[Congressional Record (Bound Edition), Volume 146 (2000), Part 15]
[Extensions of Remarks]
[Pages 22698-22700]
[From the U.S. Government Publishing Office, www.gpo.gov]



MEDICARE PARTIAL HOSPITALIZATION SERVICES RESTORATION AND INTEGRITY ACT 
                                OF 2000

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Wednesday, October 11, 2000

  Mr. STARK. Mr. Speaker, today, I am introducing legislation to 
restore a benefit in Medicare that has been destroyed. A benefit that 
is needed by about 100,000 Medicare beneficiaries who need outpatient 
mental health services to maintain their functional capacity and live 
lives that are as normal as possible. It is a benefit that was put into 
Medicare in 1990, but has now been almost completely eliminated by 
administrative actions of the Health Care Financing Administration 
(HCFA) that I believe have been and continue to be illegal. I have 
conveyed my concerns to HCFA several times, but without effect.
  The history of this benefit is truly sad. In a report issued in 
January 2000, the GAO concluded that ``HCFA's implementation of the 
partial hospitalization benefit was not adequate.'' The GAO report 
details the mismanagement of this benefit by HCFA from the beginning, 
and I believe that the mismanagement continues to this day. That is why 
I am introducing legislation today to stop the mismanagement and 
restore this benefit as the Congress intended it to be.
  Before 1990, Medicare covered partial hospitalization services 
provided by hospitals. Recognizing a broader need for outpatient mental 
health services, the Congress expanded the benefit in OBRA 1990 to 
include services provided by Community Mental Health Centers (CMHCs) as 
defined in Section 1913 of the Public Health Service Act.

[[Page 22699]]

