to finance the care of the elderly and give them the humane, compassionate care and concern due to them because of the dignity of their being and the contributions which they have made individually and collectively to this great nation of ours. We certainly feel that SSA's proposed elimination of the nursing salary cost differential is purely and simply bureaucratic fiat. There is no data to support their decision. It is another of their attempts to improve the federal budget picture. We certainly sympathize and also want to help to improve that condition but not at the expense of patients and of our institutions. PUBLIC LAW 92-603-SECTIONS 223; 224 The action by SSA in redefining reasonable cost limitations is clearly arbitrary and capricious. The Congress recognized that to determine levels of reimbursement for the multifarious sizes and configurations of hospitals could not be done simplistically. The Congress, in report language, enumerated some of the criteria. Yet SSA has disregarded these and has chosen hospital groupings based essentially on bed size and whether it is metropolitan or non-metropolitan. Catholic hospitals are larger (by bed capacity) on the average (average 241 beds), yet one-third of these are located in isolated or non-metropolitan areas. For the SSA to ignore significant variations in the kinds and scope of health services offered by our hospitals makes it difficult for us to get a clear picture of where the government is going. It appears obvious to us that HEW and SSA do nor have a clear picture of where the Congress was going. Lastly, I cannot make this final point too strongly! Management in our facilities is mired in this morass of complexity which diverts their energies and attention from what they are all about-treating sick people! Mr. ROSTENKOWSKI. Thank you very much. STATEMENT OF CHARLES D. PHILLIPS Mr. PHILLIPS. I am Charles E. Phillips, president of the American Protestant Hospital Association. We have submitted a written statement that I request be included in the record of the committee. Mr. ROSTENKOWSKI. The entire statement will be printed in the record, Mr. Phillips. Mr. PHILLIPS. The American Protestant Hospital Association represents some 230 member institutions and agencies which are operated on behalf of Protestant religious organizations in this country and 1,600 permanent members. Since other witnesses have spoken to the other issues being addressed by this hearing, and because certain examples that I have submitted as a part of our written statement deal specifically with the 82percent nursing differential, I would like to call them to the attention of the committee, sir. The letter from Mr. David Johannides, president of Central Washington Health Services, indicates that changes in the nursing differential would mean a drop of $15,000 in medicare reimbursement in a given year. It also means, therefore, that the nonmedicare patient will be required to pay the difference as a result of this proposed action. In light of the fact that medicare pays only 80 percent of the cost of providing care for medicare beneficiaries at his institution, this works a difficulty upon the nonmedicare patients. The letter from Mr. Hahn to Congressman Jacobs indicates that when the special inpatient routine nursing salary cost differential was established, it was not to take into account that different kinds of illnesses required different kinds of services, an argument that is made currently by the Secretary in his efforts to have the differential eliminated. Rather the differential was initiatd because of the increased routine type services required by elderly patients who were often unable to feed themselves, are incontinent or in other ways helpless, requiring additional bedside services. That situation continues to exist regardless of intensive care units in our hospitals. The letter from Mr. Larson of Metropolitan Hospitals, Inc., Portland, Oreg., indicates that already in his institution patients who are nonmedicare patients are paying $49 per day more for their care than medicare patients. In the second paragraph of the second page of his letter, he points out that already his hospital is operating under a minimum margin and despite their efforts to contain costs, they are now being asked to pick up additional cost of medicare patients if this regulation is implemented. Then I call your attention to the letter from Mr. McFerren of the Presbyterian-University of Pennsylvania Medical Center. In that 350-bed hospital last year they experienced a loss of $789,000. The elimination of 82-percent inpatient routine nursing salary cost differential would increase this formidable loss an additional $20,000. He points out that the only alternative is to shift this burden to the 10 percent of our patient population who are direct payers. Then I call your attention to the letter submitted by Brian C. Lockwood, executive vice president of St. Luke's Hospital Medical Center in Phoenix, Ariz. His letter is addressed to Senator Goldwater. In the letter he points out the rather precise, very scientific studies that were conducted by St. Luke's Hospital Medical Center and the conclusion of that in this well-documented study is that medicare beneficiaries who are medical-surgical patients exclusive of intensive care units, require 10 percent more nursing care than nonmedicare patients. The termination of the cost differential will result in increased costs that would have to be absorbed by nonmedicare patients in the amount of $82,000 annually. The conclusion of that study is that arbitrary regulations that are cost-saving oriented as opposed to fact-documented do not best serve the public need of good cost-effective patient care. In a study conducted by Mr. Bill Johnson of Methodist Hospital of Madison, Wis., I call your attention to four conclusions that that staff drew. One: Medicare patients arrived with multiple diagnoses and also with physical limitations where mobility, vision, and hearing are generally a problem. Two: The healing factor is generally much slower which results in dressing changes, medications, and special diets, all of which require more nursing time. Three: These patients adjust to their illness slower. Patient teaching takes longer and frequently has to be repeated many times. Four: Discharge planning for these patients is more complicated requiring an aide to teach a family member or friend how to care for the patient. In that particular hospital, the elimination of 81⁄2-percent nursing differential represents a total loss of revenue amounting to $38,586 or a cost of about 61 cents per medicare today. These costs of course would have to shifted to be other payers. It is estimated that $38,000 would be borne by medicaid, $31,000 by private insurance carriers, and $4,000 by the patient himself. The letter from J. P. Richardson, of Presbyterian Hospital, Charlotte, N.C., points out that elimination of the differential would cost nonmedicare patients in his hospital up to $50,000. A letter submitted by Mr. Carl Rasche, president of Deaconess Hospital in St. Louis points out that it would cost his hospital and the patients there approximately $100,000 per year should this be eliminated. In conclusion, Mr. Chairman, I want to point out that these examples may be used to show that medicare patients do require extra routine nursing care; that the elimination of the differential will mean that the cost of providing this additional care for medicare patients must be recovered from other payers. Another conclusion from these letters which I consider to be very important, is that hospitals have made intensive and responsible efforts to work with the administration in pointing out the difficulties they will experience, and in an effort to resolve the difficulties that will result if these regulations are implemented, and very importantly, that the administration has either not been willing to listen or has not been able to understand these difficulties and has continued to act in an abrupt and unrealistic manner. Finally, I must reiterate that hospitals are undergoing economic stress. This was pointed out by Mr. McMahon. Many are on the brink of bankruptcy. Therefore it seems patently unfair for the administration at this time of financial stress to place additional burdens upon hospitals that interfere with their ability to provide the care that the public deserves. Thank you, sir. [The prepared statement follows:] STATEMENT OF THE AMERICAN PROTESTANT HOSPITAL ASSOCIATION Mr. Chairman, I am Charles D. Phillips, President of the American Protestant Hospital Association, 840 North Lake Shore Drive, Chicago, Illinois 60611. The American Protestant Hospital Association represents 230 member institutions and agencies which are operated on behalf of religious organizations in this country, and 1600 personal members. This statement is presented along with those of the American Hospital Association, the Catholic Hospital Association, the Federation of American Hospitals, the American Osteopathic Hospital Association, and the American Association of Medical Colleges. The American Protestant Hospital Association shares the common concerns of the other hospital associations represented today regarding the proposed changes in regulations relating to Section 223 and 234 of P.L. 92-603 and implementation problems related to new utilization review regulations. Since approximately 35% of payments made to hospitals and nursing homes in Fiscal Year 1974 was paid by the Federal government, any changes in law and regulations proposed and implemented in the Medicare and Medicaid programs have drastic impact on the delivery of health care services by institutional providers. The American Protestant Hospital Association is pleased to have been invited by the Sub-Committee to participate in a panel which may express the views of the hospital industry on a number of significant changes in such regulations proposed for implementation and describe their impact on the hospitals and the patients served by these institutions. The American Protestant Hospital Association is concerned with the frequent disregard of the intent of Congress in the promulgation and implementation of regulations by the regulatory bodies of government. Such disregard and arbitrary actions often result in regulations which are contradictory and/or inconsistent. The comment periods on proposed regulations are so brief that adequate studies and substantiated comments cannot always be developed. An additional concern of the health care providers is the almost total disregard by the administration of the comments submitted by responsible authorities in the industry. Therefore the officers and members of the American Protestant Hospital Association are very pleased that this hearing has been called for the purpose of reviewing the regulations that have been promulgated to implement laws passed by the Congress. INPATIENT ROUTINE NURSING SALARY COST DIFFERENTIAL The statement of the American Hospital Association gives the background of the existing 82% differential for Medicare patients. I want to point out the following facts: (1) that this figure was based on studies that documented the fact that additional routine nursing care is required for aged persons; (2) that the figure was arrived at in discussions between the administration and the hospital field; (3) that the administration gave hospitals the understanding that any substantial changes in Medicare reimbursement would first be discussed with the hospital field to get information as to its impact on providers; (4) that the SSA stipulated that additional studies are to be a condition precedent to any modification of the differential. The proposed regulation is not based on such studies, and it was issued despite the factual comments submitted by the hospitals of this country as to its economic impact. Along with the very serious economic results is the effect the regulation will have on the pateints of hsopitals. Congressman Hannaford who has introduced H.R. 7000 with the sponsorship of a bipartisan group of over 150 members of the House of Representatives, has articulated very well the dramatic effect that the implementation of this regulation will have on Medicare patients: "The effect of the loss of this differential for Medicare patients will be either to reduce the quality of nursing care for senior citizens, which is totally unacceptable, or to cause other users of hospitals to make up the deficit by paying even higher medical bills." The contention of the administration is that the need for the differential has