Secretary WEINBERGER. Congressman, I think there is a reading of the statute that is perfectly compatible with the equally strong direction to review claims for reimbursement. The statute as I understand it, and as I understood you to read it, simply says that we cannot tell the physician what he is to do and what he is not to do. But we have under other sections of the law a very clear responsibility and a congressionally imposed duty to scrutinize the claims for reimbursement. And to allow some and not to allow others.

This is not to tell the physician what he can or can't do. But it is to say that we are not going to reimburse him for everything that he does just because he decides he should do it. I don't think there is any conflict in the law. Now, Mr. Tierney has been here longer than both of us and I would ask him if he has any comments on it.

Mr. TIERNEY. I'd only like to point out exactly what you did, Mr. Secretary.

The same law, Mr. Crane, which says we will not interfere with how people practice medicine and which we have scrupulously avoided, said that

Mr. CRANE. You avoided the law?

Mr. TIERNEY. No, avoided in any way interfering.
Secretary WEINBERGER. That is another ambiguity.

Mr. TIERNEY. The same law says the medicare program will pay the reasonable charges of medically necessary services. We can't ignore that. The Congress says you have to have somebody determine two things: is the amount reasonable and is it medically necessary?

The same law says for example, notwithstanding any other provision of this law and all that language with which you are familiar, not one dime will be spent out of either the trust funds for care which is custodial in nature. Somebody has to make that determination.

Mr. CRANE. Let's pursue this just a second because this is an interesting point, too, and it gets to the number of other concerns that a lot of medical people have. That is in the final analysis the answer to your question of what is reasonable and what is medically necessary rests with Mr. Weinberger. Is that not correct?

Secretary WEINBERGER. Well, I think the statute requires the Secretary to draw regulations that are consistent with the intention of the Congress. We believe we have done that. We always try to do

that.

In those regulations we try to indicate guidelines that will assist us and assist the intermediaries in determining what is reimbursable and what is not under the statute.

But I operate in a vacuum, without guidelines, and the congressional intent stated in these reports is what we use. For example, with respect to section 223, the committee report said your committee believes it is undesirable, from the standpoint of those who support Government mechanisms for financing health care, to reimburse health care institutions for costs that flow from marked inefficiency in operation or conditions of excess service.

So, given that kind of a statute and that kind of a committee report, we then try to draw regulations that will guide us as to what charges we will pay for out of Government funds or what we will authorize the intermediaries to pay.

Those regulations are provided to the public and to the providers so that they will be informed.

But this is a far cry from saying you should operate now or you shouldn't administer this drug or whatever.

It is a matter of what we reimburse for, not a matter of what the doctor does.

Mr. CRANE. Mr. Secretary, again you have adroitly directed the responsibility, and I will concede your point, to where it belongs and that is here. The point I am trying to make is with respect to professional decisions you can be guided by input and solicit input just as presumably the Congress will do that, but ultimately that authority does, indeed, rest with the Secretary of the Department of Health, Education, and Welfare to make those definitions of terms about reasonable compensation, and what is considered necessary medical

care.

Is that not correct?

Secretary WEINBERGER. No; I think the correct way to state it, Congressman, is that the Secretary establishes basically the process that determines medical necessity or efficiency. Nonphysicians, or Federal employees, are not making medical judgments on individual patients or anything of the kind.

Mr. CRANE. Let me give you a hypothetical here if we are talking about process.

I have an acute pain in my stomach and I go to a physician and that physician suggests that I probably ought to check into the hospital because it may be appendicitis. Now, he has made a professional judgment which may turn out to be an error and your process may say that before I can check into the hospital I have to have x amount of examination and so forth

Secretary WEINBERGER. No, it does not. We specifically avoided that. What we have now is a review of people who are admitted to see how long under the circumstances of their cases they should normally be hospitalized. That review is made by doctors, not by us, and there are exceptions to it that would be approved by doctors under unusual cases.

But on the other side of this coin, where you have a claim for reimbursement for 52 days in the hospital for a simple appendectomy, you may think properly that somebody ought to question that. That is what we are here for, to set up the procedures by which doctors will question anything that deviates from the normal, not only with respect to the care of the patient, because the quality of care is involved in that kind of situation, too, but also for the Federal Government's reimbursement requirements.

Mr. CRANE. Mr. Secretary, I have to yield to my good colleague, the prettiest member of the committee, in a moment here, but let me just add one other point in connection with somebody spending 52 days in the hospital with an appendectomy which is admittedly hyperbolic. But I would suggest that even before we had medicare on the books and before we had the responsibility vested for supervising medicaid and medicare, that there were appropriate review committees in hospitals, insurers, physicians groups that exercised that same function.

Secretary WEINBERGER. There were indeed and those are the ones we modeled the regulations on.

Mr. CRANE. To a degree in some instances, but I don't think in all cases. Let me yield now; I have a few more questions, however, after Mrs. Keys.

Mr. ROSTENKOWSKI. The time of the gentleman is expired.
Mrs. Keys will inquire.

Mrs. KEYS. Thank you, Mr. Chairman.

I have particular concern in the area of the utilization concurrent review requirements as they affect small rural hospitals. In my State, two-thirds of the hospitals have staffs of seven or less. I am particularly concerned about this. I would like to know what you have done, what alternatives have been considered or are being considered to help alleviate the problems facing small rural hospitals.

Secretary WEINBERGER. Mrs. Keys, thank you for that. We have had this under very intensive review and, as a matter of fact, this morning, on the airplane coming back from Houston, I was working on drafts of the regulations that will be specifically applicable to smaller rural hospitals and will enable them to get some relief from the situation. This was brought to our attention a number of times. I think some of the hospitals in your district as well as many others fall in that category.

