Senator MONDALE. Would you support legislation to bring us out of this conflict of interest, so that the intermediary would not have an incentive to deny claims in order to enrich themselves in their other role of insurers? Mr. TIERNEY. In fairness to the whole industry, Senator, I would think there ought to be some evidence that that is happening, in even a remote case, rather than just the assumption. Senator MONDALE. You have never seen any examples of this; is that right? Mr. TIERNEY. No. CONFLICT OF INTEREST POSSIBLE Senator MONDALE. I do not believe you. Maybe you think you are telling the truth, but I think the conflict is so obvious, it is almost inevitable; and when we realize these poor people do not have any money, they do not have lawyers, they are not going into court, and what is more, under the law, their only appeal is the people who will be enriched by turning it down; and you sit there and say there is not any problem. I think it is ridiculous. Mr. TIERNEY. Senator, let me say this to you. There is a basic common procedure when a patient goes into a Medicare facility, or to a Medicare doctor, or gets any Medicare services, the intermediaries and carriers draw on the Federal Treasury to pay the bill, and that is the end of it. On the part A or hospital side, for example, what the complementary insurer is then called upon to pay is the original $84. If you are saying that there could be a pattern of turndown in order to avoid paying that $84, I would have to say that I would have to see more evidence of such a practice. Senator MONDALE. You do not think an insurance company would rule against the claim of benefit itself? Mr. TIERNEY. I think in the business, this has always been said, Senator, that when you do rule against a claim, you avoid a loss, but I think it is minimized where it is not their money. Senator MONDALE. But where it is their money, then you say there is a conflict that might exist? Mr. TIERNEY. Yes. Senator MONDALE. I had a mother that went to a hospital with cancer, and they canceled her insurance; so I am not convinced that private insurance companies are the same as the United Fund, and I think, we ought to try to separate these conflicts of interest where we can. Senator MUSKIE. Just one final question, Mr. Tierney. To the extent that the minutes indicate the lack of real effort to determine individual patient situations, they are not in keeping with the Bureau's ongoing efforts to a clearer understanding between providers and fiscal contractors. We intend to address that problem. My question is how? Mr. TIERNEY. In this particular situation, Senator, the obvious way to do it is to sit down with the parties and find out what is behind all of these minutes, and when did they start submitting claims which were not for routine physical examination, and try to iron it out. I have every intention of doing that. Beyond that, we have to just constantly try to communicate what is and what is not covered. Even in this hearing this morning, I think there was confusion, that if there is a health condition detected by a routine physical examination, then the beneficiary is out of luck with regard to subsequent therapy. That is not so. We still might not pay for the routine physical, if that is what it was, but if an illness is detected through such an examination, then Medicare would certainly pay for all of the services involved. Senator MUSKIE. I think it would be very helpful to the committee if you would thoroughly inquire into this particular situation with a view toward identifying their hangups, resolving them if possible, and make this program work, and then submitting a report to us.1 You have been here all day. You have listened to the testimony. There is no point in my belaboring the questions that have been raised. I think you fully understand that what we want is not a confrontation. What we want is a workable program, and we think this is sufficiently exciting to look at with a positive perspective. I would think that Blue Cross-Blue Shield people would do the same, from everything I have learned, they have an excellent reputation in Minnesota. So I would like to see them address it with the same spirit and then report back to us. Then we can get a job done and stay off the television, although, I think, their presence helps us to tell a story. Mr. TIERNEY. I know of your constant interest in the health of the aged people of this country, and I can only tell you the administration has an equal interest, and will be glad to work with you and report to you on this. Senator MUSKIE. I am sure of that. Thank you. [Whereupon, the hearing was adjourned at 1 p.m.] 1 See appendix, item 2, p. 1378. APPENDIX LETTERS AND STATEMENTS FROM INDIVIDUALS AND ORGANIZATIONS ITEM 1. POLICY STATEMENT REGARDING COVERAGE OF OUTPATIENT SERVICES, MINNEAPOLIS AGE AND OPPORTUNITY CENTER, INC.; SUBMITTED BY THOMAS M. TIERNEY, DIRECTOR, BUREAU OF HEALTH INSURANCE, SOCIAL SECURITY ADMINISTRATION As we understand the situation which has evolved in Minnesota, the Minneapolis Age and Opportunity Center developed a plan with Abbott-Northwestern Hospital to provide health services for aged people who were members of the Center. A clinic known as Community Medical Associates PA was set up to provide physicians' services and to bill for all services provided. This