Believes the ideal approach would be to broaden the long-range proposals contained in S. 1470 to reach beyond Medicare and Medicaid and insure initiation of the program at the earliest possible date.

Recommends that consideration be given to the following areas in the development of long-range cost-containment strategy:

1. More effective utilization of non-physician health practitioners.

2. Increased emphasis on out-patient care.

3. Greater reliance on pre-admission testing which, according to the Blue Cross, has cut patient stays from one to two days.

4. Greater utilization of home health care services.

5. Additional public and private support for consumer health education including greater emphasis on good health practices along with a more intensive commitment to preventive health care.

STATEMENT OF THE AMERICAN SOCIETY OF CLINICAL PATHOLOGISTS

The American Society of Clinical Pathologists appreciates the opportunity to submit the following comments on S. 1470, "The Medicare-Medicaid Administrative and Reimbursement Reform Act".

The American Society of Clinical Pathologists is a non-profit, educational and scientific medical specialty society, representing nearly 23,000 medical laboratory professionals, including approximately 6,500 Board-certified pathologists. Because of this vital involvement in the health care system of this nation, we are, of course, concerned with the federal reimbursement programs, Medicare and Medicaid. We commend Senator Talmadge and the members of the Committee for their work on this complex reform legislation.

We would like to confine our comments on S. 1470 to the sections of the bill which relate to reimbursement for physician's services: Sections 12 and 15.

SECTION 12: HOSPITAL-ASSOCIATED PHYSICIANS

Section 12 of S. 1470, which outlines reimbursement policies for hospitalassociated physicians, defines such services by excluding services performed “as an educator, an executive, or a researcher; or any professional patient care service unless the service (A) is personally performed by or personally directed by a physician for the benefit of the patient and (B) is of such a nature that its performance by a physician is customary and appropriate". Further, the bill defines "pathology services" as follows:

Pathology services shall be considered "physicians' services" to patients only where the physician personally performs acts or makes decisions with respect to a patient's diagnosis or treatment which require the exercise of medical judgment. These include operating room and clinical consultations, the required interpretation of the significance of any material or data derived from a human being, the aspiration or removal of marrow or other materials, and the administration of test materials or isotopes. Such professional services shall not include professional services such as: the performance of autopsies; and services performed in carrying out responsibilities for supervision, quality control, and for various other aspects of a clinical laboratory's operations that are customarily performed by nonphysician personnel.

These definitions of services performed by physicians, and more specifically. pathologists, do not take into consideration the physician component which is a factor in all of laboratory medicine. We suggest that the language in Section 12(a) (2), 3 be deleted, and we support the inclusion of the following, in lieu of that language:

(3) Pathology services shall be considered physicians' services where the physician performs acts or makes decisions with respect to a patient's diagnosis or treatment which require the exercise of medical judgment. Exercise of this medical judgement includes operating room and clinical consultations, the interpretation of the significance of examination of any material or data derived from a human being, the aspiration or removal of marrow or other materials, the administration of test materials or isotopes, the performance of autopsies, and services performed in carrying out medical responsibilities for supervision, quality control, and the other aspects of a clinical laboratory's operations.

It is vitally important that a clear understanding be established as to the variety of services rendered by physicians throughout the spectrum of the health care system. Only then can a proper method be established for reimbursement for these services. We submit the following examples of the complexity of the physician's role.

Physicians as managers

In the next twenty years it will almost certainly have been learned that the managerial role of the physician cannot any longer either be bypassed by health care planners or ignored by physicians, since the practicing physician in any system of health care is and will continue to be the key decision-maker in the use of services, equipment and facilities. This critical decision-making function in actual day-to-day practice necessitates physician involvement in many managerial functions, such as planning, development of services, cost control, quality assurance (including over and under-utilization of services), and even operations such as surgical procedures. As health care delivery systems become increasingly complex, and they inevitably will, the managerial role of physicians will become correspondingly more important and more widely recognized. Management skills will be needed by physicians together with greater understanding of the organizational dynamics of working with other autonomous professionals and team operators. This is already underway. New professional skills are being developed which will become formalized, and physicians will be far more effective participants in the management operations of health care programs assistance than is the case today.

