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82–598 2002

CMS REGULATION OF HEALTHCARE SERVICES

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

WASHINGTON, DC

OCTOBER 3, 2002

Serial No. 107–72

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS 

DONALD MANZULLO, Illinois, Chairman 

LARRY COMBEST, Texas 

JOEL HEFLEY, Colorado 

ROSCOE G. BARTLETT, Maryland 

FRANK A. LOBIONDO, New Jersey 

SUE W. KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

JOHN R. THUNE, South Dakota 

MICHAEL PENCE, Indiana 

MIKE FERGUSON, New Jersey 

DARRELL E. ISSA, California 

SAM GRAVES, Missouri 

EDWARD L. SCHROCK, Virginia 

FELIX J. GRUCCI, JR., New York 

TODD W. AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

NYDIA M. VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

DANNY K. DAVIS, Illinois 

BILL PASCRELL, JR., New Jersey 

DONNA M. CHRISTENSEN, Virgin Islands 

ROBERT A. BRADY, Pennsylvania 

TOM UDALL, New Mexico 

STEPHANIE TUBBS JONES, Ohio 

CHARLES A. GONZALEZ, Texas 

DAVID D. PHELPS, Illinois 

GRACE F. NAPOLITANO, California 

BRIAN BAIRD, Washington 

MARK UDALL, Colorado 

JAMES R. LANGEVIN, Rhode Island 

MIKE ROSS, Arkansas 

BRAD CARSON, Oklahoma 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

DOUG THOMAS, Staff Director 

PHIL ESKELAND, Deputy Staff Director 

MICHAEL DAY, Minority Staff Director 

(III)

C O N T E N T S 

Page 

Hearing held on October 3, 2002 ............................................................................ 1

WITNESSES

Scully, Hon. Thomas, Administrator, Centers for Medicare & Medicaid Services ......................................................................................................................... 4

Harroun, Mary, President, Merry Walker Corp .................................................... 10

Probst, Dr. Edward, Columbus, IN ........................................................................ 15

Davey, Dr. Patrick, Lexington, KY, for the American Academy of Dermatology ..................................................................................................................... 17

APPENDIX

Opening statements: 

Manzullo, Hon. Donald .................................................................................... 37

Prepared statements: 

Scully, Hon. Thomas ........................................................................................ 39

Harroun, Mary .................................................................................................. 58

Probst, Dr. Edward ........................................................................................... 111

Davey, Dr. Patrick ............................................................................................ 116

Additional Information: 

Letter to Chairman Manzullo from Nancy Taylor, Greenberg Traurig, 

LLP ................................................................................................................. 122

(1)

CMS REGULATION OF HEALTHCARE 

SERVICES 

THURSDAY, OCTOBER 3, 2002

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. 

The Committee met, pursuant to call, at 2:10 p.m., in Room 

2360, Rayburn House Office Building, Hon. Donald A. Manzullo 

[chair of the Committee] presiding. 

Chairman MANZULLO. Good afternoon. We have an interesting 

scenario going on over on the floor, but what else is new in life? 

Let me get through the opening statement here and then we will 

have to adjourn and come back for the remainder of the hearing. 

And I thought it would be a good idea, just before the Congress 

ends to try to tie up as many loose ends as possible. And perhaps 

Mr. Scully could help us on that. 

This hearing really is in three parts. The first part is an update 

on the administrative process of exactly how to deal with Mary 

Harroun’s combination of a walker and seat known as a Merry 

Walker. 

I am going to be asking Leslie Norwalk to sit at the table and 

give us an update on the administrative process. Leslie, I know 

when you were in my office, we asked it be concluded within 60 

days. We were subsequently advised that you wanted to do a lot 

more research and investigation into that. 

The second issue deals with the portable x-ray provider reimbursement that apparently has reached a stalemate. We want to 

get that taken care of have asked a couple of people from CMS 

staff to join us. 

The third issue deals with CLIA, and people from CMS, along 

with Mr. Scully will help us through it. 

The purpose here is to have this as informal as possible, to have 

an exchange going on among the parties. We are looking towards 

guidelines and a resolution. 

