The fact is that despite its intentions the bill does not make basic changes in the way Medicare pays for physician services. This seems the time to eliminate from the program any physician who will not accept the Medicare rate as payment-in-full-yet S. 3205 does not. This also seems a propitious time to experiment with different methods of reimbursement such as capitation-yet S. 3205 does not. Are we correct in assuming that your bill does not mandate an objective, competitive selection process under which the most qualified intermediary in terms of efficiency and accountability would receive the Medicare contract? We had hoped this would be the case because it is the best way to encourage competitive bidding on the fixed fee per claim which you would require. Further, we are disappointed that you have apparently backed away from your expressed intention to promote the consolidation of responsibility for administering Medicare Part A and Part B under a single agent, instead of the present dual arrangement which is uneconomical. Also, we urge you to restore the provision whereby carrier and intermediary areas would be expanded or consolidated wherever necessary to promote efficient operation. Finally, we seriously question the inclusion of "productivity incentives" whereby a carrier whose actual costs were less than the negotiated fixed fee could realize increased avenues. This is carrying incentive reimbursement techniques too far. It should be assumed that the job as negotiated and contracted for will be done efficiently; if it is not done well, then that contract should be terminated come the annual renegotiations with the carrier. As we stated earlier, your proposal to allow reimbursement for costs associated with the closing or conversion of underutilized hospital facilities and services is excellent. We hope this program would include sufficient safeguards against abuse. For example, are the 50 hospitals to be selected on a first-come, first-served basis or would those in greatest financial stress be given priority? There is a possibility that every hospital with or without a financing problem could devise a plan to qualify so that the trial period you envision might serve to demonstrate little. One last point here: it would be unwise to create a Hospital Transitional Allowance Board to act upon applications by hospitals in accordance with this section. The correct place to make decisions concerning the allocation of scarce public monies to health facilities is the appropriate health systems planning agency. The planning agencies have the technical expertise and detachment to adequately oversee such a program, and these agencies are clearly accountable to the public. In closing, we would like to offer our reactions to your proposed reform of state Medicaid administration. We have gone on record in support of your plan to establish specific Federal performance criteria for state Medicaid programs, and the tying of these standards to Federal matching for administrative costs. We will support any attempt to raise Medicaid standards and to increase efficiency in operation of the program. In judging S. 3205 against these goals we believe that: (1) Greater care should be taken to ensure that uniform performance standards are broad enough and deadlines flexible enough to accept reasonable differences among the states; (2) Federal Medicaid regulations should not promote compliance with the letter of the law at the expense of the broader goal of improving programs; and (3) Fiscal sanctions should be graduated and targeted to deficiencies as past experience shows that too severe a threat fails to offer a real alternative. We congratulate you on your efforts to make significant improvements in the way Medicare and Medicaid operate because such reforms are vital to the success of these programs, as well as any future national health insurance program. Thank you for your consideration. Sincerely yours, SUSAN S. LAUDICINA, Staff Assistant for Health. PREPARED STATEMENT OF THE AMERICAN PROTESTANT HOSPITAL ASSOCIATION Mr. Chairman, I am Charles D. Phillips, President of the American Protestant Hospital Association, representing some 300 hospitals, homes for the aging and other health care agencies throughout the country, as well as some 2000 personal 75-502-76- -36 members who are engaged in the delivery of health care services. With me is Kenneth E. Williamson, the Washington Representative of the Association. We greatly appreciate the opportunity to present the position of APHA on S. 3205. Mr. Chairman, let me say at the outset that the members of APHA appreciate your concern about the rising costs of the Medicare and Medicaid programs to the taxpayers of this nation. We are grateful for your commitment to the development of reforms which will prevent the cutting and slashing of payments to hospitals and physicians indiscriminately and inequitably and the imposing of arbitrary controls and indiscriminate limits on payments to hospitals such as the administration's proposed ceilings on hospital cost increases. We are concerned, however, that the reforms which are proposed as solutions to the problem of escalating costs of hospital services under Medicare and Medicaid