factors, MedPAC 
recommended a zero update for 2004, 2005, and 2006.
    A source of concern for some policymakers has been that the number 
of home health users fell by about one million in the years preceding 
the implementation of the PPS. We do not find that this concern is 
justified. Our study found that the greatest decreases in use occurred 
among beneficiaries with the lowest predicted need for home health 
service, that the areas with the highest use of services (pre-PPS) had 
the greatest declines, and that beneficiaries eligible for both 
Medicaid and Medicare were not affected disproportionately.
    Any decrease in use of home health services does not appear to be 
from lack of access to home health agencies. In 2003 and 2004, almost 
all beneficiaries (99 percent) lived in an area that was served by at 
least one home health agency. Nearly 90 percent of beneficiaries who 
responded to a CMS survey about their experience in 2003 said they had 
``little or no problem'' accessing services. We found that rural 
beneficiaries reported even better access to care than their urban 
counterparts.
    The home health PPS has moved the payment system from cost-based 
reimbursement and introduced an episode-based payment. While this has 
encouraged the provision of efficient care, the PPS has its 
shortcomings as well. The home health product has changed considerably 
since the current PPS was designed. Quality has improved, yet episodes 
now contain fewer visits, and the share of therapy and home health aide 
visits has shifted towards therapy. The case mix system should be 
revisited to make sure it corresponds with the new home health product. 
We have found that minutes of service per episode (and hence costs) may 
vary widely within the current case mix groups, and that some patient 
characteristics that are associated with cost variation are not now 
included in the case-mix adjustment.
    The Commission has determined that Medicare should pay for higher 
quality to encourage better care for beneficiaries and better value for 
Medicare. It has also determined that the home health sector is ready 
to be paid for quality performance. The sector has a set of well-
accepted, valid measures of the quality of outcomes of care. This 
measure set is currently collected by CMS from all agencies; it does 
not present an additional data burden. Quality has shown small 
improvements since the implementation of the PPS, but there is room for 
further improvement. Moving toward pay for performance has a special 
benefit in this setting because the product is not well-defined. By 
attaching dollars to outcomes, the program can purchase what it seeks--
improvement in physical functioning or healing for wounds for example--
rather than units of services with largely unknown content.

Long-term care hospitals
    Long-term care hospitals are licensed as hospitals and are intended 
to treat medically complex patients. Medicare's only additional 
requirement is that the average Medicare length of stay be more than 25 
days. (The average length of stay in hospitals under the Medicare 
inpatient PPS is approximately 5 days.) The number of these facilities 
has been growing rapidly--at a 12 percent annual rate since 1993. 
Medicare spending for LTCHs has been growing even more rapidly--five 
fold from $398 million in 1993 to $1.9 billion in 2001; and Medicare is 
the predominant payer. LTCHs are also usually the most costly post-
acute care setting.
    In our June 2004 report, we found that in general LTCH patients 
cost Medicare more than similar patients using alternative settings; 
but for patients with the highest severity, the cost is comparable. We 
concluded that the growth in LTCHs may be due in part to the financial 
incentives in other Medicare payment systems. Hospitals under the 
inpatient PPS may want to transfer patients who are stable but have 
unresolved underlying complex medical conditions--for example, patients 
needing ventilator support for respiratory problems--because of the 
fixed payments in that system and the high costs of those patients. 
SNFs may find it less profitable to admit these patients than less 
complex patients because of the shortcomings in the SNF PPS we 
described earlier. These considerations make a new, clearer definition 
of LTCH care imperative. Therefore, we recommended that the Congress 
and the Secretary should define LTCHs by facility and patient criteria 
that ensure the patients admitted to these facilities are medically 
complex and have a good chance for improvement. Facility-level criteria 
should characterize this level of care by features such as staffing, 
patient evaluation and review processes, and mix of patients. Patient-
level criteria should identify specific clinical characteristics (such 
as open wounds), and treatment modalities such as need for frequent 
intravenous fluid or medication.
    We also recommended that the Secretary require the quality 
improvement organizations to review LTCH admissions for medical 
necessity and monitor that these facilities are in compliance with 
defining criteria.

Cross-setting issue: Patient assessment instruments
    Patient assessment tools should help providers assess patients' 
care needs and evaluate the quality of care and patient outcomes. While 
Medicare requires three of the post-acute settings to use patient 
assessment tools, each uses a different one. SNFs use the minimum data 
set (MDS); HHAs the Outcome and Assessment Information Set (OASIS); and 
IRFs the IRF-Patient Assessment Instrument (IRF-PAI). LTCHs are not 
required to have a patient assessment tool. Uniform information would 
allow comparisons to be made across post-acute settings and provide an 
opportunity to assess cost, quality, outcomes and patient placement.
    We found that although the tools measure the same broad aspects of 
patient care--functional status, diagnoses, comorbidities, and 
cognitive status--the timeframes covered, the scales used to 
differentiate patients, and the definitions of the care included in the 
measures vary considerably. These differences make it very difficult, 
if not impossible, to compare the quality of care and patient outcomes 
across all settings.
    The tools vary substantially in how frequently clinicians must 
administer them, how long the assessments take to complete, and what 
time period the assessment covers. For example, the MDS is conducted 
close to (but not necessarily at) admission and periodically throughout 
the patient's stay (but not at discharge); generally asks about the 
patient's condition over the past 7 days; and takes about 90 minutes to 
complete. In contrast, the IRF-PAI is typically administered on day 3 
of the admission and at discharge, captures the patient's status on 
that day, and is much shorter (taking about 25 minutes). As a result, 
it is impossible to evaluate whether differing assessment information 
truly reflects differences in the patients' condition, or just when the 
assessment was conducted, or the time period covered by the evaluation.
    Further limiting the comparison of information gathered from the 
instruments is that even for the common aspects of patient care, the 
definitions of the measures are different. For example:

      Functional status: The MDS evaluates whether and how 
frequently the patient needed weight bearing or verbal encouragement to 
walk; the OASIS records a patient's ability to walk safely, once in a 
standing position; and the IRF-PAI includes the distances walked.
      Cognitive status: These measures and definitions varied 
the most across the three tools--including whether the tools 
distinguished between short versus long-term memory; how depression and 
delirium were evaluated; and the types of decisions patients are able 
to make.
      Diagnoses and comorbidities: Although these measures are 
generally considered straightforward to compare, the tools lack 
consistency in how this information is recorded. The MDS does not use 
ICD-9 codes to record diagnoses or comorbidities and the OASIS does not 
require the use of all 5 digits of the ICD-9 code, limiting the 
comparisons of the severity of patients treated in different settings.

    Finally, even for measures where the definitions are the same, the 
instruments use varying scales and can measure different aspects of a 
task (such as independence) to differentiate patients. For example, the 
MDS uses a four-point scale and measures the number of times a patient 
needs assistance with dressing and the type of help involved (weight 
bearing or verbal encouragement), whereas the IRF-PAI uses a seven-
point scale to distinguish what share of the dressing a patient 
performs.

Conclusion
    Ideally, the program would use a uniform patient assessment tool to 
assess whether a patient can go home safely or which post-acute setting 
would be most appropriate, and outcomes and quality would be measured 
over subsequent assessments. The PPS for each setting would then match 
payments to the cost of an efficient provider, and quality care would 
be rewarded. Medicare post-acute care is far from this ideal state. The 
Commission has made recommendations to improve payment systems in the 
individual settings and to bring quality into Medicare payment; but 
these recommendations have not yet been acted upon. In addition, a 
uniform patient assessment tool is still elusive. Developing a common 
instrument will be complex, even if it can build on some aspects of the 
current tools. The longer term goal is a seamless PAC sector--with 
uniform assessments and payment tied to patients, their conditions, and 
their outcomes.
    Until a common instrument becomes available, we will investigate 
other approaches for improving post-acute care for Medicare 
beneficiaries. One approach could be to specify admission criteria for 
each setting, as we have recommended for long-term care hospitals. A 
different approach would concentrate on developing a ``front-end'' 
assessment tool to be administered prior to either discharge from the 
hospital or admission to a PAC setting on a physician's referral. 
Alternatively, care coordination by a case manager for post-acute care 
may be feasible. This approach could be modeled on CMS's chronic care 
improvement program with case managers assuming risk for achieving 
savings and quality targets.
    The Commission will continue to inform the Congress as it 
deliberates on these issues. MedPAC will also continue to make 
recommendations to improve the incentives in the payment systems and 
the tools that support getting Medicare beneficiaries to the post-acute 
care setting that is right for them--with the objective of getting the 
best care for beneficiaries and the best value for the Medicare 
program.

                                 

    Chairman JOHNSON. Thank you very much for your thoughtful 
comments. Dr. Kanof?

 STATEMENT OF MARJORIE KANOF, M.D., MANAGING DIRECTOR, HEALTH, 
             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Dr. KANOF. Madam Chairman, Congressman Lewis, and Members 
of the Subcommittee, good afternoon. I appreciate the 
opportunity to be here today to discuss our report issued in 
April, entitled ``Medicare: More Specific Criteria Needed to 
Classify Inpatient Rehabilitation Facilities.'' Because 
patients treated at IRFs require more intensive rehabilitation 
than is provided in other settings such as SNFs, Medicare pays 
for treatment at IRFs at a higher rate than it pays for 
treatment in other settings. This difference in payment can be 
substantial, so we need to make sure that IRFs are correctly 
classified, and only patients whose needs are best met in an 
IRF should be admitted. To distinguish IRFs from other settings 
for payment purposes and to ensure that Medicare patients 
needing less intensive services are not in IRFs, CMS relies on 
a regulation commonly known as the 75 percent rule, which 
states that if a facility can show during a previous 12-month 
period that at least 75 percent of all its patients, including 
its Medicare patients, require intensive rehabilitation 
services for the treatment of at least 1 of 13 conditions 
listed in a rule, it may be classified as an IRF. The rule 
allows the remaining 25 percent of patients to have other 
conditions not listed in the rule. Before admitting a patient, 
an IRF is required to assess the patient to ensure they require 
the level of service provided, and CMS is responsible for 
evaluating the appropriateness of individual admissions, after 
the patient has been discharged, through medical reviews 
conducted by fiscal intermediaries. Three days after admission, 
IRFs are required to complete a patient assessment instrument 
that is used to determine Medicare payment.
    Our report shows that there are Medicare patients in IRFs 
who might not need the level of care. In fiscal year 2003, 
fewer than half of all Medicare patients were admitted for 
having a primary condition on the list in the 75 percent rule. 
Almost half of all the patients with the conditions not on the 
list were admitted for orthopedic conditions, and among those 
the largest group was joint replacement patients. We found that 
relatively few of the Medicare unilateral joint replacement 
patients had a co-morbidity that needed IRF level of service. 
In fact, more than three-quarters of the patients that were 
admitted with a single joint replacement had no co-morbidities. 
Experts that we spoke with, including those that the Institute 
of Medicine (IOM) convened, told us that uncomplicated 
unilateral joint replacement patients rarely need to be 
admitted to an IRF. Our study also found that IRFs varied in 
the criteria that they used to assess patients for possible 
admissions. All IRFs evaluated a patient's function, and half 
of them stated that function was the main factor that should be 
considered in assessing the need for IRF service. The 
assessment, however, did not determine if any other setting 
besides an IRF was the appropriate site for the patient's care.
    The experts IOM convened questioned the strength of the 
evidence for adding additional conditions to the list in the 
rule. They found the evidence for certain orthopedic conditions 
particularly weak, and some of them reported that there was 
little evidence available on the need for inpatient 
rehabilitation for cardiac, transplant, pulmonary, or oncology 
patients. They called for further research to identify the 
types of patients that needed inpatient rehabilitation and, 
more importantly, to understand the effectiveness of receiving 
treatment within an IRF as opposed to other settings. In 
addition, there was general agreement among all the experts we 
interviewed that diagnosis alone is insufficient for 
identifying appropriate types of patients for inpatient 
rehabilitation, because with any condition such as a stroke, 
only a subgroup of patients require the level of services that 
are needed in an IRF. Other factors such as function should be 
considered in addition to condition. As we concluded in our 
report, if condition alone is not sufficient for determining 
which types of patients are most appropriate for IRFs, more 
conditions should not be added to the list. We recommended that 
CMS take several actions, including targeted reviews for 
medical necessity, and to more clearly define subgroups of 
patients within a condition that are appropriate for admission 
to IRFs, possibly using functional status or other factors in 
addition to condition. These actions could help to ensure that 
Medicare does not pay IRFs for patients who could be treated in 
a less intensive setting and does not misclassify facilities 
for payment. Madam Chairman, this concludes my statement.
    [The prepared statement of Dr. Kanof follows:]

  Statement of Marjorie Kanof, M.D., Managing Director, Health, U.S. 
                    Government Accountability Office

                                MEDICARE

  More Specific Criteria Needed to Classify Inpatient Rehabilitation 
                               Facilities

    Madam Chairman and Members of the Subcommittee:
    I am pleased to be here today to discuss our report entitled 
Medicare: More Specific Criteria Needed to Classify Inpatient 
Rehabilitation Facilities,\1\ which was issued in April 2005. Over the 
past decade, both the number of inpatient rehabilitation facilities 
(IRF) \2\ and Medicare payments to these facilities have grown 
steadily. In 2003, there were about 1,200 such facilities. Medicare 
payments to IRFs grew from $2.8 billion in 1992 to an estimated $5.7 
billion 2003 and are projected to grow to almost $9 billion per year by 
2015.
---------------------------------------------------------------------------
    \1\ See GAO, Medicare: More Specific Criteria Needed to Classify 
Inpatient Rehabilitation Facilities, GAO-05-366 (Washington, D.C.: Apr. 
22, 2005).
    \2\ IRFs are intended to serve patients recovering from medical 
conditions that require an intensive level of rehabilitation. Not all 
patients with a given condition may require the level of rehabilitation 
provided in an IRF. For example, although a subset of patients who have 
had a stroke may require the intensive level of care provided by an 
IRF, others may be less severely disabled and require less intensive 
services.
---------------------------------------------------------------------------
    Because patients treated at IRFs require more intensive 
rehabilitation than is provided in other settings, such as an acute 
care hospital or a skilled nursing facility (SNF),\3\ Medicare pays for 
treatment at an IRF at a higher rate than it pays for treatment in 
other settings. The difference in payment to IRFs and other settings 
can be substantial, and so IRFs need to be correctly classified to be 
distinguished from other settings in which less intensive 
rehabilitation is provided.
---------------------------------------------------------------------------
    \3\ In addition to IRFs, acute care hospitals, and SNFs, other 
settings that provide rehabilitation services include long-term-care 
hospitals, outpatient rehabilitation facilities, and home health care.
---------------------------------------------------------------------------
    To distinguish IRFs from other settings for payment purposes and to 
ensure that Medicare patients needing less intensive services are not 
in IRFs, the Centers for Medicare & Medicaid Services (CMS) relies on a 
regulation commonly known as the ``75 percent rule.'' \4\ This rule 
states that if a facility can show that during a 12-month period at 
least 75 percent of all its patients, including its Medicare patients, 
required intensive rehabilitation services for the treatment of at 
least 1 of the 13 conditions listed in the rule,\5\ it may be 
classified as an IRF. The rule allows the remaining 25 percent of 
patients to have other conditions not listed in the rule. IRFs are 
required to assess patients prior to admission to ensure they require 
the level of services provided in an IRF, and CMS is responsible for 
evaluating the appropriateness of individual admissions after the 
patient has been discharged through reviews for medical necessity 
conducted under contract by its fiscal intermediaries.\6\ An IRF that 
does not comply with the requirements of the 75 percent rule may lose 
its classification as an IRF and therefore no longer be eligible for 
payment by Medicare at a higher rate.\7\
---------------------------------------------------------------------------
    \4\ See 42 U.S.C.  1395ww(d)(1)(B) (2000). The 75 percent rule was 
initially issued in 1983 and most recently revised in 2004. See 42 
C.F.R.  412.23(b)(2) (2004).
    \5\ For an annotated list of these conditions, see appendix I.
    \6\ Fiscal intermediaries are contractors to CMS that verify 
compliance with the rule and conduct reviews for medical necessity to 
determine whether an individual admission to an IRF is covered under 
Medicare.
    \7\ In addition to the 75 percent rule, an IRF must meet six 
regulatory criteria showing that it had (1) a Medicare provider 
agreement; (2) a preadmission screening procedure; (3) medical, 
nursing, and therapy services; (4) a plan of treatment for each 
patient; (5) a coordinated multidisciplinary team approach; and (6) a 
medical director of rehabilitation with specified training or 
experience. IRFs must also meet other criteria identified in 42 C.F.R. 
 412.22 (2004) and 42 C.F.R.  412.25 (2004).
---------------------------------------------------------------------------
    IRF compliance with the rule has been problematic, and some IRFs 
have questioned the requirements of the rule. CMS data indicate that in 
2002 only 13 percent of IRFs had at least 75 percent of patients in 1 
of the 10 conditions on the list at that time. IRF officials have 
contended that the list of conditions in the rule should be updated 
because of changes in medicine that have occurred and the concomitant 
expansion of the population that could benefit from inpatient 
rehabilitation services.
    The Conference Report that accompanied the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 directed us to issue a 
report, in consultation with experts in the field of physical medicine 
and rehabilitation, to assess whether the current list of conditions 
represents a clinically appropriate standard for defining IRF services 
and, if not, to determine which additional conditions should be added 
to the list.\8\ In this testimony, I will discuss our April 2005 
report, in which we (1) identified the conditions--on and off the 
list--that IRF Medicare patients have and the number of IRFs that meet 
the requirements of the 75 percent rule; (2) described how IRFs assess 
patients for admission and whether CMS reviews admission decisions; and 
(3) evaluated the approach of using a list of conditions in the 75 
percent rule to classify IRFs.
---------------------------------------------------------------------------
    \8\ See H.R. Rep. 108-391, at 649 (2003).
---------------------------------------------------------------------------
    In carrying out our work, we analyzed data from the Inpatient 
Rehabilitation Facility--Patient Assessment Instrument (IRF-PAI) 
records on all Medicare patients (the majority of patients in IRFs) 
admitted to IRFs in fiscal year 2003 \9\ (the most recent data 
available at the time). The IRF-PAI records contain, for each Medicare 
patient, the impairment group code \10\ identifying the patient's 
primary condition and the diagnostic code from the International 
Classification of Diseases, Ninth Revision, Clinical Modification (ICD-
9-CM) identifying the patient's comorbid condition (if any).\11\ We 
used these codes to determine whether we considered the patient's 
primary or comorbid condition to be linked to a condition on the list 
in the rule.\12\ We also spoke to 12 IRF medical directors, 10 fiscal 
intermediary officials, and contracted with the Institute of Medicine 
(IOM) of the National Academies to convene a 1-day meeting of 14 
clinical experts in physical medicine and rehabilitation to evaluate 
the approach of using a list of conditions in the 75 percent rule. We 
conducted our work from May 2004 through April 2005 in accordance with 
generally accepted government auditing standards.
---------------------------------------------------------------------------
    \9\ We analyzed the 2003 data using the 13 conditions in the 
current regulation even though in fiscal year 2003 there were 10 
conditions on the list. Effective July 1, 2004, the number of 
conditions increased from 10 to 13.
    \10\ The impairment group code identifies the medical condition 
that caused the patient to be admitted to an IRF, and its sole function 
is to determine payment rates. As a result, the impairment group codes 
describe every patient in an IRF and include medical conditions that 
are on the list in the rule as well as those that are not on the list 
since IRFs may treat patients with conditions not on the list. In 
contrast, the list of conditions in the rule describes the patient 
population that is to be treated in an IRF to ensure that a facility is 
appropriately classified to justify payment for the level of services 
furnished.
    \11\ As used in this report, a primary condition is the first or 
foremost medical condition for which the patient was admitted to an 
IRF, and other medical conditions may coexist in the patient as 
comorbid conditions, or comorbidities.
    \12\ Throughout this testimony, the ``list in the rule'' refers to 
the list of 13 conditions as specified in the 2004 75 percent rule, and 
when we say that condition is on (or off) the list, we mean that we 
have (or have not) been able to link the condition as identified in the 
patient assessment record to a condition on the list in the rule.
---------------------------------------------------------------------------
    In brief, as noted in the report, in fiscal year 2003 fewer than 
half of all IRF Medicare patients were admitted for having a primary 
condition on the list in the 75 percent rule. Almost half of all 
patients with conditions not on the list were admitted for orthopedic 
conditions, and among those the largest group was joint replacement 
patients. The experts IOM convened told us that uncomplicated 
unilateral joint replacement patients rarely need to be admitted to an 
IRF, and our analysis suggested that relatively few of the Medicare 
unilateral joint replacement patients had comorbid conditions that 
suggested a possible need for the IRF level of services. Additionally, 
we found that only 6 percent of IRFs in fiscal year 2003 were able to 
meet a 75 percent threshold. We also found that IRFs varied in the 
criteria used to assess patients for admission, using patient 
characteristics such as functional status, as well as condition. We 
noted that CMS, working through its fiscal intermediaries, had not 
routinely reviewed IRF admission decisions to determine whether they 
were medically justified, although it reported that such reviews could 
be used to target problem areas. The experts IOM convened and other 
clinical and nonclinical experts we interviewed differed on whether 
conditions should be added to the list in the 75 percent rule. The 
experts IOM convened questioned the strength of the evidence for adding 
conditions to the list--finding the evidence for certain orthopedic 
conditions particularly weak--and some of them reported that little 
information was available on the need for inpatient rehabilitation for 
cardiac, transplant, pulmonary, or oncology patients. They called for 
further research to identify the types of patients that need inpatient 
rehabilitation and to understand the effectiveness of IRFs. There was 
general agreement among all the groups of experts we interviewed that 
condition alone is insufficient for identifying appropriate types of 
patients for inpatient rehabilitation, since within any condition only 
a subgroup of patients require the level of services of an IRF, and 
that functional status should also be considered in addition to 
condition.
    We concluded that if condition alone is not sufficient for 
determining which types of patients are most appropriate for IRFs, more 
conditions should not be added to the list at the present time and the 
rule should be refined to clarify which types of patients should be in 
IRFs as opposed to another setting. As noted in the report, we 
recommended that CMS ensure that targeted reviews for medical necessity 
are conducted for IRF admissions; conduct additional activities to 
encourage research on IRFs; and refine the 75 percent rule to more 
clearly describe the subgroups of patients within a condition that are 
appropriate for IRFs, possibly using functional status or other factors 
in addition to condition. CMS generally agreed with our 
recommendations.

Background
    The 75 percent rule was established in 1983 to distinguish IRFs 
from other facilities for payment purposes. According to CMS, the 
conditions on the list in the rule at that time accounted for 75 
percent of the admissions to IRFs. In June 2002 CMS suspended the 
enforcement of the 75 percent rule after its study of the fiscal 
intermediaries revealed that they were using inconsistent methods to 
determine whether an IRF was in compliance and that in some cases IRFs 
were not being reviewed for compliance at all. CMS standardized the 
verification process that the fiscal intermediaries were to use, and 
issued a rule--effective July 1, 2004--that increased the number of 
conditions from 10 to 13 and provided a 3-year transition period, 
ending in July 2007, to phase in the 75 percent threshold.\13\
---------------------------------------------------------------------------
    \13\ During the transition period, the threshold increases each 
year (from 50 percent to 60 percent to 65 percent) before the 75 
percent threshold is effective. The transition period also allows a 
patient to be counted toward the required threshold if the patient is 
admitted for either a primary or comorbid condition on the list in the 
rule. At the end of the transition period, a patient cannot be counted 
toward the required threshold on the basis of a comorbidity on the list 
in the rule.
---------------------------------------------------------------------------
    The current payment and review procedures for IRFs were established 
in recent years. The inpatient rehabilitation facility prospective 
payment system (IRF PPS) was implemented in January 2002. Payment is 
contingent on an IRF's completing the IRF-PAI after admission and 
transmitting the resulting data to CMS. Two basic requirements must be 
met if inpatient hospital stays for rehabilitation services are to be 
covered: (1) the services must be reasonable and necessary, and (2) it 
must be reasonable and necessary to furnish the care on an inpatient 
hospital basis, rather than in a less intensive facility, such as a 
SNF, or on an outpatient basis.\14\ Determinations of whether hospital 
stays for rehabilitation services are reasonable and necessary must be 
based on an assessment of each beneficiary's individual care needs. 
Beginning in April 2002, the fiscal intermediaries, the entities that 
conduct compliance reviews, were specifically authorized to conduct 
reviews for medical necessity to determine whether an individual 
admission to an IRF was covered under Medicare.\15\
---------------------------------------------------------------------------
    \14\ Rehabilitative care in a hospital, rather than a SNF or on an 
outpatient basis, is considered to be reasonable and necessary when a 
patient requires a more coordinated, intensive program of multiple 
services than is generally found outside of a hospital (Medicare 
Benefit Policy Manual, chapter 1, Section 110.1).
    \15\ Prior to this time, Quality Improvement Organizations had this 
authority. CMS Transmittal 21 made clear that fiscal intermediaries 
have the authority to review admissions to IRFs.
---------------------------------------------------------------------------
Fewer Than Half of All IRF Medicare Patients in 2003 Were Admitted for 
        Conditions on List in Rule, and Few IRFs Were Able to Meet a 75 
        Percent Threshold
    As we reported in April 2005, among the 506,662 Medicare patients 
admitted to an IRF in fiscal year 2003, less than 44 percent were 
admitted with a primary condition on the list in the 75 percent rule. 
About another 18 percent of IRF Medicare patients were admitted with a 
comorbid condition that was on the list in the rule. Among the 194,922 
IRF Medicare patients that did not have a primary or comorbid condition 
on the list in the rule, almost half were admitted for orthopedic 
conditions, and among those the largest group was joint replacement 
patients whose condition did not meet the list's specific criteria. 
(See figure 1.)

[GRAPHIC] [TIFF OMITTED] T3928A.003


    Although some joint replacement patients may need admission to an 
IRF, such as those with comorbidities that affect the patient's 
function, our analysis showed that few of these patients had 
comorbidities that suggested a possible need for the level of services 
offered by an IRF. Our analysis found that 87 percent of joint 
replacement patients admitted to IRFs in fiscal year 2003 did not meet 
the criteria of the rule, and among those, over 84 percent did not have 
any comorbidities that would have affected the costs of their care 
based on our analysis of the payment data.
    Because the data we analyzed were from 2003, when enforcement of 
the rule was suspended, we also looked at newly released data from July 
through December 2004, after enforcement had resumed, to determine 
whether admission patterns had changed. We focused on the largest 
category of patients admitted to IRFs, joint replacement patients, and 
found no material change in the admission of joint replacement patients 
for the same time periods in 2003 and 2004. Across all IRFs, the 
percentage of Medicare patients admitted for a joint replacement 
declined by 0.1 percentage point.
    In conjunction with our finding on the number of patients admitted 
to IRFs for conditions not on the list in the rule, we determined that 
only 6 percent of IRFs in fiscal year 2003 were able to meet a 75 
percent threshold. Many IRFs were able to meet the lower thresholds 
that would be in place early in the transition period, but 
progressively fewer IRFs were able to meet the higher threshold levels.

IRFs Vary in the Criteria Used to Assess Patients for Admission, and 
        CMS Does Not Routinely Review IRFs' Admission Decisions
    As we stated in our report, the criteria IRFs used to assess 
patients for admission varied by facility and included patient 
characteristics in addition to condition. All the IRF officials we 
interviewed evaluated a patient's function when assessing whether a 
patient needed the level of services of an IRF. Whereas some IRF 
officials reported that they used function to characterize patients who 
were appropriate for admission (e.g., patients with a potential for 
functional improvement), others said they used function to characterize 
patients not appropriate for admission (e.g., patients whose functional 
level was too high, indicating that they could go home, or too low, 
indicating that they needed to be in a SNF). Almost half of the IRF 
officials interviewed stated that function was the main factor that 
should be considered in assessing the need for IRF services.
    IRF officials reported to us that they did not admit all the 
patients they assessed. Typically, the IRF received a request from a 
physician in the acute care hospital requesting a medical consultation 
from an IRF physician, or from a hospital discharge planner or social 
worker indicating that they had a potential patient. An IRF staff 
member--usually a physician and/or a nurse--conducted an assessment 
prior to admission to determine whether to admit a patient.
    CMS, working through its fiscal intermediaries, has not routinely 
reviewed IRF admission decisions, although it reported that such 
reviews could be used to target problem areas. Among the 10 fiscal 
intermediary officials we interviewed, over half were not conducting 
reviews of patients admitted to IRFs. We concluded that the presence of 
patients in IRFs who may not need the intense level of services 
provided by IRFs called for increased scrutiny of IRF admissions, which 
could target problem areas and vulnerabilities and thereby reduce the 
number of inappropriate admissions in the future. We recommended that 
CMS ensure that its fiscal intermediaries routinely conduct targeted 
reviews for medical necessity for IRF admissions. CMS agreed that 
targeted reviews are necessary and said that it expected its 
contractors to direct their resources toward areas of risk. It also 
reported that it has expanded its efforts to provide greater oversight 
of IRF admissions through local policies that have been implemented or 
are being developed by the fiscal intermediaries.

Experts Differed on Adding Conditions to List in Rule but Agreed That 
        Condition Alone Does Not Provide Sufficient Criteria
    As we reported, the experts IOM convened and other experts we 
interviewed differed on whether conditions should be added to the list 
in the 75 percent rule but agreed that condition alone does not provide 
sufficient criteria to identify types of patients appropriate for IRFs.
    The experts IOM convened generally questioned the strength of the 
evidence for adding conditions to the list in the rule. They reported 
that the evidence on the benefits of IRF services is variable, 
particularly for certain orthopedic conditions, and some of them 
reported that little information was available on the need for 
inpatient rehabilitation for cardiac, transplant, pulmonary, or 
oncology conditions. In general, they reported that, except for a few 
subpopulations, uncomplicated, unilateral joint replacement patients 
rarely need to be admitted to an IRF. Most of them called for further 
research to identify the types of patients that need inpatient 
rehabilitation and to understand the effectiveness of IRFs in 
comparison with other settings of care. IRF officials we interviewed 
did not agree on whether conditions, including a broader category of 
joint replacements, should be added to the list in the rule. Half of 
them suggested that joint replacement be more broadly defined to 
include more patients saying, for example, that the current 
requirements were too restrictive and arbitrary. Others said that 
unilateral joint replacement patients were not generally appropriate 
for IRFs. We recommended that CMS conduct additional activities to 
encourage research on the effectiveness of intensive inpatient 
rehabilitation and factors that predict patient need for these 
services. CMS agreed and said that it has expanded its activities to 
guide future research efforts by encouraging government research 
organizations, academic institutions, and the rehabilitation industry 
to conduct both general and targeted research, and plans to collaborate 
with the National Institutes of Health to determine how to best promote 
research.
    There was general agreement among all the groups of experts we 
interviewed, including the experts IOM convened, that condition alone 
is insufficient for identifying appropriate types of patients for 
inpatient rehabilitation, because not all patients with a condition on 
the list need to be in an IRF. For example, stroke is on the list, but 
not all stroke patients need to go to an IRF after their 
hospitalization. Similarly, cardiac condition is not on the list, but 
some cardiac patients may need to be admitted to an IRF. Among the 
experts convened by IOM, functional status was identified most 
frequently as the information required in addition to condition. Half 
of them commented on the need to add information about functional 
status, such as functional need, functional decline, motor and 
cognitive function, and functional disability. However, some of the 
experts convened by IOM recognized the challenge of operationalizing a 
measure of function, and some experts questioned the ability of the 
current assessment tools to predict which types of patients will 
improve if treated in an IRF.\16\
---------------------------------------------------------------------------
    \16\ For example, one fiscal intermediary official reported that 
the instrument that is currently used does not adequately measure 
progress in small increments, such as a quadriplegic patient might 
experience. Another respondent also reported that the current 
instrument only measures functional status at a point in time, but does 
not predict functional improvement.
---------------------------------------------------------------------------
    We concluded that if condition alone is not sufficient for 
determining which types of patients are most appropriate for IRFs, more 
conditions should not be added to the list at the present time, and 
that future efforts should refine the rule to increase its clarity 
about which types of patients are most appropriate for IRFs. We 
recommended that CMS use the information obtained from reviews for 
medical necessity, research activities, and other sources to refine the 
rule to describe more thoroughly the subgroups of patients within a 
condition that require IRF services, possibly using functional status 
or other factors, in addition to condition. CMS stated that while it 
expected to follow our recommendation, it would need to give this 
action careful consideration because it could result in a more 
restrictive policy than the present regulations, and noted that future 
research could guide the agency's description of subgroups.

Concluding Observations
    We stated in our report, we believe that action to conduct reviews 
for medical necessity and to produce more information about the 
effectiveness of inpatient rehabilitation could support future efforts 
to refine the rule over time to increase its clarity about which types 
of patients are most appropriate for IRFs. These actions could help to 
ensure that Medicare does not pay IRFs for patients who could be 
treated in a less intensive setting and does not misclassify facilities 
for payment.
    Madam Chairman, this concludes my prepared statement. I would be 
happy to respond to any questions you or other Members of the 
Subcommittee may have at this time.

Contact and Staff Acknowledgments
    For further information about this testimony, please contact 
Marjorie Kanof at (202) 512-7114. Linda Kohn and Roseanne Price also 
made key contributions to this statement.

