U.S. GOVERNMENT PRINTING OFFICE

63–934 WASHINGTON : 2000

PAYMENT SYSTEMS FOR MEDICARE’S HOME

HEALTH BENEFIT

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH

OF THE

COMMITTEE ON WAYS AND MEANS

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

SECOND SESSION

AUGUST 6, 1998

Serial No. 105–109

Printed for the use of the Committee on Ways and Means

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COMMITTEE ON WAYS AND MEANS

BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois

BILL THOMAS, California

E. CLAY SHAW, JR., Florida

NANCY L. JOHNSON, Connecticut

JIM BUNNING, Kentucky

AMO HOUGHTON, New York

WALLY HERGER, California

JIM MCCRERY, Louisiana

DAVE CAMP, Michigan

JIM RAMSTAD, Minnesota

JIM NUSSLE, Iowa

SAM JOHNSON, Texas

JENNIFER DUNN, Washington

MAC COLLINS, Georgia

ROB PORTMAN, Ohio

PHILIP S. ENGLISH, Pennsylvania

JOHN ENSIGN, Nevada

JON CHRISTENSEN, Nebraska

WES WATKINS, Oklahoma

J.D. HAYWORTH, Arizona

JERRY WELLER, Illinois

KENNY HULSHOF, Missouri

CHARLES B. RANGEL, New York

FORTNEY PETE STARK, California

ROBERT T. MATSUI, California

BARBARA B. KENNELLY, Connecticut

WILLIAM J. COYNE, Pennsylvania

SANDER M. LEVIN, Michigan

BENJAMIN L. CARDIN, Maryland

JIM MCDERMOTT, Washington

GERALD D. KLECZKA, Wisconsin

JOHN LEWIS, Georgia

RICHARD E. NEAL, Massachusetts

MICHAEL R. MCNULTY, New York

WILLIAM J. JEFFERSON, Louisiana

JOHN S. TANNER, Tennessee

XAVIER BECERRA, California

KAREN L. THURMAN, Florida

A.L. SINGLETON, Chief of Staff

JANICE MAYS, Minority Chief Counsel

SUBCOMMITTEE ON HEALTH

BILL THOMAS, California, Chairman

NANCY L. JOHNSON, Connecticut

JIM MCCRERY, Louisiana

JOHN ENSIGN, Nevada

JON CHRISTENSEN, Nebraska

PHILIP M. CRANE, Illinois

AMO HOUGHTON, New York

SAM JOHNSON, Texas

FORTNEY PETE STARK, California

BENJAMIN L. CARDIN, Maryland

GERALD D. KLECZKA, Wisconsin

JOHN LEWIS, Georgia

XAVIER BECERRA, California

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records

of the Committee on Ways and Means are also published in electronic form. The printed

hearing record remains the official version. Because electronic submissions are used to

prepare both printed and electronic versions of the hearing record, the process of converting

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process

is further refined.

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C O N T E N T S

Page

Advisory of July 30, 1998, announcing the hearing .............................................. 2

WITNESSES

Health Care Financing Administration, Michael Hash, Deputy Administrator 15

U.S. General Accounting Office, William J. Scanlon, Ph.D., Director, Health

Financing and Systems Issues, Health, Education, and Human Services

Division ................................................................................................................. 43

Medicare Payment Advisory Commission, Hon. Gail R. Wilensky, Ph.D.,

Chair; accompanied by Stuart Guterman, Deputy Director ............................. 55

U.S. Department of Health and Human Services, Hon. June Gibbs Brown,

Inspector General ................................................................................................. 73

Home Care Association of Louisiana, John L. Indest ........................................... 124

National Association for Home Care, and California Home Care and Hospice,

Inc., Denise Palsgaard ......................................................................................... 137

Texas Association for Home Care, and Guardian Homecare, Inc., Mary Ann

Brock ..................................................................................................................... 108

Tri County Visiting Nurse Association, and Visiting Nurse Service System,

Ruth Odgren ......................................................................................................... 131

Visiting Nurse Associations of America, and Visiting Nurse Health System,

Jerry Knight ......................................................................................................... 96

SUBMISSIONS FOR THE RECORD

A+D Health Care Professionals, Inc., Saginaw, MI, Roselyn Argyle, letter

and attachment .................................................................................................... 167

American Federation of Home Health Agencies, Silver Spring, MD, Ann B.

Howard, statement ............................................................................................... 169

American Hospital Association, statement ............................................................ 174

American Physical Therapy Association, Alexandria, VA, statement ................. 178

Argyle, Roselyn, A+D Health Care Professionals, Inc., Saginaw, MI, letter

and attachment .................................................................................................... 167

Baldacci, Hon. John Elias, a Representative in Congress from the State

of Maine, statement ............................................................................................. 8

Bradberry, Anita, Texas Association for Home Care, Inc., statement ................ 229

Burgers, Timothy, Home & Health Care Association of Massachusetts, Inc.,

letter and attachments ........................................................................................ 205

Burkemper, Carole, Great Rivers Home Care, Inc., St. Peters, MO, letter

and attachments ................................................................................................... 183

Durrence, Hugh D., PHC Home Health, Charleston, SC, letter .......................... 215

Ferry, Robert, Georgia Home Health Care Agency, Inc., letter ........................... 182

Fling, James C., TLC Home Health Services, Shamrock, TX, statement ........... 225

Georgia Home Health Care Agency, Inc., Robert Ferry, letter ............................ 182

Great Rivers Home Care, Inc., St. Peters, MO, Carole Burkemper, letter

and attachments ................................................................................................... 183

Health Industry Distributors Association, Alexandria, VA, statement .............. 193

Home Care Association of New York State, Inc., statement ................................ 197

Home Care Coalition, Alexandria, VA, statement ................................................ 201

Home & Health Care Association of Massachusetts, Inc., Timothy Burgers,

letter and attachments ........................................................................................ 205

Home Health Services and Staffing Association, Alexandria, VA, statement .... 209

Howard, Ann B., American Federation of Home Health Agencies, Silver

Spring, MD, statement ........................................................................................ 169

Page

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Jefferson, Hon. William J., a Representative in Congress from the State

of Louisiana, statement ....................................................................................... 10

Matthews, Bonnie, South Shore Hospital, South Weymouth, MA, statement ... 222

New York State Association of Health Care Providers, Inc., statement ............. 212

PHC Home Health, Charleston, SC, Hugh D. Durrence, letter ........................... 215

PPS Work Group: James C. Pyles, letter, statement and attachment ................ 217

South Shore Hospital, South Weymouth, MA, Bonnie Matthews, statement .... 222

TLC Home Health Services, Shamrock, TX, James C. Fling, statement ............ 225

Texas Association for Home Care, Inc., Anita Bradberry, statement ................. 229

Watts, Hon. J.C., Jr., a Representative in Congress from the State of Oklahoma, statement ................................................................................................... 12

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PAYMENT SYSTEMS FOR MEDICARE’S HOME

HEALTH BENEFIT

THURSDAY, AUGUST 6, 1998

HOUSE OF REPRESENTATIVES,

COMMITTEE ON WAYS AND MEANS,

SUBCOMMITTEE ON HEALTH,

Washington, DC.

The Subcommittee met, pursuant to notice, at 10:17 a.m., in

room 1100, Longworth House Office Building, Hon. William M.

Thomas (Chairman of the Subcommittee) presiding.

[The advisory announcing the hearing follows:]

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Chairman THOMAS. One year ago yesterday, the President signed

the Balanced Budget Act of 1997. That legislation represented a bipartisan agreement to shore up the solvency of the Medicare trust

funds and increase the number of health care choices for our seniors.

The Balanced Budget Act also brought out necessary changes in

the way Medicare reimburses providers of home health services.

Let me say at the outset of this particular hearing, Republicans

and Democrats alike share faith in the value of home health care.

It is an integral part of the continuum of care. We want to ensure

that our seniors have access to care when they need it, or it best

serves their health needs.

However, as the American populace ages and more seniors go

into the Medicare program, it is imperative for us to make secure

the finances of the Medicare trust fund.

We have taken several steps to ensure the long-term solvency

and continuing success of Medicare. But I can tell you, as Administrative Chairman of the Medicare Commission, we still have a long

way to go.

In recent weeks, the administration has reported to this subcommittee that, for a number of reasons, the Health Care Financing Administration will not be able to implement on time the new

Medicare home health prospective payment system.

The delayed implementation of the new reimbursement system

means that the interim payment system is more significant than

it would have been, since it will simply have to be used longer.

Today, we will hear testimony on the expected impact of the interim payment system, and about the extension of this system beyond the intended two-year period as set forth in the Balanced

Budget Act of 1997.

We have witnesses from HCFA, the administration, the policy experts from the General Accounting Office, Medicare Payment Advisory Commission, and the Office of the Inspector General in terms

of another area that we’re dealing with in home health care, fraud

and abuse.

We also have witnesses from a number of home health care agencies, from all parts of the country. I look forward to not only a spirited exchange of ideas, but that all witnesses provide their solution

to the current problem.

Any discussion of this issue must begin with the recognition that

significant changes were necessary and are necessary. When Congress acted, spending for the Medicare home health benefit was

spiraling out of control.

There are people in the home health care business who continue

to manipulate innocent seniors, the media, and I’m sorry to say,

Members of Congress, with half-truths and misrepresentations.

These people want to go back to the cost-based reimbursement

system, or at least suspend any changes for as long as they could

possibly have that suspension. Those choices are simply not options.

The IPS, no matter how poorly crafted, was designed to control

escalating spending and over-utilization, and provide more efficient

and effective delivery of home health care services during the tranVerDate 11-MAY-2000 13:38 Aug 28, 2000 Jkt 063934 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 E:\HEARINGS\63934 pfrm03 PsN: 63934
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sition to a prospective payment system. The IPS does not limit the

amount of home health care services a beneficiary receives.

I have seen stories, as I’m sure you have, reported in the press,

that hundreds of home health agencies are closing. Be assured that

we intend to closely scrutinize the stated facts and the situation involved in these stories, but before these facts get bandied about,

and the stories become reality, I want somebody to closely examine

what occurs with the numbers.

For example, how many of these agencies are, quote unquote,

‘‘closing,’’ but are, in fact, merging?

This was going to be an inevitable consequence, as an area that

had, in large part, been a cottage industry, continues to grow and

become more significant in the delivery of health care. But how

many of these that are actually mergers are counted as closing?

Then, one of the more insidious aspects of past behavior: how

many of these agencies closed, and then quickly applied to reopen,

to take advantage of possibly higher reimbursement rates for new

agencies? That was just a question.

MedPAC reports that, in 1994, there were 8,057, more or less,

home health agencies. In 1997, the latest year for which we have

numbers, and additional 2,525 agencies opened, so that today, we

have 10,582 home health agencies serving our seniors.

And of course, remember, the administration imposed for four

months, between September and January of last year and this

year, a moratorium, when there were openings at approximately

100 a month, so that this number would have been far higher had

there not been a temporary moratorium imposed.

Every report that we have received indicates that the number of

home health care agencies continues to climb, and that patient access is not a problem.

I would draw your attention to the HCFA regulation soon to be

published, which refutes accounts of mass closings. HCFA reports

that it is ‘‘currently receiving many new applications from agencies

wanting to become Medicare-certified. If there are any closures as

a result of this payment system, it is expected other new agencies

or agency expansions will offset these closures.’’

I thank the witnesses in advance for being with us here today.

I ask them to focus, on their oral remarks, on specific recommendations to refine the interim payment system, which address both national and regional variations in home health care delivery.

I apologize to the numerous colleagues who wanted to testify.

I will tell you there has been a greater response to the desire to

testify on this issue by our colleagues than on virtually any other

issue that I can remember, and that it required a letter, jointly

signed by myself and the ranking member, to indicate that, given

the number of Members who wished to testify, that we would receive written testimony only from Members, so that we could get

through the schedule in a reasonable time frame.

I expect to hear, from every witness, their solution to the problem. I don’t want to hear the problem. We know the problem. We’re

looking for solutions, in a difficult time, in which HCFA can’t do

what it is supposed to do, because of the ‘‘Y2K problem.’’

The gentleman from California.

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Mr. STARK. Thank you, Mr. Chairman. Thank you for holding

this hearing in response to much concern from many of our colleagues. There has been an outcry for change in the Balanced

Budget Act’s home health provisions.

I would like to join with you to enact a better interim payment

formula, but I’m worried that if we make changes, we may jump

from one frying pan into another.

If we change the interim payment system formula, we’re going

to make a new set of agencies unhappy. The question before us

really is, who are the agencies, or which are the agencies that

would win and lose in a formula change; and, is there any good

health policy rationale for that change?

You indicated that you had heard that a lot of these agencies

closed. I heard that 200 for-profit agencies have closed in Texas,

but 900 have opened. I don’t know whether that’s good, bad, or indifferent, but it doesn’t worry me. If they want to make a profit,

some win, some lose. That’s part of the market.

Fraud, waste, and abuse remains rampant in this sector. On its

face, it’s fraud when for-profit agencies provide twice the number

of visits to the same type of patient as the not-for-profits. Why

shouldn’t we, for example, just set the payment rate at the median

of the nonprofit cost per case, and save us all some money?

In its regs on Medicare Plus Choice, HCFA is requiring that

HMOs have a compliance plan in place. The OIG is only promising

a voluntary plan for home health agencies, and I am going to urge

that HCFA make a compliance plan mandatory for home health

agencies in the future.

The nation really needs a long-term care program. We are in turmoil over home health care because it is really becoming, by default, our long-term care program, and nobody wants to pay for it.

I was on the Pepper Commission in the 1980s. We tried to develop a long-term care proposal, but no one wanted to pay for it

then either. In Medicare Catastrophic, we moved toward better

long-term care benefits, but no one wanted to pay for it, and it was

repealed.

You, Mr. Chairman, are now co-chair of the National Commission

on the Future of Medicare, trying to find a way to extend Medicare’s future, and no one wants to pay for it.

Rather than sneak a long-term care policy through the back door

of our acute care Medicare program, we should probably propose a

long-term care social insurance program, and ask the public if

they’re willing to pay for it.

Until we do, I feel that Members will just be trying to get two

ends of the teeter-totter in the air at the same time, saving money

on one group over here, while this group goes down. We won’t be

saving money, or moving the fulcrum, and will continue accomplishing nothing.

We are just going to disadvantage new sets of providers, as we

change the formula. Maybe we will be able to do that to the overall

advantage of the public. I hope so.

Finally, Mr. Chairman, I would like to enter into the record a

number of written statements from members on our side. Mr.

Cardin and Mr. Jefferson had other meetings this morning, as did

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Mr. Sanders and others. I would ask unanimous consent that those

statements be inserted at this point.

Chairman THOMAS. Without objection, any Member’s written testimony will be made a part of the record.

Mr. STARK. Thank you, Mr. Chairman.

[The following was subsequently received:]

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Chairman THOMAS. At this time, I would ask Mr. Hash, representing the administration and the Health Care Financing Administration, if he would come forward, and as he is coming forward, to tell the gentleman from California his point is well taken

about winners and losers.

However, if you could examine a number of the pieces as moving

parts—and this will be a preface to any testimony, including the

HCFA testimony—that if you dealt with a formula adjustment and

you dealt with a per visit structure, and you dealt with an outlier

approach as, for example, three parts, making adjustments in those

three could mitigate the loss or gain, principally the loss, of someone in a formula shift, and so in trying to create a new interim

payment system, it may be a blend of those three, which would not

maximize the advantage of any, but minimize the damage, might

be and most appropriate.

With that, Mr. Hash, I believe this is the first time you have appeared before the committee. Oh, it’s not true? It’s the second time.

Well, maybe this time you’ll make more of an impression on me.

[Laughter.]

Chairman THOMAS. I’m just teasing. Your written testimony will

be made a part of the record, and you can explain to us what your

suggested change in the formula is, in your own words.

STATEMENT OF MICHAEL HASH, DEPUTY ADMINISTRATOR,

HEALTH CARE FINANCING ADMINISTRATION

Mr. HASH. Thank you, Mr. Chairman. I think maybe the reason

you didn’t recall me was that on the previous occasion, Mrs. Johnson was the chair of the subcommittee; you were unavoidably detained that day, I believe.

Chairman THOMAS. Ah, okay. So it’s not Alzheimer’s. Go ahead.

[Laughter.]

Mr. HASH. No, sir. Chairman Thomas and Congressman Stark

and other members of the committee, we want to thank you for inviting us to discuss with you today the home health payment system issues.

I would first like to associate myself, and the Health Care Financing Administration, with the sentiments that you expressed,

Mr. Chairman, in your opening statement, about the intrinsic value

of home health services as a part of the continuum of care for all

Medicare beneficiaries.

As you know, the Balanced Budget Act included and mandated

many changes in the way that Medicare pays for home health services.

The new payment systems create incentives to provide care more

efficiently and to control spending. However, as you noted earlier,

the prospective payment system for home care must be delayed

while we address the year 2000 problem with our computer systems.

The Balanced Budget Act established the specific structure of the

interim payment system that is now in place, until we have prospective payment. And it was designed, we believe, to assist in the

transition from cost-based reimbursement to a prospective payment

system.

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Like the prospective payment system, the interim payment system does have incentives for efficiencies. We are aware, as I know

you and the other Members are, of the concerns that have been

raised about the impact of the interim payment system.

We have tried to make changes within our discretion, to ease the

burden of the interim payment system.

Since, as you know, the system may result in overpayments to

providers, I’m happy to announce this morning that we are advising our regional home health intermediaries to put into place extended repayment schedules for up to 12 months, for up to a year,

to make sure that those agencies who have a repayment obligation

have an adequate opportunity to meet those obligations without

undue hardship. We are notifying our contractors this morning of

this new, extended payment policy.

Secondly, you noted that we recently published an interim payment system regulation in which we announced some further discretionary steps that we believe will help home health agencies.

We have adjusted the aggregate cost limits per visit and the per

beneficiary aggregate limits for inflation, as we are required to do.

Secondly, we have updated the data on which we base per visit

cost limits so they are based on more recent cost report data than

has been the case up until now.

Thirdly, we have put forward a more flexible definition for determining when a provider is considered a new provider, as opposed

to an old provider.

Beyond that, Mr. Chairman, we do have little discretion within

the law to go further. As you know, we have been working with

your staff and with the staff of many other members of this committee, and of the House and the Senate, to provide technical assistance on a number of reform proposals that Members are considering.

We do believe that changes in this area of the interim payment

system need to enjoy broad support, be budget neutral, protect vulnerable beneficiaries, and not conflict with our year 2000 priorities.

The year 2000 compliance activities, as you know, have limited

the range of options that we can implement at this time.

One of our important tasks recently has been to identify those

administrative actions that we think are feasible and do not increase the risk of not being compliant with the year 2000 date

problem.

In that regard, we can, as we have been trying to make clear,

change the per visit and the per beneficiary cost limits, as long as

we continue to use currently available data.

We cannot make changes to the current claims processing system

or create any new databases, or do any programming for a new

claims processing system.

For example, we are not able to change the base year that is required in the statute, because that would require extensive new

data gathering and programmatic changes to our information systems.

We could implement a new blend of national, regional, or agency

specific rates, based on fiscal year 1994 data, which is the statutory

base for the interim payment system. But changing the interim

payment system, obviously, may raise budgetary concerns.

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Also, if we reduce the agency-specific component within any kind

of blend, there are both advantages and disadvantages that are

well-known to you. Agencies with lower costs would tend to benefit

from such changes, but agencies that serve special needs populations with legitimately high costs would experience payment reductions.

An outlier system, to increase payments to agencies with more

costly patients, is also problematic, but could be accomplished within the constraints of our administrative limits.

A case mix adjustment system, as you know, is being created for

the prospective payment system itself. That case mix system will

look at the resources involved in providing care and accounting for

both low and high-cost cases.

In the meantime, we cannot make outlier adjustments for highcost cases that are based on particular diagnoses or how long a

beneficiary receives home health services.

For the time being, outlier adjustments could be made only retrospectively, in combination with the settlement of home health

agency cost reports and could be based only on the data that is included in those cost reports.

We are aware that there has been a proposal for creating, perhaps, a block grant of Medicare trust fund dollars to the states to

pay for outlier cases. We are not supportive of that approach.

We think there are no good data that either we or the states

would have available to fairly determine which agencies should get

such funds. We also think such a proposal sets a dangerous precedent and raises substantial program integrity concerns.

Mr. Chairman, we do recognize the challenge of crafting interim

payment reforms within these constraints. We do, however, take

very seriously our obligation to work with Congress in evaluating

all of the options for further payment reforms to the interim system to address the concerns raised by home health agencies and by

Members of Congress.