I know with regard to the Merry Walker, I think we had three 

issues in there, and one or two of them have been resolved, and the 

third one may or may not be resolved to the likings of my constituent, but at least will be on the road to getting that resolved 

and to go on to working with Mary on further applications and 

guidelines for the applications that have already been approved by 

CMS. 

We are also going to be joined later on by Dr. David Weldon, 

M.D. He has asked to address the Committee and talk briefly 

about the status of the portable x-ray issue. The fact that the rates 

2

are so low, that the portable x-ray people are going out of business, 

and CMS is actually paying more to do the same services at a great 

disadvantage to the seniors who are involved. 

And my mother was one of those who had the benefits of using 

the portable x-ray. And then when that was ended in Rockford, Illinois, because of low reimbursement rates, she had to be carted to 

the hospital, sat in the emergency room, and 4 hours later carted 

back to the nursing home, all at a cost of several times more than 

the portable x-ray. We are quite disappointed that that issue has 

not been resolved. So that is going to be the purpose of the hearing. 

[Mr. Manzullo’s statement may be found in the appendix.] 

Chairman MANZULLO. And Dr. Christensen, did you have an 

opening statement? 

Mrs. CHRISTIAN-CHRISTENSEN. I do, Mr. Chairman. Did you want 

me to go ahead and do it now? 

Chairman MANZULLO. Did you want to do it now or wait until 

we get back? 

Mrs. CHRISTIAN-CHRISTENSEN. I will wait. I will make an informal statement. 

Chairman MANZULLO. As a Member of Congress and also as a 

medical doctor, I want to give you some time. 

Mrs. CHRISTIAN-CHRISTENSEN. Thank you. 

Chairman MANZULLO. We are adjourned here for a few minutes. 

[Recess.] 

Chairman MANZULLO. Dr. Christensen. 

Mrs. CHRISTIAN-CHRISTENSEN. Thank you, Mr. Chairman. I want 

to thank you for having this hearing. I appreciate any time that 

we have the opportunity to have Mr. Scully with us to address the 

issues that are affecting our health care providers and the patients 

that they serve. 

I am glad that we are going to revisit the Merry Walker issue 

again. I think it is a very appropriate example of how the implementation of CMS regulations sometimes just don’t serve the patients or the provider well. I hope that we will be able to resolve 

that issue today. 

And beyond that, even make a start at seeing how we can best 

fix the problem more systematically. I had the great experience of 

being with my local doctors last weekend as they were meeting 

with the representatives of our carrier in Puerto Rico, Triple S. I 

applaud the effort that they are making to try to address the concerns of the physicians, but I really think we still need to fix the 

contracting system. 

Even you, Mr. Scully, said that it was flawed. I don’t think we 

are going to be able to address a lot of the concerns unless that is 

fixed. So I just wanted to say that on the record again. 

As we meet, the issue of restoring cuts to provider payments, has 

not been resolved. There was an attempt today here. The Senate 

was to have marked up a bill this week, they have not marked it 

up yet. And I still hold that CMS can do it administratively. I want 

to get it on the record. We are forcing providers out of business. 

In doing so, we are denying many people in this country access to 

health care. 

I also want to underscore that just doing a Medicare give-back 

bill wouldn’t necessarily either get to the heart of the problem. We 

3

really need to look at how the fees are set and what are the parameters used. We said it before that the GDP was not a good way to 

determine what our Medicare fees should be. The issue, one of the 

issues I wanted to mention also is HIPPA. As that is looming very 

imminently ahead, small hospitals and other providers need funding and technical assistance, I think to make the changes that are 

necessary to become compliant, and I hope that we can begin to 

identify where such help can be found. 

And with the history of audits and the investigations, which I 

have, at least on two occasions, asked for a moratorium on, it 

causes us to be concerned over what will happen as these new regulations are put into effect, because we know that the costs of time 

and money for review or reconsideration process is usually something that most of our small health care providers can’t afford. And 

it turns out that many of those investigations don’t find anything 

except innocent mistakes. So I would like some reassurance from 

CMS that there will be some flexibility and more help and technical assistance rather than punitive measures imposed as we 

begin this very complex process.

