Please include this written statement in the printed record of the hearing. I would like to express my grave concern over the manner in which the provisions of Section 223 of Public Law 92-603 have been implemented. While your commitee clearly has the right to exclude unreasonable or unnecessary costs from reimbursement and may impose limits on routine service cost reimburse ment, to do so on a purely statistical basis is a vicious injustice to many providers of care. Clearly, these proposed revised limits were set with only one objective— to cut the cost of the Medicare Program-without regard to the effects on either the providers or your beneficiaries. On one hand, your certification and audit procedures demand the highest quality, while, at the same time, you seek to pay less. When providers either accept the penalty or reduce their costs to the 80th percentile, your only recourse will be to lower the ceiling to the 70th percentile, or lower. This obviously leads to absurb results. The proposed limits for fiscal years beginning on and after July 1, 1975, have been set, according to the Federal Register, by grouping Standard Metropolitan Statistical Areas (SMSA's) by per capita income on the assumption, that income levels tend to reflect costs of goods and services. While this may be a valid assumption for some segments of the economy, it is certainly not valid for the hospital industry. Costs of utilities, drugs, food, medical equipment, and surgical supplies have no relationship to the per capita income of a hospital's community. The largest cost in hospitals is labor, and labor costs do not necessarily reflect community income levels. If a hospital is unionized and wages are set through collective bargaining, wage rates are generally higher than non-union hospitals. Under your proposed system of limitations, the Baltimore SMSA has been placed in Group II, while the SMSA's for Wilmington, Washington, D.C., and Richmond are placed in Group I. This is a change from our previous classification which placed us in Group I. This proposal is incomprehensible since costs in Baltimore are higher than all three of these areas. Baltimore is 40 miles from Washington and 60 miles from Wilmington, and a proposal that contains a cost limit differential between us of $50.00 a day is incredible. The following data is factual and clearly shows the fallacy of basing cost limits on per capita income: Therefore, because of a false assumption that variations in per capita income should be reflected in hospital costs, The Johns Hopkins Hospital, and the Baltimore SMSA, would be subjected to cost limitations which are lower than three neighboring SMSA's where present hospital costs are substantially lower than those in Baltimore. The Johns Hopkins Hospital is perfectly willing to justify its costs in relation to the services that it renders tc program beneficiaries, and it is willing to undergo comparison with peer institutions who operate in similar labor markets and offer similar services. However, it is grossly unfair to establish cost limits on a geographical basis, using only per capita income and bed size as the criteria. I respectfully urge you to reclassify the Baltimore SMSA into Group I to avoid correlation between per capita income and hospital costs. Failure to do so will result in gross inequities for Baltimore hospitals who operate in a unionized labor market and cannot compete with hospitals in neighboring SMSA's who do not. By June 1976, The Johns Hopkins Hospital will probably be operating at cost levels in excess of the proposed $120 limit. The present Medicare payment levels are grossly inadequate to meet the financial needs of this hospital, and if this present payment level is reduced because of artificial ceilings, this hospital will have no choice but to reduce its level of service to Medicare beneficiaries. In regards to the nursing differential, The Johns Hopkins Hospital supports the positions taken by the American Hospital Association and Hospital Financial Management Association. Additionally we strongly object to the manner in which the original decision to eliminate the nursing differential was made. More specifically, we were not provided HEW's rationale and justification for so eliminating the nursing differential. There is no question in our minds that in order to treat the issue of Medicare reimbursement fairly, there must be some nursing differential included in the reimbursement. I agree with the principle that the Medicare Program should not pay costs which are unreasonable or higher than warranted by the services, but I do object strenuously to the proposed methods of determining those costs which are not appropriate. Sincerely, ROBERT M. HEYSSEL, M.D. STATEMENT OF KANSAS CITY AREA HOSPITAL ASSOCIATION, HOSPITAL ASSOCIATION OF METROPOLITAN