[Senate Hearing 106-197]
[From the U.S. Government Publishing Office]
S. Hrg. 106-197
HOME HEALTH CARE: WILL THE NEW PAYMENT SYSTEM AND REGULATORY OVERKILL
HURT OUR SENIORS?
=======================================================================
HEARING
before the
PERMANENT
SUBCOMMITTEE ON INVESTIGATIONS
of the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
JUNE 10, 1999
__________
Printed for the use of the Committee on Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
59-580 cc WASHINGTON : 1999
_______________________________________________________________________
For sale by the Superintendent of Documents, Congressional Sales Office
U.S. Government Printing Office, Washington, DC 20402
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
Hannah S. Sistare, Staff Director and Counsel
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Darla D. Cassell, Administrative Clerk
------
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
SUSAN M. COLLINS, Maine, Chairman
WILLIAM V. ROTH, Jr., Delaware CARL LEVIN, Michigan
TED STEVENS, Alaska DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico MAX CLELAND, Georgia
THAD COCHRAN, Mississippi JOHN EDWARDS, North Carolina
ARLEN SPECTER, Pennsylvania
K. Lee Blalack, II, Chief Counsel and Staff Director
Linda J. Gustitus, Minority Chief Counsel and Staff Director
Mary D. Robertson, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Collins.............................................. 1
Senator Cleland.............................................. 4
Senator Domenici............................................. 6
Senator Levin................................................ 7
Senator Edwards.............................................. 27
Prepared statement:
Senator Torricelli........................................... 45
WITNESSES
Thursday, June 10, 1999
Maryanna Arsenault, Chief Executive Officer, Visiting Nurse
Service, Saco, Maine, representing the Visiting Nurse
Association of America......................................... 11
Mary Suther, Chairman of the Board, National Association of Home
Care, Washington, DC, and President and Chief Executive
Officer, Visisting Nurse Association of Texas, Dallas, Texas... 13
Rosalind L. Stock, Vice President, Home Health Services, Home
Health Outreach, Rochester Hills, Michigan..................... 16
Barbara Markham Smith, Senior Researcher, Center for Health
Services Research and Policy, The George Washington University,
Washington, DC................................................. 18
Kathleen A. Buto, Deputy Director, Center for Health Plans and
Providers, Health Care Financing Administration, Washington,
DC, accompanied by Mary R. Vienna, Director, Clinical Standards
Group, Health Care Financing Administration, Washington, DC.... 33
Alphabetical List of Witnesses
Arsenault, Maryanna:
Testimony.................................................... 11
Prepared statement........................................... 46
Buto, Kathleen A.:
Testimony.................................................... 33
Prepared statement........................................... 148
Smith, Barbara Markham:
Testimony.................................................... 18
Prepared statement w/attachments............................. 132
Stock, Rosalind L.:
Testimony.................................................... 16
Prepared statement........................................... 88
Suther, Mary:
Testimony.................................................... 13
Prepared statement w/attachments............................. 52
Exhibits
* May Be Found In The Files of the Subcommittee
1. Memoranda prepared by Priscilla Hanley, Office of Senator
Susan M. Collins and Karina V. Lynch, Counsel, Permanent
Subcommittee on Investigations, dated June 8, 1999, to
Permanent Subcommittee on Investigations' Membership Liaisons,
regarding June 10, 1999 hearing: Home Health Care: Will the New
Payment System and Regulatory Overkill Hurt Our Seniors?....... 159
2. Excerpt of Medicare Payment Advisory Commission's (MedPAC)
Report To The Congress: Selected Medicare Issues, Chapter 6--
Access To Home Health Services, dated June 1999................ 162
3. Statement of Rosalind L. Stock, RN, BSN, CHCE, Vice
President, Home Health Services, Home Health Outreach, with
attachments. (Statement reprinted in this hearing record with
numerous attachments. Remaining attachments to submission
retained in the files of the Subcommittee as Exhibit No. 3).... *
4. Statement for the Record of the Home Health Services and
Staffing Association........................................... 174
5. Statement for the Record of the Home Care Coalition......... 181
6. Submission for the Record of the Center for Medicare
Advocacy, Inc. entitle The Faces of the Medicare Home Care
Benefit........................................................ *
7. Supplemental Questions and Answers for the Record of
Maryanna Arsenault, Chief Executive Officer, Visiting Nurse
Service, Saco, Maine, on behalf of the Visiting Nurse
Association of America......................................... 186
8. Supplemental Questions and Answers for the Record of Mary
Suther, Chairman and Chief Executive Office, Visiting Nurse
Association of Texas, Inc., Dallas, Texas, on behalf of the
National Association for Home Care............................. 188
9. Supplemental Questions and Answers for the Record of
Rosalind L. Stock, Vice President, Home Health Services, Home
Health Outreach, Rochester Hills, Micigan...................... 191
10. Supplemental Questions and Answers for the Record of
Kathleen A. Buto, Deputy Director, Center for Health Plans and
Providers, Health Care Financing Administration, Department of
Health and Human Services...................................... 197
HOME HEALTH CARE: WILL THE NEW PAYMENT SYSTEM AND REGULATORY OVERKILL
HURT OUR SENIORS?
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THURSDAY, JUNE 10, 1999
U.S. Senate,
Permanent Subcommittee on Investigations,
of the Committee on Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:05 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Susan M.
Collins (Chairman of the Subcommittee) presiding.
Present: Senators Collins, Domenici, Levin, Cleland, and
Edwards.
Staff Present: K. Lee Blalack, Chief Counsel and Staff
Director; Mary D. Robertson, Chief Clerk; Glynna Parde, Chief
Investigator and Senior Counsel; Karina Lynch, Counsel;
Priscilla Hanley and Felicia Knight, (Senator Collins); Linda
Gustitus, Minority Chief Counsel; Michael Loesch (Senator
Cochran); Ed Hild (Senator Domenici); Andrea Haer and Nicole
Quon (Senator Specter); Laura Stuber (Senator Levin); Marianne
Upton, Annamarie Murphy, and Angela Benander (Senator Durbin);
Lynn Kimmerly, Jane Greares, and Donna Turner (Senator
Cleland); and Lori Armstrong (Senator Edwards).
OPENING STATEMENT OF SENATOR COLLINS
Senator Collins. The Subcommittee will please come to
order.
Good afternoon. We thank all of you for being here with us
today.
America's home health agencies provide an invaluable
service that has enabled a growing number of our most frail and
vulnerable Medicare beneficiaries to avoid hospitals and
nursing homes and stay just where they want to be--in the
comfort and security of their own homes.
In 1996, home health was the fastest-growing component of
Medicare spending, consuming 1 out of every 11 Medicare
dollars, compared with 1 out of every 40 in 1989. The program
grew at an average annual rate of more than 25 percent from
1990 to 1997. As a consequences, the number of home health
beneficiaries more than doubled, and Medicare home health
spending soared from $2.5 billion in 1989 to $18.1 billion in
1996.
This rapid growth in home health care spending
understandably prompted Congress and the administration as part
of the Balanced Budget Act of 1997 to initiate changes that
were intended to make the program more cost-effective and
efficient. There was widespread support for the provision in
the Balanced Budget Act of 1997 which called for the
implementation of a prospective payment system for home health
care. Until this system can be implemented, home health
agencies are being paid according to an interim payment system,
or IPS.
In trying to get a handle on costs, however, Congress and
the administration created a system that penalizes lower-cost,
efficient agencies and that may be restricting access for the
very Medicare beneficiaries who need care the most--the sicker
patients with complex chronic care needs, like diabetic wound
patients or I.V. therapy patients who require multiple visits.
I accompanied a home health care nurse on a home visit once
when I was in northern Maine, and we visited an elderly couple
who were living in their very modest home, both of whom were in
their eighties. The woman was being treated for a surgical
wound that was not healing well as a result of her diabetes.
She was confined to a wheelchair. I could see what a difference
home health care made in their lives. For one thing, it allowed
them to stay together rather than having this woman be in a
nursing home. I was offered by the nurse to observe her
cleaning the wound, but I passed up that part of the visit.
That visit brought home first-hand to me what an essential
service good home health care is for our Nation's elderly.
Unfortunately, the interim payment system is critically
flawed. It effectively rewards the agencies that provide the
most visits and spent the most Medicare dollars in 1994, the
base year, while it penalizes low-cost, more efficient
providers and, I fear, their patients.
None of us should tolerate wasteful or fraudulent
expenditures, but neither should we impede the delivery of
necessary services by low-cost providers. Home health care
agencies in the Northeast and the Midwest have been among those
particularly hard-hit by the interim payment system. As The
Wall Street Journal observed last year, ``If New England had
just been a little greedier, its home health industry would be
a lot better off now. Ironically, the region is getting
clobbered by the system because of its tradition of nonprofit
community service and efficiency.''
Even more troubling, this flawed system may force our most
cost-efficient providers to stop accepting Medicare patients
with the most serious and complex health care needs.
According to a recent survey by the Medicare Payment
Advisory Commission, almost 40 percent of the home health
agencies surveyed indicated that there were patients whom they
previously would have accepted whom they no longer accept due
to the IPS. Thirty-one percent of the agencies surveyed
admitted that they had discharged patients due to the IPS.
According to these agencies, the discharged patients tended to
be those very patients with chronic care needs who required a
large number of visits and were expensive to serve. As a
consequence, these patients caused the agencies to exceed their
aggregate per-beneficiary caps under the very complex formula
in the law.
I simply do not believe that Congress intended to construct
a payment system that inevitably discourages home health
agencies from caring for those seniors who most need the care.
Last year's omnibus appropriations bill did provide a small
measure of relief for home health agencies. While I am pleased
that we were able to take some initial steps to address this
issue, I am very concerned that the proposal did not go far
enough to relieve the financial distress that cost-effective
agencies are experiencing. As a result, I will soon join with
my colleagues in introducing legislation in the hope of
remedying the remaining problems.
These problems are all the more pressing given the fact
that the Health Care Financing Administration was unable to
meet the initial deadline for implementing a prospective
payment system. As a result, home health care agencies will
struggle under the IPS for far longer than Congress envisioned
when it enacted the Balanced Budget Act.
Moreover, it now appears that Congress greatly
underestimated the savings stemming from the BBA. Medicare
spending for home health fell by nearly 15 percent last year,
and the Congressional Budget Office now projects post-BBA
reductions in home care spending at $48 billion in fiscal year
98-02. This is a whopping three time greater than the $16
billion CBO originally estimated for that time period.
As a consequence, cost-efficient home health agencies
across the country are experiencing acute financial
difficulties and cash flow problems which will inhibit
eventually, if not already, their ability to deliver much
needed care, particularly to chronically ill patients with
complex needs who need home health care the most.
Some agencies have closed because the reimbursement levels
under Medicare fall so short of their actual operating costs.
Others are laying off staff or are declining to accept new
patients with more serious health problems. This points to the
most central and critical issue, and that is that cuts of this
magnitude simply cannot be sustained without ultimately
affecting care for our most vulnerable seniors.
Moreover, these payment problems have been exacerbated by a
number of new regulatory requirements imposed by HCFA,
including the implementation of OASIS, the new Outcome and
Assessment Data Set, sequential billing, IPS overpayment
recoupment, and the new 15-minute increment home health
reporting requirement. One home health nurse told me she felt
more like a lawyer billing by the hour than a nurse taking care
of essential health care needs because of that new requirement.
Today's hearing will examine how payment reductions under
the IPS, coupled with these new regulatory requirements, are
affecting home health agencies' ability to meet their patients'
needs, because that is the bottom line.
I think the following quote which was provided to me by the
director of a New York home health agency summarizes the
problems faced by many providers. She wrote: ``I have to
prepare for Y2K and have everything ready by August 1. That has
cost me $100,000. My accounts receivable are now tied up for 4
months due to sequential billing. HCFA has called a halt to
sequential billing as of July 1, which is great. But I need 2
months' notice to change my computer system, and the vendors
are not responding. I implemented OASIS. The first year cost
$100,000, and now it is $50,000 a year maintenance. I spent
time trying to get a surety bond. The time and effort cost me
$8,000 to $9,000. Had I been able to get one, it would have
cost $216,000. I just spent $300,000 toward the payback of my
recoupment of overcharges, which is $1 million. My rates have
been cut by IPS by 30 percent, and my per-beneficiary cap is
$2,200. And last but not least, the 15-minute increment will
cost $20,000 to $30,000 to implement, and worst of all, I will
probably lose all my good nurses.''
This comment aptly reflects the concerns that I have heard
from many home health agencies in my State as they struggle to
cope with an onerous payment and regulatory system. I look
forward to hearing the testimony of all of our witnesses today
in our quest to better understand and then solve this problem
which threatens the care that we provide to many of our elderly
citizens.
I would now like to call on Senator Cleland for any
comments that he might have.
OPENING STATEMENT OF SENATOR CLELAND
Senator Cleland. Thank you very much, Madam Chairman. I
cannot tell you how much I appreciate your having this hearing
to flesh out some of the challenges that we in the Congress and
HCFA and those involved in caring for our elderly citizens and
our disabled have under the current system and under the
current law.
We have all read the stories about the toll that the
Balanced Budget Act has taken on patients across the country,
headlines like ``Medicare Cutbacks Prove Painful,'' ``Nursing
Homes Shun Some Medicare Patients,'' ``Patients Face a Limit on
Benefits for Therapy,'' and so on.
Let me just say that the Balanced Budget Act of 1997 has
produced some positive results. We do have a balanced budget,
and Medicare's fiscal health has been extended for many years--
but at a cost. BBA has brought with it unintended consequences,
and these consequences have a decidedly human face, as our
distinguished panelists well know. It is the face of the
Nation's most vulnerable elderly citizens, Madam Chairman, as
you point out, and their caregivers. It is the face of the 73-
year-old cancer patient who relies on a feeding tube and I.V.s
and who cannot find a nursing home that will accept her because
her medical needs are too costly. It is the face of the 67-
year-old woman who lost her leg to diabetes complications and
received an artificial limb but was stopped short of her goal
of walking with only one cane, because she hit her $1,500 a
year physical therapy limit. And as someone who spent a lot of
time in physical therapy, I am a cosponsor with Senator
Grassley to lift this limit, because I happen to believe not
only in home health care but in physical therapy and
rehabilitation as well. It is the face of children and parents
of patients who must make the difficult choice of whether to
care for their loved ones at home or seek care in a nursing
home. It is the face of some of you in this room, the nurses
and other dedicated employees of home health care agencies, who
have devoted your lives literally to caring for the sick.
I think many of you are really unsung heroes who serve in
some of the most rural areas of the country--a place like my
State, the State of Georgia, has so many rural areas in need of
your care. Many of you manage the sickest and most frail
patients with no means of payment other than Medicare.
