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look at this issue of physician ownership interest in entities outside the office as well.


Senator HARKIN. I see. There is another area somewhat similar to this. The inspector general's office has developed a computer data base system that permits States to identify individuals, pharmacies, and physicians, who use and prescribe excessive amounts of abusable drugs under Medicaid.

According to the inspector general, over $0.5 billion of Medicaid funds is spent annually on what are called street drugs in vogue with addicts. How many States are using computer programs such as the one developed by the inspector general to zero in on the most likely cases of fraud and abuse in this area?

Dr. WILENSKY. We are now trying to encourage States to make use of the computer program that the inspector general has developed. HCFA has instructed all of our regional offices dealing directly with the States to encourage them to consider using this system, and if they are not, to seriously do so now. I do not know the exact number of States currently using the program. My memory is that 20 or 25 States are currently employing it.

Senator HARKIN. Well, is there any way of getting them to increase that-20, 25? I mean, why are there not 50 States doing this? If you are talking about-if the inspector general is halfway right, $0.5 billion a year, it would seem to me that not only would we save money, but we would cut down on abusable drugs.

Dr. WILENSKY. Yes; as I have said, in the last couple of weeks we have actively asked our regional offices to convey to each of the State Medicaid agencies that we support this program, that we think the States ought to do it, and that if they are not using the program now they ought to think seriously about doing so. We would be glad to consider whether or not this request alone is sufficient. We have not, up until now, taken other actions to encourage the use of this program.

We have, of course, been working with the inspector general and with the DEA to try to think about ways to reduce this type of drug abuse. It is an issue that we are continuously concerned about. I have seen videos where it appears there are still plenty of transactions going on in various States. We will be very glad to pursue

this matter further.

Senator HARKIN. Well, I urge you to pursue it vigorously.

Also, do you keep track of doctors and pharmacists who are banned from the Medicaid Program?

Dr. WILENSKY. The answer is yes.

Senator HARKIN. You do track that. Well, I hope you do pursue this other thing very vigorously.

Dr. WILENSKY. We can alert you and your staff as to the results of this encouragement. We will be measuring our success, and will let you know, after going out to the States, whether or not our request has resulted in any additional use by the States. If this is not the case, we will find out what the problem is. We will be glad to keep you informed on this.

Senator HARKIN. I appreciate that. [The information follows:]


Eight States are implementing the Office of Inspector General software that facilitates the identification of individuals, pharmacies, and physicians who use and prescribe excessive amounts of often-abused drugs. Another twenty-two States are reviewing the documentation. We have asked our Regional Offices to contact the remaining States to ask them to consider use of the OIG software.

All States with a Medicaid Management Information System (MMIS) conduct postpayment reviews of patterns of provider practice and recipient use of Medicaid services. The only States without an MMIS are Nevada and Rhode Island. Prescription drugs are reviewed from three perspectives: (1) physician prescribing patterns; (2) pharmacy dispensing patterns; and (3) recipient use. This activity is accomplished through Surveillance and Útilization Review (SUR) reports from the MMIS. In order to track doctors and pharmacists banned from the Medicaid program, a Cumulative Sanction Report is published annually on April 30 and distributed to all State Medicaid Agencies. This report is updated monthly with additional sanction and reinstatement information.

Many States have implemented recipient restriction and lock-in programs. The most common reason for being placed on lock-in is abuse of prescription drugs. States such as Texas (13,000 lock-ins) and Michigan (6,000 lock-ins) have many years of experience in managing lock-in programs. States use SUR exception criteria to identify recipients who are candidates for lock-in. Following case review, recipients identified as abusers may receive a warning letter or mandatory education on proper use of health services. Recipients who continue to abuse the program may be asked to select one physician or pharmacy. Physicians and pharmacists are screened for their appropriateness as a lock-in provider. Included among the States with successful lock-in programs are California, Connecticut, Maine, Maryland, Minnesota, New York, Ohio, and Virginia.

