HEALTH SERVICES CORPORATION OF THE CHURCH OF JESUS CHRIST OF LATTER-DAY SAINTS, Hon. DAN ROSTENKOWSKI, Ogden, Utah, June 10, 1975. Chairman, Subcommittee on Health, House Ways and Means Committee, DEAR MR. ROSTENKOWSKI: This letter concerns the proposed new Medicare regulations which would revise the schedule of limits on Hospital Inpatient General Routine Service Costs. These proposed regulations appear to be attempts to circumvent the intent of Congress. As I interpret the law (92-603 Section 223), it is apparent that the concern is with identifying "inefficiencies and/or excesses" but at the same time recognizing that quality and intensity of care contribute to variations in hospital costs. In our area we have been and are now below the national norms in inpatient routine service costs. We find ourselves placed in the unfavorable position of having to "catch up" or compete regionally to obtain or hold competent employees and meet other inflationary demands. Many of our increases are a result of imposed national legislation, an example being the removal of the Taft-Hartley exemptions for hospitals. It appears to me that there is not rationale for your decision, except the "pocketbook." I object to the fact that Uncle Sam wants to play the "rich uncle" but at the same time does not want to pay the price. I feel there must be a more equitable method of identifying inefficiencies and/or excesses in individual hospitals which would not diminish the quality and intensity of care now being rendered. It does not seem fair to take punitive action against all hospitals when the problem is caused by a few. I strongly urge that you and your committee prevail upon the Secretary of Health, Education, and Welfare to correct the irregularities that exist in the proposed new Medicare regulations. Yours very truly, KENNETH C. JOHNSON, Administrator. STATEMENT OF PATRIC E. LUDWIG, PRESIDENT, MICHIGAN HOSPITAL ASSOCIATION SUMMARY The Michigan Hospital Association, which represents nearly 240 hospitals and related health care institutions in Michigan, strongly objects to the SSA actions to: (1) eliminate the routine nursing cost differential from Medicare reimbursement and, (2) revise the inpatient routine per diem cost limitations. These actions are believed to be inconsistent with congressional intent relative to the conduct of the Medicare program and, if permitted to be implemented, will adversely affect hospital care in Michigan. (Page 1 of the Statement) The SSA rationale for elimination of the nursing differential is without substance. Available evidence shows that Medicare patients, which generally suffer from conditions that are more acute than other groups, require additional routine nursing care. Even in those hospitals where special care units are available, the Medicare patient still receives relatively more routine nursing care. (Page 2 of the Statement) Elimination of the differential will unjustly reduce Michigan community hospitals' Medicare reimbursement. In 1973, the differential accounted for roughly $6.5 million. Because of the slim operating position of Michigan hospitals, this factor alone would have created a statewide hospital deficit of approximately $5 million. (Page 3 of the Statement) The revised routine per diem cost limitation disproportionately affects small rural hospitals. Data developed by SSA shows that 19 Michigan hospitals will probably exceed the revised limitation. Over half of the hospitals affected are located in towns where they are the sole institutional provider. By no means are these hospitals "luxury" institutions. (Page 4 of the Statement) The Michigan Hospital Association views the actions of SSA on these issues as inequitable and arbitrary and urges the committee not to condone their implementation. (Page 5 of the Statement) The Michigan Hospital Association, which represents nearly 240 hospitals and related health care institutions in Michigan, strongly objects to the Social Security Administration's (SSA) actions to: (1) eliminate from Medicare reimburse 54-804 0-7527 ment the 81⁄2 percent routine nursing cost differential; (2) revise the inpatient routine per diem cost limitations. We view the SSA actions as inequitable, not based on substance, and as such, are inconsistent with congressional intent relative to the conduct of the Medicare program. If permitted to be implemented, these regulations will adversely affect hospital care in Michigan. Detailed below are the Association's concerns on each issue. 81⁄2 Percent nursing differential The 82 percent nursing differential is included in Medicare reimbursement to reflect the relatively high routine nursing care given elderly patients. However, SSA now contends that this factor is no longer sighnificant becuase of increased supply and, commensurate use by the aged, of special care units (Intensive Care Units and Coronary Care Units). Among other things, this SSA contention assumes that all hospitals have such units. In Michigan, however, only 30. 