The problem primarily is that the regulations provide-as I think they have to that physicians on the review committees, and these are all doctors, we are not talking about Federal boys-that the physicians should not have a financial interest in the hospital. Not because they are not to be trusted, but simply because of the general appearance and the necessity of avoiding any kind of potential or actual conflict of interest.

It is frequently very difficult for a rural hospital to assemble enough doctors who don't have an interest in the hospital. Many times there are a small number of doctors who own the hospital and you have a great deal of difficulty finding a qualified committee.

So we are trying to develop a number of different kinds of possibilities; one would be that, instead of getting their committee within that area, which we agree they would have trouble doing, they can go further away to do it. They would have more time to do the review. There would be additional time to come into compliance.

We would allow the State itself to develop a superior plan and certify it to us and I would be extremely sympathetic in approving and granting waivers for or granting certificates of superior plans to States that develop their plans to handle this type of situation.

I believe strongly that the States and the local hospitals know more about their local situation than we do and we are trying to develop procedures that will recognize this.

Mrs. KEYS. Excuse me, Mr. Secretary, but let me suggest to you that it is not only the problem of owning an interest in the hospital, but the problem that the hospital with a staff of three or four doctors just does not have sufficient medical personnel to be able to concurrently review the admissions that are not associated with the case. Secretary WEINBERGER. I agree.

Mrs. KEYS. My feeling is that certainly a total exemption is not in order. I believe we must pursue the goal of cost containment, but there must be flexibility.

I would think there should be retrospective review. This kind of flexible approach wouldn't immediately assure that that person should be there, but at least would it provide the retrospective review of admissions, a reasonable alternative? Is this a possibility for HEW?

Secretary WEINBERGER. That is one of the possibilities we are looking at, to give more time for a hospital to be able to constitute a committee to do that.

We are not pursuing preadmission certification, so the next stage is to review the admissions. It is desirable, obviously to review them as soon as we can. In most larger areas this is not a particular problem. In the smaller hospitals it is a real problem along with the financial interest point. The changes and the degrees of flexibility that we are working on approach it from this point of view.

We do think it is desirable to have more time and to have certain exceptions made. There is a definitional problem, to describe the hospitals that would qualify.

Mrs. KEYS. How about the possibility of the State PSRO once it had received the grant for that being the final arbiter as to whether this hospital met the utilization review requirements?

Secretary WEINBERGER. Where there is a conditional or finally approved PSRO, it will take over the UR review function and the hospital will no longer have to perform it. Where there is a single State PSRO, it would do that. I think that is in effect in Utah, Wyoming, and Colorado.

The the other way out, of course, is to have the State itself submit a plan for this whole problem until the PSRO's are operative. Mr. CRANE. Will the gentlewoman yield on that point?

Mrs. KEYS. Certainly.

Mr. CRANE. On page 18 of your testimony you say a qualified conditional PSRO takes precedence over UR requirements and that a hospital's responsibilities for utilization review cease when review responsibilities for that hospital have been assumed by a qualified PSRO.

Now in section 1155(e)(1) of the PSRO law, that requires that each PSRO "shall utilize the services of and accept the findings of the review committees of the hospital."

That sounds like a contradiction to me.

Secretary WEINBERGER. No, I don't think so; because the PSRO would establish the committees under their general aegis and would take their recommendations. But the operation, the whole activity, would be managed and under the direction of the PSRO. They need not do that, but they could do that. That is essentially what we are saying. Mrs. KEYS. But there would be no contradiction between the PSRO regulations and the utilization review regulations?

Secretary WEINBERGER. No; we are trying hard to avoid that and the way we believe we have avoided it is to put the responsibility in the PSRO, where there is a conditionally or finally approved one, and relieve the hospital from the responsibility of performing review at that point.

The one responsibility would be in the PSRO. Until that happens, it is in the hospital. That is what we have tried to do.

Do you want to expand on that?

Dr. COOPER. Yes, the PSRO has the responsibility to assist the hospital review committee which is seeking a delegation from the PSRO to perform review functions. Then the PSRO would delegate the review to those hospitals found competent.

That is part of the system. The PSRO reviews care in hospitals which do not have adequate UR systems and the hospital does that if they are delegated that review activity.

Mrs. KEYS. Thank you. I would just like to urge you, Mr. Secretary, to quickly include some flexibility in these regulations. A great many of the hospitals in the State of Kansas feel that they are facing one of three alternatives either refusing to accept medicare-medicaid patients; closing down altogether; or hiring additional personnel in order to try to meet them. And they are finding it difficult to plan ahead, not knowing when this may hit them on the head, so to speak. Secretary WEINBERGER. On the basis of the work done so far, I would be reasonably safe in letting you understand that you can assure them that none of those three alternatives need be followed. I would hope within a week to 10 days we would be able to publish regulations detailing the degree of flexibility and the method of achieving it for these smaller hospitals.

Mrs. KEYS. Thank you. A lot of people in Kansas will be very happy because they were fearing they were going to lose their hospitals altogether.

Mr. ROSTENKOWSKI. Mr. Secretary, at page 9 of your testimony you state that there is a growing amount of data which indicates that some of the increase in utilization is unnecessary and can be eliminated through effective utilization review programs.

First of all, could you submit that body of data for the record please? Second, you say that this data shows that some of the increase in utilization is unnecessary. Can you tell us what precisely that data shows, the proportion of that?

Secretary WEINBERGER. Well, we will get it for you very specifically, yes.