Working together, I think we have made some progress in identifying what can and cannot be done. We, of course, want to continue

seeking solutions, and join with you in solutions that protect our

beneficiaries and the trust funds, and that sustain essential home

health services.

I’m happy to answer any questions that you or other members

of the subcommittee may have, and appreciate very much the opportunity to participate in this hearing. Thank you.

[The prepared statement follows:]

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Chairman THOMAS. Thank you, Mr. Hash. I guess my very

strong desire, mentioned twice in the opening, didn’t catch on. I’ll

do it again.

The administration, in the discussion and negotiations over the

BBA, had a policy that they were offering for a change in the home

health care area. The policy that the administration advocated had

a blend. Actually, that’s probably a misnomer.

What was it that the administration offered as a formula base;

do you remember?

Mr. HASH. I think we were proposing 100 percent agency-specific.

Chairman THOMAS. I know you were proposing. That’s why I said

it was a misnomer, to be a blend, because it wasn’t a blend.

My assumption is that you offered that in good faith, believing

that to be the most appropriate policy choice among a number of

alternatives in terms of the mix. In fact, as I recall, that was what

the Senate carried with it to conference. The House had a different

position.

What brought you, in terms of your examination of the area at

the time, to propose a 100 percent agency formula?

Mr. HASH. I think, Mr. Chairman, that the rationale behind that

position was related to a recognition that home health costs, on an

agency-by-agency and region-by-region basis, vary quite considerably and substantially.

Since we were not able to prospectively identify those agencies

which had higher costs that were the results of inefficiency, versus

those that had higher costs with regard to the nature of the patients they were taking care of, we wanted to ensure that any kind

of limits reflected the current experience of those agencies.

Chairman THOMAS. If I were to ask you, and you were to do as

I asked, what is your suggestion for a change in the formula, would

you want us to go to 100 percent agency-specific?

Mr. HASH. I think our position at this point, Mr. Chairman, is

that we would like to continue working with you and your staff

to——

Chairman THOMAS. Would you suggest that we go to the position

the administration initially advocated, 100 percent agency-specific,

since we didn’t follow your advice when we wrote the law coming

out of Conference?

Mr. HASH. I would like to tell you that I think we would still

stand by that position, but I would say this, that given how the

BBA came out in the end, I don’t know right offhand what the implications of that would be for the scoring that was otherwise associated with these provisions.

Chairman THOMAS. I’m not talking about scoring right now. I’m

not talking about the artificial world of the budget gimmicks that

we have to deal with, which frankly impair our ability to write

good policy, often.

You now have data, and we are talking about looking at a number of options, in changing the formula from the current 75/25 to

a series of different mixes. In fact, in your testimony, you indicated

that any change beyond the current one creates new winners and

losers.

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There is no—I love the quote, and I can’t remember who made

it—there is no Lake Woebegone, where everybody can be above average, in trying to deal with these restructurings.

I know you’re constrained, but I want to make the point, you

folks advocated 100 percent agency formula. That really didn’t

begin to deal with the enormous discrepancies, we thought, within

a state, let alone between states.

I can’t imagine that if you went back and huddled and decided

that you were going to offer a new position, that it would be 100

percent agency specific.

Mr. HASH. I think, like you, Mr. Chairman, since last year’s deliberations on this area, we have learned a lot and recognized that

it is much more complex than we originally thought.

Chairman THOMAS. That’s why we’re here.

Mr. HASH. Right. And I think that we would definitely want to

revisit that position of ours of over a year ago.

Chairman THOMAS. We are revisiting. That’s why we’re holding

the hearing. We are asking everyone who is coming before us to assist us. To simply indicate that you’re willing to assist us gets us

nowhere.

We do not have enough time before we take this work period

break to pull together and create a change. What we need to have,

beginning now, is input from everyone who will be major players

on what is suggested to be the best avenue today.

I’m not putting you on the spot. I’m putting me on the spot; I’m

putting every member of the subcommittee on the spot. We have

to have a solution and it has to be presented as soon as we come

back, and it has to mitigate the current problems.

Now, the administration continues to advocate a budget neutral

position. When you deal with a budget neutral position, there are

darn few boxes inside the big box that you can move around. It

may not mitigate the problem sufficiently to get a decent bipartisan

support.

I would ask you, and we will try again, on the per-visit, my recollection is that the per-visit change from the administration was, in

fact, what we have now, wasn’t it, 105 percent on the median,

changing from the mean?

Mr. HASH. I believe that’s correct, Mr. Chairman.

Chairman THOMAS. You have to get people to do better than

shrug their shoulders. It’s 105 percent of the median. The current

change was, in fact, the administration’s advocated change. Would

you stick with that? Or, based upon our experience and your examination, would you suggest a change?

Mr. HASH. Mr. Chairman, I think what we would commit to, and

what we have committed to, is that in the time frame you’re talking about, we need to sit down and actually explore the implications of each of these kinds of changes, and come to a consensus

about what is the most appropriate way that we can address the

kind of problems that have been identified with the current system.

Chairman THOMAS. Okay. What about an outlier policy?

Mr. HASH. I think we indicated that we could put into place an

outlier policy that was related to the settlement of agency cost reports, and——

Chairman THOMAS. What would that be, specifically?

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Mr. HASH. It would have to be designed specifically on the basis

of legislation since, as you know, the statute does not permit any

outlier payments.

Chairman THOMAS. I’m anxious to write legislation, as are all

members of this subcommittee. what is your suggestion on an

outlier policy?

Mr. HASH. We would like to work with you with regard to that,

Mr. Chairman.

Chairman THOMAS. I appreciate that.

Mr. HASH. I’m trying to say, Mr. Chairman, that at this point,

we are exploring, as are you, different options, and we would like

to continue——

Chairman THOMAS. Mr. Hash, we didn’t put ourselves in the box.

We didn’t come in front of this committee and say we can’t do what

we committed to do, and we can’t carry out the policy we advocated, fought for, and required to be in the law or the President

wouldn’t sign the agreement.

You folks have reneged on your end of the deal. Now, I know

that’s not a full, fair way to put an argument, in terms of Y2K, but

we are here because the policy that we guessed at wasn’t very

good. We can’t keep guessing.

There are people out there who are not going to be able to be

with us in September, and it isn’t because of fraud, it isn’t because

of wasteful resources. It is because Congress, in its inability to

have accurate data, didn’t do a good job in setting up an interim

payment system. We are going to have to do that when we come

back.

The reason it is even more critical than it would be otherwise is

because whatever we come up with has to last for a longer period

of time, because you aren’t going to be able to do your job in the

time frame that you said you were going to do it. It is very difficult

for us when, here we go again, no specific recommendation.

Now, I noticed in your written testimony, ‘‘Congress required,’’

‘‘Congress required,’’ ‘‘Congress required.’’ That was a mutually

agreed arrangement. And as you indicated—and the per-visit was

exactly what the administration advocated—you people are equal

partners in being where we are today.

I have a number of proposals I would like to offer to you, but

there is no sense in going forward, because the answer will be, ‘‘We

would like to work with you, and we will, over the period, look at

them, and we will get back to you.’’

What we are trying to do is communicate through our friends

who do the communication in a greater way, and among our members, is we have to have specific changes that minimize the downside, that certainly, as best we’re able, minimize the cost.

But cost, frankly, at this point, is somewhat secondary to making

sure that the policy is as good as we can get it, given the fact we’re

going to have to live with it longer than we thought, because you’re

not going to be able to hold up your end of the agreement.

Mr. HASH. Mr. Chairman, as you have noted, we are not able to

implement the prospective payment in a timely manner. With respect to the interim payment system, as you know, we have put it

in place. We have put the regulations in place, and we are operating it.

29

We are not in any way saying, or trying to leave the impression

that we are not open to suggestions and to working with you to

make changes to address the kinds of problems that the members

have heard about. We think that over the next month, working together, we can find some solutions that we can all agree on.

Chairman THOMAS. I’m not saying that you’re not open to suggestions. What I’m saying is that we have to come up with solutions.

Saying you’re open to suggestions sounds as though you’re a

third party waiting for us to come up with the solutions. You’re

supposed to be a partner. You’re supposed to be part of the solution, not part of the problem.

We have got to get serious and move forward and make statements so people will have some degree of belief that when we get

back, we will have a solution. That’s what we need.

One last question. There are a lot of people out there hurting.

There are a number of people who have closed. I believe, as I said

in my testimony, some of them were mergers, consolidations, some

may have even closed because of an advantage of being a new

agency, rather than an old.

Have any of these agencies applied to HCFA for an exemption

from the rules, for whatever reason they may provide?

Mr. HASH. I am not aware of that, Mr. Chairman, if they have.

Chairman THOMAS. Is HCFA examining the possibility of offering

exemptions to any agencies based upon whatever evidence they

may present to them?

Mr. HASH. Mr. Chairman, our review of the existing language

does not provide any authority that we can find for providing for

exceptions or exemptions, other than the existing authority with regard to cost limits per visit.

Chairman THOMAS. I would request that you get back to me in

writing, once you go back and ask that question directly, if there

are any agencies that have either been examined for the possibility

of an exemption or if, in fact, an exemption has been granted.

Mr. HASH. I will be happy to do that, Mr. Chairman.

Chairman THOMAS. Thank you very much. The gentleman from

California.

Mr. STARK. Thank you, Mr. Chairman. Mike, we are hearing

from some home health lobbyists that they would like the administration to enforce a moratorium on the IPS system. It is my understanding that you cannot legally do that. Is that correct?

Mr. HASH. That is my understanding, Mr. Stark.

Mr. STARK. Your proposal that all Medicare+Choice plans have

a compliance plan in place, I think, is excellent. Could we not require the same compliance plan for home health agencies?

There has actually been more concern, I think, about fraud and

abuse in the home health sector than in managed care. If an agency doesn’t have a plan to ensure compliance, I don’t suppose we

would want them doing business, anyway.

Could you implement this compliance plan, and require it of

home health agencies?

Mr. HASH. Mr. Stark, I think that is an excellent question. As

you know, just this week, the inspector general at the Department

of Health and Human Services announced the development of a

30

voluntary compliance program for home health agencies. Of course,

the inspector general will be testifying shortly, and will talk to

that.

Let me just say, in connection with your specific question, that

we currently have out a proposed rule for conditions of participation for home health agencies. We are analyzing the responses to

that proposed rule.

Among them will be issues that are raised about various pieces

or elements of a compliance program. The way we would address

your concerns, Mr. Stark, would be in the context of finalizing our

home health conditions of participation.

Mr. STARK. But not voluntary. I mean making it, the same as the

requirement for managed care plans, a requirement of participation.

Mr. HASH. What I want to be clear about is that our conditions

of participation are mandatory on home health agencies. What we

would be looking to would be to coordinate those conditions of participation with the core elements of a compliance plan that makes

sure that those are addressed adequately through our conditions of

participation.

Mr. STARK. I think you are saying that there would be a compliance plan required, in one form or another, in the conditions of participation, and that makes it not voluntary. Is that what I hear you

saying?

Mr. HASH. Yes.

Mr. STARK. Okay. You are asking us for new legislation to better

protect nursing home residents. I support that idea. You asked for

staff to prevent dehydration, malnutrition, background checks to

keep abusive people away from nursing patients, which has been,

at least anecdotally, a concern.

Why don’t we mention home health agency staff? If we are requiring, or plan to require, background checks to keep abusive people away from fragile people in a nursing home situation, why

should we not require the same thing for home health? In home

health, the people are even more isolated, often, and we are less

apt to be able to check on them and protect them?

Would you support parallel legislation that would require home

health aides and staff to have background checks to keep people

with a history of crime and abuse from participating the program?

Mr. HASH. Again, we do have, in our proposed conditions of participation, requirements, proposed requirements related to doing

background checks.

I think the piece that is missing out of that, Mr. Stark, is making

sure that, in those checks, there is access to a national database,

because the states, of course, keep background records, but that

would only reflect adjudications that take place within a particular

state.

As we know, some of these people who have had convictions

move to different jurisdictions, and——

Mr. STARK. I would like it to be as broad as it could be. But let’s

not defeat the better with the perfect.

Mr. HASH. No, absolutely. I would say that I think the national

database is the area in which legislation would likely be required.

We would be happy to work with you to take a look at that.

31

Mr. STARK. My time is going to expire, but let me try and say—

and I have a hunch the chair will indulge me on this—what I

thought I heard the chairman saying differently.

Part of why we are here today, and trying to move the chairs

around on the deck of the Titanic, is because of the lack of implementation of the prospective payment system.

It would seem to me that in any legislative solution, if there is

to be an outlier program to ease the fringe providers, that there is

no sense in our trying to develop one only to have HCFA subsequently say, ‘‘We can’t implement this.’’

You have staff that is better equipped and better understands

the questions of outliers. You have the data. I do believe that the

chairman is coming at it the right way.

It is incumbent on you, I believe, to suggest to us the structure

of an outlier plan. You may choose to reserve the payment amounts

until we see what the cost of changing the formula is.

You now have the month of August. Stay home from Martha’s

Vineyard and get us a plan that will work and that you can implement.

We may or may not be able to get the votes to pass it. But, there

is no sense our sitting down here, going through a lot of concern

with our colleagues, because in changing this plan, there are going

to be different winners and different losers, and then trying to ease

that burden by saying we have an outlier plan, and then have you

come back in three months and say, ‘‘We can’t do it.’’ I think that

is what he is saying.

If you don’t want to give us the exact numbers, at least give us

the structure, with some certainty that it is something you can do.

That the data exists, that you have the staff and the legal ability

to provide these outlier payments.

If you can’t do it, then tell us now. If, for some reason, it is just

impossible—which I guess is conceivable—then let us know.

But we—as Members of Congress—are saying, ‘‘Well, if that

doesn’t quite work, we’ll have an outlier plan that’s going to ease

this burden and that burden.’’ We may be dreaming. If so, wake

us up, please.

That’s all I have to say. The chairman’s request is fair, and it

is incumbent on your staff to follow through. We are going to hear

later from the people who advise us.

It may be the Medicare Payment Advisory Commission that’s

going to help us come up with this solution. But, you would do it

best. Other professionals would do it second best. We would be the

third, at least, best people to have to devise it.

All I’m asking is, hear what the chairman is saying and put your

troops to work to come up with something for us, so we can have

it early in September.

Mr. HASH. If I may briefly respond, Mr. Chairman——

Chairman THOMAS. I was just going to tell the gentleman, if he

had any more questions like that, we can ignore the time light.

Mr. HASH. I am happy to respond to that, because both in my

written statement and in my oral statement, I want to make clear

that, with regard to outlier payment policy, we have done a very

careful look at what we can do.

32

What we have tried to communicate is that we can administer

an outlier policy, one which would be administered in conjunction

with the data that is included in the cost reports that are filed by

home health agencies, so that the actual determination of an

outlier payment would be made at the time of settling the cost reports, it would be made on the basis of the data in those cost reports.

The limitations of that are that there are not in the cost reports

specific patient diagnostic information, but certainly there is cost

information. To the degree we are adjusting for problems that

agencies have with limits through an outlier payment, that can be

done in connection with using data from home health cost reports.

Mr. STARK. There is no way that you can take certain episodes

and say that ‘‘We know from experience that these are so much

more expensive than others that we can prospectively adjust for

those cost differences.’’ You can’t do that?

Mr. HASH. We are unable to do that.

Mr. STARK. All right. Thank you.

Chairman THOMAS. I would only indicate to the gentleman, before I recognize the gentlewoman from Connecticut, that I recall

that the President had quite an ostentatious liftoff on the changes

that were made.

Saying it in slightly another way, for the gentleman from California, as well, we are not interested in continuing to be on the airplane and find out there was one parachute, and it has been used,

and you folks are more than willing to provide us with some kind

of background and green eyeshade technical expertise.

This was a mutually-agreed-upon project, and I expect, when we

come back, that the Health Care Financing Administration, under

the Health and Human Services Agency of the Clinton administration, will all be out front publicly suggesting changes, and be partners in the adjustment period, as you were partners in the takeoff

period of new program.

The gentlewoman from Connecticut.

Mrs. JOHNSON. Thank you, Mr. Chairman. Both of the gentlemen

from California have been very polite, I believe.

I know that you have been working with us over the last few

weeks. You have been working with some of us over the last few

months.

I would have to say I am extremely disappointed in your testimony. In my estimation, we are at the time when we need to be

talking about solutions. If you’ve done all the work that you’ve

done on the outlier program, why didn’t you propose something

today?

I’m going to be back in my district for three weeks. I’m going to

be sitting down with my home health agencies. It would have been

very helpful to be able to say, ‘‘Here is what HCFA says.’’

You have the resources, the computers. We sit and look at the

chart printouts. We can’t tell whether the efficient agencies are

being damaged or the inefficient agencies.

We know new agencies are coming into the system. In many

parts of the country, those new agencies are going to be paid more

than the agencies we are pushing out of business with the overall

cost increase for Medicare.

33

Now, you have far better technical capability than we do. You

have people with long-term experience in this area, much longer

term than any of us have.

You know, you have got to be specific. What outlier policy? What

size agencies? We need to see, will this help?

Let me ask you: do you think this is a crisis? Do you think the

problem we face is serious enough so that, if we don’t address it,

it will have serious consequences for senior care?

Mr. HASH. We think that the concerns, Mrs. Johnson, that have

been raised by you and by agencies are legitimate ones. They are

concerns, and we want to work with you to address them.

Mrs. JOHNSON. That does not answer my question. There isn’t a

part of Medicare in which there aren’t serious concerns, frankly.

We have so many problems in this system right now.

What I am saying to you, do you consider the situation we face

in home health right now a crisis? In other words, do you believe

that, if we don’t do something before we leave here in October, that

in fact we will diminish access and quality to home health for seniors?

Mr. HASH. We believe that we do need to take action. We do not

believe at this point that we have the evidence that would confirm

for us that we have an access problem in home care.

We have agencies that are still coming in. We have over 170 applications pending right now for new agencies. So, on the access

side, we really don’t have data.

Mrs. JOHNSON. Have you done an analysis of where the new

agencies are coming in and where the agencies that are closing up

are going out?

Mr. HASH. We have some data on that. I would be happy to

share that with you.

Mrs. JOHNSON. I think part of what we ought to be looking at

is, are we creating an access problem? In spite of the larger number of agencies, are we creating deficits in rural areas because

those lower-cost agencies are going out? I’m just speaking from my

own limited experience in my own district.

We need to know that stuff. When we make changes in this, we

have to have some understanding of are we going to create a better

answer from the point of view of the survival of services.

So you do not consider this an emergency. You consider it serious, but you don’t consider it an emergency. I assume from that,

that if we didn’t do anything about it, you would think that was

not very good, but it wasn’t very bad?

Mr. HASH. We have obviously taken a number of steps on our

own, because we think it is a serious problem, to address many of

the problems that, within our discretion, we could——

Mrs. JOHNSON. Are the steps you’ve taken sufficient?

Mr. HASH. No. I believe that, based on the conversations that we

have had with you and others, that additional steps need to be

taken, and we need to take them together.

Mrs. JOHNSON. What will be the impact of the 15 percent cut

going into effect next year?

Mr. HASH. What will be the impact?

Mrs. JOHNSON. With no change.

34

Mr. HASH. The CBO estimates that it would remove on the order

of $2.8 billion in fiscal year 2000, if that was the scoring associated

with the 15 percent.

Mrs. JOHNSON. What is HCFA’s estimate of the impact of that

on access and quality, on home care as a service to seniors? If we

do nothing, what will be the impact of the 15 percent?

Mr. HASH. We obviously do not have a specific estimate on, agency-by-agency, how it will impact them. It will definitely have a substantial impact, because that is a lot of money that is being taken

out of payments to home care agencies.

Mrs. JOHNSON. Would you describe the situation that we would

face then as serious, very serious, or just concerning?

Mr. HASH. I think it’s very serious, because I think the Congress

did not intend, nor did we, the 15 percent to be a part of the interim payment system.

Mrs. JOHNSON. I agree with you absolutely, and I would ask that,

by the end of this interim, you come back with a plan that includes

how do we relieve that 15 percent? Frankly, you can’t do it budget

neutral, and you’ve put that out as one of your criteria. You have

to get beyond that. That’s your responsibility.

Furthermore, you know the whole system. Where is there money

that is not being paid as well? To whom are we paying money that

we shouldn’t be paying?

You’re closer to the fraud and abuse people than we are. Why

can’t we capture the dollars we need to prevent something that is

totally irrational from happening, when you’ve taken $2.1 billion

more out of an industry than you anticipated.

Indeed, we anticipated that the baseline would be 21.4 in 1998

and it’s 18.2, but it all comes out to a cut of $2.1 billion more than

anticipated. When you have done that, you have to have a way to

respond.

