Further, administrative costs of the certified contracting agencies are superimposed on the cost of the subcontracted service, thereby increasing total program costs. If tax-paying home health agencies are being restricted as a second tier provider because of fears of their level of quality, we submit that in virtually every hearing exploring this issue during the last two years, the record attests that there is no difference in quality between proprietaries and nonprofits. This holds true even in the fraud and abuse hearings conducted by Senator Chiles on private non-profits and the Ways & Means Oversight investigation of two California proprietaries. Controls for quality must lie in a set of enforced, uniform standards applicable to all agencies. We urge the Senate Finance Committee to look closely at Rep. Cohen's H.R. 6299, which mandates a one year program to enact uniform standards for home health agencies. His bill, in diluted form, is attached to H.R. 3, the Anti-Fraud and Abuse bill, now under consideration by the House Ways & Means and Interstate and Foreign Commerce Committees. It is argued that quality control ought to be the purview of Certificate of Need programs. Look at what has happened in Florida, where this philosophy has been enacted into law. In the spring of 1976, Senator Lawton Chiles of Florida held investigative hearings in Miami and Tampa which detailed certain practices of private nonprofit home health agencies. His investigation exposed a widespread practice of private nonprofits essentially distributing profits in the form of inflated administrative salaries and benefits-all paid for by Medicare (which pays all costs for Medicare patients) through the simple expedient of turning away any patient who was not covered by Medicare. The Florida legislature enacted a law that required licensure of home health agencies effective July 1, 1975. This law also required that the agency secure a Statement of Need from the local health systems agency before it could get a license. In the closing minutes of the 1976 legislative session, Senator Tom Gallen introduced an amendment that grandfathered all home health agencies that had Medicare provider numbers. The grandfather amendment states that any agency with provider number before April 30, 1976 is exempted from Statement of Need requirements. The state of Florida has, through this action, instantly legitimized and exempted from control, the very private nonprofits which caused the fiasco Senator Chiles exposed. While accepting these comparatively newly-established agencies, the state, through the grandfather clause, excluded the proprietary agencies which have been running legitimate businesses in Florida for some ten years. As you might expect, we are having a great deal of difficulty obtaining Statements of Need, since these private nonprofits lobby heavily or actually sit in key positions with the health systems agencies, and can delay or prevent proprietaries from entering their "market." The reason for these tactics? Simple. They cannot compete with the services cost or quality of nursing care provided by for-profit organizations like Medical Personnel Pool. Until recently, Medical Personnel Pool did not wish to become Medicare-certified the Medicare home health benefit is restrictive in terms of fitting care to the patient's need and overburdened with paperwork which makes it an expensive program to administer. More importantly, the Medicare rule of reimbursing the lesser of cost or charge meant that we would lose our private patients, who cannot afford to pay Medicare rates inflated by artificial cost components based on the institutional system of cost finding allowances. However, the certificate of need situation, coupled with requests from some state health departments who need us as Medicaid providers has caused us to seek Medicare certification. Medical Personnel Pool sees the Medicare/Medicaid home health benefit problems outlined in our testimony as fertile ground for S. 1470 action. We urge the Senate Finance Committee to recognize the growing Congressional realization that home health care is the wave of the present. If S. 1470 is going to provide incentives to hospitals for shifting and cutting down bed usage, it ought to provide for the increased demand for home care that will be generated by the displaced patients. 92-202-77-37 The two first steps in providing for increased availability of home care services are to enact a uniform set of standards applicable to all home health care providers and to delete the Section 1861 (o) definition which discriminates against tax-paying providers. STATEMENT OF THE NATIONAL ASSOCIATION OF CHILDREN'S HOSPITALS AND RELATED INSTITUTIONS, INC. ROBERT H. SWEENEY, EXECUTIVE DIRECTOR The member institutions of The National Association of Children's Hospitals and Related Institutions, Inc., more easily stated as NACHRI, register 87 percent of admissions to all Children's Hospitals. Through the Association, they address their dedication to the improvement of Child Health services and express a collective advocacy for the Health Care needs of Children. In the year ended September 30, 1976, the 123 Children's Hospitals admitted 370,000 patients; recorded 3.9 million outpatient visits; and expended