Through memoranda to our regional offices (RO's), we have encouraged States to consider using the OIG computer software as a supplement to the SUR reporting activity. According to the OIG, eight States are implementing the software, and another twenty-two are reviewing the documentation. We will keep the Senator informed about the progress of this initiative.


Senator HARKIN. Last question. Last year, as a result, again, of some of the inspector general's findings, in which we found that Medicare contractors were buying these huge computers and using separate systems, we talked about developing shared computer maintenance systems as well as requiring sharing of computer hardware and software to reduce the claims processing costs, and so last year I introduced legislation to require that.

I just wonder, have you been able to accomplish through these administrative processes-through shared computer maintenance and processing arrangements, have you been able to accomplish any savings?

Dr. WILENSKY. It is our estimate that the savings from shared maintenance and processing for fiscal years 1990 and 1991 has been over $30 million. We have a number of States that are using shared maintenance or processing. We are continuing to try to encourage these initiatives, but as I indicated a little earlier, we are taking a look at the whole issue of how to try to get greater uniformity and greater efficiency into the contractor system beyond shared maintenance and processing efforts.

We think that our common working file, which came on line at the end of calendar year 1990, will also help. The common working file is a merging together of part A and part B information on a beneficiary basis, with some nine common host sites.

While the common working file has brought much more commonality in terms of beneficiary information, we are interested, in a much broader sense, about how we can try to get more efficiency

into the whole contractor system, including rethinking issues like how many entities should be involved, what their roles should be, and how the entities should be configured. We hope to be discussing this project in more detail later during this calendar year. Senator HARKIN. Will you let us know if you think we need any more legislative effort in this area?

Dr. WILENSKY. Sure. I would be glad to.
Senator HARKIN. Senator Specter?
Senator SPECTER. Thank you.


Dr. Wilensky, I am interested in what has happened, as you may well suspect, with the ventilator-dependant units demonstration project for Temple University Hospital.

As I take a look at the chronology of this issue, I wonder again, as I have wondered on so many occasions in the past, about the efficacy of the money we spend on these kinds of projects and the way the bureaucracy works and just exactly what is happening, how much it costs us to get to somewhere.

This is the chronology which has been represented to me, and I would be interested to know, first of all, if it is accurate.

I am told that since July 1988, Temple has been engaged in a matter with your Department on HCFA ventilator-dependant unit demonstration project. In 1988, the Catastrophic Coverage Act mandated that the Secretary of Health and Human Services select up to five ventilator demonstration projects to examine the effectiveness of rehabilitation for chronic ventilator-dependant patients. On October 1, 1989, Temple University Hospital was informed by HCFA that its application to operate a ventilator demonstration was approved. The grant was to be for 3 years, contingent upon acceptance of Temple's waiver of cost estimate, and also approved were hospitals in Illinois, Michigan, Rhode Island, and Minnesota. In order to be eligible for this grant, institutions had to have an up-and-running ventilator unit located outside of their intensive care unit, and Temple reports having maintained the operation of this unit since July 1988.

In a sense of exasperation, a number of Senators-Heinz, Durenberger, Dixon, Simon, Chafee, Boschwitz, and I-sent you a letter on October 12, 1990, expressing concern over the long delay in developing the waiver estimates and urging expediting the commencement of the project.

In a letter dated November 19, 1990, you stated that the cost waiver estimates finally had been completed and were under review by the Department.

Now, 32 months later, the demonstration projects have not commenced. My first question: Is that an accurate chronological statement?

Dr. WILENSKY. I think I would like to indicate something about what went on in the interim-particularly around 1989

Senator SPECTER. I would be very interested to hear you state what went on in the interim, but I would like an answer to my question first.

Dr. WILENSKY. Well, in regard to when this demonstration was first put into statute, our progress as of 1990 and where we are now, I have no quarrel with your recounting. It is accurate.

Senator SPECTER. My statement of facts is correct.

Dr. WILENSKY. Right. In the interim, I have been told that there were some other activities that were going on during the 1988-89 period which I will share with you. However, this does not address the fact that the demonstration has not yet started.

Senator SPECTER. Have you previously advised me of what you are about to say?