I would ask you that, when we get back, you have something

concrete, and I would hope that you would have it in two weeks,

instead of four weeks, so we would have some time in the district

to talk to our own agencies about it, so we can get some—I mean,

they are not always right. I understand that. And it’s going to affect agencies in Connecticut very differently. There are going to be

winners and losers.

Unless we can get some hands-on opportunity to evaluate that,

and to put it with our own ideas and their input, we are not going

to get a solution that will actually be a step forward, and we certainly won’t be able to deal with that 15 percent. It is imperative

that we not neglect to relieve that date while we are making these

changes.

I hope the next time we meet, it will be concrete, a very concrete

discussion. I am truly disappointed that I don’t have the opportunity to go home and go over ideas that are concrete in your mind,

as well as a few that are concrete in mine. Thank you.

Chairman THOMAS. I do want, before I recognize the gentleman

from Louisiana, to note that the dollar amount that the gentlewoman indicated, a $2.1 billion difference in the baselines between

1997 and 1998, is partly attributed to—and the reason I’m saying

this is, I don’t want any witness who may come later in the proVerDate 11-MAY-2000 13:38 Aug 28, 2000 Jkt 063934 PO 00000 Frm 00038 Fmt 6633 Sfmt 6602 E:\HEARINGS\63934 pfrm03 PsN: 63934
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gram to ascribe that to the immediate behavioral changes based

upon the programmatic changes that we put in.

Because what did occur between 1997 and 1998, as I indicated,

was a four-month moratorium on the startup. In addition to that,

I believe that there was a releasing of the wage rates and other

items that were built into the 1998 baseline, that wasn’t in the

1997, which neither of those would be attributable to the BBA for

baseline purposes.

Now, that is a shorthand way of saying what I said earlier, that

the stupid budgetary procedures that we have to operate are not

going to stand in the way of you folks and us presenting a better

program for Americans who want to use home health care, and

need to use home health care.

I want to underscore what the gentlewoman from Connecticut

said. It is a little difficult for us, trying to look at policy when, as

the gentleman from California said, you have added a new parameter that we have never had before. That is, we come up with what

we believe to be proper policy, and you tell us you can’t do it.

You’ve got to be more out front than you have in the past, in an

advocacy role of options, instead of us asking you whether you can

do this or do that, and then we wait to find out if you can do it

or not. We don’t have the luxury of that kind of a timeline.

The gentlewoman from Connecticut.

Mrs. JOHNSON. Thank you, Mr. Chairman. My red light was on,

so I didn’t go into those details.

He brings up a very good point. What it means is, that when you

come back, you need to be able to say, ‘‘We recommend a moratorium on any new agencies who are going to come in at a reimbursement rate that is above the national average,’’ or whatever.

I mean, that might be one of the things we need to look at here,

that we need to look at the extent to which we do adjust to wages.

We need to look at what we think.

You also have access to monthly cost reports. Are we beginning

to see a slowdown in number of visits? In the GAO testimony, that

seems to be something we are beginning to see now.

I understand perfectly well that this isn’t all attributed to a slowdown in the number of visits, but the things to which it is attributed are also useful to us. That’s the level of analysis and assistance we need here so we do the right thing, and we actually improve the situation, rather than just sort of, in a sense, slog along

in a way that we all too often have.

Thank you.

Mr. HASH. We are in complete agreement with you on that, Mrs.

Johnson. We are as frustrated as you are with regard to our lack

of information about certain kinds of things, but whatever we do

have, we want to make fully available to you and to the other

members of the committee.

Chairman THOMAS. I don’t think you realize how frightening that

statement is to us. [Laughter.]

Chairman THOMAS. You people are the keepers of the flame, and

if you can’t do it, we’ll sit down and rethink how this place operates, and get people who do.

The gentleman from Louisiana.

36

Mr. MCCRERY. Thank you, Mr. Chairman. Mr. Hash, I think you

have gotten the message, so I’m not going to beat it to death. Let

me just go over a couple of things.

I gather from your statements regarding the severity of the crisis, as Mrs. Johnson would put it, that you would not favor a moratorium on the IPS, the interim payment system, and that you

would not favor, as the administration, going back to the old agency-specific cost reimbursement?

Mr. HASH. Mr. McCrery, let me answer that in two ways.

One is—and this is not whether we favor it or not—one is, we

could not do it on our own. I want to be clear about that.

Mr. MCCRERY. Yes.

Mr. HASH. The second answer, as to whether we would favor it

or not, we, as the chairman has pointed out to me repeatedly, are

partners, not only in the home health area, but in the Balanced

Budget Act in general. So that if we were to recommend a suspension or a moratorium of the interim payment system, it would be

incumbent upon us to identify how we would live up to our commitments with regard to the Balanced Budget Act.

We have not identified, as of this point, areas in the Medicare

program that have not otherwise been adjusted by the BBA, that

could provide the resources that would make up for the impact of

a moratorium.

Mr. MCCRERY. So, your answer is, no, you don’t want to go back,

you don’t want to put a moratorium on the interim payment system; and I hear you saying that the reason you have reached that

conclusion is that you don’t think that this problem with the interim payment system in home health outweighs the damage that

might be done to other parts of Medicare by paying for a change

in the IPS, they would involve more dollars.

Mr. HASH. I think we believe that we need to do everything we

can to make sure that neither access nor quality of home care services are unduly interrupted by the payment policies that are in

place.

On the other hand, we have an equally strong obligation to make

sure that, if we take steps in changing the current policies, that we

do so in a fiscally responsible manner, to make sure that we protect

the trust funds and sustain the program for the current beneficiaries and for those to come.

Mr. MCCRERY. Well, let me just get right to the nub of it. Would

you favor—and you need to think about this, I guess, over the recess—would you favor using some of the surplus to finance a

change in the interim payment system?

Mr. HASH. As you know, Mr. McCrery, the administration, taking

direction from the President, has indicated that our position is that

the surpluses that are occurring in the budget should be set aside

to deal with the challenges that are facing the Social Security program.

Mr. MCCRERY. You would not favor using any of the surplus to

solve this problem?

Mr. HASH. No, sir.

Mr. MCCRERY. Just one more quick question. Did I hear you say

that in any prospective payment system that you think you could

come up with—and we hope you do, eventually—you would have to

37

have some sort of outlier adjustment as part of that prospective

payment system?

Mr. HASH. I actually did not address that in my comments, but

I believe the statute, with respect to the home health prospective

payment, makes provision for outlier payments.

Mr. MCCRERY. Okay. Thank you. Thank you, Mr. Chairman.

Chairman THOMAS. The gentleman from Nevada.

Mr. ENSIGN. Thank you, Mr. Chairman. First of all, one way or

the other, whether the formulas are adjusted or not, Nevada is not

really affected that much. I don’t really have a dog in this fight.

What I am more concerned about is whether or not seniors

across the country are going to be getting the type of care they

need—and hopefully, that’s what all of our concerns are.

I know that it has been expressed to you already that the committee is hopefully trying to elicit your help.

Mr. HASH. Yes.

Mr. ENSIGN. We are not trying to, just beat up on somebody that

is in your position, just for the sake of beating them up, but we

really do want your input, because of what Mrs. Johnson said, that

you have the experts, you have everybody that we don’t have up

here.

We have very limited resources as Members of Congress, as this

committee, compared to what the administration has. Because of

that, we do want the answers coming from you, to help us with this

problem.

I know you have some areas in which you have a lack of information, and that is frustrating, and I guess I can understand that. At

the same time, if you have a lack of information, we have that

much more of a lack of information.

What we need from you, at least, sir, is a positive, you know,

‘‘This is what we can do.’’

My question, though, for you, is you say you don’t want to pay

for this out of the surplus. If this ends up being a cost to make the

adjustments, where does the administration propose to come up

with the money to pay for that?

Mr. HASH. As I said before, our view on that is, as we have examined what has occurred as a result of the Balanced Budget Act,

to the Medicare program, we have not been able, to this point, to

identify areas in Medicare that could be further adjusted in terms

of payment policies or other kinds of adjustments that would yield

the kind of money that might be necessary to do some of the things

that Mrs. Johnson and the chairman and others have suggested.

That doesn’t mean we can’t take a look, and continue to take a

look at opportunities. But, as I’m sure you know, the Balanced

Budget Act, in the aggregate, reduced expenditures in Medicare

$115 billion over the next five years, and as a result of that, other

providers and other benefits that are covered by Medicare are also

feeling important changes and reductions in payments of one kind,

or limits on increases in payments.

As a result of those things, we have not yet identified ways in

which we could take money from another part of Medicare for this

purpose, but obviously we have not said that we wouldn’t continue

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sources could be applied to support the kinds of changes that are

being talked about.

Mr. ENSIGN. I guess the question that would follow from that,

then, is over the next four weeks, before we come back, can the administration come back with a proposal that has identified some

suggestions to us to make changes? Will those suggestions have

your commitment to come back with where you’re going to come up

with the money.

Because, if we have identified that there is a problem getting the

care to seniors that need it, we have to come up with solutions.

Whether they’re popular or not, we have to come up with solutions,

to make sure that seniors get the kind of quality care that they

need.

Mr. HASH. I think it is accurate to say that we would not come

forward with a proposal that implicated additional spending without also being prepared to support a way to do that. That is why

we need to continue exploring if there are appropriate ways to do

this.

As I said, we recognize we would need to be fiscally responsible

and that we shouldn’t make a recommendation that implicates additional spending without a way in which to finance it.

Mr. ENSIGN. Do we have the commitment of the administration?

Can you guarantee to us, or at least reasonably guarantee to us,

that when we come back, that we will have some of the answers

to this, or do you think that there is no way we can say that?

Mr. HASH. I believe that, during the course of the recess, there

will be a sustained effort on our part and on the part of your staff

and others, to actually work through this to come to some conclusions by the time of your return.

Mr. ENSIGN. Okay. Thank you, Mr. Chairman.

Chairman THOMAS. I thank the gentleman. Does the gentleman

from New York wish to inquire?

Mr. HOUGHTON. Pass.

Chairman THOMAS. Does the gentleman from Texas wish to inquire?

Mr. JOHNSON. Thank you, Mr. Chairman. A couple of questions.

One, I’m interested in trying to find out what the problems are

with the high-cost states of Louisiana, Texas, and Oklahoma. I

wonder if you’ve done any investigation in that, since they kind of

stand out, and since they are all in the same district.

Mr. HASH. I think at least our preliminary assessment of the circumstances is that, in some cases, high-cost agencies have high

costs because the patients they are taking care of require more

services, longer services, more intense services which, of course,

means that the costs are going to be higher.

Mr. JOHNSON. Yes, but why are they different from some high retirement area, like Florida, for example?

Mr. HASH. If I may, let me finish. I think the types of patients

definitely has an effect on the cost. At the same time, there is

ample evidence that in some cases home health agencies have not

been as efficient as they should be. The incentives of our cost-based

reimbursement have rewarded increased spending.

It is very difficult to discriminate between higher costs related to

inefficiencies and the incentives of cost-based reimbursement and

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higher costs related to the kinds of patients that are being taken

care of.

Secondly, I think another issue that implicates higher use of

home care services is the extent to which state Medicaid programs

provide other kinds of home-based and community-based services

that are available for patients with those kinds of needs.

In states where Medicaid programs don’t provide much support

for that, Medicare home health is probably much more highly utilized, and in states where there is a stronger home and communitybased service benefit under Medicaid, Medicare home health expenditures are lower.

There are a number of factors that influence whether there are

higher or lower-cost agencies in a particular part of the country.

Mr. JOHNSON. Is that supposition, or do you have facts to support

that?

Mr. HASH. I think we have information about the character of

the Medicaid programs in states. What we don’t have is information that at least adequately discriminates between agencies who

have higher costs because they have been inefficient and agencies

that truly have higher costs because of the nature of the patients

they are taking care of.

Mr. JOHNSON. How often, and how many of your home health

care claims are scrutinized by your fiscal intermediary?

Mr. HASH. How often?

Mr. JOHNSON. Yes.

Mr. HASH. We have, as you know, regional home health intermediaries. The claims that are submitted come in and are reviewed

for coverage and other requirements of home health services, and

then they are paid on the basis of interim rates.

Then, ultimately, at the end of the home health agency’s cost

year, they submit a cost report and we compare the results of analyzing that cost report to what we have paid them on an interim

basis.

Mr. JOHNSON. But specifically, do you go into and audit those

things through your fiscal intermediary?

Mr. HASH. Yes, we have——

Mr. JOHNSON. How many of them do you do nationwide?

Mr. HASH. I don’t have the specific figures or percentages, but a

percentage of home health claims are subject to medical review,

both a randomized sample of claims as well as focused medical review in agencies that have been identified with aberrant utilization

or cost patterns.

There are definitely intensive reviews of claims, selected either

on a random basis or on a focused basis.

Mr. JOHNSON. You don’t know a percentage?

Mr. HASH. I think roughly 3 percent, on average, of home health

claims are actually reviewed by the regional home health——

Mr. JOHNSON. Okay. In District 6, which is where Texas, Oklahoma, and Louisiana are, are you using that same review process?

I would suppose, since the numbers are higher, you would review

more of them. Are you doing that?

Mr. HASH. I don’t have the figures for your region, but I would

be happy to get them. We would have some average figures about

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the percent of claims that are subject to medical review and medical necessity determinations.

Mr. MCCRERY. Would the gentleman yield?

Mr. JOHNSON. Yes.

Mr. MCCRERY. Mr. Hash, in answer to Mr. Johnson’s question

about is it supposition on your part, or do you have any data to

back up your conclusion about the reasons for some higher-cost

areas, didn’t, in fact, HHS conduct or commission a study in 1994

on that very subject?

Mr. HASH. I’m unaware of what study you may be referring to.

Mr. MCCRERY. Mathematica Policy Research, dated September

30, 1994. You might want to look at that.

Mr. HASH. Yes, sir. I’ll be happy to.

Mr. MCCRERY. Mr. Johnson, in fact, they do have a study, which

indicates that there are very solid reasons for higher costs that

vary, region by region. If you would like, the gentleman from Louisiana that will testify later today has some citations from that

study in his testimony.

Mr. JOHNSON. Thank you. I appreciate it.

Mr. MCCRERY. Thank you for yielding.

Mr. JOHNSON. Thank you, Mr. Chairman.

Chairman THOMAS. I would tell the gentleman, if it was data

from 1994, I would say that the world has changed quite a bit since

then. But since HCFA is locked into the world of 1994——

Mr. MCCRERY. And our interim payment system is based on

1994.

Chairman THOMAS. Since HCFA is locked into the world of 1994,

and cannot go beyond it, it seems to me perfectly legitimate for

people to present data from 1994 in refutation of a policy built on

1994, notwithstanding the fact that it may, in fact, be much ado

about nothing that applies to what we’re doing today, and that is

one of the really sad factors we’re dealing with.

Does the gentleman from Washington, a member of the committee, wish to inquire?

Mr. MCDERMOTT. Thank you, Mr. Chairman. I am interested in

your statement about the Medicaid information and the extent to

which those services overlap. I wonder how solid that data is, and

how collated it is. It sounds like there may have been a study in

1994.

I would like to know what kind of data you have, actually, because as I look at these states, all the western states—Washington,

Oregon, California, North Dakota, South Dakota—they have low

utilization of home health care, whereas you have a cluster of Louisiana, Oklahoma, Texas, Mississippi, Alabama, and Tennessee all

with almost two or three or four or 500 percent more average visits.

There is something going on there that I am interested in—and

I have a theory what it may be, but I would like to hear your answer.

Mr. HASH. I think, in short order, I’m not sure that we have a

definitive answer for those very large differences in expenditures

for home care, from region to region, because that is at the heart

of one of the problems we are dealing with here, how to fashion a

payment policy that appropriately takes into account differences,

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without locking into place differences that we would not want to

recognize because they flow from inefficiency or fraud or waste or

abuse.

I think, in many respects, the kind of variation, although the

magnitude is greater here, but the kind of variation that you are

seeing in home care is often the variation you see around the country in terms of the utilization and cost of other kinds of health care

services. In that regard, home health is not fundamentally different.

What is different is the magnitude of the differences in home

health expenditures from region to region. And as I say, we would

be happy to share with you some of the analysis, I think, that we

have, that looks at the range of factors that influence the use of

home health agencies, and there are a number of them.

One of them is the presence of home and community-based services through Medicaid, but there are other factors, as well.

Mr. MCDERMOTT. I think it would be very useful for the committee to know that analysis, because Washington state has run

the most efficient, along with Minnesota, runs the most efficient

health care system in the country. We’re at 30 visits, whereas Louisiana is at 153. The patients in Louisiana can’t be 500 percent

sicker than they are in Washington state.

The same is true for most health issues. For example, we got no

money out of the children’s heath initiative, because we already

cover children up to 200 percent of poverty. So there is a real issue

there.

There is a second issue; and I was in the state legislature when

we did this, in fact was in the middle of the fight. That was protecting the certificate of need.

The state of Washington has a very tight certificate of need process. Many states have disbanded that whole process, or have a very

loose certificate of need.

I wonder if you can tell me, Louisiana, Oklahoma, those states,

do they have certificate of need?

Mr. HASH. I don’t know the answer to that. I’m told approximately 22 states now have some form of certificate of need legislation on the books. I would be happy to get that information to you

in more detail.

Sometimes certificate of need covers certain kinds of providers,

and not others, you know, sometimes hospitals, maybe not home

health agencies. But we would be happy to get that information for

you.

Mr. MCDERMOTT. Our certificate of need goes down to kidney dialysis treatment stations. We do a whole series of things in the

state of Washington to deny people. I think one of the things that

we have to look at is this business of how much capitalization there

is in a number of states.

Clearly, if the system is open, when this benefit became available

under Medicare, or became a big issue, the companies went in.

They would never get into the state of Washington today.

Mr. HASH. I would agree with you. I think I should recognize

that the BBA, as you probably know, has put into place some additional tools for us to use in terms of more strict criteria for provider

acceptance or enrollment in Medicare.

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Those include things like standards for their capitalization, evidence that they actually are serving non-Medicare patients before

we allow them to come in and serve Medicare patients.

These kinds of requirements are going to, we believe, be very important at the front end, as a preventive measure, to make sure

that agencies do not come into the program and serve our beneficiaries when they do not meet appropriate standards.

Mr. MCDERMOTT. Do you think it is sufficient to have it all done

in Washington, D.C., rather than to have it done out at the state?

I mean, the Balanced Budget Act may have been written that

way, but I wonder if you think it might not be better to put it out

at the state level, and let them actually look at it.

Mr. HASH. I think to the degree that states are doing that, like

Washington, as you’ve described, we would have nothing but support for their efforts to do that.

We feel we have a responsibility, as the agency that is enrolling

providers, to make sure that they meet appropriate standards, both

clinical and quality standards as well as basic business standards.

Mr. MCDERMOTT. Okay. Thank you, Mr. Chairman.

Chairman THOMAS. The gentleman indicated he thought he had

a theory. I didn’t hear it.

Mr. MCDERMOTT. My theory is——

Chairman THOMAS. In terms of packaging, I’m requiring

everyone——

Mr. MCDERMOTT. I was advancing a theory in terms of certificate

of need. A tightly run certificate of need program excludes inefficient and wasteful programs. Actually, in the last, since 1994 to

1997, the number of visits in Washington state has gone down, and

we have only had one agency close, where Texas has had 450 agencies closed.

There are enormous differences in what has gone on around the

country, depending on the nature of how you let these home health

agencies start up. We let them all start up, and now we have the

problem of a lot of them saying, ‘‘We’re going to have to close

down.’’ Well, they never should have been there in the first place.

Chairman THOMAS. I understand. Perhaps, in the August break,

we can get at that from a potential angle of requesting what would

occur if you created a moratorium in highly served areas, however

you might define that, so that you can stop the ongoing change,

rather than go back and review whether or not they should have

been there in the first place, because they’re already there.

The gentlewoman from Connecticut wanted to ask one particular

question.

Mrs. JOHNSON. I just wanted to ask if you would develop some

information for us that I think will be necessary for our evaluation.

I need to know whether the increase in health care utilization reflects changes in the utilization of other post-acute care services.

Are we still seeing home care keeping people out of nursing

homes? Are we still seeing, and can we document, that home care

is enabling people to be discharged from hospitals sooner?

Are we able to say that, in those areas like Louisiana, maybe

people are in home care longer because they don’t have congregate

living facilities, and is that less costly or more costly to the system?

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We need some information that looks at rising home care costs

in the context of the overall cost of the system. That, I think, would

be very helpful to us, and play into some of these other problems

that we have.

Mr. HASH. We will be glad to try to provide what we can with

regard to that.

Mrs. JOHNSON. Thank you.

Mr. HASH. That’s an important set of questions.

