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MEDICAL DEVICE MARKETING ABUSES

Dr. Wilensky, one last question before I turn it over to Senator Reid. In previous year's hearings I have called attention to abuses in marketing reimbursement for certain pieces of durable medical equipment, such as seat lift chairs and the TENS units. Dr. WILENSKY. Yes.

Senator HARKIN. I think progress is being made in correcting these abuses. Yet it just seems like every time we think we have gotten the lid on it, something else new turns up.

Consider for example a medical device called the Pocket Doppler or the Pocket Rocket. This is one right here. You have seen these, right? Or you have not seen them?

Well, this is a Pocket Rocket right here.
Senator REID. Where do you stick that?
Senator HARKIN. Do you want me to demonstrate? (Laughter.]

Anyway, basically it is an ultrasound. It is used by physicians to check heartbeat, artery blood flow. It is a very simple device. It is used for diagnostic tests of lower limbs for blood flow.

I am told, Senator Reid, the cost to manufacture this device is about $40. They are sold to doctors for between $200 and $600. Do not shake your head yet. According to the inspector general's office, a 5-minute scan by a doctor using this costs Medicare $100; 5 minutes of using this, and doctors bill Medicare $100.

Now that is the kind of thing that keeps turning up all the time. When you are spending the billions of dollars we are, you ask: How can we possibly prevent these kinds of things from happening?

Just to show you, here is a picture of a machine that costs about $200,000. It looks like something out of Las Vegas. (Laughter.]

And I understand that for the diagnostic use of that you get a bill of about $100. So you get a $100 bill from a $200,000 machine and you get a $100 bill from something that costs $40 to make.

My point in showing these is again to bring home the idea that we just have got to keep vigilance in these areas. Up until last month, your agency made no differentiation in payments for tests by these inexpensive pocket rockets or the payments made by these machines.

I understand that you have now determined that tests with these pocket ultrasounds should be considered as a routine part of a doctor's examination and not receive any separate Medicare reimbursement at all.

Dr. WILENSKY. That is correct. Senator HARKIN. Thank you. We appreciate that. Dr. WILENSKY. We appreciate your bringing it to our attention. We have also asked our physician panel to review the medical appropriateness of the medical instruction on these ultrasound procedures so that we can provide guidance about when these devices should be used and the adequacy of existing procedure codes.

One of the reasons that we continue to try to pursue coordinated care and capitated systems of payment is because we are forever impressed by the ingenuity of various suppliers and various other parties in our health care system. Until we have bundled payments for sets of services, we will keep seeing this proliferation of new tests and new devices turning up. But again we appreciate your

bringing this to our attention, and we think a better decision has now been made.

Senator HARKIN. Again, my thanks to you for taking care of it.

I am going to say this for the record and in public view. I will go to bat for the providers when, just like on the backlog of cases, most of this affects providers. We know that. We should not say well, it is providers so we do not have to worry about it. We should worry about it. That is money that they need that they put out of pocket.

But when it comes to things like this, I do not understand a doctor that would knowingly use one of these devices, it takes him 5 minutes, and turn around and bill Medicare $100.

Senator REID. One minute.
Senator HARKIN. It is about a 5-minute exam or something.
Senator REID. That is more reasonable.

Senator HARKIN. More reasonable? Wait a minute, I said doctors, not lawyers. (Laughter.]

I just do not understand them billing that, any reasonable person doing that. And then to see that it is manufactured for $40 and sold for between $200 and $600. Now you wonder why we are spending so much on health care in this country when we have got these kinds of things going on.

Again, we will keep vigilant. And thanks for paying attention to it and getting that taken care of.

Dr. WILENSKY. Alert us if you find some others. We will take care of it.

Senator HARKIN. We will, I am sure. I hope not, but I am sure we will.

Senator Reid.

REFUSING MEDICARE PATIENTS

Senator REID. Mr. Chairman, I have a couple of areas of inquiry. I will be relatively brief.

In recent months, Doctor, I have received, as I am sure other Members of Congress have, letters from seniors who tell me they have gone to doctor after doctor who refuses to take Medicare. Are you familiar at all with this problem?