Automation and programmed health care services

Automation and programmed services of various kinds will play a prominent role in health care in the future. There is general agreement that computer banks will be used to store patient care data for both mobile and immobile populations. Inforation will be available on an on-line basis, with telephone access from distant offices, hospitals or patient bedsides. Disease detection and diagnosis will be aided by such things as automated screening systems, computer-assisted histories, paramedical physical examinations, multi-channel auto-analysis, implanted monitoring of body systems, already available telemetry of various kinds and computer-assisted diagnosis.

Since all of this will necessarily be under the supervision of physicians and used by physicians, considerable technological knowledge will be required of the physician. Automation and programmed assistance will be expected to free the physician's time and extend his reach and thus enable the professional to provide more services to more people. Whether personalization of health care will improve or deteriorate under these conditions of practice remains to be

seen.

SECTION 15: USE OF APPROVED RELATIVE VALUE SCHEDULE

Section 15 of S. 1470 provides for the establishment of a system of relative value scheduled for medical services. The American Society of Clinical Pathologists support the establishment of such a system.

Our Society supports the concept of multiple options for compensation arrangements. We view the relative value schedule as a viable option, along with direct billing, and lease arrangements.

We also strongly support the inclusion of a physician component in a relative value schedule for pathology services. The physician component varies in each laboratory service, and is determined separately for each item. It is that part of the service or procedure which requires the pathologist's professional participation-ranging from his maintaining of high standards in the laboratory, to his actual interpretation and diagnosis. We believe that a relative value schedule must include a provision for the physician component.

We support the amending of Section 15, Subsection (b), to include the following:

"(b) Upon development of a proposed system of procedural terminology and its approval by the Secretary of Health, Education and Welfare, it shall be published in the Federal Register. Interested parties shall have not less than six months in which to comment on the proposed system and to recommend relative values to the Secretary for the procedures and services designated by the terms. In the instance of hospital-associated pathologists' procedures and services, such relative value schedules shall include

physician components for each clinical pathology laboratory procedure. Comments and proposals shall be supported by information and documentation specified by the Secretary."

This addition to the language of S. 1470 properly reflects the pathologist's role in laboratory services.

We thank the members of the Health Subcommittee for this opportunity to comment on certain provisions of S. 1470.

STATEMENT OF THE AMERICAN SOCIETY OF INTERNAL MEDICINE, SUBMITTED BY WILLIAM P. DAINES, M.D.

SECTION 2-CRITERIA FOR DETERMINING COST OF HOSPITAL SERVICES This section would establish an incentive system for reimbursing hospitals' "routine operating costs" under federal health programs. Hospitals would be classified according to bed size, type, and other criteria; cost would be determined for each classification through a uniform accounting and reporting system; and a per diem rate for routine operating costs would be determined for each hospital. The American Society of Internal Medicine believes it is important to promote hospital efficiency and contain costs and that this approach is the best yet proposed by Congress. Its most desirable features are the positive incentives for efficiency and its recognition of the differences in individual hospitals.

We do have some concerns about administration of the program but will not detail them at this time. To provide the desired flexibility for dealing with individual institutions, the program must necessarily be complex. If it is enacted the development of regulations and their implementation will be critical to its success and we sincerely hope the Secretary of HEW will be responsive to input from the private sector during the process.

We are pleased that the program would be implemented "for informational purposes" in 1979 but not become effective until fiscal year 1981. This time is necessary to develop an acceptable hospital classification system and administrative capacity to implement the program and to allow hospitals to adjust to the change in reimbursement methods. We believe this time should also be used by HEW to conduct trails and report to Congress on the programs' expected impact before it becomes effective. Although similar reimbursement systems have been tried on a limited basis before, the results have been both good and bad. This particular model would be applied for the first time nationwide, and careful evaluation prior to implementation will be critical.