  The Congress was quite clear in its intent for this benefit, and the 
precise language of the statute reflects that intent. Section 
1861(ff)(2)(I), as amended by Section 4162 of OBRA 1990, specifies the 
partial hospitalization benefit as services that are:
  ``Reasonable and necessary for the diagnosis or active treatment of 
the individual's condition reasonably expected to improve or maintain 
the individual's condition and functional level and to prevent relapse 
or hospitalization, and furnished pursuant to such guidelines relating 
to frequency and duration of services as the Secretary shall by 
regulation establish (taking into account accepted norms of medical 
practice and the reasonable expectation of patient improvement).''
  The Congress did not know the specific eligibility requirements 
needed for this benefit, nor did it know the specific services that 
should be provided for each patient, depending on the functional status 
of the individual. Therefore, the Congress mandated that the Secretary 
promulgate regulations establishing eligibility guidelines and covered 
services--taking into account accepted norms of medical practice. The 
Congress expected--and required--the Secretary to promulgate 
regulations so that the public would have an opportunity to comment and 
participate in defining and establishing the standards for this 
benefit.
  In March 1992, HCFA issued a manual instruction (IM 205.8)--not a 
regulation--that included the following language:
  ``In general, to be covered, the services must be reasonable and 
necessary for the diagnosis or active treatment of a patient's 
condition. The services must not be for the purpose of diagnostic study 
or they must be reasonably expected to improve or maintain the 
patient's condition and to prevent relapse or hospitalization.
  It is not necessary that a course of therapy have, as its goal, 
restoration of the patient to the level of functioning exhibited prior 
to the onset of the illness, although this may be appropriate for some 
patients. For many other psychiatric patients, particularly those with 
long term, chronic conditions, control of systems and maintenance of a 
functional level to avoid further deterioration or hospitalization is 
an acceptable expectation of improvement. ``Improvement'' in this 
context is measured by comparing the effect of continuing treatment 
versus discontinuing it. Where there is a reasonable expectation that 
if treatment services were withdrawn the patient's condition would 
deteriorate, relapse further, or require hospitalization, this 
criterion is met.
  Some patients may undergo a course of treatment which increases their 
level of functioning but then reach a point where further significant 
increase is not expected. Continued coverage may be possible even 
though the condition has stabilized or treatment is primarily for the 
purpose of maintaining the present level of functioning. Coverage is 
denied only where evidence shows that the criteria discussed above are 
not met, e.g., that stability can be maintained without further 
treatment or with less intensive treatment.''
  Although this definition of the partial hospitalization benefit was 
not issued through regulations as required by the law, at least it was 
consistent with the intent of the law in substance, and the mental 
health community did not complain.
  On February 11, 1994, the Secretary published an Interim Final Rule 
implementing the partial hospitalization benefit. The language of the 
Interim Final Rule mirrored the language of the statute:
  ``(a) Partial hospitalization services are services that--
  (1) Are reasonable and necessary for the diagnosis or active 
treatment of the individual's condition;
  (2) Are reasonably expected to improve or maintain the individual's 
condition and functional level and to prevent relapse or 
hospitalization; and
  (3) Include the following:'' (list of services).
  This Interim Final Rule did not do what the Congress expected--it did 
not provide clear eligibility and coverage guidelines, taking into 
account accepted norms of medical practice. However, it did at least 
implement the partial hospitalization benefit through regulations, as 
required by the statute. Following publication of this Interim Final 
Rule, the 1992 manual issuance continued in force providing more 
specific instructions and guidelines.
  Because HCFA did not involve the mental health community in 
establishing eligibility and coverage guidelines, HCFA's rules were 
inadequately defined and unclear. The GAO reported that:
  ``HCFA initially gave its contractors little guidance on, or 
explanation of, the program beyond the implementing language of OBRA 
'90. As a result, contractors struggled to understand the parameters of 
the partial hospitalization benefit in the first years it was in 
effect. Our discussions with contractors and HCFA regional offices show 
that contractors raised concerns over such issues as:
   whether partial hospitalization could cover organic 
conditions such as Alzheimer's, which are unlikely to improve;
   whether the benefit was available to only those patients 
with previous psychiatric treatment, or even further limited to only 
those who had previously been psychiatric inpatients;
   which specific services could be billed to Medicare as 
partial hospitalization services;
   how frequently services had to be delivered for Medicare to 
consider a beneficiary's treatment program as partial hospitalization; 
and
   the level of physician involvement required for services 
provided to the patient.''
  Without clear eligibility and coverage guidelines, HCFA invited fraud 
and abuse into the program. Expenditures for the benefit mushroomed, 
and HCFA's contractors began to notice claims for large amounts. For 
example, GAO reported that a CMHC in Washington came to the attention 
of its fiscal intermediary because of claims in excess of $10,000 per 
beneficiary per month. That CMHC operated residential board and care 
facilities with live-in aides who assisted residents with everyday 
needs, such as cooking, cleaning, and transportation. The CMHC was 
billing Medicare up to $100 per hour, per patient, for these services. 
Another example GAO reported was in Montana, where CMHCs interpreted 
the partial hospitalization benefit to mean that all CMHC services were 
covered, and were submitting claims for day care services provided by 
the CMHC. Other examples reported by GAO include:
   Day care and geriatric care programs were being billed to 
Medicare as partial hospitalization.
   Arts and craft activities were being billed as occupational 
therapy or patient education.
   Family counseling services were being billed when there was 
not evidence of family member participation.
   Long-term psychiatric patients with controlled symptoms were 
being monitored in partial hospitalization programs for years.
  GAO reported that in 1994, one HCFA regional office expressed its 
concerns about lack of understanding of the partial hospitalization 
benefit and perhaps misrepresentation of the benefit, but HCFA did not 
follow up on the concern. By 1995, another HCFA regional office became 
alarmed about the rapid increase in applications received from new 
CMHCs, particularly when telephone calls and site visits to CMHCs 
already participating in the program reached disconnected telephone 
numbers, private residences, and nonmedical businesses. Still, HCFA did 
not issue regulations defining the requirements for the facilities and 
has not issued such regulations to this day. In a statement at a 
Congressional Town Hall meeting on CMHCs in Houston in March 1999, a 
representative of the CMHCs stated: ``I am not aware of any other 
Medicare provider that is certified and regulated in the absence of 
regulations, based upon shifting standards set out in internal 
transmittals. The provider community for some time has advocated for 
formal rulemaking to develop clear and measurable certification 
standards with industry, clinician and patient input.''
  Costs of the partial hospitalizaion benefit mushroomed. In 1993, 
costs of the benefit were about $60 million; in 1994, about $105 
million; and in 1995, $145 million.
  Finally, HCFA acted. In July 1996, HCFA issued another manual 
instruction (Transmittal A-96-2) that severely narrowed the coverage 
criteria for the partial hospitalization benefit as follows:
  ``Partial hospitalization may occur in lieu of either:
   Admission to an inpatient hospital; or
   A continued inpatient hospitalization.
  Treatment may continue until the patient has improved sufficiently to 
be maintained in the outpatient or office setting on a less intense and 
less frequent basis. This is an individual determination.''
  In my view, neither the process nor the substance of this new mandate 
is consistent with the law. HCFA issued this new limitation on the 
benefit through a manual instruction, not a regulation, in clear 
violation of the law. Medicare law requires in not one, but two places 
that the Secretary publish regulations defining this benefit. First, as 
I mentioned previously, section 1861(ff) requires that the Secretary 
publish regulations defining the partial hospitalization benefit, and 
section 1871 requires the Secretary to publish regulations for all 
Medicare policy. Indeed, section 1871(a)(2), which was enacted in 1965 
in the original Medicare statute, provides:
  ``(2) No rule, requirement, or other statement of policy (other than 
a national coverage determination) that establishes or changes a

