Dr. WILENSKY. Well, in regard to when this demonstration was first put into statute, our progress as of 1990 and where we are now, I have no quarrel with your recounting. It is accurate.

Senator SPECTER. My statement of facts is correct.

Dr. WILENSKY. Right. In the interim, I have been told that there were some other activities that were going on during the 1988-89 period which I will share with you. However, this does not address the fact that the demonstration has not yet started.

Senator SPECTER. Have you previously advised me of what you are about to say?

Dr. WILENSKY. It is my understanding that

Senator SPECTER. Well, Dr. Wilensky, you wrote to me and the other Senators on November 19, 1990, and I have just re-read your letter and my question to you is, have you told me or the others about these other factors?

Dr. WILENSKY. I have not personally told you. It is my understanding that what we would like to do differently on this demonstration from what we intended has been discussed with your staff recently.

Senator SPECTER. Let us hear.

Dr. WILENSKY. OK. First, this is a very long-drawn-out process. Senator SPECTER. I already know that much.

Dr. WILENSKY. I am not questioning that.

Senator SPECTER. I already know that much.

Dr. WILENSKY. I want you to understand I am not questioning that there has been an exceedingly long period in getting this demonstration up and running. It is not the only time it has happened, but it is not the typical.

Senator SPECTER. It is not the only time it happened?

Dr. WILENSKY. It is not the only time. We have a tremendous number of mandated

Senator SPECTER. When else has it happened, since you have brought up that it is not the only time that it happened? I mean, what is going on with the administration of this program?

HISTORY OF THE DEMONSTRATION

Dr. WILENSKY. Well, let me explain what went on earlier, because it will give you some sense of the kinds of timeframes involved in starting a demonstration.

This demonstration was part of the 1988 Reconciliation Act, or the Medicare Catastrophic Coverage Act. In fact, it is my understanding that a cooperative agreement was entered into late in 1988, and that the demonstration design was given back, in accordance with Temple as well as with a number of other places, sometime in the fall of 1989 or later.

So that the sense that hospitals hosting the demonstration were they may have been ready to be up and running, but in terms of having come to any agreement about the research design over the course of the entire demonstration, did not occur until later in 1989.

That is not atypical, because it takes us a while to establish a research solicitation process, it takes more time for institutions to respond, and it takes additional time to convene a panel of tech

nical experts to assess the responses and to make any appropriate changes. That is the only information

Senator SPECTER. Temple responded on October 1, 1989-or rather, Temple was informed by HCFA that its application was approved on October 1, 1989. Let us work backward, Dr. Wilensky, in the interests of time so that our inquiry here will not be as long as the project.

Dr. WILENSKY. OK.

Senator SPECTER. What has happened since November 19, when you wrote to this large group of Senators that the cost waiver estimates had been completed and were under review?

Dr. WILENSKY. What has happened is that in a subsequent reconciliation act we were directed to develop prospective payment systems for all sorts of activities, including PPS-exempt hospitals. Therefore, we have been questioning the reasonableness of going forward with this particular demonstration on a cost basis when we have been directed by the Congress, appropriately, we believe, to work hard to try and establish prospective payment for currently PPS-exempt institutions, including hospitals like those targeted by this demonstration.

MODIFICATION OF THE DEMONSTRATION

What we have been exploring internally, and lately with your staff and the staffs of the other Senators who expressed interest, is to try to make an accommodation of starting out in the first year of the demonstration under a cost basis. The work has been done, the hospitals are ready to go, they are appropriately anxious and more than ready to start. But that in the second year, converting to a prospective payment system for the second and third years of the demonstration would help us learn something that will help us as we attempt to abandon cost-based reimbursement.

We have been ready to move forward with this accommodation. We have been exceedingly troubled by the possibility of undertaking a 3-year demonstration that will not help us learn anything about the reimbursement climate that Congress has, in our view wisely, instructed us to pursue. So, we have discussed whether or not the concerned members would regard our proposed accommodation that as an appropriate modification to the demonstration-so we can start up immediately, and then convert to prospective payment during the second year.