Last July, the Small Business Committee on which I serve
held a hearing on home health care and whether it can survive
the new BBA regulations. At that time, I stated that the
government should allow us to make every effort to allow
Medicare recipients to live in their own homes. I can remember
after being wounded in Vietnam, I spent a year and a half in
military and VA hospitals and rehabilitation facilities, but
ultimately, I wanted to be in my own home. I guess that is what
has made me a passionate devotee of home health care.
However, despite good intentions, those of us in government
can sometimes become part of the problem we seek to correct. I
think the interim payment system is such an example. Congress
enacted the IPS to encourage providers to cut costs while
becoming more efficient--a very laudable goal. In practice,
however, we are seeing efficient agencies being driven out of
business while some less well-managed agencies have been able
to survive. Many of you know that story.
Last summer, we heard that 800 small and medium-sized home
care agencies had been forced out of business by BBA
regulations--that was just last summer. That number has now
jumped to more than 2,000 agencies driven out of business.
How many patients are being denied services now? How many
patients are being forced into nursing homes, at a higher cost,
I might add, to our government, because 2,000 of America's home
health care agencies have been forced to close their doors? All
of us--the Congress, agency owners and employees and HCFA--must
work together on this critical issue. We all have the same
objectives--to keep Medicare solvent, to weed out fraud and
abuse in the system, and more importantly, to carry out
Medicare's mandate to ensure that our most vulnerable citizens
have access to the health care they need.
Madam Chairman, I welcome this hearing, and I look forward
to the information that will be provided today by the
distinguished panelists, and I hope we can come to some kind of
consensus here about the answers that are needed in the best
interest of America's senior citizens. Thank you.
[The prepared statement of Senator Cleland follows:]
PREPARED STATEMENT OF SENATOR CLELAND
I want to thank the Chair and state how important this hearing is.
All of us have read front page stories about the toll the Balanced
Budget Act is taking on patients across the country. The headlines say
it all: ``Medicare Cutbacks Prove Painful,'' ``Nursing Homes Shun Some
Medicare Patients,'' ``Patients Face a Limit on Benefits for Therapy.''
Let me say that the Balanced Budget Act of 1997 has produced some
positive results--we have a balanced budget, and Medicare's fiscal
health has been extended by many years. But the BBA has brought with it
unintended consequences--and these consequences have a decidedly human
face.
It is the face of the Nation's most vulnerable elderly citizens and
their caregivers. It is the face of the 73-year-old cancer patient who
relies on a feeding tube and I.V.'s--and who cannot find a nursing home
that will accept her because her medical needs are too costly. It is
the face of the 67-year-old woman who lost her leg to diabetes
complications--who received an artificial limb, but was stopped short
of her goal of walking with only one cane because she hit her $1,500 a
year physical therapy limit.
It is the face of the children and parents of patients who must
make the difficult choice of whether to care for their loved ones at
home or seek care in a nursing home. It is the face of some of you in
this room today--the nurses and other dedicated employees of home
health care agencies who have devoted your lives to caring for the
sick. Many of you are unsung heroes, who serve in some of the most
rural areas of the country, who manage the sickest, most frail
patients, with no means of payment other than Medicare.
Last July the Small Business Committee, on which I serve, held a
hearing on home health care and whether it can survive the new BBA
regulations. At that time, I stated that the government should make
every effort to allow Medicare recipients to live in their own homes
for as long as possible. However, despite good intentions, those of us
in government can sometimes become part of the problem we seek to
correct.
The Interim Payment System is such an example. Congress enacted the
IPS to encourage providers to cut costs by becoming more efficient--a
laudable goal. In practice, however, we are seeing efficient agencies
being driven out of business, while some less well managed agencies
have been able to survive. Last summer we heard that 800 small- and
medium-sized home care agencies had been forced out of business by BBA
regulations. That number has now jumped to more than 2,000 agencies.
How many patients are being denied service--how many patients are being
forced into nursing homes--because 2,000 of America's home health
agencies have been forced to close their doors?
All of us--the Congress, agency owners and employees, and HCFA--
must work together on this critically important issue. We all have the
same objectives: To keep Medicare solvent, to weed out fraud and abuse
from the system, and most importantly, to carry our Medicare's mandate
to ensure that our most vulnerable citizens have access to the health
care they need. I welcome this hearing. I look forward to the
information that will be shared today, and hope that we will get
answers that are in the best interests of America's senior citizens.
Senator Collins. Thank you very much, Senator Cleland.
I am now pleased to yield to the Senator from New Mexico,
Senator Domenici.
OPENING STATEMENT OF SENATOR DOMENICI
Senator Domenici. Thank you very much, Madam Chairman, for
conducting this hearing. I wish I could stay longer, but I will
just be able to be here for half an hour or so.
I heard your opening remarks, and I would like to say that
I think you have covered almost every issue that I would have
covered, and I commend you for raising those and laying them on
the table. Some of those issues must be resolved. Some involve
overregulation by HCFA. I hope this hearing will send a signal
to them that where changes can be made, they ought to do so.
It is patent and obvious in my State, where I have a task
force on health issues, that home health care, in an effort to
save money, has become entangled in a web of new rules and
regulations that for some who have spoken with me, it is almost
impossible to deliver the kind of care that they want to
deliver. In addition, costs are not coming down. As you place
all those burdens on, the costs of keeping businesses going,
whether they are nonprofits or profit-making, are going up, and
payments are coming down.
Obviously, in a State like mine and perhaps yours, Madam
Chairperson, we have a lot of rural areas, and rural areas have
a very difficult problem not only because there are so few
patients and such big distances, but also payment was presumed
to be an average of the high costs and the low costs, and
essentially, most of the rural ones are high-cost and long-term
need patients, so the rural home health care facilities, if
they are isolated and have just rural areas, cannot make it
because what we figured as a cost is just out of kilter with
the reality of the abundance of high-cost patients.
Obviously, we are going to have to resolve some of these
things, and I look forward to working with you on that. Some, I
think can be solved with this Subcommittee and others just
telling HCFA in no uncertain terms that overregulation is not
necessarily synonymous with better care or with lower cost.
Quite to the contrary--in this industry, it is proving to be
very, very much the opposite.
Madam Chairman, I would ask that you put my remarks, which
go into more detail, in the record.
Senator Collins. We would be happy to. Without objection,
they will be entered in full in the record.
Senator Domenici. Thank you very much.
[The prepared opening statement of Senator Domenici
follows:]
PREPARED OPENING STATEMENT OF SENATOR DOMENICI
It is a pleasure to be here this afternoon and I want to start by
commending the Chairwoman, Senator Collins for holding a hearing on
this very important issue.
I too have been working on the problems facing home health for some
time now. I would also note that when I attended a recent meeting of my
New Mexico Health Care Task Force, the concerns raised by home health
care providers were identical to those being raised today.
While the Balanced Budget Act of 1997 (BBA) has produced a number
of positive results, I am concerned about the impact of the Interim
Payment System (IPS) on seniors living in rural areas.
More to the point, I am unsure whether the IPS adequately takes
into account the unique needs of our rural areas. I would submit the
premise of the IPS was sound: Home health agencies would have a blend
of short term and long term patients whose costs would average out to
the per beneficiary limit.
However, home health agencies in rural areas often do not have a
choice because these areas tend to have low volume and mostly high cost
patients.
For instance in New Medico, Catron County is almost 7,000 square
miles in size, but has a population of less than 3,000 people. There is
not even a home health agency in Catron County and for people living in
Datil the nearest agency is 164 miles away in Silver City.
Let's say this agency must see a patient in Glenwood, Datil, and
Salt Lake that is a round trip of almost 400 miles that the IPS does
not take into account. Moreover, with roughly less than one-half of a
person per square mile, I would submit that a home health agency will
have a hard time because they will have very few patients and no
control over their condition.
I think a recent GAO report reinforces this point: ``Low-volume
agencies may have less ability to stay below their caps: A few high-
cost patients can affect them more because they have a smaller pool of
beneficiaries over which to average their costs.''
Again thank you, Madame Chairwoman, for holding this hearing and I
look forward to participating.
Senator Collins. I would now like to yield to the Ranking
Minority Member of the Subcommittee, Senator Levin.
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. Thank you, Madam Chairman, for convening
these hearings and for your continued leadership in a very
critical area. Our constituents, American citizens, are very
much looking to us for leadership in helping to make sure that
they are provided with an essential service, and that is what
home health care is.
You again are playing a critical role in making sure that
that happens, and I want to commend you for that.
Today we are looking at how the home health care industry
is surviving the so-called ``reforms'' of the Balanced Budget
Act (BBA) of 1997. Having received some 1,500 letters in 1998
from both providers and beneficiaries concerning problems the
home health care industry is facing, I think the answer to that
question is: ``Not well.''
Not only is the Interim Payment System harming home health
agencies in Michigan and other cost-efficient areas, but
additional regulatory hurdles have been put in the way of
agencies, making it difficult for these agencies to continue
providing quality care.
Home health agencies provide a critical service for our
Medicare beneficiaries. According to the General Accounting
Office, there are over 1.3 million Medicare beneficiaries in my
State of Michigan alone. Well over 100,000 of those
beneficiaries use the services of Michigan's 220 home health
agencies. These beneficiaries receive much-needed services
within the comfort and security of their own homes. It is
common knowledge that most people prefer recuperating from an
illness in their own home rather than in a nursing home and
that the overall cost savings of home health care compared to
nursing home care are dramatic.
I think that probably each of us has had instances in our
own families where this need, this very human need, to have
care at home if possible has been proven. I know I have had
such instances in my own family.
In February 1998, I sat down with representatives from the
home health agencies in Michigan to discuss the interim payment
system, and the health care leaders, including one whom we have
with us today, Linda Stock, voiced serious concerns about the
interim payment system which penalizes cost-efficient home
health providers while rewarding the higher-cost agencies.
Let me just give you one example. In Michigan, the 1998
average cost of receiving home health care services per patient
was about $3,300, while the national average was about $4,000.
Ms. Stock's agency, Home Health Outreach in Rochester Hills,
Michigan, is operating under a per-beneficiary limit of about
$2,500. This is more than $1,000 below the national average,
and her agency is essentially being penalized for having been
cost-efficient for the Medicare program in 1994.
So we have that plus many other areas that we want to
explore here today, including some of the new regulations which
have been imposed by HCFA which are extremely burdensome.
The Outcome and Assessment Information Set, OASIS,
sequential billing, overpayment recoupment, and the 15-minute
increment home health reporting requirement are simply too
burdensome. I know that some of these regulations have been
disbanded or suspended, but they have not all been, and in the
process of preparing for the implementation of the ones that I
have just described, a huge amount of time and effort has been
wasted.
So in our battle to protect Medicare from waste, fraud and
abuse, we have to ensure that the great benefits of home health
care are not lost. Yes, we need to have reasonable controls in
place to avoid abuses, but at the same time, we have to make
sure these critical services remain available to those who need
them.
I hope today's hearing will help to bring HCFA and the
industry together to work on a payment system and on
regulations that make sense for the people of the United
States, for whom home health care is so important. Thank you.
[The prepared statement of Senator Levin follows:]
PREPARED STATEMENT OF SENATOR LEVIN
Today we are looking at how the home health industry is surviving
the so-called ``reforms'' of the Balanced Budget Act (BBA) of 1997.
Having received some 1,500 letters in 1998 from both providers and
beneficiaries concerning problems the home health care industry is
facing, I think the answer to that question is, ``not well.''
Not only is the Interim Payment System (IPS) harming home health
agencies in Michigan and other cost efficient regions, but additional
regulatory hurdles have been put in the way of the agencies, making it
difficult for these agencies to continue providing quality care.
Home health agencies provide a critical service for our Medicare
beneficiaries. According to the GAO, there are over 1.3 million
Medicare beneficiaries in my State of Michigan. Well over 100,000 of
those beneficiaries use the services of Michigan's 223 home health
agencies. These beneficiaries receive much needed services within the
comfort and security of their own homes. It is common knowledge that
people prefer recuperating from an illness in their own home rather
than in a nursing home and that the overall cost savings of home health
care compared to nursing home care are dramatic.
Some changes certainly needed to be made in the home health
industry. From 1989 to 1996 Medicare home health payments grew at an
average rate of 33 percent, while the number of home health agencies
swelled from about 5,700 in 1989 to more than 10,000 in 1997. During
this time, home health care was also one of Medicare's fastest growing
benefits. Medicare spent $3.7 billion to pay for home health visits in
1990 compared to $17.8 billion in 1997 according to the GAO. In
response to this rapid cost growth and some concerns about alleged
abuses, the Balanced Budget Act included a number of changes in home
health payment policies.
One significant change we made in that Act was requiring HCFA to
move to a different payment mechanism, a prospective payment system
(PPS), which under the Balanced Budget Act was supposed to have been in
place by October 1, 1999. In the meantime, the Balanced Budget Act
provided for a temporary payment mechanism, or interim payment system,
which has turned out to be quite problematic.
In February of 1998 I sat down with representatives from the home
health industry in Michigan to discuss the interim payment system.
These health care leaders voiced serious concerns about the interim
payment system, which, they said, penalizes cost-efficient home health
providers while rewarding higher-cost agencies. Michigan providers, on
average, have lower per-patient costs than their counterparts in other
regions. By paying home health agencies at rates calculated from 1994
cost reports, the interim payment system penalizes those agencies that
attempted to keep their costs down in 1994. The formula is regional as
well as agency specific which penalizes those regions, like the
Northeast and the Midwest, who were historically more efficient with
their Medicare dollars in 1994.
Let me give you an example. In Michigan the 1998 average cost of
receiving home health care services per patient was $3,285 while the
national average was $3,987. Linda Stock's agency, Home Health Outreach
in Rochester Hills, Michigan, is operating under a per beneficiary
limit of $2,531. This is more than $1,000 below the national average.
Ms. Stock's agency is essentially being penalized for having been cost
efficient for the Medicare program in 1994.
With unfair reimbursement gaps such as that experienced by Ms.
Stock's agency, no wonder the Medicare home health benefit has already
experienced significant cost savings well beyond the amount
anticipated. The original projected savings in 1998 to Medicare as a
result of the changes in home health care was $16 billion over 5 years.
Yet in March of this year, CBO baseline figures for home health
projected a five-year savings of $48 billion. That's $32 billion in
unexpected savings. While GAO says its review doesn't show that persons
who deserve home health care services aren't getting them because of
the Balanced Budget Act changes, that $32 billion is pretty good
evidence that that may be the case. It is very possible that such
savings are coming from people like Ms. Stock, at the expense of both
Medicare beneficiaries and providers.
On top of the severe reduction in payments, I am concerned that
some of the new regulations being imposed by HCFA are too burdensome.