an estimated $750 million in the care of this Nation's children. The total assets devoted to this program of service exceed $1.2 billion. In addressing S. 1470, the Association does not intend to comment on its effects on Children's Hospitals as hospitals per se, but rather on its potential consequences to the ability of these institutions to provide specialized health services to children. All the members of this Association are also members of the American Hospital Association. They should, and do, look to that Association to provide their representation as members of the hospital community. As NACHRI does not attempt to replicate AHA's program, it shall not attempt to duplicate its testimony on this proposal, but rather call the attention of Children's Hospitals to it, for their consideration of support. NACHRI's statement, then, speaks to the perceived effect of S. 1407 on the delivery of health services to children. In sharp contrast to S. 1391, "The Hospital Cost Containment Act of 1977), S. 1407 recognizes that hospitals are not the same, with exception of size and geographic location. This Association has stated publicly, to the appropriate House Subcommittees, its deep concerns about the effects of S. 1391 on effective Child Health care and its apparent insensitivity of its consequences to children. S. 1407 provides, in Sec. 2, for an appropriate system of classification of institutions which will be reflective of size, the inferences of program, teaching responsibilities, geographic variances in cost exposure; and indeed, unusual circumstances within a specific category of hospitals. Further, it is encouraging to note that the Secretary, HEW, is directed to consult with appropriate National organizations prior to establishment of the described system of hospital classification. This Association stands ready to participate in such discussions. The average Children's Hospital in this country has 106 beds, the largest having 343. Of the 70 short-term Children's Hospitals, which will be more directly affected by this proposal, the average bed size is 143. The typical short-term Children's Hospital is a regional referral center, providing a variety of sophisticated medical services for children and youth of a multi-county and frequently a multi-state area. To these institutions are referred the most complex, the most involved patients, for whom neither the high intensity of care nor of specialization is available in the local community; nor does the incidence of any particular illness indicate that it should be. A more simplistic system of classification of hospitals, such as that developed in response to Sec. 223, P.L. 92-603, which S. 1407 is designed to replace, would result in the comparison of the majority of these Children's Health Centers with the 1,363 general hospitals in the 100-199 bed size category, whose main mission is the essential, but less complex and less costly, provision of routine hospital services. As just one indicator of difference in response to patient needs, these 100199 bed general hospitals employ 2.3 personnel per bed. The short-term Children's Hospitals employ 4 employees per bed in order to meet the needs of the child and the sophisticated procedures which the causes of his hospitalization demand. It is encouraging to note that S. 1407 exhibits awareness of these differences inherent in the hospital care of children, by authorizing the Secretary to establish classification category or categories for "psychiatric, geriatric, maternity, pediatric, or other specialty hospitals, as the Secretary may determine appropriate, in light of any differences in specialty which significantly affect the routine costs of the different types of hospitals". Recognizing that the intent of this proposal is to create a credible system of classification that is objective in its expectations, and precise in its definitions, two suggested improvements to Sec. 2 are offered: (1) The Secretary's determination of the appropriateness of such categories should be on the basis of detailed, objective, and factual studies of the program characteristics and resultant costs of such institutions; and not upon any subjective conclusion that costs at variance with those of a majority of hospitals whose only similarity is size are indication of "obesity" within the health care system. In the implementation of Sec. 223, P.L. 92-603, 15 months elapsed between the promulgation of reasonable cost ceilings which, by statute, affected Medicaidonly providers, and development of the exception process which would allow such providers to seek relief from cost ceilings which were inconsistent with their cost exposure. In that interim, Children's Hospitals suffered reimbursement considerably less than the cost of provision of services, with a deteriorating effect on cash flow. To avoid repetition of such a circumstance and to encourage prompt implementation of the Congressional intent, it is recommended that the Specialty Hospitals enumerated not be subject to the cost categorization described until such studies have been conducted and the Secretary's determination made. This recommendation is made, not in an effort at evasion, but rather to prevent the repetition of a similar period of fiscal hardship which will