SECTION 3-PAYMENT TO PROMOTE CLOSING AND CONVERSION OF UNDERUTILIZED FACILITIES

This section would provide for reimbursing certain classifications of hospitals for capital and increased operation costs associated with closing down or conversion to approved use of underutilized bed capacity or services. ASIM supports this section.

SECTION 10-AGREEMENTS OF PHYSICIANS TO ACCEPT ASSIGNMENT OF CLAIMS

In the version of the bill introduced last year, non-participating physicians would not have been allowed to accept assignment on any patients. We objected to this strongly and commend its elimination from the current proposal. However, we oppose offering increased incentives only to a category of participating physicians. First, the differential between Medicare payment and physician charges is so great that we don't think the incentives identified would convince many physicians to accept assignment on all patients and thereby give up their right to bill patients directly. Second, if the objective is to save administrative time and cost by increasing acceptance of assignment, we believe offering incentives to all physicians to accept assignment on their patients would accomplish more.

For example, if it is cost effective to offer the multiple billing option to encourage assignment, it should be offered to all physicians who have assignment patients. If as we suspect, multiple billing would save tax payers money by itself, regardless of whether assignment is accepted or not, then we believe all physicians should be allowed to submit multiple claims for all Medicare patients.

The one dollar "administrative cost savings allowance" is arbitrary and its effect would vary from physician to physician. For example, for physicians who see relatively few patients the one dollar would provide little incentive. For all physicians this amount is insignificant when compared to the differential in reimbursement between acceptance and non-acceptance of assignment. Adoption of this provision would probably be beneficial to low quality, high volume type practices that specialize in Medicare patients in order to capitalize on the one dollar per patient incentive. Although a very small minority of physicians are likely to be involved in such practices, the result could be inferior care to its significant number of Medicare patients.

SECTION 11-CRITERIA FOR DETERMINING REASONABLE CHARGE FOR PHYSICIAN

SERVICES

This section of the bill would add an additional limitation on the determination of reasonable charges for physician services under Medicare. The Secretary would be required to determine statewide prevailing charge levels for each state. The statewide prevailing charge level would be set at the 50th percentile of the customary charges made for similar services by all physicians in the state. No local prevailing charge levels would be permitted to exceed the statewide level by more than one-third.

The intent of the original Medicare legislation was to reimburse beneficiaries based on the usual, customary, and reasonable (UCR) concept. Subsequent amendments and regulations eroded and distorted the original UCR concept and have caused a widening disparity between program reimbursement and physician charges. This accounts for most of the increased out-of-pocket expenditures by beneficiaries and the declining rate of assignment acceptance by physicians.

Imposition of a statewide prevailing charge level called for in this section may further increase this disparity. While ASIM concurs with the goal of attracting more physicians into rural areas, it does not believe restricting differentials between patients of urban and rural physicians in this manner will accomplish this goal. Curtailment of patient reimbursement for the services of urban physicians is more likely to result than movement of physicians into rural areas. ASIM recommends that this provision be deleted.

SECTION 12-HOSPITAL-ASSOCIATED PHYSICIANS

This section, although titled "Hospital-Associated Physicians", would establish a new definition for all reimbursable physician services under the Medicare program. The definition of "physician services" would exclude services performed as an educator, an administrator or a researcher, and would exclude any patient care service unless such service was 1) personally performed or personally directed by a physician for the benefit of such patient and 2) is of such a nature that the performance by a physician is customary and appropriate.

ASIM objects to this definition of what constitutes physician services. Physicians should be reimbursed under Medicare for services which are recognized as appropriate medical practice within their state. The proposed definition is vague and would be subject to regulatory interpretation that could further limit services reimbursable under Medicare.