Michigan agencies have been critical of the Outcome and Assessment
Information Set (OASIS), sequential billing, overpayment recoupment,
and a 15-minute increment home health reporting requirement. Some of
these regulations have been disbanded or suspended, but in the process
of preparing for their impolementaiton, time and effort has been
wasted.
In our battle to protect Medicare from waste, fraud and abuse, we
have to ensure that the great benefits of home health care aren't lost.
Yes, we need to place reasonable controls to avoid abuses, but at the
same time, we have to make sure that these important services remain
available to those who need them. I hope today's hearing can help bring
HCFA and the industry together to work on a payment system and
regulations that make sense for the people of the United States for
whom home health care is so important.
Senator Collins. Thank you very much, Senator Levin.
Due to time constraints, the Subcommittee was unable to
invite everyone who wanted to testify at this hearing. As you
can imagine, we were beseeched with many requests. We will,
therefore, leave the hearing record open for 30 days for anyone
who wishes to submit a written statement. In that regard, we
have already received a written statement from the Home Health
Services and Staffing Association, and without objection, that
statement will be included in the printed hearing record.\1\
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\1\ The prepared statement of the Home Health Services and Staffing
Association appears in the Appendix as Exhibit No. 4 on page 174.
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I am now pleased to welcome our first panel of witnesses
this afternoon. I am particularly pleased to welcome a
constituent of mine, Maryanna Arsenault, who is the CEO of the
Visiting Nurse Service in Saco, Maine, and who is also
testifying today on behalf of the Visiting Nurse Associations
of America.
We are also pleased to have Mary Suther, who is both
chairman of the board of the National Association of Home Care
as well as president and CEO of the Visiting Nurse Association
of Dallas, Texas.
Also with us is Linda Stock, Senator Levin's constituent,
who is executive director of Home Health Outreach of Rochester
Hills, Michigan.
Finally, we would like to express our appreciation to
Barbara Markham Smith who is here with us today. Ms. Smith is a
senior research staff scientist with the Center for Health
Services Research and Policy at George Washington University,
which is part of the School of Public Health at George
Washington University Medical Center.
I want to acknowledge that the Subcommittee is aware that
Ms. Smith's testimony today is based on the findings of a study
that she is conducting that has not yet been completed, so her
findings are preliminary. It is not her usual practice to
discuss her findings at this stage of her research, so I want
to acknowledge that fact and express our appreciation to Ms.
Smith's agreeing to share her very important preliminary
finding with the Subcommittee today. It is my understanding
that this will be the first public discussion of Ms. Smith's
results.
Pursuant to Rule 6 of the Subcommittee, all witnesses who
testify are required to be sworn in, so at this time, I will
ask that you all rise and raise your right hand.
Do you swear that the testimony you are about to give to
the Subcommittee will be the truth, the whole truth, and
nothing but the truth, so help you, God?
Ms. Arsenault. I do.
Ms. Suther. I do.
Ms. Stock. I do.
Ms. Smith. I do.
Senator Collins. Thank you.
I am going to ask that each of you try to limit your oral
testimony to about 5 minutes each. If you need to go a little
beyond that, feel free to do so, but we want to make sure we
have plenty of time for questions. We will be using a timing
system this afternoon, so be aware that approximately 1 minute
before the red light comes on, you will see the lights change
from green to orange, and that will give you the opportunity to
conclude your testimony.
Your written testimony, however, will be included in the
printed record in its entirety.
Ms. Arsenault, we are going to start with you.
TESTIMONY OF MARYANNA ARSENAULT,\1\ CHIEF EXECUTIVE OFFICER,
VISITING NURSE SERVICE, SACO, MAINE, REPRESENTING THE VISITING
NURSE ASSOCIATION OF AMERICA
Ms. Arsenault. Thank you, Madam Chairwoman and Members of
the Subcommittee. My name is Maryanna Arsenault, and I am chief
executive officer of the Visiting Nurse Service which is
located in Saco, Maine. The Visiting Nurse Service is an
independent, Medicare-certified home health agency serving
southern Maine and seacoast New Hampshire.
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\1\ The prepared statement of Ms. Arsenault appears in the Appendix
on page 46.
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I am pleased to be here today to present the views of the
Visiting Nurse Associations of America (VNAA), regarding the
difficulties that VNAA members, including the VNS, are
currently experiencing in meeting the health care needs of
patients within the current Federal regulatory environment.
We are grateful to you, Madam Chairwoman and Subcommittee
Members, for your interest in determining how the Medicare home
health Interim Payment System, IPS, and several new regulatory
requirements are making it difficult for the VNS and other VNAs
to meet our patients' health care needs.
We believe that this hearing is being held at a critical
time, because evidence of harmful effects on Medicare
beneficiaries is beginning to emerge, particularly involving
those with chronic health and disability conditions.
VNAA believes that it is essential to look at the combined
effect of IPS and regulatory requirements such as OASIS on
providers and their patients. IPS alone has forced VNAs to cut
costs by an average 20 percent to stay under the IPS per-
beneficiary and per-visit cost limits. On top of these cuts,
new regulations have increased home health providers' costs
significantly.
For example, OASIS implementation has cost our agency more
than $300,000. The combined effect of IPS cost limits and OASIS
implementation has caused the VNS to exceed its per-visit cost
limit for the first time ever.
While the VNS had consistently maintained per-visit costs
25 percent less than our per-visit cost limits, we are now over
the limits by 3 percent in the aggregate. Our skilled nursing
per-visit cost increased from $79 in 1998 to $91 in 1999
because (1) IPS decreased the per-visit cost limit by 16.5
percent; (2) OASIS increased our nursing per-visit cost by $7;
(3) the IPS decreased our average per patient reimbursement by
$600 in 1 year, causing utilization to drop and costs per visit
to increase; and (4) because other time-consuming and costly
regulations, including fraud and abuse initiatives, have added
to overall costs.
How has patient care been affected by the budget cuts at
VNS? During this past year, the decreased number of staff has
meant a decrease in staff continuity for patients because staff
must now cover a greater geographic area. Elderly patients have
had to adjust to new staff more frequently, which has
jeopardized the establishment of a trusting relationship.
Our monthly patient satisfaction surveys show a decreased
level of patient satisfaction. This problem will be exacerbated
in July when we close a branch office. In addition, four
surrounding agencies have closed, affecting access and
requiring further expansion and dilution of our services and
discretionary moneys to meet community needs--once again
increasing staff travel time and costs.
In order to manage the per-beneficiary cost limit, our
average number of visits per VNS patient has decreased from 56
to 45 in 1 year. This reduction has been compounded by two
significant recent changes in Medicare coverage which have
severely curtailed access for patients with medically complex
conditions.
First, the criteria for whether Medicare will cover a
skilled nurse's management and evaluation of a patient's plan
of care are now being more stringently interpreted by the
fiscal intermediaries. Medicare must approve a skilled nurse's
coordination of extended interdisciplinary care in order for
individuals with a multiplicity of functional needs to receive
such care. Such coverage has increasingly been denied.
Second, the Balanced Budget Act reduced the ``part-time or
intermittent skilled nursing care'' eligibility criteria from
56 to 35 hours per week, which has curtailed our ability to
meet the needs of this patient population.
The following two case examples provide a closer look at
the access to care issue:
Doris is an 85-year-old woman who lives alone in rural
Maine with no indoor plumbing and no telephone. Her two living
family members live outside the State. Doris is unable to
manage her medications independently. However, her need for
medication management no longer qualifies her for coordinated
services by a registered nurse. The weekly service of an RN to
assess Doris and assist with medication management had
previously enabled Doris to live at home free of hospital
admissions.
Marjorie is also 85 and has received VNS services since
1996. She has brittle chronic obstructive pulmonary disease, an
anxiety disorder, and cardiac arrhythmia requiring regular
venipuncture for coumadin management. Marjorie is homebound. We
are planning to discharge her because she no longer qualifies
for skilled RN services. Marjorie has also avoided
hospitalization for several years. She does not qualify for
Medicaid services and will lose her home health aide. Marjorie
will be at high risk for continuous hospital admissions.
As the costs to VNS increased due to IPS and new regulatory
changes and interpretations, we were forced to curtail non-
Medicare services to patients. Discretionary moneys previously
used to meet patient needs not covered by Medicare are now
being used to subsidize Medicare.
The VNS closed a much-needed personal care service that had
been subsidized by discretionary funds. Family members of 100
patients receiving care were forced to provide personal care to
elderly patients and very sick children, which in turn affected
their work schedules and job security.
On July 1, home health agencies will have to comply with
another costly and burdensome regulation mandated by the BBA--
the 15-minute increment recording requirement. The changes to
billing forms and software will be costly, and the information
collected may not be useful in terms of correlating clinical
time with patient assessment and outcome information.
VNAA believes that it is important to have standardized
accountability of processes, but we feel that this information
would only be meaningful if it captures total patient care time
in relation to patient results. HCFA's proposed 15-minute
requirement will not provide this information because it is
encumbered by a stop-watch recording method and does not
account for a clinician's activities outside the home that are
directly related to patient care, and it ignores any travel
time.
It is my understanding that this provision will be
implemented because OASIS has been suspended and may be used as
a method to assess reimbursement. The home health industry
cannot withstand one more change where the information may or
may not be needed.
Senator Collins. If you could conclude your statement in
the next few minutes, that would be great. Thank you.
Ms. Arsenault. Very quickly--I will not read the rest of my
statement--we need relief regarding the cost limits, both the
per-beneficiary and the per-visit. The 15-minute increment is
going to be a terrible burden for home health agencies.
That is about it. I thank you very much.
Senator Collins. Thank you very much. Ms. Suther.
TESTIMONY OF MARY SUTHER,\1\ CHAIRMAN OF THE BOARD, NATIONAL
ASSOCIATION OF HOME CARE, WASHINGTON, DC, AND PRESIDENT AND
CEO, VISITING NURSE ASSOCIATION OF TEXAS, DALLAS TEXAS
Ms. Suther. Thank you very much for this opportunity to
appear before you today to testify.
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\1\ The prepared statement of Ms. Suther with attachments appears
in the Appendix on page 52.
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My name is Mary Suther. I am president and CEO of the
Visiting Nurse Association of Texas, which is a 65-year-old
charitable organization serving people in rural and urban
areas. We serve about 50 counties, and that changes daily
because we have had to close offices. In the past year, we
eliminated one branch that served eight counties that we can no
longer serve. I am also chairman of the board of the National
Association for Home Care.
We are deeply appreciative of the attention the Members of
this Subcommittee have shown to the problems created by the
home health provisions of the Balanced Budget Act and the
regulatory burdens imposed by HCFA.
The CBO originally reported that the effect of the BBA
would be to reduce home health care expenditures by $16.1
billion over 5 years. Revised projections indicate that
reductions will exceed $47 billion. I am sure you remember that
one reason Congress directed that the reductions had to be so
great was because a two-thirds behavioral adjustment was made
to the projection, and therefore required greater cuts than
would normally be necessary.
We look back now, and we think we were right to begin with,
because the expenditure is along the lines had there been no
behavioral adjustments. I am confident that Congress will
restore home care for their constituents.
The financial viability of home health agencies is now
being threatened by the cost of legislative and regulatory
changes, as you have heard. The access to beneficiaries is
being greatly reduced. These changes include the line-item
billings, increased medical review, itemized bills to patients
on demand, billing in 15-minute increments, sequential billing,
OASIS.
You may have heard that sequential billing has been
suspended. It is and it is not. You can still send the bills
in, but they will not be paid until the claim in question has
cleared medical review. Also, for the 15-minute increment, you
may hear that that has been suspended, too, but only
temporarily.
These items have all increased costs due to increased staff
requirements; computer programming; printing; upgrading
computer hardware capacity; increased postage and shipping;
increase in data line costs; and coupled with that, all of the
Y2K compliance that we have to do in home care. HCFA got extra
budget for their Y2K compliance, but we have had no additional
add-ons for our Y2K compliance, and we do have to comply with
Y2K. For my own agency, it cost $1.5 million for that
compliance.
Increased cost is only one aspect. Nurses have to complete
on the average an additional 45 pages of paperwork per patient.
I have copies of admission folders here if any of you would
like to look at those. OASIS questions number more than the
questions asked of a quadruple bypass patient being served by a
hospital.
Patients are angry that we are asking them these questions,
especially some of the very personal information, and often,
they are too sick to go through this entire questionnaire and
assessment process. That is not to say that I do not believe,
nor does our association, that we should be gathering unified
data and certainly, data elements upon which we do base costs
or should base costs in the future.
An even more devastating effect of the increased
administrative burden--and this is a recent finding--is that
nurses are leaving nursing, but nurses are leaving home health
at a greater rate because they say they did not go into nursing
to be clerks or secretaries but to provide nursing care to
patients.
We are now experiencing nursing shortages. The weekend
before last, our agency, which is the largest home health
agency in the area, had to close admissions because we did not
have staff. Baylor Health Care is the second-largest serving
our area, and they had to close admissions.
I spoke with someone at Johns Hopkins, and she said that
several hospital home health agencies in the Baltimore area
also had to close admissions because of lack of staff in that
area. This is not in my written testimony, because I just found
this out.
Sequential billing has caused severe cash flow problems and
duplicative handling of claims. Billing in 15-minute increments
not only increases costs, but beneficiaries are going to be
extremely angry if a nurse comes in, and after she has been
there for 8 minutes, pulls her stopwatch out and starts turning
it off and on if the patient gets a phone call during that time
period--off; if the patient goes to the bathroom during that
time period--off. Patients are going to be extremely angry with
us because we will not be able to adequately explain to them--
think about trying to explain this to your grandmother. These
changes coupled with IPS, which produced for most home health
agencies a 14 to 22 percent decrease in the per-visit
reimbursement--and in my own agency, that was 27 percent--at a
time when costs are increasing--you heard the previous witness
talk about the increase, and the costs in our agency have
increased proportionately to those in hers--the low aggregate
beneficiary limit with no provision for increased limits for
medically complex, high-cost patients, and also the elimination
of venipuncture as a qualifying benefit. In one county that our
agency services, of all the patients discharged as a result of
the elimination of this benefit, one-third were admitted
directly into a nursing home on the day of discharge.
Venipuncture patients were included in the base year for
cost analysis; however, it changes the cost analysis when you
take those patients out of the base year cost materials, which
I do not think anyone has thought of. There are threatening
letters going to physicians which cause them to decrease or
eliminate referrals for patients. In our area, several doctors
have sent a blanket letter to all home health agencies and to
their patients, saying we will no longer admit you to a home
health agency because it may subject us to criminal charges,
and therefore, we cannot take that liability on.