One more issue I would like to add, and otherwise I will submit 

my entire opening statement for the record. And this is not in order 

of importance. I still have a problem with the prescription drug 

card that the administration is proposing. The card—I think given 

the fact—it is a poor substitute for a comprehensive Medicare prescription drug benefit. It not only will not provide substantive help 

to seniors, but it has the potential of hurting our pharmacies and 

our chain drug stores. This is, I believe, the third reincarnation of 

the program. I would like to know what is different about this program? How will this program help more than the others? How is 

it different than it will pass muster with the courts? 

With that, I would like to thank all of you who are here to testify 

this afternoon. Thank you for giving me the opportunity to make 

an opening statement and welcome again. 

Chairman MANZULLO. Thank you, Doctor. What I would like to 

do is do the testimony in thirds. Mr. Pence do you have an opening 

statement? 

Mr. PENCE. I do very briefly, Mr. Chairman. I want to thank you, 

Chairman Manzullo, for calling what I think is a very important 

hearing at a very busy time on the legislative calendar. 

As the chairman of the Subcommittee on Regulatory Reform and 

Oversight of this Committee, I regularly hear from small business 

people who are struggling under the heavy hand of government 

regulation. Often it is a small entrepreneur with a new idea for 

making a product or a family business, like yours, Mr. Chairman, 

passed down over generations that finds itself unable to stay in 

business because of the cost and the burden of onerous government 

regulations. 

But I must say, in keeping with today’s hearing, I think it is particularly troubling when I hear from physicians in my district, and 

even in my home town, which is represented here on our panel 

today. People who oftentimes hold life and death in their hands, 

the very well being of the citizens that we serve, who tell me that 

they are unable to give their patients the best care possible, in part 

because of government regulations. 

4

The Clinical Laboratory Improvement Amendments Act of 1988 

or CLIA, is the issue that I have been a part of bringing to the 

committee’s attention today. CLIA, as we all know, is administered 

primarily by the Centers for Medicare and Medicaid Services. So 

I am particularly grateful for Administrator Scully’s participation 

today, and wish to thank you publicly for being here. 

CLIA’s inception was in reaction, we all know, to poorly performed laboratory tests that resulted in missed diagnosis, particularly of cancer. It was absolutely a tragedy. CLIA’s aim was to prevent errors in laboratory testing and reporting. 

In certain respects, these efforts have been commendable, and in 

some ways quite successful. The difficulties however, began in 

treating a single physician the same way we would treat a 1,000-

person laboratory. In other areas of government we have been convinced that the one-size-fits-all regulation isn’t the answer. In the 

field of health care, I simply believe the same rule should apply. 

The Secretary of HHS, Tommy Thompson’s Advisory Committee 

on Regulatory Reform, has put together some important ideas on 

changes to CLIA. We hope there are opportunities to work with 

CMS on other changes and hopefully here some today. I think we 

will hear in this hearing today, Mr. Chairman, reasons for reform 

on the burden that physicians face. 

And hopefully in this hearing, we will begin to hear the beginnings of some very needful reforms under this new administration. 

I look forward to hearing from all of our witnesses. I would echo 

the chairman’s appreciation for your willingness to travel here 

many miles and endure the scrutiny of a Congressional panel. 

And again, we thank you, Mr. Chairman, for your leadership in 

this area. 

Chairman MANZULLO. Well, thank you. 

I want to do these in triplets, or in three parts, to keep the testimony as tight as possible, and first talk about the issue with the 

Merry Walker. Mr. Scully, if you wanted to comment on that, or 

if you wanted to defer to Leslie on that, on the status, however, you 

know, since you are the lead witness, one of the lead witnesses on 

it, however you would feel comfortable. 

Mr. SCULLY. It depends on what Leslie says. 

Chairman MANZULLO. We are looking at the administrative status on that. It is up to you. 

Mr. SCULLY. I would be happy to talk about it. 

