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labor's negotiated programs? There certainly appears to be good and sufficient reason now for some of organized labor's top policy people to start meeting with some of the administrators of the important plans to see what can be done.

4. There will be many further problems with the addition of the “individual physician fee profile" as a criterion in the determination of the percentile control point. The problems will continue whether a final control point is located at the “top of the range" (or at the 90th percentile plus), or somewhere around the middle of the range, or even at the bottom of the range.

It is my understanding that to date Blue Shield has been using its own programs to represent the "usual and customary" universe. Their programs undoubtedly constitute a very broad sample perhaps the broadest that could be found in California. But if the reliance is on Blue Shield programs alone to establish what is usual and customary, then a vast amount of other, non-Blue Shield “usual and customary" experience is left out of the calculation. Have labor's negotiated programs ever been asked to give CBS or the state any information on their physician charge profiles ? Probably not, and the whole mainstream of medical practice under negotiated health care programs has probably been left out of the determination, to date, of what usual and customary actually is.

Presumably, the use of an individual physician fee profile as a criterion in determining the maximum fee level for MediCal claims, will bring into consideration that “other, non-Blue Shield" experience. It will also bring into consideration a host of new problems in gathering and interpreting data on physician's fees.

To mention only one such problem, the fiscal intermediary will have to keep track of the entire range of each individual physician's fees for each procedure, as charged to all kinds of different, non-govermental, group and individual purchasers. Presumably, this information will be gathered from all physicians who participate in the Medical program by mail questionnaire. Of course, the respondents will know, when they get the questionnaire, that their answers are going into the determination of the price MediCal will pay for similar services rendered to recipients. What kind of ojectivity, either in the gathering or in the interpretation of the fee data, will be possible in this situation?

At every turn, the Medical program is still confronted with the need for objective data and information, which is still not being supplied to the program.

At every turn, the program is still getting answers to its problems which are primarily in terms of the special interests of the providers of services.







Mr. Chairman and Members of this committee, my name is David R. Mosher and I appear on behalf of the American Nursing Home Association. I am a nursing home administrator and the owner of two nursing homes certified as Extended Care Facilities in St. Petersburg, Florida.

Nursing homes are playing a major role in the operation of both the Title XVIII (Medicare) and Title XIX (Medicaid) programs. The role of the nursing home in both of these programs, we are convinced, will be expanded to even greater limits in the months and years ahead.

I say this because nursing homes, whether certified as Extended Care Facilities under Medicare, or operating as skilled nursing homes under Title XIX, provide a tremendous cost-saving service for government.

Those certified as ECFs are saving the Social Security Administration, the Federal Treasury and ultimately the American taxpayer, tens of millions of dollars.

*See statement, p. 703.

We do not know if some of these Rules and Regulations issued as State Agency Letters and Letters to Fiscal Intermediaries without regard to the Federal Administration Procedures Act and without publication of them in the Federal Register were first presented to Health Insurance Benefits Advisory Council, for we are not privy to the minutes of HIBAC. On the other hand, we do know, that many of them have been issued without prior consultation with national organizations as provided for under the Social Security Amendments of 1965 (P.L. 89-97). Let me cite a few examples : Spell of illness

Directing your attention to the definition of a “spell of illness" presently proposed by HEW in State Agency Letter No. 65. This letter will affect state Title XIX programs by increasing the costs thereto both to the individual states and to the Federal Government while working a hardship upon the patient.

In Section 1861 (a), "spell of illness” is defined as commencing with the first day a patient enters a hospital, uses his hospital and extended care benefits, and ending 60 consecutive days thereafter on which he is neither an inpatient in a hospital or an extended care facility.


An “extended care facility” for the purposes of "spell of illness" is defined in Section 1861 (j) (10) as a facility "which is primarily engaged in providing to inpatients (a) skilled nursing care and related services for patients who require medical or nursing care or (b) rehabilitation services for the rehabilitation of injured, disabled or sick persons.” Congress specifically defined an "extended care facility” for the purposes of "spell of illness.” Now Social Security Administration has radically altered Congress' definition.

The Social Security Administration defines "extended care facility" so as to prolong a “spell of illness” as a facility which is in charge of a licensed practical nurse (who need not be a graduate of a state approved school) with aides, orderlies or attendants on the other two shifts. Such a facility fails in the essential element that it be primarily engaged in skilled nursing care and services for patients who require medical or nursing care. State Agency Letter No. 65 adds a great deal of confusion to the health care field. More important, however, are the results which follow. This definition denies our aged people medical benefits Congress intended them to have.

THREE EXAMPLES Let's take 3 examples. Patient A who is 75 years of age and living in a custodial home. He can get around, but he needs someone to be certain to see that he eats his meals and takes his medicine. Patient A has a severe heart attack. He goes to the hospital for 90 days. He is then transferred to an "Extended Care Facility” for 100 days. He then goes back to the custodial home where he has lived for the past two years. He can never again become eligible for Medicare benefits under Letter No. 65 because there is 8 hours a day of “nursing service" available.