clinic is a separate organizational entity operating as a physician-directed clinic independent from the hospital. The hospital performs all of the laboratory and X-ray tests for the members of the Center, and the clinic furnishes only the physicians' services, working with the results of the laboratory tests. The Minneapolis Age and Opportunity Center sends out letters to all its members (aged persons with limited incomes) inviting them to visit the AbbottNorthwestern Hospital for complete diagnostic screening tests at designated times. Subsequently they are asked to report for a physical examination by a physician at the Community Medical Associates Clinic. The results of the hospital tests are used by the clinic physician in conjunction with the physical examination to determine the state of the individual's health and to provide any needed drug prescriptions. Part B of the Medicare program covers outpatient services, both in the outpatient hospital setting as well as in a nonhospital setting such as a doctor's office or a clinic. The basic coverage is defined in section 1861 (s) (2) (A) and (B) of the law in terms of: "Hospital services. . . incident to physicians' services rendered to outpatients", and "Services and supplies furnished as an incident to a physicians' professional services of kinds which are commonly furnished in physicians' offices and are commonly either rendered without charge or included in the physicians' bills." On the negative side, however, section 1862 (a) (7) of the law provides that: “(a)_Notwithstanding any other provisions of this title, no payment may be made under part A or part B for any expenses incurred for items or services "(7) where such expenses are for routine physical checkups . . .” The denial of the claims filed for diagnostic services provided to members of Minneapolis Age and Opportunity Center was based on this statutory exclusion. Intermediaries and carriers who assist the Secretary of Health, Education, and Welfare in the administration of the program have the responsibility of reviewing all bills to determine whether the requirements of the law are met. The basic guideline which has been followed in determining whether a diagnostic test is part of a routine screening procedure is whether the particular service was prompted by a specific illness, symptom, complaint, or injury. Such determinations are not simply lay judgments. Carriers and intermediaries are expected to be assisted by their medical staffs in making these determinations and, if necessary, are expected to consult with outside professional bodies in difficult or unusual cases. I would like to emphasize that the statutory exclusion of these services was not intended to reflect on their value or on the importance of preventive medicine generally. It is simply a matter of the way the priorities were assessed in the initial enactment of the Medicare law. The decision then was to primarily cover hospital costs and related care and physicians' services for persons who are ill since these are the health care costs which a majority of older people find difficult to finance. As you know, the Department has proposed to cover as part of its comprehensive health insurance proposal those preventive services that have been demonstrated to be both medically desirable and economically cost effective. With regard to routine physicals, these criteria are only met for children. A review of the minutes of the meeting between the representative of AbbottNorthwestern Hospital and a representative of Minnesota Blue Cross indicates to me that there has been a lack of communication and a mutual lack of understanding. In response to the Chairman's specific question as to whether or not the minutes reflect official BHI policy, I would say that perhaps the description of legislative limitation on the basic Medicare benefit is exact but failure to delve into the specific facts of various specific situations is unfortunate and reflects the necessity of a much clearer understanding between the clinic and the intermediary as to the appropriate definition of services. If a large number of the rejections were based on the fact that the claims really did result from an invitation to come in for a physical examination, that would be in keeping with the law and regulations. To the extent that the minutes indicate the lack of any real effort to determine individual patient situations, they are not in keeping with the Bureau's ongoing efforts toward a clearer understanding between providers and fiscal contractors. We intend to address that problem. ITEM 2. LETTER AND ENCLOSURES FROM THOMAS M. TIERNEY, DIRECTOR, BUREAU OF HEALTH INSURANCE, SOCIAL SECURITY ADMINISTRATION; TO SENATOR EDMUND S. MUSKIE, DATED SEPTEMBER 16, 1974 DEAR SENATOR MUSKIE: This is a followup to my previous report of July 31, 1974, with regard to Medicare payments to the Abbott-Northwestern Hospital and the Minneapolis Age and Opportunity Clinic. You will recall, of course, that complaints from these two organizations were, in part, the subject of your subcommittee hearings on June 26. This final report from our regional office is very lengthy but perhaps the statements made by our Regional Representative in his memorandum to me of August 30 are of particular significance. They indicate that both Mr. Daum and the director of the