STATEMENT OF THE HON. THOMAS SCULLY, ADMINISTRATOR, 

CENTERS FOR MEDICARE AND MEDICAID SERVICES 

Mr. SCULLY. If you wouldn’t mind first, so I don’t forget to just 

quickly run through the Congresswoman’s issues, could I jump to 

those and then go straight back? Because a lot of them—they are 

all important issues. 

Let me start with the drug card, as you know this is something 

that came out of our career staff. And I talked to you before about 

it. We clearly don’t look at that as a substitute for a Medicare drug 

benefit. We really wanted to get a drug benefit this year. We spent 

a lot of time supporting the House bill. 

5

We showed great willingness to work on any kind of variable 

with the Senate. And I am personally very disappointed, it doesn’t 

look like we are going to get one this year. 

We believe that the drug card, as I said before, I represent 40 

million seniors and disabled, we believe they walk into a pharmacy 

and pay the highest prices. We all have, or I have Blue Cross of 

Virginia. I probably pay 15 to 20 percent less because of their use 

of a PBM than a senior does, and we are basically trying to organize the seniors to have the same kind of purchasing power people 

under 65 have in the interim. 

In the long run, seniors want an insurance plan where they are going to pay $10 a prescription like I do. In the short term, we 

want to give them some hope by coordinating their market power. 

We have spent a lot of time with the drug makers, the retail pharmacists and the chain drug stores. We understand their concerns. 

I think the new reg is much tighter, and answered a lot of their 

concerns. They have not actually sued us yet. 

Ms. NORWALK. They filed Friday. 

Mr. SCULLY. We spent a lot of time talking to them. I understand 

their concerns. They have a lot of legitimate concerns. They are 

concerned that we organize 40 million seniors, and seniors pay the 

highest cost in a retail pharmacy, they are concerned more that we 

are going to go to mail order, which I don’t think will happen, we 

are concerned about that. 

They are also concerned that if seniors pay lower prices, they are 

going to get stuck in the squeeze and their margins, where there 

are high costs on seniors will be lower. 

We have every expectation that people under 65 may pay more, 

but we don’t believe people over 65 should be paying the highest 

prices, which is what happens right now. So that—we are trying 

to work with the pharmacists as much as we can. The drug card 

is clearly a short term—I think it is a little more than a band aid, 

but we believe it is a help. We also think it is a first step. 

We have had a lot of bipartisan support. You may have noticed 

that in the Senate, one of the few things that got through the Senate in the drug bill was that both sides on a bipartisan basis, said 

the drug discount card is a good idea. But we have never held it 

out as a substitute or even a short term fix. Almost all of the bills, 

Democratic and Republican on both sides, envision us organizing 

40 million seniors into purchasing co-ops. That is all we are trying 

to do. We are very sensitive to the pharmacists’ concerns. I never 

expected them to like it, but I do think we have bent over backwards to find ways to address their concerns, purely because of the 

lawsuit, because there is a question about our existing legal authority or ability and our rules to answer all of their concerns, we 

are kind of in a catch-22. 

The more we tighten up our rule, the more people—there is a 

legal question about our authority to do it. So, but we are committed to working with them. I spent a lot of time talking to them. 

I went and spoke at their annual meetings. I have talked to the 

chain drug stores, and you know we think they have a lot of legislate concerns we would like to address. We also think that we have 

40 million seniors that aren’t organized, and we have a responsibility to organize them. 

6

I am glad to hear you have a good relationship with your contractor. As you know, we want to do contracting reform. I think 

there is a pretty good chance, if we do get a bill in the next couple 

of weeks that we are going to get contracting reform. SSS is part 

of Empire. My guess is they will probably be involved no matter 

what. But they tend to be one of our better contractors. We think 

that we can do a lot to improve that system. 

On physician payment reform. Chairman Thomas and many 

other people hope that I can fix that on my own. I can tell you I 

have spent many hours with every lawyer in the government. We 

can’t fix it. Unfortunately, there is a negative 4.4 percent update 

coming on top of last year’s negative 5.4 percent, and we are very 

strongly trying to fix that this year. 