4 percent of all hospitals had a Coronary Care Unit (CCU) while 59.9 percent. had an Intensive Care Unit (ICU)1. This data is for 1973. Thus, in many Michigan hospitals, it is not possible for the intensely ill elderly patients to be treated in a special setting. Moreover, the proportion of hospitals having such units has not increased substantially in recent years. For example, in 1972, 31.5 percent of Michigan hospitals had a CCU while 55.3 percent had an ICU. Despite the existence of special care units, SSA has not demonstrated that the elderly in hospitals that have these units, do not receive additional routine nursing care. On the contrary, the evidence shows that even in these hospitals, Medicare patients receive additional nursing care. For example, the authors of the original study which determined the existence and magnitude of additional nursing service provided the elderly have upon futher investigation concluded: "Medicare patients in adult medical and/or surgical units do receive relatively more care even when the intensely ill are not cared for in these units."3 In 1972, Medicare patients represented 14.4 percent of all discharges from Michigan hospitals. However, by examining the types of conditions treated it can be readily seen that the elderly are disproportionately affected by more severe disorders which are generally associated with a high degree of bodily dysfunction. These facts are readily linked to more intense routine nursing care required of these patients. The table below arrays the percentage Medicare discharges representive of all discharges by 19 final diagnosis categories for 1972. Condition All conditions. 1. Infective and parasitic diseases_ 2. Neoplasm: Malignant 3. Endocrine, nutritional, and metabolic diseases. 4 Diseases of blood and blood-forming organs. 5 Mental disorders 6. Diseases of nervous system and sense organs. 7. Diseases of circulatory system. 8. Diseases of respiratory system. 9. Diseases of digestive system... 10. Disease of genitourinary system.. 11. Complications of pregnancy, childbirth, and puerperium. 12. Diseases of skin and subcutaneous tissue.... 13. Diseases of musculoskeletal system and connective tissue. 14. Congenital anomalies. 15. Certain causes of perinatal morbidity. 16. Symptoms and ill-defined conditions. 17. Accidents, poisonings, and violence.. 18. Special conditions and examinations without sickness. 19. Newborn... Source: Loup, Roland and Matteson, Ann Inpatient Statistics of Short-Term Hospitals, PAS Hospitals 1972, CPHA, Ann Arbor, September, 1974. 1 Source: Hospital Statistics, 1974 Ed. American Hospital Association, Chicago. 2 Source: Hospital Statistics, 1972, American Hospital Association, Chicago. 3 Communication from Stanley E. Jacobs, Ph.D. and Glenn L. Anderson to J.B. Cardwell, May 1, 1975. Loup, Roland and Matteson, Ann Inpatient Statistics of Short-Term Hospitals, Michigan PAS Hospitals 1972, CPHA, Ann Arbor, September. 1974. Elimination of the Medicare nursing differential which is justly due hospitals will have a catastrophic effect on the finances of Michigan hospitals. The Association has estimated that the differential represented about $6.5 million in 1973 for Michigan community hospitals. In that same year, total revenue (less deductions) was $1,343,815,000 while total expenses were $1,342,425,000. This results in a total industry-wide surplus of only $1.4 million or .1 percent. From this miniscule operating surplus, remodeling of facilities and upgrading services is taken. Therefore, as can be seen, had the elimination of the nursing differential occurred in 1973, Michigan hospitals would have run a statewide deficit on the order of $5 million. It is not possible to provide a continuum of ample and high quality care under such terms. Revised inpatient routine per diem cost limitation (sec. 223) The Congress' intent in section 223 of P.L. 92-603 was to limit Medicare reimbursement to institutions that are inefficiently operated or provide unnecessary degree of service. Under the revised section 223, limits on per diem cost and revised SSA classification scheme which categorizes all of the nation's hospitals into one of 32 groupings, this intent is not met. Because SSA did not account for enough factors in its classification scheme and because they arbitrarily lowered the routine per diem limit to the 80th percentile plus 10 percent of the median. hospitals are unjustly penalized. SSA has provided the names of Michigan institutions which probably will be impacted by the revisions. This data which was requested by the American Hospital Association shows that 19 Michigan hospitals will probably exceed the revised limits. However, a thorough analysis of this data by the Michigan Hospital Association reveals an alarming situation. First, 13 of the 19 impacted hospitals are located in rural or so-called non-SMSA areas. In other words, nearly 70 percent of the institutions affected are rural based. Does this disproportionate impact suggest equitability in design of the regulatory scheme? Upon closer inspection, the data shows that of the 13 non-SMSA hospitals, ten are located in Michigan towns in which they are the only institution. These are not "luxury" hospitals, but rather institutions offering basic and necessary community service. The average number