Mr. GORMLY. We will appreciate that. Thank you.

Mr. Chairman, we as providers of health services in California comprise an organization of 1,300 private facilities, with approximately 55,000 medical care beds. All are licensed by the State; mostly as nursing and convalescent homes, and some as mental hygiene long term care facilities.

Virtually all of these institutions-both proprietary and taxexempt-currently provide services to patients under the title 19 program, known in this State as Medi-Cal, and to which I shall hereinafter refer.

Of equal interest is the fact that over half of these facilities-over 700 in number-are title 18 medicare-certified, thus forming by far the largest State group of extended care facilities-ECF's-in the Nation.

In addition, our California membership includes hundreds of residential care homes and institutions-all of them licensed. I mention this group particularly because of its increasing importance and potential as this committee weighs the advisability of defining various levels of aged and needy patient care to meet more exactly the needs of the individual elderly and convalescent ill.

I might add that our State association is dedicated first and foremost to the constant betterment of patient care. As a demonstration of this, a primary requirement of membership for each facility is State licensure, and the meeting of State-set standards of care. Conversely, loss of licensure terminates membership.

In the light of our prime interest in the patient, then, I will respond briefly to the suggested question: What has been the effect of the medicare and Medi-Cal programs upon the kind of services provided by our member institutions-and what recommendations do we have for further legislative or policy change?

MEDI-CAL AND MEDICARE STANDARDS

In general, there seems little doubt that the two programs have resulted in higher standards throughout California. In fact, the newly required title 19 Medi-Cal or skilled nursing home standards are nearly approaching Title 18 medicare standards in terms of costs.

Our California association has just completed a cross section study of 309 facilities to find there is now only 44 cents difference per patient day between a Medi-Cal skilled nursing home and a freestanding ECF. On the average, then, Medi-Cal standards are catching up costwise with medicare.

Mr. ORIOL. May I ask why you so pointedly say "costwise?" What other comparisons might be made?

Mr. GORMLY. Well, the standards of the title 19 program have been elevated, and they have, in fact, come up almost to the medicare standards, and this in effect raised the cost-standardwise they have

to

Mr. ORIOL. So that cost follows standards?

Mr. GORMLY. Yes, they are going down the same road.

The basic reason for this growing similarity is easy to identify: it is the increasing nurse staffing requirement the major cost item in today's nursing and convalescent home. Nevertheless, the delivery of good quality nursing care in these Medi-Cal institutions constitutes

government's biggest bargain in health care for the elderly and needy at a time when general hospital care costs are soaring toward the hundred-dollar mark per patient day.

Mr. Chairman, despite the foregoing analysis favoring improved patient care standards overall, we are confronted with many obstacles in our efforts to deliver services efficiently and economically.

California providers are not unique in this regard because standards and regulations are promulgated at the Federal level but implemented at the State level often with inconsistent, rigid, and inflexible interpretations.

Further, we in California nursing homes live with the necessity of pleasing several governmental masters. Federal HEW sets skilled nursing home standards as a title 19 requirement. The State department of public health has separate licensure standards in many ways in difference with the Federal program.

The department of health care services administers title 19 standards, adding its own inspired regulations and interpretations. And last, but by no means least, the State department of finance-unconcerned with patient care standards-unilaterally sets the budget.

Mr. ORIOL. That department of health care services-that's the State department of health care services; is it?

Mr. GORMLY. Yes. These are State agencies I am talking about. Thus our facilities have been and continue to be caught and squeezed between demands for higher and higher standards, while denied just recompense for providing care to our elderly.

In the interest of time, Mr. Chairman, we would like to conclude with brief references to three specific problem areas, by way of responding to the question in your opening statement: "Are present medicare and Medi-Cal policies intensifying old problems in the organization of health services or causing entirely new problems?"

SPELL OF ILLNESS

Mr. Chairman, the American Nursing Home Association has had a longstanding controversy with the Social Security Administration concerning definition of a "spell of illness" for purposes of determining covered and noncovered benefits under title 18. I will not take up the committee's time now, but with your permission submit for the record excerpts from association testimony before the Senate Finance Committee on H.R. 12080-1967 amendments to the Social Security Act, which discussed this issue in detail.* We feel this is a good example where an existing policy denies the elderly benefits which Congress intended them to have.