Alarming letters go to patients about their Medicare bills
regarding fraud and abuse. In many areas, the Health Care
Financing Administration's regional determinations regarding
strict, archaic rules for branch offices, which increase costs
and cause offices to close. In our area, we have had to
eliminate one office already that served eight counties because
of this rule, and we are threatened with having to close
another one that serves 15 counties because of this. They do
not understand that we have telephones and fax machines and
computers to assist in running those offices.
I would like to give you an example of some access
problems--and I will submit this testimony for the record,
because I did not have this information earlier. I found out
that in Texas prior to BBA, there were 15 counties with no home
health agency. Now, as of April 1, we have 40 counties with no
home health agency in Texas. Two of those counties have areas
greater than 4,500 square miles, and each of those is bordered
by another county that has no home health agency. So, access is
being severely affected in Texas.
My time is up, so I will just conclude by saying that in
many instances, the Balanced Budget Act has certainly
lengthened the life of Medicare, but sometimes, the cure is
worse than the disease. The effects of the BBA have produced
many unintentional consequences. We are relying on your
interest in this problem to help repair that damage. Thank you.
Senator Collins. Thank you very much. Ms. Stock.
TESTIMONY OF ROSALIND L. STOCK,\1\ VICE PRESIDENT, HOME HEALTH
SERVICES, HOME HEALTH OUTREACH, ROCHESTER HILLS, MICHIGAN
Ms. Stock. Chairman Collins, Senator Levin and Senator
Edwards and the staff, thank you for this opportunity to
discuss the effects of the 11 mandates of BBA on home health
patients and their providers since October 1, 1997.
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\1\ The prepared statement of Ms. Stock appears in the Appendix on
page 88.
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I am Linda Stock, vice president of Home Health Services
and a director of the Michigan Home Health Association, and I
speak for the majority of providers who want to be part of the
solution and not part of the problem.
Each mandate is unfunded if the provider is at, or above,
their per beneficiary cost limits. Home health is the only
Medicare benefit for which patients pay all the costs at the
site of care. So any recurrent calls for copayments are
unconscionable.
As a home care provider for over 18 years, I am saddened to
see peers close their doors or eliminate Center of Excellence
programs for wounds, strokes, and diabetes in response to the
severe cutbacks.
Home Health Outreach is a system-affiliated home care
agency, serving urban and rural areas. In 1998, we admitted 934
Medicare patients. Because our per beneficiary limit is so low,
we depleted our expenses and cut anything that was deemed
nonessential to short-term survival. Staffing expenses were
reduced by 19 percent.
Our Y2K budget was cut to two PCs and their software, one
fully dedicated to OASIS. Y2K has made that a very short-term
decision.
Just one of our home care patients with complex wound care
costs us over $25,000 a year. Balancing these costs and patient
service is next to impossible. I have personally seen the
anxiety of an elderly patient being taught how to give their
own intravenous care.
Access to care is becoming a greater issue for Michigan.
Over 10 percent of our agencies have closed, and others are
limiting their admission criteria. We have case managers who
will confirm that they are prolonging discharges from hospitals
because they cannot find care for complex cases.
Please eliminate the 15 percent additional reduction due in
October of this year and mandate a rational PPS by October 1,
2000.
Hastily enacted surety bonds, sequential billing and OASIS
mandates created serious operational and financial problems and
then were suspended. What a waste of time and resources for the
Federal Government and for providers.
In April, HCFA implemented OASIS, and the 79 OASIS
admission questions added 17 pages to our assessment. Separate
data is also required on readmission, change of patient
condition, recertification, transfer, discharge, and death.
Protection of clients' right to confidentiality and
participation in their care decisions has not been adequately
addressed by OASIS. The benefits should not be denied if the
patient refuses to answer the questions. Non-Medicare patients
show greater resistance to the personal aspects of the
questions. HCFA should not have the authority to mandate data
collection for services they do not pay for.
Here are some examples of OASIS-related situations. A
patient with severe lung disease develops such shortness of
breath during the OASIS assessment that the interview had to be
suspended so the nurse could intervene.
A confused elderly man was also unable to answer for
himself, and his caregiver, a neighbor, knew nothing about him,
so the assessment is meaningless.
An elderly female patient hospitalized twice in the first 2
weeks of OASIS was being subjected to her third OASIS
interview. Weak and tired, she voiced her frustration by saying
she would not go back in the hospital if she had to answer
those questions again.
During the nurse's first contact with the patient, asking,
``Are you having thoughts of suicide?'' is a totally
unacceptable entry into the psychological assessment of a
patient. Will it be perceived as a suggestion? Will it trigger
anger or rejection of service?
Providers do not oppose collection of outcome measurements.
We oppose inefficient data collection which jeopardizes patient
rights and implements a system without adequate provider input
or funding.
For OASIS, HCFA prepared three manuals of instructions
coming to 512 pages--just for OASIS. Our agency's projected
OASIS cost for the first year is $126,000. In the last week
before OASIS was suspended, our HCFA OASIS software froze, and
all the data to date was lost.
We recommend delaying the OASIS implementation until
patient rights, funding, and data volume and frequency issues
are addressed, and we also ask that OASIS not apply to non-
Medicare patients. The new 15-minute increment reporting
mandate on home health care claims becomes effective in just 20
days. Providers anticipated a simpler formula, and we knew we
had to report visit time, but now our staff will need
stopwatches to delete the items that HCFA arbitrarily
determined do not constitute allowable time, such as charting
and dishwashing by an aide.
Now, the HIM 11 says both of these items are allowable in
the content of a visit, but they are being eliminated. Even
OASIS is being eliminated.
Agencies will need to run concurrent time studies, one for
payroll and one for the new mandate. They must revise their
software and establish a new tracking system.
Was it Congress' intent that the 15-minute increment be
labor-intensive and micromanaged? I do not think so.
Because of Y2K complications, we recommend delayed
implementation of the 15-minute reporting until a simpler, less
costly formula can be designed.
In conclusion, I believe that mandates have already
impacted patients by diverting limited resources away from
direct care. Congress did not mandate this minutiae. There is
provider support for practical, effective regulations for each
of these mandates. My hope is that together we can replace
reactive fixes for current problems with a more efficiently
designed home care benefit.
My thanks to those who helped me prepare for today's
session and to this Subcommittee for addressing this critical
issue.
Senator Collins. Thank you very much. Ms. Smith.
TESTIMONY OF BARBARA MARKHAM SMITH,\1\ SENIOR RESEARCHER,
CENTER FOR HEALTH SERVICES RESEARCH AND POLICY, THE GEORGE
WASHINGTON UNIVERSITY, WASHINGTON, DC
Ms. Smith. Good afternoon, Madam Chairman, and Senators.
Thank you for inviting me here today to testify on a matter
that affects not only Medicare beneficiaries who may need home
health services now and in the future but indeed affects the
coherence and viability of the Medicare program itself.
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\1\ The prepared statement of Ms. Smith with attachments appears in
the Appendix on page 132.
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My testimony, based on the preliminary findings of our
study, will suggest today that as a result of the Balanced
Budget Act of 1997, home health agencies in general are driven
to change the case mix of their patients and alter the patterns
of practice of the care they deliver to conform to
reimbursement constraints. These constraints appear to be
creating substantial tension with meeting the clinical needs of
some patients. As a result, many seriously ill patients,
especially diabetics, appear to have been displaced from
Medicare home care. Other patients are experiencing significant
changes in services, with effects on health status that are
unknown, but suggest greater risk as a result of greater
fragmentation of services.
I am going to flip through my testimony in order to
expedite it, but I think it is important to recognize that even
though we are in the midst of this study now, I would say that
the biggest methodological problem that we have is that it is
still too early to fully assess all of the impact, so that
these findings should be regarded as signals of greater effects
yet to come.
I want to put the findings in some context. We do have
outcome studies that have been funded by HCFA recently, very
large, that I would regard as flagship studies, on the effects
of home care on patient health status. Basically, these studies
show that patients with more home health care have better
outcomes both in terms of improved functioning and reduced
hospitalizations. These studies specifically warn that an
attempt to force patients into a short-term care model could
have very adverse consequences on the health status of
beneficiaries.
In addition, the studies show that the regional variation
in home health utilization correlates to the health status of
beneficiaries in home health care in those regions. For
example, the mortality rates among beneficiaries in high-
utilization regions are 34 percent higher 30 days after
discharge from home care than patients in low-utilization
regions.
This is not a reflection of the quality of care, because it
happens 30 days after discharge; it is a reflection of the
fragility of the patient's health status in the system.
With those outcomes studies in mind, I would like to go
straight to my specific findings. First, just to backtrack,
what that means is that it is very important not to confuse low
cost with efficiency. An agency can be low-cost and be
inefficient because it has a very healthy patient mix, or it
can be high-cost and be very efficient because it is taking
care of critically ill patients. So I think it is important to
bear that in mind throughout an analysis of this problem.
The key preliminary findings of our studies suggest
significant potential effects on beneficiaries, particularly
those with unstable chronic illness or who have even short-term
intensive needs. It appears that these patients are being
displaced from home care or are experiencing significant
changes in services. These changes appear to be driven by
reimbursement policies and intermediary scrutiny, rather than
clinical considerations. And let me just state the findings for
you one by one.
Home health agencies in general are moving fairly
aggressively to adjust their case mixes and/or their practice
patterns to conform utilization to reimbursement. While
intermediary practices have also clearly had an effect on both
utilization and case mix, reimbursement changes appear to be
the dominant driver of practice in case mix changes.
A number of agencies have achieved virtual reversals in
their short stay/long stay ratios through changes in their
patient mix. Other agencies with very sick patient mixes have
significantly reduced visits and clinical staffing levels even
as they dramatically increase their patient census, raising
serious quality concerns.
These significant reductions in care in agencies with very
adverse patient mixes are driven almost exclusively by
reimbursement considerations and are most notable among
agencies operating under national median limits in
traditionally high-cost areas.
Both the interim payment system and fiscal intermediary
policies have created a stratification of beneficiary
desirability among providers. Orthopedic rehabilitation
patients, particularly joint replacements, coronary artery
bypass graft, also known as CABG patients, nondiabetic post-
operative wound care, pneumonia-type infectious disease
patients have become the ``Brahmins'' of desirable patients and
are the focus of competition among agencies.
Diabetics, particularly brittle diabetics, appear to have
experienced the most displacement from home care. The extent to
which complex diabetics are even being admitted to home care
has declined significantly among the study agencies. Among
diabetics already in care, agencies report very aggressive
efforts to discharge them.
The extent of the decline in the home care diabetic census
among the study agencies, as well as the reductions in care,
raise concerns about the long-term health status and outcomes
of this population.
Similar patterns of aggressively seeking discharge or
avoidance of congestive heart failure patients and chronic
obstructive pulmonary disease also appear, although to a lesser
extent.
Patients who require two visits daily or even one visit
daily, even for very short periods of time, seem to be
experiencing significant displacement from home care. This was
a surprising finding, and it has affected short-term I.V.
therapy patients in particular, who need care for only 3 to 6
weeks and whose care is unquestionably post-hospitalization and
very acute. A number of agencies report overt screening to
exclude or time-limit these patients specifically.
Mental health services are also experiencing some exclusion
and decline in services, either because they do not want to
keep the patients in long enough to--I see my time has expired;
I have a few more findings and some implications. Should I go
ahead and proceed?
Senator Collins. If you could summarize those quickly, that
would be great.
Ms. Smith. OK. Foley catheter patients do not appear to be
experiencing displacement because while they are very long-
term, they are also low-intensity. Home care's perception of
their mission has changed dramatically from preventing
hospitalization and preventing acute exacerbation to
discharging people as quickly as possible.
Agencies appear to be applying eligibility standards in a
manner to exclude patients rather than to include them, bending
over backwards to exclude them from Medicare rather than
bending over backwards to qualify them for Medicare. And a lot
more patients are paying 100 percent out of pocket for services
they previously received in Medicare as a result.
The findings are listed in my testimony, and I am going to
quickly flip to some myths and implications. One of the myths
that I think is important to dispel is that these patients
cannot go right into Medicaid and receive Medicaid services.
The functional and financial qualification standards are very
stringent, and even dually-eligible beneficiaries frequently do
not qualify for these programs.
For the home and community-based waiver programs, they do
not often provide skilled services, and their limited services
are provided on a queued basis, so that patients do not make a
straight walk from Medicare home care into Medicaid services.
The implications of this are profound, looking at the big
picture. Among the study agencies, the number of Medicare
beneficiaries in home care has declined 20 percent since 1997,
but the number of Medicare beneficiaries since 1994 has
expanded by 2 million beneficiaries. Those numbers alone should
tell us that something is seriously wrong here.
My main concern is that we are carving out a wedge of
people who are chronically ill and have intensive service needs
services who are not going to have a reliable source of care in
any sector. They are becoming the health care system's
untouchables.
The other important consideration is that it should be
clearly understood that many of the sickest patients may
already be out of the system, and therefore, any PPS system
which is based on the utilization data from 1998, I think,
would be seriously flawed because I believe that that
utilization data will not adequately express the needs of the
population.
I'll stop there and take questions. I appreciate your time
and consideration.
Senator Collins. Thank you very much, Ms. Smith.
We now will start a 10-minute round of questions, but I
want to start by thanking you all very much for your very
insightful and illuminating testimony.
As I mentioned in my opening statement, my primary concern
is to evaluate what impact the changes in the payment system
and in the regulatory system are having on our most vulnerable
senior citizens. In that regard, your testimony is very
interesting because it seems to contrast greatly with the
testimony that we are going to hear later this afternoon from
HCFA.
I want to read you three statements from the written
testimony that is going to be presented by HCFA later today.
The first statement is: ``We are diligently monitoring the
impact of these changes and thus far do not have evidence that
access to care has been compromised.''
The second statement is: ``Again, we have not seen
objective evidence that closures have affected access.''
And the third statement is: ``We to date do not have
objective evidence that beneficiary access to care has been
compromised.''
In other words, three times in the testimony, HCFA
officials are maintaining that our seniors are not experiencing
any problems getting access to home care. That does not seem to
be what I am hearing from any of you, nor is it what I am
hearing from my home health agencies throughout the State of
Maine.
So to set the record straight on that issue, since you are
out there on the front lines, I would like to hear your
reaction to the three statements that I have just read, and I
will start with Ms. Arsenault.
Ms. Arsenault. From where my agency sits providing care, we
are basically one of the only organizations providing care in a
very large geographic area, and I would have to say that we do
admit patients if we find them to be eligible, but
interpretations have become much more stringent. So today, we
are admitting fewer patients because we are willing to take the
risk. We have already been under 50 percent review by Medicare.
So whereas a year ago, we would have said yes, let us admit
this patient; we believe we can fight and win, today we know
that we cannot win, so we are indeed seeing patients with
access problems.
