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Senator BUMPERS. Please do. [The information follows:]


OBRA 87 brought significant, additional demands for the survey process. Although the most visible increase in HCFA's operating budget attributable to OBRA 87 expansions was seen in the fiscal year 1991 budget, when most of these demands were first implemented, OBRA 87's effects are carried throughout the fiscal year 1992 request.

For nursing facilities, these include:

Extended surveys for those NF's that have been cited as having a significant number of deficiencies.

New resident-centered, outcome-oriented survey requirements which focus more on the NF's actual provision of care rather than its administrative and technical capability to provide care.

Implementation of revised sanctions to impose when appropriate, including the appointment of temporary management; denial of payment for new admissions; civil money penalties, and others.

Revised guidelines to allow for the conversion of Medicaid-only facilities to duallyparticipating Medicare/Medicaid facilities. This restructuring caused the number of NF's to be surveyed under this appropriation to double from the pre-OBRA 87 facility count.

The evaluation of the NF's nurse aide training and competency evaluation programs and its nurse aide registry.

Enhanced training of all State agency surveyors to assure complete understanding of the complexities of the OBRA 87 requirements and uniform application of survey protocols.


Senator BUMPERS. Just to close by pursuing a line of questioning that Senator Harkin got into, and that was the fact that these nursing homes are going to recoup this money-now, I did not get that. A nursing home, if they had to pay a $15,000 inspection fee, obviously that would be an expenditure that they could deduct on their tax return, but how do they get this money back from HCFA? Dr. WILENSKY. Well, to the extent that there are Medicaid or Medicare patients, it would be part of the allocated costs to HCFA. Senator BUMPERS. You have a large role in determining a facility's rates, do you not?


Senator BUMPERS. Do you determine how much a nursing home can charge per patient, depending on the class of the patient, whether it is skilled or intermediate? You set those rates, and they are usually set based on a lot of criteria that a particular nursing home sends you about their expenditures, is that not correct?

Dr. WILENSKY. The State actually sets the rate, but we need to approve it to make sure

Senator BUMPERS. You have to approve it, though.

Dr. WILENSKY. Right.

Senator BUMPERS. So, what they will do, they will just put this $17,000, like a utility company, in their base rate, and as Senator Harkin said, they are going to recover it. They are going to recoup it, because it is going to go into their base rate, is that not a fact? Dr. WILENSKY. But this will not occur in a uniform way, because the number of Medicaid patients in a nursing home is not uniform. Senator BUMPERS. Well, I understand that, but what is going to happen, for example, in a nursing home with 100 beds, where 50 of them are Medicaid and 50 of them are private patients, is that

they are going to show that entire fee in their cost of doing busi


Dr. WILENSKY. Not if we can help it, they will not.
Senator BUMPERS. No?

Dr. WILENSKY. No; I say that facetiously, but I do not-I mean, the issue about how nursing homes allocate costs between their public and private pay patients is an issue that we already have to consider in determining whether or not a rate is a reasonable rate, based on nursing home costs and the allocation of these costs. It is not an uncommon problem.

The issue of how you measure costs in any facility, part of which covers public patients and part of which covers private patients, and allocate those costs, is something that nursing homes need to be able to demonstrate. They would clearly have to demonstrate that they are allocating a reasonable share, and not the total costs, to Medicaid as they would for any other expense.

Senator BUMPERS. When I was involved in this business, Dr. Wilensky, we had-oh, 250 licensed nursing homes in the State, and do you know how many of them were licensed to take Medicare patients? Do you know why?

Dr. WILENSKY. Why is that?

Senator BUMPERS. It just was not worth it.

Dr. WILENSKY. Medicare or Medicaid?

Senator BUMPERS. Medicare. Oh, no, everybody took Medicaid patients. That is where they make their money, I guess. All of them charge private patients more than Medicaid pays, but the reason nobody wanted to take Medicare patients, first of all, back then-I do not know what it is now-90 days was the longest you could stay in a nursing home under Medicare, and the paperwork was just staggering.

That is all.

Dr. WILENSKY. Medicare is a very minor payer. Medicare is clearly intended to be primarily an acute-care payer.


Senator HARKIN. I want to get back to user fees again. You just raised another point, Senator Bumpers, and that is that now, if you are going to have to get in there and allocate reimbursement to each specific nursing home between private payers and the Medicaid payment and Medicare patients, you are going to have to hire several hundred more people.

You cannot do it with the personnel you have got right now, and so it is going to cost us even more money. That is why I say, this whole concept of user fees, I do not know that we are going to save a dime out of it.

Senator BUMPERS. Incidentally, one question I wanted to ask you, how much do you think you are going to get from user fees under your projections?

Dr. WILENSKY. Well, our estimate was that the net amount, after offsets, would be $286 million. That included nursing homes, home health care agencies, and other facilities.

Senator BUMPERS. Have you done any projections on how much of that you are going to get back?

Dr. WILENSKY. How much is going to come back?

Senator BUMPERS. To the nursing home under their base rate? Mr. MOSEDALE. Yes; we think that about 9 percent of the money will go back into Medicare, and about 46 percent or so will come back to Medicaid. Of the $333 million in total user fees, more than $46 million would be offset as passthrough costs, for a net total of $286 million.

Senator BUMPERS. So you think you will be able to keep about one-half of it?

Mr. MOSEDALE. That is a fair assessment in Medicaid, yes. Senator HARKIN. Then you use that to go out and hire more inspectors to go out and decide whether or not they are allocating it correctly.

Dr. WILENSKY. I think it is fair to say we have a difference in terms of the philosophical desirability of employing user fees. I do not think that this allocation of inspection costs, given all of the other allocations of expenses that go on in nursing homes, is going to impose a substantial burden. I could be wrong, but I do not regard this as a controversial issue. But the question of whether some of the costs of inspections come back, or whether user fees are an appropriate way to finance inspections, I think is an issue worthy of further debate.


Mr. MOSEDALE. Senator, I think one of the frustrating things from a bean counter's standpoint is, it is amazing how much attention we get when we bring up a user fee concept, but these requirements for inspection are statutory. Requirements have been increasing over the last 15 years, including new specialty requirements like psychiatric review and facility review, that have forced inspection teams to grow from a size of 2 people to perhaps as many as 10. Now we are seeing how much these additional survey requirements really cost. When these costs are put in plain view, they do become real targets. Whether user fees are paying for inspections or not, it will cost the taxpayer $17,000 to do a survey. Dr. WILENSKY. It really is the only question of who pays; $17,000 represents our estimate of what it will cost to do, on average, the survey, all the hearings and followup that are involved with the survey and certification process.

Senator HARKIN. $17,000, you said, for what?

Dr. WILENSKY. For the average nursing home.

Senator HARKIN. I thought I had heard it was perhaps, $16,000 to $17,000. I thought $17,000 was the top.

Mr. MOSEDALE. That is true.

Senator HARKIN. How can that be the average?

Mr. MOSEDALE. We have projected user fees by looking at average costs. Some nursing homes are going to cost far more than $16,000, or $17,000, others will cost less, so we are trying to come up with an average. The regulation has not been developed, Senator, because this is a proposed law item. Once the law goes into effect, of course, we will go through the rulemaking process and determine what the fee scale should be. What we are trying to give you is an idea of what the average fee would be.

Dr. WILENSKY. The number I was giving was for another type of facility. It was $5,800, on average, we estimated as fees for home

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 payment.

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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