[[Page 22700]]

substantive legal standard governing the scope of benefits, the payment 
for services, or the eligibility of individuals, entities, or 
organizations to furnish or receive services or benefits under this 
title shall take effect unless it is promulgated by the Secretary by 
regulation under paragraph (1).''
  I find it troubling that those charged with enforcing the law ignore 
the law and proceed as though the law does not apply to their actions, 
but only to the actions of others. We must change the culture in HCFA 
and in HHS that repeatedly issues manual instructions in violation of 
the law.
  The substance of the 1996 HCFA ruling was also inconsistent with the 
law. Nothing in section 1861(ff) limits the partial hospitalization 
benefit to services ``in lieu of either:
   Admission to an inpatient hospital; or
   A continued inpatient hospitalization.''
  However, in issuing this new ruling, HCFA relied on a technical 
inconsistency in the statute. Although the partial hospitalization 
benefit is defined in section 1861(ff), section 1835(a)(2)(F) provides 
that a physician must certify that the individual would require 
inpatient psychiatric care in the absence of such services. Despite 
HCFA's February 11, 1994 regulation to the contrary, HCFA issued a 
manual instruction limiting the benefit to the level of the physician 
certification requirement provided in section 1835.
  Based on the new HCFA instruction that severely limited the benefit, 
HCFA and the Inspector General began intensive investigations of 
partial hospitalization claims, and not surprisingly, they found that 
high percentages of the claims did not meet the new standards. When 
HCFA severely restricted the benefit, programs suddenly found 
themselves out of compliance. HCFA and the Inspector General then 
proclaimed that there was widespread ``fraud and abuse'' in the partial 
hospitalization benefit. HCFA has been seeking repayments of 
substantial amounts paid to mental health programs that had been 
operating on the basis of the earlier published regulation and the 
manual instructions that were consistent with the regulation and the 
law.
  We need to refocus our attention on the beneficiaries who use the 
partial hospitalization benefit. In 1997, about 88,000 Medicare 
beneficiaries were using this benefit. About 60 percent of them were 
disabled beneficiaries, under the age of 65, and about 60 percent of 
them were dually eligible for both Medicare and Medicaid. The 
beneficiaries who need and use this benefit are among the poorest and 
most disabled beneficiaries in the entire Medicare program. They need 
our help and our protection, and they need these services.
  My record of fighting fraud and abuse in Medicare is long. I hate 
fraud. We must do everything we can to eliminate fraud in Medicare, 
including any fraud in the partial hospitalization benefit. But the way 
to eliminate fraud is not to eliminate the benefit itself. By that 
standard, it would be easy to eliminate all fraud in Medicare. We would 
simply eliminate the program! No, instead, we must take steps to 
address those areas of the benefit where fraud has been found, but we 
must also restore this benefit for those Medicare beneficiaries who 
need it.
  Today, I am introducing legislation, ``The Medicare Partial 
Hospitalization Services Restoration and Integrity Act of 2000,'' that 
would restore the partial hospitalization benefit as the Congress 
intended, while also taking steps to limit fraud in the benefit.
  First, the bill would require a face-to-face visit with a physician 
to certify the need for the services.
  Second, the bill would tighten the language regarding ``individual 
activity therapies'' ((ff)(2)(E)), using limits already in the statute 
for other approved services (requiring the services to be directly 
related to the therapy program).
  Third, the bill would tighten the survey and certification 
requirements in (ff)(3) for community mental health centers.
  And fourth, the bill would correct the technical flaw in the statute, 
which HCFA has used to limit the benefit, making the physician 
certification language under section 1835 the same as that defining the 
benefit in section 1861(ff).
  To address HCFA's lack of publishing regulations, the bill would 
require a negotiated rule making process to define the benefit, 
establish quality of care standards, and establish survey and 
certification standards for CMHCs.
  I am introducing this bill now so that interested parties can study 
it over the adjournment period and suggest improvements. I will 
reintroduce the bill early in the new Congress, with appropriate 
refinements. For the sake of some of the most vulnerable in our 
society, I hope we can enact this kind of legislation early in 2001.

                          ____________________