SECTION 14-PAYMENTS ON BEHALF OF DECEASED INDIVIDUALS

ASIM supports this provision to provide greater flexibility for survivors of deceased beneficiaries in obtaining payment for services rendered to the beneficiary under the Medicare program.

SECTION 15-USE OF APPROVED RELATIVE VALUE SCHEDULE

This section would direct the Secretary of HEW to establish a system for defining medical services and procedures under Medicare Part B. This system and a corresponding set of relative values would be developed by the Health Care Financing Administration (HCFA) with the advice of professional groups and other interested parties.

ASIM strongly opposes development of a new system of terminology by HEW and cannot support the bill if this provision is included.

For a procedural terminology system to be meaningful and equitable, we believe it must accurately describe the way medicine is actually being practiced. Such a system exists in "Current Procedural Terminology, Fourth Edition" (CPT IV). We support its adoption as a nationwide uniform system to define physician services and procedures.

We believe the medical profession is in the best position to describe what it does most accurately. The American Medical Association, with the active participation of ASIM and other specialty societies, has worked long and hard since 1960 to develop precise definitions of medical services and a corresponding coding system. First published in 1966 CPT is more widely accepted than any other system. Its use is endorsed by the Health Insurance Association of America, 36 state medical associations, and 16 national specialty societies. CPT has been adopted as the preferred system for the CHAMPUS program and is accepted under Medicare and Medicaid.

The major criticism of CPT has been its infrequent updating. With the recent publication of CPT IV, a mechanism for systematic and continuing review and updating has been established. This will insure the timely inclusion of new procedures of proven clinical value as well as the elimination of outdated procedures. Directing HEW to develop another system would require the expenditure of unnecessary effort and government funds.

Past discussions with HEW officials about development of a procedural terminology system for Medicare have indicated their inclination to compromise accuracy for administrative and cost consideration.

HEW has suggested (Federal Register, May 27, 1975) adoption of a terminology system that would describe services in terms of the time they take as well as other factors. ASIM had objected to using time as a descriptor for the following reasons: 1) If time is used other more meaningful descriptors would be ignored. 2) Time is an inaccurate and often misleading measure of medical service. It fails to take into consideration differences in the complexity of illnesses, competence and proficiency of physicians, practice environment. and patient population. For example, a system describing medical services in terms of time would fail to distinguish between the value of the time spent by an internist with a 65-year-old patient with coronary disease complicated by diabetes and the time spent by a physician seeing an otherwise healthy adolescent with a sore throat. 3) Describing services (and paying for them) according to the time they take can reward inefficiency and thereby increase costs.

In spite of these arguments HEW has continued to support time as a descriptor of medical services for administrative reasons.

Although section 15 directs the HCFA to seek the advice of professional groups in developing this system, we don't believe that this will assure accurate descriptions. A system without accurate descriptions is counterproductive and unacceptable to the medical profession. Further, this section gives no recognition to the substantial efforts of the medical profession to develop a procedural terminology system. ASIM therefore recommends that this section be amended to provide for the use of the most current edition of CPT under all federal health insurance programs or be completely deleted.

SECTION 23-VISITS AWAY FROM INSTITUTIONS BY PATIENTS TO SKILLED NURSING OR INTERMEDIATE CARE FACILITIES

This section allows a Medicare patient in a skilled nursing facility or in an intermediate care facility to make visits outside the institution without such visits being regarded as indicating conclusively that the patent is not in need of the facilities' services. This is highly commendable. If more regulations which affect patient care were similarly flexible to allow application on an individual patient basis, physicians would find federal health programs much less objectionable.

SECTION 33-REPEAL OF SECTION 1867

Repeal of this section would abolish the Health Insurance Benefits Advisory Council (HIBAC). The stated reason for discontinuing HIBAC is that it is no longer significant in policy development for Medicare and Medicaid. What has not been stated is the reason-HIBAC has been denied the opportunity to play a significant role. Initially, HIBAC served as a valuable advisory group. But as the programs evolved, bureaucratic policy direction appears to have replaced