Appendix I: List of Conditions in CMS's 75 Percent Rule
    A facility may be classified as an IRF if it can show that, during 
a 12-month period \17\ at least 75 percent of all its patients, 
including its Medicare patients, required intensive rehabilitation 
services for the treatment of one or more of the following conditions: 
\18\
---------------------------------------------------------------------------
    \17\ The time period is defined by CMS or the CMS contractor.
    \18\  See 42 C.F.R.  412.23(b)(2)(iii) (2004).

     1.  Stroke.
     2.  Spinal cord injury.
     3.  Congenital deformity.
     4.  Amputation.
     5.  Major multiple trauma.
     6.  Fracture of femur (hip fracture).
     7.  Brain injury.
     8.  Neurological disorders (including multiple sclerosis, motor 
neuron diseases, polyneuropathy, muscular dystrophy, and Parkinson's 
disease).
     9.  Burns.
    10.  Active, polyarticular rheumatoid arthritis, psoriatic 
arthritis, and seronegative arthropathies resulting in significant 
functional impairment of ambulation and other activities of daily 
living that have not improved after an appropriate, aggressive, and 
sustained course of outpatient therapy services or services in other 
less intensive rehabilitation settings immediately preceding the 
inpatient rehabilitation admission or that result from a systemic 
disease activation immediately before admission, but have the potential 
to improve with more intensive rehabilitation.
    11.  Systemic vasculidities with joint inflammation, resulting in 
significant functional impairment of ambulation and other activities of 
daily living that have not improved after an appropriate, aggressive, 
and sustained course of outpatient therapy services or services in 
other less intensive rehabilitation settings immediately preceding the 
inpatient rehabilitation admission or that result from a systemic 
disease activation immediately before admission, but have the potential 
to improve with more intensive rehabilitation.
    12.  Severe or advanced osteoarthritis (osteoarthritis or 
degenerative joint disease) involving two or more major weight bearing 
joints (elbow, shoulders, hips, or knees, but not counting a joint with 
a prosthesis) with joint deformity and substantial loss of range of 
motion, atrophy of muscles surrounding the joint, significant 
functional impairment of ambulation and other activities of daily 
living that have not improved after the patient has participated in an 
appropriate, aggressive, and sustained course of outpatient therapy 
services or services in other less intensive rehabilitation settings 
immediately preceding the inpatient rehabilitation admission but have 
the potential to improve with more intensive rehabilitation. (A joint 
replaced by a prosthesis no longer is considered to have 
osteoarthritis, or other arthritis, even though this condition was the 
reason for the joint replacement.)
    13.  Knee or hip joint replacement, or both, during an acute 
hospitalization immediately preceding the inpatient rehabilitation stay 
and also meet one or more of the following specific criteria:
          a.  The patient underwent bilateral knee or bilateral hip 
        joint replacement surgery during the acute hospital admission 
        immediately preceding the IRF admission.
          b.  The patient is extremely obese, with a body mass index of 
        at least 50 at the time of admission to the IRF.
          c.  The patient is age 85 or older at the time of admission 
        to the IRF.

                                 

    Chairman JOHNSON. Thank you very much. Mr. Kuhn.

     STATEMENT OF HERB KUHN, DIRECTOR, CENTER FOR MEDICARE 
 MANAGEMENT, CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S. 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Mr. KUHN. Madam Chairman, Congressman Lewis, Members of the 
Subcommittee, thank you for inviting me here today to discuss 
ways to improve coordination in the payment and clinical 
assessment of post-acute care. A more beneficiary-centered 
system of post-acute care services has the potential to improve 
quality of care, access to care, and continuity of care in a 
cost efficient way. Post-acute care services are offered in 
SNFs and IRFs, in the home, and in LTCHs. Each of these 
settings has its own payment system and method for evaluation 
of patient functioning. The transition from cost-based 
reimbursement to the PPS in post-acute care was a major 
milestone for Medicare that resulted in improved cost 
containment, while more directly linking payments to the care 
needs of each beneficiary. However, since each of these systems 
was developed independently, it is time to consider ways of 
improving coordination and payment and clinical assessment 
across care settings to provide a more seamless system of post-
acute care services. Today, Medicare's benefits and policies 
have focused on phases of a patient's illness as defined by 
specific site of service rather than on the entire post-acute 
care episode. Thus, payments across settings may differ 
considerably even though the clinical characteristics of the 
patient and the services delivered may be very similar. 
Further, each patient assessment instrument collects somewhat 
different content and stores the patient's health and 
functional status information in different data formats which 
are often not compatible. Because of this variation, care may 
be disrupted when a Medicare patient moves across settings. We 
should focus on the actual patient need and eliminate the 
financial incentives for providers to transfer patients from 
one post-acute care setting to another based on financial 
considerations.
    To do so, we should investigate a more coordinated approach 
to payment and delivery of post-acute care services that 
focuses on the overall post-acute care episode or attempts to 
pay more consistently across the different sites of care, an 
approach that relies on a single comprehensive assessment of a 
patient's needs and clinical characteristics that ensure that 
payments are at levels consistent with high quality cost-
effective care, regardless of setting. The CMS has several 
initiatives in the planning and implementation phase to develop 
a more consistent payment and assessment structure in post-
acute care. More specifically, we are working to study existing 
patient assessment instruments and potential for the future. We 
are also working with the National Quality Forum to set up a 
technical expert group to look at the development and the 
functional status framework to identify information we should 
be collecting on aspects of relevant functional status. 
Furthermore, we are mapping the Minimum Data Set (MDS), to 
Consolidated Health Informatics (CHI), to ensure the MDS 
conforms to CHI standards. In addition, CMS has twice expanded 
the post-acute care transfer policy under which it pays the 
acute hospital transferring a patient to a post-acute care 
setting under a per diem payment rather than the full Diagnosis 
Related Group (DRG) payment. In the most recent inpatient PPS 
notice of proposed rulemaking, CMS proposed to expand the 
policy even further.
    MedPAC has commented on the challenges we face in 
coordinating our post-acute care payment methods, and suggested 
that it may be appropriate to explore additional options for 
reimbursing post-acute care services. We agree that CMS, in 
conjunction with MedPAC and other stakeholders, should consider 
a full range of options in analyzing our post-acute care 
payment methods. In fact, we have recently issued proposed 
regulations for SNFs and IRFs in which we discuss the long-
range possibilities for an integrated post-acute care payment 
structure. While we have not made any formal proposals, we have 
solicited comment on potential models from the industry and 
other stakeholders. The CMS is committed to a variety of 
activities to develop more consistent payment and assessment 
systems for post-acute care. We fully recognize and support the 
benefit of having a more comprehensive system where the 
incentives are to place the patient in the most appropriate 
post-acute care setting rather than a setting where the payment 
is most advantageous. Thank you again for the opportunity to 
speak to you today about the potential for increased payment 
accuracy and patient assessment standardization in post-acute 
care. I would be happy to answer any questions you may have.
    [The prepared statement of Mr. Kuhn follows:]

   Statement of Herb Kuhn, Director, Center for Medicare Management, 
 Centers for Medicare and Medicaid Services, U.S. Department of Health 
                           and Human Services

Introduction
    Madam Chairman Johnson, Congressman Stark, distinguished members of 
the subcommittee, thank you for inviting me here today to discuss ways 
to improve coordination in the payment and clinical assessment of post-
acute care. A more beneficiary-centered system of post-acute care 
services has the potential to improve quality of care, access to care, 
and continuity of care in a cost efficient way.
    CMS is committed to ensuring that our administrative actions 
provide maximum support to further steps toward higher quality post-
acute care and we have numerous initiatives underway to further this 
goal. Medicare pays for rehabilitation and other post-acute care 
services in a variety of settings, including skilled nursing facilities 
(SNFs), inpatient rehabilitation facilities (IRFs), long-term care 
hospitals (LTCHs), and home health. Adopting techniques that can 
provide greater uniformity in how patients are assessed and quality is 
measured can support efforts to pay more consistently for services 
across different sites of post-acute care while eliminating 
administrative barriers and incentives that impede high quality care. 
CMS is actively exploring such approaches as it works to improve its 
payment systems under Medicare while supporting quality and access.

Background
    CMS began transitioning to the various post-acute care prospective 
payment systems (PPSs) in accordance with the Balanced Budget Act of 
1997. The transition began with skilled nursing facilities in July of 
1998, followed by rural swing beds SNFs in July of 2000, home health 
agencies (HHAs) in October of 2000, IRFs in January of 2002, LTCHs in 
October of 2002, and finally psychiatric hospitals in January of 2004. 
The new administrative pricing models have generated substantial 
improvements over the preexisting cost-based systems. Further, the 
transition from cost based reimbursement to PPS in post-acute care was 
a major milestone for the program that resulted in improved cost 
containment while more directly linking payments to the care needs of 
each beneficiary. However, since each of these systems was developed 
independently, it is time to consider ways of improving coordination of 
payment and clinical assessment across care settings to provide a more 
seamless system of post-acute care services.
    To date, Medicare's benefits and policies have focused on phases of 
a patient's illness as defined by a specific site of service, rather 
than on the entire post-acute care episode. Thus, payments across 
settings may differ considerably even though the clinical 
characteristics of the patient and the services delivered may be very 
similar. As the differentiation among provider types becomes less 
pronounced, it may now be appropriate to explore more coordinated 
approaches to the payment and delivery of post-acute care services that 
focus on the overall post-acute episode. Initially such approaches 
would focus on establishing more consistent payments across different 
sites of service where services provided to patients and associated 
resource requirements are similar. Ultimately, we should focus our 
efforts on developing a system that provides payment and assures 
quality for the overall post-acute episode, rather than each individual 
component of the continuum of care. In order to accomplish these 
objectives, we need to begin to collect and compare consistent clinical 
data across various sites of service and use these data as part of our 
research efforts to build the components of such a system.
    In the long run, our ability to compare clinical data across care 
settings is one of the benefits of standardized electronic health 
records (EHRs) and other steps to promote continuity of care across all 
settings. It is also important to recognize the complexity of the 
effort, not only in developing an integrated assessment tool that is 
designed using health information standards, but in examining the 
various provider-focused prospective payment methodologies and 
considering payment approaches that are based on patient 
characteristics and outcomes.
    MedPAC has recently taken a preliminary look at the challenges in 
improving the coordination of our post-acute care payment methods, and 
suggested that it may be appropriate to explore additional options for 
reimbursing post-acute care services. We agree that CMS, in conjunction 
with MedPAC and other stakeholders, should consider a full range of 
options in analyzing our post-acute care payment methods.

Post-Acute Care Settings
    Post-acute care services are offered in SNFs, in IRFs, in the home 
by HHAs, and in LTCHs. Each of these settings has its own payment 
system and method for evaluating patient functioning. Each of the 
current payments systems is described below.

SNF Per Diem Payments Based on Resource Utilization Groups
    SNFs provide short-term skilled nursing and rehabilitative care to 
people with Medicare who require such services on a daily basis in an 
inpatient setting after a medically necessary hospital stay lasting at 
least three days. SNFs receive per diem payments for each admission, 
which are case-mix adjusted using a resident classification system, 
Resource Utilization Groups (RUG) III, based on data from resident 
assessments and relative weights developed from staff time data. SNFs 
use the MDS 2.0 instrument to assess care planning as part of the 
federally mandated process for clinical assessment of all residents in 
Medicare or Medicaid certified nursing homes. This process provides a 
comprehensive assessment of each resident's functional capabilities and 
helps nursing home staff identify health problems. More specifically, 
patients are classified into RUG-III groups based on need for therapy 
(i.e., physical, occupational, or speech therapy), special treatments 
(e.g., tube feeding), and functional status (e.g., ability to feed self 
and use the toilet). Patient status is reviewed periodically to update 
the RUG-III grouping.
    An interdisciplinary team completes the MDS via several sources, 
such as communicating with and observing the resident, reviewing the 
medical record, and communicating with family & staff. The assessment 
for a SNF patient is completed at a few intervals of his/her stay, on 
days 5, 14, 30, 60, & 90 day, although there are times when an off-
cycle assessment may need to be completed. The 5-day assessment covers 
payment for days 1--14; 14-day for days 15--30; etc.
    CMS requires that once the MDS is completed, it be submitted 
electronically to the State database. When the assessment is required 
for SNF payment, a Resource Utilization Group (RUG) is assigned to the 
assessment. The RUG assignment is based on specific items within the 
MDS. The RUG categories are based on time study data, which measured 
staff time for medical conditions, disease processes and treatment 
interventions. A provider may submit a claim to its FI once the 
assessment is submitted and accepted into the State database.

Home Health 60-Day Episode Payments Based on National Rate
    To qualify for Medicare home health visits, people with Medicare 
must be under the care of a physician; have an intermittent need for 
skilled nursing care, or need physical therapy, speech therapy; or have 
a continuing need for occupational therapy; be homebound; and receive 
home health services from a Medicare approved home health agency. Under 
the PPS, Medicare pays higher rates to HHAs to care for those 
beneficiaries with greater needs. Home health is measured in 60-day 
units called episodes, and the amount of payment for an episode is 
thenational base rate, adjusted for case-mixand for prices in the area 
where thepatient resides. The base payment covers the costs of visits, 
to include the costs of routine and non-routine medical supplies, which 
is based upon a model with 1998 costs and updated annually using the 
home healthmarket basket.
    Payment rates are based on relevant data from patient assessments 
using the Outcome and Assessment Information Set (OASIS). The OASIS is 
a group of data elements that represent core items of a comprehensive 
assessment for an adult home care patient and form the basis for 
measuring patient outcomes used by CMS to determine appropriate case-
mix adjustment for Medicare payment purposes and by individual agencies 
for outcome based quality improvement, or OBQI. Medicare Conditions of 
Participation (CoPs) for Home Health Agencies (HHAs) require that 
information about a patient's health status be collected by HHA staff 
using the OASIS assessment instrument at the start of care, at 
discharge or transfer, at follow up (60 day re-certification) and at 
resumption of care.
    The purpose of case-mix adjustment, like the DRG system for 
hospitals, is to adjust payment based on the different levels of 
resources used for a unit of service. The home health case mix 
methodology uses a combination of scores from 23 OASIS items and an 
additional data element measuring the receipt of therapy services that 
result in one of 80 case mix weights or home health resource groups, 
which in turn determine the payment for the episode of care. These data 
elements are organized into three dimensions to capture clinical 
severity factors, functional severity factors, and service utilization 
factors influencing case-mix.

Inpatient Rehabilitation Facility (IRF) Per Discharge Payments Based on 
        Cse-Mix Groups
    For classification as an IRF, a percentage of the IRF's total 
inpatient population during the compliance review period that is 
associated with an IRF's cost reporting period must match one or more 
of thirteen specific medical conditions. Payments under the IRF PPS are 
made on a per discharge basis. Under this system, payment rates are 
based on case-mix groups (CMGs) that reflect the clinical 
characteristics of the patient and the anticipated resources that will 
be needed for treatment.
    IRFs use the IRF Patient Assessment Instrument (IRF-PAI) to assess 
the functional performance and health status of the patient and changes 
in the patient's functional performance status from admission to 
discharge. Under IRF PPS, a person with Medicare must be assessed using 
the IRF-patient assessment instrument (PAI). The IRF-PAI is a three 
page form that captures demographic, medical, and functional 
performance data regarding the patient. Using the IRF-PAI, an IRF's 
clinicians assess the inpatient at both admission and discharge, and 
the combined data is electronically transmitted to CMS only once after 
the patient is discharged. Typically the admission assessment is 
performed during the first three calendar days of the patient's stay. 
The admission data that is recorded by the IRF's staff on the 
electronic version of the IRF-PAI results in the patient being 
automatically classified into one of the payment groups that are 
referred to as case-mix groups (CMGs). The IRF then records the CMG 
code on the Medicare claim. As the IRF's Medicare claim is processed by 
the fiscal intermediary both case level and facility level adjustments 
are automatically applied to the initial unadjusted CMG payment rate 
resulting in the adjusted payment amount that the IRF will receive for 
care furnished to the inpatient.

Long-Term CareHospital (LTCH) Per Discharge Payments Based on Diagnosis 
        Related Groups
    Long-term care hospitals have an average Medicare inpatient length 
of stay greater than 25 days. These hospitals typically provide 
extended medical and rehabilitative care for patients who are 
clinically complex and may suffer from multiple acute or chronic 
conditions. Services may include comprehensive rehabilitation, 
respiratory therapy, cancer treatment, head trauma treatment, and pain 
management. The PPS for LTCHs classifies patients into distinct 
diagnostic groups based on clinical characteristics and expected 
resource needs (LTC-Diagnosis Related Groups (DRGs)), which are based 
on the existing CMS DRGs used under the acute hospital inpatient PPS 
that have been weighted to reflect the resources required to treat the 
medically complex patients treated at LTCHs.
    Although LTCHs do not have a standard patient assessment tool, 
following a rigorous analysis of existing research on the universe of 
LTCHs and their typical patients, CMS has a contractor collecting 
information from several sources that could be used to develop patient-
level criteria for LTCHs. There are three main types of data sources 
for this facet of the project: Claims analysis, Quality Improvement 
Organization interviews, and site visits/provider discussions. CMS 
expects to receive the final report on this research project from our 
contractor by the end of FY 2005.

CMS is taking Action toward Change
    CMS has several initiatives in the planning and implementation 
phases to further our goals of developing a more consistent payment and 
assessment structure in post-acute care. More specifically, we are 
working with our stakeholders to study existing patient assessment 
instruments and potential for the future. We are also working with the 
National Quality Forum (NQF) to set up a technical expert group to look 
at the development of a functional status framework to identify 
information we should be collecting on aspects of relevant functional 
status. Furthermore, we are mapping the MDS to Consolidated Health 
Information (CHI) to ensure the MDS conforms to CHI standards. In 
addition, CMS has twice expanded the post-acute transfer policy under 
which it pays the acute hospital transferring a patient to a post-acute 
setting under a per-diem payment, rather than the full DRG payment. In 
the most recently-proposed inpatient PPS Notice of Proposed Rulemaking, 
CMS proposed to expand the policy even further.   Finally, we are 
currently evaluating CMS research priorities and anticipate funding 
future research to develop payment systems using clinical data 
collected across post-acute care settings.

CMS is Working in Coordination with out Stakeholders
    Beginning in 2001, CMS has been working collaboratively on an 
investigatory effort funded by Assistant Secretary for Planning and 
Evaluation (ASPE) to learn more about the current and potential future 
design of our patient assessment tools. More specifically, this effort 
was designed to hold initial meetings with stakeholder groups, other 
Federal agencies, and researchers to identify issues with current 
assessment systems, investigate future needs, and to elicit comments on 
what is perceived as the government role in the collection and 
reporting of assessment data. We met with over 200 different 
stakeholders across the continuum of care as well as the Agency for 
Healthcare Research and Quality, the Department of Veterans Affairs, 
and MedPAC staff.

BMS is Working to Identify Common Measures and Process for the Clinical 
        Assessment of Patients
    A key to developing more consistent payment and quality assurance 
methodologies across different sites of post-acute care is the use of 
common measures and processes for the clinical assessment of patients. 
CMS and the Department of Health and Human Services as a whole are 
committed to the development of standardized health information 
terminology (e.g. Systematized Nomenclature of Medicine, Logical 
Observation Identifiers Names and Codes--Clinical Terms (SNOMED-CT) to 
reconcile disparate assessment items collected by the different health 
care providers in their particular settings. In addition, CMS has asked 
the National Quality Forum (NQF) to convene a group of technical 
experts to identify a standard framework for measuring functional 
status that could be used in CMS instruments and programs. This 
technical group could create a subset of items common to payment (and 
quality for continuity of care measures) and allow flexibility for the 
other items specific to a particular setting. Factors such as 
diagnosis, functional status, activities of daily living (ADLs), prior 
hospitalizations, and discharge to community are just a few elements 
that could serve as a common set of information collected at admission 
and discharge to help structure payment and quality programs. Once 
these changes are made, CMS could test the new instrument, and begin 
collecting data for use in developing more advanced methods for payment 
and quality assurance in post-acute care. In the short term, the 
potential exists to recalibrate existing SNF, IRF, LTCH, and home 
health payment systems based on the standardized data elements, and use 
the data to measure resources and establish payment levels more 
consistently across these sites of care.

CMS is Collaborating with ASPE to MAP MDS to CHI Standards
    In October of 2004, CMS and ASPE contracted work to begin mapping 
of MDS items to the adopted medical terminologies and standards 
recommended by the CHI initiative. This work ensures that the future 
version of the MDS conforms to CHI standards thus supporting the 
adoption and promotion of interoperable electronic health information 
systems.

CMS' Expanded Transfer Policy Helps Ensure Accurate Payments
    Due to concern that hospitals may be discharging patients as 
quickly as possible to post-acute settings, thus substituting post-
acute care for the end of the hospital stay, CMS has proposed expanding 
the post-acute transfer provision to help ensure that acute care 
hospitals receive accurate payments for cases that those hospitals 
transfer to post-acute care. The provision would add additional DRGs to 
the existing policy that pays acute hospitals that transfer patients to 
a hospital or unit excluded from the IPPS, skilled nursing facility, or 
home health agency after a shorter than average length of stay on a 
per-diem basis, rather than the full DRG payment. More specifically, 
each transferring hospital is paid a per diem rate for each day of the 
stay, up to the full DRG payment that would have been made if the 
patient had been discharged without being transferred.

DMS is working to Ensure that People with Medicare are Treated in the 
        Most Appropriate Setting
    CMS covers rehabilitation and post-acute care in a variety of 
settings. CMS is committed to ensuring that beneficiaries have access 
to high quality rehabilitation services in these settings at an 
appropriate cost to taxpayers. Generally inpatient rehabilitation 
facility payments are much more generous than those paid to acute care 
hospitals; therefore it is important to ensure that the majority of 
patients treated by inpatient rehabilitation facilities truly require 
the higher level of care available at such a facility.
    In February of 2005 CMS in collaboration with the National 
Institutes of Health, Center for Medical Rehabilitation sponsored a 
panel meeting to review available research on the types of patients 
appropriate for inpatient rehabilitation care and provide insight into 
where additional research may be needed.

Significant Variations across Post-Acute Care Settings Exist
    It could be that the current variation in payments across settings 
creates incentives that inappropriately affect where providers send 
their patients. We should investigate a more coordinated approach to 
payment and delivery of post-acute care services that focuses on the 
overall post-acute care episode or attempts to pay more consistently 
across different sites of care. Payments for particular post-acute care 
services should be more consistent regardless of the setting in which 
the services are furnished. An approach that relies on a single 
comprehensive assessment of a patient's needs and clinical 
characteristics could ensure that payments are at levels consistent 
with high quality, cost effective care regardless of setting.
    The following case example illustrates how the payments under 
Medicare for levels of rehabilitative care received in the various 
settings may differ for a patient that has a primary diagnosis of a 
lower extremity joint replacement, which is a common patient condition.
    A 74-year-old woman has experienced a right total knee arthroplasty 
(TKA), with a wound infection, fever, and high white blood cell count, 
noted on her second postoperative day. A work-up indicates the 
existence of staphylococcus aureus septicemia. The patient lacks full 
extension and has only 65 degrees of flexion on her third post-
operative day. The chart below demonstrates how the different post-
acute care settings provide different classifications, lengths of stay, 
and payments.

----------------------------------------------------------------------------------------------------------------
       Setting                 Classification                Length of Stay            Payment (2003 rates)
----------------------------------------------------------------------------------------------------------------
            IRF         Case-mix group 804 (lower                  14 days                        $10,828.60
                      extremity joint replacement with                           The existence of staphylococcus
                      some functional capabilities)                              aureus septicemia, a comorbid
                                                                                  condition (ICD--9--CM code
                                                                                   038.11), would place this
                                                                                 patient into the tier 2 payment
                                                                                                   category.
----------------------------------------------------------------------------------------------------------------
            SNF       Either the very high (RVB) or                14 days       $4,446.82 for RVB and 14 days,
                      ultra high (RUB) rehabilitation                            $6,352.60 for RUB and 14 days
                                            group
----------------------------------------------------------------------------------------------------------------
               LTCH             Patient group 238                  14 days         $17,671.22 for 14 days or
----------------------------------------------------------------------------------------------------------------
    Home Health          High/High/Moderate group          60-day episode*            $5,165.26 for services
                                                                                 delivered for a 60-day episode
----------------------------------------------------------------------------------------------------------------
*Payment is always based on 60-day episode unless low utilization or other adjustment applies.

    In addition to the above-mentioned options, the patient could also 
receive outpatient therapy or remain in the original surgical acute 
care hospital, both of which would have different classifications, 
lengths of treatment, and payments than those mentioned in the chart. 
This illustrative example shows the extent to which assessment and 
payment across care settings varies substantially when a patient 
presents with the same condition in each setting.

Benefits of Standardizing Payment Systems
    An integrated payment system for all post-acute care services could 
encourage a focus on actual patient need and eliminate the financial 
incentive for providers to transfer patients from one post-acute care 
setting to another based on financial considerations. We also believe 
an integrated post-acute care strategy could help to address the growth 
in post-acute care spending. We realize that any site-neutral, 
beneficiary-centered system of paying for post-acute care services will 
need to allow for certain variations in costs, such as room and board 
among different types of providers. However, by providing more 
consistent payments for the same treatment in different sites, the 
payment structure should not influence clinical decisions about the 
appropriate site of care.
    As mentioned above, MedPAC has recently commented on the challenges 
we face in coordinating our post-acute care payment methods and 
suggested that it may be appropriate to explore additional options for 
reimbursing post-acute care services. We agree that CMS, in conjunction 
with MedPAC and other stakeholders, should consider a full range of 
options in analyzing our post-acute care payment methods. In fact, we 
have recently issued proposed regulations for SNFs and IRFs in which we 
discuss the long range possibilities for an integrated post-acute 
payment structure. While we have not made any formal proposals, we have 
solicited comment on potential models from the industry and other 
stakeholders. This is an action step that we have taken to advance the 
issue and initiate a dialogue with our stakeholders. In addition, we 
want to encourage incremental changes that will help us build toward 
longer-term objectives. An obvious problem in establishing an 
integrated post-acute PPS is that the research, like the payment 
systems, has been specific to each type of provider. Much work remains 
to be done to develop a case mix adjusted payment system that spans the 
various provider types.
    In addition, ASPE is funding a study examining the relative cost-
effectiveness of post-acute care services provided to Medicare 
beneficiaries who have suffered a stroke. This work as well as work 
that has been funded by National Institute on Disability & 
Rehabilitation Research (NIDRR) in the Department of Education and the 
private sector will provide policy makers with needed information to 
develop a more patient-focused payment policy.
    CMS has existing models of seamless care that may serve as good 
examples for post-acute care payment and assessment systems. For 
example, through Medicare Advantage (MA), CMS makes up-front capitated 
payments to MA plans to provide coordinated beneficiary-focused care. 
The plans then determine the best care setting for the person with 
Medicare based on his or her health care needs. As we begin to make 
incremental changes toward increased standardization and a more 
seamless system of post-acute care and as we review public comments, 
CMS will consider conducting new demonstrations to evaluate the 
effectiveness of different approaches.

Benefits of a Standard Patient Assessment Tool
    As CMS considers modifications to standardize payments in post-
acute care settings, it is essential to recognize the relationship 
between payment structure and clinical data collected through patient 
assessment instruments. By examining the provider-focused prospective 
payment methodologies and considering patient-focused payment 
approaches while developing an integrated assessment tool, CMS is 
taking a necessary first step toward increased system integration.

Increased Standardization Improves Continuity and Quality of Care
    The various assessment instruments used by Medicare providers 
differ because even if providers are collecting similar information 
each instrument collects and stores the patient's health and functional 
status information in different data formats, which are often not 
compatible (as demonstrated in the chart discussed earlier). Because of 
this variation, care may be disrupted when a Medicare patient moves 
across settings.
    Increased interoperability of data standards would allow providers 
to share existing patient information across settings without the 
unnecessary burden of data re-entry for Medicare patients already 
receiving care in other care settings. It also may reduce the incidence 
of potentially avoidable re-hospitalizations and other negative effects 
on quality of care that could occur when patients are transferred 
between different facility types.

Conclusion
    CMS has committed to a variety of activities to develop more 
consistent payment and assessment systems because we realize the 
benefit of having a more comprehensive system where the incentives are 
to place the patient in the most appropriate post-acute care setting 
rather than the setting where the payment is advantageous. Standardized 
payment and patient assessment data elements would make it possible to 
evaluate health and functional status across the range of post-acute 
care settings and bring us closer to establishing a single post-acute 
care payment system, with uniform payments for clinically similar 
admissions and a consistent set of incentives. Greater integration and 
coordination in Medicare's post-acute care payment system could enhance 
our focus on patient need while at the same time reducing unnecessary 
transfers between settings. Ultimately, an integrated patient-focused 
model could allow us to gain control of the rapid growth in post-acute 
care.
    Thank you, Madam Chairman, for the opportunity to speak to you 
today about the potential for increased payment and patient assessment 
standardization in the Medicare program. I would be happy to answer any 
questions you may have.