be based on an awareness of the factors which are responsible for such increases, and that the reforms address those factors rather than taking a simplistic approach of limiting reimbursement. We believe that this bill demonstrates your awareness of the enormity of the problems faced both by the federal government and the health care institutions of this nation and that it is a step in the direction of addressing needed reform. Mr. Chairman, we will comment on only certain sections of this bill which we feel are of more crucial significance to our members. Section 2. Establishment of Health Care Financing Administration The bill addresses the current fragmentation of health programs by proposing to merge four existing programs under one administration. We favor efforts to bring about the increased coordination of federal programs. However, we feel that fragmentation and a lack of uniformity in federally financed health programs is likely to be perpetuated if the proposal for two assistant secretaries is enacted. The separation of the administrations for financing and for delivering health care is not in the best interest of the health care services of this nation. Therefore, we support the creation of a cabinet-level Department of Health rather than as a mechanism for the most effective coordination of the setting of national health policies and administration of federal health programs. Section 4. State Medicaid Administration This section reflects the awareness of the Chairman of the problems besetting hospitals because of the performance of states in administering Medicaid. We support the proposal to establish specific performance criteria for state administration of Medicaid which will result in more prompt payment of claims and vastly improved administration of the program. Section 8. Termination of Health Insurance Benefits Advisory Council APHA believes that the use of expert non-governmental advisors through HIBAC has been the source of significant contribution to the development and implementation of federal programs. Such advisory group appears to be of potentially great importance to such major programs as Medicare and Medicaid, especially during a period of transition. APHA recommends the continuation of HIBAC and a greater utilization of this resource by government, or, in the case of its dissolution, the formation of a new policy advisory council with added authority and responsibility in advising the Secretary of HEW on health programs. Section 10. Improved Methods for Determining Reasonable Costs of Services Provided by Hospitals The APHA is concerned with the proposal for the classification of institutions for the purposes of reimbursement on a comparative basis. We can understand the attractiveness of such a methodology to the federal government. However, we feel that great difficulty will be experienced in the technical aspects of devising such a methodology for classifying institutions for purposes of reimbursement. The fact that S. 3205 deletes from the comparison procedure for routine per diem hospital costs some of the elements over which an institution has little or no control is a vast improvement over Section 223 of P.L. 92–603. APHA is on record as supporting a reimbursement system which includes prospective reimbursement administered on a state level under federal guidelines. We strongly urge that this proposed legislation be amended to permit a state administered rate review option for the determination of institutional reimburse ment based upon prospective payment methodology under federal guidelines. State level rate review on a prospective basis will assure that the variables among institutions, which are often very local, are taken into account and that the full financial requirements of institutions are provided. Therefore, we urge that you consider amending the proposed legislation by permitting as an option to a classification system of hospitals a state prospective rate review system involving all payers. Although APHA supports an amendment which provides for a state level prospective rate review option, we realize that a methodology must be devised for those states not willing or able to exercise the option. For those states a classification system would be appropriate. We are greatly concerned that the classification system be devised with full consultation from the field of health care and government agencies. We therefore recommended that this committee bring together a group of technical experts who have been involved in MedicareMedicaid reimbursement matters over the years. Representatives should include persons from associations of providers, Social Security Administration, health care institutions, congressional staff, Blue Cross Association, and etc. These experts would discuss in depth the basis for the classification system and the appropriateness and the validity of the components now included in this bill. We believe that the formation of such a panel of experts would be in keeping with the spirit of openmindedness expressed by the chairman when you introduced the bill and that it would prove to be of substantial assistance in forming a workable and equitable method of classification. Further I want to state that