RETROACTIVE DENIAL OF BENEFITS BY INTERMEDIARIES

Another area of concern to both nursing homes and the beneficiaries is the retroactive denial of benefits after beneficiaries have been certified for services. This is the result of social security guidelines being interpreted by fiscal intermediaries in a manner offering no flexibility. In effect, the intermediary overrides the utilization review commit

*See app. 1, p. 739.

tee's decision. Not only is this a form of practicing medicine but it is an injustice to the patient needing medical care and to his family, often unable to pay for services already provided in good faith by the facility, but suddenly "uncovered services.'

In this connection, I have personally received this reaction from several of the Western State associations making up region VIII of which I am vice president. Their responses to the subject matter before this committee are still coming in. I want to assure you, Mr. Chairman, that the reports on medicare and title 19 in Arizona, Nevada, Oregon, Washington, Idaho, Utah, and Hawaii will be filed with your committee within the specified time limit.

Concluding our comments on retroactive denial of benefits, this situation which has continued for almost a year shows hope of clearing up. Some longstanding denials are now being authorized to be paid under instructions issued September 23 by Director Thomas M. Tierney of the Bureau of Health Insurance.

While we are gratified at this progress, we feel that present policies continue to hamper the programs for the elderly.

Mr. ORIOL. Mr. Gormly, if I may interrupt?

For one, we will be happy to receive those reports.

For another, I see Mr. Mulder is still here, and we are interested in full discussion, so if he has any comments to make at the end of this discussion, perhaps you would care to remain?

Mr. GORMLY. Fine.

Perhaps I might elaborate and ad lib a little bit here on this retroactive denial. What has really happened is that the care has been provided the patient under title 18, the billing submitted to the fiscal intermediary, and the patient has gone home thinking his bill has been paid, and that he was covered under an insurance program.

And then payment was not made for the care going back 6 months. Mr. ORIOL. And it is the individual himself who becomes responsible for ultimate payment?

Mr. GORMLY. Well, the recipient of medicare-the beneficiary of medicare-assumes that he has an insurance program covering his illness, and all of a sudden by some decision made by some-not necessarily a medical staff-he is not covered under the program.

Mr. ORIOL. Who is ultimately responsible for paying that bill? Mr. GORMLY. The patient-if he signs a financial responsibility. In other words, if he signs a financial responsibility statement saying he was responsible for his debt, regardless of governmental coverage or any other insurance coverage, then he would be responsible.

But trying to go back 6 months and tell a patient, "I am sorry, your benefits didn't come through"-maybe the patient died-maybe he has moved. The point is, many times you can't recover the cost.

Mr. ORIOL. So the nursing homes are bearing some financial loss because of this?

Mr. GORMLY. In Kansas City there were over $300,000 in claims disallowed-and arbitrarily disallowed.

Mr. ORIOL. And how were those claims paid?

Mr. GORMLY. They were not paid.

Mr. ORIOL. In other words, the nursing home

Mr. GORMLY. They couldn't find the patient.

Mr. ORIOL. They could not collect? We have received reports from elsewhere on this very problem, and we are very interested in it. Mr. GORMLY. Yes, very well.

PROPOSED CHAPTER 9 OF PROVIDER REIMBURSEMENT MANUAL

Finally, we would like briefly to mention the difficulties with which owners of ECF's and skilled nursing homes will be confronted under a proposed draft of chapter 9 of the Provider Reimbusement Manual now being considered by SSA. We were asked, along with other organizations, to submit comments.

Frankly, Mr. Chairman, we find the proposed draft objectionable, and moreover we feel that SSA is asserting authority that Congress did not intend it to have. As stated in our comments submitted to SSA:

Our primary objection * ** is that it is invalid and in violation of Section 1801 of the Act. Section 1801 provides in part that "Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control * ** over the compensation of any officer or employee of any institution, agency or person providing health services ***" Nothing could be clearer than the fact that the Social Security Administration is attempting to regulate in an area from which it has been conclusively foreclosed by Congress. Since time is of the essence, Mr. Chairman, we wish only to cite this as another example of legislating by regulations, and/or guidelines, which will impair the smooth operation of needed programs of elderly patient care.