Dr. WILENSKY. No; in fact, I am actually very surprised to hear that because both the number of visits that are being accepted on assignment, and the participating physician rate are at all time highs.

Senator REID. Do you think the southern Nevada area, the Las Vegas area would be unique? Will you check into that for me?

Dr. WILENSKY. We will check into it.

I would not have thought so, but I certainly will go back. We have statistics by State and area and we will report back to you. [The information follows:)

PARTICIPATING PHYSICIAN RATES IN NEVADA The Participating Physician and Supplier Program was established to limit the impact of medical costs on Medicare beneficiaries by providing incentives to providers and suppliers to accept Medicare payments as their full fees. Participation rates among physicians in Nevada have exceeded comparable national rates as demonstrated in the two most recent periods of available data:

PERCENTAGE OF MEDICARE PHYSICIANS OPTING TO BECOME

PARTICIPATING PROVIDERS

[In percents)

January 1989

April 1990

Nevada
National

64.7
40.7

69.8 44.1

High participation rates imply broad acceptance of Medicare patients among Medicare providers. However, the Regional Office overseeing Nevada has reported anecdotally that some physicians have recently threatened to stop accepting Medicare patients because of declining reimbursement and increasing paperwork burden. No studies have yet been done which substantiate increased rates of withdrawal of physicians from the Medicare Program in Nevada.

INTERSTATE TRANSPLANT REIMBURSEMENT
Senator REID. I have also three letters that I have written to you.
And I am sorry to say that you have not answered any of them.

Dr. WILENSKY. That is inexcusable. What are your letters about?
Senator REID. I really think it is inexcusable.
Dr. WILENSKY. I agree.

Senator REID. Especially when each letter deals with the same subject. Each letter becomes, from me, more desperate.

I have a rule with my staff that we may not want to give the answer that we have to give, but we have to answer the letters. And I can understand how one could get lost someplace in the shuffle of the vast bureaucracy that we deal in, but three is not really appropriate. The first one was sent on September 6 of last year. And then we sent a couple after the first of the year.

Dr. WILENSKY. I know that I have seen at least one, if not more, letters addressed to you. But we will go back and make sure. (The information follows:]

CORRESPONDENCE FROM SENATOR REID HCFA records indicate that we responded to Senator Reid's September 6, 1990 letter on October 1, 1990, but the Senator's office has no record of having received that response. HCFA, however, has no record of receiving any correspondence from the Senator on liver transplants after the first of the year. HCFA is working with the Senator's staff to get the correspondence back on track. A copy of the HCFA October 1 letter has been sent to the Senator's office, and the Senator's staff has sent copies of the January letters to HCFA. A reply will be sent within the next few days.

MEDICARE

Dr. WILENSKY. Again, there is no excuse for such a delay in having your letters answered and answered promptly.

Senator REID. The reason we wrote these letters is that I have people in Nevada, two in number, who are in California hospitals. The reason that they are in California hospitals is that there are no hospitals in Nevada that do liver transplants. They are awaiting liver transplants which are to be paid for by Medicare.

This is 1 year later now. Medicare is not yet paying the hospitals for liver transplants. We have been told the reason this is so is that your regulations are still in the developmental stage. People's lives are literally hanging by a thread waiting for liver transplants. And how can I tell them, and how can we tell them that the regulations are not yet written? What again do I tell these people?

Dr. WILENSKY. We had proposed rules that were put out last spring. We have received some comments. We have revised the regulation accordingly. The revised regulation is not exceedingly different from the proposed rule. We anticipate that we will be submitting this regulation to the Office of the Secretary within the next couple of weeks. At that point, it will go the Office of Management and Budget.

It is our
Senator REID. That is probably a deep-six forever.

Dr. WILENSKY. Actually, all of our regulations take this route, and we actually do get most of them out.

Senator REID. You do get most of them out?

Dr. WILENSKY. We do get most of them out. We anticipate we should have this regulation out this spring, and that it will be very close to the final rule. The proposed rule had coverage for adults in specific medical conditions as long as they were taken care of in centers that were participating facilities. It covered inpatient and physician services, as well as the organ acquisition. There are some details of the final rule that have yet to be sorted out. But it will still be quite close to the proposed rule.