Senator Collins. So you would disagree with HCFA officials,
and you believe that care and access have already been
compromised. Would it be fair to say that you believe it will
become worse if, for example, the 15 percent payment cut goes
into effect?
Ms. Arsenault. If the 15 percent payment cut goes into
effect, it will definitely get worse.
Senator Collins. Ms. Suther.
Ms. Suther. In the area that I serve, access has been
impaired in several ways. Many agencies in our area, rural and
urban, have closed. It is not the agencies that have caused the
access as much as other things. Base year, we provided over
450,000 visits for Medicare clients. This year, we will provide
under 200,000 visits at a time when other agencies are closing.
The difference is that the patients we serve are getting
and receiving care. We are not turning anyone away. Our agency
has used donations to offset our losses and has subsidized the
Medicare program, and even though Dallas and its surrounding
counties are a very generous community, they said enough is
enough, that they cannot continue to do this.
So I do not know what we are going to do after this year.
We are having to cut back on specialty care. For instance, we
had seven enterostomal therapists who take care of very severe
wound care patients, and it has been our experience that a
wound care specialist can treat a patient for a shorter period
of time, get out of the home, and the patient will have the
same results as having a generalist treat the patient for a
longer period of time. But we cannot do that under IPS because
the per-visit limit is exceeded. We are over the per-visit
limit, but we are $3 million under the per-beneficiary limit,
but we cannot use our judgment in using a specialist--we have
to use generalists in order to get reimbursed. So patients are
not getting the best care.
There are many agencies in our area that are asking us to
see their long-term patients, and we are admitting them because
we had a very low utilization rate before, and the way the
formula is, we got a little piece of the State rate which had a
high beneficiary limit, so therefore we can admit some of their
patients.
But this is all going to go away, and in fact, our board of
trustees met yesterday, and if there is a 15 percent cut, we
will probably go out of business--and we have been doing this
for 65 years.
Senator Collins. I think you have raised a very important
point, because I am hearing from home health care agencies in
my State, as well, that are turning to private fundraising to
subsidize Medicare. Prior to that, the fundraising efforts were
used to provide non-Medicare service to elderly people, but now
we have a situation where private fundraising is being used to
make up the deficit because of the problems with the regulatory
rates and with the cost of regulation. So I think that is a
good point.
Ms. Suther. One more remark. I don't know the specifics of
this case, but I believe there was a case in North Carolina in
which HCFA even said they would pay for the care, but they
could not find an agency that would provide it. And I cannot
give the specifics, but I will get the specifics for you,
because the patient was such a high utilizer.
Senator Collins. Ms. Stock.
Ms. Stock. I see the access issue in three areas that I
know of in our State, and I think we are just at the tip of the
iceberg, Senator, because the majority of the State is on the
December 31 year-end for their cost reporting period and are
just finishing their cost reports now, and when they see their
bottom lines, they will be closing their doors in much, much
higher numbers than we saw before.
But I see access being affected in three ways. There are
patients who are not being admitted to care. We are seeing
that, and we can validate that with case managers at hospitals.
There are also patients who are being discharged earlier and
end up rehospitalized, end up in the emergency room, end up
going to a nursing home.
The third thing we are seeing is underutilization. We are
skimping on the visits so much that patients are having to
subsidize that with their own funds or private community
resources to pay for services that they are entitled to by the
Medicare benefit.
Senator Collins. Ms. Smith?
Ms. Smith. I think the evidence that contradicts that first
and foremost is the fact that we have seen a negative growth
rate of 15 percent in the claims in this industry. You really
do not need to know anything else to know that you probably
have an access problem when you see negative growth of 15
percent in 1 year. It is unprecedented in recent health care
history.
The other evidence of course would come from the fact that
agencies are overtly screening patients and admit to very early
discharge of patients whom they would previously keep,
describing this as discharging them at the first signs of
stabilization, often precipitating readmissions to hospitals,
readmissions to emergency rooms, and also applying these
eligibility standards quite strictly.
I think also the number of people who need skilled care and
are being discharged into basically nonskilled environments
would also tell you that there is a significant access problem.
Senator Collins. Ms. Smith, I want to follow up on that
point, because in your written testimony you mentioned that
diabetics, particularly brittle diabetics, appear to be
experiencing considerable displacement from home care.
Ms. Smith. Right.
Senator Collins. What do you think is happening to those
patients? One of the issues here is that home care is a much
more cost-effective way to care for people than hospitalization
or nursing home care.
Do you think that a lot of these people are going to get
sicker because of the lack of home care and will end up having
to be admitted into hospitals or nursing homes, ironically,
costing the Medicare system far more than if we had cared for
them adequately through the home care system?
Ms. Smith. The short answer is that we do not know where
these people are. I said to one person that if I were going to
put this testimony to music, it would be, ``Where Have All the
Diabetics Gone?''
My suspicion is that what we are seeing is much more
fragmentation of care, that they are basically bouncing between
different types of health care providers and experiencing more
periods of deterioration between getting care from those
different types of health care providers.
Senator Collins. Is there any tracking of patients who have
been discharged from the system?
Ms. Smith. I am not aware of any tracking, and I know that
the GAO study specifically did not track specific patients.
Senator Collins. My concern, for example, is the two 85-
year-old women who have been receiving services in Maine. What
is going to happen to them? It seems to me that they are at
risk of getting sicker, of being hospitalized. It is just of
tremendous concern to me.
I want to ask one final question on this round about the
OASIS issue. Ms. Arsenault, I am going to direct this to you.
In HCFA's prepared testimony, they state that once providers
learn to use OASIS, it actually ``slightly reduces the total
time it takes to conduct and document a thorough patient
assessment.'' In your testimony, however, you state that OASIS
has actually increased your agency's per-visit nursing cost by,
I believe, an additional $7. Is that correct?
Ms. Arsenault. That is correct.
Senator Collins. That seems inconsistent with HCFA's
statement that OASIS actually saves time--and maybe I will
quickly go across the three home health agency representatives
that we have here. Time is obviously money. You have actually
quantified it in your agency. Do you disagree with HCFA's
assessment?
Ms. Arsenault. I disagree with the fact that it will take
us less time to do an assessment with--and I can never remember
if it is 92 or 102 extra data elements. But we already have an
assessment, and we added data elements to that assessment. Some
of them were the same questions, but most of them were not. No,
I do not agree with that at all.
As an example, for our organization, on the first visit,
which is the visit when we admit a patient, we have always done
an assessment and we begin our teaching. When patients began to
fall asleep, we had to divide that and do the assessment on
visit one and the teaching on visit two.
Senator Collins. Very quickly, because my time has
expired--Ms. Suther, do you agree with HCFA that once you get
used to the system, it is going to actually save you money?
Ms. Suther. I do not know what they mean by getting used to
it. We were a test agency, and we were involved in the research
on this, and we have been completing it for a long time, and
time required has never decreased beyond about 10 minutes.
Senator Collins. Ms. Stock.
Ms. Stock. The only other thing I would like to add is that
since you have to do it so many times in the intervention with
the patient, it adds enormous volume. You cannot add 79
questions and not take more time.
Senator Collins. Thank you very much. Senator Levin.
Senator Levin. Thank you, Madam Chairman.
Ms. Stock, you said in response to the question about
access being reduced, that you can demonstrate through
experience that patients are not getting the benefits that they
are entitled to under the Medicare system, that you can
actually demonstrate that to HCFA. Are you saying that Medicare
is refusing to pay for benefits that are rightfully covered by
Medicare, or are you saying that even though Medicare will pay,
nobody is willing to provide the service--or both?
Ms. Stock. The latter, Senator. I think what we are saying
is that we are more than willing to do what we have
commissioned ourselves over the years to do. We cannot afford
to do it for the money that we are being paid. We cannot offer
the services. We cannot admit a patient unless we have adequate
resources to provide that care, so that is deterring us from
accepting or continuing needed care that is covered by
Medicare.
Senator Levin. Each of you, in response to the Chairman's
question, indicated that access is indeed being impaired by the
recent Balanced Budget Amendment changes, and the regulatory
changes. The General Accounting Office and HCFA have said that
the opposite has occurred. The headline of the GAO report is:
``Closures Continue with Little Evidence Beneficiary Access is
Impaired.''
Some of their findings are, for instance, that ``The
decline in visits per user between 1996 and 1998 is consistent
with IPS incentives and does not necessarily imply a
beneficiary access problem.'' And then, a few lines later, they
say that ``Certain patterns are consistent with the IPS
incentives to constrain the costs of care for each beneficiary
but not necessarily the number of users.''
There seems to be a real gap between your experience in the
real world and what HCFA interprets is going on or what the GAO
is interpreting is going on, because I have no doubt that you
know what is going on. These studies are fine, and they are
useful, but they have certain limits, and one of the limits is
that if folks who are out there delivering services have a real
world experience that is as yours has been, and where we have
people who are entitled to benefits and need benefits and we
want to have benefits for human reasons as well as for
financial reasons so we can save the costs of having them in
the hospital or in a nursing home, that we are not somehow or
other connecting your experience with HCFA's, or with the GAO
for that matter.
What is your experience in dealing with HCFA? Why is there
this apparent gap between what they see and transmit to us and
what you know and transmit to us?
Ms. Arsenault, maybe we could start with you.
Ms. Arsenault. It is my understanding that the particular
study that you are referring to was done early on when IPS was
first implemented. I think a lot of what we are telling you
today is the experience that we have out in the field in our
home States, and I think it is too early to truly quantity in a
study format what the two effects are going to be.
Senator Levin. It is more than ``are going to be''; it is
``already have been.'' That is my point.
Ms. Arsenault. You cannot study only the first 3 months of
IPS and project for the future or even know truly what is going
on right now.
We have a lot of experience with studies coming out that
either used false methodology or concentrated in areas--for
example, the fraud and abuse study, I think it was the GAO.
They concentrated their assessment in a number of States that
were known to have fraudulent providers and then extrapolated
that to the entire Nation.
Senator Levin. Ms. Suther.
Ms. Suther. I think she is on the right track. I think it
is that we are talking in real time, and the study was done
right at the beginning of IPS. It was January 1, 1998, before
you even knew what your cost caps were going to be, even though
it was implemented October 1, 1997.
Second, providers did not know what their per-beneficiary
caps were. HCFA was not even directed that they had to do it
before April 1. Many people were already into that year. And
then, many agencies did not get their per-beneficiary limits
for over a year after they were on IPS, so they did not know
where they stood during that time period, and they are just now
finding out where they stand, and they are just now beginning
to turn patients way. I think there is a definite access
problem, and all you have to do is be in the churches and the
clubs and the community to see exactly what that access problem
is. People who really need it are not being served.
Senator Levin. And if you invited HCFA to come out and sit
with you for a day and talk to people who are providing
services, would their response be positive? Would they come out
and sit with you and join you in the real world or not?
Ms. Suther. I do not know, but I would love for them to
come. We have a State senator who has been out doing visits
because he is very concerned about this, and he looked at
patients who were high-utilization patients to see what would
happen to them over time, he has been following these patients
over time, and we have been documenting for him the amount of
care we are giving beyond what normally we could afford if we
were not being subsidized by the community.
Senator Levin. Thank you. Ms. Stock.
Ms. Stock. Senator, your question regarding HCFA's
willingness to work with the industry is really tantamount to
the heart of the issue. They have waived the requirements for
comment periods on some of these mandates. They have also
underestimated the costs, especially of OASIS, and also, the
Paperwork Reduction Act issues.
They have had some meetings with us, Senator, but I do not
think it is a two-way communication, and we have been working
on PPS either through the work group or our State and national
associations since 1993, always willing to give our input--you
know how talkative we are--but it is not always a two-way
conversation. We would be glad to fix the problems. We think
there are some solutions.
Senator Levin. For instance, Ms. Suther gave us the
statistic that one-third of the people, as I wrote it down,
after they are discharged from home health care are going to
nursing homes within a matter of days, I think you said.
Ms. Suther. This was a specific instance with venipuncture
alone, and this is in one county in which we discharged the
patients who no longer qualified for service because
venipuncture was the sole qualifying service, and we discharged
those patients specifically directly into nursing homes. That
is not the case in every county, and that is not the case with
all discharges from home care.
Senator Levin. In that specific case, we surely lost a lot
of money, I assume.
Ms. Suther. Right.
Senator Levin. Ms. Stock, let me ask you a question about
the regional disparities that exist here. In your prepared
testimony, and I think in your oral testimony as well, you
indicated that your agency's per-beneficiary limit was $2,531
for 1998, which is more than $1,000 below the national average
of $3,987. The agency limits are based on 1994 cost reports, so
I have two parts to my question.
How did you keep costs low in 1994, because that now is
causing you a big loss; and how much have your actual costs
increased since 1994? Basically, are you being punished for
being efficient in 1994, and if so, how did you do it in 1994,
and what has gone on since then?
Ms. Stock. Am I taking it personally? Yes. Because we have
been involved in the PPS project since 1993, we have been
planning for managed care, planning for PPS, and trying to
limit our cost. It was intentional to be below the cost limits
all along. We did not max our caps as some of the people in the
industry went to seminars about, and I think very few providers
try to do that.
Actually, what we try to do is use good resources. We are
business people, and we are trying to provide good care. What
has happened since that reduction is that our resources are
limited, and we now have less than we had in 1994. We are
treating more highly technical patients than we did in 1994. We
are seeing more early discharges from the hospitals, and those
patients are intense and complex. The diabetics are an issue
for us, wound care is an issue for us. So a lot of creative and
really dedicated people have tried to cut what we really need.
Senator Levin. But those who limited costs in effect really
worked at it back in 1994 compared to those who did not, as you
put it, maximize their caps in 1994. The ones who were careful
to limit their costs are now in effect being punished for that.
Is that accurate?
Ms. Stock. That is correct, and eventually, we will be out
of business. If we do not have relief, we will not survive to
the year 2000.
Senator Levin. And does HCFA understand, then, the negative
incentive that that created, in effect, the reward for
inefficiency or lack of constraints back in 1994? Is that
something you have raised with HCFA, and if so, what is their
response?
Ms. Stock. I believe the issue has been raised. I do not
know the conscience of HCFA about their response to that, but I
would say that they think that because we are going to PPS,
this is a temporary solution, but some of us will not make it
to PPS.
Senator Levin. I am reminded that that is a statutory
matter, but if they agreed with you, HCFA could of course, make
a recommendation to us for a statutory change.
Ms. Stock. For which we would have been grateful.
Senator Levin. My time is up. Thank you.
Senator Collins. Thank you, Senator Levin.
Senator Edwards, welcome. We are glad to have you with us.
OPENING STATEMENT OF SENATOR EDWARDS
Senator Edwards. Thank you, Madam Chairman. I am glad to be
here.
