We endorse the concept of Senator Bennett's amendment No. 651 on peer review in our written testimony.

Since that time, we have considered it more thoroughly and have discussed it with various individuals, including members of the staff of this committee.

We wish the committee to know that we are more convinced than ever that the Bennett amendment will lead to better health care at less cost to the Federal Government, consequently, we are enthusiastic in our endorsement.

In the area of health services, we endorse section 221 because we share the concern of the House Ways and Means Committee, as expressed in its report on H.R. 17550, with regard to "higher costs of medicare, medicaid, maternal and child health care programs where these costs result from duplication or irrational growth of health care facilities."

The Indiana Nursing Home Association has encouraged its membership to participate in the Indiana Health Planning Agency and the regional and local agencies subordinate thereto. We are represented on the State body and on the various regional and county bodies.

Concerning section 222, we would like to briefly outline a concept for an experimental reimbursement project which we feel could well be undertaken in Indiana.

We believe Indiana has certain qualifications which are essential to the potential success of a meaningful experimental program, including:

1. An already existing and thoroughly tested program utilizing a prospective payment plan. The hospitals of Indiana and Blue Cross of Indiana have utilized a prospective payment plan for the past 11 years. It is our understanding that a proposal utilizing prospective rating for an experimental program involving the Indiana hospitals under titles XVIII and XIX is currently being readied for submission to the Secretary and his staff.

2. The Indiana Nursing Home Association will bring to an experimental program a membership which represents approximately 73 percent of the total beds certified for medicare, medicaid, and intermediate care in Indiana.

We would further like to briefly outline what we envision as guidelines to a meaningful demonstration project in Indiana.

The Indiana Nursing Home Industry endorses an experimental program utilizing rates for all services determined in advance of the rendering of services and remaining constant for a specified period of time.

We also would envision certain criteria to which the providers of service would be subject as a condition of participation in an experiment which would include:

1. Active participation in health planning. Indiana's membership welcomes the opportunity to actively participate in the requirements for preplanning and approval for both capital improvements and the expansion of services."

2. Utilization of meaningful principles of pricing and effective guidelines for costs and rate determination.

We are at this time in the process of developing these principles in Indiana.

3. Utilization of a Rate Review Committee. Such a committee would be given power to approve or reject rate requests for all services The committee would be made up of representatives from industry from the intermediary, the Government and the consumer public The committee would review data prepared under the terms of the guidelines and principles outlined above, and would be granted dis cretionary power of approval or denial of requests. A comparable program has existed in Indiana for the past 11 years and has bee very successfully utilized in an advisory capacity to Blue Cross o Indiana in hospital rate determinations.

4. Utilization of a unified rate. All consumers of a specific servic would pay the established rate for that service. Thus, medicare medicaid, private individuals and third-party insurers would pay single rate, a unified single rate, for comparable service received from a single provider.

Thank you very much, Mr. Chairman. We would be happy t answer any questions.

(The prepared statement of Mr. Norman follows. Hearing con tinues on p. 419.)

STATEMENT OF THE INDIANA NURSING HOME ASSOCIATION

SUMMARY

I. INTRODUCTION

(a) Names of persons involved on behalf of Indiana Nursing Home Associa tion.

(b) Advises that the comments on H.R. 17550 are limited to three section namely: Sec. 221, 222 and 225. That Sec. 222 is the principle purpose for appear ing and submitting testimony, and that statements concerning Sec. 221 and 23 are brief.

(c) That the Nursing Home Association was a founding member of ANH. That the American Nursing Home Association is scheduled to submit testimon on all health facilities (nursing home) affected sections of the Bill and the INHA indorses the ANHA testimony.

II. SEC. 221. FEDERAL PARTICIPATION FOR CAPITAL EXPENDITURES

(a) Indorses provision of Bill with the authorized Secretary to withhold reduce reimbursement for services rendered where a health care facility incur capital expenditure in excess of $100,000.00 without prior approval of Stat or local planning agencies.

(b) Advises that the Indiana Nursing Home Association membership partic pates in Indiana Health Facility Planning Agency and regional and local agencie established pursuant to P.L. 89-749.

(c) Notes that the enactment of this section provides an indirect franchisin concerning which there are potential problems, which problems are more speci cally outlined in the American Nursing Home Association statement.

(d) Suggests that because of the franchising potential, the Secretary's dec sions should be subject to judicial review.

III. SEC. 225. ESTABLISHING OF INCENTIVES FOR STATES TO EMPHASIZE OUTPATIEN CARE FOR NURSING HOMES

(a) Gives qualified indorsement to the section of the Bill which gives 25 medical assistance increase to the states for home health care services. Poin out, however, objections raised by Senator Moss of his statement in the Congre sional Record, July 21, 1970.

(b) Opposes the 90 day limitation for patients in skilled nursing homes and indorses Senator Hartke's statement to the Senate on August 4, 1970, in this regard.

