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health care agencies, $1,700 for smaller entities like hospices and ambulatory surgery centers, and on average, $16,000 for nursing homes. This nursing home fee will vary below and above $16,000 depending on the size of the facility, but, on average, for all nursing homes $16,000 is the expected fee amount, and it is the amount that we estimate we are spending under the current survey and certification process on nursing homes.

Senator HARKIN. Senator Bumpers, that just sounds awfully high to me, and I am going to ask my staff to get some more data on that-supplied from you and others.

Dr. WILENSKY. Sure. We will be glad to provide it.
[The information follows:]


The Administration's proposed Medicare/Medicaid State Certification user fee structure is modeled on the user fees legislated by the Clinical Laboratory Improvement Amendments (CLIA) of 1988. The fiscal year 1992 State Certification programs, like CLIA, would be funded entirely (i.e., for both inspections and overhead costs) through the Survey and Certification Revolving Fund.

Following our approach to CLIA fee-setting, we have calculated the actual amount of resources necessary to conduct the various onsite inspections, and have estimated the amount of additional resources necessary to implement and maintain the program. This is accomplished through a complex unit cost budget methodology that incorporates the following elements: workload; time parameters to conduct the workload; and hourly rates involved in conducting the workload.

For nursing facilities (NF's), the actual costs for initial, recertification, complaint and follow-up surveys will be nearly $14,000 per NF in fiscal year 1992. In addition to the onsite costs, costs of the following activities must be apportioned to each NF: performing enforcement activities to ensure compliance with program requirements; conducting studies, research, surveyor training, and evaluations directed toward enhancing survey and certification operations; implementing and maintaining computerized data systems; implementing and maintaining a satellite teleconferencing system; and conducting Federal monitoring surveys, developing regulations, and other required administrative oversight of the Medicare/Medicaid State Certification programs.

This range of required activities equates to a fee of approximately $16,000 per NF. The amount is significant, but accurate, and it will be required regardless of whether it is paid by a NF or appropriated by the Congress.


Senator HARKIN. Let us move on.

The recent study published in the December 1990 issue of the New England Journal of Medicine found that doctors who perform their own imaging exams order these studies more than four times as often as those who refer patients to radiologists. Moreover, doctors who operate their own imaging equipment charge significantly more than radiologists performing the same tests, and here is the data.

The studies showed that "self-referring physicians ordered and performed imaging studies 4 to 42 times as often as physicians who referred their patients to radiologists. Even more astounding was the fact that the mean costs of the imaging exams by self-referring physicians were 4.4 to 7.5 times as great as those performed by radiologists."

Now, do you have any evidence that doctors who self-refer are ordering an unnecessary amount of imaging tests?

Dr. WILENSKY. No; but you have hit the main issue, which is the necessary.

What we have seen, and are very troubled by, is the tremendous variation that exists in frequency of testing between those physicians that own their own equipment and those that do not. It is a variation that is large enough as to cause concern, and OBRA 90 requires us to provide a statistical profile comparing the use of such services by the elderly and by the Medicare beneficiary in entities in which the referring physician has an ownership interest with those entities where the referring physician has no ownership interest.

The other issue that you raised, however, is no longer an issue, and that is whether or not the amounts paid to nonradiologists for providing a given test can be greater than those paid to radiologists for providing the same service. OBRA 90 limits make sure that the amount paid to either a nonradiologist or a radiologist will be the same according to the radiological fee schedule. This limit anticipates the kinds of changes that will go on in physician payment reform, when the service provided, and not the specialty of the provider who performs the service, will determine the amount of pay


So while the issue of nonradiologists getting paid more than radiologists for identical services is moot, the question as to whether or not those physicians who own their own equipment doing substantially more testing than those who do not still is a legitimate issue, and one that we have some interest in on our own. We have been giving some thought to: one, how we would try to assess whether testing is necessary or unnecessary; and two, how we might be able to curb abuse through more appropriate or lower fees. We continue to be troubled by this very striking variation that was reported, physicians owning equipment and those who do not.

Senator HARKIN. Do you have any way of auditing or taking a look and seeing if a physician is self-referring more than once or twice on a patient on imaging?