ST. LOUIS, AND MISSOURI HOSPITAL ASSOCIATION, C. DUANE DAUNER, PRESIDENT AND CHIEF EXECUTIVE OFFICER The hospital associations in Missouri are grateful for the Subcommittee on Health's interest in the Medicare program. We are pleased to offer this statement for consideration. A. Utilization review Several months ago HEW proposed that all admissions receive prior approval to qualify for Title XVIII reimbursement. We objected to this imposition on the grounds that prior approval is unnecessary in many cases and impossible in others. Smaller hospitals would have a particularly difficult time in complying. Their physicians are short in supply and cannot be reached for prior approval verification in many instances. When proposed regulations were published in the Federal Register on November 29, 1974, the hospital field again voiced its feelings about the problems inherent in HEW's requirements. Most of the deficiencies have been corrected, with the exception of alternative systems for smaller institutions. Due to the unique characteristics of small rural hospitals, such as travel distances, limited number of physicians, composition of medical staffs, high proportion of aged patients, hospital services, alternate health care services and facilities and proximity to specialized hospitals, special provision should be made for compliance. We recommend that recognition be given to smaller hospitals in accordance with H.R. 3716, introduced by Representative English of Oklahoma. B. 82% Nursing differential As an economic move, HEW is attempting to eliminate the inpatient routine nursing salary cost differential. Reasons given in the Federal Register of April 3, 1975 do not support elimination of the differential. Attached is the Missouri Hospital Association's letter of April 28, 1975 challenging the assertions made in the Federal Register. The detrimental impact can be readily demonstrated. In a recent survey, the Hospital Association of Metropolitan St. Louis found that hospitals in the St. Louis area will lose over $1 million in Medicare reimbursement if the differential is eliminated. These costs, which are legitimately incurred on behalf of Medicare patients, will have to be passed on to nongovernmental patients, further escalating hospital charges. We urge Congressional action on H.R. 7000 to overcome SSA's "legislation by regulation" on this important reimbursement matter. C. Limits on general routine service costs Our position statement to SSA on the proposed action of HEW to revise the schedule of limits on hospital inpatient general routine service costs is attached. We believe that the schedule and scheme on which the schedule is based represent a gross misapplication of Section 223 of P.L. 92–603. Section 223 was enacted to limit reimbursement to inefficient and luxury hospitals. The Committee Report accompanying the 1972 Amendments makes it clear that the intent is to limit reimbursement to institutions whose costs are reflected by "marked inefficiency in operation or excessive service". The classification system developed by SSA leaves much to be desired. It is based on non-hospital or health criteria, fails to recognize variations among hospital services and facilities and arbitrarily presumes guilt for institutions exceeding the artificial limits thus forcing such hospitals into an exceptions process. We vigorously oppose this process and the underlying philosophies with SSA that led to its development. We strongly feel that SSA has no statutory authority to force individual hospitals to endure a burdensome cost justification appeals process, particularly when the basis for forcing such action is based on irrelevant criteria. The hospital associations of Missouri respectfully request Congress to enact corrective legislation that will channel SSA regulations and administration into a system that is equitable and in accord with Congressional intent. Mr. J. B. CARDWELL, MISSOURI HOSPITAL ASSOCIATION, Commissioner, Social Security Administration, Department of Health, Education, and Welfare, Baltimore, Md. DEAR MR. CARDWELL: The Secretary of Health, Education and Welfare proposed to amend Regulations No. 5, 20 CFR, Part 405, Section 405.430 on March 5, 1975. As published in the Federal Register on April 3, 1975, the 81⁄2 percent inpatient routine nursing salary cost differential will be eliminated. We strongly oppose such a move and urge that the proposed action be reconsidered. Our reasons are given below. First, it is asserted that the number of disabled beneficiaries and those with end-stage renal disease who are under age 65 reduce the need for the differential. Since these persons were made eligible for Medicare coverage by Public Law 92-603, the number of patients over age 65 has not been reduced. The patient populations are mutually exclusive, thus we