(c) Indorses the Moss amendments to the Social Security Act of 1967 which provides for regular State medical review programs and the amendment offered by Senator Bennett to the present Bill, which provides for the establishing within the States of local or area-wide Professional Standards Review Organizations. Both of these being directed toward reducing overutilization of skilled nursing homes. These would be in lieu of the 90 day limitation contained in the section. (d) Gives statistics to show that there is relatively little problem of overutilization in Indiana.

(e) Notes that Intermediate Care costs in Indiana are approximately one-third less than Skilled Care costs and that there are about three Intermediate Care beds to one Skilled Care bed in Indiana.

IV. SEC. 222. EXPERIMENTS AND DEMONSTRATION PROJECTS

(a) Prime purpose of paper and presentation showing that there already is in existence in Indiana a tested program utilizing prospective payment plan involving Indiana hospitals and Blue Cross of Indiana. Said plan has been in operation for eleven years.

(b) That the nursing home industry in Indiana, through the Indiana Nursing Home Association, has a successful working relationship with the State and local government bodies involved with nursing home care as well as the Fiscal Intermediary (Blue Cross of Indiana).

(c) That as a demonstration project, the application of the Principles used in hospitals could be adapted to nursing homes.

(d) Summarizes in some detail how such a project in Indiana could develop meaningful data which could well be applied nationally.

TESTIMONY

Mr. Chairman, and members of the Committee. The Indiana Association appreciates this opportunity to appear before this Committee today.

I am C. Robert Norman, Administrator of the Heritage House Convalescent Center, a 100 bed nursing facility in Shelbyville, Indiana. Heritage House is certified for Extended Care, Medicaid and Intermediate Care. I have been in the nursing home field for a number of years and I am currently serving as President of the Indiana Nursing Home Association. I am a member of the Legislative Committee of the American Nursing Home Association.

Accompanying me today are several individuals who assisted in the preparation of this report: Miss Elsie Dreyer, Association Vice President and Chairman of our State Legislative Committee; Sam Gunnerson, CPA, with Turtle Creek Convalescent Centers, and a consultant to our Assoication; Albert Kelly, Executive Director; and Harry T. Latham, Jr., Legal Counsel for the Indiana Nursing Home Association.

The Indiana Nursing Home Association is a non-profit organization representing both proprietary and non-proprietary nursing facilities. Our membership is composed of 244 facilities, representing 14,635 beds. We are also a founding member of the American Nursing Home Association.

The major goals of our Association are to upgrade the quality of nursing home care through educational programs; to deliver the highest quality care at a reasonable cost to the patient; and to maintain an on-going liaison with the Indiana State Welfare Department, the Indiana State Board of Health and the fiscal intermediary for Medicare, Medicaid and Intermediate Care, Indiana Blue Cross. We are particularly proud of the excellent working relationships that have been established between our Association and the agencies which I just mentioned. I believe each of these organizations would attest to this fact.

H.R. 17550 contains multiple provisions which directly affect the delivery of Health Care in Nursing Facilities. Many of the provisions are excellent and still others we believe need to be deleted or modified. The major portion of our testimony will be directed toward Section 222 with regard to Experiments and Demonstration projects. We will, however, comment briefly on certain other provisions, namely, Sections 221 and 225. The American Nursing Home Association will be presenting detailed testimony before this Committee later this week on the entire Bill and we strongly support that testimony.

SEC. 221. LIMITATION ON FEDERAL PARTICIPATION FOR CAPITAL EXPENDITURES

We share the concern of the House Ways and Means Committee as expresse in its Report on H.R. 17550 with regard to the "... higher costs (of medicar medicaid, maternal and child health programs) where these costs resu

from duplication or irrational growth of health care facilities."

We endorse the provision of Sec. 221 of the Bill which authorizes the secretar to withhold or reduce reimbursement amounts for services rendered unde Titles V, XVIII and XIX where health care facilities incur capital expenditur indebtedness in excess of $100,000.00 without the prior approval of State local planning agencies.

The Indiana Nursing Home Association has encouraged its membership participate in the Indiana Health Planning Agency (established pursuant to th Public Health Service Act-P.L. 89-749) and the regional and local agencie subordinate thereto. We are represented on the State body and on the variou regional and county bodies.

Up to now, the question of enforcement of decisions of those bodies has bee the problem. The enactment of this section will go a long way toward solvin that problem.

We would add a word of caution, however, in connection with this provisio As is noted in the American Nursing Home Association statement, which to be presented, it provides, in effect, for an indirect franchise concerning whic there are a number of potential problems more specifically set out in sa statement. We believe, as ANHA does, that the decisions of the Secretary shou be subject to judicial review. Further, insofar as Indiana is concerned, it won be our opinion that any enactment directed toward implementing this provisi would have to provide for court review to survive Constitutional consideration

SEC. 225 ESTABLISHMENT OF INCENTIVES FOR STATES TO EMPHASIZE OUTPATIE: CARE UNDER MEDICAID PROGRAMS

Our initial reaction to the first provision of this section which provides financi incentives to the States to encourage Home Health Care Services is that it ha merit. However, that reaction is considerably tempered upon consideration the various ramifications. Senator Moss sums up our doubts best in his stat ment to the Senate which appears in the Congressional Record of July 21, 1970 We quote, in part as follows:

"Another provision also objectionable is the 25-percent bonus which is giv to the State in the event it elects to treat the patient through its home heal services, rather than through its nursing home system. *** The problem he is that over 50 percent of the patients presently on the medicaid roles ha no family and no home. What some envisage, then, is purchasing old hotels a buildings and creating artificial homes by the State and then bringing hor health services to take advantage of the additional 25-percent bonus in Feder matching funds."