Chairman THOMAS. Thank you, Mr. Hash. I want to underscore

what my colleague from California said.

We can sit here dreaming up ideas, hand them to you, and you

tell us whether you can do it or not. Seems to me you changed the

rules of the game by not being able to do what we say you ought

to be able to do.

We expect some specific model options in the area of formula

change, in the area of per-visit change, and in the potential for an

outlier policy.

Mr. HASH. We look forward to working with you, Mr. Chairman.

Chairman THOMAS. I would have preferred ‘‘Yes,’’ but that’s

okay. Thank you very much.

Next panel, please—somewhat a cast of regulars. We welcome

back Dr. Bill Scanlon, director of the Health Financing Systems,

General Accounting Office; Dr. Gail Wilensky, Chair of the Medicare Payment Advisory Commission, better known as MedPAC;

and Honorable June Gibbs Brown, Inspector General of the Department of Health and Human Services.

I want to thank all of you. We did take a rather long time with

our first panelist, but as I think you know well, the difficulty with

the Y2K problem and the need to come up with a solution required

us to pursue options perhaps longer than we normally would have.

Your written testimony will be made a part of the record, and

you may inform us as you see fit of your specific suggestions or

criticisms or critiques of the home health interim payment system.

Dr. Scanlon.

STATEMENT OF WILLIAM J. SCANLON, DIRECTOR, HEALTH FINANCING AND SYSTEMS ISSUES, HEALTH, EDUCATION, AND

HUMAN SERVICES DIVISION, UNITED STATES GENERAL ACCOUNTING OFFICE

Mr. SCANLON. Thank you very much, Mr. Chairman, and members of the subcommittee. I am very happy to be here today as you

review the recent changes in Medicare payment policies for home

health services and the need to ensure that the spending for these

services and its distribution under the interim payment system are

appropriate.

The goal for a long time, as you know, has been to implement

a prospective payment system for this benefit, to establish and

maintain control over the growth of spending, and also to better

match payments with patient needs. However, in enacting the Balanced Budget Act last year, you recognized the implementation of

a prospective payment system would not occur before fiscal year

2000, and an interim payment system would be needed to initiate

control over payments.

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As the interim payment system will be in place now longer than

you intended, issues with regard to its adequacy and appropriateness become more troubling, though they might not have been so

in the short term. In particular, there are questions about whether

the per-beneficiary limits will excessively restrict overall payments

and about the relative stringency of these limits among agencies.

One thing we should recognize is that the per-beneficiary limits

were established using the average number of visits per beneficiary

in the 1993–1994 period.

Most of the rapid growth we have witnessed in the number of

visits per beneficiaries since 1989 had occurred by then, and would

be reflected in the data used to establish these limits.

Evidence from both our past work and that of the Inspector General have indicated that utilization levels in recent years, to some

degree, have been inappropriately inflated by services provided to

some beneficiaries who didn’t qualify for the benefit, by some beneficiaries receiving unauthorized visits, and even by, instances of

visits being billed but never being delivered.

Consequently, concerns about the overall spending under the interim payment system may be unnecessary. Ensuring, however,

that the limits reflect appropriate cost differences across agencies

is a more difficult issue to address.

Blending historic agency-specific and regional payments to determine the per-beneficiary limits was intended to recognize that significant variation in costs across agencies and geographic areas exists, and to reduce some of the extremes.

How much agencies spent in the past does provide some indication of the types of patients they serve. Although cost data are

readily available, they are admittedly very crude case mix adjusters, because cost differences can reflect multiple causes.

Agencies can have higher costs due to inefficient practices, and

then they will have a higher per-beneficiary limit. Conversely, if an

agency had a history of managing its costs and controlling its visits

to each patient, its per-beneficiary limit will be constrained.

Unfortunately, examining costs alone cannot reveal whether an

agency serves a more needy patient population or operates inefficiently. As a practical matter, therefore, in order to protect those

serving a more complex mix of patients, other inefficient agencies

may be rewarded.

The per-beneficiary limits based on 1993–1994 data also may

prove problematic for some agencies if external factors have resulted in significant changes in their costs since then. An example

would be a shift in the mix of patients that might accompany a

change in the number of providers in their local market which

would then have an effect on the clients available to other agencies.

An even more widespread impact could accompany a state’s

adoption of a so-called Medicare maximization policy. Through

these policies, some states have attempted to ensure that Medicare

is billed first, instead of Medicaid, for visits to patients who are eligible for both programs. This increased Medicare billing may not

be reflected in the per-beneficiary limits when states have recently

implemented such policies, and their agencies may be facing limits

that are tighter than appropriate.

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Unfortunately, attempting to calibrate the per-beneficiary limits

to reflect legitimate differences among agencies without data, on

the causes of those differences, inevitably leads to potential underpayments and overpayments. A well-designed prospective payment

system with an adequate case mix adjustment will address these

concerns and provide Medicare with better tools to control its

spending.

We believe, however, that the development of the prospective

payment system for home health will be a much greater challenge

than prior efforts to create one for hospitals or skilled nursing facilities.

For home health, for example, defining what is the unit of service, which most conceive of as an episode of care, should contain

may prove very difficult. At present, no consensus exists on what

constitutes a needed Medicare-covered visit or what a visit should

entail, basic information essential to the appropriate definition of

an episode and the design of prospective payment.

We need a candid and realistic assessment of when the prospective payment system and adequate accompanying oversight mechanisms can be implemented. Depending on the delay, it may be important to consider how to make agency-specific adjustments to the

limits to better account for appropriate variations in current costs.

Potential adjusters that could be developed include information on

the proportion of Medicare patients that are Medicaid eligible as

well, patient length of stay, and the proportion of beneficiaries that

were recently hospitalized. Research that HCFA currently has underway to develop the prospective payment system could very well

guide this kind of an effort. Without adjusting the limits, the extent of overpayments and underpayments is likely to increase over

time.

Let me say in conclusion that you have taken very positive steps

in giving HCFA the tools to maintain control over the growth of

home health spending. The goal should be to move as quickly as

possible to take full advantage of those tools. In the meantime, we

need to remain attentive to the effects of the interim system and

seek to ensure that agencies are paid appropriately for the mix of

beneficiaries that they serve.

Thank you very much. I would be happy to answer any questions

that you may have.

[The prepared statement follows:]

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Chairman THOMAS. Thank you, doctor.

Dr. Wilensky.

STATEMENT OF GAIL R. WILENSKY, CHAIR, MEDICARE PAYMENT ADVISORY COMMISSION, ACCOMPANIED BY STUART

GUTERMAN, DEPUTY DIRECTOR, MEDICARE PAYMENT ADVISORY COMMISSION

Ms. WILENSKY. Thank you for inviting me here to testify. I am

here as the chair of the Medicare Payment Advisory Commission,

and I have with me Stuart Guterman, who is the deputy director

of the commission.

You have heard in some detail about why the prospective payment system was adopted as part of the Balanced Budget Act, and

I’m not going to review that with you. It is in my written testimony.

You have also heard a clear description of what it is we have

moved to in the interim, in terms of the interim payment before

the time the prospective payment system is ready, and I’m not

going to go through the detail of that, as well.

I want to mention a couple of the provisions, the effects of the

provisions, in terms of what we know about the general direction

of the effect, and then make some suggestions about where we

might go from here.

Because of the introduction of not only a per-visit cost limit,

which had been part of the prior payment strategy, and also the

change, as you know, going from 112 percent of mean cost to 105

percent of median cost, but also including, now, a per-beneficiary

limit, as well, which, as you have mentioned, is based on 1994

data, we have set up a stress in terms of the kinds of effects that

this interim payment system will have will differ according to the

type of patients that will go to the agencies.

In general, because of the system that was devised, what we

know is that those agencies which tend to have patients that have

a limited number of high-cost visits, like after a hospital, for example, will have most of the effect, will come from the per-beneficiary

cost limit, because they don’t have a lot of visits, and the ones they

have are very costly.

It appears, for example—and since you have Members up here

from these states—that Louisiana is, at least in large part, affected

more by the cost limits than, say, by the numbers of visits.

On the other hand, if you have agencies that serve people with

a lot of chronic conditions, who have a lot of visits, which perhaps,

knowing a little bit about the demographics of the country, is more

associated, we think, with a place like Connecticut, they are much

more likely to get impacted by the per-beneficiary limit rather than

the visit limits, for cost.

These were not unreasonable additions to bring to the payment.

The problem is, we don’t know what is going on in these visits, and

we don’t have information about case mix.

The basic problem that you are now going to deal with is that

you are going to try to make changes that either will increase

costs, and then the issue is can you negotiate a way to pay for some

additional money, or that will create winners and losers.

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You are fundamentally going to be left in the position of not

knowing very well, at least, whether the money that you shift is

going to more efficient agencies or going to agencies who have less

sick or less complicated cases.

My first plea is that, while we come up—and we will, certainly,

at MedPAC, be glad to assist you in any way; we have, I know,

been providing some analysis during the last few weeks, for some

of the Members’ requests—is to start working on getting better information.

It doesn’t have to be perfect information. It is certainly possible

to have approximation of information early on at the same time we

start instituting some more specific efforts to get what goes on in

the visit and to get case mix information, so that we can move off

the problem of not knowing whether agencies have low costs because they are efficient, or whether they have low costs because

they have less sick patients.

The additional issues which we had raised as part of our recommendations, which you may want to think about, depending on

what other steps you take in order to fix the problem that you are

now concerned about, which is whether too much money is coming

out of this system and more impact may be occurring in terms of

some of the agencies, is whether you want to consider the recommendation we made with regard to a modest co-payment on the

part of beneficiaries, subject to an annual limit, and secondly, after

60 visits, to have an independent case manager review the case

plan for the beneficiary so that the big spenders of home care

money—that is, the people who have over 100 or 150 visits—who

are a small part of the population, 15, 20 percent, but who account

for most of the money in the system, know that they are getting

an independent assessment about whether they have the right plan

of care for them, not by somebody who is related to the home care

agency, and not by the physician who has been asked to sign off,

because there is a lot of pressure that that physician is frequently

put under.

So my plea, again, as you go forward and try to deal with the

uncertainties of not knowing why these differences occur, is to start

early, soon, as soon as possible, on collecting as good data as you

can in the interim, and then better data over time. It will help resolve these problems, which are obviously causing you and your

constituents a lot of concern.

Thank you. I will conclude my oral presentation at this point.

[The prepared statement follows:]

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Chairman THOMAS. Thank you very much, Doctor.

Inspector General Brown.

STATEMENT OF JUNE GIBBS BROWN, INSPECTOR GENERAL,

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Ms. BROWN. Good morning. I’m June Gibbs Brown, Inspector

General of the U.S. Department of Health and Human Services.

I am pleased to be here to talk about our recently released voluntary compliance guidance for the home health industries. The

guidelines are the latest in a battery of remedies addressing the extraordinary vulnerabilities inherent in the Medicare program.

Indeed, the home health program is remarkable in its

vulnerabilities. In the past we have found payment error rates of

19 to 64 percent in individual home health agencies, and are 40

percent across California, Texas, Illinois, and New York.

Improper payments were made for unnecessary services, patients

who were not homebound, inadequate physician certifications, and

services not provided. Numerous investigations have revealed instances of outright fraud.

A recent example is a former owner of a now defunct Texas home

health agency who pled guilty to conspiracy to defend Medicare.

She was charged with submitting false cost reports of more than

$3.6 million.

Not all of Medicare’s improper payments are due to fraud,

though. They probably run the gamut from innocent errors, inadequate management, financial irresponsibility, recklessness, abuse,

and fraud. Whatever the underlying motives, the result is the

same—significant loss to Medicare, and American taxpayers.

Fortunately, most of the vulnerabilities are being addressed

through the combined efforts of the Congress, the Health Care Financing Administration, and the home care industry itself.

Many potential solutions were incorporated into the Balanced

Budget Act of 1997, as well as in the regulatory and administrative

initiatives of the Department of Health and Human Services.

To add to the remedies already available earlier this week, on

August 4th, I released the most recent in a series of compliance

guides entitled Compliance Program Guidance for Home Health

Agencies. This guidance was prepared in cooperation with the

Health Care Financing Administration, the Department of Justice,

and the representatives of the home health industry.

It is offered to assist home health agencies in developing specific

measures to combat fraud, waste, and abuse, as well as in establishing a culture of integrity that promotes prevention, detection,

and resolution of misconduct. Copies have been provided for members of this subcommittee.

I wish to emphasize that this guidance is voluntary. We also encourage home health agencies to adapt these principles to their

particular needs and circumstances. I am pleased to see that the

home health industry has responded favorably to this guidance.

We have identified seven fundamental elements to an effective

compliance program:

First, standards of conduct and written policies and procedures

that promote the home health agencies’ commitment to compliance

and address specific areas of potential fraud. The risk areas include

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claims development and submission processes, cost reporting, and

financial relationships with physicians and other health care professionals and entities.

Second, the designation of a compliance officer, and other appropriate bodies, responsible for operating and monitoring the compliance program.

Third, regular, effective education and training programs for all

affected employees.

Fourth, a hotline or other reporting system to receive complaints,

and procedures to ensure the anonymity of complainants, and to

protect them from retaliation.

Fifth, a system to respond to allegations of improper activities

and enforce appropriate disciplinary action.

Sixth, audits and other evaluation techniques to monitor compliance.

Seventh, finally, the investigation and remediation of systemic

problems, as well as policies to prevent employment and retention

of sanctioned individuals.

One advantage of the compliance guidance is that it cultivates

reform from within, rather than outside the home health agencies.

I believe that each agency itself is best positioned to guarantee the

integrity of its operation.

Like all recent reforms, the guidance is just the beginning, a

kind of structure to be filled out and implemented by home health

agencies. We are far from finished with the task of reforming home

health, and we cannot drop our guard.

We hope that the new initiatives of both the Congress and the

administration, coupled with the Compliance Program Guidance for

Home Health Agencies, will go a long way to solving the serious

problems that have plagued Medicare’s home health benefit.

This concludes my prepared statement, and I will welcome any

questions you have.

[The prepared statement follows:]

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Chairman THOMAS. Thank you, Ms. Brown. You indicated a couple of examples, and I know in your written text there are a number of examples, and they seem to be, a significant percentage of

them, from one state.

I know that when you launched your Operation Restore Trust,

you did so initially in just five states, I believe.

Ms. BROWN. That’s right.

Chairman THOMAS. What was the rationale for choosing Florida,

Illinois, Texas, New York, and California?

Ms. BROWN. Those states represented a cross-section of the country, and a great deal of the Medicare money was spent in those

states. (so) We felt that we could get some experience in looking in

those concentrated areas and then expand to the rest of the country.

Chairman THOMAS. The assumption would be that the bulk of

the examples that you would have available would be atypical, because you drew those states initially?

Ms. BROWN. That’s right. They aren’t typical of the proportion of

problems in those states, but only that we have finished those at

an earlier point in time.

Chairman THOMAS. I wanted to make that point, and that as you

do the nationwide examination, unfortunately, you’ll have a number of examples that you could present from every state——

Ms. BROWN. I believe so.

Chairman THOMAS [continuing]. Unfortunately, in the Union.

Dr. Wilensky, this problem is even more difficult for us than

some others that we have tried to deal with, because of the computer situation at HCFA, but also the game that apparently a majority of my colleagues believe is important to play, and the administration indicated it was going to be, perhaps, a requirement as

well, and that’s budget neutrality.

The difficulty I think some of us are having is that we could not

believe the lack of information that had been collected, or the usefulness of the lack of information that had been collected, when everyone knew this is one of the fastest-growing expenses in the

Medicare area, so that a lot of what we’ve been doing, frankly, is

guessing.

We are now at the stage where we are examining, if you will, our

first guess, and we need to look at options.

How critical is it, in your opinion, as we look at options to ease

the transition for a longer period of time, now, as Dr. Scanlon indicated, to try to do this in a revenue neutral environment?

Can you move enough parts around to have any kind of a meaningful impact in a revenue neutral environment, or should we look

at possible additions of modest sums, or significant sums, in making these adjustments?

How critical is it to do it with no new money, or how critical is

it to do it minimally right for the period we are going to have to

live with, with some addition of funds?

Ms. WILENSKY. If you knew more about either appropriate clinical standards of care in home care, and more importantly, the case

mix that various agencies had, it might be possible to do this in

a budget neutral way, but the fact is you don’t know that.

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So you will be flying blind. You can change the mix of money,

and all you will know is that there will be winners or losers. You

will have no reason to assume that the winners are the good guys

or the agencies that have sicker patients and the losers are the

ones that are profligate in their funds.

Given that that’s the case—and again, I implore you, at one step,

to try to engage in activities that will fix that—you obviously can

make a case for putting a little more money in, both on the

grounds that the surplus seems to be bigger than what was being

anticipated initially, and that the slowdown in spending is greater

than was anticipated in the BBA.

As you know better than I do, that does not give you any automatic call on those funds, but it is something that indicates more

of an impact than was scheduled, not surprisingly. That, of course,

happened at the beginning of PPS for hospitals, as well. The very

first year was a bigger impact.

Chairman THOMAS. I’ll borrow the gentlewoman from Connecticut’s question to HCFA.

Do you consider the situation we are in, in dealing with the home

health care, and the ability to maintain adequate home health

care, an emergency situation? Is it a very serious situation? What

kind of a context should we be examining this in, in terms of immediacy of need for action and degree of action?

Ms. WILENSKY. I don’t think there is any indication yet it’s an

emergency. It is somewhere between serious and very serious.

More money is coming out than we anticipated, and that’s a fact.

My understanding is that there is a net increase of agencies,

home health care agencies. There is not any available evidence that

there is either a big dropoff in agencies or an access problem for

the seniors themselves.

The difficulty is, by the time we actually can see either of those,

we will have caused a problem. If you want to take the first step

and say substantially more money is coming out of the system than

we anticipated, we are at least setting ourselves up for a problem,

although there is no documentation yet that we have one. So it is,

at the very least, a serious problem.

Chairman THOMAS. As I indicated at the beginning, we can talk

about examining the blend, but because the variation, intrastate,

is as great or greater than the variation interstate——

Ms. BROWN. Correct.

Chairman THOMAS [continuing]. It is extremely difficult, just in

adjusting the blend, to really deal with the problem.

We could deal with the per-visit. Since we changed it from the

mean to the median, we can play with the percentage in that area.

The outlier has been mentioned, just for those who don’t have

the ability to deal with a case mix, either pre or post, and simply

deal with the reality that some folks fall outside it.

Would those be the universe of appropriate examinations? Now,

I know you mentioned a co-pay, and my colleagues here—I’ve discussed it with them—are not as enamored with that. Obviously,

that involves a slight behavioral change in terms of choices that

are made.

You indicated a limit, which would limit the impact on lower income. Of course, Medicaid takes care of that bottom end, anyway.

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Have you looked, at all, along the lines of a moratorium in areas

where there clearly appear to be a sufficient number of agencies,

or is that a policy that probably would not be looked at if you could

deal with it in terms of the blend, the per-visit, the outlier?

Ms. WILENSKY. A moratorium on going forward with the payment, or——

Chairman THOMAS. No, a moratorium on new home health agencies in those areas where—using some criteria for adequateness or

number of agencies.

Ms. WILENSKY. We haven’t. At least, I am not aware of it. Personally, I don’t think that having a moratorium on a number of

agencies is the way that I would recommend going forward to try

to solve this problem.

Chairman THOMAS. Thank you very much. I believe this is the

first statement that anybody has made today that indicates that

one option probably is one that we ought not to pursue. Thank you

very much.

Ms. WILENSKY. You’re very welcome. Let me tell you, there is a

blend that I was having a brief discussion on in terms of what will

be arbitrary changes in blends that might provide some assistance.

That is, rather than the agency national as the primary blend,

looking at the differences in the number of visits that are skilled

nursing versus home health care aides, as a type of a blend on the

grounds that that may be picking up some differences in the case

mix.

The point is, it is possible that, having MedPAC staff work with

some of your staffs, that we might be able to come up with some

short-term interim fixes to try to proxy better than what we have

now in terms of the intensity of need.

Again, I plead with you to try to make sure you have either legislative authority or other pushes to get going on the data. It is impossible not to fly blind without it.

Chairman THOMAS. Is our time frame that I tried to indicate—

doing a lot of heavy lifting over August, so that when we come back

in September, we will have to the best of our ability, the solution

that is the best that we can provide on a bipartisan basis—an appropriate time frame?

That is, we need to respond as soon as possible, notwithstanding

the desire the longer we go the better info we have?

Ms. WILENSKY. The fact is, you don’t have much information, and

you’re not going to have it in the next few months, so you might

as well come up——

Chairman THOMAS. Just let me interrupt you, and underscore

that, in looking through what we had mandated, it isn’t until October 1, 1998 that the home health care agencies are required to

specify by code to the Secretary the length of the service visit in

terms of 15-minute increments, so we don’t even know the length

of the visits.