Ms. Stock, if I could just follow up on that last question,
and then I have some general questions I want to ask. If I
understand this correctly--and I have talked with a lot of
folks about it--the bottom line is if you were efficient in
1994, you are punished for that now--this is what Senator Levin
just asked about. If you were inefficient, you are rewarded for
it. Isn't that the bottom line?
Ms. Stock. That is, as long as you make the distinction,
Senator, that many agencies that had high costs per patient
were treating a very complex population or were in rural areas
where their expenses were higher. But yes, there were people
who got more money.
Senator Edwards. And that is the point Ms. Smith was making
when she said low cost does not indicate efficiency. It depends
on your patient.
Ms. Stock. Right. Efficiency is efficiency. It may be high
or low cost.
Senator Edwards. I have three concerns, and I will address
questions to a number of you. One is my concern about
unnecessary and inefficient bureaucracy, and I have this OASIS
questionnaire in front of me right now which I want to ask you
some questions about.
The second is loss of service--people who do not have
access to home health care and so desperately need it,
particularly diabetic patients, as Ms. Smith keeps making
reference to.
The third thing--and Senator Collins made reference to
this--is when we are trying to be efficient in the spending of
our Medicare dollars, which I think all of us are concerned
about whether we are doing that or not, and particularly
whether we are doing it when often prevention is in the long
term the lowest-cost thing we can do, and home health care is
the most efficient means of prevention.
I presume most of you would agree with that; is that true?
[Panel members nodding.]
Senator Edwards. OK. Let me start with this OASIS form and
ask a simple question first--and maybe this is too simple, but
I feel like I need to establish it.
Ms. Suther, I will start with you. Do you all need to fill
out this big, long form in order to treat the patient?
Ms. Suther. That is just part of it. That is the OASIS
part. But there are other questions----
Senator Edwards. Oh, there is more to it than this?
Ms. Suther. There are other questions and information that
must be collected in addition to that, plus information that
you must share on advance directives and all sorts of other
things with patients.
No, you do not need all the information. Yes, we do need a
data set that collects information that is relative to cost and
can predict cost, but we do not need all of that information.
That questionnaire had to be integrated into your regular
assessment methodology, and that is what I was referring to
when I said 45 additional pages, because 17 were on admission,
and then there was readmission, and when I looked at the length
of time in the program for the average patient, the average
number of times that one had to complete that set, that is
where I came up with the 45. And in our agency, that equates to
over $1 per visit. The larger the agency, the less it costs per
visit to do it because of the start-up costs in the first year.
Senator Edwards. I understand.
Ms. Stock, did I understand you to say that big notebook
that you have in front of you is all of the manual, or is there
more to it than that?
Ms. Stock. Our agency has three manuals, 512 pages, and
this is just the instructions. But HCFA did allow us $170 per
patient to in-service our staff on it, so reading it would not
cover $170.
Senator Edwards. I presume all three of you would agree
that all this information that you are gathering for purposes
of OASIS is not all medically necessary for the treatment of
your patients; is that true?
Ms. Stock. That is correct.
Senator Edwards. Now let me ask you a different question.
Looking through this form, I see some things--for example,
there is a question about life expectancy. Is life expectancy
generally considered a medical diagnosis, and is that something
that nurses are normally trained to offer medical opinions
about? Any of you can answer that.
Ms. Arsenault. That would be a question if someone had a
terminal illness, and we were looking at them for hospice
benefits, but not for normal treatment.
Senator Edwards. How about you, Ms. Suther?
Ms Suther. I do not have any nurses who are actuaries, nor
do any of them pretend to be. [Laughter.]
Senator Edwards. That is what I thought. Ms. Stock.
Ms. Stock. We are often accused of practicing medicine
without a license when we make recommendations to physicians,
but that is not one I would make.
Senator Edwards. In reading through some of these questions
and forms and knowing less than you do, but knowing the real
world and some of the concerns that I have had expressed to me
by people in North Carolina--what do you do when patients
either cannot or will not answer these questions? And I guess I
will ask you a very practical question, do you find that
sometimes your caregiver is put in the position of trying to
figure out the answer themselves, even though they cannot get
the patient to respond directly?
Ms. Arsenault. No. We would document that the patient
refused to answer the question.
Senator Edwards. Do you know whether that occurs, Ms.
Arsenault, what I just described?
Ms. Arsenault. It does occur. I could not give you any data
on that, though.
Senator Edwards. Ms. Suther, how about you?
Ms. Suther. I think it probably does occur. Our staff has
been instructed that if patients refuse to answer the
information, they must document that, and that if they do not
document that and attempt to fill in the blanks, they will be
fired on the spot, and we will turn them in to the Board of
Nursing.
Senator Edwards. Ms. Stock.
Ms. Stock. I think the instructions say that you can answer
some questions by observation, but I would hesitate to have my
staff do that if they can get direct information from the
patient.
Senator Edwards. I am told that when HCFA did their study
and demonstration on the answers to these questions on the
OASIS form, they had folks out in the field with a laptop
computer in place, answering the questions. Would I be correct
in presuming that you all are not able to send out laptop
computers with all of your health care providers when they go
out to see their patients?
Ms. Stock.
Ms. Stock. I cannot afford that.
Senator Edwards. How about you, Ms. Arsenault?
Ms. Arsenault. We cannot afford to implement laptop
computers.
Senator Edwards. Ms. Suther.
Ms. Suther. We do not have laptop computers. However, I had
not heard that HCFA was doing that. I know some agencies do
have laptop computers and do complete the forms that way, but I
had not heard that HCFA had done that.
Senator Edwards. I do not know whether it is accurate or
not; it is just some information that I had.
Let me go to another question, and Ms. Smith, this is an
issue which is of tremendous concern to me, and I wish I could
find the quote. You said that the home health care industry's
perception of its mission has changed so that it is now
discharging people as quickly as possible.
Ms. Smith. Right.
Senator Edwards. That is of tremendous concern to me,
particularly if they are discharging folks who need ongoing
home health care. I wish you would elaborate on that.
Ms. Smith. Part of the study that we conducted--in addition
to the survey, we do about an hour and a half telephone
interview with the agencies--and they indicated that they no
longer consider it part of their mission to provide preventive
care or try to keep the patient out of the hospital; that their
job is now an immediate, short-term perspective which is to
stabilize for the condition at hand for which they were
admitted at that moment, and then to get out.
So I would describe the mission as one of getting patients
out of home care as quickly as possible, as opposed to keeping
them out of other sources of care.
Senator Edwards. Ms. Stock, is that healthy?
Ms. Stock. It is not healthy, but one more thing that
impacts on that which we did not address in our testimony is
that each patient is only counted once a year in aggregate, and
if they are admitted 25 times a year, you still have to provide
service.
So to your issue, we close them if we can as precipitously
as we can that is safe, so the next time they come that year,
we have some resources to use for them on the aggregate. HCFA
will say that that is not true for each patient, but you do
have to take that into consideration when you are admitting a
patient--if they are chronically unstable, they will be with
you many times.
Ms. Smith. If I could just respond to that.
Senator Edwards. Absolutely.
Ms. Smith. A couple of agencies have indicated that one of
the things that they are doing in marketing for their referrals
is to try to figure out a way to avoid readmission of patients
to home care because they regard readmission as a marker,
obviously, for more complex patients. So they are trying to
direct their marketing to referring providers in a way that
avoids their getting patients back.
Senator Edwards. Let me ask this question--and I presume I
know the answer to this question. It sounds like all of you
believe that there are people who do not have access to home
health care now who need it. is that a fair statement?
[Panel members nodding.]
Senator Edwards. And I also presume that if this 15 percent
cut goes into effect in the fall, that would be dramatically
increased; is that a fair statement?
Ms. Smith. I think so, unquestionably.
Senator Edwards. Ms. Stock.
Ms. Stock. No question.
Senator Edwards. And Ms. Suther?
Ms. Suther. No question.
Senator Edwards. Ms. Arsenault, do you agree with that
also?
Ms. Arsenault. I do.
Senator Edwards. And finally, if I can ask a general
question for each one of you to comment on, if I could get you
to talk from your perspective about knowing that one of our
responsibilities is to be efficient with taxpayer money and
making sure that these Medicare dollars are being spent in the
best way they can be, from your perspective, the way the system
operates now and particularly if folks are not getting the kind
of home health care that they need, how that impacts the long-
term Medicare/health care costs associated with that patient--
i.e., how can we most efficiently spend our Medicare health
dollars?
Ms. Smith, I want to start with you.
Ms. Smith. I think the risk of creating greatly exacerbated
costs in other sectors, particularly hospitals and skilled
nursing facilities, is substantial. I would also point out that
the Federal Government pays a very large share of Medicaid
costs as well. So I think the attempted--and I think largely
unsuccessful--cost-shift to Medicaid will have a similar
effect.
The other point I would like to make is that one of
Medicare's missions is to assure a reliable source of care to
sick people. If we are not doing that, then it seems to me we
have failed in our essential mission.
Senator Edwards. Thank you. Ms. Stock.
Ms. Stock. I think I would limit it to two suggestions--
first, to try to direct HCFA to limit the scope of their
regulations for your mandates to your intent; and second, to
include providers in the development and implementation phases
of those requirements to preclude some of the problems that we
have seen, and then they got suspended, and we all paid the
money.
Senator Edwards. Those are very good suggestions. Ms.
Suther.
Ms. Suther. I have 35 years' experience in home care, and I
feel like I know a little about this. I think there is a short-
term solution, and that is to make some corrections in the IPS.
And then I think there is a long-term solution, and that is to
make certain that PPS is properly done. Thus far, the providers
have not had an opportunity to look at the provisions for
implementing PPS to assure that appropriate information for
making the decisions as to what the cost therefore
reimbursement should be for the future.
Senator Edwards. Thank you. Ms. Arsenault.
Ms. Arsenault. I would say that it is foolish to skimp on
home care. It is very foolish to eliminate seeing an 85-year-
old woman one time a week to manage her medications. That
individual's health will deteriorate, and we have talked a lot
about inpatient care, but none of us talked about how many
times that 85-year-old woman will see someone in an emergency
room--probably more frequently than the inpatient admissions.
And we all know that emergency room care is very, very
expensive.
The accelerated rate that regulations are coming forward
from HCFA has placed tremendous burdens on home health
agencies. We could reduce the number of regulations, and we
have all talked about them. Regulations come forward, then are
suspended. This 15-minute increment--we have not even received
regulations, and we have to implement that on July 1. We are
working in a crazy world. Home health care can be very cost-
effective and can save the Nation tremendous amounts of money.
Senator Edwards. I see my time is up. Let me just say that
you all being willing to come here and tell us these stories is
critically important so that the country and the Congress can
hear what basically all of us have been hearing back home when
we move across our States and talk to folks. What you have said
today is completely consistent with what I have been hearing
from people who are on the front line back in North Carolina.
So I thank you very much for taking the time to be here.
Thank you, Madam Chairman.
Senator Collins. Thank you, Senator Edwards.
I want to thank the panel also for your very valuable
testimony. Both your written and your oral testimony it seems
to me have suggested three very important issues for us to
pursue.
The first is the issue of the impact on our senior
citizens, and the evidence you have given us suggests that
Medicare beneficiaries with chronic conditions--those most in
need of care--are going to be most hurt by this system, that
they are already starting to feel the impact, and that is only
going to get worse unless the administration and Congress step
in and rectify the situation.
Second, the current IPS system is clearly unfair to those
historically low-cost agencies. In Maine, I am particularly
sensitive to this issue because 85 percent of our home health
agencies in Maine are below the national medium costs. So we
have been hit very hard, and as with Ms. Stock's agency, and I
am sure Ms. Suther's as well, we are penalizing those agencies
which have been most prudent in their use of Medicare
resources, so the system is truly perverse when that is the
result.
And third, it seems to me that we have a state of
regulatory chaos at HCFA. Ms. Arsenault in her written
testimony described a system of ``implement and suspend,'' a
costly system where regulations are implemented by agencies,
and the costs are somehow taken care of, only to be suspended
later when the problems become evident. I think part of the
reason for that is HCFA's failure to fully consult with the
industry in developing these regulations.
Those are three issues that I have taken from your
testimony today, and I want to thank you very much for sharing
your direct, front-line experience with us. And Ms. Smith,
thank you again for sharing the preliminary results of your
study. We hope that you will share your final findings with us
as well.
Ms. Smith. I look forward to that. Thank you, Senator.
Senator Collins. Thank you very much.
I would like to call up our second panel of witnesses this
afternoon. Representing the Health Care Financing
Administration are Kathleen A. Buto, who is deputy director of
the Center for Health Plans and Providers, and Mary R. Vienna,
the director of the Clinical Standards Group.
I look forward to your testimony and your recommendations
on how we can solve some of the problems that we have just
heard described. Before you get too comfortable, I am going to
ask that you stand, since I do need to swear you in.
Do you swear that the testimony that you are about to give
to the Subcommittee will be the truth, the whole truth, and
nothing but the truth, so help you, God?
Ms. Buto. I do.
Ms. Vienna. I do.
Senator Collins. Thank you.
As you know, I had asked the previous witnesses to limit
their testimony to 5 minutes, but I am going to give you
additional time since a lot of issues have been raised. I would
ask, Ms. Buto, that you limit your oral testimony to no more
than 15 minutes--we are giving you three times as much--and we
will be using the timing system, which I believe you are
familiar with.
It is my understanding, Ms. Buto, that you are going to be
presenting the testimony, and that Ms. Vienna is available for
questions but will not be presenting a formal statement. Is
that correct?
Ms. Buto. That is correct.
Senator Collins. Please proceed.
TESTIMONY OF KATHLEEN A. BUTO,\1\ DEPUTY DIRECTOR, CENTER FOR
HEALTH PLANS AND PROVIDERS, HEALTH CARE FINANCING
ADMINISTRATION, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES,
WASHINGTON, DC, ACCOMPANIED BY MARY R. VIENNA, DIRECTOR,
CLINICAL STANDARDS GROUP, HEALTH CARE FINANCING ADMINISTRATION
Ms. Buto. Thank you. I hope I can complete my oral
statement in less than 15 minutes so we can get to the
questions, because I sense that there are a lot of questions
waiting to be asked.
---------------------------------------------------------------------------
\1\ The prepared statement of Ms. Buto appears in the Appendix on
page 148.
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Chairperson Collins, Senator Levin, and distinguished
Subcommittee Members who have asked a number of questions that
I hope we will get a chance to respond to, thank you for
inviting us to discuss the impact of home health care payment
reforms. I am accompanied this afternoon by Mary Vienna, from
our Office of Clinical Standards and Quality. She is both a
registered nurse and an expert in the new OASIS home health
patient assessment system which will help us to improve the
quality of care and pay for it accurately.