Dr. WILENSKY. It is my understanding that

Senator SPECTER. Well, Dr. Wilensky, you wrote to me and the other Senators on November 19, 1990, and I have just re-read your letter and my question to you is, have you told me or the others about these other factors?

Dr. WILENSKY. I have not personally told you. It is my understanding that what we would like to do differently on this demonstration from what we intended has been discussed with your staff recently.

Senator SPECTER. Let us hear.

Dr. WILENSKY. OK. First, this is a very long-drawn-out process. Senator SPECTER. I already know that much.

Dr. WILENSKY. I am not questioning that.

Senator SPECTER. I already know that much.

Dr. WILENSKY. I want you to understand I am not questioning that there has been an exceedingly long period in getting this demonstration up and running. It is not the only time it has happened, but it is not the typical.

Senator SPECTER. It is not the only time it happened?

Dr. WILENSKY. It is not the only time. We have a tremendous number of mandated

Senator SPECTER. When else has it happened, since you have brought up that it is not the only time that it happened? I mean, what is going on with the administration of this program?


Dr. WILENSKY. Well, let me explain what went on earlier, because it will give you some sense of the kinds of timeframes involved in starting a demonstration.

This demonstration was part of the 1988 Reconciliation Act, or the Medicare Catastrophic Coverage Act. In fact, it is my understanding that a cooperative agreement was entered into late in 1988, and that the demonstration design was given back, in accordance with Temple as well as with a number of other places, sometime in the fall of 1989 or later.

So that the sense that hospitals hosting the demonstration were they may have been ready to be up and running, but in terms of having come to any agreement about the research design over the course of the entire demonstration, did not occur until later in 1989.

That is not atypical, because it takes us a while to establish a research solicitation process, it takes more time for institutions to respond, and it takes additional time to convene a panel of tech

nical experts to assess the responses and to make any appropriate changes. That is the only information

Senator SPECTER. Temple responded on October 1, 1989-or rather, Temple was informed by HCFA that its application was approved on October 1, 1989. Let us work backward, Dr. Wilensky, in the interests of time so that our inquiry here will not be as long as the project.


Senator SPECTER. What has happened since November 19, when you wrote to this large group of Senators that the cost waiver estimates had been completed and were under review?

Dr. WILENSKY. What has happened is that in a subsequent reconciliation act we were directed to develop prospective payment systems for all sorts of activities, including PPS-exempt hospitals. Therefore, we have been questioning the reasonableness of going forward with this particular demonstration on a cost basis when we have been directed by the Congress, appropriately, we believe, to work hard to try and establish prospective payment for currently PPS-exempt institutions, including hospitals like those targeted by this demonstration.


What we have been exploring internally, and lately with your staff and the staffs of the other Senators who expressed interest, is to try to make an accommodation of starting out in the first year of the demonstration under a cost basis. The work has been done, the hospitals are ready to go, they are appropriately anxious and more than ready to start. But that in the second year, converting to a prospective payment system for the second and third years of the demonstration would help us learn something that will help us as we attempt to abandon cost-based reimbursement.

We have been ready to move forward with this accommodation. We have been exceedingly troubled by the possibility of undertaking a 3-year demonstration that will not help us learn anything about the reimbursement climate that Congress has, in our view wisely, instructed us to pursue. So, we have discussed whether or not the concerned members would regard our proposed accommodation that as an appropriate modification to the demonstration-so we can start up immediately, and then convert to prospective payment during the second year.

It has been my understanding from discussions with my staff that this proposal has generally been regarded as a reasonable strategy, and that we have received positive responses. This is the direction we now intend to pursue.

Senator SPECTER. I do not understand what you just said.

Dr. WILENSKY. All right, let me try and explain it. We pay most hospitals

Senator SPECTER. I think you got a direction from Congress in the Reconciliation Act.

Dr. WILENSKY. Right. In the 1990

Senator SPECTER. Which you consider to be a wise direction.

Dr. WILENSKY. Right.

Senator SPECTER. Unlike other congressional directions.
Dr. WILENSKY. This was a particularly wise direction.

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