we concur with the addition of an incentive reimbursement system to the Medicare reasonable cost controls which is now in effect. We commend the chairman for his proposal to move from a retrospective costly reimbursement system to one of prospective reimbursement. We also urge that the bill be modified to provide for a new method of reimbursement for Medicaid which would assure that payments are made at a reasonable level so that hospitals will not be forced to provide services for those patients at rates which are below cost. Section 11. Inclusion in Reasonable Cost of Hospital Services on Allowance for Retirement or Conversion of Underutilized Facilities We support the demonstration project proposed in Section 11 by which federal financial support would be provided institutions which apply for such support on the basis that their operations would be made more efficient or cost-effective by the closing or conversion of underutilized beds and that they would also become eligible for positive incentives under the provisions of Section 10. Section 12. Return on Equity to be Included in Determining “Reasonable Cost" of Services Furnished by Proprietary Hospitals APHA supports the principle implemented in this section-that an adequate return on investment is a reasonable expectation in business. By the same principle, we urge the Committee to amend this section to provide for an adequate operaitng margin on reimbursement by Medicare and Medicaid to not-for-profit institutions, since no institution can continue to operate only on the basis of costs. Section 22. Hospitals-Associated Physicians We recognize that the problem which this section attempts to address is not a new one for hospitals or the government. We express grave concern, however, over the proposal that the federal government involve itself with such specificity in determining the types of contractual arrangements between hospitals and physicians We recognize that cases of unreasonable compensation can be documented, but believe that to enact legislation prohibiting a specific type of contract removes decision making from its proper authority-management and the governing boards-and places it in Washington. This eventuality serves neither the best interest of the community or the government. We are concerned further that the language of the bill will not accomplish the intended result of reducing hospital costs. There are those who have studied this proposal who are convinced that the aggregate costs resulting from categorizing the various services of these physicians and the mandating of a fee-for-service basis of reimbursement for personal patient services will be greater than those now being experienced. Section 40. Procedures for Determining Reasonable Cost and Reasonable Charges APHA vigorously opposes this section. The Medicare law already contains adequate provisions to determine reasonable costs. Further, the proposal is a gross infringement on the management prerogative of individual institutions. SUMMARY OF RECOMMENDATIONS Mr. Chairman, in conclusion we would like to summarize some of the recommendations that we have made here today. (1) We support efforts to end the current fragmentation of federal health programs. However, we recommend, consistent with our previous position, the creation of a cabinet-level Department of Health as a mechanism for the coordination of the administration of all federal health programs. (2) We recommend the continuation of a Health Insurance Benefits Advisory Council, and a greater utilization of the resources by government. However, in the case of its dissolution, we recommend the formation of a new policy advisory council with added authority and responsibility in advising the secretary of HEW. (3) We recommend that Section 10 be amended to permit as an option to a classification system of institutions for the purposes of reimbursement on a comparative basis a reimbursement system which includes prospective reimbursement administered on a state level under federal guidelines. (4) We recommend that the committee in devising the classification system to determine reimbursement for institutions in those states not able or not wishing to adopt state administered prospective reimbursement under federal guidelines, consult in depth with a panel of experts drawn from association providers, hospital executives, Social Security Administration, Blue Cross and Other third party payers, congressional staff and etc (5) We recommend that the bill be modified to include a new method of reimbursement for Medicaid to require that these payments be made at a reasonable level. (6) We recommend that Section 12 be modified to assure an adequate operating margin on reimbursement for Medicare and Medicaid for not-for-profit institutions in recognition that no facility can continue to operate only the basis of cost. (7) We recommend that Section 22 be modified so that these specifics of contractual arrangements between hospitals and physicians are left to the management prerogatives and that further studies be conducted to determine more appropriate ways of assuring the accompilshment of the objective of controlling excessive compensation to hospital based physicians. (8) We recommend