Home health is an essential benefit for millions of
beneficiaries. Unfortunately, as you have already pointed out,
Madam Chairperson, the expenditures have been growing at an
unsustainable rate, and several studies have documented
widespread fraud, abuse and waste.
Between 1990 and 1997 when the Balanced Budget Act was
enacted, the number of beneficiaries receiving home care
doubled from 2 to 4 million while expenditures more than
tripled, from $4.7 billion to $17.8 billion. This is something
that you have already pointed out.
The Balanced Budget Act addressed these concerns by closing
loopholes, raising standards and creating incentives to deliver
care efficiently. The payment reforms require agencies to
change past behavior and eliminate unnecessary and uncovered
services. The incentive to supply virtually unlimited visits is
gone. This should not mean that care is compromised for any
patient.
Home health spending is down for other reasons as well.
Home health is one of the initial targets in our aggressive and
highly successful fight against fraud, waste and abuse, and
these efforts have had an enormous impact. We have focused on
reducing erroneous Medicare payments and bringing down the
error rate in this area of home health spending.
Also, some apparent home health savings are temporary
effects of slower claims processing. A September 1998 CBO
report concludes that program integrity efforts, demographic
changes, lower than expected inflation and other factors, not
related to the BBA, account for the difference between savings
projections when the BBA was enacted and the total spending
since then.
I understand that in testimony this morning before the
Senate Finance Committee, the Congressional Budget Office
projected annual increases of 7\1/2\ percent for home health
agencies once the new prospective payment system is implemented
on October 1, 2000. There has been an expected market
correction in the total number of home health agencies serving
Medicare, along with an increase in mergers among agencies.
Most closures were in areas that had the sharpest growth in the
number of providers and many areas where there were
questionable billings before the Balanced Budget Act.
Importantly, monitoring by us and by the General Accounting
Office has not found that beneficiary access to care has been
compromised, and I would also say, just to correct an
impression, that the GAO report actually goes up through the
beginning of 1999, so it covers most of 1998. It was not just
the first couple of months of 1998.
We are continuing to proactively monitor the BBA's impact
on access. We have instructed our regional offices to gather
extensive information. We are tracking the Bureau of Labor
Statistics data on home health employment trends, and the
Inspector General of the Department of HHS will survey hospital
discharge planners to determine whether there are problems in
finding home health placements.
Last year, Congress raised the limits on costs somewhat in
an effort to help agencies, and we are on a schedule to
implement the prospective payment system in October 2000. But
given the magnitude of the changes, it is understandable that
concerns remain.
We are committed to giving providers as much flexibility as
our authority and responsibility allow. We are giving agencies
up to a year to repay overpayments resulting from the interim
payment system, interest-free. We have limited pre-payment
medical reviews where appropriate, and we are ending a
sequential billing policy which had raised cash flow concerns
for some agencies. This is the policy, by the way, that was
necessitated by the A/B shift in home health spending so that
we could account for some of the BBA changes in home health.
At the same time, we are implementing the Outcome and
Assessment Information Set, now known as OASIS. We are required
by law to monitor the quality of home care with a
``standardized, reproducible assessment instrument.'' OASIS
will help home health agencies determine what patients need. It
will help improve the quality of care, and it is essential for
accurate payment under prospective payment. Our entire payment
system for PPS is really built on the OASIS system.
We are committed to continuing our efforts to monitor
access to care and to taking administrative steps to help
agencies adjust to the BBA reforms and other changes.
We appreciate this Subcommittee's attention to the issue,
and we look forward to continuing to work with you to ensure
that beneficiaries who qualify for Medicare's home care benefit
receive efficient, high-quality care.
I will stop there and take questions.
Senator Collins. Thank you very much for your testimony.
I want to start by actually commending, believe it or not,
HCFA on its increased efforts to combat fraud in the Medicare
program, particularly in the home health care area. As you are
well aware, this Subcommittee has held several hearings on
fraud in the Medicare program, and indeed next week, Senator
Durbin and I are going to be introducing legislation that comes
from the hearings we held last year on this area.
I mention this because I think it is very important as we
talk about this to distinguish between legitimate efforts to
squeeze fraud, waste and abuse out of the program versus
regulations and cutbacks that have the result of impeding the
delivery of necessary services to our elderly by completely
honest providers. And we know that the vast majority of health
care providers in this country are honest and ethical and
committed to serving the needs of their patients.
In your written testimony, you said that a lot of the
regulations that you have implemented come from the fraud
effort, but unfortunately in the attempt, perhaps, to crack
down on inappropriate payments, I think you have implemented
regulations that are doing what none of us wants--which is
making it very difficult for home health care agencies to
deliver services and driving up their costs in complying with
regulations at the very time that their reimbursement levels
are being curtailed.
One of the ways that could have been avoided is through
more consultation with the industry. We have heard the example
of numerous regulations that have been implemented and then
suspended, creating, as I said, an environment of regulatory
chaos.
Why didn't HCFA spend more time consulting with the
industry on how to do this job more effectively?
Ms. Buto. Well, it is hard--and I do not want to sound
defensive about this--but if you think back to the Balanced
Budget Act, it was really enacted in August 1997. The interim
payment system actually went into effect in October 1997, even
though we were not required to issue regulations until January
for the per-visit limits and then April for the per-beneficiary
limits. The law actually did some things that we were not
prepared for, to be quite honest.
For example, it is very prescriptive about the blend in the
per-beneficiary cap between the per-agency amounts back to
1994, and with the regional amount. We did not have regional
amounts. We had to gather the data and move very quickly in
that respect.
I can only say, having been at HCFA for a long time and
working on most of the major changes in statute over the years,
that the Balanced Budget Act presented the greatest challenge
we have ever had to face, and particularly in home health, we
had a very short turnaround time between August and April to
get a lot of the rules written. And a lot of it was driven by a
formula that said you had to come up with the 75 percent
agency-specific and then 25 percent regional aggregate per
beneficiary limit. We had to gather the data and synthesize it.
On things like the home health agency bond issue, again a
statutory requirement, there was a lot of pressure coming from
the Operation Restore Trust effort to get a bond requirement
out there. And I agree with you that it would have been better
to take more time. We certainly recognize that now. The
administrator, Nancy-Ann Min DeParle, asked us to suspend that
rule and meet with the industry to talk about the very issues
you are suggesting.
There are some things that we definitely could have done
better in that regard, but I have to say that the time frames
for implementation for the IPS were extremely short for the
complexity involved.
Senator Collins. My response to that would be that HCFA was
very involved in all those negotiations during the Balanced
Budget Act. Many of the provisions that were in there came
directly from HCFA.
Ms. Buto. But not the biggest data gathering exercise,
which is the regional blend. We did not have a data base, and
we had to create that by pulling in the data. That was
something that was added as part of the conference discussion
and was not part of our proposal.
Senator Collins. It is also HCFA's obligation to come back
to us in Congress if you think something is not working. I have
had a lot of conversations with Nancy-Ann Min DeParle about the
problems with the formula penalizing the historically cost-
efficient agencies, which just seems like such a reverse of
what it should be doing.
I have talked with Secretary Shalala about it, I have yet
to see a concrete plan from the administration on how to solve
this problem. When might we receive the recommendations from
you?
Ms. Buto. Let me first address your concern and then talk
about how we get from here to there.
I think the concern comes from the fact that as in so many
areas of Medicare, and it is also true in managed care, we have
such variation in the spending patterns and utilization
patterns around the country. I think the tough thing for
Congress certainly in devising the formula for an interim
system was do you take down, if you will, or try to average the
utilization and the caps across the country, or do you try to
keep people more or less where they are, with some reductions,
which is what was happening, realizing that is going to have
some inequities of its own. And I think that it is always a
difficult thing when you also know that you are going to try to
move to something else.
It is hard to justify those kinds of issues when you have
very conservative agencies that feel they have been especially
penalized. But the alternative would have been to either spend
a lot of money to bring them up to the national average or to
bring down agencies around the country where the spending was
higher. We sensed, and it was certainly discussed, there was
not a willingness to do that. So that was very hard. I do not
think it is easy to justify, but that is the way the formula
works.
What we obviously want to do is move to a formula that will
reward agencies for the complexities of the individuals they
actually see, so that they begin to get payment appropriately
for higher-risk, higher-acuity patients. That is really what we
need to move to, and again, we were going to do that by October
2000 for a lot of folks. That is some way away, and we realize
that.
Senator Collins. We have heard very strong testimony today
that those patients that you have just described, those with
chronic conditions, with complex cases, who are most in need of
quality home care, are being most affected by the problems in
the current system. And that recommendation, or that finding,
rather, is consistent across the board. GAO says that they are
most at risk. Ms. Smith's findings are that they are most at
risk. The recent MedPAC report expresses concern that the
Medicare patients who are sicker and more expensive to care for
are going to have the most difficulty. Every one of our
witnesses agrees that that is the case.
What is HCFA going to do about that? Are you going to
develop some sort of system for outliers for the expensive
cases--because we have heard very clearly today, and it is a
unanimous finding, that if we do not take care of those
expensive cases and in some way develop a system for
recognizing them, home health care agencies feel that they have
no choice but to essentially cherrypick and take the healthier
patients to care for. And that is contrary to the whole purpose
of the system.
Ms. Buto. I totally agree with you. I think the
difficulty--and this gets to another kind of unpopular topic,
OASIS--is that we do not have a standardized system right now
for being able to say that among the home health care
population, these are the characteristics or the individuals
whom we can identify and also associate a higher payment for.
That is exactly what we are doing with the payment system--we
are going to associate higher payment with individuals who are
more clinically complex, who are more functionally complex, and
who require more services.
I would like to ask Mary to comment on that, because she is
more of an expert on OASIS, but that is exactly where we are
trying to go with the payment system.
Ms. Vienna. I would agree with Ms. Buto. And I wanted to
say that contrary to some of the other rules that we have
promulgated around IPS, OASIS was developed with extensive
consultation with the industry. It took about 5 years to
develop through a contract with the University of Colorado and
was developed by clinicians. It was also proposed as a rule,
and we got extensive public comment on the instrument, and it
has had, prior to the rule, at least, a broad base of support.
As a matter of fact, the National Association for Home Care
distributed it to home care agencies for their voluntary use
back in 1996 and 1997.
So it is an instrument that was developed by clinicians, is
useful in determining what kinds of services patients need and
what kind of quality of care and outcomes patients are
experiencing. And serendipitously, it turned out to be very
useful in predicting the types of services that patients would
need under a prospective payment system.
Senator Collins. Ms. Buto, I want to go back to the point
that you made that you recognize that we do need to somehow
take care of the outlier case or the complex, chronic case that
is expensive to treat, so that we do not create these perverse
incentives. But I think that what you are telling me is that we
need to wait until the prospective payment system is in place,
which will not be until October 1 of the year 2000, to take
care of this.
We have heard today from agencies that are providing low-
cost quality care, but they are not going to be around by
October 1, 2000 if we do not remedy the system right now.
What can we do in the interim to correct this problem?
Ms. Buto. Senator Collins, I was listening very carefully,
and in fact, I thought there were some very good comments about
some of the burden issues, and we will certainly take a look at
those.
In terms of outliers, we really do not have a way to
provide an outlier under the current structure. The statute is
very specific. I think we do need to look at and continue to
monitor the access issues.
Although studies are remote, they are helpful. What we have
also asked--and I would just suggest to the panelists who were
here--is that anecdotes help us identify areas where we might
be able to see if there are things that we can do under current
authority or not.
We have invited the National Rural Health Association and
other providers to actually provide us with specifics so we can
go out and look at particular cases for agencies that are
experiencing trouble, and for beneficiaries who are having
trouble. We are also working through our Center for Beneficiary
Services, and we have State organizations that counsel Medicare
patients.
This has not been a big issue among the State agencies that
are counseling Medicare patients, i.e., that they are being
displaced, but we have asked them particularly to be alert to
this, because we are concerned, and we are hearing of some
anecdotes and some instances of individuals who are having
difficulty and need help.
So we have our antennae out there, and we would appreciate
any intelligence these groups can give us, but yes, we are
looking at the outlier issue in relation to the PPS system.
Senator Collins. You have heard some pretty powerful
testimony today from people who are on the front lines, who
have told us, and told you, that there is a problem now and
that it is only going to get worse. We also have the evidence
of the MedPAC survey, and we have the preliminary findings of
the George Washington University study.
Has that changed your view on whether there is a problem
here?
Ms. Buto. I have never discounted that providers are having
a problem and that some beneficiaries may be having problems. I
have never ruled that out, and as I said, both through our
regional offices, through the State counseling organizations
and our 1-800 Medicare line, we are really trying to find out
the extent of the problem and what is happening.
We are also, as you are, looking at legislation and what
kind of legislative changes we might want to suggest. We do not
have those to give you today, but those are the kind of things
that we are certainly looking at.
Also, I think issues of burden are important. And if there
are areas where we have some ability to loosen the burden, we
should. We have taken some steps to do this, For example, the
sequential billing requirement which led to claims processing
hold-up, will be removed as of July 1. We have provided for the
extended repayment plan which is interest-free for 12 months.
That is unprecedented in Medicare. We want to give these
agencies some breathing room to deal with the changes.
So we are looking at changes, but I do not have a set of
legislative recommendations that we could present to you today.
Senator Collins. On the overpayment problem, I think it is
important for the record to show that HCFA helped create that
problem by being very slow in giving agencies their per-
beneficiary caps.
Ms. Buto. Yes, we acknowledge that. There is no question,
and we actually got started just about the time the Balanced
Budget Act was enacted, and we started to get information about
what we would have to do to get our systems ready. The
coincidence of this year and last year with our Y2K renovation
efforts was really unfortunate. We were trying to renovate and
certify our systems at a time when we had to change them and
get the intermediaries to start doing different things, and
they were torn in several ways. So I agree with you; we wish we
could have done that more quickly, but they were under
unbelievable pressure last year.
Senator Collins. I would like to ask you about some
specific recommendations that our witnesses have made for
reforms. All of our witnesses have said that if the 15 percent
across-the-board cut is allowed to go into effect, the results
will be devastating for home care agencies and their clients.
Similarly this morning, at the Finance Committee hearing, Bill
Scanlon of the General Accounting Office expressed support for
some sort of adjustment in the planned 15 percent reduction. He
also raised a very important point, which is that another one
of these across-the-board approaches only further penalizes the
low-cost agency once again.
Since I know you share my concern about not hurting those
agencies that have been conservative and prudent with their use
of Medicare dollars, that did not have excessive visits, that
did not overutilize the benefit, how can we implement a cut of
this nature? We know it is unfair, we know it is wrong, we know
it is going to hurt patients. Is the administration prepared to
support the repeal of that provision?