endanger the ability of these institutions to meet the needs of patients, for many of whom they are the singular indicated source of needed care. Indeed, this Association has begun just such a comprehensive study, the results of which will be available and readily shared with the Secretary for use in his determination of the cost exposure of Children's Hospitals. (2) Use of the term "Pediatric", in defining those hospitals which care solely for children is compromised by the inprecise definition of the word itself. "Pediatric", through usage, has come to identify a relationship with, or orientation to, the particular medical specialty of Pediatrics. As such, its employment in the context of S. 1407 might be perceived to indicate exclusion of Children's Orthopedic Hospitals, Children's Rehabilitation Hospitals, Children's Respiratory Disease Hospitals, etc., and their consequent classification by bed size alone. The cost exposure of these hospitals results from response to the needs of their patients, not the specialty of those who attend them. To continue the precision of effort so evident in the language of the proposal, it is, therefore, recommended that this identification be changed from "Pediatric" to "Children's". It is encouraging to note that S. 1407 reflects awareness of the cost consequences of a hospital's teaching responsibilities, by its creation of a classification for those "hospitals which are the primary affiliates of accredited medical schools (with one hospital to be nominated by each accredited medical school)". This demonstrates recognition of the compounded cost consequences of such activities; the cost of the education process itself, and the increasingly complex clinical challenges which are referred for treatment to such institutions. The definition of a special category for Children's Hospitals might be perceived to speak to the needs for proper consideration of the teaching Children's Hospitals; and, since the vast majority of Children's Hospitals are actively engaged in teaching programs, the aggregate costs of that category will reflect the consequence of such activities. Further, it is recognized that S. 1407 provides for consideration of the individual situation, wherein "the hospital satisfactorily demonstrates that its patients require a substantially greater intensity of care. . .". There are Children's Hospitals, in major metropolitan areas of the country, however, whose patient referrals are not merely regional, but indeed national or international as a consequence of their intensive teaching, research, and clinical activities. These Children's Hospitals would appear to be potential re peated annual petitioners of the Secretary for such consideration, at considerable cost to the petitioner for preparation of such appeal; and to the Federal government for its consideration. In recognition that S. 1407 seeks cost effectiveness in administration of its provision as well as in the hospitals affected, two recommendations are presented: (1) To Sec. 1861 (aa) (4) (F) be added: "In the interest of effective administration, upon satisfactory demonstration by a hospital, the Secretary may reclassify the hospital to another category appropriate to such unusually greater costs hereby demonstrated". (2) That Sec. 1861 (aa)91) (B) (ii) (II), describing that category of hospitals which are primary affiliates of medical schools be modified to permit, at the option of the Secretary, recognition of the circumstance of teaching specialty hospitals; i.e., that for the clinical specialty involved the hospital's program and resultant cost exposure are as great as those of the single designated primary affiliate. The Medical Schools with which many Children's Hospitals are affiliated have no Pediatric service within the general hospital which is their prime affiliate. To the affiliated Children's Hospital accrue the intensity and cost of the Pediatric service. With incorporation of these two modifications, the Secretary would be able to shift these Children's Hospitals of particular intensity to a more appropriate peer group classification; thus, an administrative process will exist for recognition of unusual operating costs which will be less complex and costly to institution and the Federal government alike. S. 1407 also provides for expansion of the determination of reasonable costs to other reimbursable hospital services, and sets general parameters for the comparison among providers of the resultant costs. Omitted, however, is specific recognition of patient characteristics which is so evident in the separate categorization of specialty hospitals for routine cost determination. It is recommended that the bases for comparison among providers be expanded to include such recognition, lest this determination of reasonable "other costs" slip back into the simplistic quantitative process so evident in the Sec. 223 implementation. Similarly, NACHRI would urge that the Secretary's agreement with the States, for conduct of a hospital reimbursement system, require that recognition of the Specialty Hospitals cost exposure, for both routine and other costs, be evidenced and be a part of such system. Finally, the Association notes with appreciation the inclusion of Sec. 42, authorizing grants for Regional