the deletion of Section 40 in its entirety. Mr. Chairman, we thank you and members of this committee for considering these views and for giving us this opportunity to appear before you. Thank you. Re S. 3205. Mr. JAY CONSTANTINE, NEBRASKA ASSOCIATION OF COUNTY OFFICIALS, Lincoln, Nebr., July 26, 1976. Staff. Senate Finance Committee, Health Subcommittee, Dirksen Senate Office Building, Washington, D.C. DEAR MR. CONSTANTINE: Enclosed you will find copy of letter sent to The Honorable Carl T. Curtis on July 23, 1976, regarding the above listed Medicare and Medicaid Administrative and Reimbursement Reform Act. Please insert this into the record of the hearings for S. 3205 for July 26, 1976. Very truly yours, Hon. CARL T. CURTIS, ARNOLD RUHNKE, NEBRASKA ASSOCIATION OF COUNTY OFFICIALS, U.S. Senate, New Senate Office Building, DEAR SENATOR CURTIS: We at the Nebraska Association of County Officials o been following efforts for medicaid reform with much interest and concern. As you may know, Nebraska counties paid 20.3% ($13.2 million) of the state's medicaid program costs for FY '76. It is also our understanding that many counties in other states pay a substantial share of the program and/or administrative costs of their states' medicaid programs. This financial involvement causes a tremendous strain on county budgets. Nebraska counties along with many other counties nationwide are also responsible for eligibility determination in the medicaid program. The complicated regulations now in force contribute to the high error ratio and the large amounts of bureaucratic red tape further disrupting the medicaid system. Our Washington, D.C., national office, the National Association of Counties, has informed us that they will be testifying before the Health Subcommittee of the Senate Finance Committee on Monday, July 26. We are in agreement with the National Association of Counties position on medicaid reform and feel that this is an excellent time for our association to inform you of our position concerning Senator Talmadge's bill (S. 3205). We support the Medicare and Medicaid Administrative and Reimbursement Reform Act (S. 3205) and commend Senator Talmadge for his efforts. The Talmadge bill will help eliminate the overlap and red tape now in existence and will also help reduce the high error rates. Some of the proposals in S. 3205 which we do support are: (1) Consolidation of the Medical Services Administration (Medicaid), the Bureau of Health Insurance (Medicare), the office of Nursing Home Affairs (Long-Term Care) and the Bureau of Quality Assurance (PSRO's) into a single administrative unit-the Health Care Financing Administration. Coordination under one financing unit can lead to more uniform and consistent policy development. (2) Creation of a Central Fraud and Abuse Unit charged with the overall monitoring of the various health care programs. The unit would assist federal and state investigative activities as well as provide support to federal and state prosecutors, upon request. (3) Provision of technical assistance to the states and counties for improving the management, administration and operation of the Medicaid program. (4) Requirement that regulations pertaining to this act must be issued by HEW Secretary within 13 months of passage. (5) Requirements for states to comply to standards in eligibility determination, quality control, claims processing and program reports and statistics. However, we also feel that the October 1977 date for complying is too early for states and counties to meet the requirements. We strongly urge the Talmadge bill to keep its 30 days processing standard for Medicaid eligibility determination and 60 day processing period for medically needy disabled applications. This ensures the applicant and the local health care facility that fast action will be taken. The Nebraska Association of county Officials feels that an effective administration, not bureaucracy and red tape, will help reform the Medicaid program. We sincerely hope that you will support S. 3205 and help bring the needed administrative reform to the Medicaid program. Very truly yours, ARNOLD RUHNKE, STATEMENT OF P. RAPHAEL CAFFREY, M.D., PRESIDENT, PATHOLOGY AND CYTOLOGY LABORATORIES, INC. I am a physician and pathologist practicing primarily in the Lexington, Kentucky area. I am President of Pathology and Cytology Laboratories, Inc., a corporation which has approximately 60 employees. Pathology and Cytology Laboratories, Inc. operates laboratory facilities principally in Lexington, Kentucky, serving 15 hospitals in Central and Eastern Kentucky, having an aggregate capacity of approximately 1,400 beds. The corporation also provides necessary clinical laboratory services to approximately 300 physicians in the Central and Eastern Kentucky area. The corporation presently employs seven qualified pathologists, a Ph. D. bacteriologist on its staff. Through its professional employees, the corporation acts as a consultant or director of various hospital laboratories. The aim of the corporation is to provide the highest quality of clinical laboratory services at the lowest fees consistent with maintaining the quality of its services to its patrons in Central and Eastern Kentucky. |