And as I think you would ask, I have been the number 1 advocate of fixing it. And the administration does not look at that as 

a give-back. We look at it as a technical fix. The formula is screwed 

up, and we are determined to fix that. We are not great fans of a 

big give-back bill, as you know. But we do believe that Congress 

absolutely has to fix the physician payment formula before we 

leave or we are going to have a significant access problem. 

So we are completely in support of that. And the two other quick 

things, I will mention HIPAA. I agree with a lot of your concerns 

about HIPAA. We have a lot of work to do on HIPAA, but I do 

think in the long run, all of the doctors’ offices, all of the hospitals, 

and I used to represent 2,000 of them, you know they now get 

billed by 25 different insurance companies with 25 different sets of 

forms. It is going to be difficult and intimidating to go to one common set of forms. 

It may be difficult a year from now when we flip the switch and 

use a common data set. But people have been talking about this 

for 15 years as the right thing to do. I think 2 or 3 years from now 

when you go into a lot or a physician’s office, they are going to have 

a lot lower need for clerical staff, hopefully, because they will have 

one set of forms for every insurance company, and for Medicare 

and for Medicaid. It is an intimidating task, and we are responsible 

for the education. It is going to be tough. 

But I do think that we need, at some point, to close our eyes and 

take the leap of faith and have every provider use one set of common codes. In the long run, it will do a lot to debureaucratize the 

billing system. And we are hoping to do the best we can to work 

with your providers to educate them on that. 

The last thing I have tried, maybe I will just use this as my introduction to the other issues we are going to get into. We tried the 

best we can to debureaucratize CMS in the last year and to deal 

with people, even this morning at our staff meeting, I was in North 

Carolina, rural North Carolina touring five hospitals on Friday. I 

came back and gave the example of one that had a minor investigation 5 years ago. It turned out after 5 years of investigation, that 

they had no violation, but they spent $1 million dollars on legal 

fees on a 60-bed hospital. And that is the kind of thing that drives 

people crazy. 

We are doing the best we can to avoid that kind of thing. On the 

other hand, we are spending $560 billion of taxpayer money every 

year in Medicare and Medicare and S–CHIP and you have to have 

7

some reasonable guidelines to make sure the programs don’t get 

defrauded. 

But I think we have made a lot of gains. We are here to talk 

about the issues that came up 4 or 5 months ago. And I think we 

have spent a lot of staff time and made a lot of effort. We haven’t 

resolved all your issues, but we spent a lot of time on them. And 

I will just jump in by talking about Merry Walker. 

If you would like, stop there and go on one by one? 

Chairman MANZULLO. Yes. 

Mr. SCULLY. On the Merry Walker issue, we almost resolved it 

during the break on the vote. But we are very sensitive to Mary’s 

concerns. We spent a lot of time on it. Leslie spent a lot of time 

on it. The bottom line is, it is pretty clear that she obviously come 

up with a creative product that makes a lot of sense. 

I am sure in many cases, her ambulatory device makes a lot of 

sense and would help in a lot of nursing homes. I spent a lot of 

yesterday in a nursing home in Arkansas. And there is no question 

that you can pretty much look at it from the perspective of many 

seniors, that the device makes a lot of sense. 

In my written testimony, we laid out a lot of examples of why 

we have concerns about the Merry Walker. It is a great product. 

I think we are making a lot of changes in our regulatory basis to 

make sure it is not automatically coded as a restraint. In most 

cases it is not going to be a restraint. 

Out of about 3,100 I think cases of restraint—6,100, filed complaints about restraints this year, about 30 of them came from 

Merry Walker. There is no doubt the company, that Mary had no 

intention of having it be designed as a restraint, but we have a 

statutory requirement that if anything, whether it is a wheelchair 

with a belt, whether it is bed with a brace on it, whether it is a 

walker that is intended to be helpful for rehab, which this one is; 

if a patient who is physically or mentally limited has trouble getting out of it by themselves, we have to code it as a restraint. 

I think Mary’s major concern, and I think we have had some 

gains with your staff’s help in the last few months, is that nursing 

homes haven’t been buying them because they thought they always 

had to code it as a restraint. 