                                 

    Chairman JOHNSON. I thank the panel for their comments. It 
does seem a simple thing to create a single assessment tool, 
but as you read through the testimony it clearly is not going 
to be an easy thing to do. There are also some things happening 
that raised a lot of questions about what we are currently 
doing, and I would like to share with you a sentence or two 
from the testimony of Carol Raphael of the Home Health Services 
of New York, New York. She says, ``In addition, the report 
shows that from 1996 to 2001, post-hospital discharge home 
health care utilization fell from 108,000-plus episodes to 
59,000-plus episodes, yet SNF utilization increased from 52,000 
to 67,000 episodes.'' Now, I don't know to what extent--this 
raises in my mind the question of whether, when we went to an 
episode payment, PPS under home health, whether or not we 
didn't incentivize the institutionalization in nursing homes of 
certain patients, that in some states were in home health on a 
very long-term basis, and by cutting off the home health option 
for long-term care, we actually ended up putting them in a more 
expensive setting and a setting less harmonious with their 
personal health and other needs. So, I would be interested in 
your commenting on that, because if our payment system is 
already driving certain adjustments, then we need to be aware 
of that, as we begin to look at how we make sure that this is a 
more patient-centered system and not a facility-centered system 
or a payment-structured system. Anyone? Mr. Hackbarth.
    Mr. HACKBARTH. We have spent some time looking at those 
issues and, of course, a lot of time discussing them with 
Carol, a Member of MedPAC. Our analysis suggests that the 
decline in home health users was greatest among patients with 
the lowest expected use of home health services, number one, 
and greatest in those States that had the highest levels of 
home health utilization to begin with. We also looked at the 
question of whether there was a relationship between the 
decline in home health, on the one hand, and the increased 
utilization of SNFs on the other hand, and we looked at that by 
State. There was not a clear relationship at a State level, at 
least between those two things. So, we didn't see home health 
go down dramatically and SNF jump way, way up in the same 
States. So, the pattern is--if there is a relationship, it is a 
more complicated one than that.
    Chairman JOHNSON. Thank you. Anyone else care to comment on 
that?
    Mr. KUHN. I would just make an observation that I couldn't 
agree more with your assessment, the fact that we can look at 
the episode of care of the patient rather than the specific 
site of service, is something we all aspire to, and I think 
your comments are right on point. Also with the different 
silos, the providers act individually and not in concert with 
one another to consider the seamless transition of the patient 
through their entire episode of care. So, some of the fractures 
that you are talking about right now are evident in the system, 
and there is no question that we need to look at those 
opportunities where we can do better.
    Dr. KANOF. They are not just in home health or SNF. There 
is evidence, such as, if you look at SNF versus the IRF, you 
are seeing the same type in shift in utilization depending upon 
what is in the community. So, you could have certain patients 
in community X being admitted to an IRF, but in another 
community, where there might be more SNFs, they are going 
there.
    Mr. HACKBARTH. Could I just add one other point, Chairman 
Johnson? In evaluating the decline in home health, which was 
quite dramatic, we also need to take into account that the 
rules changed. There were some statutory changes in refining 
the definition of eligibility for the benefit. In addition to 
that, there was a major effort in HHS to make sure that the 
benefit was only going to patients who properly qualified for 
it. So, there were some factors outside the system that we 
think were major contributors and probably appropriate 
contributors to the significant decline in home health users.
    Chairman JOHNSON. In Dr. Votto's testimony later on, he 
points to the Quality Improvement Organizations (QIO) and their 
work in looking at appropriateness of discharges, at least in 
the LTCH area, but also mentions hospital discharge planners. 
Have you looked at the effectiveness of discharge planners in 
terms of selecting the appropriate patient placement and how 
effective is that mechanism? Who else is doing it? How else are 
they getting into the system? Is there always somebody in 
charge of planning? To what extent is planning influenced by 
factors like the availability of someone at home to--if they 
are discharged to home--to help? In other words, how effective 
are the systems that we have there that we can call on? How 
much of the problem--because, actually, in the fine print, of 
your testimony, Mr. Hackbarth, you say there has been a 50-
percent increase in spending since 2000 and 80-percent increase 
in spending for LTCHs. Now, those are just extraordinary 
amounts in terms of the size of the increase. When you think of 
the developments--not developments in medicine--but in terms of 
rehabilitation of stroke victims and cardiac victims and so on; 
how much of that is medically driven; how much of that is 
driven by the change in family structure, where most family 
members are working, so there isn't anyone home, so you don't 
have a choice of home care? How much is influenced by the 
availability of care providers? In Connecticut we are very 
strong on home care providers because we have had a cap on 
nursing home beds for several decades. So, has there been any 
attempt to analyze what is driving this? What are levers and 
why haven't we used the ones in the system more effectively?
    Mr. HACKBARTH. We fear that the current system does not 
work well. Two reasons that it doesn't work well are, number 
one, there are not clear criteria on how patients should be 
assigned to different types of facilities. Number two, the 
incentives are often not right; for example, for the hospital 
discharge planner. So, without clear criteria and incentives 
pointing in the proper direction, the potential is great for 
patients to go to facilities that are not appropriate. 
Sometimes that may be a facility that is way more intensive, 
more costly than they need. There is also a risk in the other 
direction as well, that a patient could be discharged from an 
acute care hospital and sent to an SNF that doesn't have the 
capabilities that are necessary to care for that patient. So, 
there is a lot of work to be done to get it right.
    Chairman JOHNSON. Mr. Lewis.
    Mr. LEWIS. Thank you very much, Madam Chair. Let me thank 
each panel Member for your testimony. Mr. Director, MedPAC 
recommends that CMS continue to use clinical criteria to 
determine the most appropriate setting for patients, where the 
common patient assessment tool has been developed. Do clinical 
criteria exist for all post acute setting to determine the best 
placement for patient? If so, can you please provide us with 
some examples of the clinical criteria for each setting?
    Mr. KUHN. I don't have the exact information here in terms 
of the clinical information for each setting. We would be happy 
to get that information to you, Mr. Lewis. At least with the 
different settings that are out there, the MDS is what is used 
primarily in SNFs, and it really tries to look at the highest 
function of the patient or the resident. The Outcome and 
Assessment Information Set (OASIS) is used right now for home 
health agencies, and that looks at a different level of 
functionality. So, you have two different assessment 
instruments looking at two different things for patients, one 
staying at the home, one in SNFs. Another instrument called the 
Inpatient Rehabilitation Facility Patient Assessment Instrument 
(IRF-PAI), is what is used in IRFs, and is a different 
assessment instrument. Then, as we heard in opening comments, I 
think Madam Chairman stated that, in LTCHs, we do not have a 
patient assessment instrument.
    Mr. LEWIS. Do you plan to develop plans? Or, if so, when?
    Mr. KUHN. Yes. That is the key here, and the real linchpin 
of this whole discussion is that you need a standard patient 
assessment instrument that can look at those common dimensions 
that we need to be looking at for patients, whether it is co-
morbidities, functional status, diagnosis, and so forth, so we 
can pull that information together and have it in a rather 
seamless system. We have begun to work on electronic data 
interchange where we can begin sharing that information. We 
need to now start looking at those other elements. We hope to 
be in a position that we can be testing products early next 
year. It is something that is long overdue and that we are 
working on at the agency right now.
    Mr. LEWIS. Your agency has been looking to issues related 
to post-acute care since the early nineties. Can you please 
tell us what you have learned over the past 15 years and what 
changes the agency has made to address the issues that have 
been identified over the years?
    Mr. KUHN. The big changes that have been made in the 
nineties and particularly in the late nineties for which Mr. 
Hackbarth provides some pretty good information in his 
testimony, included some really rapid growth in these areas. 
Within the Balanced Budget Act 1997 (P.L. 105-33), Congress 
gave CMS the authority to begin moving to PPSs in these areas. 
The agency has now completed transitioning to the PPS, and we 
think that has really begun to put the brakes on this area in 
terms of spending, trying to get better utilization, and trying 
to get better classification of facilities, to make sure we get 
the patients to the right place, but obviously we need to do 
more. I think we are at a mature place now in terms of our PPS, 
because we finished transitioning the last one at the beginning 
of this year and that was the inpatient psychiatric facility 
PPS. Now, while that is not a post-acute care setting, we have 
now finished implementing all the PPSs. So, I think it is an 
appropriate and timely hearing to begin thinking about the next 
steps to move forward. All of us need to focus on post-acute 
care right now.
    Mr. LEWIS. Thank you very much. Doctor, thank you for being 
here. The CMS has provided a three-year transition period to 
phase in the 75 percent threshold. Based on your study, based 
on your finding, RFs, do you think a transition period is 
justified?
    Dr. KANOF. Well, what you want to make sure is that CMS 
(Medicare) is paying for the appropriate patient, and you want 
to make sure that the payments are medically necessary. What 
our data showed for looking at fiscal year 2003, was that in 
fact if we were to use the transition rules, about 60 percent 
of the patients had a condition that was on the list and also 
had a co-morbidity, so that in fact it would have matched the 
rules as played through in their transition. If, however, we 
did not include the co-morbidities, then payment would have 
been much lower, and less than 40 percent of the facilities 
would have been able to be receiving payment as Medicare IRFs. 
So, there is value in having this transition as--as we have 
said both in our report and today, that we believe CMS needs to 
do some refinement and clarify what are the appropriate 
subgroups and go beyond just using diagnose for admissions.
    Mr. LEWIS. Chairman, how about do you have anything to add?
    Mr. HACKBARTH. MedPAC supports the concept of the 75 
percent rule. The purpose is to assure that only appropriate 
patients receive this intense and relatively high-cost form of 
care. We have urged CMS to establish the criteria and the 
proper diagnostic groups with a transparent process involving 
clinicians that have experience in the field and also 
clinicians that have experience with other types of post acute 
facilities. We have suggested that it might be appropriate for 
there to be a brief halt in the transition to allow that sort 
of public process. We would also concur that it may well be 
true, as GAO points out, that just a diagnosis level statement 
is not precise enough and that there ought to be a more 
detailed set of criteria to really make sure that the right 
patients get there.
    Mr. LEWIS. Thank you very much. My time is up. Madam Chair, 
thank you for being so patient.
    Chairman JOHNSON. Thank you. Mr. McCrery.
    Mr. MCCRERY. Thank you, Madam Chair. I would like to pursue 
this questioning Mr. Lewis started on the IRFs. Dr. Kanof, 
Chairwoman Johnson and I wrote a letter several years ago 
asking GAO to do a report on this subject; and indeed you did--
GAO did a report. Since then, I think the Chairman and I have 
heard from some who have complained about the report, as you 
might expect. One of the specific complaints, and I would like 
for you to address it if you can, was that in the course of the 
study, GAO only spent 1 day with the IOM and interviewed just 
14 clinicians, the implication being you just didn't do your 
homework. Is that true? If so, how do you justify that?
    Dr. KANOF. Well, in fact, we too have heard some similar 
questions, so I can answer that one. I know that specifically, 
as you go through the methodology and the report, yes, we did 
speak to many clinicians. We convened experts at, but we spoke 
with many experts in the field and we spoke with IRFs and we 
spoke with fiscal intermediaries, and we spoke with a total of 
106 individuals, and 65 of them--so over half of them--are 
clinicians. So, we really do believe that we have a wide 
breadth of individuals that we spoke with.
    Mr. MCCRERY. Do you think that you should conduct any 
additional clinical research to further assess the needs?
    Dr. KANOF. One of our recommendations in the report is 
that, in fact we do believe that there is a need for more 
clinical research. The CMS are working with the National 
Institute of Health (NIH) to clearly convene more individuals, 
not as much because the evidence really is not there to say 
that there should be more conditions and the evidence isn't 
there to show that you have different outcomes if you are in an 
IRF or a SNF, but actually more to begin to think about what is 
the research and how to find out the important question as to 
who should be admitted to an IRF.
    Mr. MCCRERY. Thank you for that explanation. Continuing on 
this, you use the percentages that the GAO concluded regarding 
how many IRFs could comply based on 2003 data. One piece of 
data that we have been provided with is that only 6 percent of 
IRFs could meet the 75 percent criteria in 2003. Does that 
comport with your----
    Dr. KANOF. That is true. That was if you--Mr. Lewis was 
asking me--I believe he was asking me how many would work, 
comply if we were using the transition.
    Mr. MCCRERY. Phase-in.
    Dr. KANOF. Right. So, in the phase-in it is about 60 
percent. If there is no phase-in and you just go to the 13 
conditions, it is 6 percent.
    Mr. MCCRERY. Well, that would lead us to the conclusion, 
wouldn't it, that when it is fully phased in, only 6 percent 
would be able to comply.
    Dr. KANOF. No, because you would have to assume that there 
is no change in anybody's behavior between the phase-in and 
2007. I am not disagreeing with you that it would probably be a 
relatively lower number, potentially, than 75 percent, but in 
fact the way that the phase-in is, is that there are these 3 
years of the additional co-morbidities. In fact, many of the 
IRF medical directors that we spoke with did acknowledge that 
if they were to be paying closer attention to the diagnoses 
that they were being admitted, they would be paying closer 
attention to--in fact looking at the diagnoses that they were 
being admitted for. In 2003 you have an environment where CMS 
is not really -has not looked at the 75 percent rule. As Mr. 
Hackbarth explained, there is really no incentive for anybody 
to be thinking twice about where somebody should be admitted. 
That is why I am not sure that the 6 percent is correct.
    Mr. MCCRERY. Well, in any event, I think one thing that we 
need to consider is the financial viability of these rehab 
centers if they have to make the changes necessary to come 
under compliance under the 75 percent rule. That is the big 
question. Do they go away if they have to comply, or are 
constraints so severe that they can't get enough patients under 
those conditions to sustain themselves financially? Given 
that--just one last question on this, Madam Chair--do any of 
you think that the rule should be reexamined with an eye toward 
more leniency for more than 3 years as we get more data? Or do 
you think the three-year phase-in is exactly the right path 
that we should be on?
    Dr. KANOF. I think one of the important points, though, 
that I said in my oral statement, too, is that--and I 
understand the question you are asking--is, though a 
significant amount of the patients from the 2003 data that were 
being admitted to IRFs are single joint replacements of knee 
and hip, there is evidence that those are individuals that do 
not need to be admitted to IRFs. So, I think that in addition 
to the question in terms of the transition, I think clearly 
also that what we need to consider is are we spending 
appropriate dollars for individuals in these settings.
    Mr. MCCRERY. I don't question that. You didn't really 
answer my question.
    Dr. KANOF. I think that the transition as proposed gives--
CMS gives IRFs the ability to process patients, learn to do 
assessments, allows CMS the ability to develop finer refinement 
of the rule. So, the answer, as I said to Mr. Lewis, would be 
yes.
    Mr. MCCRERY. Mr. Kuhn, would you agree?
    Mr. KUHN. It is a little bit premature to judge whether 
additional leniency needs to be built into the system. We did 
build additional leniency in the system when we published the 
rules last year, when we moved from ten conditions to thirteen 
conditions. I think, as Dr. Kanof said, there are going to be 
behavioral changes by these facilities. I think we need to see 
more data, see how they are transitioning, seeing how they are 
working as they move forward. The key here, as she said, is 
that we don't want Medicare to be at risk of overpayments for 
these services, because I think that clinical evidence in the 
area of orthopedic joint replacement, as she indicated, is 
rather weak concerning whether individuals should be in these 
facilities.
    Anecdotally, I recently saw a news article about a 
particular facility that decided to convert itself from a 
rehabilitation facility to a sub-acute care facility, an SNF. 
Most of the employees were able to transfer over to the new 
facility, but I think it is pretty clear that the patients are 
still getting the same level of services they need but in the 
right setting. The behaviors and payment systems, are driving 
us to change here rather gradually. I think more data is 
needed. We need to all monitor it closely, because I think your 
concern is genuine that these patients should get the care that 
they need and we want to continue to work with all the 
stakeholders to make sure that that happens.
    Mr. MCCRERY. Thank you very much. Thank you, Madam 
Chairman.
    Chairman JOHNSON. Mr. Thompson.
    Mr. THOMPSON. Thank you, Madam Chair. Thanks to the panel 
Members for being here. Mr. Kuhn, MedPAC says, and I think I am 
quoting you correctly, that the system doesn't work well. We 
just heard that in the testimony. Your agency has been looking 
into issues related to post-acute care for the past 15 years or 
so. Can you give us an idea of what you may have learned and 
what recommendations your agency has made to improve matters?
    Mr. KUHN. That is a good question. I think we have got our 
arms around a couple of things. First I think we have really 
been able to slow some of the growth in some of the areas of 
spending that has been out there, and I think that has been 
effective, although we still see growth in this area. We have 
also learned that there is the need for additional research in 
a lot of these areas, particularly for LTCHs, and also for IRFs 
and others.Importantly, what we have really seen is that, now 
that we have finished the work with all the PPSs, it is time to 
move the whole system forward and think about a site-neutral 
payment, one that focuses on the patient instead of the name on 
the door of the facility. Currently, if it is one kind of 
facility, you pay one rate and you pay another facility another 
kind of rate, but the money really needs to focus on the 
patient for the entire course of care. That is one of the big 
lessons here, and all of us need to be thinking about this in 
the future.
    Mr. THOMPSON. Thank you. Mr. Hackbarth--and I didn't ask 
them to say that--but the site-neutral payment issue is 
something that has interested me a lot. When we talk about care 
versus the site, how much of the site part of it is determined 
by regulatory changes or even State law in some instances? It 
seems to me we have the same patients, we are just moving them 
around to follow the money, and not in a negative sense. 
Everybody that is providing health care today is struggling to 
do so, and they are trying to figure out what works best for 
them and how they can maximize their reimbursements to continue 
to provide quality health care. If in fact that is what we are 
doing, it seems to be in conflict with what you had said 
earlier about the high quality and appropriateness of care at a 
reasonable cost.
    Mr. HACKBARTH. Well, let me go back to your first question: 
How much of a difference in cost is attributable to a 
difference in regulatory requirements and the like? I can't 
give you an answer to that. Surely some of it is.
    Mr. THOMPSON. Not so much the cost, but the care versus the 
site; where you are taking care of the same people, just you 
are doing it in a different location----
    Mr. HACKBARTH. The issue oftentimes is whether a given 
patient needs that particular type of care that may be more 
intensive and, therefore, more costly. You can have--we did an 
analysis of care of patients with knee and hip replacements, 
that some of them go home and receive home health care or 
outpatient therapy, some of them go to IRFs, and some go to 
SNFs. Well, in fact although they all have the knee replacement 
in common, they are very different in other respects, in terms 
of things like care givers at home to support them, in terms of 
their clinical characteristics. So, a diagnosis alone, a common 
diagnosis doesn't tell you all you need to know about the 
differences in patients. So, if we have a patient that could go 
home--and orthopedic surgeons tell us that most patients, 
Medicare patients with a single knee replacement can go home. 
If they end up in an IRF, they may not get poor-quality care, 
but they may get much more expensive care than they need. That 
is our concern.
    Mr. THOMPSON. Thank you. A question--and I guess, Dr. 
Kanof, I don't want you to feel left out, so I will ask you. 
How do we balance that need for data vis-a-vis the need for 
health care, and, at the same time, try and consider the morale 
of the health care providers? I can't tell you how many times I 
have heard from providers that they feel like they are data 
collection employees, and they are spending most of the time at 
their home health visit collecting data. I am sure some of it 
has got to be valuable, but how do you balance that need to 
make sure it doesn't conflict with the health care part of it?
    Dr. KANOF. Well, I think that one of the common things we 
have all said is that one way to balance this all is in fact to 
try to create more of a uniform assessment tool that we could 
then use regardless of what setting you were in, so that from a 
health care provider they don't need to sit there and say, 
okay, this is my home health patient and this is my Durable 
Medical Equiptment (DME) patient and this is my SNF patient, 
but that in fact there is one tool that might have certain 
questions on it that you might ask or not ask, depending upon 
the setting, but that there is more of a uniform way of asking 
the question. One of the interesting distinctions between all 
the current tools is that they all have, in fact, different 
grading scales, so on one you have to remember that the lowest 
number is the high and the high is the low. So, I don't think 
from a health care prospective or a health care provider 
prospective you can eliminate the work involved with the tool, 
but there are many ways that we could develop tools that are 
more user friendly, client specific, patient specific, and 
would still give us the information for both payment and 
quality. I don't want to forget quality.
    Mr. THOMPSON. Please hurry. Thanks.
    Chairman JOHNSON. Mr. Hulshof.
    Mr. HULSHOF. Thank you, Madam Chairman. Listening to the 
discussion about home health a little bit ago, while I wasn't 
honored to serve on this Subcommittee, I remember the 
discussions about the Balanced Budget Act 1997 as a freshman 
Member on the full Committee. I remember, Mr. Hackbarth, you 
touched on this, that there were some substantive changes that 
we made. We saw the rapid growth in home health, and we saw--
let me characterize--some particular States where the growth 
was really going. So, we painted with a very broad brush to try 
to rein those in, and, as a result of that, though, there were 
many efficient good home health agencies that folded their 
tents in the aftermath of that as well. Just a parenthetical 
comment.
    I do want to ask you, though, Mr. Hackbarth, because as we 
look now at the rapid growth in long-term care, I think--and my 
characterization of what you said was, number one, no clear 
criteria, and number two, the incentives are skewed, in my 
characterization. Is that a conjunctive or disjunctive? In 
other words, if there were clearer criteria, would the 
incentives be okay? Or is it clear incentives and the 
incentive--excuse me, clear criteria and, by the way, the 
incentives don't really fit?
    Mr. HACKBARTH. That is a good question. MedPAC's initial 
recommendation on LTCHs was to develop the criteria. So, if you 
can't change the incentives, at least have criteria on who it 
is that needs this expensive type of care. We thought that 
there ought to be both patient criteria and facility criteria. 
This is what it means. These are the services that LTCHs should 
be delivering. So, we thought that is the easiest first step. 
As I said in my opening statement, that doesn't deal with the 
incentive issue. If we really want the decisions made properly, 
we need to address that as well. There are a couple different 
paths that you might take. One is to bundle all the post-acute 
care payments in a lump, and then give somebody responsibility 
for managing that and holding them accountable for both quality 
and cost performance. Another approach would be to establish a 
case manager that doesn't bear the utilization risk, but they 
are an impartial party evaluated under quality performance in 
getting patients to the right settings. So the first step is 
criteria. We don't think you can stop there. In the longer run 
we have got to do something about the incentive issue as well.
    Mr. HULSHOF. I appreciate that. Mr. Kuhn, we sought some 
information from my home State of Missouri, tried to get some 
data, and so we turned to the Missouri IRFs. What they did was 
to take the last six months and then extrapolate to a full year 
to come up with an annual estimate. What they told us was that 
17,000 patients would be treated over a one-year period. As all 
of us have expressed, as the 75 percent rule is being phased 
in, there is a lot of concern about how that is going to impact 
the 17,000-plus folks that are receiving this care.
    I have got the--Mr. McCrery referenced the April 2005 GAO 
report, and we have batted that around a little bit. The 
report's suggestion--and Dr. Kanof echoed that in her testimony 
today--that a patient's medical condition or diagnosis in 
isolation is not, in my view, a fully sufficient measure by 
which to classify IRFs. In fact, let me--I almost applauded 
what you said a moment ago when you said let us focus on the 
patient, the patient's functional status, functional decline, 
motor and cognitive function, functional disability. These 
things in a best-case scenario would be taken into account. Let 
me just even--a quick personal note. Two years ago my mother-
in-law, 57 years of age, an active Licensed Practical Nurse, 
one night, brain aneurysm. So, our families experienced in a 
very real way--and I would even say that not just the initial 
diagnosis after this aneurysm, but even to see the functional 
changes over the last two years in this case. So, what is CMS--
give us some wisdom as far as CMS trying to incorporate some of 
these functional measurements into the rule.
    Mr. KUHN. I'd like to provide a couple of quick 
observations. First, concerning the data, we have been looking 
at some data elsewhere that others have been bringing forward 
to us. Remember in 2002 we suspended the enforcement--a 
moratorium on the 75 percent rule. Between then and July of 
2004, when we implemented the two-year moratorium of the new 
rule, and there was no enforcement of the rule, we saw 
utilization spike. So, for those that are saying that we are 
seeing this rapid reduction in terms of the number of people 
being served in IRFs, during the moratorium there was a spike 
in admissions. If you go back to maybe a baseline in 2002, you 
might come out with a different number. This is just a 
cautionary note on the interpretation of those data.
    Second, when we talk about the folks that aren't being 
served in rehabilitation facilities now, when you ask the 
industry where they are going, it appears that they are getting 
services elsewhere, for example, in an SNF or through home 
health services. They are not going without services. I think 
that is an important issue. To address the key point that you 
raised in terms of what we are going to do next, we have this 
classification system with 13 categories that we are using with 
IRFs. We are looking at research in this area. We convened a 
panel with the National Institutes of Health in February of 
this year; we will receive a recommendation from them about 
next steps so we can begin to look at functionality with some 
of these issues. We think further research is an important next 
step, and that is how the Agency plans to proceed. We have the 
effort to enforce the classification system, but we are not 
stopping there. The research will continue, because we will 
continue to look in more detail at this area. As Dr. Kanof 
said, there is not a lot of research in this area, so we all 
need to step up to the plate to help support that and make that 
happen.
    Mr. HULSHOF. Thank you.
    Chairman JOHNSON. Thanks. I am going to ask a couple of 
summary questions because we have this vote and then we have 
ten or eleven five-minute votes. So, I am sorry to 
inconvenience the next panel, but I think we will start you all 
at once after this series of votes. Actually, if there is 
anyone who can't stay, because that is an hour's delay, would 
you--would one of the staff members go back? Kathleen will come 
back and let you know; maybe we can get in one or two before we 
leave. I think in kind of wrapping up--and we have all 
acknowledged that there are big problems in the system, that 
our payment system doesn't assure that patients get to the 
setting in which they get the care they need, for the least 
amount of public dollars. Five years ago we did ask CMS to do a 
report on this, and it was due in January. Now, recognizing 
that CMS has had a lot of other responsibilities as well, 
nonetheless you have all been concerned about it, and we have 
got bits and pieces. Why aren't we closer to a single 
assessment tool and to a structure that uses that tool to at 
least direct the first level of flows, and then to pick up at 
the institutional level the more precise detail that we need 
for payment?
    Mr. KUHN. I would just make this observation, Madam 
Chairman, that sometimes progress is measured in inches rather 
than feet. We are making progress in this area, perhaps not as 
rapid as some would like to see, but we are making progress in 
terms of things that we are doing. In terms of the report, you 
are absolutely right. We owe the Congress a report and we did 
not meet the deadline that we had out there. We are doing well 
on the report. It is a much more complicated issue than we had 
originally thought. I wish I could give you a certain time when 
we could have it deliverable to you; I can commit to you that I 
will have CMS staff follow up with Committee staff on a regular 
basis to give updates, and as we get information we will make 
that available to you as well, because this is an important 
topic, and the sooner we can give information to you all so you 
can have good data from which to make decisions, we would like 
to do that for you. So, we will continue to work to get that to 
you as soon as possible.
    Chairman JOHNSON. Thank you. I appreciate that. I hope that 
you will continue to work as you have with the LTCH on the 
material that they are developing, which is probably more 
specific patient-based material than I think anything I am 
aware of the Federal Government doing. So, I think that would 
be useful.
    Mr. KUHN. One quick thing about LTCHs. Just to let you 
know, as part of the effort we are doing the research. 
Actually, in the next week or two we will be in the field with 
that research, visiting the facilities. We hope to have a 
report by the fall, and we hope to be able to include that in 
next year's regulation cycle. So, we are making progress there 
as well.
    Chairman JOHNSON. I wonder how you view your 25 percent 
rule for the LTAC in the context of this discussion about 
patient-centered health needs.
    Mr. KUHN. When we looked at the LTHC issue, we saw a real 
incentive to unbundle services in these facilities when they 
were co-located in the same facility. To a degree, we were 
seeing two payments for the same episode of care, and that 
concerned us a great deal. So, we tried to phase into this new 
system at the 25 percent level. We made a number of exceptions 
to consider whether they triggered outlier payments, whether 
they were in rural facilities and whether they were the 
dominant hospital in a marketplace, and we tried to create as 
many opportunities there as well. Importantly, we said we 
needed to move pretty aggressively on research dealing with 
patient-specific criteria, things that MedPAC had brought 
forward. Again, we hope to have that report in the fall and 
move that into the immediate regulation cycle. So, I think we 
will hit our milestones on this one and keep the process moving 
forward.
    Chairman JOHNSON. I hope when we get to that point we can 
eliminate the 25 percent rule, because it is absolutely 
arbitrary and there are examples of pairing long-term care 
institutions with institutions that do a lot of heart surgery 
or other kinds of procedures that clearly will result in a 
referral to an LTAC and to require that we pay the $850 
ambulance fee to ship them someplace else, so that the other 
hospital can pay $850 to ship someone else into that LTAC bed a 
few miles down the road. You get into that kind of bizarre 
dance because you are looking at the source from which the 
referral came rather than the patient's need. If the patient is 
qualified and is going to get that care here or ten miles down 
the road, we should not be insisting that they be shipped ten 
miles down the road. So, the arbitrary impact of the current 25 
percent rule is, in my mind, anti-patient-centered health care, 
but also just one more thing that pumps our costs up without 
any benefit to the patient.
    So, I hope that we will be able to move to a criteria-based 
system and get rid of some of these kind of arbitrary policies 
that we put in place during the years when we had inadequate 
criteria. Thank you very much for your testimony. I look 
forward to your input as we move down this road. We must move 
down it, and we cannot actually move down it as slowly as some 
of the testimony sort of implies that we have in the past and 
we will in the future. The future cannot repeat the past in 
regard to the criteria-based system that we need to develop for 
post-acute care. Thank you very much for being here. The 
Committee will reconvene five minutes after the last vote. So, 
for those of you on the next panel it will be at least an hour. 
Thank you. My apologies.
    [Recess.]
    Chairman JOHNSON. The hearing will reconvene. Other Members 
are on their way, but in deference to the witnesses who have 
been waiting such a long time, my apologies again, on the 
record, for having had to take such a long break for the votes. 
We are reconvening now, and we would like to start first with 
Ms. Ousley.

 STATEMENT OF MARY OUSLEY, EXECUTIVE VICE PRESIDENT, SUNBRIDGE 
  HEALTHCARE, ALBUQUERQUE, NEW MEXICO, ON BEHALF OF AMERICAN 
                    HEALTH CARE ASSOCIATION

    Ms. OUSLEY. Good afternoon, Madam Chairman and Members of 
the Subcommittee. I appreciate the opportunity to be here today 
to provide a perspective and recommendations on how to improve 
the efficiency, quality and reimbursement uniformity of post-
acute care. I am the immediate past Chair of the American 
Health Care Association, representing over 11,000 Members and 
the 1.5 million individuals that we serve each day and the two 
million care givers that provide that care. I would like to 
thank the Chair for her leadership on this issue and her 
commitment to ensuring America's seniors receive the highest 
quality care. Like many of the policy debates regarding the 
financing of our Nation's health care system, the problem we 
are discussing today relates to the fragmented and sometimes 
irrational nature of our health care services payment 
structure. In post-acute care, it seems that we really have it 
backward. Our post acute payment structure is tied to where the 
patients receive care, not the actual services that they 
require. As highlighted and talked about earlier, in the June 
2004 report to Congress, MedPAC examined all of these 
significant differentials and distinctions in care across the 
post acute continuum. Not only does CMS require different 
patient assessment instruments for three of the four post acute 
providers, the law also requires each provider type to be 
certified under different criteria. The CMS ensures patient 
safety and quality in each setting through different regulatory 
structures.
    Obviously, the physical settings where patients receive 
care are very different, from the home to the nursing facility 
to the hospital. Post-acute providers, physicians and others, 
involved in patient care believe in hierarchy of acuity among 
the different settings and assume that patients with the 
highest clinical needs will actually receive care in the 
highest acuity setting. Research and experience show that 
different post acute settings actually serve very similar 
patients. An overlap in patient population can occur for 
legitimate non-clinical reasons or clinical reasons that are 
not measurable by research. However, that overlap is many times 
inappropriate. For certain DRGs, IRF payments can be up to 
three times more than skilled care, and for LTCHs, as much as 
ten times more than skilled care. Some of this is clearly due 
to variations in severity of illness of our patients, but 
because there is no common patient assessment tool or outcome 
measures across all settings, it is absolutely impossible to 
ascertain whether patients are being treated in the most 
appropriate setting and whether resources are being allocated 
efficiently and appropriately.
    We believe that it is essential for CMS to develop a 
patient-centered core uniform screening and assessment tool for 
post-acute care and a uniform integrated payment system based 
on this comprehensive assessment tool. Until CMS can finalize 
and apply a uniform system, we do believe we can do a better 
job today in placing post acute patients. We support, and the 
American Health Care Association supports, the continued use of 
the QIOs to review the appropriateness of placement for 
patients with hospital stays, CMS should continue to apply 
hospital discharge planning that is required today by law and 
regulation, and it should do so as a starting point to 
standardize post acute assessment tools. We also believe it is 
very important to implement the 75 percent rule to ensure IRFs 
are treating appropriately placed patients.
    Madam Chair, you have heard from us on many occasions and 
you have heard actually from me on several different occasions 
regarding the importance of sustaining our quality initiatives. 
HHS has noted in several recent reports they are working. The 
quality of care and services in our Nation's nursing homes is 
improving. Nursing facilities currently publicly disclose the 
information to patients and their families on quality 
indicators. All providers should disclose comparable 
information. This will include increased patient knowledge and 
improve the quality of care and services delivered. Also, we 
believe that any system we construct should allow for 
flexibility so that clinical judgment can be used effectively. 
A beneficiary's clinical profile may indicate a need for home 
health, but home health may not be available or they may not 
have the capacity to take a new patient. Therefore, the system 
must be flexible to allow for facility or market limitations.
    In the final analysis, there are many potential changes 
that would better align financial incentives with clinical 
placement. Tightening and enforcing the new and existing 
certification requirements are one, and enhancing--enhancing 
the role the QIOs are playing in reviewing the appropriateness 
of placement. Madam Chairman, at a time when the President and 
Congress are being forced to consider budget cuts in health 
care programs, the first priority must be to ensure that we are 
using existing resources efficiently and effectively by 
establishing a post-acute care structure that is patient 
centered, not site centered, we believe that can happen. We 
believe that this Congress must and should make the development 
of the common patient assessment tool one of its highest 
priorities, and we look forward to working with you and this 
Committee on this issue. Thank you very much.
    [The prepared statement of Ms. Ousley follows:]

  Statement of Mary Ousley, R.N., Executive Vice President, SunBridge 
                  Healthcare, Albuquerque, New Mexico

                              On behalf of

              The American Health Care Association (AHCA)

    Good morning Madame Chair, and members of the Subcommittee. I 
appreciate the opportunity to be with you here today, and to provide 
you with perspective and recommendations on how to improve the 
efficiency, quality and reimbursement uniformity of post-acute care.
    My name is Mary Ousley--and I am immediate past Chair of the 
American Health Care Association. I speak today on behalf of all 
members of the American Health Care Association (AHCA). We are a 
national organization representing nearly 11,000 providers of long term 
care, providing critical long term care services to more than 1.5 
million elderly and disabled people every day and employing more than 2 
million caregivers.
    I have been in the care giving profession for nearly three decades. 
I am a registered nurse and a licensed administrator. I am intimately 
familiar with the challenges of being on the front lines of care 
giving--and highly cognizant that providing quality care to our 
seniors, necessarily, is a collective and collaborative effort.
    I have worked formally and informally with the Centers for Medicare 
and Medicaid Services (CMS) and its predecessor, the Health Care 
Financing Administration (HCFA), in various capacities on many issues 
representing the long term care profession.
    I'd like to thank the chair of this distinguished subcommittee for 
her leadership on this issue, and for her commitment to ensuring 
America's seniors receive the highest quality health care our great 
nation has to offer.
    Like many of the necessary policy debates we now see on Capitol 
Hill regarding the financing of our nation's health care system, the 
problem we are discussing today relates to the excessively fragmented 
and irrational nature of our collective health care services payment 
structure.
    When it comes to post-acute care, we now have it backwards: our 
post-acute payment structure is tied to the institutional setting in 
which patients are placed--not to the services required by patients.
    In its June 2004 report to Congress, the Medicare Payment Advisory 
Commission (MedPAC) examined the significant payment differentials and 
distinctions in care provided across the post acute spectrum.
    CMS requires different patient assessment instruments for three of 
the four post-acute care provider categories. The law requires that 
each provider type be certified under separate criteria. CMS ensures 
patient safety and quality in each of these settings through vastly 
different regulatory structures. In addition, the physical settings in 
which patients receive care greatly differ, ranging from a patient's 
home to a nursing home to a hospital.
    Most post-acute care providers, physicians and others involved in 
patient care believe in a hierarchy of acuity among the different 
settings and assume that patients with the highest acuity clinical 
needs will receive care in the highest acuity setting. Some research as 
well as provider experience shows that different post-acute care 
settings sometimes serve similar patients. This overlap in patient 
populations can occur for legitimate non-clinical reasons or clinical 
reasons that are not measurable by research; however, the overlap is 
sometimes inappropriate and results in Medicare overpayment.
    For certain DRGs, IRF payments can be up to three times more than 
SNF payments, and LTCH reimbursements can be up to ten times more. Some 
of this is clearly due to variations in severity of illness, but 
because there are no common patient assessment tools or outcomes 
measures across all settings, it is not possible to ascertain whether 
patients are being treated in the most appropriate setting, and whether 
resources are being allocated efficiently and appropriately.
    First and foremost, it is essential for CMS to develop a patient 
centered core uniform screening and assessment tool for post acute 
care, and a uniform integrated payment system based on this 
comprehensive assessment tool.
    But until CMS can finalize and apply a uniform system, it can do a 
better job of placing post acute patients in the most appropriate care 
settings. For example, AHCA supports the use of hospital discharge 
planning as a starting point to standardize post acute assessment 
tools.
    For patients with prior hospital stays, CMS should continue to 
apply hospital discharge planning that is already required by law and 
regulations. AHCA also supports continued Quality Improvement 
Organization (QIO) review of the appropriateness of patient placement.
    CMS should also implement the ``75 percent rule'' to ensure IRFs 
are treating appropriately-placed patients and not those who could be 
effectively treated in SNFs.
    Madame Chair, you have heard from us on many occasions regarding 
the need to maintain and sustain our quality initiatives--which, as HHS 
has noted in several recent reports, are working. Nursing facilities 
currently disclose information to patients and their families on 
various quality indicators. All providers, across the board, should 
disclose comparable information. This will increase patients' knowledge 
base and improve the quality of care delivered by all providers.
    As this Committee will readily agree, any system we construct 
should allow for flexibility, so that clinical judgment can be 
effectively exercised in the best interests of patients. Even though a 
beneficiary's clinical profile is a good match for home health care, a 
home health agency may not be available or may not have capacity to 
take a new patient. Therefore, the system must be flexible enough to 
allow for facility or market limitations in post-acute care supply.
    In the final analysis, there are many potential changes we could 
make within the existing system that would better align financial 
incentives with clinical placement decisions. These include ideas such 
as tightening and enforcing new and existing certification criteria for 
IRFs and LTCHs, and enhancing the role of QIOs in reviewing 
appropriateness of patient placement.
    Madame Chair, at a time when the President and Congress are being 
forced to consider budget cuts in many essential health care programs, 
the first priority must be to ensure we spend existing resources wisely 
and efficiently--and in a manner that best serves our seniors as well 
as our taxpayers.
    By establishing a post-acute care structure that is patient 
centered, not site-centered, we can indeed do so.
    Despite all of the big picture changes now being sought on the 
Medicaid and Social Security fronts, the development of a common 
patient assessment tool for post-acute care services must be a high 
priority in this Congress--and we look forward to working with you and 
this Committee to ensure this issue receives the focus and action it 
deserves.