Ms. WILENSKY. And we know, of course, nothing about the content.

Chairman THOMAS. The content of the visits. That kind of underscores what we do. The point is, though, that if we wait longer, we

are not really going to have any more resources available to us for

making a better judgment on the changes that might be needed.

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Ms. WILENSKY. In terms of the short-term options, I think you

will have as much as you’re likely to have when you come back in

the fall, and as you know the calendar as well as I do, if you don’t

do something then, it will be at least until the springtime before

you can do something. I don’t know that you will have substantially greater substantive information in terms of intensity or content by that time.

So my recommendation is, if you re interested in moving ahead,

moving ahead in September is as appropriate as waiting another

five months.

Chairman THOMAS. My assumption is you believe that we should

be interested?

Ms. WILENSKY. I think that, because of the magnitude of the

change, the potential for doing things you didn’t intend is greater

than if it had been about the amount you expected.

Chairman THOMAS. Thank you very much. Mr. Stark.

Mr. STARK. No questions.

Chairman THOMAS. The gentlewoman from Connecticut.

Mrs. JOHNSON. Thank you. I was interested in your comments

about a moratorium.

You know, the Dartmouth studies show, in their comparison of

Boston and New Haven, that the availability of services definitely

influences the amount of services delivered, and that that amount

can’t always be correlated with quality of care.

So it does seem to me that, first of all, we certainly can look at

the kinds of savings that would be realized if high-resource, highutilization regions were constrained to a lower-resource, lower-utilization pattern. Look at New Haven and Boston. You know, there

are some things that you can learn.

The question I would ask you is twofold.

First of all, what do we know about the payment rates of the new

agencies? Do we know that, on average, or whatever, that the new

agencies coming in are coming in at higher reimbursement rates—

I think this is generally true in my part of the country—as opposed

to the older agencies that are there?

If that is the case it is an overall loss to Medicare to have older,

lower-cost providers leave the market and higher-cost new providers come into the system.

We need to look at who is coming in, what is it costing us, who

is going out, and are they going out because they are low-cost, efficient providers, because that is not in our interest. In that case, we

might want to have a moratorium in areas where there is already

a high level of providers.

Then I think this issue of looking at what are the other services

we are paying for in those areas is important, so that we can set

home health care costs in the context of other services.

I would hope that you wouldn’t dismiss the possibility of a targeted moratorium until PPS goes in, as one of the possible tools in

constraining costs and, frankly, freeing up the dollars we definitely

need if we are going to solve this problem.

If we are not going to use any of the surplus, then there has to

be—and you can’t solve this problem budget neutral. Then you’re

just going to shift around the pain. If you’re going to have some

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new money to put in, you’re going to think about where it’s going

to come from.

It seems to me a moratorium in the dense, high-resource areas

has some merit.

Ms. WILENSKY. You raised several issues. Let me try to briefly

respond to them.

There is some dispute about whether availability of services

drives demand. If it did, we wouldn’t have hospitals at 60 percent

occupancy. It is much more complicated than just if they’re there,

people will come.

The second issue is that variations exist all over Medicare, as

they do all over health care, and to try to respond to them in one

sector without looking at variations in other part of Medicare is

very, I think, dangerous.

We have enormous variations in the service of care—Mr.

McDermott raised this earlier—in terms of Florida and California

versus the state of Washington and the state of Oregon and the

state of Minnesota, for example.

The whole issue of should we narrow the amount that Medicare

allows for in terms of variation in practice style, and at which level

should we aim for, is a serious issue, one that MedPAC and its

predecessor commissions dealt with, and I think it is an important

issue for the Congress to deal with.

We have to be very careful to look at home care as the only service in which you are really doing, because the fact is, states differ

in terms of how much home care they use vis-a-vis physician care

and hospital care and skilled nursing care, and I think to put a

moratorium in one area alone is to ask for difficulties, because it’s

not the broader context.

Finally, if it is really only the concern that new agencies are getting paid at higher rates and some of the older agencies that may

be exiting, although we don’t know much about older agencies

exiting and whether they are efficient, you could, of course, pay

them at the lower cost. You can have the payment for new agencies

at whatever payment level you want.

Rather than put a moratorium on, if you think that the newer

agencies are getting paid too much, there are ways to fix that.

Again, I spoke, obviously, not on behalf of the commission, in response to Mr. Thomas’s comment, but on behalf of myself as a market economist, and I don’t think moratoriums are a good way to go.

Mrs. JOHNSON. I appreciate, particularly as a market economist,

why you would not be interested in moratoriums. But we are talking about an interim between now and a payment system that we

think will be more sensitive to the product that we’re trying to deliver and the price of that product.

There is a macro difference. I mean, there are certificate of need

states. Mine happens to be one, too.

To look at the configuration of the services, not just home care,

but the others, in those states versus other states—we certainly did

find, when we looked at specialty care and Medicare, that there

was a very different use of specialists and number of second, third,

fourth, and fifth opinions in areas where those services were easily

available.

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It does seem to me, at a time when we are under such enormous

pressure, that it is at least something that we have to look at.

Maybe we don’t call it a moratorium. Maybe we look at it in the

certificate of need context.

Ms. WILENSKY. Of course, MedPAC would be glad to respond to

any request for an analysis on this issue that we would have.

Mrs. JOHNSON. Thank you.

Chairman THOMAS. Thank you very much. Does the gentleman

from Maryland wish to inquire?

Mr. CARDIN. Yes. Thank you, Mr. Chairman. I thank the panelists for their testimony.

Dr. Wilensky, I accept your characterization that the situation is

somewhere between serious and very serious, as it relates to the

entire circumstances on home health reimbursement under the interim payment system.

As related to me, I think it has reached the critical or emergency

stage in some places. Let me just give you a few of the examples

that have been given to us, and get all of your input here.

There are many areas that, because we are using historical agency-specific costs, to such a high degree, that where agencies has already brought down the costs, they are being more adversely impacted than in those areas of the country that have had higher utilization and costs.

In those areas, we have reached the critical point, because of the

reliance on the agency cost data, and it cries out for some change

in the mix immediately.

We also have problems in rural areas, that the per-visit limit is

so conservative, that there is need for a change there if we’re going

to be able to provide services in rural areas, where the number of

patients that you can see in a given day is much less than in other

areas.

Thirdly, for those agencies that have made special efforts on difficult patients, the outliers, having some form of an outlier payment seems to make some sense on an emergency basis, in order

to be able to continue this type of service.

I agree with Mrs. Johnson that to try to do this without putting

more money into the system is going to be impossible.

First of all, as you pointed out, Dr. Wilensky, the dollars have

already been stretched more than we thought they would be, and

there is at least some indication that there we have gone too far.

Secondly, the politics of trying to deal with taking money from

someone to pay others just won’t work. We’re going to have to come

up with some new money in this area.

My point—and I would like to get all of your reactions, if I

could—is that I think we’ve passed the very serious situation, as

it relates to these three specific points in some agencies and that,

if we don’t take action quickly, we do run the risk, in areas of our

country, of seeing services actually be eliminated and not available.

Ms. WILENSKY. There is some question that, if you wait until you

can document the problem, you will, in fact, have gone much farther than I believe that you wish to.

On the other hand, we clearly, as I said, don’t have any national

system, and it is much easier to do it if it is not budget neutral,

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particularly when you don’t have very good information on which

to take money out of the pie.

The outlier payment, I think, is actually not one I have given a

lot of thought to. Personally, I think it is one, particularly if you

were to demand more information to justify the outlier payment,

that might help in the short term, while we are getting better data.

It is a very skewed distribution of monies in home care. As I

mentioned earlier, something like 15 percent of the patients use, or

the beneficiaries, use more than 150 visits, but they account for a

very large amount of the dollars.

That means that you actually might be able, depending on

whether you used number of visits or the cost per visit, or either,

as an outlier potential, to demand supporting data for these cases,

so at least you would have a little better sense that, in the outlier

payments, that you had some idea about what you were paying for,

although you didn’t know compared to what.

I think that might well be a way to start, while we go collect better data.

Mr. CARDIN. Dr. Scanlon, if we wait and do nothing, what is the

risk here? Are there going to be agencies that are going to close?

Are there going to be services that are not going to be provided?

Mr. SCANLON. Both could potentially happen. I think that, as you

have indicated, the issue is localized. It applies to particular agencies; it may apply to particular areas, and that’s where the concern

needs to be.

As Dr. Wilensky indicated, we have been operating without information. We have a payment system that is designed with very few

refinements, and it impacts unevenly across agencies.

For the agencies that are seriously affected, some are critically

affected, and they believe there is a crisis today, not at some point

in the future.

More generally, with regard to access and quality of services

overall. I agree that we are not at a crisis point now.

Mr. CARDIN. Could any of you help me? On the three areas that

I mentioned, am I right on those three areas to be concerned

about?

Is there a priority within those three that is more critical than

others? Are we in more danger in rural areas, more danger on difficult patients, or will there be more problems because we’re using

the historical cost in the formulas? Is there any relative concern

here?

Ms. WILENSKY. Those are the areas that you would think to look

at. Again, to the best of my knowledge, there is no information suggesting we have a problem now.

The rural areas we worry about, because of the density, lack of

density; the very sick patients, because in this and other areas,

health care is so concentrated. Although there has been so much

rapid growth and spending in this area that it is hard to feel like,

early on, this is an industry that has been strapped for funds.

Again, there are probably some agencies in some parts of the

country that are very low-cost, and that will find themselves in difficulty. I can’t give a response whether or not, in order to protect

them, to put in money in a generalized way.

Mr. CARDIN. Thank you, Mr. Chairman.

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Chairman THOMAS. Thank you. The gentleman from Louisiana.

Mr. MCCRERY. Thank you, Mr. Chairman. Dr. Wilensky, I would

like for you to explore with me—because I know you have, in your

various capacities over the last few years, looked at this—explore

with me the possibility of instituting a co-pay for home health services, or instituting an option for home health agencies to impose a

co-pay, if they so chose. Do you have any thoughts on that?

Ms. WILENSKY. Yes.

Mr. MCCRERY. And if possible, a partial solution to the problem

we find ourselves in?

Ms. WILENSKY. I believe in a co-pay for two reasons, particularly

one that is rather modest, and that is subjected to an annual limit,

so that, for the small numbers who have a great number of visits,

it is not imposing a major burden.

In the first place, I think that it will help in some of fraud detection. It focuses attention in a way that doesn’t always occur when

you have a free service, so I think it would assist in some of the

activities that the inspector general has been concerned with.

In the second place, it gives you a little money. That is, if you

allow for a co-pay, either on an optional or a regular basis, it would

give you a little more money to distribute elsewhere, and it will

have or it may have, depending on how you define it, some impact

on behavior.

Again, as you know, there has been a very rapid increase in the

number of users and in the number of visits per use, basically a

doubling over a few years, and while that appears to have slowed

down in 1997, you have a lot of years for which that was growing

like crazy.

I think it is a way to try to provide you with some additional

funds, and also try to have some involvement by the patient.

I and MedPAC commissioners were concerned that it not be too

burdensome for the elderly. Therefore, we were talking about a

modest, in the neighborhood of $5, subjected to an annual limit of

maybe a couple hundred dollars, so that the people who have these

extensive numbers don’t get materially impacted.

Mr. MCCRERY. Thank you.

Chairman THOMAS. I thank the gentleman. The subcommittee

will stand in recess until about 20 minutes until 1:00, at which

time we will be pleased to entertain the last panel. Thank you very

much.

[Recess.]

Chairman THOMAS. I want to thank the last panel for their patience, but I assume they have an ongoing interest in the subject

matter.

I would call Jerry Knight, chief operating officer of the Visiting

Nurse Health System, on behalf of the Visiting Nurse Associations

of America; Mary Ann Brock, owner and administrator, Guardian

Homecare, Bellaire, Texas, on behalf of the Texas Association for

Home Care; John L. Indest, chief executive officer, Health Care Resources, New Iberia, Louisiana, on behalf of Home Care Association

of Louisiana.

Ruth Odgren, vice president of Operations, Visiting Nurse Service System, on behalf of the Tri-County Visiting Nurse Association,

Plainfield, New Jersey; and Denise Palsgaard, president, California

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Home Care and Hospice, Inc., Merced, California, on behalf of the

National Association for Home Care.

Thank you all. Any written testimony that you have will be made

a part of the record.

I would ask you, in the time frame that you have, if you would

address us, hopefully, on the specifics as we indicated, of any potential solutions, and I would hope that the solutions do not totally

consist of a moratorium, to go back two, three years ago, pretend

the current trends don’t exist, or any of those kinds of options.

With that, why don’t we just start with you, Mr. Knight, and

we’ll go right across the panel.

Let me, before you begin, indicate these microphones are very

unidirectional. You have to pull them down and speak directly into

them. Thank you.

Mr. Knight.

STATEMENT OF JERRY KNIGHT, CHIEF OPERATING OFFICER,

VISITING NURSE HEALTH SYSTEM, ATLANTA, GEORGIA, ON

BEHALF OF THE VISITING NURSE ASSOCIATIONS OF AMERICA

Mr. KNIGHT. Mr. Chairman and members of the subcommittee,

my name is Jerry Knight, and I am chief operating officer of the

Visiting Nurse Health System in Atlanta.

Founded in 1948, VNHS is the largest not-for-profit home health

agency in Georgia, providing care to over 20,000 patients annually.

We are a very cost-efficient agency, and let me tell you what that

means.

According to 1995–1996 Medicare cost report data, our Medicare

home health program cost per patient was $2,084, compared to

Georgia’s statewide average of $5,054. In 1997, our number of

home health visits per patient was 38, compared to the national average of 80 visits per beneficiary.

Our low utilization is not an accident. It is an intended outcome

for our organization. This has meant over $5 million in savings to

the Medicare program over the prior five years.

In fact, it is this very philosophy that has created the serious financial problem for our agency, and many others that have been

efficient providers. The interim payment system penalizes VNHS

for its cost-consciousness.

I am pleased to present recommendations of the Visiting Nurse

Associations of America, an organization of nearly 200 members

and nearly $4 billion in revenues annually, on how Congress can

address this problem.

The VNAA and VNHS are grateful to you, Mr. Chairman, for

holding this hearing and for your commitment to act this year. Refinements to IPS are even more critical today because of the expected delay of the Medicare home health prospective payment system.

We are also grateful for the support of so many Members of Congress for legislation that tries to address these problems.

Two IPS provisions are problematic, and must be addressed now:

one, the formula for calculating the agency-specific per-beneficiary

cost limit; and second the reduced per-visit cost limit.

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We estimate that at least 50 percent of our members are affected

by the new per-beneficiary limit, while another 25 percent are subject to the lower per-visit limit.

The impact of the per-beneficiary limit is harsh. Many agencies

will actually be reimbursed on the basis of their calendar year 1993

cost. VNAA now estimates that its members will experience average reductions in payments of 25 percent.

We can’t compromise patient care and outcomes and quality, and

may be forced to make tough decisions about our participation in

the Medicare program.

The other primary problem is the low per-visit cost limit in BBA

1997, which penalizes agencies that have had higher per-visit costs

but low numbers of visits and low overall per-patient costs. This is

where it hits home, Mr. Chairman.

For example, it costs VNHS, in the aggregate, close to $80 to

make a home health visit. Under IPS, we will be reimbursed $8

less than our cost per visit. In 1998, we anticipate a loss of over

$2 million from the 267,000 projected Medicare visits because of

this reduced per-visit cost limit.

Here are VNAA’s specific recommendations on how to amend

BBA 1997 to address these concerns:

First, change the formula for the per-beneficiary limit to a blend

of 75 percent national and 25 percent regional, retroactive to October 1, 1997.

I must stress at this point that retroactivity is an extremely important issue to the organizations we represent and to my particular agency.

This must be based on fiscal year 1994, as we heard earlier, because HCFA apparently cannot calculate a new base year because

of its Y2K difficulties. Therefore, it is very important to update

these numbers by the home health market basket index in each of

the four years between fiscal year 1994 and fiscal year 1998.

Second, raise the per-visit limit to 112 percent of the mean, the

pre-1997 level.

Third, because PPS will be significantly delayed, eliminate the

imposition of the 15 percent payment reduction that is now scheduled for October 1, 1999.

We understand that the need to maintain budget neutrality may

affect Congress’s ability to act on this last issue until next year.

Changing the per-beneficiary limit formula affects different agencies in diverse ways. VNAA believes that a transition might be considered as agencies move to a more appropriate per-beneficiary

limit formula, as well as an outlier provision for those organizations that care for unusually high-cost patients.

VNHS, and our VNAA colleagues in New Orleans, Dallas, Houston, and other Sunbelt cities, are proof that cost-effective and medically effective home health care is alive and well in the South. If

we can do it, why can’t other agencies?

If VNAs and other cost-effective providers are the model you

want for Medicare for the future, then act on our recommendations

this year.

We have been gratified that you, Mr. Chairman, and other Members of Congress, have been willing to listen to VNAA’s concerns

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about IPS, and we look forward to developing a workable solution

this year.

In addition, we are willing to bring some of our top financial

folks from around the country to work with the subcommittee, then

HCFA, to work out the details of some of the issues that have been

troubling us all morning.

This concludes my testimony, and I would be happy to answer

any questions.

[The prepared statement follows:]

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Chairman THOMAS. Thank you very much, Mr. Knight.

Ms. Brock.

STATEMENT OF MARY ANN BROCK, PRESIDENT, ADMINISTRATOR AND CO-OWNER, GUARDIAN HOMECARE, INC.,

HOUSTON, TEXAS, ON BEHALF OF HERSELF AND THE TEXAS

ASSOCIATION FOR HOME CARE

Ms. BROCK. Thank you very much. I agree with you that we need

to find a solution. I thank you, Mr. Chairman and members, for

this opportunity. I am in Washington on a mission.

Chairman THOMAS. Ms. Brock.

Ms. BROCK. Yes.

Chairman THOMAS. If you can turn your head, would you move

the mike? It is very unidirectional.

Ms. BROCK. Yes, sir.

Chairman THOMAS. Thank you.

Ms. BROCK. Thank you, Mr. Chairman and members, for this opportunity. I am in Washington on a mission. I am representing myself as an owner of Guardian Home Care, a typical independent

owner of a small agency, and the 1,200 agencies that are members

of the Texas Association for Home Care.

I have approximately 100 patients on service, and 60 full and

part-time employees who have already been adversely affected by

IPS.

I believe we do have an emergency situation. I believe you are

going to have at least 75 percent of the agencies in Texas closing

within the next month or so.

When we talk about closing, we are not talking about closing and

then reopening, as you mentioned earlier, but closing and staying

closed. Texas is not a CON state, as we were asked earlier.

I agree with Mr. Hash from HCFA that this is a situation that

is much more complex than originally thought out. That 75 percent

of our agencies close that means that we will not be able to make

payroll, that we will not be able to pay our bills, and that we have

financial obligations that we will not be able to meet. We will go

into bankruptcy, both corporately and personally.

I think that we need to look for a reasonable solution, and look

at all the different issues with the transition period.

I believe that we are guessing and that we are flying blind at

this point, and that we need to have a transition period to discuss

all the different options, so that we don’t come up with a plan that

we would have difficulty implementing, and becoming the same

problem that we’re in now.

When we discuss the 12-month repayment schedule that Mr.

Hash discussed earlier, there are a lot of agencies that are not

meeting payroll now, and they may not be able to meet a 12-month

repayment schedule.

You’ve discussed fraud and abuse on occasion, many times. I believe that we have a zero tolerance and that we support the compliance mandates and criminal history checks for all employees.

We need to move to PPS as soon as possible—the costs, due to

a desire to be profitable and manage quality through clinical outcomes monitoring.

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I agree with Congresswoman Johnson’s concern that HCFA does

not have a plan, and the committee, without involvement of the

home health agency sector, encapsulizes the information without

good implementation projections.

I believe that we need to have a 75 percent national and 25 percent regional for all agencies, with no pre and post-1994 issues. We

need to treat all agencies equally in a community, with the same

per-beneficiary, per-patient limits.

We need to have outliers based on diagnoses, such as insulin-dependent diagnosis or COPD. Those are patients that are high-utilization, high-cost.

When we talk about the outliers—and Mr. Hash referenced the

fact that the outliers could be reimbursed on the end of the year

cost report, that’s going to cause a big cash flow problem, and I

don’t think that that would work at all.

The retroactive implementation will close agencies. Going back to

the 10–1–1997 cost limits per patient, per beneficiary, is undoubtedly going to close agencies across Texas and across the United

States.