clinic appear to be satisfied with the results obtained. If there are further developments, I will let you know, and if there are any other questions from you or members of your subcommittee, I will be glad to answer them. Sincerely yours, THOMAS M. TIERNEY, Director, Bureau of Health Insurance. [Enclosures] MEMORANDUM DEPARTMENT OF HEALTII, EDUCATION, AND WELFARE, REGION V-CHICAGO. HI-22-a. July 29, 1974. Refer to: III:95:C22. To: Director, Bureau of Health Insurance From: Regional Representative, HI. Subject: (1) July 23, 1974 meeting between Travelers Insurance CompanyMinnesota, Abbott-Northwestern Hospital (ANH), the Minneapolis Age and Opportunity Clinic (MAO) and Community Medical Associates (CMA); (2) July 24, 1974 meeting between B/C of Minnesota, ANH, MAO Clinic, CMA, and Minneapolis Age and Opportunity Center. As I stated in my July 24 telephone conversation with you, the two meetings produced what I believe will continue to be a cooperative working relationship between the participants which will allow the prompt and proper processing of claims. Both meetings produced a common understanding of the issues involved in the problem, the coverage policy which needs to be applied, and a working agreement to move forward and to process both accumulated and future claims. In addition, the channels of communication were solidified so that any further question can be resolved. I am providing a rather lengthy report on each of the meetings since I think it explains the basis for concluding that this problem is resolved. I. THE JULY 23, 1974 MEETING—A LIST OF PARTICIPANTS IS INCLUDED AT THE END The Travelers Insurance Company opened the meeting by identifying the objectives. These were: (1) To clarify the routine physical examination exclusion, (2) To apply this clarification to the claims the carrier is holding, (3) To reach agreement upon the information needed to process future claims, and (4) To address the other issues of reasonable charge and patient obligation to pay for the services. The representatives of the Hospital, MAO, and CMA agreed that these were the objectives. The carrier went on to state that where a beneficiary comes in as a result of a call-in letter and the beneficiary has a complaint which requires a followup, it would consider that the patient came in to see the physician for the complaint and that the exam would be covered, unless the complaint was so slight that it would be unreasonable to expect the individual to seek medical care. The carrier's investigation of a sample of the 400 claims which it is currently holding resulted in the conclusion that the great majority of beneficiaries visited the Minneapolis Age and Opportunity Clinic because of symptoms or complaints that required treatment. Both the hospital and CMA representatives substantiated this conclusion from their description of how the MAO program operates. Dr. Werges, CMA, stated that the vast majority of individuals who visit the CMA doctor came because of a medical problem which they wanted to have treated. He estimated that about 10 percent of the patients were complaint-free and he would be the first to conclude that the service provided was a routine physical exam. Furthermore, it was agreed that in the event that the routine physical resulted in the need for further treatment or diagnosis, those subsequent services are covered under the law subject to medical necessity. Based upon the above, the carrier stated the general conclusions it had reached regarding the claims it is holding. The carrier's review of the claims shows that 50-70 percent of those claims show medical conditions which substantiate the coverage of the physician visit. Another 20-40 percent may require additional information which is within the clinic's medical records. The carrier and the clinic agreed to work together this week to identify any needed information. The clinic asked what would serve the carrier's future needs best. The carrier said it would like to see both complaints and diagnosis on the claims form. Dr. Werges stated that this is exactly what he has been trying to do and would expect to see this procedure followed by the other clinic physicians. Essentially all parties agree that this would be a sound and unencumbering procedure to follow for future claims. In addition, Dr. Werges stated that the physician would be in the best position to identify those situations where the beneficiary came in for the purpose of a routine check-up and that these claims would not be submitted. The discussion concerning the reasonable charge involved two issues. First, it is clear that CMA is charging 4 different rates for an office exam ranging from $10 to $50 depending on the nature of the exam. The other issue concerned the level of reimbursement. The carrier explained a problem of different allowances for the same service which is not corrected and provided CMA with the prevailing charge levels it had requested. The carrier asked CMA whether it was billing other third parties. CMA is to the extent that there is other third party coverage. Claims are being submitted to Title XIX and reimbursement is being received. Thus the no legal obligation to pay exclusion does not apply as this is all we require of other similar clinics. In conclusion, the carrier indicated that they would confirm, in writing, that |