                                 

    Chairman JOHNSON. Thank you very much, Ms. Ousley. Ms. 
Raphael.

   STATEMENT OF CAROL RAPHAEL, PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, VISITING NURSE SERVICE OF NEW YORK, NEW YORK, NEW 
 YORK, ON BEHALF OF THE VISITING NURSE ASSOCIATIONS OF AMERICA

    Ms. RAPHAEL. Good afternoon, Madam Chairwoman. I am pleased 
to be here on behalf of the Visiting Nurse Associations of 
America, the national association for nonprofit, community-
based Visiting Nurse Agencies (VNA) across the country. I 
appreciate the opportunity to help the Subcommittee review the 
current Medicare post-acute care system and determine whether 
some areas, in fact, are in need of reform. As you pointed out, 
post-acute care is a very important part of the health care 
system, not only because because of what we heard, that one-
third of people who leave hospitals go on to post-acute care, 
not only because it is likely to grow, but also because what 
happens in post-acute care affects what happens in the rest of 
the system. We know the first 60 to 90 days after someone has 
an acute episode are really pivotal. We know that we can do a 
lot to prevent re-hospitalizations and those costly transitions 
in and out of acute care. Basically, the VNAs have two 
recommendations.
    Like my colleague, we believe the post-acute care system 
should be built around the patients, their needs, and not 
around facilities. Second, I think we have to move to enable 
Medicare to be what I would call a ``value purchaser'' in the 
future of post-acute care. We know the system is very complex, 
not only because of what we have heard about the difficulty of 
commonalities across sites, but also because of what you, Madam 
Chair, pointed out this morning. We bring home 1,000 people 
from hospitals every week, and I can tell you that often the 
process of decisionmaking is very compressed. A family will get 
a call in the morning that their family Member is being 
discharged that day and all of the decisions have to be made 
within a few hours. The pressure upon discharge plans is 
enormous, and many patients and families really are not 
educated about what their options are; and I think this is the 
context in which we currently operate. We do believe we need to 
move toward a common assessment system. I call it a ``system'' 
because it is more than a tool. We need a common assessment 
process, and we really need to build that on a foundation of 
understanding how similar are the patients who were cared for 
in these different sites, what are the services, and what is 
the mix and intensity, because we don't really have solid 
evidence that will inform us as to the degree of overlap in 
suitability.
    I can speak for home care. Thirty-1 percent of the patients 
that we take care of at VNAs are in rehab, but I believe that 
for nursing homes it is 75 percent and for rehab facilities it 
is probably 100 percent. Many of the people that we see do not 
have conditions that require the standard rehab. Many of them 
have congestive heart failure, complex diabetes, pulmonary 
disease, and so forth. So, I think we need to start with 
understanding the patients. Now, much of what we do in a home 
care setting is similar. If someone has had a stroke, we 
continue the treatment on anticoagulants. We do work on rehab, 
physical, occupational rehab, and dealing with language 
impairment. We do monitor patients to try to prevent someone 
from landing back in the hospital, but some of what we do is 
very different because we are focused on the care giver, 
supporting that wife, husband, daughter, son, and so forth. We 
are also focused on teaching the patient because that patient 
has to live with some degree of impairment for the rest of his 
or her life. We are focused on the underlying diseases, like 
hypertension, which contributed to the stroke in the first 
place. So, I think we really need to devote time and research 
to understand how these sites actually compare.
    I also am a believer in involving the patient in 
assessment. I always say, ``Quality is in the eye of the 
beholder,'' and we need to find out from the patient whether 
they think they have made progress and have had a good result. 
I do believe that a common assessment instrument has to 
complement what we do in our own sites. We use OASIS. It is a 
system that measures outcomes and has a mechanism for payments 
which I think is unique; we want to hold on to that. You need 
that instrument to do care planning, to monitor and change the 
care plan as the person's condition changes. We believe that 
the implementation of OASIS, albeit painful at times, has 
really caused us to focus on outcomes. We no longer provide a 
visit; we are really taking care of a patient to produce the 
best possible result. That has been an important change, and it 
has also enabled us to move toward public disclosure and 
compare outcomes in the home care field. So, I believe that we 
need to really not replace what we have, but find a way to 
supplement it.
    I think that as we look to Medicare as a purchaser of post-
acute care, we heard this morning that there are substantial 
differences in costs in these settings, and we do not know what 
the outcomes are for the same patients who are cared for in 
each of these settings. This is what we do know: We do know 
that people prefer to be in their own home whenever possible. 
We do know that the States are trying very hard, as we speak, 
to rebalance their systems to move from institutionalization to 
home- and community-based care wherever possible and wherever 
appropriate. So, I believe that in order for Medicare to get 
the best value for the dollars it spends, we should have as our 
guidelines to always be able to help patients make choices that 
will be the least restrictive, least intense and least costly. 
I would like to conclude by saying that I do not believe that 
decisions are always made, nor should they always be made, 
solely on clinical grounds because, legitimately, people make 
decisions based on proximity, capacity, confidence in an 
institution or an organization, availability of care givers, 
and cognitive status. All of those need to be knit together to 
create the post-acute care system of the future. Thank you very 
much for the opportunity, Madam Chairman.
    [The prepared statement of Ms. Raphael follows:]

  Statement of Carol Raphael, President and Chief Executive Officer, 
         Visiting Nurse Service of New York, New York, New York

    Madam Chairwoman, Congressman Stark and Members of the 
Subcommittee:
    Good afternoon. My name is Carol Raphael and I am the President and 
CEO of the Visiting Nurse Service of New York (VNSNY). VNSNY is the 
largest non-profit home health agency in the United States. Based on 
112 years of experience in serving the diverse population of New York 
City, VNSNY has an in-depth understanding of the health care needs of 
some of the most vulnerable individuals in our country and on how to 
cost-effectively meet those needs. In 2004, VNSNY had an active daily 
census of 24,000 patients and delivered more than two million home 
visits.
    I am pleased to be here today on behalf of the Visiting Nurse 
Associations of America (VNAA), which is the official national 
association for non-profit, community-based Visiting Nurse Agencies 
(VNAs) across the country. For over one hundred years, VNAs have shared 
several common goals: to care for the sick and the disabled, to help 
people recover their strength and independence, to partner with their 
communities in improving public health care, and to assure that all 
people, rich or poor, have access to the home care they need.
    VNAs created the profession of home health care over a century ago, 
and it is our hope and intention to provide high quality home care for 
at least the next one hundred years. That is why we are grateful to 
help the subcommittee explore current Medicare policies for post-acute 
care and determine whether some of those policies are in need of 
reform. This is particularly important in light of the anticipated 
pressure that will be placed on the health care delivery system as the 
baby boom generation retires and begins to access post-acute and long-
term care services on a large scale.
    At the outset, the VNAA agrees with the subcommittee that post-
acute care should be more patient-focused rather than facility-focused. 
Decisions about where individuals receive post-acute care should be 
determined by patient characteristics and needs. Medicare currently 
pays for post-acute care in four separate settings--Home Health 
Agencies (HHAs), Skilled Nursing Facilities (SNFs), Long Term Care 
Hospitals (LTCHs), and Inpatient Rehabilitation Facilities (IRFs). Each 
payment system uses different eligibility criteria, units of payment, 
quality measurements and assessment instruments. We believe it is 
important to conduct research on patient characteristics of those 
served in each setting in order to better understand their common needs 
and understand the degree to which services overlap among the different 
settings.
    The VNAA therefore recommends that a mechanism be developed that 
compares patient characteristics, patient outcomes and costs across 
settings. We further recommend that a uniform assessment process be 
developed to assess patients at the same points in time, such as at 
admission and every 60 days.
    A post acute care assessment process should not replace OASIS 
(Outcome Assessment Information Set) or perhaps any other existing 
tool, but should have the specific purpose of identifying upfront what 
type of post acute care would produce the best outcomes for an 
individual for the least amount of money based on standard criteria and 
patient choice. In order to do this, VNAA believes that it is essential 
to begin comparing patient characteristics (in order to identify the 
overlap of such characteristics), outcomes and payments across post-
acute care settings. Once the best setting for post-acute care is 
identified, an assessment instrument specific to that setting can then 
be used.

Current patient assessment and payment systems
    CMS's conversion of the four different provider settings to 
prospective payment systems during the past six years happened 
sequentially rather than concurrently. Each assessment tool had its own 
purpose and often the original purpose for the tool was different than 
its primary function today. In the case of home health care, the OASIS 
instrument was conceived as a joint effort by CMS and the home health 
community to develop an outcome measurement tool rather than a tool for 
predicting costs and reimbursement. The goal was to select the best 
variables to measure the positive outcomes of home health care. It was 
also developed to assess an individual's ability to function in his or 
her own home. When the Congress mandated the creation of the home 
health PPS system in the Balanced Budget Act of 1997, OASIS was adapted 
for payment purposes because it was the best tool for predicting costs 
available at the time and would enable CMS to implement PPS 
expeditiously.
    The assessment instruments that have been employed in other post-
acute settings were adopted for specific purposes unique to those 
settings as well. Each was designed with an eye toward the unique 
aspects of the care model involved rather than with consideration of 
commonality in patient description across care settings. For example, 
the IRF assessment tool was shaped to evaluate only rehab outcomes. 
Therefore, each assessment tool carries with it unique metrics that are 
not necessarily compatible in other settings.
    During my six year tenure as a MedPAC commissioner, I was a 
proponent of ascertaining the degree to which a uniform patient 
instrument could be developed. I thought that given MedPAC's concerns 
around the SNF instrument (MDS), which was originally designed for care 
planning for long-stay patients, and concerns about the RUGs III 
system, it made sense to use those concerns as an opportunity to do 
more standardization across post-acute care settings. However, MedPAC 
staff found that the definitions of care, the time periods for 
assessing patients, and the scales used varied to such a degree that it 
would be difficult to move toward consolidation.

Uniqueness of Home Health Care
    A thorough understanding of the differences of the various post 
acute care settings will help Congress and CMS understand what is 
comparable across provider settings and recognize which aspects of each 
care model are integral to that care model and therefore not 
comparable. Each of the settings has unique characteristics. With 
respect to home health care, we cite the following salient features:

      Home health clinicians operate independently in patients' 
homes and treat multiple acute and chronic conditions. They must be 
trained to independently intervene in emergency situations, such as 
kidney failure or congestive heart failure. They are responsible for 
overseeing and implementing a patient's entire plan of care as 
specified by the physician and in consultation with the physician.
      Most beneficiaries express a strong preference for home 
care rather than institutionalization. Home health agencies have 
enabled millions of people to stay in the comfort of their own homes 
who might have otherwise been in more restrictive settings.
      Home care is cost-effective; the Administration and the 
National Governors Association want to ``rebalance'' Medicaid 
expenditures in favor of home and community-based care. The differences 
in cost in post-acute settings can be substantial. IRFs are paid on a 
per case rate and costs can range from about $5,000 to $17,000 
depending on functional status and co-morbidities.

    According to the 2004 Annual Statistical Supplement to the Social 
Security Bulletin, the average cost to Medicare for 60 days of home 
health care in 2004 was $2,213. In contrast, the average cost to 
Medicare for 60-days of skilled nursing facility care was $28,560. And, 
the average cost to Medicare for only one day in the hospital was 
$3,608 in 2004.
    However, recent data from MedPAC demonstrates a downward trend in 
the use of home health care following hospital discharge. A June 2003 
MedPAC report states,'' we find substantial declines in the use of home 
heath care, increases in the use of skilled nursing facilities and 
other post-acute providers, and some substitution of SNFs for home 
health services following hospital discharges.'' In addition, the 
report shows that from 1996 to 2001, post-hospital discharge home 
health care utilization fell from 108,529 episodes to 59,101 episodes, 
yet SNF utilization increased from 52,710 to 67,647 episodes. All other 
post acute providers' post-hospital discharge utilization increased 
from 23,517 to 31,163 episodes.

Development and Benefits of OASIS
    Recognizing the challenges of developing one assessment tool for 
all post acute care settings, it is important to note that OASIS has 
become a very valuable assessment tool for home care. For the first 
time, OASIS has given the home health industry and the government 
national data on publicly reported outcomes for home health care. 
Before OASIS, there was absolutely no national data to benchmark our 
clinical and operational practices in order to improve outcomes. Most 
importantly, OASIS is a motivator for internal quality improvement 
efforts and for focusing on patient outcomes because an agency can 
clearly see progress between the admission assessment and the discharge 
assessment.
    Significant amounts of resources and time have been invested by 
home health agencies in implementing OASIS into their businesses. The 
complexity of the instrument creates a constant need for training and 
retraining staff. Now that home health agencies are beginning to see 
the value of the thousands of dollars that they have individually 
invested on average in implementing OASIS into their practices, the 
idea of transitioning to a wholly new assessment system would be 
difficult to contemplate. In addition, OASIS is the result of over 10 
years of research and testing and, therefore, no small cost or effort 
on CMS's part. We hope that you will consider these issues and allow 
considerable time and additional resources as part of any major 
transition.

Other factors in determining post acute care setting:
    Despite the desire for some uniformity based on a common assessment 
process, there remain a number of reasons why an individual might go to 
one post acute care setting as opposed to another and why a uniform 
assessment tool would not necessarily capture these factors. These 
include:

      geographic variation in availability of facilities and/or 
staff;
      prevalence of different post acute care settings in 
particular regions and their capacity;
      patient and family choice;
      patient's co-morbidities, obesity or cognitive 
impairments; and
      availability of family or informal caregivers.
VNAA recommends that the following occur:
    1.  The federal government should move forward in developing a 
uniform assessment process for post acute care where there is overlap 
in the types of patients served by different types of provider. To 
achieve that goal, VNAA believes that it is essential to begin 
comparing patient characteristics, outcomes and payments across all 
post-acute care settings.
    2.  To ensure patient choice, patients must be made aware of their 
options for all appropriate post acute care, preferably in advance of 
hospital discharge.
    3.  There is a need to expand opportunities for patients to select 
home and community-based alternatives to institutional care both as a 
matter of cost-efficiency and patient preference. In general, patients 
should go to the least intensive, least restrictive, and least costly 
setting. This, of course, is dependent on reliable and ongoing data on 
outcomes and cost-effectiveness. If the same type of care that is 
provided in a SNF or IRF can be provided in the home at a lesser cost, 
it would make sense for home and community-based care to be the first 
consideration in the decision tree for patient placement after 
hospitalization.
    4.  Implementation and transition costs of any new process must be 
considered. The enormous expense of adopting new assessment 
technologies cannot be ignored. This includes not only the development 
and testing costs and crosswalks between existing payment and quality 
systems, but also the additional investments that providers will have 
to make for new technology and staff training.
    5.  The development of a system where different providers can 
electronically access standardized medical records will inevitably 
require greater uniformity in patient assessment and outcome reporting. 
Perhaps these efforts could take place simultaneously. Standardized 
descriptions for assessment could potentially be included in electronic 
medical records. This would not only achieve economies of scale and 
reduce duplication of effort, but could lead to ongoing improvement in 
assessment, evaluation and payment policy.

    Thank you once again for the opportunity to testify today. I would 
welcome the opportunity to respond to your questions.

    For more information, please contact Kathy Thompson or Bob Wardwell 
at 240/485-1856(5).

                                 

    Chairman JOHNSON. Thank you very much for your testimony. 
Dr. DeJong.

      STATEMENT OF GERBEN DEJONG, SENIOR FELLOW, NATIONAL 
REHABILITATION HOSPITAL, AND VICE PRESIDENT, AMERICAN CONGRESS 
       OF REHABILITATION MEDICINE, INDIANAPOLIS, INDIANA

    Dr. DEJONG. Thank you, Madam Chairman, Mr. Lewis and 
Members of the Committee. My name is Gerben DeJong and I am a 
Senior Fellow at the National Rehabilitation Hospital here in 
Washington, D.C. I am a clinical and health services 
researcher. I do not speak for any organization, constituency 
or industry here today. I am a long-time student of American 
post acute health care. I have studied it across all the 
different industries: IRFs, SNFs, home health agencies and 
LTCHs. We have been asked to address two main topics this 
afternoon. One is the development of a common patient 
assessment tool, and the second is the development of a more 
rational post acute payment system. I would like to address 
both of these.
    First, with regard to a common patient assessment tool, I 
believe that we do need a common patient assessment tool. The 
MedPAC report that came out yesterday really underscores the 
shortcomings of the present system. What it said is that we 
have different tools with different purposes with different 
time periods with different types of clinicians doing the 
assessments using different scales and addressing sometimes 
similar, but different domains and using different diagnostic 
coding. I would caution us against a one-size-fits-all, all-
inclusive measure. There is an overlap in types of patients 
across the four post acute industries, but there is also a 
great diversity in the types of patients seen in post-acute 
care. My great fear is that we will end up with a very large 
and unwieldy assessment tool that tries to be all things to all 
people. We have already been down this road. Back in 2000-2001, 
CMS, at that time known as Health Care Financing Administration 
(HCFA), was trying to come up with an MDS for post-acute care 
that would eventually apply across all four industries. It 
included about 400 data elements and 20 pages. I do not think 
we really want to go there again.
    My recommendation would be to keep it simple: Develop a 
core instrument with the elements that are essential to 
assessment, payment and outcome; allow for some auxiliary data 
modules to be added to the core instrument to meet the needs of 
individual sites and different types of patients, but do not 
try to impose the whole thing on everybody. It is not going to 
work; it will be overly burdensome. My written testimony 
outlines several different steps in developing a more 
parsimonious, well-grounded, valid, and reliable instrument, 
and I will not go into that at this time. If Congress and the 
Administration believe they need to do something quickly and 
does not have time to do all the development work for a new 
instrument, I would encourage them to seriously consider the 
most parsimonious of instruments now in post-acute care and 
that would be the IRF-PAI as a potential point of departure for 
a system-wide instrument.
    On to payment systems for a moment: Yes, we do have a very 
irrational post acute payment system with four very different 
PPS methodologies that differ in terms of unit of payment, type 
of case-mix adjuster, number of case-mix groups, and type of 
patient assessment tool. Some of the payment systems, in my 
view, are very convoluted, especially the SNF-PPS based on the 
MDS and the Resource Utilization Groups (RUG). I do not know 
how anyone can live with that particular system. In going 
forward I would urge caution. First, do no harm. I believe that 
the post-acute care system has gone through a lot of upheaval 
over the last decade. We had tremendous consolidation from 1993 
to 1997. We went through the managed care revolution in the 
mid-nineties. We had the Balanced Budget Act 1997 and its long 
lasting effects. We have had the collapse of several large post 
acute chains in 1998 and 2000. Some parts of the post acute 
system are still implementing the PPS. For example, both IRFs 
and the LTCHs started implementing a PPS as recently as 2002, 
and LTCHs are still in the process of phasing in their new 
payment system.
    So, what are our options? Our options are really threefold. 
First is to pick the best of existing post acute payment 
systems. The leading candidate in my opinion, is the IRF-PPS. I 
say that in part because it is a function-based system that is 
aligned with restorative goals of the Medicare post-acute care 
system. I say it for other reasons as well. I would, even now, 
add on a pay-for-performance component. Something that is 
lacking in all four post acute payment systems. The payment 
systems are supposed to be based on the characteristics of the 
patients, but it also needs to take into account clinical 
performance. A second option is to consider bundling acute and 
post acute payment. That idea has been around for more than 20 
years. I think, however, that it poses some very difficult 
implementation issues, and is likely to have several unintended 
consequences. A third alternative is to develop an Internet-
based bidding system where providers bid for patients on price 
and outcome with some risk sharing for more difficult patients. 
I think this option has some promising possibilities that 
deserve to be explored. I would also encourage the development 
of one or more demonstration projects as an interim step, and I 
could perhaps share some ideas, should there be more time to do 
so. Ultimately, we need an integrated post acute payment system 
that competes effectively on price and quality. Let me say 
something about that here.
    We talk about payment systems and we talk about patient 
assessment instruments, but we cannot have an effective payment 
system unless payment is also linked to quality. What we need 
is a more effective system of public disclosure of outcomes and 
quality indicators so that all post acute stakeholders--
consumers, family Members, payers, and providers alike--can 
make the informed choices that they need to make. The CMS has 
already taken some important steps in this direction, 
particularly with the nursing home quality initiative and the 
home health quality initiative, but I think there is still a 
lot more work to be done in this area. Other than that, I just 
want to say that when we look at different sites of care, we 
need not only consider whether or not one site is more 
effective than another, we also need to consider what actually 
occurs in the process of treatment and care; what are the 
active ingredients each site provides. It is not good enough to 
say that an SNF is better than an IRF or better than home 
health or whatever the case may be. We need to take that bundle 
of services apart. We need to find out what really goes on 
there. What are, in fact, the active ingredients at each site 
of care? I believe that purchasers and payers alike need to 
know what it is that they are buying; they cannot be informed 
buyers unless we peer into the black box and find out what in 
fact is making the difference in each site of care. Thank you 
very much.
    [The prepared statement of Dr. DeJong follows:]

      Statement of Gerben DeJong, Ph.D., Senior Fellow, National 
                        Rehabilitation Hospital

    Good afternoon. My name is Gerben DeJong. I serve as a senior 
fellow at the National Rehabilitation Hospital in Washington, DC.
    I want to thank the Subcommittee for inviting me to testify. I want 
to make clear that I do not speak for any particular organization, 
constituency, or industry. I am first and foremost a clinical and 
health services researcher who has been a long-time student of American 
post-acute care. I have been tracking industry growth and development 
in post-acute care for about 25 years. I have tracked the spurts in 
growth across all four major sectors of post-acute care--inpatient 
rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), 
home health agencies (HHAs), and long-term care hospitals (LTCHs). I 
have watched how these industries have waxed and waned in response to 
the changing needs of Medicare beneficiaries, changes in Medicare 
payment policy, and the vagaries of the larger national economy.
    I should also disclose that I am the vice president of the American 
Congress of Rehabilitation Medicine (ACRM)--a group of 800 researchers 
and clinicians devoted to enhancing evidence-based practice in 
rehabilitation and health care for individuals with disabilities. ACRM 
is also committed to the concept of evidence-based health policy. Many 
observers have been critical about the lack of evidence-based practice 
in health care but the lack of evidence-based policy is equally 
striking. In this regard, I believe it is important that, when we 
embark on potential changes in post-acute assessment and payment, these 
changes be anchored in solid research. I want to compliment the 
Subcommittee for taking on these difficult topics and hope that, as we 
move forward, we do so considering all the evidence and, where evidence 
may be lacking, we defer judgment and garner the evidence still needed.
    The Subcommittee has requested that we address two main topics, the 
development of a common patient assessment tool and a more rational 
payment system for post-acute care. I will address both and add a 
couple of additional comments.

Common Patient Assessment Tool
    Three of the post-acute settings--IRFs, SNFs, and HHAs--have their 
own patient assessment instrument and a fourth setting, LTCHs, use none 
for purposes of patient placement, outcome, and payment. I want to 
express some caution here. There is a presumption in some quarters that 
there is considerable overlap in the types of patients seen in various 
post-acute settings and that we need to develop a uniform patient 
assessment tool to address patients regardless of post-acute setting. I 
agree that some or similar patients are seen in different post-acute 
venues, but I would also submit that there is a diversity of patients 
and that it will be difficult to find or create one tool that can 
capture the full range of patient need across all settings of care. By 
trying to create an all-inclusive instrument, we run the risk of 
developing an unwieldy instrument, many elements of which, will not 
apply to many patients.
    We have been down this road before and backed away. Recall that in 
2000-01, the Health Care Financing Administration, now Centers for 
Medicare and Medicaid Services (CMS), then proposed the Minimum Data 
Set for Post-acute Care (MDS-PAC) as uniform instrument for all post-
acute settings as the basis for both payment and quality monitoring. 
This effort failed for many reasons but the chief among them was that 
the MDS was a huge instrument (20 pages) that consisted of over 400 
data elements many of which simply did not apply to the care and 
management of many patients. It was anything but ``minimum'' and it was 
a clear case of overreach in an attempt to develop a one-size-fits-all 
instrument.
    If we choose to go forward in developing a common patient 
assessment tool--and I would recommend that we do, I would make several 
recommendations:

    1. Purpose. Be clear as to what the patient assessment tool is for. 
Is it for making post-acute patient placement decisions? For 
determining payment level? For quality monitoring? For developing 
quality indicators that payers and consumers can use in making informed 
choices? For all of the above?

    2. Theoretical framework. Choose a theoretical or conceptual 
framework that is consistent with the purpose of the Medicare-supported 
post-acute care. The purpose is restorative care, not custodial care. 
Yet, MDS 2.0, for example, is replete with references to the 
``resident'' and contains a strong custodial or nursing home bias that 
is not congruent with the functional enhancement goals of 
rehabilitation. Medicare does not pay for custodial nursing home care.

    3. Parsimony. Do not try to develop an all-inclusive, one-size-
fits-all instrument. Focus on some core variables or indicators of 
patient need, progress, and outcome. If one were to build on an 
existing patient assessment instrument, consider using the IRF-PAI as 
the point of departure, not the MDS. The IRF-PAI is the most 
parsimonious of the three post-acute patient assessment instruments.

    4. Validity and reliability. Test for relevance, clarity, validity, 
inter-rater reliability, internal consistency, redundancy, and 
respondent burden. These are fundamental instrument development steps 
many of which were not satisfactorily addressed when the MDS was 
developed. Consumers, taxpayers, and providers alike expect instruments 
to provide a valid and reliable basis for patient care and the payment 
of public dollars. The careful scientific process of validity and 
reliability estimation must be completed before a new instrument is 
implemented for an entire post-acute system. The implications of a 
common assessment instrument are too far-reaching to short-change these 
instrument development processes--especially when we are talking about 
the allocation of more than $30 billion of Medicare resources.

    5. Computer-aided ``dynamic assessment'' technologies. Consider 
using computer-aided dynamic testing technologies that enable one to 
measure functional status using fewer data points. We have already 
greatly reduced respondent burden in the administration of well-know 
tests such as the SAT and the GRE by using computers to vary the degree 
of difficulty each question presents and then pin-pointing the 
respondent's capacity based on this hierarchy of difficulty without 
having to ask each question. We can do the same in post-acute 
functional assessment because there is a hierarchy of functional tasks 
where the ability to do one task presumes the ability to complete less 
demanding tasks. Such technologies allow us to address a broader range 
of human function across more settings of care than a setting-specific 
instrument that may present ``floor'' or ``ceiling'' problems for 
another setting of care. Some excellent work in this area is occurring 
in places such as Boston University, Northwestern University, and the 
University of Florida.
    If the Subcommittee or CMS believes that it needs to proceed more 
quickly in implementing a uniform patient assessment instrument, I 
would strongly recommend using the IRF-PAI with only modest changes. 
Some SNFs and LTCHs already use the FIM embedded in the IRF-PAI and 
thus are already familiar with the functional concepts that undergird 
the IRF-PAI.

Rational Post-acute Care Payment System
    Apart from care obtained from outpatient centers, each of the four 
major post-acute settings of care has its own payment system. From a 
system-wide point of view, the current multi-setting payment system 
appears irrational and reflects as much about the setting of care as it 
does about the patient. Moreover, there is a concern that we are using 
different payment systems when patients in one setting of care may, in 
some instances, be similar to patients in other settings of care. At 
another level, the current state of affairs is not as irrational as it 
may appear since each payment system contains features that speak to 
the strengths and traditions of each setting. The accompanying table 
compares each of the four post-acute payment systems in terms of their 
unit of payment, case-mix adjuster, number of case-mix groups, and 
effective dates of implementation following the passage of the Balanced 
Budget Act of 1997 (BBA'97) and the Balanced Budget Refinement Act of 
1999 (BBRA'99). To date, we have had research that examines the effects 
of individual payment systems but no research that attempts to look at 
the interactions across all four systems especially at the market level 
in terms of their effects on market entry and exit, market supply and 
mix of facilities, with-in market referral patterns, access, patient 
case-mix, utilization, and practice patterns across all four settings.
    In going forward, I would argue for proceeding cautiously and 
carefully. First, do no harm. I say this because payment systems can 
result in unintended consequences that may be adverse to the needs of 
patients and the overall system and cost of care. Over the last 8 
years, the nation's system of post-acute care has undergone tremendous 
upheaval some of which came in the wake of managed care in the 1990s, 
the BBA'97, and also with the collapse of several large provider chains 
from 1998-2002. More upheaval and instability are not what this sector 
needs in its immediate future. Some venues such as IRFs and LTCH's 
began implementing their respective PPSs as recently as 2002 following 
years of research, development, and planning that proved arduous for 
both CMS, its contractors, and the affected post-acute industries.
    In developing a more integrated post-acute payment system, there 
are several options, some of which will require several years of 
careful work and implementation.
    The most immediate option is to take the best of the existing post-
acute payment systems and apply it to the other settings of post-acute 
care--with perhaps some additional features such as a pay-for-
performance provision. The leading candidate among the existing payment 
systems is the function-based IRF-PPS. As a function-based system, it 
is perhaps best aligned with Medicare's restorative model of care and 
would relieve SNFs, for example of its awkward and burdensome MDS and 
RUGs-based PPS that is derived from a more custodial model of care.

                                 Prospective Payment Systems for Post-acute Care
----------------------------------------------------------------------------------------------------------------
                                               Inpatient         Skilled
                                            Rehabilitation       Nursing       Home Health      Long-term Care
                 Feature                   Facilities (IRF-    Facilities    Agencies  (HHA-   Hospitals  (LTCH-
                                                 PPS)           (SNF-PPS)         PPS)               PPS)
----------------------------------------------------------------------------------------------------------------
Unit basis                                   Per case / per   Per diem \1\       Per 60-day      Per Case / per
                                            hospitalization                 episode of care     hospitalization
----------------------------------------------------------------------------------------------------------------
Case-mix adjuster                          Function-related      Resource       Home Health   Diagnosis-related
                                           groups (FRGs) or   Utilization   Resource Groups       groups (DRGs)
                                            case-mix groups    Groups III           (HHRCs)        specific to LTCH
                                                     (CMGs)    (RUGs III)                              patients
----------------------------------------------------------------------------------------------------------------
No. of case-mix groups                           95CMGs X 4            44                80                 540
                                                comorbidity
                                          subgroups / CMG =
                                                 380 groups
----------------------------------------------------------------------------------------------------------------
Input document / information Source       Patient Assessment  Minimum Data        Outcome &      ICD-9-CM codes
                                                 Instrument     Set (MDS)        Assessment      recorded on pt
                                                  (IRF-PAI)           \2\   Information Set              claims
                                                                                    (OASIS)
----------------------------------------------------------------------------------------------------------------
Effective dates & phase-in period           Jan 2002 67% or      1999 25%     Oct 2000 100%        Oct 2002 20%
                                                       100%      2000 50%      (no phase-in        Oct 2003 40%
                                              Oct 2002 100%      2001 75%           period)        Oct 2004 60%
                                                                2002 100%                          Oct 2005 80%
                                                                                                  Oct 2006 100%
----------------------------------------------------------------------------------------------------------------
\1\ Based on assessments made on the 5th, 14th, 30th, 60th, and 90th days after admission to a SNF.
\2\ The MDS is completed on the 5th, 14th, 30th, 60th, and 90th days after admission to a SNF.

