CONCLUSION As both a Medicare Intermediary and a major carrier of private health benefit coverage, we recognize the responsibility of the payer to act as a prudent purchaser However, balancing and complementing this responsibility is the equally important obligation to act as a prudent manager. The temptations of intuitive and expeditious decisions must be controlled. The issues addressed above represent in principle the type of actions which a responsible payer has an obligation to pursue. The benefit of these initiatives should not be allowed to be either dissipated or reversed through inappropriate decisions. We do not urge a retrenchment in policy but rather a more careful implementation; one which is sensitive both to the need to act and the detrimental impact which inappropriate action will produce. APPENDIX NURSING SALARY COST DIFFERENTIAL The preamble eites Public Law 92-603 as support for the proposed regulations. These amendments increased the scope of coverage under Medicare to disabled and end-stage renal disease patients under age 65. The larger the segment of the below age 65 population covered under Medicare, according to the preamble, the more appropriate is an average routine per diem amount for beneficiaries which corresponds to that of the general patient population. For such an argument to have validity, it must be demonstrated that 1) the age 65 patient population no longer requires a significantly greater amount of general routine nursing care than other segments of the total patient population, or 2) the Medicare program does not have a higher proportion of patients aged 65 and over than other payers, or 3) the below age 65 patient population under Medicare requires significantly less general routine nursing care than below age 65 patients in the general population, thereby off-setting any greater amount of general routine nursing care required by pateints age 65 and over under the Medicare program. As none of these three conditions has been demonstrated to be met, the use of an average per diem would be inappropriate and inequitable, resulting in a legitimate cost differential being shifted from one payer-the Medicare Program-to all other payers. With respect to the first condition, the original studies conducted in connection with the introduction of the nursing service differential established a correlation between nursing service and patient age. Specifically, the studies found that persons age 65 and over required additional hours of general routine nursing service above and beyond that required for those under age 65. No further studies have been undertaken to controvert those findings. On its face, the second condition is totally invalid, as over 95% of the population age 65 and over are beneficiaries under the Medicare Program. With respect to the third condition, no studies have been undertaken which demonstrate that Medicare patients below age 65 require lesser amounts of general routine nursing care than similar aged patients in the total population. Logic would suggest that if any difference were to exist, it would be in the opposite direction. A second basis quoted in the preamble for eliminating the differential is the fact that a greater number of special care beds (intensive care, coronary care, etc.) now exists and, therefore, there has been a substantial shift of the intensely ill patients from general routine care areas to these special care units. Further, the preamble states that since Medicare utilization is higher in the special care units than in general routine care areas, this affects, to a significant extent, the additional nursing care which was originally reflected in the differential. There are a number of factors which would need to be considered in reaching this conclusion. Among these are: 1. the relative utilization of general routine care areas by patients 65 and over at the time of the original studies and currently. 2. the relative utilization of special care areas by patients 65 and over, both at the time of the original studies and currently. 3. the relative shift of patients 65 and over and those under 65 to special care areas from general routine care areas from the time of the original studies, and 4. the cost of rendering nursing care in general routine areas for patients 65 and over compared to patients under 65. In view of the multiplicity of factors affecting this issue, the conclusion reached in the preamble could only be supported by a study which specifically compared the cost of care in general routine nursing care areas for Medicare beneficiaries with the cost of such care for all other patients. No evidence is presented that such a study has been made. The third point listed in the preamble states that the Medicare program gives special recognition to its beneficiaries' utilization of special care areas and that the nursing differential does not apply to special care areas. We agree that Medicare does, in fact, give special reimbursement consideration to its utilization in the special care units and that the current formula for calculating the nursing salary cost differential does not apply to these units. However, this does not support the termination of the nursing