The patients should not be forced to go to a higher per-beneficiary, per-patient provider, but should be allowed to select a home

health agency by quality.

I think that we should use the surplus to manage IPS, and take

some of those funds in order to help the problems that we have

now.

I think that we should cut costs. I think that we should tighten

homebound status and institute guidelines.

I think that co-pays, when we go into PPS, are realistic. I think,

at this point, when you have patients that you are talking about

$5 co-pays, they’re not going to be able to afford to do that.

I think that we need to look at the patient issues. We’re going

to have a lot of patients that are in nursing homes and emergency

rooms and go into the hospital prematurely, because they’re not

being taken care of properly at home.

We have insulin-dependent diabetics that are real committed to

their independence and staying at home, and so are their families,

and they’re going to end up in a critical situation and end up in

the emergency rooms.

I think that we need to look at increased access and substantial

savings, already realizing expected—excuse me.

I think that we need to look at the 15 percent on 10–1–1999, and

go ahead and use some of the already realized savings to that

point, look at the decrease in utilization and the cost savings that

we have already achieved, and use that to offset some of the percentage.

I don’t want to create new winners and losers. Dr. Scanlon mentioned that less than efficient agencies might be rewarded if we use

the system that we have now, or possibly in a new system.

In Texas, the length of stays in hospitals has decreased over the

last five years. Nursing home admissions have been flat.

In Texas, we have the highest number of poverty-level elderly in

the country, and I think that is one of the reasons that we have

high utilization in Texas. Those patients are committed to independence and they want to stay at home.

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Thank you very much, and I appreciate you letting me speak. I

think that we need to work towards a solution for IPS that is not

going to close down all the agencies throughout the United States.

Thank you.

[The prepared statement follows:]

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Chairman THOMAS. Thank you, Ms. Brock.

Mr. Indest.

STATEMENT OF JOHN L. INDEST, CHIEF EXECUTIVE OFFICER,

HEALTH CARE RESOURCES, NEW IBERIA, LOUISIANA, ON BEHALF OF THE HOME CARE ASSOCIATION OF LOUISIANA

Mr. INDEST. Mr. Chair, too, I do thank you for the opportunity

to be able to address this subcommittee and the rest of the subcommittee members.

I appreciate your acknowledgement of the inherent problems that

we are experiencing in IPS, and have changed my remarks, because I assume that you realize that, hopefully, IPS, as it stands

today, is not a workable solution.

I also appreciate your commitment to our industry, to the elderly

people and the homebound, that we serve, and finally, the urgency

that you have expressed that something needs to be done about

this matter.

When Congressman Johnson asked the HCFA representative

about whether they considered the problem urgent, serious, in crisis, probably that answer, if anything, more today scared me than

anything else.

We are in crisis. There is no doubt. I don’t know where they’re

coming from. But if they would like to come to Louisiana, I would

love to drive them around and show them that we are in crisis.

I would like to talk to you about the solutions that you had requested of me, and address some of those points.

I and the Home Care Association of Louisiana fully support—and

if it is mandated, that would be fine—a corporate compliance program for Medicare home health agencies. I think that is a good

idea.

We believe that we need to get away from an agency-specific perbeneficiary limit and go to some sort of blend. While I will be the

first to admit that I would love to see a moratorium, a blend is necessary. This blend should not be agency-specific, because then we

are rearranging the winners and losers.

I can tell you that, in Louisiana, across the street from each

other, we have agencies with a $3,000 per-beneficiary limit and an

agency with close to an $18,000 per-beneficiary limit. They are literally advertising the fact that they can provide more care than

someone else.

I am also familiar with agencies that are saying, ‘‘I have two provider numbers, both with high per-beneficiary limits, and am willing to sell one for prime dollars.’’

It is becoming a tool, in our state, that is just, in my opinion, unacceptable.

I would recommend that we go to 110 to 112 percent of the

mean, versus 105 percent of the median.

We do need to establish an outlier program, an outlier plan. My

understanding is that many of our national associations have tried

to work with HCFA on this. The one thing that was stated earlier

about an outlier program, tying it to a cost report causes me concern.

If you tie it to a cost report, which is filed five months after the

close of your fiscal year, by the time your fiscal intermediary starts

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to look at it and owes you money back, you could be out of business.

I think pro-ration is a bad idea that causes headaches that can’t

be taken care of.

I’m concerned about implementation of OASIS in the midst of all

of this, there is no funding that will help us implement this very

costly program that is being proposed.

I would continue the PIP payments for home health agencies

until the enactment of prospective payment.

It seems that, as of late, our fiscal intermediary, PGBA, has increased their claims review, and I do not condemn this. I think

claims review keeps us all honest, as long as we have a right of

appeal, which everyone should have a right to.

It also seems that, finally, statistical information is being used

to target aberrant behavior among home health agencies. I’ve been

in the home care business for 15 years and have never seen this

done before. But lately, it’s being done, by the OIG, by the United

States Attorney’s Office; by HCFA. I consider this a good way of

proceeding, and it certainly is happening in Louisiana.

I believe we must go retroactive to 10–1–1997. I don’t know anyone in business who could see the Balanced Budget Act that was

enacted in August of 1997, it became effective 10–1–1997. No one

knew the rates. The national rates were published 3–31–1998.

Agency-specific rates, some have them, some still don’t.

We are shooting in the dark. This is intolerable. To go back is

a must for us. The final nail in the coffin is that most of the rates

that are published are in error.

I would hopefully eliminate the 15% reduction—a lot of the rates

that are being sent out to the home health agencies are in error,

and subject to review.

Chairman THOMAS. It was the Louisiana pronunciation. But Jim

immediately told me what that was. [Laughter.]

Mr. INDEST. I’m sorry.

Chairman THOMAS. That’s OK.

Mr. INDEST. Then, on top of that, I’m a Cajun.

Chairman THOMAS. That’s why he told me what you said.

[Laughter.]

Mr. INDEST. Mr. McCrery is from the north, but I appreciate the

interpretation.

I would like to address, just for a second, co-pays. I think co-pays

are something that should not be acceptable in the home health

agencies. Co-pays are a tax on the sick. Those patients who will be

subject to the most co-pays will be the sickest patients.

Any home health agency can cite you statistics, instances where

we enter a patient’s home and, if we are going to ask them for $5

a visit, they don’t have the money to buy all of the medicines that

the physician has prescribed for them.

Or, like someone pointed out to me last night, because they like

their home health agency, they will come up with the $5 and not

buy another medicine that they were supposed to have.

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I, too, appreciate the opportunity to address this subcommittee.

Questions were brought up about CON, high utilization in Louisiana. Those are certainly areas that I would love to address upon

further questioning.

Thank you.

[The prepared statement follows:]

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Chairman THOMAS. Thank you. You can certainly submit those,

in terms of additional writing, if you want to direct it to that, as

well, if we don’t give you ample opportunity to get your point out.

Mr. INDEST. Thank you.

Chairman THOMAS. Thank you very much, Mr. Indest.

Ms. Odgren.

STATEMENT OF RUTH ODGREN, VICE PRESIDENT OF OPERATIONS, VISITING NURSE SERVICE SYSTEM, ELIZABETH,

NEW JERSEY, AND PRESIDENT, HOME HEALTH ASSEMBLY

OF NEW JERSEY, ON BEHALF OF TRI-COUNTY VISITING

NURSE ASSOCIATION

Ms. ODGREN. Thank you. Thank you, Chairman Thomas and the

rest of the subcommittee, for allowing me to come and testify on

behalf of Tri-County Visiting Nurse Association in Plainfield, New

Jersey.

I am also the president of the Home Health Assembly of New

Jersey, which represents the majority of the home care agencies in

New Jersey, as well.

For those of you who are not aware, New Jersey is the fourth

lowest state in total overall Medicare home care cost. We have a

certificate of need in place in the state of New Jersey, and we also

have very strict and stringent regulations.

I would like to just talk for a minute about two issues that have

been brought up in the testimony, about ways to sort of game the

system, that are unavailable to home care agencies in the state of

New Jersey.

First of all, it is regulatorily impossible to close your organization

in New Jersey and reopen. It’s not an option.

Secondly, if Tri-County Visiting Nurse Association was merged

into or acquired by another home care association within the state

of New Jersey, at its per-beneficiary limit of $1,950, whoever acquired them would cost the system more money than Tri-County

VNA costs the system right now, because, to my knowledge, it is

also in the lowest region the fourth lowest state, and the agency

with the lowest per-beneficiary limit, so I don’t know that anybody

would want us.

This year, Tri-County VNA, when we looked at our per-beneficiary rate and the effect of the change in the per-visit rates from

112 percent of the mean to 105 percent of the median, was anticipating about a half-a-million dollar loss on a budget under $4 million.

We have made some adjustments. We have reduced some of our

staff. We have suspended our pension payments to our staff for the

rest of the year, which was not an easy decision.

We have reduced the amount of money that we pay our staff for

using their automobiles to see patients. The Federal IRS limit is

32.5 cents. We have reduced the amount that we are paying our

employees down to 20 cents.

We believe we have cut as much as we can from our budget, and

we will still anticipate being $2.5 million in the red at the end of

the year.

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We don’t have cash reserves. We are a voluntary, not-for-profit

organization established in 1894, and we do not have a large ability

to borrow money to offset that loss.

In my written testimony, I pointed out two, which I would con- sider outlier cases, that cost the Medicare program between $8,000

and $9,000 for each of those patients.

Had those patients been unable to get home care because the

agency no longer existed or a higher-cost agency existed—or what

may happen, and I believe is happening across the country, forcing

agencies to pick categories of patients they can no longer admit

across the board.

For instance, Tri-County Visiting Nurse Association could develop a policy that says, ‘‘We are no longer able to admit anybody

who requires daily care or care more often than that. We can’t afford to. We need to be here for the bigger picture.’’

Then, what would happen is, those patients that I used as examples in my written testimony would end up in sub-acute skilled

nursing facilities, to the tune of $450 for the first 20 days of care,

and 80 percent of that, or $360 for the next 80 days. It costs the Medicare program between $8,000 and $9,000 for

those gentleman in Plainfield, New Jersey in home care. It would

have cost the Medicare program, in a skilled nursing facility, in excess of $30,000 to provide the same service in a skilled nursing facility.

Therefore, I think that IPS needs to be changed. It needs to be

changed for this current fiscal year, and not next year or a year

after, and I think that we need to go to a blend that is more acceptable:

Seventy-five national/25 regional; 112 percent of the mean; delete

the 15 percent per-visit limit cap reduction of 10–1–1999; continue

PIP until HCFA can put in place a prospective payment system;

and everything needs to be retroactive to 10–1–1997.

I have listened today to some of the ideas about co-pay and

outliers, and I’m certainly willing to listen to that. I don’t have

enough information. Obviously, a lot of us don’t have enough information to make those decisions right now.

I thank you for listening to me, and I do implore you to do something this year, because I do believe the Tri-County VNA, and

many other community-base VNAs in the state of New Jersey, will

not exist in and of themselves, come the first of 1999. Thank you.

[The prepared statement follows:]

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Chairman THOMAS. Thank you, Ms. Odgren.

Ms. Palsgaard.

STATEMENT OF DENISE PALSGAARD, PRESIDENT, CALIFORNIA HOME CARE AND HOSPICE, INC., MERCED, CALIFORNIA, ON BEHALF OF THE NATIONAL ASSOCIATION FOR

HOME CARE, ACCOMPANIED BY MARY SUTHER, CHAIRMAN

AND CHIEF EXECUTIVE OFFICER, VISITING NURSE ASSOCIATION OF TEXAS AND CHAIRMAN, BOARD OF DIRECTORS, NATIONAL ASSOCIATION FOR HOME CARE

Ms. PALSGAARD. Thank you, Mr. Chairman. My name is Denise

Palsgaard. I’m a registered nurse and president of California Home

Care and Hospice in Merced, California, home of the next U.C.

campus. The Chamber of Commerce asked me to say that when I

got here.

Mary Suther, chairman and CEO of the VNA of Texas, and

chairman of NAHC’s board of directors, is accompanying me here

today.

NAHC appreciates the opportunity to testify on solutions to the

very serious problems resulting from IPS, and deeply appreciates

the support you, Chairman Archer, and members of this subcommittee have shown for reforming IPS. IPS reform in this session is urgently needed.

The per-beneficiary limit, the per-visit cost limit reductions, the

October 1, 1999 15 percent reduction, and the effect of IPS on elderly and disabled individuals most in need of home care top the

list of issues that must be addressed.

NAHC fully appreciates the sensitivities surrounding the concept

of an IPS moratorium. However, the IPS problems are so many and

so serious that another solution simply may not exist that would

fix the problems for home health providers in all parts of the country, and provide a solution that could be put in place before October 1, 1998.

NAHC is joined by the American Federation of Home Health

Agencies, the Home Care Association of America, and the Home

Health Services and Staffing Association, in supporting this position.

Absent a moratorium, there are specific issues that must be addressed to adequately reform IPS. Unless reforms are implemented

retroactively to October 1, 1997, many of the home health agencies

that Congress most wants to help just won’t survive to see the life

raft.

I sit here as one of those small companies. We have 45 employees, myself as the administrator, and we are a very cost-effective

agency. That has, like many on the panel, gotten us a very low-cost

per-beneficiary limit.

Some of the things we have done is to implement a 10 percent

across-the-board pay decrease to our 45 employees. We have tried

to look at other cost savings. Because we were so cost-effective anyway, that was very difficult to do.

I agree with Mr. Indest, that my agency is in a crisis, and I believe that what will help that crisis is reform in this session.

I also think that it is very interesting, as a registered nurse, that

many folks don’t understand the crisis.

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I would invite them, certainly to come and do home visits with

us, and then, on the other end of my spectrum, to sit in a bank,

as I did Monday, and ask for another line of credit because I need

to make payroll, when my receivables well could make payroll, but

they’re stuck in a system that won’t let the money go. And bankers

are tough people to address.

I think that those are crises, and they are real; and that is just

this week.

Specifically, Congress should revise the per-beneficiary limit, implementing a regional blend that will help level the playing field

in all regions of the country.

Under this approach, each census region would be assigned the

greater of one or two blends—either 75 national and 25 regional,

or 75 regional and 25 national. Payments would be set at the percentage of the blends necessary to ensure that total expenditures

are no greater than budgeted levels.

Eliminate the 15 percent October 1, 1999 reduction. Raise the

per-visit cost limit to 110 percent of the mean from 105 percent of

the median. Establish a funded outlier policy based on costs incurred in caring for patients. Pro-rate the per-beneficiary limits

only where agencies transfer or prematurely discharge patients for

purposes of circumventing the limits. Maintain PIP for home

health agencies until 12 months after implementation of PPS.

Other elements of IPS that should be addressed include the application of extending the savings from the freeze to the per-beneficiary limits; setting the base year at fiscal year 1994; and denying

providers the opportunity for exemptions and exceptions to the perbeneficiary limits.

Some of these issues can be resolved administratively, and do not

need a legislative fix. We urge the Committee to insist that HCFA

reverse its decisions in each of these areas.

While resolving these issues would not fix all the IPS problems,

it would certainly address some important points that would make

a legislative solution within the required budget parameters that

much more feasible.

Specifically, HCFA chose to apply the recapture of the savings of

the freeze provision to the calculation of the new beneficiary limits

in addition to the per-visit cost limits, setting the per-beneficiary

limits at artificially lower rates. The new limits didn’t even exist

at the time of the original rate freeze.

HCFA assigned new providers a rate that reflects national rather

than census data, giving some new providers much lower and others much higher reimbursement levels than other providers in the

same areas.

HCFA chose to pro-rate the per-beneficiary limit in all cases,

rather than only in cases where home care agencies act to circumvent the limits. HCFA is not allowing any exceptions to the

per-beneficiary limits, even though using a five-year-old base year

does not account for many changes in the amounts and types of

services provided to patients.

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We deeply appreciate your leadership, Mr. Chairman, and the

support of other members of the subcommittee, to fundamentally

reform IPS this year, and we look forward to working closely with

you to resolve these issues. Thank you.

[The prepared statement follows:]

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Chairman THOMAS. Thank you, Ms. Palsgaard.

I guess my basic comment to all of you is that I continue to be

very, very frustrated, although there are some specific instances

where there has been some useful information provided to us; and

frankly, this is not new with this particular industry.

When we were trying to work out a program to deal with this,

when we were writing the Balanced Budget Act, we had somewhat

similar cooperation.

Virtually all of you want to go back to the 112 percent of the

mean. Virtually all of you want to eliminate the 15 percent reduction. None of you have provided any way in which we could find

those dollars.

Your proper answer would be, ‘‘That’s up to you.’’ My answer is,

the Congressional Budget Office tells us that eliminating the 15

percent is a $4.1 billion cost.

The idea that we should just go ahead and let folks pick their

own poison in terms of the blend in their particular area, on its

face, is pretty naive.

The reason we are going with these structures—if you will recall,

the administration offered a 100 percent agency blend—the reason

we are going with some kind of a structured blend is to begin to

move in the direction of what will be in place on a prospective payment system. It may not be going in place on time, but it is going

in place, shortly after they indicated.

If everybody is going out of business in this current structure before the minus 15 percent is in place, then there won’t be anybody

in business when the prospective payment system goes into place.

I see all of you nodding your heads.

Ms. Brock, you just testified that 75 percent of the home health

agencies in Texas will be out of business this month or shortly

thereafter. Is that correct?

Ms. BROCK. Sir, I believe it is correct.

Chairman THOMAS. All right. That means 1,500 home health

care agencies will close in the state of Texas.

Ms. BROCK. That’s true. And I think that there have been a tremendous amount of new agencies since 1994, so we have to take

care of that, and we have to adhere to that——

Chairman THOMAS. I understand all that. But I’m looking at the

data in 1994, not in terms of the number of agencies, but in terms

of the number of visits and patients.

In 1994, there were 20 million visits for 211,000 patients and the

average visit per patient was $96.75. In 1995, 28 million visits,

245,000 patients, $116. In 1996, 33.7 million visits, 259,000 patients, $130 per visit.

In 1997, 35.8 million visits, 257,000 total patients—interestingly,

fewer patients, but 2,000 more visits between 1996 and 1997—to

increase to $139 per patient.

In fact, if you look at it between 1994 and 1997, the increase in

the number of home health agencies went up 85 percent. And you

are going to come in front of this subcommittee and testify that,

within the next month, 75 percent of the agencies are going to close

in Texas?

Ms. BROCK. As of my last year’s cost report, the end of my last

year’s cost report, on 3–31–1998, I was being reimbursed $81.85

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per visit. At this point right now, I am at $32.50 a visit, and I have

an overpayment due back to Medicare immediately of $54,000. I

have——

Chairman THOMAS. I understand. That’s the reason we’re holding

the hearing.

Ms. BROCK. Right.

Chairman THOMAS. We’re trying to make adjustments. But for

you people, as an industry, to come in front of me and tell me that

75 percent of the agencies in Texas are going to close within a

month is either a scare tactic—which, guess what, it doesn’t

work—or naivete, which, if you’ve been selected by your various

groups to testify and represent the sophistication level of this industry, then what you have asked in terms of the solution fairly

well reflects that, that what you want is nothing.

I said at the beginning of the hearing, we have to go forward

with the changes in this industry because it is rife with fraud, people are being ripped off, and those that are honest agencies have

got to figure out ways to come to the surface. Frankly, we don’t

have the tools that we would like, but we have got to make sure

that this industry rights itself.

I would much prefer a peer group review inside each of the operations, going after the bad apples, so that when you sit here and

tell me that 75 percent of the agencies in Texas are going to close,

we can all agree that those should have closed, because of the way

they operate, and if they shouldn’t have, we would be sitting down

and working on solutions that would resolve it.

It is just extremely difficult for us, in terms of trying to put together a solution for your problems, to be told the answer is a moratorium, the answer is don’t do anything, the answer is, let us pick

whatever rate we want in our area, repeal or go back to previous

law and, by the way, we’re all going out of business.

It just is simply not reflected in all of the evidence that we’re getting. If that’s the position you wish to maintain in our determining

how we are going to change your industry, then just sit back. We

will do what we believe what we believe is the appropriate thing

to do, and the information that you provide to us, we will simply

disregard. That’s not a healthy relationship, when the committee

reaches out and says, ‘‘Give us some solutions.’’

Now, I would say that the testimony from Ms. Odgren from New

Jersey, based upon my knowledge of how narrow the range between home health agencies is New Jersey, one of the narrowest

ranges between the high and the low, and at the same time, very

few visits, creates a real problem for us in trying to determine how

we evaluate it with the gentleman, Mr. Indest, from Louisiana,

which has one of the greatest ranges between and the high and

low, and the evidence he gave with the folks across the street is

clearly evident, but what it also sounded to me like was that this

is one of the hot new investment areas, and that there are people

who have gone into this because clearly it appears to be a way to

make money. At least it was in the past.