    What the IRF-PPS lacks, however, is an explicit incentive for 
outcomes and performance. The IRF industry already has many of the 
requisite measures that can be used as the basis for a partial payment 
that is linked to performance. I could envision a system in which a 
part of each facility's payment might be tied to specific performance 
measures on either an individual patient basis or on the basis of the 
facility's aggregate performance on patient outcomes.
    There are many other potential integrated post-acute payment 
systems. The concept of ``bundling'' acute and post-acute payment has 
been around for more than two decades although I believe it has 
significant implementation problems. Another alternative is to 
construct an Internet-based bidding system in which providers might bid 
for patients on the basis of price and outcome with some risk-sharing 
to induce providers to take on the most difficult patients. All of 
these different systems require advanced thinking, research, and 
planning.
    The Subcommittee and CMS should also consider sponsoring one or 
more demonstration projects. For example, CMS should consider how 
multiple levels of care might be provided in a step-down fashion within 
a single provider system that cannot be fully accommodated within the 
existing silo-by-silo post-acute payment system. One of the challenges 
we now have is that a patient may start at one level of need at the 
outset of their post-acute experience but may require a very different 
mix of services as he or she progresses. The challenge is to design a 
payment system that allows a single provider system to better optimize 
the mix of services over time in a way that provides continuity of 
care, maximizes outcome, and minimize costs.
    Ultimately, we need to work toward a more integrated market-based 
system that competes effectively on both price and quality. Making 
health care conform to market-based principles has bedeviled even the 
most ardent advocates of market-based health care including myself. 
When patients are in medical crisis, they or their family members are 
not always price sensitive nor do they always know how to get the 
information to make choices they need to make in selecting a provider 
or course of care and often depend on the advice of their physician, 
other family members, or friends. Moreover, their choices are often 
preempted by the decisions of third-party payers who may have 
prearranged provider networks that limit choice.
    Nonetheless there are steps that can be taken regardless of the 
payment systems that might evolve in the years to come. One key to any 
reform is effective quality competition that will allow providers to 
compete on quality as well as price and mitigate the potential effects 
of stinting that may result from fixed payment systems.
    Central to such competition is the public disclosure of outcomes 
and quality indicators that will enable payers, consumers, and family 
members to make the post-acute choices they need to make. This clearly 
takes us back to the issue of a common patient assessment system. In 
its 2001 landmark report, Crossing the Quality Chasm, the Institute of 
Medicine identified 10 cardinal rules to govern the transformation of 
the American health care system. Rule 7 is the need for transparency:
    ``The health-care system should make information available to 
patients and their families that allow them to make informed decisions 
when selecting a health plan, hospital, or clinical practice or 
choosing from among alternative treatments. . . .''
    Fortunately, some steps in this direction are already being taken 
in both acute and post-acute care. In post-acute care, CMS has launched 
the Nursing Home Quality Initiative, which provides 10 quality measures 
on every nursing home in the nation. One can now go to the Web and 
check any nursing home's performance on these 10 measures. CMS is 
continuing to develop an analogous Web-based quality initiative for the 
home health industry.
    The current indicators for nursing home and home health care are 
only a start. They are fairly crude and not adequately sensitive to the 
functional restoration goals of post-acute care. CMS and its companion 
agencies in the federal government need to capitalize on the functional 
status and outcome measures already used in rehabilitation and consider 
their applicability to other portions of the post-acute care system. 
They are not perfect and much work needs to be done.
    The development of an effective integrated post-acute payment 
system requires the development of outcome measures and quality 
indicators that are publicly disclosed and support decision making by 
all post-acute care stakeholders. There are several steps that CMS and 
its companion federal agencies, e.g., AHRQ, can start to take now that 
will serve the needs of future integrated payment system regardless of 
the exact payment system chosen. CMS needs to foster buy-in across the 
different types of post-acute providers that a quality-indicator and 
outcome disclosure system is in fact needed and is integral to the 
development of an integrated payment system. And working with all post-
acute stakeholders, including consumer groups, CMS needs to create 
rules for a fair outcome disclosure system that provides for a level 
playing field among providers. This includes consensus on standardized 
reporting methods, research on risk--or case-mix adjustment, and 
methods to prevent gaming and cheating. Finally, CMS needs to test 
multiple reporting formats that will make the information usable for 
different stakeholders.

Other Issues Related to an Integrated Post-acute Care System
    Lurking behind the discussion of the need for a more integrated 
post-acute system of care are issues and concerns that I believe need 
to reframed if we are to have a more informed discussion about the 
future of post-acute care. For example, there is an abiding concern 
that the same kinds of patients are being served in multiple settings, 
some at lower costs than in other settings, with similar outcomes. As a 
researcher, I am especially concerned that we are not always comparing 
apples with apples and oranges with oranges particularly in our 
characterizations of patient populations and in our computation of 
costs associated with each site of care. This testimony is not the 
venue to go into the particulars but I would urge caution.
    These issues come into their sharpest focus when we address 
questions regarding the efficacy of care for certain patients in one 
setting versus another as in the case of IRFs versus SNFs. We usually 
frame the question as follows: Do stroke patients do better in an IRF 
or a SNF? Do joint replacement patients do better in an IRF or a SNF? 
Instead, we need to ask which stroke patients do better in an IRF and 
which do better in a SNF? Or, which joint replacement patients do 
better in an IRF or in a SNF? One's research may find that one setting 
or another does consistently better with one patient group or subgroup 
than another but we should not start with the presumption that one 
setting has an exclusive franchise with a particular impairment group.
    In examining the differences in outcomes and costs between IRFs and 
SNFs, we also need to be able to characterize the differences in the 
care received in these two settings. One needs to look at all 
interventions and processes of care from basic medical support to 
individual therapies. Moreover, one needs to characterize these 
differences in terms of timing, intensity, frequency, and duration. 
Without these characterizations, both settings remain black boxes and 
prudent purchasers, both government and health plans, cannot fully know 
what it is that they are purchasing. Nor can they discern the active or 
inactive ingredients in the IRF and SNF rehabilitation process that 
shape outcomes. Purchasers and providers alike, need to know which 
clinical activities and interventions make the biggest difference for 
which patients and in what setting these activities and interventions 
are most likely to be found. It is not enough to say one setting is 
more effective than another without stating what it is about that 
setting that accounts for difference.
    Most controversial at this time is the best venue for the post-
acute rehabilitation of joint replacement patients especially in the 
wake of the 75% rule that requires IRFs to have 75% of its patients 
come from one of 10-13 impairment groups (10 under the old rule; 13 
under the new rule). Over the last decade (1994-2003), the number of 
joint replacement patients discharged from acute care hospitals 
increased 51%, from 241,410 to 364,824 patients and a corresponding 
increase has been seen in post-acute care. If we are to have an 
effective integrated post-acute system of care, we will still need to 
sort out which patient groups and subgroups do better in one setting 
versus another. In short, there is a huge need to conduct research that 
will enable us to refine the placement and treatment decisions in post-
acute care even if we are to achieve a more integrated system of post-
acute assessment, placement, treatment, and payment. In fact, answering 
these types of questions is essential to a more integrated post-acute 
system. CMS and its companion agencies need to make a significant 
investment in the research that can undergird a more rational system.

                                 

    Chairman JOHNSON. Thank you very much. Dr. Votto.

STATEMENT OF JOHN VOTTO, PRESIDENT AND CHIEF OF STAFF, HOSPITAL 
 FOR SPECIAL CARE, NEW BRITAIN, CONNECTICUT, ON BEHALF OF THE 
          NATIONAL ASSOCIATION OF LONG TERM HOSPITALS

    Dr. VOTTO. Thank you, Madam Chair, and Congressman Lewis, 
for inviting me here today to speak on these very important 
issues. I am here representing the Hospital for Special Care 
and the National Association of Long Term Hospitals. My name is 
John Votto. I am a practicing pulmonary physician; I have been 
practicing for approximately 20 years at the Hospital for 
Special Care and the Veteran's Affairs (VA) hospital in 
Connecticut. I am currently President of the Hospital for 
Special Care and Chief of Staff, and I am active in the 
National Association of Long Term Hospitals in the sense that I 
am Chairman of the Physician Committee and the Criteria 
Development Committee. The Hospital for Special Care is a 228-
bed LTCH which has been around for 65 years. During that time, 
we have developed our programs based on the community needs in 
the area. Our major programs are those of ventilator weaning, 
brain injury, complex medical, wound care, and pediatrics. We 
also have a spinal cord injury program, which is the only 
Commission on Accreditation of Rehabilitation Facilities 
(CARF)-accredited program in the State of Connecticut. The 
hospital also operates a 282-bed nursing facility, SNF, and so 
I feel that I am keenly aware of the issues that are talked 
about at this meeting. I know that the Committee is very 
concerned about overpayments and inappropriate payments, and so 
in this regard I will have some comments. In regards to the 
patient assessment tool for LTCHs, as we have all heard, we 
don't have our own patient assessment tool, and the rehab 
hospitals do, the SNFs do. These, I don't feel, are appropriate 
for the LTCH industry, having done both of these things and 
been involved in both of these things. I do believe, though, 
that data does exist which could help develop a patient 
assessment tool for the LTCH industry.
    One of the things that we recently did in the National 
Association of Long Term Hospitals is we just completed a two-
year study looking at 1,419 ventilator-dependent patients who 
came to LTCHs especially for weaning. They came from 23 
different LTCHs across the country. We did not direct how they 
were weaned, we just directed that they came in for weaning. 
This is a prospective study. What we did was look at many 
outcome measures, including time to wean, length in the acute 
care hospital prior to discharge to the LTCH, mortalities, 
outcomes, functional status, and many, many other things that 
we have studied. In addition, we also looked at the cost of 
care, and in 963 of these patients we were able to come up with 
costs of care and get the data that included that. During the 
course of the study we did share some of this outcome data with 
CMS and MedPAC. I believe, though, that the results of this 
study would be at least some basis for developing a patient 
assessment tool, and I think that, given the way this study was 
done, we could develop patient assessment tools for other 
programs and other diagnostic categories like wound trauma and 
medically complex.
    We are obviously interested in the appropriateness of the 
patient setting and the appropriateness of care, and I believe 
that in the short term, QIO review is probably the best remedy 
to do that. The QIO did review only 1,400 cases, as many of you 
know, in 2004, and there was a very high denial rate, 
indicating that maybe there was inappropriate placement of 
certain patients. I don't believe that 1,400 cases across the 
entire industry in 1 year is probably a good measure. The 
example given of the hip fracture patient where the payments 
were so different, I don't know if they took the short-stay 
policy into account in the LTCH that the LTCH industry has in 
place, but I can assure you that the Hospital for Special Care, 
first of all, rarely admits these types of patients because 
they have to have uncontrolled diabetes, uncontrolled 
congestive heart failure, or other things before we would take 
that patient, but I can assure you that we aren't getting 
$44,000 for that patient. Although I am very much in favor of 
the QIO review, I think that the screening process could be 
improved. I don't believe that the criteria sets that are 
available now are aligned with the PPS that we have right now.
    MedPAC's report to Congress did indicate that screening 
criteria were a priority, and we have at the National 
Association of Long Term Hospitals just completed the 
development, after 2 years, of screening criteria which we feel 
are quite good and appropriate for the industry; we are in the 
process of having professional validation this summer, and 
should have that completed by this fall. We have also shared 
drafts of these criteria with MedPAC and CMS. In the long term, 
I believe the Secretary should participate in the construction 
of a database which, if the work was done with MedPAC and the 
industry, probably could be very helpful in developing a 
patient assessment tool. I am concerned about the payment 
systems, the combinations and the difficulties of counting 
Medicare days and overlap of patients. This could be a very 
difficult problem, as has already been noted, but I think it 
probably could be overcome, and we could develop a patient 
assessment tool. In conclusion, I think in the short term QIO 
and screening criteria could stabilize at least the payments to 
LTCHs, and, in the long term, a comprehensive database, which I 
believe may have to be done with more than a 5 percent sample, 
which is what is proposed, could be used as a patient 
assessment tool or help in the development of a patient 
assessment tool. Thank you for your attention.
    [The prepared statement of Dr. Votto follows:]

   Statement of John Votto, D.O., National Association of Long Term 
                  Hospitals, New Britain, Connecticut

    Chairman Johnson and members of the Subcommittee, thank you for 
inviting me to speak before you today on the important questions 
presented in the notice of this hearing which concern the status of 
assessment tools and payment issues related to long-term care hospitals 
and other post acute Medicare providers. My name is John Votto. I am a 
physician with a specialty in pulmonary medicine. For the past 
seventeen years I have practiced medicine at the Hospital for Special 
Care in New Britain, Connecticut. Currently I am the President of the 
Hospital for Special Care and also maintain an active practice caring 
for patients at the Hospital. Additionally, I care for pulmonary 
patients at the Veterans Hospital located in Newington, Connecticut. I 
am active in the National Association of Long Term Care Hospitals and 
serve as the Chairman of the Association's Physician Committee and 
Committee on Criteria Development. The hospitals which comprise the 
National Association of Long Term Hospitals account for approximately 
one third of all Medicare beneficiaries who receive services in long-
term care hospitals. While many of my remarks today are made on behalf 
of the National Association of Long Term Care Hospitals they also 
relate to the Hospital for Special Care. The Hospital for Special Care 
is a relatively large long-term care hospital with 228 beds and an 
active outpatient department. The hospital provides a wide range of 
clinical services, including ventilator weaning services to patients 
who have complex medical care needs. The hospital provides 
rehabilitation services and maintains the only certified spinal cord 
injury unit in the State of Connecticut. The Hospital for Special Care 
also operates a free standing 282 bed skilled nursing facility. 
Accordingly, I am keenly aware of the issues related to the 
appropriateness of services provided to inpatients in the settings 
which are the subject of this hearing.
    The focus of the this hearing is to explore issues related to the 
establishment of patient assessment tools and particularly a common 
assessment tool which could be used across post-acute Medicare provider 
types. Additionally, I understand the Committee is concerned that the 
Medicare program makes inappropriate payments where patients who 
require the same or similar medical resources receive care in different 
Medicare provider settings at different rates of payment. The National 
Association of Long Term Hospitals strongly supports the creation of 
appropriate patient assessment tools and the use of safeguards which 
assure that Medicare beneficiaries receive care in the most appropriate 
cost effective and safe setting. I will focus my specific comments on 
these questions by reviewing policy initiatives that the Medicare 
program could undertake in both the short and long term to achieve 
these goals.

Actions the Secretary can undertake now
    The National Association of Long Term Care Hospitals is unaware of 
any ongoing activities which have been undertaken by the Secretary to 
establish a patient assessment tool or patient outcome measures for 
patients who use long-term care hospitals. The patient assessment tools 
which currently exist for other types of post acute hospital providers 
are not adequate to assess patients who receive care in long-term care 
hospitals. The Minimum Data Set (MDS) which is used as an assessment 
tool for skilled nursing facilities does not measure physician directed 
services and related medical complexity of hospital level patients. The 
MDS measures routine care needs of patients on a per day basis and, 
therefore, can only be used with a per diem payment system. Long-term 
care hospitals and inpatient rehabilitation facilities are reimbursed 
by the Medicare program on a per discharge basis and not on a per diem 
basis. Functional related groupings (FRGs) which are used by inpatient 
rehabilitation facilities contain functional measures and are not 
appropriate for the medically complex cases which are admitted to long-
term care hospitals.
    Studies and data do exist which the Secretary could consider to 
establish a patient assessment tool for Medicare beneficiaries who use 
long-term care hospitals. For example, a significant segment of 
patients admitted to long-term care hospitals are in respiratory 
failure with ventilator support. The National Association of Long Term 
Care Hospitals is sponsoring a study of the characteristics of these 
patients, including ventilator weaning rates. The final report on this 
study is expected in a few weeks. This multi-site study was conducted 
by the Barlow Respiratory Hospital Research Center which is located in 
Los Angeles, California. The study included data on 1,419 patients who 
were admitted to 23 long-term care hospitals located throughout the 
country with active ventilator weaning programs. The study contains 
survey instruments and outcome data which could readily considered in 
the development of an assessment instrument which then could be applied 
across all post acute Medicare provider types. This data include:

         1.  Days on a ventilator prior to admission to a long-term 
        care hospital.
         2.  Demographic and patient characteristic data such as sex 
        and pre-morbid domicile;
         3.  Pre-exiting co-morbid diagnoses and comorbidities.
         4.  Patient location prior to admission (e.g. ICU, step-down 
        or monitored unit, rehabilitation unit).
         5.  Patients with and without a surgical procedure;
         6.  Length of stay in transferring hospital;
         7.  Percentage of cases admitted with single and multiple 
        pressure ulceration together with stage and description of 
        ulcer;
         8.  Functional status at the beginning and end of a long-term 
        care hospital stay: Zubrod score.
         9.  Procedures and treatment provided at the long-term care 
        hospital or on a ``same day'' basis at an acute care 
        hospital.\1\
---------------------------------------------------------------------------
    \1\ All ``same day'' services received by long-term care hospital 
patients are ``bundled'' within the long-term hospital DRG and remain 
the financial responsibility of the long-term care hospital. The cost 
of acute hospital services for these patients is not separately billed 
to the Medicare program.
---------------------------------------------------------------------------
        10.  Complications arising at the long-term care hospitals by 
        frequency of occurrence.
        11.  Outcome of long-term hospital stay, i.e. weaned, 
        ventilator dependent, deceased.
        12.  Hospital specific cost of care based on cost to charge 
        ratios.
        13.  Twelve month post admission status.

    During the course of conducting this study the National Association 
of Long Term Care Hospitals provided CMS, as well as MedPAC, with 
interim reports and study outcome data. The Secretary could consider 
the results of this study in developing a patient assessment tool for 
ventilator dependent patients who are admitted to long-term care 
hospitals and perhaps other post acute Medicare provider settings. The 
data which have been collected and analyzed on patient functional 
status as well as ventilator weaning rates may also provide a basis for 
outcome measures. Moreover, the Secretary could consider whether these 
same data should be used to study whether patients admitted to any 
other classes of post acute Medicare providers have similarities to 
those admitted to long-term care hospitals.
    The Secretary could also make an assessment whether the data 
collection instrument used in this study could form a basis to collect 
data for wound care, cardiac, and other classes of patients admitted to 
long-term care hospitals. I wish to underscore that a basic patient 
assessment tool which records data including patient diagnosis, 
comorbidities, functional status on admission and discharge as well as 
readmission rates, should be attainable by the Secretary within the 
short term.
    I now wish to turn my attention to the very important question of 
the appropriateness of placement of patients in post acute care 
providers and in particular in long-term care hospitals. This issue is 
at the heart of the Medicare payment questions presented in the notice 
of this hearing. It is important that at least since the early 1990s, 
until 2004 the Secretary has omitted from the annual scope of work for 
Quality Improvement Organizations (``QIO''), review of the medical 
necessity and appropriateness of services provided to Medicare 
beneficiaries in long-term care hospitals.
    Historically there has been no ongoing professional review of 
whether patients selected for admission to long-term care hospitals 
required medical resources of the type and frequency which are provided 
in another, lower cost setting. As part of implementation of the long-
term care hospital prospective payment system the Secretary included 
review responsibilities for the appropriateness of admission to a long-
term care hospital for a small sample of 1,400 Medicare cases in the 
QIO scope of work for 2004. The reported denial rate from this review 
process was 29%. The Secretary has retained this small sample size for 
the 2005 QIO scope of work. The denial of a patient admission by a QIO 
means there has been a finding that the patient could have been treated 
in a lower cost more appropriate Medicare provider setting such as a 
skilled nursing facility or by a home health agency. In every case 
where there is a final denial by a QIO the long-term care hospital 
receives zero payment for the case at issue. The National Association 
of Long Term Care Hospitals has closely followed the review of Medicare 
cases by QIOs and believes that QIOs can effectively and efficiently 
distinguish between cases that require the medical resources and 
programs provided by long-term care hospitals and those provided by for 
example, skilled nursing facilities. The differences in payment across 
post acute settings recited in the notice of this hearing do not 
consider the effect of QIO review and especially the effect of 
continued stay review on payments to long-term care hospitals. The 
example given is a $44,633 payment to a long-term care hospital for a 
hip fracture while payments to a rehabilitation facility and skilled 
nursing facility would be significantly less. The long-term care 
hospital prospective payment system has a short stay payment policy 
where patients with stays less than 5/6th of the geometric 
mean length of stay for the applicable LTCH-DRG are paid on a per diem 
and not a full case basis. The Secretary may properly consider 
expanding QIO review responsibilities to include the appropriateness of 
continued stay and discharge. This would result in review for medical 
necessity and length of stay the two factors which effect payment under 
the long-term care hospital prospective payment system.
    I do wish to point out an important area where review by QIOs could 
and should be improved. QIOs use ``screening criteria'' to 
differentiate cases which can be approved by nurse reviewers from those 
which are referred to physicians for further review. Commercially 
available screening criteria authorize a patient discharge whenever a 
patient, during a stay qualifies under a criteria set for another 
provider type. These screening criteria sets are not designed to be 
used for payment purposes. One of the objectives of a prospective 
payment system is to include the full course of care within fixed LTCH-
DRG reimbursement. MedPAC review of long-term care hospitals together 
with its report to Congress in June of 2004 focused the National 
Association of Long Term Care Hospitals on the need to develop 
appropriate screening criteria for the Medicare program. The National 
Association of Long Term Care Hospitals over a two-year period, has 
developed long-term care hospital screening criteria and is in the 
process of engaging in a professional validation of these criteria \2\ 
The Association has shared drafts of these criteria with the 
Subcommittee staff, both CMS and MedPAC. Current care plans are to 
present the criteria for review by payors, including the Medicare 
program, on a pilot basis this summer. Final validation is projected to 
be concluded in the fall of this year.
---------------------------------------------------------------------------
    \2\ These criteria sets include: cardiovascular, complex medical, 
respiratory, ventilator weaning, wound care and rehabilitation.
---------------------------------------------------------------------------
Longer term steps actions and issues
    In the longer term the Secretary should participate in the 
construction of a post acute data base which would allow for the 
establishment of a post acute patient assessment instrument. A valid 
post acute assessment instrument is an essential prerequisite to the 
establishment of a patient classification system which, in turn, would 
allow for consideration of whether a uniform payment system could 
account for the variation in patient cost and resource use across post 
acute provider types. The National Association of Long Term Care 
Hospitals understands that MedPAC has established a post acute data 
base which is comprised of a 5% sample of Medicare beneficiaries who 
are discharged to post acute providers. The Association recommends that 
this sample size be expanded as it is unlikely that a sufficient number 
of discharges from long-term care hospitals are included in the data 
set. Expansion of the data set is necessary to establish a common 
patient assessment tool. The Secretary should consider working closely 
with MedPAC and industry representatives in the establishment of this 
data base to ensure that assessments made under a uniform payment 
system are appropriate and feasible.
    Finally, I wish to point out that a merger of payment systems could 
present a host of policy challenges. For example, the Medicare program 
provides different benefit day coverage depending on whether a 
beneficiary receives services in a hospital or skilled nursing 
facility. Also, the placement of a beneficiary in a skilled nursing 
facility triggers a new co-insurance obligation. Currently, if a 
patient remains in a hospital at a skilled nursing facility level of 
care waiting placement in a skilled nursing facility, days of hospital 
service are not counted toward the limited 100 day skilled nursing 
facility benefit. If the beneficiary has not reached DRG cost outlier 
status, days of care in excess of those used to reach the geometric 
mean length of stay for the applicable DRG are not countable towards 
the beneficiary maximum hospital day benefit of 150 days. These 
policies exist for the fundamental reason that it is important to 
include as much services as is reasonably possible and appropriate in a 
fixed per discharge DRG payment system. Skilled nursing facilities are 
reimbursed on a per diem payment system where, unlike day of care in a 
hospital, beneficiary days are counted on a consecutive day basis. 
Additionally, due to the per discharge basis of the long-term care 
hospital and inpatient rehabilitation facility prospective payment 
systems, the Medicare program does not make an additional payment when 
a patient stay qualifies for full DRG payment. There is no additional 
payment until the patient qualifies for high cost outlier payment. The 
per diem nature of the skilled nursing facility payment system results 
in payment for each day of care. It is important that any future 
changes to post acute payment systems carefully consider consequences 
to the count of beneficiary benefit days, beneficiary co-insurance 
liability and the no payment zones which exist under current patient 
discharge based long-term care hospital and rehabilitation hospital 
prospective payment systems. I have included as Attachment A to this 
statement a number of similar issues related to the potential 
integration of post acute payment systems.
    I wish to thank you again and the Committee's staff for inviting me 
here today and for your courtesy and attention to these important 
questions.

                              Attachment A

Questions Related to Merger of Post-Acute Providers and Payment Systems

    1.  What are the payment objectives of the policy? Should budget 
neutrality is to be preserved within each payment system and if not 
then across all effected payment systems.

    2.  Which provider types are included in this policy initiative? 
NALTH assumes long-term care hospitals, IRFs and SNFs are included. 
Should psychiatric hospitals and units also included? Patients admitted 
to all of these provider types may, during a stay, have characteristics 
of patients admitted to one of the other provider types. For example, 
patients who access an IRF or long-term care hospital and who are at an 
appropriate hospital level of care upon admission may at the end of a 
stay or intermittently during a stay appear to be at a SNF level of 
care. These patients, however, use and require hospital resources 
(physician and, many times, hospital technology). Also, based on 
Medicare claims data patients may appear similar across settings at 
times during their stay but in fact, may be treated very differently 
during the stay as a whole. These patients benefit from hospital 
resource use to maintain and improve their health status and, 
importantly, to maintain functional and clinical stability upon 
discharge. This is consistent with MedPAC finding that patients who 
access long-term care hospitals have a 26 percent lower acute hospital 
readmit rate than patients who do not access long-term care hospitals.

    3.  What administrative data, or alternative special instruments, 
would be used to identify patients (or portions of stays) which overlap 
between provider types, i.e. LTCH, SNF, and IRF? The current 
administrative data which is available to the Medicare program are: 
cost reports, Medpar files etc. Examples of special instruments are the 
MDS and FRGs. Existing administrative data and special instruments do 
not appear to be designed or adequate to identify or define patients 
subject to the new policy. Also, these data/instruments are not 
reported on a timely basis for the policy to operate efficiently. A 
brief example is the MDS which does not collect information on 
physician interaction but, instead is directed at routine care needs of 
nursing home patients. NALTH understands the MDS is only compatible 
with a per diem and not per discharge payment system.

    4.  Consideration of the proper accounting of benefit days? The 
Medicare program accounts for benefit days based on the provider type 
where a beneficiary receives services. Days are assigned to a 
beneficiary's Part A hospital benefit based on days spent in a 
hospital. If a beneficiary uses SNF services in a hospital these days 
accrue toward the limited hospital day benefit and not the SNF benefit. 
The program allows beneficiaries to remain in a hospital while they are 
at a SNF level of care to allow for a nursing home search. It is widely 
known that some of these patients will never be placed in a SNF due to, 
e.g. infectious and behavioral issues. A new Medicare policy which pays 
days spent in a hospital as SNF services, must carefully consider the 
effect on the accounting of benefit days, co-insurance and deductible 
amounts. Payment for these services as provided in a hospital as SNF 
services would seem to result in substitution of SNF benefit days for 
hospital benefit days. If so, beneficiaries would be required to pay 
additional co-insurance and may have a reduction in total available 
Part A days. Also, beneficiary days are counted consecutively when 
providers are paid on a per diem. The count of beneficiary days is 
suspended in a hospital when a beneficiary has reached the geometric 
ALOS for the applicable DRG and is only resumed when the patient 
qualifies for cost outlier status. The interaction of a per discharge 
per diem payment system could reduce part A coverage days and also has 
implications for the time of exhaustion of benefits and related 
liability for supplemental payments, including beneficiary personal 
liability.

    5.  Will relative weights of PPS systems and other PPS payment 
adjusters be affected by a change in payment policy? A policy which 
transports payment between payment systems e.g. paying an IRF or long-
term care hospital at a SNF rate for some patients or portions or stays 
would seem to distort payment weights and, as a related issue, budget 
neutrality within PPS payment systems. We believe that a deviation from 
established PPS payment rates would result in consistent underpayment 
of hospital resources. Similarly, a policy which paid SNFs at hospital 
rates would distort and overpay SNFs by making payments which reflect 
hospital resources. It is important that federal law imposes different 
Medicare certification requirements and related costs on hospitals and 
SNFs. NALTH believes it is important that any new policy not distort 
PPS payment weights. As a related matter it is important to consider 
how PPS adjusters, which are not uniform across payment systems, would 
be affected. For example, IRFs are entitled to a DSH adjustment while 
long-term care hospitals and SNFs are not. The loss required before 
cost outlier payments accrue is after other applicable PPS adjusters, 
which are different depending on provider type and may or may not 
include DSH, IME and a loss threshold have been reflected in payments 
due to a provider. If a LTCH or SNF is paid at IRF rates could those 
rates be inclusive of DSH and other IRF adjustments?

                                 

    Chairman JOHNSON. Thank you very much. Ms. Rice.

 STATEMENT OF PAT RICE, PRESIDENT AND CHIEF OPERATION OFFICER, 
       SELECT MEDICAL CORP., MECHANICSBURG, PENNSYLVANIA

    Ms. RICE. Thank you, Chairman Johnson and Committee 
Members, for allowing us to talk about the post-acute care 
continuum today. I have had about 37 years of health care 
experience as a Registered Nurse (RN) and also as a health care 
administrator, and during that period of time have worked in a 
number of the post-acute care continuum facilities, including 
20 years in inpatient rehabilitation, 2 years in hospital 
skill-based centers, and 9 years in LTCHs. I am currently the 
President of Select Medical Corporation. We operate 99 LTCHs 
across the country, and we also operate Kessler Rehabilitation 
Hospital in New Jersey. So, we have a large amount of 
experience both in LTCHs and in rehabilitation. I also speak on 
behalf of the Acute Long Term Hospital Association that 
represents over 300 LTCHs all across the country, with Select 
and also Kindred Healthcare being a large portion of their 
membership. Kindred operates the third largest number of SNFs 
across the country as well. So, I have quite a bit of 
experience, as you might see.
    First of all, I would like to address what we believe are 
the guiding principles and the--as you look at the post-acute 
care continuum is, with that first guiding principle being that 
there really is a distinct and unique difference in each of the 
sectors in the post-acute care continuum. Policy should seek 
definition of these distinct roles based upon patient 
characteristics, patient clinical characteristics, and 
patients' needs. The LTCHs provide care to a very small segment 
of the acute care patient population, patients that are very 
high in severity of illness that have multiple complex medical 
conditions. These patients require a very intense level of 
intervention during the healing process. The LTCH patients are 
less than 1 percent of the Medicare beneficiaries discharged 
from general acute care hospitals. They are the patients with 
the highest severity of illness regardless of diagnosis, and 
are nearly four times more likely to be admitted to an LTCH 
because of the severity of their diagnosis.
    Certainly, IRFs serve a very important role in the post-
acute care continuum, providing comprehensive, goal-directed 
rehabilitation in a team format, with the access to 
physiatrists to be able to make very aggressive decisions about 
care on a short-term basis. The SNFs also provide a very 
important role in the post-acute care continuum through the 
provision of restorative care, through skilled nursing and also 
through skilled therapy. There are some similarities in these 
venues of care, but there are more differences than there are 
similarities. The differences include the reason for patient 
admission, the severity and acuity of the patient that is being 
admitted to each one of these levels of care, the risk of 
mortality, the intensity of monitoring and of services that the 
patients require, the type and availability of services that 
are available in each venue; and also the knowledge, 
specialization, and the amount of time that is afforded 
patients based on the patients' actual individual needs.
    So, we do believe that there is a difference in the level 
of care. That difference in regulatory requirements has not 
been outlined as significantly as it should be, and because of 
that, you do see some overlap within the treatment that is 
provided. Not only would we recommend that there be patients' 
differences outlined, that separate what these sectors of care 
are, but we also recommend and agree with the development of a 
common, comprehensive patient assessment instrument that could 
differentiate the appropriate level of care for patients, as 
well as determining which patient should go into a specific 
level of care. Currently, there does not exist a common, 
comprehensive patient assessment tool that would adequately 
reflect the complexity of care and the acuity of care of the 
LTCH patient. Now, certainly, LTCH patients are assessed. They 
are assessed at the time of admission by physicians and by the 
team that is caring for them, but there is not an instrument 
that is provided. We would recommend that an instrument be 
developed that addresses the complexity of those patients as 
well as clearly differentiating that.
    We also do believe that the third guiding principle should 
be that the patient should be cared for and paid for in the 
appropriate setting. If a patient meets SNF criteria, they 
should not be cared for in an LTCH, but right now there is not 
specific criteria out there. The only regulatory requirement 
for LTCHs is that you have a 25-day length of stay. That 25-day 
length of stay does not indicate the complexity of the care 
that the patients require or the specific patients that should 
be admitted to the LTCH as well. There has been much made about 
the patient that has a fractured hip and what level of 
treatment they should go into. I want to specifically talk 
about the stroke patient. You cannot look at diagnosis alone as 
you look at where a patient can go. It is much more complicated 
than the 13 diagnostic categories that the IRFs have to contend 
with. It is very complicated in which specific locale the 
patient should be admitted to. The stroke patient that leaves 
the acute care hospital that has unstable blood sugars requires 
very frequent monitoring as far as an RN is concerned; that 
requires a higher ratio of RNs in a facility than might be 
required in an SNF. That patient could potentially be on 
dialysis because they also have renal failure, be receiving 
respiratory treatments, or even potentially be on a ventilator. 
Those patients clearly are patients that should be cared for in 
a long-term care facility, an LTCH. The stroke patient that 
would be most appropriately cared for in an IRF, is a patient 
that can tolerate 3 hours of therapy a day, is essentially 
relatively stable, and is able to participate in therapy and is 
able to make progress toward being able to go home. Another 
stroke patient with a specific diagnosis that should be 
considered for either an SNF or being treated at home is the 
patient that, as far as an SNF is concerned, is the stroke 
patient that cannot participate in three hours of therapy, 
still requires therapy, or potentially has a cognitive 
disability that does not allow learning or comprehension or 
follow-through. Those patients clearly should not go to an LTCH 
and should not go to a rehab hospital. Certainly, if the 
patient can be cared for at home by their families, that is the 
situation where they should be cared for. So, we do believe 
that a system should be developed that clearly outlines who the 
patients are, what their needs are, and where they should go 
for treatment. That decision should be made by the physician 
and by the patient based upon what the individual patient's 
needs are.
    The fourth guiding principle should be that post-acute care 
providers must have the capacity to care for the needs of the 
patients that they are admitting. All post acute providers are 
not created equal and all patients' needs are not created 
equal. This is not a situation of one-size-fits-all when you 
talk about the post-acute care patient. It is a situation 
whereby the patient, depending upon what their individual needs 
are, should go to the level of care that can meet those needs. 
In the LTCH situation, RNs are at a higher ratio per patient 
because of the potential instability of the patient's medical 
condition than it currently is in a SNF situation. So, we 
firmly believe that there are different levels of care, that 
those levels of care can be defined, that the common patient 
assessment that could be developed would assist us in making 
that definition of what patient should go to the specific 
location. We do not believe that these levels of care are 
interchangeable. Thank you for allowing me to speak with you 
today. I would request that if you have not been to these 
different levels of care, there can be visits made to them, so 
that you can see on a first-hand basis what the differences in 
the patients are that are cared for at each of these levels, 
and what should be done to differentiate those specific levels 
of care. Thank you.
    [The prepared statement of Ms. Rice follows:]

  Statement of Pat Rice, BSN, MSN, President/Chief Operating Officer, 
        Select Medical Corporation, Mechanicsville, Pennsylvania

                              Representing

            The Acute Long Term Hospital Association (ALTHA)

    Madam Chair, Members of the Committee:
    Thank you for convening this hearing on post-acute care and for 
involving providers in these discussions. By way of background, I have 
served as a registered nurse and healthcare administrator for the past 
37 years in a variety of settings including seven years at a university 
medical center, twenty years in inpatient rehabilitation, two years in 
hospital based skilled nursing and nine years in long term care 
hospitals. Currently, I am the President/Chief Operating Officer of 
Select Medical Corporation, operator of 99 long term care hospitals 
(LTCH), in 26 states and Kessler Rehabilitation Institute in New Jersey 
that is recognized as a premier rehabilitation hospital. U.S. News and 
World Report ranks Kessler the leading rehabilitation hospital in the 
East--and 4th best nationwide--marking the 13th 
consecutive year that Kessler has been named to this prestigious list.
    I am also a Board member of the Acute Long Term Hospital 
Association (ALTHA). ALTHA represents over 300 LTC hospitals across the 
United States, constituting over two-thirds of LTC hospitals 
nationwide. ALTHA's member hospitals provide care to severely ill, 
medically complex patients with multiple comorbidities who require 
hospitalization for extended periods of time. Both Select Medical and 
Kindred Healthcare, another leading LTCH provider who also is the third 
largest operator of skilled nursing centers, are ALTHA members. ALTHA 
represents the vast majority of the LTCH industry.