salary cost differential because it does not address the central issues-the comparable cost of nursing care in the general routine nursing care areas for patients 65 and over and those under 65. Furthermore, the studies upon which the differential was originally based only considered general routine nursing care utilization and cost of care in those areas and specifically excluded consideration of the special care units. Hon. JOHN MARTIN, Committee on Ways and Means, [Telegram] HALE FLOYD COUNTY MEDICAL SOCIETY, DEAR MR. MARTIN: The entire membership of the Hale Floyd Briscoe County Medical Society of which I have the honor to be the president, wish to appeal to you to oppose two provisions (those providing for federal controls of residency and payback by medical school graduates of aid to medical schools) HR 5546 the health manpower bill. We also wish to express our opposition to the utilization review regulation developed for medicare and medicaid and we wish to oppose the secretary of HEW having anything to do with determining "reasonable charges" for physicians using an economic index selected by the secretary. We also wish to put on record our opposition to revision of the limits on hospital service costs from 90th to the 80th percentile. Please be aware of the number of physicians represented by the signatures attached to this letter. We are the physicians serving rural west Texas throughout the south plains. MARY D. BUBLISH, M.D., President. (and 34 others). [Telegram] PLAINVIEW, TEX., June 12, 1975. Hon. JOHN MARTIN, Longworth Office Building, Washington, D.C.; Strongly recommend revocation or change in medicare regulations. Present regulations are atrocious. Mr. JOHN MARTIN, Esq., Dr. C. L. BUSBY. CALIFORNIA MEDICAL ASSOCIATION, Chief Counsel. Commillee on Ways and Means, Washington, D.C. DEAR MR. MARTIN: The California Medical Association, representing 26,000 private medical practitioners, requests that the attached statements relating to the subjects of Hospital Utilization Review and Criteria for Determining Reason able Charges (under Medicare) be received by the Committee and be made part of its record of oversight hearings to be held on June 12, 1975 by the Subcommittee on Health. We appreciate the opportunity to provide these statements and hope that they will be of assistance to the Subcommittee in its consideration of these important matters. Sincerely, Enclosure. CARL GOETSCH, M.D., President. STATEMENT OF THE CALIFORNIA MEDICAL ASSOCIATION UTILIZATION REVIEW California Medical Association welcomes this opportunity to present the concerns of California physicians with regard to implementation of the utilization review regulations for Medicare and Medicaid which were published in the November 29, 1974 Federal Register. There appears to be three major problem areas relating to the regulations: their overly broad application of the admission review requirement to all Medicare and Medicaid admissions; the questionable procedure employed by the Secretary of HEW to gain authority for their promulgation; confusion surrounding the effective date of the regulations as well as conflicting interpretations of various provisions. 1. Overly broad application of concurrent admission review procedures.-California Medical Association supports the concept of concurrent utilization review and has actively encouraged hospital medical staffs to provide organized and effective peer review. We do believe, however, that review of all admissions is not necessary and not desirable. Our Association and the California Hospital Association have ointly developed a set of "Guidelines for Hospital Patient Care Evaluation." The Guidelines present a model program of hospital utilization review endorsed by the major fiscal intermediaries in California as well as the regional hospital councils and allied health organizations. Although the Guidelines include recommendations basically similar to the concurrent review program required by the new regulations, a system of selective review of admissions based on patterns of care and acknowledged problems is proposed which we believe will accomplish the objectives of the Medicare law in a less costly and time-consuming way and enhance rather than hinder the provision of quality medical care to government program beneficiaries. 2. Questionable procedure employed in promulgation.-Public Law 92-603 authorized the Secretary of HEW to apply Medicaid utilization controls to the Medicare program if such methods are found to be more "effective." CMA considers such a procedure highly objectionable in its application to the utilization review regulations published November 1974. The Secretary in effect introduced an untried and highly controversial program of utilization control in Part 150.18 of the Medicaid regulations and in the same issue of the Federal Register declared these Medicaid requirements superior to Medicare! 3. Confusion surrounding implementation.