Senator REID. Would you notify me when the proposed regulation goes through the various steps that you have outlined?

Dr. WILENSKY. Yes; we will keep you informed when it leaves the Department, and when it is cleared for final printing.

Senator REID. And you will have somebody look into the other problem as it relates to that?

Dr. WILENSKY. Absolutely.
Senator REID. Thank you, Mr. Chairman.
Senator HARKIN. Thank you, Senator Reid.
Senator Bumpers.

NURSING HOME EXPENDITURES

Senator BUMPERS. Very quickly, Dr. Wilensky, how much Federal money do we spend on nursing homes in a year, about $25 billion?

Dr. WILENSKY. Something like that.

Senator BUMPERS. Anybody, wherever you are sitting, do you know the answer?

Dr. WILENSKY. I think you are in ballpark.
Senator BUMPERS. What does that mean?

Dr. WILENSKY. That is, I think, $48 billion was spent on longterm care in fiscal year 1989, most of it in nursing homes. Medicare and Medicaid accounted for about $25 billion. [The information follows:)

NURSING HOME COSTS Nursing home costs for the United States in fiscal year 1989 were $47.9 billion. Private funds accounted for payments of

$22.7 billion and Government payments accounted for $25.2 billion. These private funds were composed of $21.3 billion in outof-pocket payments, $0.5 billion in private insurance payments, and $0.9 billion in miscellaneous payments. Government funding was composed of $20.7 in Medicaid payments, $3.6 billion in Medicare payments, and $0.9 billion in payments from the Veterans Administration. The Medicaid program provided $11.7 billion in Federal payments and $9 billion in State payments. The impact of the combined Federal and State Medicaid programs accounted for 43.2 percent of total nursing home pay, ments, and the Medicare program contributed another 7.5 percent of the national total. Together these programs accounted for 50.7 percent of nursing home pay. ments in the United States in fiscal year 1989.

In fiscal year 1992, skilled nursing facility payments by the Medicare program are estimated to be $2.8 billion. The Medicaid program projects fiscal year 1992 nursing home payments totaling $23.5 billion, including $13.4 billion in Federal payments and $10.1 billion in State payments.

MEDICARE PART A AND PART B CONTRACTORS Senator BUMPERS. Let me ask you a couple of questions. Through your Medicare contractor budget, you pay Arkansas Blue Cross/Blue Shield to process claims for the Medicare program in Arkansas, am I correct?

Dr. WILENSKY. I do not know if we have the same contractor acting as both the fiscal intermediary and the carrier. We use intermediaries to pay for part A or hospital care, and we use a different contractor, a carrier, typically to pay for part B, physician and outpatient care.

Senator BUMPERS. Why do you do that? Why do you have separate contractors for part A and part B?

Dr. WILENSKY. They are different types of contractors in large part because they deal with different kinds of claims, and have different expertise. Part A and B contractors are not always different in a given area, but they are usually different. We have a total of about 84 contractors now in the 50 States providing these functions. It is an area

Senator BUMPERS. That means that you have a number that overlap, that do both.

Dr. WILENSKY. Right.
Senator BUMPERS. OK

Dr. WILENSKY. We are, and have been since last spring, looking at the whole issue of how we go about paying our bills, examining who does what and how many groups are involved in the process. Our basic payment strategy, which has developed according to who does what and how many groups do it, was adopted when the Medicare Program was first set in motion 25 years ago. We are now reassessing whether or not, 25 years later, enough changes have occurred to justify rethinking how we process bill payments.

Senator BUMPERS. Do you put these contracts out on competitive bids periodically?

Dr. WILENSKY. It depends on the particular situation. Once a contractor is inside the process as either a carrier or fiscal intermediary, we would only put that contract out for bid if the established contractor fails to meet our performance standards, or if the contractor voluntarily withdraws for its own reasons like dissatisfaction with our payments. In such cases, we would put the contract out for a competitive bid. But once we have a carrier or intermediary in the process, and if it meets our standards for performance, we continue its contract on a yearly basis.

ESTABLISHING NURSING HOME INSPECTION FEE AMOUNTS Senator BUMPERS. You contracted with Arkansas State Health Department to do your nursing home inspections for you?

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