been negated by current Medicare method of reimbursing routine services. The attached letters from a sampling of the membership of the American Protestant Hospital Association indicates that this is an incorrect and unsubstantiated assumption which is cost-oriented as opposed to fact-documented. Such arbitrary changes in regulations do not best serve the need of the public for good cost effective patient care. When the aforementioned studies are made, and if they indicate that a change in the differential is warranted, I am sure hospitals will cooperate fully in response to appropriate regulations. In any situation where government reimbursement is insufficient, hospitals have no recourse but to recover the losses from other patients. The Medicare law specifically prohibited the burdening of non-Medicare patients with costs of the Medicare program. Therefore, the regulation seems to be arbitrary, detrimental to the health care of Medicare patients, and, in fact, unlawful. Again I quote Mr. Hannaford: "This shortsighted approach to health care for the elderly is not only grossly unfair to senior citizens but it will contribute to the current inflationary spiral by raising hospital costs to an even higher level." SECTION 223 OF PUB. L. 92-603 The American Protestant Hospital Association recognizes as valid the principle which Congress set forth in Section 223 of Pub. L. 92-603 but protests vigorously the arbitrary and capricious system followed by the Social Security Administration in administering the Act. The three basic elements of the system-bed capacity, per capita income, and metropolitan-non-metropolitan designation do not. effectively define classes of hospitals in keeping with Congressional intent or according to purposes of economic comparison. The Administration has acted arbitrarily also in reducing the ceiling on inpatient routine care from the 90th to the 80th percentile. The American Protestant Hospital Association repeats that one of its key concerns is the principle of arbitrary and capricious action by the Administration, without consultation with the providers, which as in this case, results in inequities and additional burdening of other users of health care facilities and other third party payers with Medicare costs. SECTION 224 OF PUB. L. 92-603 The American Protestant Hospital Association endorses heartily the conclusion drawn in the statement of the American Hospital Association that the Social Security Administration has acted in a unilateral and arbitrary manner and without subjecting its methodology to scrutiny and validation. I repeat that this general pattern of arbitrariness is of great concern to members of this Association. UTILIZATION REVIEW REGULATIONS The statement of the American Hospital Association describes well the concerns of members of the American Protestant Hospital Association. I will only summarize at this point some of the problems our members have encountered. (1) Unrealistic and ever-changing timetable. (2) The mandating of far reaching regulations before adequate field testing. (3) Costly duplication of existing regulations have been required. (4) Lack of assurances as to how the revised program will be financed and the question as to whether the program will result in savings adequate to offset the additional costs. (5) Lack of clear instructions to enable hospitals to put the program in place. In conclusion I want to point out a number of situations confronting the religiously related hospitals of this nation: (1) Prices for supplies, services, and wages continue to increase. (2) At the same time the number of unemployed has increased enormously and many have moved into the category of the poor. A new group of the poor has emerged as the formerly near poor, persons who want to support themselves in productive employment, are immersed in inflation. At a time like this, when hospitals are already struggling economically, it is grossly unfair for the Federal government to take action which will increase problems of inability in the management of hospitals and add to the burden of striving to serve effectively their communities. The American Protestant Hospital Association does not oppose effective and fair regulation of the health care industry. It does oppose arbitrariness, inconsistency, and contradiction of Congressional intent by regulations. Mr. Chairman, I thank you for this opportunity to present our views. COMMISSIONER, CENTRAL WASHINGTON HEALTH SERVICES, Social Security Administration, Department of Health, Education, and Welfare, DEAR SIR: This letter is to protest the announced decision in the April 3 issue of the Federal Register discontinuing the 8.5% inpatient nursing salary cost differential for Medicare beneficiaries. I have read the Federal Register and do not feel that the reasons given by Mr. Weinberger for the decision are adequate and substantiated with facts. According to our records, this would mean that our reimbursement for Medicare would drop $15,000 for 1974. It also means that the non-Medicare patient would be required to pay the difference as a result of the proposed action. Unfortunately, the government wants us to balance our budgets and squeeze more and more services out of less and less dollars. When is this going to end? Medicare pays only 80% of the cost of providing care for Medicare beneficiaries in our institution. This decision does not comply with the original Medicare law which stated that the reasonable cost of care would be paid by the government. I sincerely trust that this decision will be reconsidered. Sincerely, DAVID F. JOHANNIDES, President. APRIL 14, 1975. Representative ANDREW JACOBS, Jr., Longworth Office Building, Washington, D.C. DEAR ANDY: It was a pleasure to visit with you last month. I am addressing this letter to you primarily because of your membership on the House Ways and Means Committee. In 1968, then HEW Secretary Finch unilaterally withdrew a two percent above cost reimbursement factor from hospital reimbursement under Medicare. I served as the chairman of a committee of the American Hospital Association which subsequently renegotiated with HEW to identify some replacement for this percentage factor which was implemented in the original regulations to compensate for otherwise unidentifiable or unincluded costs. |