—The administrative history of the new utilization review regulations has been characterized by confusion, ambiguity and conflicting interpretations. The process more or less began with an "Intermediary Letter" issued in 1973 by the Bureau of Health Insurance which attempted to impose preadmission certification of Medicare hospital admissions. This requirement was reiterated by proposed regulations in the January 9, 1974 Federal Register which evoked a storm of protest. The final regulations issued November 29, 1974 replaced the preadmission certification requirement with concurrent admission review of all Medicare and Medicaid cases within "one working day." Only within recent weeks has an "official" definition of a hospital working day been provided by the Department of HEW. The effective date of the regulations was first announced as February 1, 1975 (barely 60 days from the date of publication). This was later "extended" to April 1, 1975, and finally formally postponed until July 1, 1975. Following the announced postponement, various guidelines and letters were issued in an attempt to clarify what, precisely, would be expected of hospitals and their medical staffs on or after July 1, 1975. A clear answer to this question has yet to be provided. Formation of a special task force within the Bureau of Quality Assurance has recently been announced. It appears that this group has been charged with analysis and clarification of the utilization regulations six months after they were issued in final form. This is particularly unfortunate with regard to questions such as the relationship between the new utilization review requirements and local PSRO programs. In conclusion, the net effect of such administrative inconsistencies has been to create an atmosphere of wariness and mistrust among physicians. During the past two years it has become increasingly difficult for California physicians who advocate full cooperation with government programs to maintain credibility. Because of this unfortunate situation, we request that a thorough review be carried out of the administrative rule-making process and its relation to federal health care programs. FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED SUBPART E—CRITERIA FOR DETERMINATION OF REASONABLE CHARGES; REIMBURSEMENT FOR SERVICES OF HOSPITAL INTERNS, RESIDENTS, AND SUPERVISING PHYSICIANS may In enacting Section 224 of Public Law 92-603, the Congress approved of the principle that "the prevailing charge level (for physicians' services) not exceed in the aggregate the level determined under such clause for the fiscal year ending June 30, 1973, except to the extent that the Secretary finds, on the basis of appropriate economic index data, that such higher level is justified by economic changes." In so doing, the Congress introduced a new concept into the Medicare program, that reimbursement levels reflect prevailing charges only to the extent that increases do not exceed increases in costs ("economic changes"). The original concept of the Medicare program was to reimburse physicians according to their customary charges. When the program was implemented, controls were necessarily developed so that carriers could evaluate what might be realistically deemed a "prevailing" level, and the criterion for evaluation was a specified percentile in the array of charges among all physicians for each service in the specific area. In most areas, specialty criteria were also applied in determining what constitutes a "prevailing level.” The net effect of this process is often to lower charges that may indeed be a physician's "customary" charge, and ones that may also be deemed "reasonable." The fact that the data base against which third parties measure prevailing charges represents a time frame ranging from six to eighteen months prior to the time that the service was provided further controls charge levels and subverts what was designed to be a "usual fee" program. The medical profession has been concerned with the use of these techniques for restricting payments to physicians, since their effect can be either to disadvantage the physician who is willing to accept assignment, or to shift the financial burden to the patient. Nevertheless, to the extent that adjustments in levels of prevailing charges are based on actual billings by the majority of physicians, the intent of the original legislation has been carried out. The introduction of an "appropriate economic index" significantly changes the concept of the Medicare law, since it introduces external contro in order to further assure, as Secretary Weinberger indicated, that fees for medical services will "follow, rather than lead, any inflationary trends." Thus, physicians who accept assignment are placed in an even more disadvantageous position where they will, under the best of circumstances, only be able to keep up with inflation. Their more logical alternative may be to begin refusing assignment, and thus shift further fiscal responsibility to elderly patients. The Senate Finance Committee report on Section 224 called for "most refined indexes that can be developed," and it is assumed that this was the intent incorporated in the phrase "appropriate economic index data" used in the legislation itself. The Department of Health, Education and Welfare has developed an index that purports to carry out the intent of Congress, but has in fact developed an index that is unsophisticated and relies on surrogate indices