In concluding, we wish to express our appreciation for this opportunity to present comments on the effects of medicare and Medi-Cal.

I would particularly like to put in the record the California Association's gratitude for the cooperation and assistance received from Mrs. Mercia Leton Kahn-Regional representative for the Western States of the Social Security Administration-in developing title 18's program in ECF's here in the Far West.

Similarly, the State Department of Public Health of California, and the Department of Health Care Services have been most helpful and cooperative, in their acting capacities as arms of the Federal Government on behalf of both the medicare and Medi-Cal programs.

To us, our mutual relationships in bettering elderly patient care is a fine example of government and the private sector working together in a common cause *** which is the same noble cause that brings us all here today.

Mr. ORIOL. Thank you very much, Mr. Gormly.

I might add that we are impressed by the evidence of the very responsible position taken by the American Nursing Homes Association in its statement. The Nursing Homes Association's statement on matters that are of concern to the Federal Government because of the high level of assistance and support it gives.

So we really thank you.

Do any other members

Mr. GORMLY. If we may have another minute, I would like to give an example of what happens in this "spell of illness" thing.

Unless you are familiar with it, or unless you prefer me to submit it for the record.

Mr. ORIOL. Well, we are getting-we are late-we are not just getting late. It might be better to submit it for the record.

A written question that we will submit to you in writing is: How the intermediate care facility requirement under the 1967 amendment is affecting you here in California.

In Washington they are very concerned about it, and we want to known how it is affecting you.

Mr. GORMLY. We have filed-I believe objections to the definition as published in the Federal Register, because we feel that intermediate care is a care concept that should encompass from the title 19 standards going down through licensed residential care facilities, because we don't think that the intermediate care patient is a static thing-that he remains in one spot.

He will move from slot to slot. Maybe he will require nursing care 2 weeks and then be able to go into a residential care facility providing another type of program.

And that is our main difference with the concept of intermediate care as published in the Federal Register.

Mr. ORIOL. Thank you.

Mr. Mulder, did you have anything you wanted to discuss at this point?

Mr. MULDER. No. The points that Mr. Gormly discussed were primarily points to do with medicare.

Mr. ORIOL. Thank you. Thank you very much.

Mr. GORMLY. Thank you.

(Subsequent to the hearing, Senator Williams asked the following questions in a letter to Mr. Gormly :)

1. What are the most common reasons given for retroactive denial of nursing home benefits? We would like to have the reports from individual states for our hearing record. Have any improvements in the situation occurred since Director Tierney's directive of September 23?

2. What will be the likely effects of establishment of the "Intermediate care" category in California? Will redefinition of state categories be necessary? (The following reply was received:)

1. The common reason given for retroactive denial of Medicare nursing home benefits in California as well as other states is that the patient is not qualified to receive such services. This declaration made by the fiscal intermediary thus overrules completely the physician's medical decision.

Director Tierney's instructions have lately begun to improve the situation. 2. The likely effect of establishing "Intermediate Care" in California would be to give official sanction to a continuing deficient level of skilled nursing home care, thru by-passing the higher Title XIX standards already pending implementation in 1969.

Pressure from agencies concerned with Medi-Cal costs would tend to result in moving patients "down" from Medi-Cal to Intermediate Care: the only practical difference being a reduction in professional nursing coverage from "around the clock" to day shift only. Already some 250 small nursing homes are expected to be de-certified from Medi-Cal in 1969 because of this very "difference," i.e., they cannot meet the higher standards of patient care.

There is also considerable question as to how many Medicare and Medi-Cal certified facilities would seek to provide Intermediate Care for the same though transferred-downward patients at a lower reimbursement rate when they must be fully staffed and tooled up to the higher standards.

The California State Association's position on Intermediate Care, based upon the H.E.W. guidelines requiring RN and LVN daytime staffing is that "the quality of patient care would be seriously jeopardized by such a program and accordingly is incompatible with the State Association's standing policy advocating higher standards of patient care in nursing homes."