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for antibiotics provided via an implanted infusion

pump.

Question. Do you have an estimate of how much could be saved by not having to pay the cost of nursing facility beds for patients who need medications such as antibiotics?

Answer. Patients are admitted to nursing

facilities for medical conditions and

treatment which may include antibiotics or other types of drug therapy. It would not be an allowable cost under Medicare to admit a patient to a Skilled Nursing Facility solely to qualify that patient for the payment of drugs under Medicare. If the drugs could be administered in an outpatient setting, Medicare would not pay for either the drugs or the per diem cost of institutional care. Accordingly, we have no cost estimate of such care.

REDUCED ALLOCATIONS FOR

PROFESSIONAL RELATIONS

R-69

Question. It is our understanding that the task of implementing physician reform (RBRVS) will be much more difficult and complex than the prospective payment system for hospitals. If that is true, why is the Administration proposing a reduction in the allocation for professional relations? Are we making a mistake in underestimating the need to invest in more educational activities to lay the groundwork for a smoother implementation and transition to the new physician payment system? In some respects shouldn't we view professional relations and education activities as productivity investments, because better understanding of the payment and policy changes can reduce the number of claims processing problems and inquiries?

Answer. We agree wholeheartedly that

professional relations and education activities are worthwhile investments. Statutory changes are often complex, if not arcane. If contractors can explain these changes to physicians and providers before claims are submitted and problems arise, then all parties benefit. In FY 1992 we are facing grave constraints on our budget. We must maintain basic standards of claims processing efficiency and must spend money on payment safeguards in order to maintain trust fund integrity. The remaining funds must be carefully allocated and HCFA has chosen to

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spend a large portion of them on professional relations at the expense of other, important services. In fact, the requested funding level for professional relations is $20 million in FY 1992, only $100 thousand less than the FY 1991 level.

REVERSAL RATES FOR RECONSIDERATIONS AND HEARINGS

Question. The Administrator's proposal to drastically cut funding for hearings and

reconsiderations is a serious erosion of basic due process for Medicare patients, physicians, and other providers. What are the current reversal rates for Medicare denials at the reconsideration and appeal levels?

Answer. Current data from FY 1990 indicates a reversal rate for Part A reconsiderations and hearings of 51.1%, based on 121,957 claims processed. The reversal rate for Part B reviews and hearings is 60.8%, based on 7,056,867 claims processed.

AVERAGE TIMEFRAMES FOR RECONSIDERATIONS AND APPEALS

Question. What are current backlog situations? What is the average time span between an initial denial, reconsideration...and then a formal appeal?

Answer. Based on FY 1990 data the backlog is 20,779 for Part A appeals and 608,951 for Part B Reviews. We do not capture data indicating the average time span between each step in the appeals process (i.e., claim denial, reconsideration, hearing). However, the maximum statutory timeframes for each step are as follows:

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Question. Is it true that HCFA is considering charging physicians fees for claims that are rejected, charging Medicare beneficiaries and providers fees for unsuccessful appeals, and

installing 900 telephone lines to handle claims processing questions from physicians?

Answer. HCFA is currently considering a number of options as part of an overall effort to seek out efficient and equitable ways of reducing

administrative expenses while maintaining the highest possible levels of beneficiary and provider services. HCFA is not yet far enough along in the policy development process to be able to discuss specifics. We will meet with you later to discuss the specifics if you wish.

POTENTIALLY NEGATIVE IMPACT OF USER FEES

Question. Won't such a user unfriendly system be counterproductive? If you erect barriers to information, won't you just increase claims processing inefficiency? Doesn't this strike you as absolutely contrary to how you would run a private insurance program? Are private insurers making deep cuts in beneficiary and provider service programs?

Answer. In evaluating various cost-saving measures, including some user fee mechanisms, HCFA will not select options which would have adverse effects on claims processing operations. Beneficiaries will not be charged a fee for initiating a review or reconsideration of a denied claim.

QUESTIONS SUBMITTTED BY SENATOR MARK O. HATFIELD

CATARACT DEMONSTRATIONS

Question. Dr. Wilensky, I understand the Administration is considering the implementation of a Medicare Cataract Preferred Provider Demonstration Project. To what degree will the Cataract

demonstration tilt the playing field in favor of high-volume providers? Will this create an anticompetitive atmosphere which will disadvantage small, high quality practices?

HCFA

Answer. HCFA recognizes that the highest volume providers are likely to have a competitive pricing advantage as a result of economies of scale. will, therefore, consider favorably any proposals from large providers that incorporate a volumerelated discount to reflect the efficiencies they

expect to achieve. However, smaller volume providers should not be discouraged from proposing discounted prices reflecting potential efficiencies in their scale of practice. In addition to other criteria, HCFA expects to select designated providers based on several volume-related thresholds for pricing, anticipating larger discounts at higher volumes.

Participation in the demonstration, by both providers and beneficiaries, is completely voluntary. Those providers not participating in the demonstration, including those providers located in a demonstration area, will continue to treat Medicare beneficiaries and receive payment under the regular Medicare payment system. In turn, beneficiaries remain free to select the provider of their choice for cataract surgery.

Question. If implemented, how will establishing large volume urban providers impact upon residents of rural areas needing care? How will this affect the economic viability of rural ophthalmologists who will never have practices sufficiently large to qualify as preferred providers?

Answer. Volume-related thresholds for pricing will enable smaller volume providers to compete effectively in the application process. Given these relative pricing scales, combined with the fact that beneficiary participation is completely voluntary and that the demonstration is being conducted in metropolitan statistical areas, the demonstration's effect on the economic viability of rural ophthalmologists should be, at most, minimal.

O reduce Government involvement in the pricing of individual services in the providers' decisionmaking;

provide insight into appropriateness indicators and effective quality assurance and utilization review mechanisms for cataract surgery; and

provide information regarding factors influencing providers' decisions to participate and beneficiaries' decisions to select designated providers under a demonstration that will be strictly voluntary.

Question. Is there a problem in the quality of cataract care being provided by local

ophthalmologists?

Answer.

In

In general, cataract procedures result in a relatively high rate of successful outcomes. order to assure continued high standards of quality of care as well as to protect beneficiaries from unnecessary surgery, the demonstration incorporates a variety of safeguards. Criteria for selection of designated providers will emphasize appropriateness and quality indicators, and designated providers will be subject to more intensive prospective and retrospective assessment of the appropriateness and quality of surgery and follow-up care.

Question. If the problem is overutilization, hasn't the Congress demonstrated its commitment to attack the problem without having to resort to a procedure which discriminates against local providers?

Answer. Cataract surgery is performed over one million times a year at an estimated cost to the Medicare program of over $3 billion annually. The per-case cost of this procedure has not significantly decreased to reflect technological improvements, nor to take into account the shift in surgical setting-from inpatient to outpatient facility-- that has taken place during the past decade. Rather, costs have stabilized as a result of regulatory intervention and congressional mandates.

This demonstration project would be an opportunity to study efficiencies that can be achieved by managing an episode of care for cataract surgery, while maintaining high quality of care throughout the episode. This arrangement would combine the physician and facility services on the day of surgery, the intraocular lens, and various pre-and post-operative tests and visits into one comprehensive package and single negotiated global In this manner it will:

fee.

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allow providers flexibility in managing the mix
and type of services used to accommodate their
practice style preferences;

provide incentives to manage patient care so that
cost efficiencies are realized while maintaining
a high standard of quality of care,

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