It has been my understanding from discussions with my staff that this proposal has generally been regarded as a reasonable strategy, and that we have received positive responses. This is the direction we now intend to pursue.

Senator SPECTER. I do not understand what you just said.

Dr. WILENSKY. All right, let me try and explain it. We pay most hospitals

Senator SPECTER. I think you got a direction from Congress in the Reconciliation Act.

Dr. WILENSKY. Right. In the 1990

Senator SPECTER. Which you consider to be a wise direction.

Dr. WILENSKY. Right.

Senator SPECTER. Unlike other congressional directions.

Dr. WILENSKY. This was a particularly wise direction.

Senator SPECTER. Particularly wise direction.

Is that causing you to reexamine this whole proposition, because some of the factors do not make sense for year two but they might make sense for year one?

Dr. WILENSKY. They do not make sense for year one, but everybody involved in the demonstration is ready to go, and rather than delay while redesigning the year one

Senator SPECTER. It does not make sense for year one, but you will go anyway?

Dr. WILENSKY. Right, that is correct. It does not make sense for year one.

Senator SPECTER. It does not make sense for year one

Dr. WILENSKY. No.

Senator SPECTER. But you will do that anyway?

Dr. WILENSKY. Right, at the start only, because of the enormously long delay.

DELAY AND MODIFICATION OF THE DEMONSTRATION

Senator SPECTER. When are you going to do that?

Dr. WILENSKY. I think we are well, I should not say that. I think we are ready to go.

Senator SPECTER. Should not say what?

Dr. WILENSKY. I was going to say I think we are ready to go immediately. I do not know how the redirection

Senator SPECTER. When is immediately?

Dr. WILENSKY. While we had been ready to go ahead-I will have to reverify this is true. I do not think there is anything stopping us from going ahead in the next week or two. We had been planning to direct the various hospitals to proceed as they have proposed to us for year one, but to come back to us with redesigns for years two and three in terms of the new payment schedule. I do not know what piece of paper we need to move this forward, and whether we will be prevented from literally saying: "Start, but know what you have to come up with in the next few months, before you can start year two."

Senator SPECTER. It will not prevent you from literally saying, go ahead, but you will have to come back?

Dr. WILENSKY. Right. Well, the reason is, if we do not

Senator SPECTER. How are we to function in this kind of a context, with this kind of a timeframe, when my constituents come to me, and my staff comes to me, and it takes me so long to figure out what has happened, and I now ask you because we have a moment to talk about this at a hearing, which is only illustratively one project, but our office is absolutely inundated with them from a State the size of Pennsylvania, and I hear this goes on in all the other States.

I am trying to explore with you in some modest amount of time, because we all have so many things to do, and what I hear you saying is that you do not like the project at this point, but you are willing to go ahead with it in the first year and then you are going to want to have years two and three redesigned.

There are so many questions which arise from your answer. No. 1, why are you going to go ahead with a project you do not like? No. 2, if you are going to have years two and three redesigned, are

they going to be able to be redesigned and answered before year two starts?

Based on the history here-we have been working on this for 3 years now. What expectation is there that there will be an answer to years two and three before year two starts?

Ďr. WILENSKY. Let me respond to each of those questions separately. If there are any other projects or activities going on in Pennsylvania that you would like to explore with me, in or out of the hearing process, I will always be pleased to meet-just call my office. I will be glad to talk about any activities that you think are not progressing as they should. This particular project got derailed-I do not know all the reasons why.

Senator SPECTER. I am not unaware of your willingness to do that, but I just do not have the time to do that. Dr. WILENSKY. All right.

Senator SPECTER. So tell me about this one.

Dr. WILENSKY. The reason we would like to start now, in accordance with the accommodation I outlined, is because the delay has been so long. We are concerned about its length, nor are we pleased by it. It happened.

Senator SPECTER. Well, when are you going to start?