Dr. WILENSKY. As part of our study, we are attempting to develop a statistical profile from data from a number of States so that we will get a better sense of those physicians who have a financial interest and those that do not. Sometimes, it is difficult to assess whether or not there is ownership involved. It is a little easier to determine ownership if imaging is being delivered in the physician's own office, for example, than if the physician has ownership in an outside entity where that ownership is not obvious. However, the statistical profiling should help to see whether or not there is difference according to this financial interest; it is again much more difficult to determine ownership in an outside entity in which the physician has some interest, because ownership outside the physician's own office is rarely readily apparent.

Senator HARKIN. Is this going on in any other areas of medicine, do you know?

Dr. WILENSKY. Well, the general consensus is, yes. We were directed, as part of OBRA 90, to examine a minimum of six entities for patterns of abuse, including: ESRD facilities, parenteral and enteral suppliers, ambulance services, physical therapy services. We are certainly giving a lot of thought to making sure that one of the areas that we look at is imaging, because there has been such major growth in these expenditures. But we also are directed to

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look at this issue of physician ownership interest in entities outside the office as well.


Senator HARKIN. I see. There is another area somewhat similar to this. The inspector general's office has developed a computer data base system that permits States to identify individuals, pharmacies, and physicians, who use and prescribe excessive amounts of abusable drugs under Medicaid.

According to the inspector general, over $0.5 billion of Medicaid funds is spent annually on what are called street drugs in vogue with addicts. How many States are using computer programs such as the one developed by the inspector general to zero in on the most likely cases of fraud and abuse in this area?

Dr. WILENSKY. We are now trying to encourage States to make use of the computer program that the inspector general has developed. HCFA has instructed all of our regional offices dealing directly with the States to encourage them to consider using this system, and if they are not, to seriously do so now. I do not know the exact number of States currently using the program. My memory is that 20 or 25 States are currently employing it.

Senator HARKIN. Well, is there any way of getting them to increase that-20, 25? I mean, why are there not 50 States doing this? If you are talking about-if the inspector general is halfway right, $0.5 billion a year, it would seem to me that not only would we save money, but we would cut down on abusable drugs.

Dr. WILENSKY. Yes; as I have said, in the last couple of weeks we have actively asked our regional offices to convey to each of the State Medicaid agencies that we support this program, that we think the States ought to do it, and that if they are not using the program now they ought to think seriously about doing so. We would be glad to consider whether or not this request alone is sufficient. We have not, up until now, taken other actions to encourage the use of this program.

We have, of course, been working with the inspector general and with the DEA to try to think about ways to reduce this type of drug abuse. It is an issue that we are continuously concerned about. I have seen videos where it appears there are still plenty of transactions going on in various States. We will be very glad to pursue this matter further.

Senator HARKIN. Well, I urge you to pursue it vigorously.

Also, do you keep track of doctors and pharmacists who are banned from the Medicaid Program?

Dr. WILENSKY. The answer is yes.

Senator HARKIN. You do track that. Well, I hope you do pursue this other thing very vigorously.

Dr. WILENSKY. We can alert you and your staff as to the results of this encouragement. We will be measuring our success, and will let you know, after going out to the States, whether or not our request has resulted in any additional use by the States. If this is not the case, we will find out what the problem is. We will be glad to keep you informed on this.

Senator HARKIN. I appreciate that.
[The information follows:]


Eight States are implementing the Office of Inspector General software that facilitates the identification of individuals, pharmacies, and physicians who use and prescribe excessive amounts of often-abused drugs. Another twenty-two States are reviewing the documentation. We have asked our Regional Offices to contact the remaining States to ask them to consider use of the OIG software.

All States with a Medicaid Management Information System (MMIS) conduct postpayment reviews of patterns of provider practice and recipient use of Medicaid services. The only States without an MMIS are Nevada and Rhode Island. Prescription drugs are reviewed from three perspectives: (1) physician prescribing patterns; (2) pharmacy dispensing patterns; and (3) recipient use. This activity is accomplished through Surveillance and Utilization Review (SUR) reports from the MMIS. In order to track doctors and pharmacists banned from the Medicaid program, a Cumulative Sanction Report is published annually on April 30 and distributed to all State Medicaid Agencies. This report is updated monthly with additional sanction and reinstatement information.