Here is Entrepreneur Magazine for August of this year: ‘‘Have

health care experience? Here’s a business just for you. The demand

for quality health care at affordable prices is rapidly increasing,

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and you can turn that demand into a highly profitable home health

care agency.

‘‘Many treatments that once required hospitalization can now be

done on an outpatient basis. If you have experience as a nurse,

therapist, or medical assistant, you can take advantage of these advancements by caring for patients in their own homes, or if business skills are your forte, you can provide health care supplies and

hire health givers to work for you’’—et cetera, et cetera. This is a

new investment opportunity.

My guess is that perhaps your argument is that was true preBBA; it isn’t any more, and what you are doing is indicating to me

that there is going to be a settling out in the industry. Frankly, it

was overdue.

Our job is to make sure that the good people, who do a good job,

survive; those who weren’t don’t. And, frankly, we are doing it with

very little information and data.

We do know this, for example. On average—and perhaps all of

you are not average, or above—on average every home health care

agency had costs increasing faster than inflation. When we did our

caps in terms of the rates, we used market basket to update them.

Why are costs going up faster than inflation? Is it management?

Ms. ODGREN. I would be happy to respond to that. I think that

some of the things that have caused the costs to go up faster than

inflation—and again, I can only speak from New Jersey, I can’t

speak from any other part of the state—is that the length of stay

between 1993 and 1998, in New Jersey hospitals, for Medicare patients has decreased by three days. So there is a three-day period

of acuity that wasn’t there before.

I don’t think it’s a single reason. I don’t think it’s a single reason.

I think there’s a number of reasons.

Chairman THOMAS. The ripple effect of other changes is an absolutely legitimate argument, if we have empirical data to back it up.

We’re trying to look at those factors.

Ms. ODGREN. I got the hospital length of stay on Medicare patients data yesterday, from the New Jersey Hospital Association, so

that’s the information that I was given.

Chairman THOMAS. The approach we need to take is to get as accurate of information as we can, to be able to make the best decision that we can, in largely a dollar neutral world.

You heard a lot of us willing to go find more money to help fix

this problem but, frankly, from my position, the industry has to be

far more responsive, far more open, and far less hectic in trying to

create impressions that are not backed up by careful analysis of

fact.

There are several organizations, national and other, that are

doing your industry no service whatsover by blast-facting nonfactual information, by attempting to run around and create difficulties for those of us that are trying to approach this in a rational

way by stirring up Members with information that those Members

do not have the ability to evaluate.

I would hope that, other than go back to current law, put in a

moratorium, let us pick our own rates—and there are a couple of

others that you have offered that, obviously, we will be looking at—

is simply not a conducive way to be able to make decisions.

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The gentlewoman from Connecticut.

Mrs. JOHNSON. Thank you very much, Mr. Chairman. I just have

a brief couple of questions, as I have to leave.

First of all, it is as frustrating to us as it is to you that we are

bound by budget rules, but you can only run a nation with certain

rules, and that is just simply the way it is. So it isn’t possible to

do what you’re proposing we do. It just isn’t possible.

What we have to do is, what are those things that we could do

that would be helpful to you, that are also affordable and wouldn’t

draw money out of some other sector in a way that would be destructive.

There are two things that I would say.

First of all, Ms. Brock, I think you have an enormously good

case, and somehow you have to all get together or be heard better,

and I think, frankly, your own Congressman can help you be heard

better by the regional HCFA people.

You should not be getting letters that tell you one week your rate

is going to be this, and two months later your rate is going to be

that. In her testimony she detailed how she got one rate, and they

said that they had underpaid her $117,000, and then two months

later, a much lower rate, and she had been overpaid.

You can’t run a business this way, and you can’t go to the bank

and get a loan this way. That is something that we’ve got to fix,

just the mechanics of moving the payments out.

If you listened carefully, you might have heard the GAO say that

he thinks the two causes were the moratorium and also the slow

rate of payment.

We can probably help you on that, just being able to get your

money moved through in a way that you can stay alive if you deserve to stay alive, and not lose your own personal investment as

a small businesswoman. That’s——

Chairman THOMAS. Will the gentlewoman yield briefly?

Mrs. JOHNSON. Yes.

Chairman THOMAS. I want the record to reflect accurately what

has occurred.

In terms of the letter that was sent initially, that was on the pervisit. In fact, the letter said: ‘‘A review of your interim rates incorporating the per-beneficiary limitation will be addressed in a separate letter.’’

The separate letter was, in fact, the per-beneficiary cost. It

wasn’t that they said one thing and then said another.

Mrs. JOHNSON. Okay. Thank you. I did skim through her testimony. Nonetheless, I think the point that you can’t get information

about what your costs are in a timely fashion, and then you can’t

get paid in a timely fashion, is a problem in a period of such——

Chairman THOMAS. I would tell the gentlewoman she, in skimming, read the testimony correctly. The testimony misrepresents

the letters and the content of the letters in a specific way. One was

the per-visit, which said, ‘‘Another letter will be coming,’’ which is

the per-beneficiary.

It was not that they sent a letter with one rate and then sent

a second letter with a second rate. It was two different rates because it was two different subject matters.

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Mrs. JOHNSON. All right. It does need to be looked into more

carefully, though, because if under rate you were underpaid

$117,000 and at the other rate you were overpaid—so, anyway, the

point is that, really, these things ought to be worked out with the

administrators in a way that just merely payment flow isn’t the

problem.

I am a big supporter of continuing PIP, and I can tell you that,

at least in my area, the regional people have really been willing,

once I brought that to them, because they’re not interested in seeing agencies die just because the bureaucratic mechanism didn’t

allow, you know, honest reimbursement under our current system

to flow.

I will just urge you to try to deal with those problems, and some

of us can maybe help you.

I am very surprised that all of you are willing to move into the

future with a system that drifts toward national and regional data,

and excludes entirely agency data.

The more I’ve thought about it, and I think about the spectrum

of cases that you deal with, and the inability of the national system, no matter how good, to ever really judge efficiency, or really

be patient-specific, I don’t know why you would want to go to a system that has no agency-specific data in it.

Yes.

Ms. ODGREN. I’ll respond to that, as well. I think because the

people, for the most part, that I see that are sitting here, are on

the low end of the per-beneficiary limits, and so—I mean, I understand what Chairman Thomas was saying, but I don’t think it is

the people that he is the most concerned with that are necessarily

the people sitting at this table, because they’re not here to testify,

because they’re not being hurt.

So, if we are at the very low end, as an individual agency, it

would make sense that a national and a regional board——

Mrs. JOHNSON. That might make sense in the short run. What

I would ask you to think about is, do you really want that in the

long run? If you have any follow-on thoughts about that——

Ms. ODGREN. I will.

Mrs. JOHNSON [continuing]. Yyou know, please let me know. Because while right now, it might look good to you, because it would

raise your rates, in the long run, are we going to have a system

that serves us, if it is blind to actual costs?

Ms. ODGREN. Right. But, in the long run, we’re going to have the

prospective payment system, which we’re all looking for. I mean,

hopefully, not in the real long run. I’m trying to exist in the short

run.

Mrs. JOHNSON. Yes. Thank you very much. Thank you, Mr.

Chairman.

Chairman THOMAS. The gentleman from Maryland.

Mr. CARDIN. Thank you, Mr. Chairman. As I’ve indicated earlier,

I have a major concern that we move forward quickly, because of

the urgent situation, so I agree with the thrust of all of your testimonies.

Let me talk a little bit about the per-beneficiary problems and

the way that the current interim payment is handled.

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I must tell you, I can relate much more with New Jersey and

California than I can with Texas or Louisiana or Georgia, because

of the number of average visits per use. I come from the state of

Maryland, which is at 34 average visits per user in 1997. California

was at 47 and New Jersey was at 41, compared to Texas at 134

and Louisiana at 153 and Georgia at 93.

I guess I have a question for each of you. That is, if you come

from a state that has a high average use per beneficiary, why

shouldn’t we expect you to do something about that, and get that

number down to a more reasonable level?

If you come from a low-user state, how did you do it? Maybe you

should be sharing the secret with other states, and help us save

money on home health care.

Mr. INDEST. If I may respond?

Mr. CARDIN. Sure.

Mr. INDEST. Since our state has the dubious honor or the highest.

In my written testimony, I was very candid about what I feel are

the problems in Louisiana. I have served for numerous years as

chair of the Government Affairs Committee of our State Home

Care Association. I’ve been in business since 1983.

We tried, on numerous consecutive years, to get a CON, some

type of sensibility to the rapid growth of home care in Louisiana.

As an industry, we tried to do that.

We were very naive about the process. We found out the first two

years, it was the Governor’s office that was shooting us down.

Mr. CARDIN. Let me just suggest and support what Mr. Thomas

has said, then. Why didn’t you come forward and ask us to help

you in the interim payment, to put a reward on some action by

your state to reduce what I believe you are saying is unreasonable

utilization?

Mr. INDEST. I might be misunderstanding your question. I’m not

asking for a reward. I do not support the wide variety in per-beneficiary limits in Louisiana. I think that any business needs to be

on a level playing field, and what I support is a level playing field

for the home care providers in Louisiana.

Mr. CARDIN. Good. How do you do it? Can you tell us something

of how you were able to get it down? You’re being penalized under

the current formula for your success. But how did New Jersey and

California do it?

Ms. PALSGAARD. Well, I can speak for California and specifically

the Central Valley, because they’re the people that I’m most

around.

I do think one of the reasons is that we have had, in the last few

years, a big push for seniors, for managed care. In some other kind

of environment, perhaps you have to look at exactly what the doctor is ordering and what you can provide.

Also, perhaps we have just been able to look at the issues of the

fact that, as a businessperson, we want to be very cost-effective, because we were looking at the prospective payment proposal that we

have all been looking forward to happening in our industry.

Our agency was looking at being just as cost-effective as we could

with our mission always being the highest quality care possible to

our patients and following the physicians’ orders for what care is

needing to be provided.

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I really can’t speak for other parts of the country. I see the statistics like you do, and I believe that, just in California, we’re just

trying to work within all the regulations and within all what is allowed under the Medicare home care benefit, and try to do a very

good job for the patients——

Mr. CARDIN. Let me compliment you on what you have done in

California, but let me just, I guess, underscore the point that Mr.

Thomas has made.

That is, your associations could do us a service to look at this,

and give us recommendations where we could come in with a more

rational formula—even if it’s the interim formula, forget the PPS—

so that you don’t lose money as you’re losing today, because we’re

paying for the inefficiencies of unjustified per-visits in other parts

of the country, or among other agencies, if it’s not the full state,

if there are problems with different practices within different agencies within a state.

Obviously, there is some waste here. It’s difficult to understand

these numbers. We can’t afford that, particularly when we are trying to find revenues in order to deal with the problem currently.

It would be useful if you could help us, and rather than just say,

‘‘Well, add more money and hold everybody harmless,’’ if we could

get at where we are paying for services that perhaps are not needed, to be able to use those resources to deal with the legitimate

problems that you have brought to our attention.

Chairman THOMAS. I thank the gentleman. The gentleman from

Louisiana.

Mr. MCCRERY. Thank you, Mr. Chairman. Each of you has a

home health agency. Do you know what your per-beneficiary visit

cap is and, if so, would you just let us know? Mr. Knight?

Mr. KNIGHT. Mine is about $3,300 in Atlanta. As I said in my

oral presentation, the per-beneficiary cap is not the issue that confronts my particular agency.

Mr. MCCRERY. Yes, I’ll get into that. I just want to know if you

know what your cap is. Ms. Brock?

Ms. BROCK. About $3,300.

Mr. INDEST. We do not know yet.

Ms. ODGREN. $1,950.

Mr. MCCRERY. About $2,000?

Ms. PALSGAARD. A little over $3,000.

Mr. MCCRERY. A little over $3,000?

Ms. PALSGAARD. Mm-hmm.

Mr. MCCRERY. Okay. Mr. Indest, let me get the good stuff out

first.

You include, in your written testimony, a reference to a report

that was done for HHS which justifies, to some extent, the higher

cost in Louisiana and some other high-cost states vis-a-vis other

states that have lower costs, and they refer to such things as availability of alternative delivery systems.

In your testimony, you refer to a higher incidence of cancer and

some other diseases that carry with them higher costs in the home

health field.

Would you like to elaborate on that? Do you think there is really

that much difference between Louisiana, Texas, and some other

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high-cost states and, say, New Jersey and Connecticut, and lowcost states?

Mr. INDEST. The Mathematica study that I quoted came from our

national association, the National Association for Home Care. I

don’t have the full study, but I quoted that section of it that gave

some explanation for the increase.

Again, I am being extremely candid. I think that is an explanation but I don’t think it is the full explanation as to why we have

high utilization in Louisiana, and that’s all I can speak for.

Louisiana has been an open state for home care. Those people in

Louisiana are reading the magazine that the chairman read from,

and I stated that in my written testimony.

Mr. MCCRERY. Let me stop you before you get into too much

more trouble. [Laughter.]

Mr. MCCRERY. How about, let me ask about the proposal from

the VNA that we go to a new blend of 75 percent national and 25

percent regional. How would that go over in Louisiana?

Mr. INDEST. I think that would hurt Louisiana.

Mr. MCCRERY. I think you can leave off the ‘‘think.’’

Mr. INDEST. Yes. It would hurt Louisiana substantially.

Mr. MCCRERY. So you would not be in favor of that new formula?

Mr. INDEST. I would not be in favor of that. No, sir.

Mr. MCCRERY. I want to ask you now another tough question. In

looking over the data for the number of home health agencies in

various states, I’ve picked out some states that are approximately

the same size as Louisiana.

Alabama has 183 home health agencies; Arkansas, 206; Georgia,

98; Kentucky, 109; Mississippi, 70; Missouri, 275; North Carolina,

162; Tennessee, 238; Louisiana, 514. What is your explanation for

that?

Mr. INDEST. Well, the last time I started to make it, you stopped

me, because you didn’t want me to get into any more trouble.

Mr. MCCRERY. Yes, but now I’m prepared for you to go there.

Mr. INDEST. Number one—and I can only speak to certain of

those states—Mississippi, I think, has a CMN, and that has been

in effect for a long time. I think the same is true for Alabama.

As far as Louisiana is concerned, I spoke about the problems we

had with the downturn in our economy in the 1980s. A lot of people, and I have people that I know of who were in the oil and gas

business, and they read the magazines and said, ‘‘Well, you know,

this looks like a great business to be in.’’

It used to be, and I stress ‘‘used to be.’’ I would think, in most

states, if you had two physician friends who were high referrers to

home care, legitimate referrers to home care, and you could get

them to refer to you, you had a home health agency.

Mr. MCCRERY. It’s an interesting point, about the oil and gas industry. Surely, there’s nothing to that. But it does appear that

Texas, Oklahoma, and Louisiana have the highest proportion of

home health agencies in the United States for the population.

[Laughter.]

Chairman THOMAS. Would the gentleman yield?

Mr. MCCRERY. Be glad to yield.

Chairman THOMAS. I would want to point out that Kern County,

California, which is three counties away from Ms. Palsgaard’s operVerDate 11-MAY-2000 13:38 Aug 28, 2000 Jkt 063934 PO 00000 Frm 00159 Fmt 6633 Sfmt 6602 E:\HEARINGS\63934 pfrm03 PsN: 63934
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ation, produces more oil than the entire state of Oklahoma and

that, if it were a state, this one little county in California, it would

be behind only Texas, Alaska, and Louisiana in oil production; and

we only have 48 visits. So the series is going to stop right there.

There is no connection to oil and gas.

Mr. MCCRERY. That’s probably true, but it is an interesting coincidence. In California, you have other things to do besides oil and

gas.

Mr. Indest, it’s clear to the members of this panel and to the

Congress and, obviously, to the Clinton administration, that there

were problems in the home health industry that needed to be addressed. Utilization was going way out of control, costs were going

way out of control. We had to do something.

It is clear to us now that the steps we took to try to get us to

a prospective payment system, which all of you told us you wanted,

and we said, ‘‘Yes, it sounds like the solution,’’ the interim steps

were not the best that we could have devised, evidently.

We are in a bit of a problem, due to the budget rules and the

reluctance of the administration to suggest any plans that are anything but budget neutral.

I don’t know what to tell you. I’ve been telling folks back home,

Mr. Indest, that we are going to do something, and we are going

to do something. Unfortunately, I can’t report to you today that

that is something that we are going to do is going to help.

We are looking to you all for more suggestions, if you have any,

short of ‘‘Let’s go back to the old system,’’ because that isn’t going

to happen. We would like to have them.

I will tell you, too, that this reshuffling of the formula is just

picking new winners and losers, and that’s not acceptable to me,

nor is it acceptable, I would think, to any of the other high-cost

states. We have to find a way to wean some of these agencies,

while not hurting the good actors in the program.

Thank you all very much for your help, and we look forward to

receiving more input.

Mr. INDEST. If I just might say, the executive director of our

state home care association is with me today, and we will take you

up on your offer of getting in touch with your office——

Mr. MCCRERY. Good.

Mr. INDEST [continuing]. To hopefully come up with a solution.

Mr. MCCRERY. Thank you.

Chairman THOMAS. The gentleman from Washington, a member

of the full committee.

Mr. MCDERMOTT. Thank you, Mr. Chairman. This is a bit like a

busman’s holiday. I feel like Mr. Knight and Ms. Odgren and the

lady from California, Ms. Palsgaard, are sort of the people that

have been going through my office, one after another, for the last

three months in the state of Washington.

As I listen to this discussion, it seems like what we have done

is we have slammed the barn door when the cow is way down the

road, and now we are trying to figure out what do we do with it.

It seems——

Chairman THOMAS. Excuse me. The cow or the barn door?

[Laughter.]

Mr. MCDERMOTT. Either. A good question.

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Chairman THOMAS. I’m trying to follow you, but I didn’t know

which one you meant.

Mr. MCDERMOTT. The issue that, it seems to me, that we have

to decide on this committee is how much do we try and micromanage this situation, and how much do we let it be decided by

the states, because Mr. Cardin and I and Oregon and New Jersey

are going to be in bad trouble here, very quickly.

I don’t know how you stay open when you’re $2 million in debt.

What do you say to a banker when you say, ‘‘Well, I got $ 2 million

in debt and I would like some more line of credit’’? You don’t make

it up in the volume, so to speak.

The question is whether or not we might just block grant the

money to the states, give everybody a per capita amount, and let

them all figure out how to do it, because I know that New Jersey

and California and Maryland and Washington would be able to figure out how to do it. There would be a lot of pain in some places

like Texas, but at least you would decide it down there.

What troubles me is Texas and Louisiana seem to have the problem that the state legislature and the Governor and people at that

level were unwilling to step up and do what had to be done.

I think that the committee is caught between—I mean, many of

my colleagues on the other side don’t like big government. They

don’t want Washington to decide everything. This looks like a perfect issue to give a block grant to the state and say, ‘‘You do your

home health care agencies on the basis of we’ll give everybody $10

per person in the state, and you can go down the road and figure

out how to deliver the care,’’ because that would force a process in

the legislature.

The other way, sitting up here trying to figure out, should we

take back the 15 percent? Well, that gives us a short term break.

That’s like taking your foot off the air hose for a patient who is on

oxygen for about 20 minutes.

Ultimately, it is going to come back down in some kind of crazy

way, if we don’t figure a way to break this disparity between the

high and low states.

I would like to hear what your view is. I suggest to the chairman

that maybe we ought to lift the 15 percent cut, but give every legislature exactly two years, or one year, to come up with a certificate

of need process, to weed out, according to some national characteristics, who is capitalized properly, and then you get these wildcatting entrepreneurs out pretty quick.

I don’t think the fact that Texas lost 450 nursing home agencies

worries me very much. I figure that’s a real shakeout, and it’s

going to have to get worse.

I would like to hear how you think, besides having us do all the

work and just shoveling more money to you, what is it that has to

happen at the local levels that we can mandate and say, ‘‘You people solve it your own way locally.’’ Yes.

Ms. ODGREN. I would like to speak to that. I think Mr. Cardin

has asked earlier, you know, how do we do it. I think you’re hitting

on some of the issues.

I do believe, in New Jersey, we have a combination of two things

that keep our per-visit and our cost per visit low.

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One is, we are a CON state. We are high-density population, particularly frail elderly, a larger growing over 85 population, and that

we have the certificate of need in place. We have no more than 60

Medicare-certified home health agencies in the entire state.