Pediatric Respiratory Centers. Chronic respiratory disease is the leading cause of disability among children. Asthma and bronchitis affect 70 of every 1,000 persons under 17 years of age, more than twice the incidence of those affected by heart conditions, hearing impairments and vision impairments combined. Untreated, it leads to chronic disability and shortened life expectancy. Its treatment and prevention through programs of training of health care personnel and clinical services will prove most cost effective, by allowing young persons to lead productive lives and be contributors to society, rather than being dependent on it. NATIONAL ASSOCIATION OF MANUFACTURERS, Hon. HERMAN A. TALMADGE, DEAR CHAIRMAN TALMADGE: The National Association of Manufacturers is a trade association composed of some 13,000 member manufacturing organizations representing seventy-five percent (75%) of those employed in industry. As the representative of this vast number of health care users, employers who provide health care protection to these employees and their families and of this great number of taxpayers who must bear the cost of Medicare and Medicaid, we welcome the opportunity to comment on S. 1470. Speaking for American industry, the NAM is extremely concerned about the problem of escalating health care costs. We continue to believe, as we have stated in the past, that the achievement of reasonable cost levels in Medicare and Medicaid are an absolute requisite before Congress considers any form of National Health Insurance legislation. We believe that the problem of health care costs, in both the private and public sectors is an issue of such extreme complexity that there is no single solution. We congratulate the sponsors of this bill for the conscientious and apparent intensive research into the problems of the Medicare/Medicaid programs and for their courage to attack the difficult problem of Medicare/Medicaid cost escalation. Subject to the resolution of the spill-over problem, the NAM supports S. 1470 in general. The approach of S. 1470 is basically one of incentives which is entirely consistent with industry's position on cost containment. COMMENTS ON SPECIFIC ISSUES 1. Hospital reimbursement reform We strongly support the use of incentives to control health care costs. This bill establishes a method and applies the method to reimbursement for routine operating costs, leaving open the problem of other costs until the approach has proved itself. We support the idea of working on the problem in stages and using the knowledge developed in finding answers to questions which arise as the program is extended. We encourage the indexing of hospital facilities to allow appropriate comparisons to be made. We support the establishment of a uniform cost reporting system and commend the sponsors of the bill for the specification of at least a six month period to react to proposed systems. There is no question that any effective reporting system must be developed with full input and consideration of the views of those who are affected by and will have to live with the system. The NAM is seriously concerned that the exemption procedure contained in S. 1470 may not be able to be implemented without encouraging further abuse. The very broad definition of unusual costs may create an opportunity for those who most need to examine their cost to be exempted from the provisions of this Act. To minimize the opportunity for abuse, we recommend that the state and regional health planning agencies established under PL93-641 be given an effective role in the exemption process. 2. State reimbursement systems. We fully agree that where State hospital reimbursement systems result in lower aggregate payments to hospitals in a state then the system established by S. 1470, that the state system can be retained. We have already seen gratifying progress in hospital cost reduction in several states, particularly Maryland and Connecticut. Such efforts should not be discouraged by federal surplantation when they are about to mature as effective agencies. In addition, effective state review systems can permit the development and testing of alternative payment methods and the evaluation of their effectiveness. 3. Payments to promote closing and conversion of underutilized facilities We agree that hospitals which are ill-needed should be closed or diverted to some other use. In general we feel that the federal government should not pay the cost of overbuilding. Being somewhat cautious of subsidies for non-production along the lines of the recently discontinued farm subsidies, we are glad to see the two year trial period on this issue. Very close oversight in administration of that section of the bill must be continued. Public hearings should be held at the close of the original two year period so that those representatives of the public who have an interest in this legislation are afforded an opportunity to report on their experience with it. 4. Federal participation in hospital capital expenditures NAM has consistently supported the development of health planning systems and encouraged its members to serve in them. These new organizations must be given a significant role in health care cost control and the support and training to carry out that role. |