that mah have little or no bearing on a physician's cost of priacticing medicine. A specific and poignant example of the fallacy in using dubious surrogate indices to represent changes in physicians' costs is the precipitous increase in Professional Liability coverage, which is not reflected in any other sector of the economy for which indices are developed. Specific concerns in relation to this were outlined in Point 4 of a recent letter to Superintendent Cardwell, a copy is enclosed for your information and entry into the record. We ask that this letter be considered a part of out official statement, since it deals with specific issues not reiterated in this document. Point 3 of the letter, which addresses itself to the discrepancy between the legislation, which calls for the application of the index "in the aggregate," and the regulation, which would evaluate prevailing charge levels on a service-byservice basis, also warrants the Subcommittee's particular attention. This means of implementing the legislation is absolutely and totally in conflict with not only the intent of Congress, but also the legislation itself, which is quite specific on this issue. Because of the manner in which physicians' charges are adjusted and areawide prevailing charge levels change, this method is necessarily inequitable, rendering a disservice to physicians by lowering the level of reimbursement allowed for procedures that may have increased above the index level, but providing no upward adjustment for those services where the 75th percentile either did not change or changed less than the index. In empirically testing the effect of these regulations, had they been in place since 1971, we have discovered that among 15 common services in one area, there was no change whatever in the 75th percentile for eight services, a slight decrease in two procedures, and an upward adjustment in five procedures. Just two of these adjustments in the "natural" 75th percentile would have exceeded the economic index for that period; however, in the aggregate, the increases were well below the index. Under the regulations, the prevailing level for these two services would have been subject to downward adjustment, however, entirely because the regulations provide for a service-by-service basis, rather than the legislatively mandated "aggregate" figure. As outlined in Point 2 of the attached letter, the implementation of this regulation would be discriminatory and would forever place on physicians or their patients a restriction based on 1971 charge levels and would permit adjustments thereto which may have no bearing whatever in costs of engaging in medical practice. These regulations would be particularly discriminatory against certain specialists, such as anesthesiologists who are experiencing increases in insurance coverage and, hence, costs of practice, that are in no way accounted for by some extraneously developed economic index. Lastly, if the example outlined earlier is representative, and we have no reason to believe that it is not, the actual effect of these regulations on overall Medicare costs would be minor, while the effect on specific individual patients could be substantial and the alienation of participating physicians will undoubtedly be significant. The California Medical Association requests that the Committee on Ways and Means exert the influence at its disposal to see that the intent of Congress is not distorted by implementation of this regulation. HON. J. B. CARDWELL, Commissioner of Social Security, CALIFORNIA MEDICAL ASSOCIATION, Department of Health, Education, and Welfare, DEAR COMMISSIONER CARDWELL: This letter relates to proposed amendments to provisions in Subpart E-Criteria for Determination of Reasonable Charges; Reimbursement for Services of Hospital Interns, Residents and Supervising Physicians of Public Law 92-603, Federal Health Insurance for the Aged and Disabled. The specific citation is to regulation No. 5 of the Social Security Administration (20 CFR, part 405) published in the Federal Register, Volume 40, No. 72, Monday, April 14, 1975. The California Medical Association, representing some 26,000 physicians in the private practice in medicine throughout California, wishes to make several general and specific comments concerning the proposed amendments to the regulations. They are the following: 1. Limitations in prevailing charges, such as have been proposed, will result in an economic disadvantage to persons covered under Part B of the Medicare program. Because these limitations will tend to diminish physician willingness to accept assignments under the program, that proportion of a fee increase which falls outside the federal guidelines will be shifted to the patient and will increase the proportion of the cost of health care which he must necessarily bear. Additionally, physicians who choose to continue accepting assignment will suffer economically relative to those who choose not to accept assignment and to bill patients for amounts customarily charged. This imposition of additional costs of care on the elderly or disabled further dilutes a program designed to protect them from the heavy burden of expense for their health care. |