do not believe that expanded Medicare coverage constitutes a reason for eliminating the nursing differential. Secondly, patients past 65 still require more nursing care as was documented in the earlier studies which led to establishing the differential. The creation of special care units such as intensive care and coronary care do not alter that fact. Över one-third of the hospitals in the nation do not have special care units, and many of those in existence are not designed to handle the progressive care concepts that are tacitly assumed in the Federal Register. The conclusion that special care units eliminate the basis for maintaining the differential is invalid, particularly in view of the fact that the majority of patients past 65 still receive their care in routine nursing units rather than special care facilities. We believe that the decision to eliminate the differential is inappropriate unless a comprehensive study conducted in cooperation with hospitals documents the assumptions made in the Federal Register. Thirdly, changes in Medicare cost-apportionment requirements in 1972 do not constitute justification for terminating the differential because the adjustments apply only to special care units when beneficiaries are treated therein. The changes in no way affect the greater nursing requirements of routine inpatients over 65 years of age. As an economic move to reduce the cost of the Medicare program, termination of the nursing cost differential is proposed. This reduction in Medicare reimbursement will force non-Medicare patients to underwrite real and actual costs of care for Title XVIII patients. Such subsidization by private patients is contrary to the intent of Public Law 89-97. In view of the lack of a second indepth analysis of nursing requirements for patients over age 65, the irrelevance of disabled and end-stage renal disease patients under age 65 on nursing needs of people over 65, and the policy of Congress to have the Medicare program cover the reasonable cost of providing care to its beneficiaries, we respectfully urge you to rescind the proposed notice to eliminate the nursing differential and to study the impact of changes since 1969 in cooperation with the American Hospital Association. Sincerely, C. DUANE DAUNER, President. Mr. J. B. CARDWELL, MISSOURI HOSPITAL ASSOCIATION Commissioner, Social Security Administration, Department of Health, Education, and Welfare, Baltimore, Md. DEAR MR. CARDWELL: This letter contains the response of the Missouri Hospital Association Board of Trustees to the revised Schedule of Limits on Hospital Inpatient General Routine Service Costs in the Medicare Program as published in the Federal Register, Vol. 40, No. 75, April 17, 1975. The Missouri Hospital Association takes issue with the methodology employed in carrying out the intent of Section 1861 (v)(1) of the Social Security Act. Its stated purpose relative to Medicare reimbursement is to exclude therefrom any part of incurred cost found to be unnecessary in the efficient delivery of needed health services. The efficient delivery of needed health care services is a goal of providers as well as government. However, the rationale for evaluating and determining "efficient delivery" should reflect recognized parameters and methods of analysis. Health care is a service, not a product. The assumption that "efficient delivery of health care services" is a function of "per capita income levels" is an unproven and untested hypothesis. The wide range of independent variables that must be considered in quantifying "efficient delivery" preclude a simplistic model that is limited to the non-health factors of per capita income and standard metropolitan statistical areas. We seriously question that the Congress envisioned a matrix classification based on two unrelated statistical measures when it enacted Section 223 of P.L. 92-603. It is our strong recommendation that the systems described in the Federal Register of April 17, 1975 be expunged from the record, and replaced with a responsive system that is developed in cooperation with the American Hospital Association. Examples of specific problems created by the 80th percentile plus 10 percent of median classification system when coupled to per capita income and SMSAS are provided herein to document the inequities that are inherent in the control program. 1. Kirksville Osteopathic Hospital, Kirksville, Missouri, is affiliated with the Kirksville College of Osteopathic Medicine. The institution is a teaching hospital, located in a non-SMSA. Based on the Schedule of Limits proposed in the Federal Register, the hospital is limited to a maximum of $67 per day for inpatient general routine service costs. It is axiomatic that such a figure is unrealistic under these circumstances. 