Dr. WILENSKY. It is my understanding we are ready to start now. It is our interest

REQUIREMENTS FOR PROCEEDING WITH THE DEMONSTRATION Senator SPECTER. What has to be done so that Temple University can proceed?

Dr. WILENSKY. There are two ways that we can proceed with the project. The fastest, but not the best way, is to do a project for 3 years that is based on cost-based reimbursement. We could do that, but it would not be particularly helpful. This is not a strategy that we believe

Senator SPECTER. That is the fastest but not the best way?
Dr. WILENSKY. That is right. We believe that-

Senator SPECTER. What do you recommend?

Dr. WILENSKY. Well, it would be best to use a prospective payment system for all 3 years, but we understand that would require the facilities to stop, redesign their participation, and develop a new plan.

Senator SPECTER. How long would it take them?

Dr. WILENSKY. I do not know. I assume several months. I do not know. We have not asked them how long.

Senator SPECTER. Well, you have not asked them to do it either, have you?

Dr. WILENSKY. No; we have been speaking with the interested Senators and staffs first.

As a compromise, in order to be able to start immediately, we thought it permissible to start on the basis of the design that they have submitted and that we have accepted, based on a cost-based reimbursement system, and to ask the hospitals in year 2 to bring to us a design that would have a prospective payment attached to it, so that we could learn something from prospective payment, but would not engage in any further delay of the demonstration.

Senator SPECTER. So what you are saying is that while you might like to redesign all three of the years, you think it would make at least some sense to proceed now with year one on the basis of the plan submitted?

Dr. WILENSKY. Correct.

Senator SPECTER. Then to redesign years two and three?

Dr. WILENSKY. Correct.

Senator SPECTER. Now, what kind of document or statement is necessary from your agency for Temple to proceed with year one? Dr. WILENSKY. I do not think anything further, other than our directive to tell them to go.

Senator SPECTER. Well, how do we get that directive?

Dr. WILENSKY. Well, it would have to be with the understanding-they need to be alerted to what they are going to face 2 to 3 years in advance. Currently, a design has been submitted to us that indicates that years two and three will look like year one. We will have to direct the hospitals that year one is fine, what we expect from years two and three. As long as they are willing to go ahead, they would proceed on the basis of that understanding.

Senator SPECTER. All right, I understand that. Now, what sort of a paper has to be issued to effectuate that proposal?

Dr. WILENSKY. It is my understanding only a letter from our Office of Research and Demonstrations is needed.

Senator SPECTER. Only a letter. When can we get the letter?

Dr. WILENSKY. I will call you as soon as I know when we can get the letter. I do not anticipate it would be very long.

Senator SPECTER. How about today?

Dr. WILENSKY. I will see.

Senator HARKIN. It depends how long we keep her here.

Senator SPECTER. Well, it is a question of how many of my other issues I take up, Mr. Chairman. I am going to terminate my questions now so that we give them the maximum time on the balance of the day to get the letter out.

I would like for you to answer, in writing, what is the cost to all parties concerned on this process up to this date. I would like you to give me a cost figure for what it has cost Temple University and each of the universities, what it has cost the Department of Health and Human Services for all of the bureaucratic processing to date, and we will figure out what it has cost the various Senators and our staff offices, because I intend to make a determination as to just what the cost is here.

My principal goal is to try to get this moved today, so I am not asking any further questions at the moment, except to ask you if you are willing to provide that cost for me?

Dr. WILENSKY. Certainly we will do the best we can.

[The information follows:]

VENTILATOR-DEPENDENT UNIT DEMONSTRATION

Since HCFA awarded the no-cost grants to the ventilator demonstration sites in October 1989, HCFA estimates that it has spent 1,700 staff hours on the demonstration. We estimate that the costs that Temple and the other universities have incurred to this point have been minimal because HCFA and its contractor, Lewin/ ICF, have done the actual preparation of the waiver cost estimates, developing criteria for admitting patients to ventilator units, and preparing an evaluation design. The universities have supplied the basic information for these analyses. To date, Lewin has billed HCFA $307,000 for their services.