Many States have implemented recipient restriction and lock-in programs. The most common reason for being placed on lock-in is abuse of prescription drugs. States such as Texas (13,000 lock-ins) and Michigan (6,000 lock-ins) have many years of experience in managing lock-in programs. States use SUR exception criteria to identify recipients who are candidates for lock-in. Following case review, recipients identified as abusers may receive a warning letter or mandatory education on proper use of health services. Recipients who continue to abuse the program may be asked to select one physician or pharmacy. Physicians and pharmacists are screened for their appropriateness as a lock-in provider. Included among the States with successful lock-in programs are California, Connecticut, Maine, Maryland, Minnesota, New York, Ohio, and Virginia.

Through memoranda to our regional offices (RO's), we have encouraged States to consider using the OIG computer software as a supplement to the SUR reporting activity. According to the OIG, eight States are implementing the software, and another twenty-two are reviewing the documentation. We will keep the Senator informed about the progress of this initiative.


Senator HARKIN. Last question. Last year, as a result, again, of some of the inspector general's findings, in which we found that Medicare contractors were buying these huge computers and using separate systems, we talked about developing shared computer maintenance systems as well as requiring sharing of computer hardware and software to reduce the claims processing costs, and so last year I introduced legislation to require that.

I just wonder, have you been able to accomplish through these administrative processes-through shared computer maintenance and processing arrangements, have you been able to accomplish any savings?

Dr. WILENSKY. It is our estimate that the savings from shared maintenance and processing for fiscal years 1990 and 1991 has been over $30 million. We have a number of States that are using shared maintenance or processing. We are continuing to try to encourage these initiatives, but as I indicated a little earlier, we are taking a look at the whole issue of how to try to get greater uniformity and greater efficiency into the contractor system beyond shared maintenance and processing efforts.

We think that our common working file, which came on line at the end of calendar year 1990, will also help. The common working file is a merging together of part A and part B information on a beneficiary basis, with some nine common host sites.

While the common working file has brought much more commonality in terms of beneficiary information, we are interested, in a much broader sense, about how we can try to get more efficiency

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into the whole contractor system, including rethinking issues like how many entities should be involved, what their roles should be, and how the entities should be configured. We hope to be discussing this project in more detail later during this calendar year. Senator HARKIN. Will you let us know if you think we need any more legislative effort in this area?

Dr. WILENSKY. Sure. I would be glad to.
Senator HARKIN. Senator Specter?
Senator SPECTER. Thank you.


Dr. Wilensky, I am interested in what has happened, as you may well suspect, with the ventilator-dependant units demonstration project for Temple University Hospital.

As I take a look at the chronology of this issue, I wonder again, as I have wondered on so many occasions in the past, about the efficacy of the money we spend on these kinds of projects and the way the bureaucracy works and just exactly what is happening, how much it costs us to get to somewhere.

This is the chronology which has been represented to me, and I would be interested to know, first of all, if it is accurate.

I am told that since July 1988, Temple has been engaged in a matter with your Department on HCFA ventilator-dependant unit demonstration project. In 1988, the Catastrophic Coverage Act mandated that the Secretary of Health and Human Services select up to five ventilator demonstration projects to examine the effectiveness of rehabilitation for chronic ventilator-dependant patients.

On October 1, 1989, Temple University Hospital was informed by HCFA that its application to operate a ventilator demonstration was approved. The grant was to be for 3 years, contingent upon acceptance of Temple's waiver of cost estimate, and also approved were hospitals in Illinois, Michigan, Rhode Island, and Minnesota.

In order to be eligible for this grant, institutions had to have an up-and-running ventilator unit located outside of their intensive care unit, and Temple reports having maintained the operation of this unit since July 1988.

In a sense of exasperation, a number of Senators-Heinz, Durenberger, Dixon, Simon, Chafee, Boschwitz, and I-sent you a letter on October 12, 1990, expressing concern over the long delay in developing the waiver estimates and urging expediting the commencement of the project.

In a letter dated November 19, 1990, you stated that the cost waiver estimates finally had been completed and were under review by the Department.

Now, 32 months later, the demonstration projects have not commenced. My first question: Is that an accurate chronological statement?

Dr. WILENSKY. I think I would like to indicate something about what went on in the interim-particularly around 1989

Senator SPECTER. I would be very interested to hear you state what went on in the interim, but I would like an answer to my question first.

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