of beds in these ten hospitals is 56— thus, relatively speaking, they are quite small. As for the remaining three non-SMSA hospitals affected, it is interesting to note that they are all located in Battle Creek. Half of the hospitals in the major Michigan city are adversely impacted. The adversely affected hospitals have an average occupancy rate of more than 80 per cent with each having bed complements above 200. The apparent reason that the revised limits have such concentrated impact in Battle Creek demonstrates again the inadequacies of the SSA scheme. Despite Battle Creek being a major Michigan city, it was not classified in an SMSA grouping, In all likelihood, this technicality when applied in the classification scheme caused this unequal impact. With respect to the six SMSA located hospitals, it should be noted that a number are speciality orientated with some having teaching status. In conclusion, the Michigan Hospital Association on behalf of its member institutions, submits that the two changes cited in Medicare reimbursement are inequitable and arbitrary. Furthermore, we believe the intent of Congress with respect to the Medicare program is being violated by these recent SSA actions. As a consequence, we urge this Committee not to condone these changes. Respectively submitted to the subcommittee on Health of the United States' House Ways and Means Committee, May 30, 1975 by Patric E. Ludwig, President of the Michigan Hospital Association. • Hospital Statistics, 1974 Edition, American Hospital Association, Chicago. MONTANA DEACONESS HOSPITAL, Re statement on terminating the inpatient routine nursing salary cost differentia as a reimbursable cost of a provider (Federal Register: April 3, 1975). Subcommittee Chairman DAN ROSTENKOWSKI Subcommittee on Health, Committee on Ways and Means, Washington, D.C. DEAR MR. ROSTENKOWSKI: Montana Deaconess Hospital takes great exception to the termination of the inpatient routine nursing salary cost differential allowable for Medicare patients. We have analyzed the reason given for this termination and find no documentation that justifies the proposed action. For example, the first reason given for this change is: "Public Law 92-603, the Social Security Amendments of 1972, 86 Stat. 1329, expanded the scope of Medicare coverage to include a significant number of beneficiaries in the below-age-65 population; that is, certain disabled beneficiaries and those with end-stage renal disease. The larger the segment of below-age-65 population is encompassed by the Medicare Program, the more appropriate an average per diem amount for all beneficiaries becomes." There are two problems with the above. The first is our experience does not indicate that a significant number of other Medicare beneficiaries are utilizing hospital services. During our fiscal year ending June 30, 1974, only 7.3% of our Medicare patient volume was in the below-age-65 category. Surely, this is not a significant number. The other problem is that patients now covered under the new scope of Medicare are very difficult to care for. Disabled population, as well as the end-stage renal population, require more care than the average patient we serve. It would appear additional studies should be initiated to substantiate that an average routine per diem reimbursement for Medicare beneficiaries would be appropriate. The second reason given for this change is: 1 "The study originally used in establishing the inpatient nursing salary cost differential indicated that elderly patients received a greater degree of nursing care than did younger ones. Since July, 1969, there has been a marked increase in the number of special care beds providing more intensive nursing care than is found in general routine areas, and there has thus been a substantial shift of the intensely ill from general routine care areas to these special care units. In addition, a higher percentage of utilization of health insurance program beneficiaries of the special care units than of general routine care areas reflects to a significant extent that the nursing care that brought about recognition of the routine nursing differential is now being given in special care units." At Montana Deaconess Hospital we have not found that Medicare patients have created a need to markedly increase the number of our special care beds. In fact, during the past 8 years we have not added a single bed in either the Cardiac Unit or our Intensive Care Unit. It was also mentioned that Medicare patients utilize special care units to a greater degree than the rest of the hospital population. Our statistics do not substantiate this. During the fiscal year ending June 30, 1974, the patient days of care rendered in our Cardiac Care Unit and Intensive Care Unit totaled 3,477. Of this amount, Medicare utilization accounted for 997 patient days. During the same period our total patient day volume was 66,478 and Medicare total patient care volume was 23,023. These statistics show that Medicare utilization of our special care units is actually less than the total hospital utilization of our special units. It would appear that similar statistics in