Two years later he falls and breaks his leg. Under Letter No. 6.5 he can obtain no medicare benefits because this residential care home is defined as an ECF or skilled nursing home because it has an LPX as a charge nurse. The travesty lies in the fact that this residential care home is considered by SSA to be an ECF solely for the purpose of not breaking this “spell of illness.” SSA would never certify this residential care home as an ECF or as a skilled nursing home for participation in Title XVIII or Title XIX programs. In those instances, SSA would judge this residential care home to be below the standards required of a facility for it to be certified as an ECF or a skilled nursing home.

Patient B is 68 and lives in his own home. He is not well but is able to take care of himself. He has a serious heart attack. He is in the hospital for 90 days. He goes to an "extended care facility" where he remains for 100 days. Thereafter he is transferred to a nursing home where he remains for 60 days. He then goes home and 10 days thereafter he falls and breaks his leg. He is not eligible for Medicare.

Patient C is 70 years of age. He has a serious heart attack. He goes to a hospital for 90 days and is then transferred to an "extended care facility" for 100 days. He then goes home and during the next 60 days he exhausts his 100 home health care visits under Part A. On his 61st day he falls and breaks his leg. He is eligible for Medicare benefits.

Patient C is eligible for Medicare because he had such resources that after being discharged from an extended care facility, he could be taken to his own home. He could receive 100 home health care visits and his new "spell of illness" would start 60 days from the date that he was discharged from the ECF. In other words, an individual is not required to have a 60 days “spell of health.”

State Agency Letter No. 65 makes one's Medicare benefits turn on his station in life or on the circumstances under which he is living at the time that he enters the hospital. The individual who needs Medicare benefits the most is denied them.

In each of these three instances we have a new illness but because of the technical misinterpretation placed on the word "extended care facility” by SSA two of these elderly people have what amounts to a cancellable health insurance policy where it seems certain that Congress did not intend such a catastrophe to happen.

Our objections to Letter 65 are threefold. First, it nullifies the definitions of Congress and causes undue hardships to those who need medical care most. Second, it defines a "facility primarily engaged in skilled nursing care” as one that is not rendering skilled nursing care. We have fought for over 10 years to raise standards of professional care which SSA now downgrades. Third, it makes “spell of illness” turn in part on one's station in life. We thought Medicare did away with any kind of a means test.

"Spell of illness” should be defined in terms of a new medical illness. Accordingly, we suggest that Section 1861 (a) (2) on "spell of illness” be amended to read as follows (amendment is italic):

“(2) ending with the close of the first period of 60 consecutive days thereafter on each of which he is neither an inpatient of a hospital nor an inpatient of an extended care facility, under Title XVIII for the same medical illness."







The practices which have the greatest potential for reducing the cost of medical care also have the greatest potential for improving the quality of care.

The cost reduction can be achieved by utilizing the least costly facility or service appropriate to the patient's need (and by preventing illness or the advance of illness or by providing restorative services which enable the patient to be served by a less costly facility).

The improvement in quality of care stems from developing the full constellation of facilities necessary to supply appropriate care at lower cost. The over-utilization of high cost facilities such as the acute hospital represents not only wasted dollars but poor care because of the inappropriateness of the facility for the patient's need.

Efforts to reduce the number of individuals in need of expensive services have been advocated by many and we do not wish to be trite by joining sanctimoniously in such advocacy. Nevertheless, there is no broad-based, consistent, effective program of prevention and early diagnosis for the aged in this country and such programs must be established to serve the ends of lower cost and higher quality. Facilities which must be available in addition to the acute hospital include:

Intensive Rehabilitation Unit.
Extended Care Facility.
Long Term Care Facility :

Nursing Homes.

Homes for Aged.
Coordinated Home Care.
Individual Home Services : i.e., Nurse, Physical Therapist, Medical Doctor,

Day Centers :

Outpatient Department.

Private Office. Substitute Homes. Multi-disciplined patient care planning teams must be involved early after hospital admission in order to shorten hospital stays and choose the appropriate alternative to hospitalization. Such teams can also participate in planning which prevents hospitalization.

The greater the success we have in using appropriate alternatives to hospitalization, the more the cost of care per patient day in the acute hospital must go up, since only the sickest patients requiring the most service and use of the most elaborate "hardware” will be served in such institutions.

Ultimately, then, we must arrive at a true assessment of health costs in terms of total community expenditure per 1,000 persons over age 65. Of the two costs involved, the one expressed by the per diem rate in the hospital must go up. Our only hope there is to stabilize the rise, i.e. to diminish the speed of rise. The other cost expressed as communal cost can go down by coordinated community effort. The community can make certain that its dollars are effectively spent and that it gets more for its money through avoidance of unnecessary duplication and of over-utilization of expensive services and facilities.

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