I think, for those of you who understand cost-based reimbursement, if you have, I’m just going to say a million Medicare-eligible

home care patients in the state of New Jersey, and you’re costbased reimbursed, it’s going to cost you more per beneficiary if you

have 500 agencies versus 60 agencies, because you’re paying the

administrative overhead for every one of those agencies.

I think, when you talk about whether it’s state block grants or

thinking of some way, you have to, until we get to a prospective

pay system, while we are still in a cost-based reimbursed system

for home care, that the more agencies taking care of the same

amount of patients is going to cause you to spend more money.

That is one thing.

Second, I have to say that the region we are in, which includes

New York and New Jersey, I believe has one of the toughest fiscal

intermediaries in the Medicare program, and I think that we have

not been allowed to exploit the Medicare program.

We are allowed to provide to Medicare patients what conditions

of participation say that Medicare beneficiaries are allowed. We

have very few people that get daily home health aides.

We get what is called a 488 called in, which is the HCFA, the

intermediary’s check to call the record in and check medical necessity, check homebound status, and check all of that.

I do believe those two factors have kept our visit number per

beneficiary low, and then our cost per visit low, because of the

CON issue.

Mr. MCDERMOTT. I have a Visiting Nurse Association in Seattle

that has an average of 17 visits per case.

Ms. ODGREN. Are you a high-Medicare managed care?

Mr. MCDERMOTT. Yes. Sure. We’ve had it for a long time. We

have a 30-visit average. We have some that are obviously below

that, one is 17.

When you take a 15 percent cut in that, you are up against the

wall. I think that there is clearly going—and if the Visiting Nurse

Association goes out of business, it will be the oldest, the longeststanding agency in the state that will go bankrupt around the 1st

of October.

They’re bankrupt now, but they’re going to have to say it publicly, at some point. That’s why I think that the chairman is right

in calling this hearing.

I don’t have a clear answer. I don’t know how we mandate tough

fiscal intermediaries in Medicare, because we have one, too.

Chairman THOMAS. Will the gentleman yield?

Mr. MCDERMOTT. Yes.

Chairman THOMAS. We did in the BBA. At least, we began the

process.

I believe the gentleman from Louisiana’s attempt to find some

linkage between Texas, Oklahoma, et cetera is the fact that it’s in

the same region and that, while we mandated Section 4614, normative standards for home health care claim denials, including the

frequency and duration of home health services which are in excess

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of normative guidelines the Secretary shall establish, by regulation,

we set up a process to begin to examine the out line and figure out

why regions utilized the home visits more than others, and HCFA

will not implement this section.

We are currently at war over their failure to do a number of

things under the BBA, including what is an obvious step to begin

to get adjustments on usage between regions.

Now, I agree with everything you said about getting people to

look at their state level, and that is one of the reasons it bothers

me a little bit, but there is easy stuff that we can do here that we

have already done.

I know the gentleman is not aware of every particular segment,

but this one was important to me because they kept telling me they

had no standards, they couldn’t apply anything.

I said, ‘‘The least you can do is a relative comparison between

what one region is doing and another which produces the outliers,

then make them explain why they’re doing more than the others.’’

We are hearing some of the reasons: the certificate of need; the

very tough intermediaries; managed care as a kind of a third party

overseer for what is going on, versus wild entrepreneurial areas

with no certificate of need, with a regional intermediary that is not

doing the same thing that somebody else is doing.

All those could be put into the normative standard structure, and

it would be a useful tool, had they begun the process of implementing that section.

As a matter of fact, it was supposed to apply to services furnished on or after October 1, 1997. We should have had a half to

three-quarters of a year of experience in looking at this data. We

don’t have it because HCFA won’t do the job that the law said they

should do.

Mr. MCDERMOTT. Mr. Chairman, could I just ask, though, the

bill passed when?

Chairman THOMAS. It was effective immediately. It was on the

beginning of the fiscal year of 1997. That was the effective date on

the bill.

Mr. MCDERMOTT. What I am suggesting is that perhaps having

it effective immediately, you can’t have the rules and regulations

prepared that quickly. I mean, you got to give them a little time.

You may say they haven’t done enough, but I——

Chairman THOMAS. It’s normative standards. They already have

the data coming in by region. All you have to do is compare the

regions.

Mr. MCDERMOTT. I would like to work with you on it. The reason

I came to this hearing is because I think every Member of Congress

is going to be in trouble in their district after the 1st of October

when these home health agencies, the really effective ones, and the

old standing ones, are announcing in the paper that they are going

bankrupt.

That is going to be a real crisis for a lot of people in the election.

Chairman THOMAS. I agree.

Mr. MCDERMOTT. I really think this is something we must do

something with.

Chairman THOMAS. I would tell the gentleman that, although I

have heard that suggestion, block grants to states, the problem is

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that money then would be going to the states which have refused

to take what I would consider reasonable and appropriate steps.

The next problem is that during the next Congress, you are back

lobbying for a larger block grant to maintain the same discrepancies that weren’t corrected in the first place by the state that

was getting the money, so it doesn’t have to make the tough decisions. To me, that is a circular problem.

We’ve got to go to the heart of it and figure out a way to create

a system which, on a cooperative basis, the people who are doing

a good job have got to get far more aggressive in their associations

and demand that the people who are trying to maintain the old

system, who are presenting arguments of ‘‘Don’t do anything, just

bail us out, because it’s a crisis,’’ that will not carry the day.

Go back inside. Get your associations to get serious about who

is responsible and who is not in your area of activity. What you do

is important. You’ve got to look inward.

We will help you in terms of trying to make the system as fair

as possible. But there has to be a settling out in this industry, and

all of us want the settling out to be the quality care folk.

Mr. MCDERMOTT. Mr. Chairman, I was making my suggestion

about the block grant following the aphorism of Benjamin Franklin

that the imminence of hanging tends to focus men’s minds.

If they know that they have a fixed period in which they are

going to be faced with real problems, there would be action in those

states, there is no question about it, or else they would pay the

price.

I think that’s our problem. We either micromanage it, or we do

it bluntly. I’m not sure I know how to micromanage from this level,

but I do know how to be blunt.

Chairman THOMAS. My concern is, that listening to the recent

testimony, I don’t know that the message would necessarily get

through. It would probably create more chaos.

The gentleman from Louisiana had a couple of additional questions.

Mr. MCCRERY. Thank you, Mr. Chairman. Mr. Indest, in your

testimony, written testimony, I think you say that, since sometime

in 1997, Louisiana has lost 80-something home health agencies. Is

that correct?

Mr. INDEST. Those are statistics I received from my state home

care association.

Mr. MCCRERY. Okay. Do you have any statistics on how many

new agencies have been created since that same point in time?

Mr. INDEST. One thing that I stated in my written testimony,

that I did not state earlier, currently in Louisiana, I think, as of

two years ago, there was a moratorium on the establishment of

home health agencies.

I do not have those statistics, but with a moratorium I would

hope that none.

Mr. MCCRERY. So there is a net decrease of 80-something since

this went into effect?

Mr. INDEST. Yes, sir.

Mr. MCCRERY. I want to explore for a minute with all of you the

question of co-pays, because every time we mention co-pay, industry just says, ‘‘That won’t work.’’

161

What I am talking about, and I think the chairman is talking

about, is the possibility of giving agencies the option to charge a

nominal co-pay, $5 per visit, where there is some cap on the number of visits that you could charge a co-pay for, and then you, the

agency, could discriminate at your will.

If you think some of your patients are unable to pay, don’t charge

them, but those who are, charge them, and then you have some income to supplement your activity.

What’s wrong with that?

Mr. INDEST. Could I respond to that, Mr. McCrery?

Mr. MCCRERY. Anybody. Yes, anybody.

Mr. INDEST. Am I understanding you to say that we will be able

to charge the co-pay and keep that money?

Mr. MCCRERY. Yes.

Mr. INDEST. It will not be deducted from our cost of doing business?

Mr. MCCRERY. Well, we can work on that.

Mr. INDEST. I think my understanding of co-pays is that it is a

built-in loss to the home health agency. If you don’t collect it,

you’re already operating in a cost-based system——

Mr. MCCRERY. We can discuss this. But it doesn’t make any

sense to me to give it to you in one hand and take it away in another. That doesn’t help you.

Mr. INDEST. You’ve just painted a very different light on the way

I understand co-pay.

Mr. MCCRERY. I mean, let’s just explore this for a minute. We’re

stuck in the budget, because we did some stuff that got savings,

and now we can’t, even though we got more savings than we

thought, we can’t go back and spend the extra savings. So we’re

stuck.

We can’t give you any more money. That’s what I’ve understood

at this hearing today, from the administration and from conversations with Members of Congress. We can’t find any new money to

give you.

What I’m suggesting is, we give you the option to get new money

yourself, from your own patients. What’s wrong with that? $5 a

visit. It’s called balance billing, $5 a visit. Hey, a lot of folks out

there can probably afford $5 a visit. Some can’t. Why not leave it

up to the agencies to decide?

I mean, that’s a way to help you out of this interim—and we

could do away with that option at the time we get a prospective

payment system. I’m just trying to figure out a way to help us

through this problem time that we are experiencing.

Ms. ODGREN. Thank you. I would suggest that, if we are going

to look at co-pay, it really needs to be an across-the-board.

If I have a per-beneficiary limit of $1,950, in order to survive, I

have to charge a $5 co-pay to those people who, on my sliding fee

scale, can afford to do that, the agency down the street that has

a $3,300 doesn’t have to, how long am I going to be in business?

Mr. MCCRERY. Well, that’s the market, you know. Maybe we

should try to get back a little bit to the market. That would help.

In fact, I’m of the opinion that, if people actually had to pay something for what they get, utilization would go down.

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I mean, if you want to get into it, I can get into that with you,

and we can just do away with all this stuff and let people pay.

Chairman THOMAS. Will the gentleman yield?

Mr. MCCRERY. That would be a lot better solution than a lot of

this junk that we are trying to do in micromanaging the health

care system from here.

Chairman THOMAS. Will the gentleman yield?

Mr. MCCRERY. Yes.

Chairman THOMAS. We keep talking about low income, and how

difficult it is for them to operate. It’s my understanding that Georgia has a co-pay.

Mr. KNIGHT. For the Medicaid system?

Chairman THOMAS. For the Medicaid system.

Mr. KNIGHT. That is correct.

Chairman THOMAS. How much is it?

Mr. KNIGHT. $2, I believe, per visit.

Chairman THOMAS. How good are you at collecting it?

Mr. KNIGHT. Not very good at all.

Chairman THOMAS. If we gave you a $5 co-pay in the rest of the

income range, in terms of the patients, you would be better?

Mr. KNIGHT. If that is an option to explore, to help offset the

challenge that we have on the 15 percent number for next October,

we would love to work with this committee and you, Mr. Chairman,

on that thought.

I think that there are other methods of managing utilization,

other than that. I don’t disagree that the co-payment system that

exists in other parts of the health care system is working.

What I think I take exception to is the fact that it is cost reductive, as we have heard it, and as it has been presented in the past.

We are not even receiving all costs from Medicare, to begin wit.

There are some disallowed or nonallowed costs, and this becomes

yet another opportunity for us. So——

Chairman THOMAS. I would tell the gentleman that his statement is absolutely correct. The gentleman from Louisiana is drilling a wildcatter here, and we don’t know whether it’s dry or not,

because we haven’t discussed this proposal before.

My belief is it probably a dry well, because my concept was an

agency optional passthrough but, frankly, it was back to the old

traditional, the money comes through and it either comes from you

or it comes from the beneficiary.

The decision as to where it comes from is up to you, to provide

money to be able to do something like defray the 15 percent reduction, because that would be kind of a revenue neutral way, on a

passthrough basis, to remove what I consider to be a far more onerous hammer that has a $4.1 billion price tag that, if we can’t get

rid of that—let me say it another way, and I’ll give the time back

to the gentleman.

If you had a choice—which nobody wants to do in this industry,

they just want us not to do anything—if you had a choice between

the 15 percent reduction going into effect on its current date, or a

$5 or $8 co-pay, which would replace the minus 15 percent, but it

really wouldn’t be a co-pay, it would be an agency optional passthrough, and you have only two choices, which one would you

choose?

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[No response.]

Chairman THOMAS. I know. You want moratorium. You want to

go back. You have two choices. Anybody, reaction?

Mr. KNIGHT. I think, in our particular situation, it would need

to be studied, because I’m not sure today that the 15 percent

wouldn’t be a better hit if I had to take one of the two, than the

$8 co-pay. I’m not sure how that lines up.

I think that, when you think about the administrative costs associated with that, which have not been factored into any year, much

less 1994——

Chairman THOMAS. I understand.

Mr. KNIGHT [continuing]. It is a little bit difficult to sit here on

the fly and make a decision and answer, you know that question

intelligently.

Chairman THOMAS. All I’m telling you is that that should have

been the kind of discussions that you folks were making as you

were thinking about coming here to tell us how to solve the problems, because those are the kind of decisions that we’re going to

make with or without your input. I would much rather make those

kind of decisions with your input.

Ms. Brock, what do you want, minus 15 or the agency optional

passthrough?

Ms. BROCK. I think both of them are going to make our lives totally impossible.

Chairman THOMAS. I understand that.

Ms. BROCK. I think if we had a smaller co-pay, that might be

more realistic.

Chairman THOMAS. $5. Going once.

Ms. BROCK. I think they’re both impossible. If I had to pick, I

would pick the co-pay.

Chairman THOMAS. Thank you very much and thank you for

making a decision. I appreciate that very much. Mr. Indest?

Mr. INDEST. Would the co-pay be, as Mr. McCrery, Congressman

McCrery described it?

Chairman THOMAS. Notwithstanding your state affiliation, the

answer is a flat out California no. [Laughter.]

Mr. MCCRERY. I think you should explain exactly what your proposal is, in case they don’t understand your jargon.

Chairman THOMAS. The proposal is an agency optional passthrough, for example, a $5 levy. The agency could pay it, or the

agency, at its option, could pass it to the beneficiary.

Mr. INDEST. If I had to state right now, I would go with the copay. Without thoroughly studying——

Chairman THOMAS. Agency optional passthrough.

Mr. INDEST. Yes, sir.

Chairman THOMAS. Not a co-pay.

Mr. INDEST. Yes, sir.

Chairman THOMAS. Ms. Odgren?

Ms. ODGREN. I’m just trying to think——

Chairman THOMAS. I understand.

Ms. ODGREN [continuing]. From the cost perspective.

Chairman THOMAS. All I’m trying to do is get you folks to realize

the kind of decisions that we’re going to have to make, and we

would love to begin sharing the decision making process with you.

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Ms. ODGREN. I would think that the agency optional passthrough

would be the——

Chairman THOMAS. Agency optional passthrough. All right. And

the brain trust decides. Ms. Palsgaard?

Ms. PALSGAARD. I think if you could look at how much the 15

percent, if you meet the budget target, how much of the 15 percent

would be required to do that, or is there more. I’m just——

Chairman THOMAS. No, you don’t understand the way the game

is played.

Ms. PALSGAARD. I do.

Chairman THOMAS. If we change the baseline, we are obligated to find the money. It is a $4.1 billion cost. I have to replace $4.1

billion if I drop the 15 percent reduction.

I’m trying to figure out a way to soften the blow in terms of raising some money that might be a more palatable way, not necessarily out of your pocket, but out of the larger universe’s pocket,

rather than just yours, or you can choose the option and it comes

out of your pocket.

That’s the agency optional passthrough—15 percent reduction on

the date that it currently occurs, or an agency optional passthrough.

Ms. PALSGAARD. For a co-pay?

Chairman THOMAS. No, an agency optional passthrough. You decide whether you want to collect it from the beneficiary or not.

Ms. PALSGAARD. I think that, if I speak as my agency——

Chairman THOMAS. I’m asking you talk for yourself.

Ms. PALSGAARD. Okay. If I speak for our agency, we have a very,

very poor clientele in our county right now, and it would be very

difficult for us to be able to do any kind of co-pay collection.

There are certainly people that could afford it, but the majority

of the people in our Central Valley, as you know, are

farmworkers——

Chairman THOMAS. What percentage are on Medicaid?

Ms. PALSGAARD. In our service area, we have——

Chairman THOMAS. Your clients.

Ms. PALSGAARD. Our clients.

Chairman THOMAS. Your clients.

Ms. PALSGAARD. Our clients have a low percentage of MediCal,

probably, in Merced County.

One of the other things that I didn’t remember when we were

talking about the lower utilization in California was the in-home

supportive service program in California, that maybe is a reason

there is not as much help there.

Chairman THOMAS. That’s another fallback that softens the blow

on the number of visits, if there is no such agency.

Ms. PALSGAARD. I suppose, yes.

Chairman THOMAS. I just wanted to finally get you into the level

of the kind of decisions that we are going to be looking at.

Mr. CARDIN. Would the chairman yield just for one second?

Chairman THOMAS. Certainly.

Mr. CARDIN. I think this is a very, very helpful discussion, but

I would just put on the table that we have to realize that this is

an interim situation.

Chairman THOMAS. Exactly.

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Mr. CARDIN. What that is going to mean, as far as your administration of home health services, an ability to keep the network

afloat until the PPS system comes into effect, I think we need your

good counsel as to what these different—of course, we assumed the

15 percent was going to go in when the PPS went into effect. We

never assumed that the 15 percent was going to be before the PPS.

Chairman THOMAS. That’s another renege on HCFA’s part.

Mr. CARDIN. I agree. We thought the new system would be in.

So we never thought that you would have to implement that under

the IPS.

Chairman THOMAS. Correct.

Mr. CARDIN. But now, if you are going to be asked to implement

some type of a collection process, on top of the IPS, before the PPS

comes into effect, what does that mean as far as the ability to efficiently administer a program, until we can get the PPS into effect?

Chairman THOMAS. Again, all of us are committed—in fact, we

just had another conversation—to go try to find some money, if we

can, but you have to be realistic in terms of the needs and the demands and the amount of money that this area was changing,

which was absolutely necessary for all the reasons that you provided, in certain states, but there are victims in other states that

were doing a good job, that we don’t have the ability to select out

with criteria and data yet, that we will with the prospective payment system.

If you don’t want us to impose something on you that we will impose, we’ve got to get feedback from you on options, just like the

difficult one I made you go through.

Ms. Odgren.

Ms. ODGREN. Yes. I would question, Chairman Thomas, when

you gave us the option of choosing the passthrough or the 15 percent, was that to pay, the passthrough was to pay for the 15 percent?

Chairman THOMAS. Roughly, change the structure of where the

money comes from so you could then deal with having an option

of helping cast off that cost, because the 15 percent is yours.

Ms. ODGREN. It doesn’t impact any decision that this committee

will make about what will happen in 1998? I mean, is it related

in any way to, you know, the blend?

Chairman THOMAS. No. What we would be doing is looking at options of where we get money, if we could sweep the floor, do some

other things.

We would look at, in making changes, the possibility of including

in the package reducing the 15 percent reduction but there would

have to be a revenue source that assists us in replacing it.

One of the revenue sources could possibly be the agency optional

passthrough, which not only produces a portion of the revenue that

we have now denied, but that, if the marketing situation is such

that you were able to pass it through, it might have a certain beneficial behavioral restructuring, as Dr. Wilensky testified, in terms

of the MedPAC argument for what would be a traditional co-pay.

But I didn’t just want to do a co-pay. I thought the agency optional passthrough would give you some decision in a marketing

way that might help some, since we have so few tools available to

let you make decisions on your own. That was the reason.

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Ms. ODGREN. It’s not really taxing the elderly? I mean, a co-pay

sometimes is considered taxing.

Chairman THOMAS. But it’s your decision.

Ms. ODGREN. Right. That’s what I’m saying. So——

Chairman THOMAS. My assumption is you won’t go taxing the

poor folk that you all are dedicated to serving——

Ms. ODGREN. Right.

Chairman THOMAS [continuing]. And that there may be some individuals where it would be perfectly fine.

Ms. ODGREN. Perfectly fine to do that.

Chairman THOMAS. That’s just one little exercise that we are

going to have to go through about 10 times, to come up with a policy, because we are going to come up with a policy.

We are going to replace the current policy. It will create new

winners and new losers. We will do it before we adjourn.

Our goal is to try to minimize simply reshuffling the dollars and

creating new winners and losers. Everybody has to participate, to

be as positively creative as we can. That means you folks and your

associations.

If we ask for information again, to provide us with the answer

that three-quarters of your agencies are going to shut down within

a month, that the only options that we really should be looking at

are moratoriums, you know, et cetera, or pick our own blend, then

we simply have failed in our ability to include you in the process

of coming up with a relook at the solution to the interim payment

factor.

I would very much like to include you in the decision that we

come up with. All of us would like to include you.

With that, thank you all very much. The subcommittee stands

adjourned.

[Whereupon, at 2:27 p.m, the hearing was adjourned.]

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