other hospitals should be reviewed to determine the actual Medicare utilization of special care units. Both of the above reasons given for terminating the inpatient routine nursing salary cost differential overlook the most important factor in hospitalization of the over-age-65 population. This factor is nursing needs required by the elderly. At our hospital we evaluate each patient daily to determine level of nursing care required. We have found that the above-age-65 group requires a higher level of nursing care than the below-age-65 category. A study recently conducted on our nursing floors has proven that the above-age-65 population required special care 45% of the time, while below-age-65 required special care only 25% of the time. Montana Deaconess Hospital also operates a nursing home as well as an acute hospital. Therefore, we are experts in the care of the aged. We are convinced that the care of the elderly poses very special problems for the health care field. Services we offered when the inpatient routine nursing salary cost differential was recognized are not different than the nursing services offered today. Ir anything, the care required by the aged has increased. The government does a great disservice to the aged as well as the general public to state that the aged represent an average hospital inpatient. Our Medicare nursing care salary differential during fiscal year 1974 was $32,846.00. This money was earned by our nurses caring for Medicare patients and constitutes a real recognition for work performed and not a fictitious bookkeeping entry. To force us to increase our rates to the private sector to recover the cost is wrong. We would urge your subcommittee to have a recognized industrial engineering firm to again study the nursing needs of all Medicare beneficiaries before you implement these proposed regulations. Our hospital stands ready to offer any information which would substantiate what has been referenced in this letter. Sincerely, FRED K. HOLBROOK, Administrator WASHINGTON, D.C., June 12, 1975. Re promulgation by the Social Security Administration, Department of Health, Education, and Welfare, of revised schedule of limits on hospital inpatient general routine service costs in the medicare program. Hon. DAN ROSTENKOWSKI, Chairman, Subcommittee on Health, Committee on Ways and Means, DEAR CHAIRMAN ROSTENKOWSKI: We are submitting a statement to your committee on behalf of our client, Naples Community Hospital, 350 Seventh Street, North, Naples, Florida 33940, to protest the promulgation of revised limits on hospital inpatient general routine service costs for hospitals with cost reporting periods beginning on or after July 1, 1975 by the Department of Health, Education & Welfare (HEW). The approach used by HEW to develop these limits disregards the Congressional intent which motivated the passage of § 223 of P. L. 92-603 and fails to demonstrate that a hospital's inpatient general routine service costs are a direct function of solely its location and bed size. As a result, those hospitals with cost structures at variance with other hospitals in their group have been severely penalized. Almost 200 comments were submitted to HEW in April and May, 1975 concerning the proposed limits by various hospitals and state and national hospital associations. Those comments were virtually unanimous in criticizing the HEW approach. Therefore, we believe that Congress, at this point, would be warranted in issuing further guidance to HEW in order to eliminate the inequities created by the current geographical and bed size group methodology. At the very least, your committee should hold further hearings to examine the HEW approach and obtain the views of the many hospitals who believe that the limits are unfair and ill-suited to their situations. Naples Community Hospital is a perfect example of a hospital which may suffer hardship and inequity as a result of the inpatient general routine service cost reimbursement schedule. The hospital is located on the Gulf Coast of Florida in Collier County, and primarily serves the cities of Naples, Marco Island, Immokalee, Everglades City, Ochopee, Goodland, and Bonita Springs. Collier County is predominantly rural and semi-rural, although, according to the 1970 census, it is the fifth fastest growing county in the nation. Naples Community Hospital (240 beds) is the only acute care facility in Collier County and serves an area approximately 125 miles in diameter. The peculiar fact which distinguishes the Naples area from the other cities in Collier County is that it has an extremely diverse population, in terms of age and income, since it is a very popular vacation and retirement area. The continued and rapid development of high-rise apartments and condominiums along the Gulf Coast attests to this fact. The 1970 population of Naples was 43,000, and by the end of 1975 it is estimated to be 71,000. Studies by the Chamber of Commerce indicate that the influx of winter residents and tourists doubles its year round population. In addition, approximately 25,000 migrant agricultural workers locate in Immokalee during the fall and winter seasons. |