Introduction
    I commend the Committee for convening a hearing to discuss the 
critical role that post-acute providers play in meeting the needs of an 
important patient population. To be sure, there is a continuum of post-
acute care that can create confusion among policymakers, payers and 
patients about which setting is most appropriate for patients with 
certain medical conditions. The purpose of my testimony today--as a 
nurse and operator of LTCHs and rehabilitation hospitals--is to assist 
the Committee in understanding the similarities and differences between 
the settings so that policy decisions can be made to achieve the goals 
of fiscal responsibility, patient access to care, and quality care.
    In general, I believe the Committees deliberations should be guided 
by four overriding principles.
    First, each provider in the post-acute sector plays a critical and 
distinct role in meeting the needs of the post-acute patient 
population. Policy should seek clearer definitions of those distinct 
roles but should recognize that a certain amount of overlap is 
inevitable and necessary to ensure continuity of patient care across 
settings.
    Second, both ALTHA and Select support the Committee's efforts to 
explore and evaluate development of a comprehensive post-acute 
assessment tool. Development of such an instrument is an important 
prerequisite to integrating care, and possibly payment, across the 
post-acute setting. I caution the Committee, however, that development 
of an common instrument is a very complicated and important task. As 
described more fully in my testimony, the range, depth, and content of 
clinical information necessary to evaluate and treat LTCH patients is 
more comprehensive than is captured in the assessment instruments used 
by other post-acute providers. Accordingly, policy makers should 
proceed carefully in developing a common instrument and ensure active 
participation by clinicians involved in treating patients across the 
post-acute continuum.
    Third, we support the principle that patients should be cared and 
paid for in the appropriate setting. MedPAC's recommendations and CMS's 
current research on revised certification criteria for LTCHs are 
designed to achieve this goal. While determination of appropriate 
setting is a complicated decision requiring extensive input from 
treating physicians in consultation with patients, we agree with the 
premise of MedPAC's recommendation that the decision should be made 
based primarily on patients' clinical characteristics and needs. 
Patients who can be safely and effectively cared for in SNFs should not 
be treated and paid for in LTCHs or IRFs. Conversely, severely ill, 
medically complex patients with multiple co-morbidities should have 
access to the intensive interventions only available in LTCHs. Again, 
from a clinical perspective, these determinations are not always clear. 
Policy should allow for some flexibility so that clinical judgment can 
be effectively exercised in the best interests of patients.
    Fourth, as noted by MedPAC, policy should also require not only 
that patients be placed in the appropriate setting, but that providers 
in the post-acute sector have the capacity to meet the needs of the 
patients. As summarized below, staffing levels, staff skill mix, 
availability of diagnostic tests, sophistication of technology and 
intensity of service vary significantly across post-acute settings. 
While tempting for policy to encourage patients to be placed in the 
least intensive and least costly setting, this decision must be made in 
light of patient needs and quality of care, as measured by the 
providers' capacity to effectively treat patients with certain clinical 
conditions.

Differences in Post Acute Levels of Care
    In the past 20 years, health care provided after the general acute 
hospitalization has become known as post acute services or the post 
acute care continuum. Included as post acute are long-term care 
hospitals (LTCH), inpatient rehabilitation facilities (IRF)--whether 
rehab unit or freestanding rehabilitation hospitals, skilled nursing 
facilities (SNF), hospices and home health. Although they tend to be 
categorized together, each setting is unique and there should be unique 
definitions of each that support the clinical care they are organized 
to deliver. They have few similarities and many differences. 
Similarities between post acute settings include providing for the 
health care needs of patients and doing so through medical personnel 
such as physicians, nurses and therapists. Each is regulated by state 
and federal authorities, and each is paid by CMS at a different rate 
for Medicare patients if the service is medically necessary and 
admission and continued stay criteria are met.
    Differences between each of these levels of care include:

    1) Reason for patient admission
    2) Severity and acuity of illness
    3) Risk of mortality
    4) Intensity of monitoring services
    5) Type and availability of services
    6) Knowledge, specialization, amount of staff
Reason for Admission
    The reason for admission for each level of care is:
    LTCH: Medical observation and intervention for complex multiple 
medical conditions.
    IRF: Comprehensive rehabilitation requiring rehabilitation 
physicians, nurses, therapists.
    SNF: Restorative, requiring skilled nursing and/or skilled therapy.
    HH: Skilled or unskilled care managed safely in home environment 
when patient/primary care giver demonstrates ability to manage care at 
home.
    Each of these locations has the potential to care for the patient 
with a specific diagnosis(es). The placement decision should be based 
upon: patient needs, patient acuity, complexity of multiple conditions, 
stability, intensity of monitoring/observation required, knowledge and 
intensity of services required, staff expertise and knowledge, staff 
time required, and availability of technology and equipment.
    For example, the patient who has experienced a stroke has the 
potential of being admitted to an LTCH, IRF, SNF or returning home with 
home health. The potentially unstable medically complex stroke patient 
who has multiple co-morbidities such as unstable diabetes, renal 
failure with dialysis, and/or respiratory insufficiency requiring 
respiratory therapy, will require multiple physicians' specialists, 
frequent laboratory tests, dialysis, nutritional support and acute 
frequent nursing observation and interventions would most appropriately 
be admitted to an LTCH.
    The stroke patient with functional impairments in eating, dressing, 
bathing who is aphasic and has progressed to sitting, is medically 
stable, and can participate in a minimum of three hours of therapy a 
day, would most appropriately be admitted to an IRF where the patient 
would receive a comprehensive rehabilitation program that is medically 
directed. The patient would have a goal directed rehab treatment plan 
that is aggressive, rapidly responsive to change in the patient status, 
and delivered by the highly trained, experienced and licensed rehab 
team.
    The stroke patient with functional impairments who is medically 
stable, but whose endurance is insufficient to participate in an active 
three hour a day program, or who has cognitive impairment that prevents 
learning would most appropriately be admitted to a SNF if she/he cannot 
be cared for safely at home with home health care.

LTCH Characteristics
Severity and Acuity of Illness; Complexity of Care
    Patients with medically complex conditions that are severely ill 
tend to utilize more staff time and clinical resources/interventions 
and be more medically unstable. In the post acute continuum, these 
patients are typically treated in LTCHs. These patients have multiple 
co-morbidities and many of these are being actively treated along with 
the primary diagnosis. LTCH care requires frequent, often daily 
physician assessment and intervention due to the high risk nature of 
the patients and multiple medical conditions that exist and have 
potential for rapid or unpredictable deterioration. Overall, severity 
of illness is significantly higher in LTCH than in other post acute 
settings.

Risk of Mortality
    The risk of mortality is increased when the severity of illness is 
greater. The LTCH patient typically has multiple medically complex 
conditions, and the acuity of illness is high. When risk of mortality 
is higher, the need for intensity of monitoring services is greater.

Intensity of Monitoring Services
    Intensity is established by a list of treatments, medications, 
interventions and therapy required by the patient based on the 
patient's needs and condition. When the patient's condition requires 
more frequent monitoring, intervention procedures, invasive treatment, 
intravenous medication and/or nutrition, the level of care required is 
of greater intensity and LTCH care is indicated.

Types and Availability of Services
    The need for the availability of on-site services increases with 
the acuity and complexity of the patient's condition. Continuous 
cardiac monitoring, on-site pharmacy, diagnostic services, dialysis, 
intensive care or high observation units, emergency rescue services, 
i.e., code team are common services in LTCHs. Patients in IRF's and 
SNF's tend to be more stable, so available services on-site vary based 
on patient programs.

Knowledge, Specialization, Amount of Staff
    The knowledge, specialization and amount of staff vary greatly in 
the different post acute levels of care. The medical staff in the LTCH 
is comprised of multiple specialists including pulmonologists; 
cardiologists; gastroenterologists; general, plastic and vascular 
surgeons; infectious disease and internists. These physicians see 
patients daily and consult routinely at the LTCH. The medical staff at 
the inpatient rehabilitation facility is also an organized staff model. 
The attending physician is typically the physiatrist. Consultants may 
see the patient at the hospital or in his or her office. The SNF 
typically does not have an organized medical staff. The attending 
physician may be the patient's family physician or a physician 
contracted with the nursing home to see patients. Consultants, when 
required, see the patients in his or her office.
    The amount of nursing hours required by the patients, the ratio of 
RNs to other nursing staff, and the clinical expertise required is 
different in each setting. LTCHs require acute care nurses with 
emphasis on monitoring and managing potential and actual acute events 
with a higher number of nursing hours per patient day and a higher 
ratio of RNs. Advanced cardiac life support is paramount. Inpatient 
rehabilitation requires nurses with rehabilitation training with 
emphasis on mobility, cognitive and elimination, etc.
    Rehabilitation therapists at inpatient rehabilitation facilities 
specialize in neurological treatment, spinal cord injury and traumatic 
brain injury. The level of specialization they need in rehab is not 
required in the LTCH or SNF.
    Respiratory therapists in LTCHs utilize ventilator weaning 
protocols jointly developed with the pulmonologist to facilitate 
weaning. This level of expertise may not be required in a SNF with 
chronic ventilator management or in inpatient rehabilitation.

Assessment Tool
    Developing a common assessment tool for post acute providers is an 
important but difficult task. Inpatient rehabilitation utilizes 
Inpatient Rehabilitation Facility--Patient Assessment Instrument (IRF-
PAI) as their assessment tool. SNFs utilize Minimum Data Set--Resident 
Assessment Instrument (MDS-RAI), home health utilizes OASIS. These 
tools are specific to that level of care and not usable for the other 
or LTCHs. The current tools, (MDS-RAI,OASIS, IRF-PAI), are not 
sufficiently comprehensive to capture the severity of illness/acuity, 
the intensity of the services and the complexity of the needs of the 
medically complex patient with multiple co-morbidities requiring 
multiple interventions The focus of these tools is the level of 
disability and the amount of help a person needs from others to perform 
basic activities of daily living. If one tool is to be created, 
clinicians from each of the post acute levels of care must be involved. 
Adequate trials of the tool must be completed before implementation. At 
the individual hospital level, when IRF-PAI was implemented, a new 
position of PPS coordinator was created and with MDS-RAI a MDS 
coordinator was created to ensure compliance and timely completion. 
Both positions are typically filled by registered nurses in a time of 
nursing shortages taking more nurses from the bedside and increasing 
cost to comply.
    Key elements of a patient assessment tool that would adequately 
assess LTCH patients would include:
    Indicators of severity of illness and intensity of services, such 
as
      Emergency management
      Medical complexity of care
      Infectious disease monitoring and management
      Intravenous interventions including medication and/or 
nutritional support through TPN
      Blood and blood products
      Medication titration
      Respiratory interventions, respiratory therapist time
      frequent suctioning
      brochoscopy
      tracheostomy care
      Potential for instability
      Lab monitoring
      Intensity of observations required in rapidly changing 
medical condition
      Hemodynamic monitoring
      Cardiac monitoring
      Frequent physician specialty consults
      Radiology diagnostic procedures
      Special procedures
      CT scans, MRI, EKG

Summary
    Again, on behalf of Select Medical and ALTHA, I commend the 
Committee for convening hearings on this important topic and soliciting 
the input of providers across the post-acute continuum. We urge the 
Committee to use as a guide the four principles summarized at the 
beginning of my testimony. ALTHA and Select Medical stand ready to 
assist the Committee in any way we can. Specifically, we urge Committee 
members and staff to visit LTCHs, IRFs and other post-acute providers 
to learn more about the fundamental differences in patients served in 
these settings and the capacity of different provider types to meet 
patient needs.

                        POST ACUTE LEVELS OF CARE
------------------------------------------------------------------------
                        LTCH           Rehabilitation          SNF
------------------------------------------------------------------------
   Reason for       Medical and        Comprehensive       Restorative
     Admission      Respiratory       rehabilitation         requiring
                          Needs     requiring therapy    skilled nursing
                                      for functional     and/or skilled
                                         impairments           therapy
------------------------------------------------------------------------
             Licensure/   Acute             Acute or               SNF
  Registration                        Rehabilitation
       (State)
------------------------------------------------------------------------
Provider Number                LTCH   Rehabilitation               SNF
------------------------------------------------------------------------
     Medicare          Excluded     Excluded Hospitals             SNF
 Classification   Hospitals CMS           CMS 412.23
                         412.23
------------------------------------------------------------------------
CMS Exclusion           25-day Length 75% of              ----
      Criteria             Stay           admissions
                                           within 13
                                           diagnoses
                                        Pre-
                                           admission
                                           screening
                                        Team
                                          Conference
                                     Medical
                                            Director
                                           Full-time
                                        Experienced/
                                             trained
                                            in rehab
------------------------------------------------------------------------
Medicare Payment               LTCH-PPS        Rehab           MDS-RAI
         Basis                               IRF-PAI              RUGS
                                     Case Mix Groups
                                       Rehab
                                          Impairment
                                       Category (RIC)
                                                 FIM
                                                 Age
                                     Comorbidit
                                                 ies
                                             4 Tiers
------------------------------------------------------------------------
   Admission/      Interqual or      Functional  Requires either
 Continued Stay        Mass Pro          deficit due     skilled nursing
      Criteria    (Designated by            to acute        or skilled
                           QIO)            condition     therapy daily
                                     Intensive,
                                              multi-
                                        disciplinary
                                               rehab
                                     24-hour
                                        availability
                                                  MD
                                         Rehab Nurse
                                     Able to
                                    tolerate 3 hours
                                        of therapy a
                                              day, 5
                                         days a week
                                           2
                                         disciplines
                                            required
                                       (PT, OT, Speech)
------------------------------------------------------------------------
  Severity of     Actual/Potential            Stable            Stable
       Illness      Instability
------------------------------------------------------------------------
 Intensity of              High               Medium                  Low
 Interventions/
      Services
------------------------------------------------------------------------
    Physician      Daily     3x week to   Monthl
   Assessment/          or more       daily               y by
  Intervention         frequent          Physiatrist        regulation
                   Multipl                        MD/PA/
                    e Physician                                     NP
                     Specialists
                   Pulmono
                         logist
                      available
                       24 hours
------------------------------------------------------------------------
      Nursing     Acute Care Nurse     Rehab Nursing     Skilled Nursing
                   8.5h-12h PPD        6.2h-6.5h PPD     at least daily
                  High RN ratio                                  3-4h Low RN
                                                                 ratio
------------------------------------------------------------------------
  Respiratory     Active weaning           As needed              ----
                     management
                         24h/7d
------------------------------------------------------------------------
     Pharmacy           On-site              On-site     Delivered from
      Services                                                off-site
------------------------------------------------------------------------
   Diagnostic           On-site               Varies          Off-site
      Services
------------------------------------------------------------------------
Rehabilitation    Varies based on        3 hours/day        1 hour/day
 Therapies (PT,   patient needs
   OT, Speech)    Averages--1h/day
------------------------------------------------------------------------
Interventions      Continu     Rehab      Skille
                    ous cardiac            Therapies         d Nursing
                     monitoring      Psychology   Skille
                   Acute     Cognitive       d Therapy
                     intubation              Therapy
                   Ventila   Urological
                    tor weaning           Management
                   Mechani
                            cal
                     ventilation
                   Compreh
                         ensive
                        Medical
                     Assessment/
                     Consultations
                     IV
                   Medications/
                            TPN
                   Renal
                       Dialysis
                   Wound
                     Assessment/
                     Management
                      including
                     Enterstomal
                      Therapist
------------------------------------------------------------------------
Assessment Tools  No standardized            IRF-PAI           MDS-RAI
                     assessment
                    required by
                     regulation
------------------------------------------------------------------------
             LOS             27                   13     Approximately
                                                                    40
------------------------------------------------------------------------


                                 

    Chairman JOHNSON. Thank you very much, Ms. Rice. Ms. 
Edelman.

 STATEMENT OF TOBY S. EDELMAN, SENIOR POLICY ATTORNEY, CENTER 
                  FOR MEDICARE ADVOCACY, INC.

    Ms. EDELMAN. Madam Chair and Members of the Committee, 
thank you for the invitation to testify today. My name is Toby 
Edelman; I am a Senior Policy Attorney with the Center for 
Medicare Advocacy, a private nonprofit organization that 
provides education, analytical research, advocacy, and legal 
assistance to help older people and people with disabilities 
obtain necessary health care. Since 1977, I have represented 
and worked on behalf of nursing home residents. Most recently, 
I was a Member of the technical advisory panel that made 
recommendations to CMS about refinements to the Medicare 
reimbursement system for SNFs. The idea of using a uniform 
assessment instrument for post-acute care has been discussed 
for many years. A single comprehensive instrument might produce 
benefits of assuring appropriate care and improved care 
outcomes for beneficiaries; however, another key purpose of 
uniform assessment instrument is saving public money. It 
appears to make little sense to pay vastly different amounts 
for the same services based solely on the setting of care. 
While this point has validity, we need to keep in mind the 
unintended consequences of similar cost containment efforts in 
the past. Cost shifted from one setting to another: uniform 
rates gave windfalls to some providers, eliminated other 
providers, and did not improve care for beneficiaries, and 
beneficiaries and providers each lost the opportunity to make 
choices about the site of health care. I would like to discuss 
these, each very briefly.
    First, cost-shifting: 20 years ago, Congress enacted PPS 
for acute care hospitals. Research on the treatment of 
beneficiaries with hip fractures found enormous changes 
following implementation of the new reimbursement system. One 
study found that before PPS, patients received rehabilitation 
in the hospital and generally went home either directly or 
following a short stay in a SNF. After PPS, hospital lengths of 
stay declined from 22 days to 13 days in this study, and the 
percentage of residents discharged to SNFs increased from 38 
percent to 60 percent. Nothing surprising here. The expectation 
was that patients would get the same rehabilitation services in 
SNFs that they had received in acute care hospitals, but at 
lower cost. This did not prove true. Researchers found that, 
for various reasons--and these are their words--
``Rehabilitation therapy within the nursing homes was less 
effective than inpatient therapy before PPS.'' Instead of 
getting therapy and returning home, patients were more likely 
to be in the nursing home a full year after their hip fracture. 
There was a 200-percent increase in the rate of nursing home 
residence 1 year after hospitalization after PPS. Not only were 
the care outcomes worse for beneficiaries with hip fractures, 
but expected cost savings also did not materialize as costs 
moved elsewhere. After PPS, although people with hip fractures 
spent less time in the hospital, they then became Medicare 
patients in SNFs, and then, as the researchers found, long-term 
care residents in nursing homes. So, the savings in Medicare 
acute care costs were accompanied by increases in post acute 
costs for both Medicare and Medicaid. Care was worse; costs 
shifted. I promised my friend, Mary Ousley, that I would say 
that the study does not reflect care in nursing homes today, 
which we would agree is better following implementation of the 
nursing home reform law.
    Second point: Recent experience in nursing home 
reimbursement following enactment of the PPS in 1997 
illustrates some consequences of establishing uniform rates. 
The PPS system for SNFs eliminated the longstanding payment 
differential between reimbursement rates for free-standing and 
hospital-based SNFs. All SNFs now receive the same rates, based 
on assessed needs of their residents. The CMS used both sets of 
rates when it computed the new uniform rates, however, and so 
hospital-based SNFs wound up with lower rates and free-standing 
SNFs got a windfall. The GAO reports that hospital-based 
facilities had extremely negative margins. Twenty-6 percent of 
the units closed between 1998 and 2000. On the other hand, 
free-standing facilities increased their Medicare margins from 
8.4 percent in 1999 to 18.9 percent in 2000. Paying uniform 
rates across SNF settings did not assure necessary care was 
provided to beneficiaries. The GAO reported that SNFs changed 
their care practices in response to the PPS system so that the 
majority of residents, in fact, received less therapy than 
before.
    The last point is about choices for beneficiaries. 
Generally, Federal law guarantees beneficiaries the right to 
choose among post acute providers that are certified to provide 
them with care and that agree to serve them. Use of the uniform 
instrument raises some questions. Would such an instrument 
eliminate beneficiary choice and automatically limit 
beneficiaries to the least expensive care setting? Some years 
ago, beneficiaries in a western State were denied the right to 
choose a hospital-based SNF when a lower cost, free-standing 
SNF was available. Beneficiaries objected when they were told 
they would have to move great distances from their families. 
Post-acute care for many people becomes a permanent placement. 
While people may choose short-term care in distant locations, 
they usually want to be near families and friends if a 
placement turns into the rest of their lives. We need to be 
concerned if a uniform assessment instrument precludes 
beneficiary choice among appropriate providers. The evidence is 
in conflict whether the different post-acute care settings 
actually serve the same or different populations, and whether 
they provide the same or different services or intensities of 
services. We do know that people become more different from 
each other as they age; and the combination of various chronic 
and acute conditions, mental functioning, and social factors 
may make people with similar post acute conditions very 
different from each other in significant ways that may justify 
different post acute settings.
    Finally, I think assuring accurate and comprehensive 
assessments so that Medicare beneficiaries get the care and 
services they need in the appropriate setting of their choice 
is an important public goal of uniform assessments and could 
certainly be an improvement over today's system. If paying the 
lowest rate possible is the primary goal of uniform 
assessments, beneficiaries may not be well served, and it may 
create a false sense of savings if costs are simply shifted 
elsewhere. I don't have simple answers to these concerns, and I 
am not suggesting that change isn't needed, but I am 
encouraging you to proceed with caution in this highly complex 
area of post-acute care. Thank you.
    [The prepared statement of Ms. Edelman follows:]

   Statement of Toby S. Edelman, Senior Policy Attorney, Center For 
                        Medicare Advocacy, Inc.

    Madam Chairwoman and Members of the Committee:
    The idea of using a uniform assessment instrument for post-acute 
care has been discussed for many years.\1\ As Congress has recognized, 
there are many potential benefits from using a single instrument. A 
single, comprehensive instrument might lead to more uniformity, more 
accuracy, and less confusion if it captured all relevant information 
about patients that health care providers needed in order to assure 
appropriate post-acute care for Medicare beneficiaries. Improved care 
outcomes for Medicare beneficiaries could result.
---------------------------------------------------------------------------
    \1\ Joan L. Buchanan, Ph.D., et al, ``An Assessment Tool 
Translation Study,'' Health Care Financing Review 24(3): 45-60 (Spring 
2003) (describing benefits from comparable measures across settings, 
but difficulties in developing a single assessment tool for long-term 
care); MedPAC, Report to Congress: Medicare Payment Policy 93 (March 
2001) (noting 1999 and 2000 MedPAC recommendations to develop a common 
core set of assessment data elements for post-acute care).
---------------------------------------------------------------------------
    In addition to planning care for beneficiaries, however, another 
key purpose of a uniform assessment instrument is saving public money. 
It appears to make little sense to pay vastly different amounts for the 
same services, based solely on the setting of care. While this point 
has validity, we need to remember the unintended consequences of 
similar cost-containment efforts in the past. Costs shifted from one 
setting to another; uniform rates gave windfalls to some providers, 
eliminated other providers, and did not improve care for beneficiaries; 
and beneficiaries and providers lost the opportunity to make choices 
about health care.
    Cost-shifting. Twenty years ago, Congress enacted a prospective 
payment system for acute care hospitals. One explicit purpose was 
reducing hospital costs. A considerable amount of research found, as 
expected, that hospital lengths of stay were reduced following the 
introduction of PPS. There is certainly a benefit to that result, in 
and of itself, both for public payment systems and for beneficiaries. 
But some less predictable and less beneficial results also occurred.
    Research on the treatment of beneficiaries with hip fractures found 
enormous changes in care settings and costs following the 
implementation of PPS. One study found that before PPS, patients 
received rehabilitation in the hospital and generally went home, either 
directly from the hospital or following a short stay in a SNF. After 
PPS, hospital lengths of stay declined from 22 days to 13 days and the 
percentage of residents discharged to SNFs increased from 38% to 60%. 
The expectation was that patients could get the same rehabilitation 
services in SNFs that they had received in acute care hospitals, but at 
lower cost. This did not prove true. After PPS, the researchers found 
that, for various reasons, ``rehabilitation therapy within the nursing 
homes was less effective than inpatient therapy before PPS.'' The 
outcomes for patients with hip fracture were worse following PPS. 
Instead of getting therapy and returning home, patients were more 
likely to be in the nursing home a full year after their hip fracture; 
a 200% increase in the rate of nursing home residence was reported by 
the study after PPS was implemented.\2\ The researchers called this 
finding ``alarming'' and their most important finding. Services were 
not the same in the different settings.
---------------------------------------------------------------------------
    \2\ John F. Fitzgerald, M.D., et al, ``The Care of Elderly Patients 
with Hip Fracture,'' New England Journal of Medicine 319(21):1392-1397 
(Nov. 24, 1988).
---------------------------------------------------------------------------
    Not only were care outcomes worse for beneficiaries with hip 
fractures following PPS, but expected cost savings also did not 
materialize as costs moved elsewhere. After PPS, people with hip 
fractures spent less time in the hospital, but these patients then 
became Medicare patients in SNFs and then, frequently, as the 
researchers found, long-term residents of nursing homes. Medicare 
payments to SNFs increased in the years following implementation of PPS 
for hospitals.\3\ And patients who would have gone home from the 
hospital now found themselves living in nursing facilities on a long-
term basis, generally, as Medicaid beneficiaries. Savings in Medicare 
acute care hospital costs were accompanied by increases in Medicare and 
Medicaid post-acute costs. Costs shifted from one setting to another, 
with worse care outcomes for beneficiaries. Lessons learned from this 
experience are that lower-cost settings do not necessarily provide 
comparable services and that new health care costs may emerge in other 
settings.
---------------------------------------------------------------------------
    \3\ MedPAC reported that Medicare spending in SNFs increased from 
$3.6 billion in 1992 to $13.5 billion in 2003. MedPAC, A Data Book; 
Healthcare Spending and the Medicare Program 142, Chart 9-2 (June 
2004). Other factors also contributed to the growth in SNF care during 
this period, including new SNF coverage guidelines issued in 1988, 
enactment of the Medicare Catastrophic Coverage Act of 1988 (which 
revised rules for SNF coverage), and Medicare's use of cost-based 
reimbursement prior to 1998. ``A Review of Issues in the Development 
and Implementation of the Skilled Nursing Facility Prospective Payment 
System'' 2 (May 2004).
---------------------------------------------------------------------------
    The consequences of uniform rates: Recent experience in nursing 
home reimbursement following enactment of a prospective payment system 
in 1997 illustrates the consequences of establishing uniform rates. The 
PPS system for skilled nursing facilities eliminated the long-standing 
payment differential between Medicare reimbursement rates for free-
standing and hospital-based SNFs. All SNFs now receive the same rates, 
based on the assessed needs of their residents. In developing these 
rates, the Centers for Medicare & Medicaid Services used both free-
standing and hospital-based rates. When the rates were combined, 
hospital-based SNFs wound up with lower rates and free-standing SNFs 
got higher rates (i.e., the financial benefit of the higher rates that 
hospital-based SNFs had received). As a consequence of these changes, 
the Government Accountability Office has repeatedly found that free-
standing facilities have increased their Medicare margins--from 8.4% in 
1999 to 18.9% in 2000--and hospital-based facilities have had extremely 
negative margins,\4\ with 26% of the units closing between 1998 and 
2000.\5\
---------------------------------------------------------------------------
    \4\ GAO, Medicare Payments Exceed Costs for Most but Not All 
Facilities, GAO-03-183 (Dec. 2002).
    \5\ ``A Review of Issues in the Development and Implementation of 
the Skilled Nursing Facility Prospective Payment System'' 29 (May 
2004).
---------------------------------------------------------------------------
    Paying uniform rates across SNF settings did not assure that 
necessary care was provided to beneficiaries. In a series of reports, 
the GAO found that SNFs changed their care practices in response to the 
PPS system so that residents received less therapy than before.\6\ And 
SNFs failed to increase nurse staffing, despite a statutorily-mandated 
increase in the nursing component of the Medicare rates.\7\ These 
reports demonstrate that reimbursement systems alone are not sufficient 
to assure that facilities provided appropriate care and services to 
Medicare beneficiaries. A strong regulatory system, with incentives 
that are consistent with, and complemented by the reimbursement system, 
is necessary.
---------------------------------------------------------------------------
    \6\ GAO, Skilled Nursing Facilities; Providers Have Responded to 
Medicare Payment System By Changing Practices, GAO-02-841 (Aug. 2002).
    \7\ GAO, Skilled Nursing Facilities: Available Data Show Average 
Nursing Staff Time Changed Little after Medicare Payment Increase, GAO-
03-176 (Nov. 2002).
---------------------------------------------------------------------------
    Choice for beneficiaries: Generally, federal law guarantees 
beneficiaries the right to choose among post-acute providers that are 
certified to provide them with care. As long as the provider agrees to 
serve the beneficiary, the beneficiary can choose among providers.
    As we think about a uniform assessment instrument, questions arise. 
Would such an instrument restrict beneficiary choice and limit 
beneficiaries to the least expensive care setting, regardless of 
beneficiary and provider choice to the contrary? Some years ago, 
beneficiaries in a western state were denied the right to choose a 
hospital-based SNF when a lower-cost free-standing SNF was available. 
Some beneficiaries objected when they were told they would have to move 
great distances from their families to a free-standing facility. Post-
acute care, for many people, becomes a permanent placement. While 
people may choose short-term care in distant locations, they usually 
want to be near families and friends if a placement turns into the rest 
of their lives. An assessment instrument should not be used to limit 
beneficiary choice among appropriate post-acute providers.
    Finally, do various post-acute settings in fact serve the same 
populations and provide identical services? The evidence is in 
conflict.
    Some evidence indicates a clear overlap in the populations served 
by different post-acute care settings and in the services these 
settings provide. The increasing acuity of SNF residents is 
demonstrated by the proposed Medicare reimbursement rules for SNFs, 
published last month, which modify the 44 assessment categories and add 
nine new high-cost categories to reflect residents who are medically 
complex and also need rehabilitation.\8\ On the other hand, some 
studies indicate that post-acute providers may serve different people 
or provide different intensities of services, or both.\9\
---------------------------------------------------------------------------
    \8\ 70 Federal Register 29070 (May 19, 2005).
    \9\ MedPAC, Report to Congress: Medicare Payment Policy 91-92 
(March 2001).
---------------------------------------------------------------------------
    Geriatricians tell us that people become more different from each 
other as they age. The combination of various chronic and acute 
conditions and health care needs may make people with similar post-
acute conditions different from each other in significant ways that 
justify different post-acute settings. While government payers do not 
want to pay for more expensive services when less expensive services 
would work equally well, older people may have different needs, or may 
suddenly and unexpectedly develop new needs, and require different 
settings as a result.
    Assuring accurate and comprehensive assessments so that Medicare 
beneficiaries get the care and services they need in the appropriate 
setting of their choice is an important public goal of uniform 
assessments and could be an improvement over today's system. However, 
if paying the lowest rate possible is the primary public goal of 
uniform assessments, beneficiaries may not be served well and it may 
create a false sense of savings if costs are simply shifted elsewhere.
    Thank you.
    The Center for Medicare Advocacy is a private, non-profit 
organization founded in 1986, that provides education, analytical 
research, advocacy, and legal assistance to help elders and people with 
disabilities obtain necessary healthcare. The Center focuses on the 
needs of Medicare beneficiaries, people with chronic conditions, and 
those in need of long-term care. The Center provides training regarding 
Medicare and healthcare rights throughout the country and serves as 
legal counsel in litigation of importance to Medicare beneficiaries 
nationwide.
    Toby S. Edelman is a Senior Policy Attorney with the Center for 
Medicare Advocacy in the Washington, DC office. Since 1977, she has 
represented and worked on behalf of nursing home residents. She was a 
member of the Medicare SNF Technical Advisory Panel that considered 
refinements to the Medicare SNF reimbursement system (2004).