2. The University of Missouri Medical Center, Columbia, Missouri is listed in SMSA Group V. The institution serves as the major teaching hospital for the University of Missouri School of Medicine. The $84 limitation for bed group 405-684 ignores the actual services and expenses incurred in that hospital. Emphasis on this inequity is evident when comparison is made with the Group 1 figure of $133. 3. Charles E. Still Osteopathic Hospital, Jefferson City, Missouri, serves as a teaching hospital for osteopathic externs, interns and residents. The 187 bed institution is located outside a SMSA. The limitation of $65 has no correlation to similar institutions that do not have teaching programs. 4. Lester E. Cox Medical Center (618 beds) and St. John's Hospital (700 beds), Springfield, Missouri, are placed in SMSA Group IV, while Methodist Medical Center (542 beds), St. Joseph, Missouri, is put in SMSA Group III. The limits for two groups vary by $2 ($87 for Group IV and $89 for Group III). These figures give no recognition to the differences in age of facilities, debt service obligations, construction programs, training programs, specialty services or variances in medical practice between the Southwest and Northwest Missouri communities, or whether services being provided are "needed". While other examples could be cited, we believe the case has been made to justify the need for a completely new system for identifying hospitals who are not efficiently delivering needed health services. We sincerely hope that the Social Security Administration will rescind its current program and cooperate with hospitals in developing a system that will carry out the intent of Congress. Sincerely, C. DUANE DAUNER, President. KANSAS HOSPITAL ASSOCIATION POSITION PAPER ON THE UTILIZATION REVIEW PROCEDURES FOR HOSPITALS I. SUMMARY OF THE KHA POSITION We seek modification of the new utilization review regulations calling for admission review within one working day as this applies to rural hospitals and/or those with small medical staffs. Comments 1. A hospital with only a few physicians will have great difficulty arranging for eligible physicians to review a given case within the time period allowed under HEW rules. 2. An eligible physician is one who has no professional involvement in the case. In some small hospitals this would rule out the entire staff since, by necessity, the doctors work on a reciprocal basis of substituting for each other almost daily. 3. The added pressure of this new form of paperwork and the onerous task of questioning the propriety of a colleague's judgment on a daily basis could cause many physicians to consider leaving the rural areas. 4. The same rules and logistics should not be imposed on all hospitals, regardless of size. Larger hospitals with enough medical staff over which to spread the UR work load are better equipped to perform admission review. II. KHA PROPOSES AN ALTERNATIVE We propose a retrospective admission review program, with emphasis on education. Our reasons: 1. We have been operating a successful retrospective program in Kansas for several years for Medicare and Medicaid cases. 2. Looking at questionable cases in retrospect gives all concerned time to make better judgments. A physician whose pattern of admissions is questionable can be warned and eventually placed on a preadmission approval basis. 3. The main value of utilization review is the exposure it gives to each doctor's practice. In our opinion, more effective results can be achieved by prevention of over-utilization by highlighting patterns of faulty admission than by challenging admissions on a case by case basis. JOHN M. MARTIN, Jr., LANCASTER COMMUNITY HOSPITAL, Chief Counsel, Committee on Ways and Means, DEAR MR. MARTIN: Termination of the inpatient routine nursing salary differential would cost our 99 bed hospital approximately $13,000-$15,000 annually. The impact of reducing inpatient routine service cost from the 90th to 80th percentile is not yet clear. But the obvious effect is negative. Also, it appears doubtful whether the special characteristics of small rural hospitals such as ours have been fully taken into account. Hospitals, commercial, and self-pay patients have about reached the limit of absorbing costs government programs should pay. Title XVIII of the Social Security Act clearly intended Medicare reimbursement for the fair share of program patient cost. Implementation of the aforementioned measures would continue the withdrawal of Medicare from paying for its just obligations. Continued reductions in allowable cost year after year will result in a most detrimental effect on health care in this community as well as the general American public. Please reconsider the termination of nursing salary differential and reduction of cost units from 90th to 80th percentile. Sincerely, J. A. HAGEN, Controller. |