If some means could be devised to eliminate the potential hazards noted Senator Moss, we feel that provision could be of value.

With regard to that provision of the section which would reduce the Feder medical assistance percentage after 90 days in a skilled nursing home, we mu interpose our opposition. The reasons for our opposition are best stated by a contained in a statement by Senator Vance Hartke to the Senate on August 1970, which we quote in part, as follows:

"Medicaid is a prgram for the needy or medically indigent-poor people. If, Section 225 (a) provides, an indigent elderly individual can only receive care a skilled nursing home for 90 days or care in a mental hospital for 90 to 2 days, or intensive care in a general or tuberculosis hospital for 60 days, he w be at a distinct disadvantage when his allotted time is up. He certainly is 1 going to be able to pay for his own extended care-and the States will not able to pay for additional institutional care for him. Evidence of this may found in projection from the States themselves, on losses they will have to bear Section 225 (a) becomes law.

"It is estimated that New York will lose $105 million, California $20.4 milli and my own State of Indiana estimates a loss of over a millon. Compared to large losses that will be sustained by New York and California, this loss m seem small, but when one considers the condition of most State budgets the days, it means a great deal in terms of services to older people who have resources of their own."

According to the Committee Report "These provisions reflect the concern that many patients remain in skilled nursing homes longer than necessary and that as a result program costs are unnecessarily increasing."

We are as opposed to unnecessarily increased costs as is the Ways and Means Committee, but we do not believe that penalizing the patient is the way to combat this problem.

Rather, we would propose the implementation of the Moss amendments of 1967, which calls for the States to set up regular programs of medical review. As far as we can ascertain, very little has been done in this regard, even though these amendments have been part of the law for over two and one-half years.

We note, with interest and approval, the amendments presently before your Committee offered by Senator Bennett. These amendments, as you know, provide, in substance, for the establishment of local or area-wide Professional Standards Review Organizations within the States, made up primarily of physicians who would function as Utilization Review Committees in their respective areas. These Committees would regularly review the level of care of patients and determine that the care given is appropriate.

We are not certain whether this amendment would supplement or supplant the Moss amendment. Under any circumstances, either one or both is much more equitable and fair.

Additionally, we feel that we can state that in Indiana there should be no real concern about the overutilization of skilled nursing homes. In support of this we submit the following statistical information.

1. There are 5,000 certified skilled beds in 99 health facilities. (10 of those facilities are hospital connected, and as result, are not eligible for participation in intermediate care. Of the remaining 89, 63 have dual certification, i.e.: part skilled and part intermediate care.)

2. There are approximately 15,000 intermediate care beds in some 390+ health facilities. (This figure includes the 63 dual certified homes.)

In the dual certified homes, distinct parts are certified pursuant to Federal regulations.

In all instances, at the present time, the patient's physician largely determines the level of care needed and the facilities are governed accordingly. This is particularly effective in the dual certified homes.

One additional fact should be noted in connection with the matter of cost of care in Indiana. That fact is that the cost of intermediate care is approximately one-third less than the cost of skilled care. Further, the Committee will be interested in knowing that in this State we are presently investigating the feasibility of developing a second level of intermediate care, i.e. lower patient care requirements, particularly personnel-wise. Authorization for this is contained in the promulgated regulations for intermediate care facilities. The implementation of this would result in a further reduction in the overall cost of the medical assistance program.

SEC. 222 EXPERIMENTS AND DEMONSTRATION PROJECTS TO DEVELOP INCENTIVES FOR ECONOMY IN THE PROVISION OF HEALTH SERVICES

As I stated earlier, our prime purpose in presenting our testimony today is to emphasize the need for an alternative method of reimbursement and to outline briefly a concept for an experimental project which we feel could well be undertaken in Indiana. We feel that Indiana has certain qualifications which are essential to the potential success of a meaningful experimental program including:

I. An already existing and thoroughly tested program utilizing a prospective payment plan. The hospitals of Indiana and Blue Cross of Indiana have utilized a prospective payment plan for the past eleven years. It is our understanding that a proposal utilizing prospective rating for an experimental program involving the Indiana Hospitals under Titles XVIII and XIX is currently being readied for submission to the Secretary and his staff.

II. The Indiana Nursing Home Industry represented by its State association has a close and successful working relationship with State and local governmental bodies and the fiscal intermediary.

III. The Indiana Nursing Home Association will bring to an experimental program, a membership which represents approximately 73% of the total beds certified for Medicare, Medicaid and Intermediate Care in Indiana. It is esti