                                 

    Chairman JOHNSON. Thank you. Thank you. It is interesting 
to hear the unintended consequences of past policy changes. 
There are two issues I want to plumb. First of all, on this 
issue of uniform assessment tool, it does seem to me from 
listening to the testimony of both the first panel and the 
second panel that there is some definable body of information 
that could be used to make that as a common base; though 
clearly, there is a need for additional assessment in each 
setting. It does seem to me that if you did that, you would end 
up altering the OASIS and MDS and everything else. If you have 
something that takes the first piece of it and then you add on, 
depending on the institution's focus, you would change all 
tools. Now, is that where you think we are heading, those of 
you who are much closer to this than I am? Dr. DeJong.
    Dr. DEJONG. Yes, I think so. I think that one of the 
difficulties we are going to have is getting consensus on the 
core elements. Each post acute sector is highly vested in its 
particular instrument and its approach. All these instruments 
were developed over long periods of time through consensus 
building and research. The silos that are represented in these 
institutions, and these post acute industries, are not just the 
facilities themselves; it goes much deeper. With the skilled-
nursing industry, for example, there are people who are trained 
in long-term care who have had their entire professional 
careers in the area of long-term care, and that has spilled 
over into skilled nursing. You have got people in the 
rehabilitation community who have come through their particular 
traditions and whatnot. Each of these silos has certain 
cultural and intellectual traditions that are reflected in the 
instrument that each uses. To obtain consensus across the 
different sectors and different silos, I think is going to be 
quite a challenge. I think we are going to need to do that. I 
think one option is to allow people to retain certain elements 
of what they currently have, but make it auxiliary to the core 
instrument.
    Chairman JOHNSON. Ms. Ousley.
    Ms. OUSLEY. Having the assessment instrument, actually I 
think that has been in place the longest in skilled nursing. I 
firmly believe that there is a core set of data elements that 
can go across all settings. Now, for MDS, CMS is in the process 
now of looking at an update, which is overdue. To me, it seems 
that the time is right to be able to look at what is the core 
set of data elements that can go across the settings. The three 
things that we can't lose sight of are that, whatever this 
instrument looks like, it must be able to define the care, link 
it to payment, and we have to be able to define outcome 
measures. I am not so wedded to MDS that I don't see the need 
for change. We have, I think, the best database in the Nation 
of MDS-derived quality indicators over the years that we have 
used it, and would love to be able to see that continue and, 
again, go across all post acute settings. I think it is doable.
    Ms. RAPHAEL. I was struck when MedPAC took a look at this, 
and, in fact, we all are looking at the same things, for 
example, mobility. When you looked, one person was saying, 
``Did you walk 20 feet?`` Another one was looking, ``Did you 
walk 100 feet;'' ``Did you walk unassisted?`` So, I think we 
are all looking at the same things to some degree; it is just 
how we are defining and when we are measuring. I think that 
there could be consensus here on what we think is important in 
trying to make these determinations.
    Chairman JOHNSON. Then just to focus on the nursing home 
for a moment. I recently visited a nursing home that is part of 
the Evercare program, and they don't use MDS, they just have a 
case manager and outcomes--just outcomes focused. The person is 
in the nursing home, working with a nursing home staff, but it 
is an Evercare patient. So, I was interested that they could 
just not do the MDS forum. So, I do think we need to think 
clearly about this base data. Dr. Votto, you mentioned in your 
testimony that you thought that from the trial program--and I 
want to come to you, Ms. Rice, to see if you are familiar with 
this research that they are doing, because that seems very 
promising to me. It is the only tangible, concrete, fairly 
comprehensive effort being made right now, as far as I can 
tell.
    Dr. VOTTO. Right. The point I would like to make is that I 
think we can have a basic patient assessment tool. I think one 
of the things about the silo concept is that in many of the 
programs that we have in the LTCH industry, you do need a 
critical mass of patients. You can't just have a weaning 
program and have three patients a year or ten patients a year. 
You have to have a program. A spinal cord program is very 
similar, brain injury is very similar. If you want to have a 
comprehensive program which is multidisciplinary, you do have 
to have a core or critical mass, I believe. If you had a 
patient assessment tool which would separate out those small 
groups of patients, then maybe geographically you don't have 
many of these programs. I think that that has to be--that point 
has to be made.
    Interestingly, in the study that we did with the ventilator 
patients, we had thought that the patients that ended up on 
prolonged mechanical ventilation would be the very sick; coming 
out of nursing homes, just going into a hospital Intensive Care 
Unit (ICU) and not getting better. It turns out, 86.5 percent 
of those patients were independently living before they ever 
ended up on prolonged mechanical ventilation, and 82 percent of 
them were very functional out in the community before they 
ended up on prolonged mechanical ventilation. So, we are not 
talking about a patient population that is at the end of life 
and at the end of the rope, and they come in and we are doing 
all these things to them; they were actually very functional, 
most of them. So, that kind of data is important to have, I 
think.
    We also found that 42 percent of them had bed sores when 
they came to our hospitals. Also, some very interesting data 
was that the Acute Physiology and Chronic Health Evaluation 
(APACHE) scores--which is an acute physiology score, an acuity 
score which measures your likelihood of dying--when compared to 
ICUs in multiple patients, thousands of which were in one 
study, the APACHE scores of patients going into the ICUs was 
41. The higher, the worse it is, and the range is zero to 115. 
The scores in our study were 35, meaning that our patients that 
were coming into the LTCHs for weaning were just about as 
critically ill as the patients going to the ICU the first time. 
So, you do get very interesting information when you do study 
subpopulations.
    Chairman JOHNSON. Interesting.
    Ms. RICE. I am familiar with that study, and it is--the 
tool that will have to be developed to be usable by the LTCH 
industry, as well as post acute, is a tool that will have to 
look at complexity. Whereas most of the tools that have been 
developed thus far, IRF-PAI, MDS, they look at functional 
independence measure as it relates to Activities of Daily 
Living (ADL). The patients that we are seeing, we are more 
concerned about if they are going to survive the 
hospitalization, their risk of mortality because of the level 
of illness. Although it would be nice to know that, it is not 
the primary thing that we treat during the long-term acute care 
hospitalization. So, for admission, we use criteria currently 
in our hospitals and in most of the LTCHs, because most of the 
QIOs are now using it; we use InterQual criteria for admission 
and continued stay. That is more oriented toward the acute 
care, acute hospital, rather than toward the post-acute care 
arena, so that the two will have to be significantly different 
than the tools that are currently out there.
    Chairman JOHNSON. Dr. Votto, do you have any comment on the 
InterQual criteria?
    Dr. VOTTO. My biggest concern about the InterQual criteria 
are the mutual exclusivity that is inherent in them. In other 
words, if you qualify for an IRF, you don't qualify for an 
LTCH. If you qualify for an LTCH, you don't qualify for a SNF. 
If you qualify for an acute care hospital, you don't qualify 
for either of the other two. I am concerned about that as the 
payment following the criteria that InterQual has. That is one 
of the problems that I have with it. There are a few other 
things that I think are very rigid about their criteria, but I 
think that that is the major issue that I see with them. I 
don't think they really differentiate patients correctly.
    Chairman JOHNSON. Interesting.
    Dr. VOTTO. They don't follow the PPS, as far as I am 
concerned.
    Chairman JOHNSON. Ms. Edelman.
    Ms. EDELMAN. Yes. Thank you. I wanted to say one thing 
about the MDS that is used in Medicare SNFs, because the 1987 
Nursing Home Reform Law (P.L. 100-175) made the same standards 
basically for Medicare SNFs and Medicaid Nursing Facilities. 
The assessment instrument that is used, the MDS, has a lot of 
information that is important for a long-term care stay, for 
somebody who will be living in an institution for a prolonged 
period of time. The part that is unique about the MDS, or one 
of the parts that is unique, is the section on customary 
routines. This section tries to understand who that person is, 
when the person likes to get up, go to bed, things that might 
not be as relevant for other settings. I would not want to lose 
that part of the assessment process because it has been a very 
important part of nursing home reform and is really making care 
better for residents.
    Chairman JOHNSON. Interesting. Mr. Lewis, would you like to 
inquire?
    Mr. LEWIS. Thank you very much, Madam Chair. Madam Chair, I 
want to be very brief and apologize to you for being a little 
late, but a group of young students from Connecticut hijacked 
me, or maybe they tried to kidnap me, on the steps of the 
Capitol and I had to speak to them. So, I didn't think you 
would mind. Thank you very much. I want to thank each and every 
one of you for being here. I know you have been so patient and 
it has been a long afternoon for you. I know you hadn't planned 
to be here so late. I have been trying to peruse each 
statement, and really appreciate all the wonderful information 
that you have provided, so I would be very, very brief. I just 
want to say, higher SNF reimbursement under Medicare appears to 
be cross-subsidizing Medicaid's lower rates. Medicaid isn't 
before our Committee. We deal with it indirectly and remain 
concerned about the potential cuts this year on behalf of the 
people we serve and with respect to how it could affect 
Medicare. Now, if Medicaid is on the table, with all due 
respect, you hope that Congress will find the big money. Are 
you concerned about Medicaid cuts this year? What might that 
mean to your patients and facility?
    By the way, you are here, and while you are here this is an 
oversight hearing, and maybe I can just--this may be sort of 
off message and maybe not complete, Madam Chair, in compliance 
with the hearing--but I want to ask you, do you have any 
concern about how the new Medicare prescription drug program 
will impact you, your patient, your facilities? Anyone. Each 
one can say something.
    Ms. OUSLEY. To your first question. Any potential cuts in 
skilled nursing today, be they from Medicare or from Medicaid, 
would be very difficult for us to deal with. We have--I think 
we do have a high acuity level of patients, and we are, of 
course, looking at individual States all across the Nation and 
hoping that Medicaid cuts will not hit us in such a way that 
will compromise our ability to provide that care. As we are 
learning on a daily basis now what the impact of the Medicare 
prescription drug benefit is going to be, I quite honestly have 
to tell you that even though we are very few months away from 
implementation, in our nursing facilities we are still trying 
to figure out exactly how we are going to manage that process, 
how we are going to make sure that the residents have the 
appropriate choice, the cost containment, if appropriate. All 
of those details are simply not available to us now today. I 
will tell you that there is a high level of apprehension in 
nursing facilities and by managers such as myself of being able 
to administer this in an appropriate way to meet the needs, the 
intent of the statute and meeting the needs of our residents.
    Mr. LEWIS. Thank you.
    Ms. RAPHEL. We see about 24,000 patients a day, and a 
number of them are dual-eligibles.
    Mr. LEWIS. You say you see 24,000 patients a day?
    Ms. RAPHEL. Right. A number of them are dual-eligibles.
    Mr. LEWIS. For both Medicare?
    Ms. RAPHAEL. They are both Medicare- and Medicaid-eligible. 
I would say that at this point we really don't know enough 
about how the implementation is going to evolve. We are working 
with a number of groups in our community to make sure that 
people are educated and informed and know how to go through the 
process, but it is not yet clear. Our greatest concerns are 
about those people who have depression or anxiety and who have 
finally been stabilized on medication regimes and who cannot 
afford any destabilization period, and trying to make sure that 
they don't miss a beat as we move to the new system.
    Mr. LEWIS. Thank you.
    Dr. DEJONG. I am concerned about the new prescription drug 
benefit because I think it is extraordinarily complicated and 
confusing with the various deductibles, the doughnut hole, and 
whatnot. I am trained in health policy, and I don't fully 
understand it, and I pity the beneficiary who is going to cope 
with it. The kinds of beneficiaries that are in the types of 
facilities represented here, are not necessarily people who 
have the wherewithal to fully understand the benefit and how it 
is going to affect their lives. I think a massive education 
process is needed, and I would suspect that no education will 
ever be adequate to the complexity of the benefit. I am deeply 
concerned that a lot of people are not going to understand the 
benefit and are not going to be able to use it appropriately.
    Mr. LEWIS. Doctor, do you have any recommendations or 
suggestions that Members of this Committee or the Congress 
could take?
    Dr. DEJONG. Well, I think it is inherent in the structure 
of the benefit itself. I don't know how you get around it. With 
the doughnut hole, the deductibles, and the record keeping that 
people are going to have to do to figure out whether or not 
they are over the deductible or in the doughnut hole, and when 
the full coverage starts kicking in upon reaching the 
``catastrophic'' threshold. I don't have a solution. I don't 
think there is any amount of education that is going to help 
beneficiaries get through all that complexity.
    Mr. LEWIS. Others?
    Dr. VOTTO. I don't know that the drug bill will affect the 
inpatient, the LTCH, at this point. I am not sure of that. I do 
know that Medicaid cuts could be a major problem for us. About 
60 percent of our revenue is from Medicaid, from the hospital 
standpoint, and about 80 percent at the nursing home. So, I 
think that Medicaid cuts are going to be a major problem for 
us. Any Medicaid cut would be a major problem. I hope that 
there is a--I don't know the transition for the drug program, 
but we hope that that will be a smooth transition, and that is 
all.
    Mr. LEWIS. Thank you. Yes, ma'am.
    Ms. RICE. As a hospital we are reimbursed under Medicare 
part A, so drugs are included as part of our overall PPS 
reimbursement system. So, on an inpatient hospital basis we 
really should not be affected by the drug bill essentially. As 
far as Medicaid is concerned, we do see relatively large number 
of Medicaid patients that require LTAC in patient care. 
Certainly cuts in the Medicaid program would adversely affect 
our ability to care for those patients.
    Mr. LEWIS. Thank you. Yes, ma'am.
    Ms. EDELMAN. Most nursing facilities in the country 
participate in both Medicare and Medicaid. Medicare is 
generally ten or twelve percent of facilities' reimbursement. 
Mostly facilities rely on Medicaid. That is the major payer, 
so, there are concerns if cuts are very steep. This could be 
very, very difficult. I think the Medicare Part D is a very 
complicated benefit for nursing home residents in particular. 
When residents come into an SNF as Medicare beneficiaries, they 
are covered by part A, and that includes drugs. Once Medicare 
ends, which is usually 20 days, 30 days--very few people get 
the full 100-day benefit--then they would need a Part D drug 
plan. They might have to change drugs right then. What CMS has 
said is that the way to get a medically necessary drug that is 
not covered by the formulary of the plan that the person is in 
is to go through the exceptions process. That is going to be a 
very difficult and confusing process for people.
    Many people in nursing homes are dually eligible--that is, 
they are eligible for both Medicare and Medicaid. Once Medicare 
coverage ends, they are then covered by Medicaid. What CMS is 
going to do is randomly assign people in the fall to a 
prescription drug plan to make sure that there is coverage for 
their prescription drugs once they are on Medicaid. When CMS 
does this random assignment, because it is random, it is not 
going to take into account what drugs the person needs. As a 
result, the person could be assigned to a Prescription Drug 
Plan (PDP) that has a formulary that does not include that 
person's drugs, or the PDP may not have the pharmacy that the 
nursing home uses. There can be tremendous complexities to make 
sure that people don't have gaps in coverage when January 1st 
comes. We have been meeting collectively with CMS and with the 
provider associations, with the pharmacists, various health 
care professionals, but it is complicated. Part D is not really 
ready to be implemented at this point.
    Mr. LEWIS. I want to thank each of you for being here, and 
adding so much needed information as we wrestle with some of 
these tough and hard decisions. Thank you. Thank you, Madam 
Chair.
    Chairman JOHNSON. I thank my colleague, Mr. Lewis of 
Georgia. The Subcommittee will have a separate briefing on 
this. It is not surprising. You don't--you aren't informed 
about it, since we are almost seven months out from the program 
beginning. There is--the administration has a very logical and 
very direct and I think quite simple program planned. They are 
already communicating with the States. All the people who are 
in Medicare and dual-eligible will find it very easy, a much 
easier experience. Sometimes, by accident, you do something 
really brilliant. The discount plan proved to be really 
brilliant in the sense it gave us all a lot of experience with: 
how do you communicate; how do the different levels of 
government communicate; how does the private sector and the 
public sector communicate; how did the seniors understand? So, 
we come to this--this will challenge with a much greater body 
of experience. Now, the nursing homes have a unique problem, 
because they usually have their own pharmacy capability, and 
that has been a subject of discussion between the 
administration and the nursing home industry to try to make 
sure that that works smoothly -that they are discharged, and 
that that will work smoothly.
    These problems were inevitable, but they--in my mind, the 
choice between seniors having a prescription drug coverage and 
having to solve problems is a no-brainer. So, I am interested 
in the heavily negative tone at the table. For me, I am just 
thrilled that so many seniors will have really good drug 
coverage. Now, I am very pleased that the administration also 
recently made very clear that the offerings for people with 
mental health problems and problems like that are going to be 
very broad. So, we shouldn't have these problems of an appeals 
process by people who are in multiple complex groups of drugs 
and would not be in a good position to appeal. Always when you 
put a new program in place--when an employer puts a new program 
in place if they have several thousand employees, there are 
always some rough spots. I believe we will be able to work out 
the problem with the nursing homes to everybody's satisfaction. 
It is moving along. One thing that is unique about this 
administration, having served under four Presidents of both 
parties, I can tell you that I have never, ever, served under 
an Administration that had the time, energy, and respect for 
the constituents and the providers that this administration 
does.
    So, people do come in. They do talk, there is dialog. There 
is a lot of dialog between the Federal government and the State 
government about the dual-eligible population. On the 
experience of the discount program, we are going to be able to 
move that, I think, very easily and without a lot of concern by 
the seniors themselves. I think the nursing home problem will 
work out. The conversations between the employer sector and the 
government are going well, because that is a different, unique 
wrap-around issue, and you see many categories of seniors 
aren't affected by the structure of the program. The structure, 
with its period of personal responsibility--I prefer to call it 
personal responsibility as opposed to a doughnut hole because, 
frankly, my husband and I can afford $3,500 if we need to, and 
my children can't. In the long run, that is why there is a 
personal effort thing. The personal effort is not at the 
beginning, because then people who couldn't afford $3,000 off 
the bat get no program. So, we provide enough programs so that 
about 60 percent of seniors will have all of their drugs 
covered. Then there is a personal effort. Cut out from the 
personal effort people are all the Medicare/Medicaid. They 
don't have personal effort.
    All the people in Connecticut's Program of All-Inclusive 
Care for the Elderly (PACE) or Pennsylvania's PACE program or 
the six or eight States that have subsidy programs--we saved 
Pennsylvania just for the discount card, someone was telling me 
on the floor today, $90 million last year. They were able to up 
the income program of their PACE program because under the law 
the PACE contributions count toward the $3,500. So, in 
Connecticut where our PACE program income is now approaching 
200 percent of poverty income--maybe it is more than that, I 
have forgotten--you might know, John. We will be able to use 
our savings to attune that income level, because it has to be 
higher in the Northeast where the cost of living is higher. 
Mississippi wouldn't need as high a one. So, from this savings 
the States will be able to attune that State program level to 
the point where, people who can't afford the $3,500 are never 
exposed to it. People on the integrated plans, advantage plan, 
can be protected from the $3,500 till probably they will never 
need it. So, this is a flexible structure that provides, for 
$400 billion, an absolutely extraordinarily good benefit. The 
idea of a benefit with no doughnut hole was $1.3 billion, and 
that is to start.
    So, we have to be realistic in today's world. We have got a 
good, solid program to implement any new benefit to seniors, 
and all of the circumstances they find themselves in is really 
difficult. I know for an absolute fact, because I circulate the 
senior citizen centers a lot, that I have seniors paying the 
most extraordinary amount of money for Medigap insurance. I am 
just shocked. I know they are going to have many lower-cost 
alternatives for more integrated care and for those with 
chronic illnesses, that will absolutely be a big boon--and the 
integrated drug program into either integrated care or fee-for-
service care. So, while I appreciate you don't know all that 
you need to know now, I hope you will remember that this is a 
giant step forward. There are so many middle-class seniors who 
can't afford Medigap insurance who are going to be able to 
afford $37 a month, $35 a month. They will be integrated plans 
that will probably have lower premiums than that--remember the 
old zero premium plan--they seem to be coming back. Some of 
those will include a very small payment premium for drugs, 
because with integrated care, you and I know, you can keep 
people out of hospital, you can keep money out of emergency 
rooms, and that money flows back to the patient. In the 
government, we keep people out of the hospital and it flows 
back to us.
    So, there are some interesting, new and tremendously 
positive possibilities in bringing prescription drugs into 
Medicare. The biggest, most important, new possibility is this 
possibility of integrated comprehensive chronic disease 
management which will, in the end, flow right into the kind of 
basic assessment we are talking about. Because as people manage 
chronic illness, and when we get that electronic health 
record--it is one question I meant to ask them earlier--we 
really need to think as we move toward a basic assessment and a 
series of new assessment tools in a rather complicated area, we 
ought to try to coordinate this with the implementation of 
electronic capability, because we have got to have better 
electronic capability in health care for accuracy, for patient 
safety, for everybody's well-being. This will be much less 
complicated to implement if we think about it from the 
beginning and we structure it from the beginning with the 
electronic capability in mind.
    So, quality is the real challenge in health care; in a 
health care sector that is developing new and remarkable 
treatments and diagnostic capabilities and care capabilities 
that were simply never imagined. So, we have to have the help 
of the electronic records. We have to have medications, we have 
to know people can get them. This is a first giant step toward 
that. I hope all of you at the table--because every one of you 
have the brains enough to be a font of information about this 
program--make it your business to not say oh, this is so 
complicated; make it your business to say, just tell me your 
zip code and I will tell you what is available.
    Mr. LEWIS. Madam Chair.
    Chairman JOHNSON. Yes.
    Mr. LEWIS. I want to be sure that I heard you correctly. 
Did you suggest that we would hold a briefing on the Medicare--
--
    Chairman JOHNSON. Oh, yes, we will.
    Mr. LEWIS. Would we also consider holding an oversight 
hearing on the program?
    Chairman JOHNSON. We will see the right time for that--
certainly we need to do that. Whether we hold a public hearing 
at this time, we will decide. Certainly I want the Committee to 
see the rollout that the agency has now put in place. We hope 
to do that before the August recess; maybe before the July 
recess.
    Mr. LEWIS. Thank you.
    Chairman JOHNSON. Thank you all for participating. My 
heartfelt apologies for having this hearing dragged on so long, 
but it is a big issue. Remember, your thoughts are welcome 
throughout the process, because this is going to be a 
challenging process. Thank you very much. The hearing is 
adjourned.
    [Whereupon, at 5:35 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

  Statement of Felice Loverso, Ph.D., American Medical Rehabilitation 
                         Providers Association

    The American Medical Rehabilitation Providers Association (AMRPA) 
is the leading national trade association representing over 450 
freestanding rehabilitation hospitals, rehabilitation units of acute 
care general hospitals and numerous outpatient rehabilitation services 
providers. Our members serve over 450,000 patients per year, and most, 
if not all, of our members are Medicare providers. We appreciate the 
Subcommittee's focused attention on post-acute care services in 
Medicare. Rehabilitation hospitals and units are a crucial part of the 
spectrum of post-acute care providers, and we believe it is important 
to examine the issues surrounding this complex area of care.
    An ongoing debate exists among policymakers, providers and various 
organizations about whether skilled nursing facilities (SNFs), 
inpatient rehabilitation facilities (IRFs) and possibly long term care 
hospitals (LTCHs) provide the same programs and activities with 
equivalent outcomes to patients needing medical rehabilitation 
services. Facilities should be compared both by their physical 
attributes, and the complete nature of the care and services they are 
organized to provide. Comparing facility performance solely by patient 
diagnoses or cost provides an extremely limited picture of the patients 
treated in these settings, the nature and value of the care they 
receive. One must look at additional patient information to truly 
appreciate the patients and their characteristics.
    IRFs provide programs of care that utilize skilled rehabilitation 
services to Medicare patients at a pace, intensity, and sophistication 
that cannot be obtained in other health care settings. IRFs provide 
intense rehabilitation medicine and therapy to patients with 24-hour 
nursing and physician services. Patients receive a high-quality, 
coordinated program of care with the goal of achieving the maximum 
level of function possible and a rapid return to the community.
    ARMPA shares the Committee's interest in examining the complicated 
issues surrounding assessment tools and looking at other ways to 
address payment across post acute providers, and we appreciate the 
opportunity to present our recommendations to the Committee.
75% Rule
    One overarching concern facing all post-acute care rehabilitation 
providers is the dramatic impact implementation of the 75 Percent Rule 
on patient access to rehabilitative care. The 75% Rule is 
unquestionably having a more severe impact on patients and providers 
than CMS or OMB originally estimated. The Medicare program originally 
estimated that implementation of the 75% Rule would reduce payments to 
IRFs by $10 million in FY 2005 and $30 million in FY 2006. However, the 
President's FY 2006 Budget revised these estimates to show a savings of 
$50 million in FY 2005 and $70 million in FY 2006. AMRPA's own data 
suggest that Medicare is likely to save $165 million dollars in the 
first year alone. Clearly, CMS did not anticipate such a dramatic 
decline in patient services as a result of implementing this 
regulation.
    Most alarming is the impact the rule is having on patients' access 
to treatment. Clear evidence now exists that IRF discharges have 
started to decline, and this change is orders of magnitude greater than 
CMS estimated. ERehabData, AMRPA's data service, estimates that in the 
first year alone, over 39,000 patients will be refused admission to 
inpatient rehabilitation facilities in order for hospitals to maintain 
compliance with the new 75% Rule. For the first three quarters under 
the new 75% Rule, volume is down 5.8% from the comparable three 
quarters in 2003 and 2004, meaning that approximately 20,000 Medicare 
patients have been denied admission since July 1, 2004. By the fourth 
year of the 75% Rule, IRFs will be forced to turn away one out of every 
three patients in order to remain compliant. As noted in the GAO Report 
entitled ``More Specific Criteria Needed to Classify Inpatient 
Rehabilitation Facilities,'' only 6 percent of IRFs will be able to 
meet the 75 percent threshold required at full implementation ofthe 
rule at the end of the transition period. Without any direction from 
Congress, the 75% Rule is eliminating intensive inpatient 
rehabilitation as a treatment option for a significant number of 
Medicare beneficiaries.
    At the core of the 75% Rule seems to be a mistaken reliance on the 
assumption that one site of care can be substituted for another with no 
impact on quality or outcomes. In particular, CMS, in promulgating 
changes to classification criteria for IRFs, assumed that SNF and other 
post-acute care settings can be substituted for IRFs if patients are 
denied care due to the exclusion criterion in the 75% Rule, and that 
this is clinically acceptable and economically desirable. AMRPA 
strongly disagrees with this premise. IRFs provide a very unique, 
specialized, intensive form of rehabilitative care that cannot be 
duplicated in other Medicare settings. Given the enormous impact the 75 
Percent Rule has had on inpatient rehabilitative care, AMRPA urges the 
Ways and Means Committee to consider legislation that would hold the 
50% threshold for compliance for two additional years. Moreover, to 
facilitate collaborative relationships with federal policymakers, AMRPA 
urges consideration of a federal advisory council on medical 
rehabilitation that would work with CMS to properly characterize IRFs 
and separately establish workable guidelines to distinguish appropriate 
patient selection criteria.

Current Financing for Post-Acute Care Services
    Current Medicare program post-acute care policy is focused on 
providing care based on types of providers, with the key post-acute 
care institutional providers being LTCHs, IRFs and SNFs. While all of 
these sites provide post-acute care to Medicare beneficiaries, each 
site of care currently utilizes its own prospective payment system. The 
SNF PPS began in 1998 and is based on a per diem payment unit. SNFs use 
a patient classification system called resource utilization groups 
(RUGs), of which there are 44 groups. On May 19, CMS issued a proposed 
rule to change the RUGs and increase the number to 53. In contrast, the 
LTCH PPS is based on a per discharge payment unit and uses LTCH DRGs, 
of which there are currently 550. The LTCH PPS is being phased in over 
5 years. Finally, the IRF PPS was initiated in January 2002 and is also 
based on a per discharge payment unit. There are 21 Rehabilitation 
Impairment Categories (RICs) and 95 case mix groups (CMGs) with four 
payment tiers, for a total of 380 possible CMGs and separate HIPPS 
codes. Each system is based on research reflective of the costs of care 
in a base year used to calculate the payment rates.
    CMS, MedPAC and others have expressed concern that the post-acute 
care payment systems provide incentives for engaging in behavior solely 
to enhance reimbursement, without regard to quality or appropriateness 
of care, patient outcomes or cost. Policymakers must realize that 
looking at payments in the context of diagnoses only, without looking 
at other factors, can be quite startling but does not reveal much about 
patient differences and reasons why a particular setting (1) best suits 
the need of that patient and/or (2) contains the resources necessary to 
obtain the optimum patient outcome. For example, payment for a stroke 
case may vary from $31,496.00 in an LTCH to $8,905 in a SNF according 
to a MedPAC report in June 2004 examining the most severe stroke cases 
(Chapter 5, June 2004 report on LTCHs). However, since those figures 
are for the most severely ill types of patients in that diagnosis, the 
numbers cited do not reflect the average payment, which is considerably 
lower. For example, the average Medicare payment for a stroke in an IRF 
in 2003 was $16,769.00 according to AMRPA's eRehabData.
    While federal policymakers understandably look closely at payment 
differentials, these payments encompass costs that are larger than the 
individual patient being treated. All of the payment systems discussed 
are based on historical costs that reflect not only patient care but 
also the setting-specific requirements and different Medicare 
Conditions of Participation each type of entity must meet. These 
requirements vary considerably by setting in the length, depth, scope 
and cost of compliance. Each system also relies on some patient's 
diagnosis information and varying amounts of functional information.
    AMRPA has closely analyzed cost reports for SNFs and IRFs, 
examining both routine costs and ancillary costs in order to determine 
any differences between the two settings and whether such differences 
are representative of varying levels of services delivered. When the 
SNF PPS and IRF PPS were under development in 1998, AMRPA analyzed the 
available costs reports for 1996 to see what the impact of a 
prospective payment system would be on SNFs. AMRPA found that there 
were higher costs in hospital-based SNFs than freestanding SNFs, a 
finding later reaffirmed by MedPAC reports. These findings suggested 
that a different type of patient was being treated with more complex 
needs in the hospital-based SNF setting. At the time of the analysis, 
the average length-of-stay (ALOS) for the hospital-based SNFs was 16.56 
days, in contrast to 45.03 days in the freestanding SNFs.
    AMRPA also examined routine and ancillary cost differences between 
IRFs and SNFs. It was clear that both the routine costs and ancillary 
costs were higher in the IRF setting, reflecting the greater intensity 
of care. IRFs had higher ancillary costs per day ($274 per day for 
rehab units; $134.74 for SNF hospital based units; $268 for rehab 
hospitals; and $118.96 for freestanding SNFs), as were specific therapy 
charges. However, we believe that ancillary costs have decreased in 
response to the SNF cuts and therapy cuts in the Balanced Budget Act of 
1997 and the implementation of the SNF PPS. Such a decrease would 
reflect a reduction in the amount of therapy delivered and the 
intensity of care. AMRPA is currently working on updating this 
information using 2002 costs reports.
    The cost differential between SNFs and IRFs is significant, but the 
cost variation represents differences in prospective payment systems 
and the greater intensity of care provided in the inpatient 
rehabilitation setting. Thus, the faulty belief that care is equivalent 
among post-acute care settings is also leading CMS to argue that 
Medicare is paying too much for some patient care provided in IRFs. In 
its September 9, 2003 proposed IRF rule, CMS assumed that the average 
payment for an IRF was $12,525 and that by substituting care at a 
payment of $7,000 per case it would ``save'' approximately $5,525 per 
case. It is clear now that the cases being denied access to IRF care 
due to the 75% Rule are primarily lower extremity joint replacement 
cases whose payments on average in 2004, based on eRehabData, were 
approximately $9,151. Hence the actual difference in payments is only 
$2,151 per case. Additionally, these numbers may also be misleading 
because of differences in lengths of stay. If the average Medicare SNF 
stay for similar cases is 31 in 2001 and 33 days in 2003 according to 
MedPAC, at an average daily rate of approximately $400, then the 
payment is closer to $12,000 thereby further reducing Medicare's 
alleged savings. We would be pleased to provide the Committee with the 
AMRPA analysis.