Ms. Buto. I cannot speak to that right now. That is part of
the consideration we are now undergoing about the legislation.
But if I could, there are two issues I want to bring back to
your attention.
One, it is a 15 percent reduction. It would not be, in a
Gramm-Rudman-Hollings fashion, an across-the-board reduction of
the type I think you are talking about. What we are talking
about is that that reduction would be against the base that we
use to compute the prospective payment rates.
I do not think that makes it any easier to swallow, quite
frankly, for agencies that it is not just an across-the-board
reduction, but it takes money out of the base. I think that
what everybody is considering whether it is a good idea to
include a 15 percent reduction as part of the prospective
payment system.
Senator Collins. In that regard, CBO testified this morning
that, ``The one policy for which CBO may have significantly
underestimated savings is the interim payment system for home
health agencies.''
Since we know that the savings are far greater than
Congress or the administration ever anticipated, why, given the
problems we have heard about, would we impose a further 15
percent cut on the system?
Ms. Buto. I think that this is one of the issues that
everybody is looking at, including the administration. As you
are well aware, the CBO and our actuaries estimate savings and
costs relative to the current law baseline. They do not adjust
savings or cost estimates, either, from year to year, even
after changes have been made, and say that we are either
spending too much vis-a-vis what we thought or that we are
saving too much vis-a-vis what we thought. They are usually
making projections 2 or 3 years ahead of time. But it is an
issue that is clearly important when thinking about this.
Senator Collins. Another issue that has been raised in the
written testimony of the VNAA is the recommendation that
Congress reinstate the periodic interim payment system. There
have been considerable cash flow problems caused by the
sequential billing system--which I realize has been suspended,
but it did a lot of damage in the meantime--and the PIP
reimbursement, particularly for smaller agencies, has been
important. Are you giving any consideration to reinstating
that?
Ms. Buto. We are looking at that in the context of
everything else, but in the context of the 2000 budget and the
prospective payment system, I think some of those issues really
should be very different because of the way that payment will
be made on a per-episode basis for the individuals who are
being served, rather than on a claim-by-claim basis. So some of
the cash flow problems may be ameliorated, but we obviously
need to look at the whole package. In fact, I think we need to
look at the interactions among the various proposals to see
what makes sense.
Senator Collins. Another recommendation made by our
witnesses is to postpone or repeal the implementation of the
15-minute interval rule. Would you comment on that as well--the
stopwatch rule.
Ms. Buto. That is clearly in the Balanced Budget Act, and
we have been criticized for actually not implementing that
provision on schedule. It was to go into effect in October
1998. Again, because of the difficulties around the year 2000
systems renovation and some proposals that were too complex
were delayed. The uniform billing committee looks at making
these kinds of billing changes for all insurers, and we got a
late start. We could not come up with a proposal that was easy
enough to do under our current system. So this ended up being
delayed over its original effective date.
This is an area where I heard some testimony that I had not
heard about what is counted and what is not counted, and I
certainly want to go back and look at that, but we really do
not feel that we have the discretion to waive implementation of
the 15-minute increment. We are going ahead with it.
As people in the audience probably know, it goes into
effect July 1, but there is basically a 3-month grace period so
that agencies can fully come up-to-speed and use it, and we are
giving them the extra time. But we are basically several months
behind in implementing this provision.
Senator Collins. There is no doubt that Congress shares in
the blame for the problems that we have created here. However,
HCFA has taken the statutory provisions to an extreme in almost
every single case, whether it is the surety bond or the
implementation of the 15-minute rule.
What I am asking from you is to give us a specific set of
recommendations so that we can work together in a bipartisan,
cooperative, nonpartisan way to solve what is a very real
problem for our cost-effective home health agencies, such as
the ones that we have in Maine and that you apparently have in
Michigan, as well as in many other States, and to ensure that
we are not disrupting care for frail, vulnerable, sick, elderly
people whom all of us care a great deal about.
We need your help to do that job right. I have been
disappointed that despite the many conversations I have had
with administration officials at the highest levels of about
this that we still do not have a proposal from the
administration. We can learn from the mistakes that we both
have made in this area. We can learn from the testimony we have
heard today. We can learn by listening to the researchers and
MedPAC and those home health agencies and nurses who are on the
front lines. But we need your help to solve this problem, and
we cannot wait until October 1, 2000 to do so.
Ms. Buto. Well, we would like to work with you, Madam
Chairman, and as soon as we have some proposals that we can
discuss with you, we would be glad to do that.
Senator Collins. Thank you. Senator Levin.
Senator Levin. Thank you, Madam Chairman.
I know you have already talked about the origin of the
problem and the fact that there is some mutuality in terms of
causation and who participated in the Balanced Budget Agreement
and so forth. I do not think that that is really the issue now.
The issue now is, as the Chairman said, what can we now do to
correct the flaws in the Balanced Budget Agreement. There are
obviously flaws, and whether they should have been foreseen or
not is no longer the point. And by the way, even if Congress
mandated it, which I am sure we did in many cases, HCFA can
recommend changes in the law. You are able to make any
suggestion just as any other American citizen.
The administration could come forward and, if there is a
mistake in the law, regardless of how it got there, suggest
changes. It is equally important to work with the industry,
with the providers, to understand what is happening at the
grassroots level in the real world, and what are the real world
impacts of what we have done. There seems to be a huge
disconnect here between your conclusions and GAO's conclusions
and what legitimate, honest providers of essential services to
vulnerable people are facing in the real world.
Since there is a vote on, I am going to be very brief.
First, on Linda Stock's testimony that 10 percent of our State-
certified agencies have withdrawn from the Medicare program,
why are so many agencies withdrawing in your judgment?
Ms. Buto. Well, it is a combination of two things. Some are
withdrawing because they think the payment system is not
favorable to them to continue to participate. Some are merging.
There have been a lot of mergers of home health agencies with
other home health agencies--consolidations.
A third reason is that also in the Balanced Budget Act is a
provision that says that payments for services to individuals
will be based on where they live as opposed to where the agency
is. In some cases, the agencies have chosen to pull back some
of their satellite offices that are in areas that would now be
receiving lower payments. So it is a combination of things.
Senator Levin. But some of those are very undesirable, I
would assume, from your perspective; is that not true?
Ms. Buto. Some of the pullouts are undesirable?
Senator Levin. Yes. If these areas are underserved, would
that not be undesirable?
Ms. Buto. It would be undesirable if the areas were
underserved, but we found, as GAO has, that most of the home
health agencies are pulling out where there are lots of other
home health agencies, and that it is where there has been the
most growth over the last 2 or 3 years in agencies--in urban
areas, actually--that is occurring to the greatest extent.
Senator Levin. If you found that in a significant number of
cases, people who are no longer eligible or are removed from
eligibility immediately moved into nursing homes, would that
trouble you?
Ms. Buto. That would trouble me, but we do not have any
evidence of that, including in our----
Senator Levin. You heard this sort of evidence this
afternoon.
Ms. Buto. I heard the testimony, and I heard it was related
to venipuncture. And of course, patients who were solely
eligible because of the need for venipuncture are those who are
now not eligible under the Balanced Budget Act for home health
services.
Senator Levin. I understand, but back to my question of
moving them directly into nursing homes; would that then
trouble you?
Ms. Buto. It does trouble me, but again, we have not seen--
and the Inspector General is helping us do an analysis of what
is happening with admissions to nursing homes with discharges
from hospitals to see if we are seeing any of these patterns--
and we have not seen anything like this so far.
Senator Levin. I am glad you were here this afternoon.
Ms. Buto. Again, I welcome specifics, because I asked the
last panel if they have got the specifics, we would like to
have them so we can look into it further.
Senator Levin. I hope that when you do look into it, and if
you do find that information is accurate, your answer would
then be that indeed you are troubled by it and that together we
should try to see what the solution is. In any event, let me
move on to the next question.
I was very much struck by Ms. Stock's statement about sick
people not getting benefits that they are entitled to under
Medicare, not because Medicare will not pay for the service but
because no agency would provide the service. I just want to
make sure you heard that.
Ms. Buto. I did hear that, but we are not finding that.
Again, I would like to know where this happens.
Senator Levin. Again, you heard this from a very credible
source who will be happy to show it to you.
Ms. Buto. I believe it.
Senator Levin. I think it is important that you do see it
and ask to see it and want to see it.
Ms. Buto. Absolutely.
Senator Levin. Would you agree with Ms. Stock's point that
the interim payment system tends to penalize those who were the
most efficient or the least costly in 1994--for whatever
reason.
Ms. Buto. I tried to address this a minute ago. The interim
payment system, because it is what it is, when it was
constructed, the decision was made not to move money from the
higher-paying areas to the areas that were below the national
average. Had we done that, that would have helped the areas
that had held down their costs. It would have hurt home health
agencies in other areas, and Congress just decided not to do
that.
Senator Levin. What was your recommendation at the time--
different from what we came up with?
Ms. Buto. I will turn to our legislative staff to see
whether we had one on that. We will have to get back to you for
the record on that issue.
Senator Levin. Would you let us know what your
recommendation would be now in order to correct that negative
incentive. This is not the way we want to deal with people, I
would hope.
Finally, if you have not already commented on it, what can
you offer these agencies with respect to the 15-minute
reporting regulation, if you have not already answered that
question.
Ms. Buto. Again, we have already delayed that. It is
required under the Balanced Budget Act, and it is going into
effect in July. What we have said is that we are going to give
a grace period until the end of September to implement it----
Senator Levin. Are you going to recommend to Congress that
the 15-minute reporting be changed? Or is that a regulation?
Ms. Buto. No. It is in the statute. We are looking at a
whole package of issues around the statute, and we are also
looking to see what can we do in areas of cash flow to provide
relief. So we are really looking at the areas where we have
some control.
I think the issues that were raised by one of the panelists
about what is counted in the 15-minute increment is something
we could definitely look at, but not the----
Senator Levin. You do not want folks with stopwatches,
which is the way it would have to be under the existing
regulations. It seems to me that that is what we are forcing
people to do, or it is an absurdity which would have to be
ignored. Neither one is acceptable, so I would hope you would
come up with something which is workable. If it takes a change
in law, let us know. That is our responsibility. But it is your
responsibility, it seems to me, to make recommendations and to
tell us what needs to be done to avoid those outcomes which are
unacceptable. In the real world setting, they are either not
going to do it or they are going to do it with stopwatches;
neither one makes sense. You do not want someone with a
stopwatch at each moment, and you do not want someone to
pretend to be complying if they are not.
Thank you.
Senator Collins. Thank you very much, Senator Levin, for
your usual excellent presentation in our oversight hearing.
I want to thank all the witnesses for being with us today.
Ms. Buto, I hope you will take back to your department our
overwhelming concern about the impact of the system, and I hope
that this Subcommittee will receive from the administration a
concrete list of recommendations for statutory changes no later
than the Fourth of July. I think Independence Day would be a
good day for us to receive those changes.\1\
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\1\ See Exhibit No. 10 which appears in the Appendix on page 197.
---------------------------------------------------------------------------
This is a serious subject, and we do need to take swift
action to correct the problems that have been very eloquently
described today. We need your partnership in doing that, we
need to work together, and we need to get the job done this
year.
I want to thank all of our witnesses for their testimony
today.
Finally, I also want to thank my staff for their excellent
work, particularly Priscilla Hanley, Karina Lynch, Lee Blalack,
and Mary Robertson. They worked very hard to put this hearing
together, and I thank them for their contributions as well. I
also want to thank the minority staff for their excellent work
on this hearing.
Thank you. This hearing is now adjourned.
[Whereupon, at 4:25 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
PREPARED STATEMENT OF SENATOR TORRICELLI
I would like to thank and acknowledge the distinguished Chairman of
the Permanent Subcommittee on Investigations, Senator Collins, and the
distinguished Ranking Member, Senator Levin, for holding this hearing
to discuss the affect of Medicare cuts on the delivery of home health
care services. This issue is of particular concern to the 100,000
patients who rely on home health services in my State of New Jersey.
Despite these times of unparalleled economic prosperity, home
health care agencies located in New Jersey are on the verge of
financial collapse. This precipitous economic decline is not the result
of mismanagement or inefficiency. Rather, it can be attributed, in
part, to the unintended consequences of the Interim Payment System
(IPS) included in the Balance Budget Act (BBA) of 1997. Indeed, the BBA
was vital to the long-term strength of the Medicare program; however,
the original estimated reductions of $25 million which are now
estimated to be much higher, that New Jersey home health agencies will
ultimately face will be economically devastating. In fact, three
separate agencies in New Jersey have already been forced to close and
others will undoubtedly follow.
The fundamental flaw in the IPS is the requirement that home health
services be reimbursed based upon their average cost per visit and the
average number of visits in FY 1994. For States such as New Jersey, who
had an average 39.7 home care visits in 1994, this payment methodology
penalizes them for being diligent and efficient in the delivery of
services. This inequity is best illustrated when States like New Jersey
are compared with other States whose average home health visits are
over 100 for 1994. The result is that New Jersey home health agencies
are receiving only slightly more than $2,500 per patient annually,
instead of the $4,000 per patient which reflects the actual costs of
providing services.
Making matters worse, the Health Care Financing Administration
(HCFA) has developed burdensome regulations to implement the IPS which
are compounding the economic pain for home health agencies. These
regulations include a new 15-minute visit increment reporting
requirement, increased claim reviews, additional audits, post-payment
reviews, and branch office restrictions. Perhaps most troubling is
HCFA's decision to use the Outcome and Assessment Information Set
(OASIS) requirements in the development of a case-mix adjustor for a
home health prospective payment system (PPS). It appears that HCFA may
have significantly underestimated the cost to home health agencies to
implement these requirements. In New Jersey, home health agencies have
already incurred OASIS related costs estimated at $100,000.
These legislative and regulatory requirements are having a very
real impact for thousands of patients in my State who rely on home
health services because they are unable to care for themselves. Every
day, I hear the stories of my constituents who are forced to go without
needed care. These stories include Mr. Faltisco of Morris County, New
Jersey, who at 93 and suffering from Alzheimer's disease, recently had
his home health aide visits cut from 20 hours per week to 90 minutes a
week. It is Mr. Faltisco's family who must now struggle to provide the
care he desperately needs. In many other cases, however, patients have
no family to provide care.
Thus, it is imperative that Congress now seize the opportunity to
provide relief to home health agencies in States like New Jersey where
efficiency has been rewarded with payment reductions. Last year, the FY
1999 Omnibus Appropriations Bill included some corrections to the
inequalities created by IPS; however, we have a long way to go to
reverse these dangerous trends. I look forward to working with the
Committee and others in the Senate in supporting a legislative solution
to home health care crisis.
Again, I would like to thank Chairman Collins and Ranking Member
Levin for their commitment and attention to this important issue.
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