Services Provided in IRFs Compared to Other Post-Acute Care Settings
    One frequent discussion in comparing settings is whether a nursing 
home or skilled nursing facility can substitute for IRF care and 
provide equivalent services and outcomes. Practitioners find that in 
general, nursing homes and skilled facilities do not have all the 
characteristics of an IRF. Facilities may share some characteristics 
with IRFs, but this varies widely geographically. IRFs are subject to a 
number of standards that no other post-acute care setting must meet, 
including: (1) close medical supervision by a physician with 
specialized training in rehabilitation; (2) patients must undergo at 
least 3 hours a day of physical and/or occupational therapy; and (3) a 
multidisciplinary approach to delivery of the rehabilitation program. 
(Please find attached a chart delineating a comparative analysis of SNF 
and IRF coverage criteria). There are no comparable specific standards 
for other facilities relating to rehabilitation services (such as the 
``three hour rule'' for IRFs), and, therefore, each nursing home or SNF 
must be evaluated individually.
    A good illustration of the difference in services provided in these 
rehabilitation settings can be seen in the Spring 2005 MedPAC analysis 
examining single hip and knee joint replacements in IRFs and SNFs. 
MedPAC commissioned the RAND Corporation to study outcomes across 
settings for hip and knee replacement cases in response to changes to 
the 75% Rule that would force fewer hip or knee replacement patients to 
be treated in IRFs each year. MedPAC staff conducted two studies and 
presented the results at the April 2005 meeting. The first study 
involved a physician panel of six (6) orthopedic surgeons and five (5) 
specialists in physical medicine and rehabilitation. The physician 
panel noted that close to 50-80% of such patients go home with home 
health care or outpatient services, and therefore not to institutional 
settings. The panel said that patients who could not go home should 
have the following characteristics for referral to a SNF or IRF:

     Be limited in weight bearing or unable to walk 100 feet;
     Be obese or have comorbidities;
     Have an impairment of one or more joints (not replaced);
     Have diminished pre-surgery functioning; or
     Have architectural barriers or no informal caregiver at 
home.

    Panelists also said that patients who need extra medical attention 
should go to IRFs, while patients who need convalescent care or cannot 
tolerate 3 hours per day of therapy should go to SNFs. In some 
communities, surgeons refer based on the qualifications of specific 
facilities that are available, such as how the facilities are staffed, 
whether they follow rehabilitation protocols or are convenient for the 
surgeon to follow-up.
    Another point MedPAC has clearly established is that the types of 
patients treated in each setting are considerably different. MedPAC 
recently examined the types of patients in SNFs, IRFs and home health 
agencies (HHAs) receiving care for single joint replacements. 
Specifically, it found that:

               Patient Populations Differ Across PAC Sites
                           Acute Care Hospital
------------------------------------------------------------------------
       Home (35%)               IRF (35%)                SNF (30%)
------------------------------------------------------------------------
         Youngest                    Older                  Oldest
------------------------------------------------------------------------
                 Least coMore complications       Most complications
------------------------------------------------------------------------
                 Least coMore comorbodities       Most comorbidities
------------------------------------------------------------------------
      Highest SES                         Lower SES               Lowest SES
------------------------------------------------------------------------
       Most knees        More knees than SNFs     Most hip replacements
------------------------------------------------------------------------
     Replacements          Shortest acute LOS                     Longest acute LOS
------------------------------------------------------------------------
                         Higher functional        Higher functional
                                    scores                  scores
                         at discharge (than       at admission (than
                                     SNFs)                   IRFs)
------------------------------------------------------------------------
* MedPAC Staff Handout, April 2005 Meeting

    RAND presented a number of conclusions about the differences in 
cost and care among settings. Generally, RAND found that the functional 
level of patients in IRFs was lower at admission than in SNFs, but 
patients ultimately had greater functional gains, suggesting that the 
greater intensity of therapy in IRFs improves functional status. In 
addition, after controlling for a number of variables, RAND found that 
SNF and IRF patients were more likely to be institutionalized compared 
to patients sent home. However, 2.5 times more patients in SNFs were 
institutionalized or died (0.46%) than those in IRFs (0.18%). Further, 
as expected, SNFs and IRFs were paid more than patients discharged 
home. RAND found that SNFs cost $3578 and IRFs cost $8,023 for total 
post-acute payments as opposed to home care. Note, however, that these 
figures are misleading and understated for home health costs and SNF 
costs because they do not include any Part B outpatient services 
provided.
    AMRPA is particularly concerned that patients referred to LTCHs and 
IRFs are being pressured by Medicare into staying in acute care longer 
or treated in SNFs. This view has become much more prevalent as CMS 
issues regulations that are detrimental to certain sites of care, such 
as CMS's FY 2005 LTCH rate year update, the IPPS FY 2005 proposed rule 
proposal pertaining to hospitals within hospitals, and the various 
proposed and final rules pertaining to the 75% Rule for IRFs. Many 
post-acute care LTCH and IRF providers are left with the impression 
that a federal bias in defining LTCHs and IRFs more narrowly is 
designed to: (1) close many of these facilities; and (2) force patients 
to be treated in skilled nursing facilities (SNFs). Many post-acute 
care providers and physicians believe that while SNFs may be able to 
treat a percentage of such patients successfully with respect to 
outcomes, many are not able to successfully treat these patients 
because of serious differences in a patient's medical and functional 
abilities and the significantly more limited resources provided in 
SNFs.
    CMS and Congress should actively initiate research on how these 
sites of care provide treatment to Medicare beneficiaries and how each 
site's functional outcomes vary by patient diagnosis. As noted by the 
National Institutes of Health's February 2005 panel on medical rehab 
and by MedPAC, there is little evidence on the different care provided 
by these entities and how outcomes differ by site of care. The Agency 
for Healthcare Research and Quality (ARHQ) conducted a literature 
review and found after reviewing 4600 studies, few studies are 
available on this topic\1\] We call the Committee's attention to one 
timely published study that compared the outcomes of hip fracture 
patients treated in SNFs and IRFs. The study, ``Effect of 
Rehabilitation Site on Functional Recover After Hip Fracture,'' by 
Munin et. al.\2\ found that IRF patients had superior functional 
outcomes compared to those treated in SNFs when the same measurement 
tool was used. The improved outcomes occurred during a significantly 
shorter rehabilitation length of stay and remained even when 
statistically controlling for baseline differences between groups. The 
study called for further research to more fully understand the 
differences between rehabilitation treatment settings. Notwithstanding 
current available research, there is a significant need for prospective 
studies examining the provision of care among various settings 
providing medical rehabilitation services, SNFs, IRFs and LTCHs, to 
better determine how outcomes and treatment differ among these 
settings. We would be pleased to work with the Committee in developing 
these studies as well as working with our colleagues in the medical 
rehabilitation field to engage in research efforts.
---------------------------------------------------------------------------
    \1\ An Assessment of Medical Literature Evaluating Patient 
Rehabilitation facility programs on conditions of interest, Agency for 
Healthcare Quality and Research, March 2005.
    \2\ Effect of Rehabilitation Site on Functional Recovery After Hip 
Fracture, Munin et.al, Archives Physical Medicine & Rehabilitation, Vol 
86, pg. 367, March 2005.
---------------------------------------------------------------------------
Patient Assessment Instruments
    While post-acute care payment systems generate considerable data 
about each setting of care, the data is difficult to compare because 
each payment system uses a different data collection tool. At its March 
2005 meeting, MedPAC examined the various data sets and realized that 
they cannot be easily cross-walked with each other in order to compare 
the patients, outcomes, and costs, other than to observe broad outcomes 
such as mortality and readmission to acute care. The LTCH PPS uses the 
standard UB 92 claim form. The IRF PPS requires each facility to 
complete the inpatient rehabilitation facility patient assessment 
instrument (IRF PAI) as well as the UB 92 for each case. The SNF PPS 
requires each facility to complete the Minimum Data Set (MDS) form for 
each patient and the UB 92. The UB 92 form, while common to all 
settings, collects information solely on diagnosis codes and does not 
include any functional information.
    Because these settings serve different populations and do not have 
any common functional assessment tools, outcomes at this point can only 
be measured at a broad level that is not truly representative and fails 
to measure the full impact of a rehabilitation program. As noted above, 
certain observations can be made about mortality, readmission to acute 
care and institutionalization of patients for the long term when 
referred to certain settings, such as SNFs. However, in comparing these 
settings, there are significant limitations that were studied and 
acknowledged by MedPAC in its March 2005 discussion of post-acute care 
and patient assessment tools. RAND repeatedly cautioned about some 
significant deficiencies in the obtainable data that limited the 
findings of the study. First, controlling fully for selection is 
extremely difficult, and it is unclear whether the models capture this 
data in an accurate manner. Second, RAND was unable to conduct a 
substantive analysis of patient function; thus, the outcomes analyzed 
are not the ideal outcomes measures for joint replacement patients.
    Similar to variances discussed in conjunction with the different 
payment systems, each tool used to assess diagnoses, comorbidities and 
medical functional status and cognitive status uses significantly 
different measurement items. As a result, today it is simply impossible 
to assess outcomes and quality of care at the level necessary to 
accurately and fairly compare the various sites of care.

Recommendations
    We think the issues facing policy makers, providers and patients 
relating to post-acute care payment and services would best be 
addressed through a broad, cross-site prospective study of these sites 
of care and the outcomes provided by their distinct treatment 
resources. Not only do Congress and CMS need to have comprehensive and 
accurate data before engaging in any sweeping payment structure 
changes, such data will be crucial if the federal government intends to 
take any substantive, meaningful action that will save the Medicare 
system money while still protecting the quality of care given to 
beneficiaries nationwide.
    We recommend a multi-step approach to evaluating the state of post-
acute care across settings for rehabilitation patients and implementing 
a new payment structure to capture the true costs of patient care. As 
mentioned above, measuring function is the critical aspect of 
understanding a patient's rehabilitation needs. The approach outlined 
below should be viewed as a framework and could be amended or added to 
other studies designed to lead to creation of a new payment structure:
    1. Data Collection: CMS should use the IRF-PAI for data collection 
throughout the treatment sites in order to collect data and compare 
costs, patient characteristics, and medical and functional outcomes 
across sites. Such a uniform data collection tool is necessary to 
eliminate the problems with the various existing tools and create one 
assessment instrument to cross walk to the three different tools 
currently used in post-acute settings. Data should be collected at 
admission, discharge, and for a follow-up period.
    2. Creation of new Rehab Post-acute Care Groups (RPACGs): New 
patient groups would be created using an expanded version of CMGs that 
would reflect function, age, diagnosis, LOS, and comorbidities for 
medical status, and the ICF conceptual approach. Expanded CMGs would 
then be matched with costs to create new Rehab Post-acute Care Groups 
(RPACGs) and to develop appropriate weights. The RPACGs would use a per 
discharge model using a discharge as the payment unit and episode of 
care. SNF and LTCH patients who are not discharged and who exhaust 
their Medicare days should be tracked separately even after they 
exhaust their care and go on private pay or Medicaid for one year in 
order to establish total costs for that period. Facility adjusters 
would be provided (wages, low income, rural, others), as well as 
special payment rules such as transfers, short stay, interrupted stay 
and outliers. The groups would be matched with cost to develop the 
complete set of new payment groups reflecting payment rates for various 
types of patients receiving medical rehabilitation. Payments would 
reflect patient characteristics (such as age, diagnosis, function, 
comorbidities, complications, length of stay, etc.) and resource use in 
whatever setting, eliminating the need to distinguish patients by 
current institutional sites or ``silos'' of treatment.
    3. Adjustments: Adjustments would be made for facility specific 
costs as are currently recognized in all prospective payment systems 
(e.g. wages).
    4. Revision of Payment System: Finally, after initial 
implementation, revision of the payment system would take place in 
order to provide bonuses for better functional outcomes.
    As we know, therapy services, physician services and nursing 
services of varying intensity, length and costs are provided currently 
in these three inpatient settings. These three sets of services, 
especially the intensity of therapy services, are key to the success of 
a rehabilitation program. From a policy perspective it makes the most 
sense to reexamine this situation and realign the policies with the 
providers, payers and, most importantly, patients in mind.
    AMRPA acknowledges that these ideas may appear quite radical, but 
we firmly believe that the study recommended here would help settle the 
current debates and assumptions and remedy recent action by CMS that is 
jeopardizing patient care. CMS and Congress should continue its efforts 
to engage all the stakeholders, public and private, state and national, 
involved in this issue. Each such entity has its own priorities and 
perceptions that will need to be addressed for any proposal to be 
effective and successful.

Conclusion
    AMRPA cautions against adopting a simplistic viewpoint that growth 
in post-acute care is simply a function of substitution of care, or 
adopting the attitude that ``if you build it they will come.'' CMS's 
rationale to date in making these assertions about substitutability has 
been that since there are few studies on point, the assumption must be 
correct (e.g., the absence of proof is the proof of absence). Most 
post-acute care providers vehemently disagree. We urge Congress to 
recognize that the federal government cannot adopt the improper 
assumption that these settings can provide similar outcomes at similar 
costs. One only needs to look at the enormously detrimental effects of 
the 75 Percent Rule to see that such a policy will ultimately be 
grossly adverse to patient outcomes.
    We again commend the Committee for its interest in rehabilitation 
and post-acute care, and we look forward to working with you and your 
staff on these issues.

  Inpatient Rehabilitation Facilities Provide a Rehabilitation Setting
             Distinguishable from Skilled Nursing Facilities

                            COVERAGE CRITERIA

  CMS assumes that post-acute rehabilitation care settings are readily
    interchangeable. In doing so, CMS ignores the enormous difference
  between the two care settings and the improved outcomes that occur at
                                  IRFs.
------------------------------------------------------------------------
                        Inpatient Rehabilitation      Skilled Nursing
     Requirements              Facilities               Facilities
------------------------------------------------------------------------
Medical Supervision     IRFs are required to      A SNF patient's care
                        provide close medical     would usually require
                         supervision by a         only the general
                           physician with         supervision of a
                        specialized training or   physician, rather than
                            experience in         the close supervision
                          rehabilitation.         which rehabilitation
                                                     patients need
------------------------------------------------------------------------
Availability of         IRFs are required to      While a SNF patient
 Rehabilitation            supply 24-hour         may require nursing
        Nursing         rehabilitation nursing.   care, specialized
                           This degree of         rehabilitation nursing
                        availability represents   is generally not as
                        a higher level of care    readily available in
                        than is normally found    such a facility.
                                in a SNF.
------------------------------------------------------------------------
 Intensity of Care      IRFs must offer a         SNFs are only required
                        relatively intense level  to offer services on a
                        of rehabilitation         ``daily basis,'' with
                        services. The general     no requirement as to
                            threshold for         amount of patient
                        establishing the need                care.
                        for inpatient hospital
                        rehabilitation is that
                        the patient must require
                        and receive at least 3
                        hours a day of physical
                        and/or occupational
                                 therapy.
------------------------------------------------------------------------
Multidisciplinary Team    IRFs must use a                  No such
 Approach to Care       multidisciplinary team    multidisciplinary
                        approach to delivery of   approach is required
                        the rehabilitation        at a SNF hospital.
                        program. At a minimum, a
                        team must include a
                               physician,
                        rehabilitation nurse,
                        commonly registered
                        nurse, social worker and/
                        or psychologist, and
                         other therapists
                          involved in the
                          patient's care.
------------------------------------------------------------------------
Coordinated Program of  IRF patient records must    SNFs must only
           Care         reflect evidence of a     maintain a complete
                        coordinated program of    and timely clinical
                        care, i.e. documentation  record of the patient
                        that periodic team          which includes
                        conferences were held     diagnosis, medical
                        with a regularity of at   history, physician's
                        least every two weeks to  orders, and progress
                        assess the individual's             notes.
                        progress and consider
                        the rehabilitation goals
                          of the patient.
------------------------------------------------------------------------
Significant practical   Hospitalization after     Services must be
    improvement         the initial assessment      reasonable and
                        is covered only in those  necessary for the
                        cases where the initial      treatment, be
                        assessment results in a   consistent with the
                        conclusion by the         nature and severity of
                        rehabilitation team that  the illness or injury,
                        a significant practical   and must be reasonable
                        improvement can be        in terms of duration
                        expected in a reasonable     and quantity.
                          period of time.
------------------------------------------------------------------------
Realistic goals         The most realistic          Rehabilitation
                        rehabilitation goal for   services must be
                            most Medicare         ``reasonable and
                        beneficiaries is self-    necessary'' to the
                        care or independence in   ailment being treated.
                        the activities of daily   The SNF manual makes
                        living; i.e., self-        no reference to
                        sufficiency in bathing,   rehabilitation goals.
                        ambulation, eating,
                        dressing, homemaking,
                        etc., or sufficient
                        improvement to allow a
                        patient to live at home
                        with family assistance
                        rather than in an
                        institution. Thus, the
                        aim of the treatment is
                        achieving the maximum
                        level of function
                                possible.
------------------------------------------------------------------------
Sources: IRF--Medicare Benefit Policy Manual  110.4
  (Rehabilitation Hospital Screen Criteria)
SNF--Skilled Nursing Facility Manual, Pub. 12,  214 (Covered
  Level of Care)


                                 

   Statement of American Occupational Therapy Association, Bethesda, 
                                Maryland

    The American Occupational Therapy Association (AOTA) represents 
nearly 35,000 occupational therapists, occupational therapy assistants, 
and students of occupational therapy to promote the interests of the 
profession and patients. AOTA submits this statement for the record of 
the hearing on June 16, 2005 on the current financing and assessment of 
post-acute Medicare providers. Occupational therapists and therapy 
assistants work in post-acute care settings to increase the 
independence and quality of life of their patients.
    Occupational therapy practitioners provide services in a variety of 
settings, including, long term acute care hospitals (LTCH), inpatient 
rehabilitation facilities (IRF), skilled nursing facilities (SNF), and 
in the home (HHA). Occupational therapy is a health, wellness, and 
rehabilitation profession working with people experiencing stroke, 
spinal cord injuries, cancer, congenital conditions, developmental 
delay, joint replacements and surgeries, mental illness, and other 
conditions. It helps people regain, develop, and build skills that are 
essential for independent functioning, health, and well-being.
    AOTA strongly supports maintenance of the full spectrum of post-
acute care settings to assure that patients have choice, that health 
care dollars are used most efficiently, and that the best possible 
outcomes are achieved. With that said, AOTA also supports efforts to 
develop more consistent and comprehensive methods to determine patient 
needs for post-acute care and continuing research on best practices and 
protocols.
    Occupational therapy professionals assist those with traumatic 
injuries--young and old alike--to return to active, satisfying lives by 
showing survivors new ways to perform activities of daily living, 
including how to dress, eat, bathe, cook, do laundry, drive, and work. 
It helps older people with problems like stroke, arthritis, hip 
fractures and replacements, and cognitive problems like dementia. In 
addition, occupational therapists work with individuals with chronic 
disabilities including mental retardation, cerebral palsy, and mental 
illness to assist them to live productive lives. By providing 
strategies for doing work and home tasks, maintaining mobility, and 
continuing self-care, occupational therapy professionals can improve 
quality of life, speed healing, reduce the chance of further injury, 
and promote productivity and community participation for Medicare 
beneficiaries.
    Medicare provides health insurance for nearly 35 million people 
over 65 years old and 6 million people under 65 years old with 
permanent disabilities. Medicare benefits are expected to total $325 
billion in 2005, accounting for 13% of the federal budget. In post-
acute care settings, Medicare expenditures are currently more than $30 
billion annually. It is critical for Congress to determine whether 
patients are being treated in the most appropriate post-acute care 
setting and whether Medicare dollars are being allocated appropriately. 
LTCHs, SNFs, IRFs, and HHAs have all experienced major changes over the 
past 10 years.
    The multiple and ongoing changes to Medicare post-acute care 
payment policies creates a unique environment in which measuring the 
effect of service delivery is particularly difficult. One of the 
biggest changes is the implementation of new prospective payment 
systems (PPS) for each post-acute care setting. Each PPS varies in 
terms of key design features such as the unit of payment (per diem, per 
discharge, every 60 days), classification schemes (RUGs, HHRGs, and 
case mix groups), and patient assessment instruments and processes used 
for patient classification (MDS, OASIS, and IRF-PAI). Each of these 
payment systems were installed on different timetables, and each is 
being modified in different ways and at different times. Such 
fragmentation could affect the quality and outcomes of patients in 
post-acute care.
    The policy concern that Medicare may be paying different amounts to 
different types of post-acute care providers for patients with similar 
care needs raises important questions for AOTA. How are we judging 
effectiveness? Have post-acute care providers worked to achieve the 
highest functional outcomes possible for its beneficiaries? What are 
the prospects and problems for moving ahead with a standardized 
assessment tool to evaluate the level of care a patient requires in 
each post-acute care setting? Will we create a system that does not 
have enough variation in options to achieve optimum goals for patients?
    The focus of post-acute care includes medical stabilization as well 
as practical improvements in function, with discharge determined by the 
speed in which the person returns to a reasonable level of 
independence. Occupational therapists and therapy assistants work in 
different post-acute care settings providing varying intensities of 
therapy to best meet the needs of their patients. Occupational therapy 
services are considered reasonable and necessary when it is expected 
that the therapy will result in significant improvement in the 
patient's level of function within a reasonable amount of time. With 
speedy discharge to return to normal activities an important aspect of 
post-acute care, function should be the governing assessment component 
across all settings. Where will the patient best regain medical 
stability but also regain ability to fully recover and return to 
activities? Occupational therapy is not only focused on lost function, 
but also improves a patient's ability to remain independent and sense 
of well-being which can contribute to better recovery following post-
acute care. It is imperative that occupational therapy be an integral 
part of the development of the plan of care of people transitioning 
into post-acute care, in determining readiness for discharge and in 
developing discharge plans. Occupational therapists' and therapy 
assistant's success can be measured by the quality of life and level of 
independence of their patients once they are discharged. This should 
also be the measure of the effectiveness of Medicare dollars.
    Each post-acute setting provides different levels of therapeutic 
intervention combined with differing levels of other care. Each setting 
has advantages for different types of patients. However, each post-
acute care setting uses a different patient assessment instrument to 
evaluate the level of care a patient requires. This makes it difficult 
to know whether patients are being treated in the most appropriate 
setting and whether Medicare dollars are being allocated appropriately. 
Any standardized assessment should look at the distinct aspects and 
benefits of the services provided in that setting. A standardized 
assessment would need to focus on the differences in each post-acute 
care setting and the services provided there. A standardized assessment 
should also recognize the distinct differences and contributions of 
each needed service.
    One significant problem faced by occupational therapists in post-
acute care settings is the financial limitations on therapy imposed by 
Congress in the Balanced Budget Act of 1997. The legislation imposed a 
$1500 annual cap on Medicare Part B outpatient occupational therapy 
alone and physical therapy and speech-language pathology combined. A 2-
year moratorium was included in the Medicare Modernization Act of 2003 
(P.L. 108-173), however, that moratorium will expire on December 31, 
2005. Congress currently has before them a piece of legislation that 
repeals these therapy caps. However, current discussions have included 
a number of different options on how to address this piece of bad 
policy. AOTA has stressed the need to keep occupational therapy 
distinct and separate because of the uniquely beneficial service that 
occupational therapists and therapy assistants provide. Financial 
limitations to proper therapy services impede the therapists' ability 
to care for their patients appropriately and use professional judgment 
effectively.
    Another critical issue for occupational therapy is the limitation 
experienced by occupational therapy practitioners in home health field 
because of an outdated and obsolete eligibility criterion. 
Beneficiaries must need one of three qualifying services--nursing, 
physical therapy, speech-language pathology services--to be eligible 
for the full home health benefit. Occupational therapy cannot be an 
initial qualifying service. As far back as March 1997, the former 
Medicare Prospective Payment Commission said that the ``lack of a 
clearly defined benefit compromises'' the program's ability to pay only 
for services that are reasonable, necessary and medically appropriate. 
AOTA believes that a key problem in the definition of the home health 
benefit is the qualifying service issue which may cause some patients 
to receive unnecessary physical therapy, for instance, when their need 
is for occupational therapy. The failure to recognize occupational 
therapy as an initial qualifying service limits the use of occupational 
therapy to conduct important activities including the initial OASIS. 
Legislative action is necessary to correct this; AOTA urges further 
study of how this could be changed in a cost effective manner.
    Finally, AOTA commends the Subcommittee for taking the time to 
debate and learn more about the post-acute care system. Congress is in 
a position to create a system more tailored to the services required by 
patients rather a system that favors the setting in which patients are 
placed. AOTA looks forward to working with the Committee to better our 
nation's healthcare system.

                                 

         Statement of John D. Shaw, Next Wave, Albany, New York

    I am a health systems researcher and policy analyst located in 
Albany, New York. Since the early '70s, I have been involved in the 
design, development, implementation, and evaluation of patient 
assessment, payment, and quality measurement systems for both acute and 
post-acute care. These projects have ranged from national pilot 
projects to develop the initial Diagnosis Related Group (DRG) and 
Resource Utilization Group (RUG) payment systems and Quality Assurance/
Quality Indicator (QA/QI) tools, to the design, evaluation, and 
refinement of state payment systems on the behalf of state Legislative 
and Regulatory branches, insurers, provider groups, and individual 
providers. We have also worked at the individual provider level to 
refine and implement internal Information Technology (IT) and manual 
systems and procedures to collect accurate data to support the payment 
and quality processes. My comments represent a synthesis of viewpoints 
gleaned from all of the stakeholders for whom I have worked over the 
years and a review of Subcommittee testimony--but as stated below, they 
are my own.
    First, I agree with the Subcommittee that Congress and the 
Medicare/Medicaid programs must place a high priority on a payment 
system that focuses on meeting the individual patient needs rather than 
institutional settings that deliver services. Tool(s) common to all 
settings to assess patient needs and align payment for services to meet 
these needs are critical. We recommend:

      Payments based on the patient episode, with the same 
total payment regardless of setting for the same patient 
characteristics, including the acute care component where feasible.
      A family of screening plus in-depth assessment tools, 
with common definitions across all settings, can balance the need for 
precision to plan, provide, and pay for individual care needs, while 
NOT requiring an in-depth assessment of areas that do not apply.

    Second, added features are critical to incorporate into the details 
of the above to overcome and avoid major controversies such as ``cream 
skimming'' (e.g. Physician Owned Specialty Hospitals), inconsistent 
payments for similar services (e.g. 75% Rule), and cost shifting to 
others (e.g. annual debates over Federal/State/Provider/Consumer share 
of cost.) These include:

      Incorporate into the assessments--all data fields needed 
to provide an evidence base to address the above controversies, rather 
than the current ``battle of the hypotheticals.''
      Mandate timely, transparent access to de-identified data 
details to all key stakeholders to:
          Overcome distrust of any findings that cannot be 
        independently verified and
          Allow for reconciliation of any conflicting findings 
        from all viewpoints.
      Include measures for program focus and regional health 
care delivery environment as well as setting, e.g. a hospital-based 
Skilled Nursing Facility (SNF) in one region may be similar to an 
Inpatient Rehabilitation Facility (IRF) in another region, while others 
differ.
      Incorporate elements from all current assessment tools to 
facilitate accuracy and buy-in.

    Some examples from current controversies help illustrate the need 
for the above recommendations. We focus on Hip and Knee Joint 
Replacement since it is a source of controversy in recent years, is a 
high volume and growing component of total health care expenditures, 
has a significant Post Acute Care (PAC) fraction, and spans multiple 
settings.

Consistent Time Frame and Case Mix Adjustment for Comparisons
    While the patient experiences (and Medicare/Medicaid pays for) an 
entire episode, policy comparisons over the past few years have been 
limited to selected portions of the episode, without appropriate 
adjustment for earlier and later contributors to overall episode costs. 
Some trade-offs that stakeholders assert include:

      Extending stays (and hospital payments) for 1-2 days so 
that some Knee replacement patients can negotiate stairs and go 
directly home could save institutional PAC costs.
      Patients also receive Home Health Care and Outpatient 
Rehabilitation after discharge from both IRFs and SNFs. The cost and 
frequency of these non-institutional services affect total payments and 
should be included in any policy debate.
      Consistent data to identify and predict the appropriate 
patient trajectory and costs are either lacking or not reported today.
Missing Data for Consistent Comparisons
    Major controversy is focused on post acute care for joint 
replacements in IRF/SNF settings.

      Obesity, particularly morbid obesity (BMI>40) is a 
major determinate of costs and quality risks. IRFs indicate that they 
have more of these patients than SNFs, who are a large driver of 
functional scores. SNFs indicate that they are not reimbursed for the 
higher care needs of these patients. However, the IRF-PAI lacks height 
and weight and the MDS lacks the detailed functional scores needed to 
measure and validate either claim.
      Analysis to date to inform the controversy is inadequate 
to do so. Not only are comparable outcome measures unavailable, volumes 
to compute materiality and consistent cost components are also 
unavailable for comparison:

          Examples of dollar differences between each setting 
        lack volume data. We need this to differentiate whether the 
        hypothetical patient represents all, most, some, few, or one-
        in-a-thousand. A difference that applies to handful of patients 
        somewhere is very impact on the overall Budget than most 
        patients everywhere. For example, a recent comparison uses a 
        patient with septicemia, which appears to represent a fraction 
        of one percent of joint replacement cases in either setting. 
        Also, since SNF rates are per day, length of stay assumptions 
        used in comparisons should be stated, and should be validated 
        to confirm they are representative.
          Costs included in bundled rates in each setting 
        differ widely. For example, respiratory therapy and high cost 
        pharmaceuticals used to treat patient clinical needs generate 
        NO additional SNF reimbursement, while IRFs are typically paid 
        an additional $ 1,500 per case for clinical needs identified by 
        ``tier'' payment add-ons. Economic realities and facility 
        claims indicate wide variations; however, data to validate 
        these claims are unavailable.

Transparent Access to Data Facilitates Reduction of Controversy
    We strongly believe that if more detailed evidence were shared 
between all stakeholders, they would have already have validated each 
others' findings and reconciled differences. This sharing, however, may 
require further Congressional mandate.

Measures of Program Focus and Regional Health Care Delivery 
        Environments
    Rehabilitation professionals identify two major subpopulations:

      Patients who desire and tolerate Intensive (3+ hours per 
day) rehab in 9-14 days are typically treated in IRFs, but a few SNFs 
also have short stay programs.
      Patients who can only tolerate lower impact (0.5-1.5 
hours per day) rehabilitation Extended over 3-4 weeks are typically 
treated in SNFs.

          In addition, if family caregivers and safe housing 
        resources are available, some patients can safely recover using 
        home care and outpatient rehabilitation services.

    In assessing PAC programs in both settings over the years, total 
costs for either approach in an institutional setting appear similar 
regardless of program and setting; however, payments could differ 
widely today. Failure to differentiate these program approaches makes 
overall comparisons of costs/outcomes invalid.
    For example, in reviewing post acute care statewide in New York, we 
found that the predominate PAC setting for joint replacement patients 
in the New York City Metropolitan area, while hospital-based SNFs are 
the predominate setting in Rochester and Syracuse. Programs are fairly 
similar; however, the setting difference is driven by factors other 
than post acute care. Other payors, for example Blue Cross, have 
supported the programs historically, while currently these programs are 
cross subsidized by the hospital. In the New York City area, however, 
other payors have not supported PAC until recently, and there are few 
hospital based facilities to cross subsidize significant SNF losses.
    There is even potential for Home Care, which is the predominate PAC 
setting in the Binghamton and Elmira areas. In these predominately 
rural areas, there are typically several generations of extended family 
living close by to provide assistance. In our own community around 
Albany, there is no predominate setting, rather, there are award 
winning free standing and hospital-based IRF and SNF programs, and 
quality home care services. In talking to patients and their families, 
only the program matters--most are not aware of the difference between 
an IRF or SNF based program. A number of recent studies in the 
literature have found similar patterns nationally. Any solution that 
assumes program availability in all settings in all geographic 
locations is contrary to available evidence and will cause local access 
problems for taxpayers in these areas.

Family of Comprehensive Assessments
    Screening tools to identify where added assessment is needed should 
incorporate major elements of existing setting tools the IRF-PAI for 
IRFs, the MDS for SNFs and the OASIS for Home Care, including for 
example:

      Case Management (including the patient's own cognitive 
capabilities and desires) should combine local program availability 
with elements of all existing tools, with key additions such as height, 
weight, and smoking status,
      Housing needs and supportive assistance (home vs. 
institutional bed) from OASIS,
      Personal Care needs (ADL's and IADL's) from MDS and 
OASIS,
      Functional Status and Rehabilitation needs from IRF-PAI, 
and
      Medical/Clinical needs (therapy and non-therapy ancillary 
services, medical monitoring).

    Case management can apply the overall screening tool and the 
appropriate detailed assessments to find the best ``fit'' for each 
individual resident, while at the same time providing consistent data 
for evaluation and future policy refinements.
    The Institute of Medicine (IOM) recommended that financial and 
quality incentives be aligned in order to transform health care. 
Currently in today's fragmented system of setting ``silos'', the 
strategy for financial success is to identify flaws in today's 
inconsistent regulatory structure, and then seek out windfall 
opportunities, while avoiding any underpayment gaps (and/or to shift 
the cost to someone else.) Where inconsistencies are identified between 
stakeholder estimates today, and lacking complete evidence, they are:

      At best--good faith estimates that are incomplete, 
inconsistent, wrong, and 
likely to continue controversy
      At worst--``Spin Wars'' where the best hypothetical 
example wins
      Regardless of what is good for the patient and the Budget

    Fixing these flaws will both close the gaps and reduce the ability 
and need to shift costs elsewhere. Providing consistent and complete 
evidence measures transparently to Congress, the Centers for Medicare 
and Medicaid Services (CMS), providers across all settings, and 
consumers will help focus the attention of all on pursuing quality and 
safe outcomes efficiently.
    Thank you for the opportunity to contribute to moving toward 
setting evidence-based policy in this important area.

                                  
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