And so if they are going to have to report it as a restraint and 

fill out pages and pages of forms they weren’t going to buy it and 

use it. We have made a big effort in the last 4 or 5 months. We 

have sent out a guide to almost every nursing home in the country 

saying this should not automatically be coded as a restraint. We 

are about to send out to all of the State surveyors guidance that 

says that it should not be coded as a restraint. 

In talking to Mary during the break, I think she—apparently 

didn’t know it—we are coming up with a new code that takes it out 

of a category that apparently more automatically throws in that 

problem area. 

But it is clear we spent a lot of time looking, probably more time 

looking at this device than any device in the world, I would guess 

the last 6 months. There are some cases where clearly, and yet I 

think you can see it by looking at it, an elderly patient who maybe 

much better off in this than a wheelchair, and in some cases, can’t 

8

get outside of the railing, and can’t get out of the thing, and it is 

not intended to be used as a restraint, but it might be. 

And in these cases where we have tried to set up a situation 

where if nursing homes essentially certify, they would not be consider it automatically as a restraint, which is Mary’s number one 

concern. But a nursing home would have to say, we don’t believe 

for this patient it is a restraint. But for other patients, there are 

a subset of patients where it could be a restraint, we have at least 

30 examples where patients have had significant problems getting 

out of it, or have fallen. That is not the intent. Clearly having been 

in a lot of rehab hospitals over the years, it is a great device, and 

probably could be very helpful to a lot of patients. 

But clearly you can see in some cases could be difficult for some 

patients to get out of. So that is the problem. Your original request, 

or Mary’s was that we never classify it as a device. I think we have 

gone to every length—sorry, as a restraint, every length we can to 

educate the provider that it should not be used as a restraint. 

But that they—if they basically find that for that patient it is not 

a problem, then it is not a restraint. Because the issue for her, if 

it is ever classified as a restraint in the MDS system, the nursing 

home then has to fill out lots of forms and must have greater oversight, which is clearly not the case. 

And, I think for many patients this is probably a far better device than a wheelchair. That is pretty obvious. I think it is also obvious that for the agency to say this could never be a restraint for 

any senior in a nursing home also is inaccurate. 

So that is—I skipped over my testimony. But that is a quick 

summary on that subject. We spent a lot of time talking. 

[Mr. Scully’s statement may be found in the appendix.] 

Chairman MANZULLO. I would like to go to Leslie Norwalk, who 

is the policy director and counselor to the Administrator at CMS. 

And I just want to take you back to our office. When was that, in 

June? 

Ms. NORWALK. In June. 

Chairman MANZULLO. Our goal was to try to get the resolution 

in 60 days, and that time has come and passed. But, there have 

been reasons for that, because I know you have been doing a lot 

of research on it. If you could bring us up to date, give us the 

legals, where we are exactly on it, and then, Mary may have a 

question or a comment and we can take it from there. 

Ms. NORWALK. As Tom alluded we—Barry and I, actually spent, 

your fabulous regulatory counsel spent——

Chairman MANZULLO. I will note that for the record. 

Mr. PENCE. Move to Strike. 

Ms. NORWALK. But of course. We spent a significant amount of 

time after that meeting, and I think it was July 10th when Barry 

and I actually came to some understanding that the resident assessment instrument, which is the guidance that goes along with 

our Minimum Data Set that nursing homes are required to fill out, 

those instructions to the nursing homes, we altered those and 

amended those, so it was clear, as Tom mentioned, that it was not 

always classified or categorized as a restraint and tried to make 

clear to the nursing homes that they needed to do an individualized 

9

assessment to see whether or not the effect of the particular device 

had the effect of being a restraint. 

And if it did, then they would need to code on the MDS as a restraint. And then, follow the statutory requirements of when it is 

a restraint. When something is a restraint, the statute requires— that it has to be used to treat medical symptoms, and it cannot be 

done purely for staff convenience. 

And the concern is, that while most of the nursing homes are terrific, but every once in a while you get a bad egg and they might 

put someone in Merry Walker’s fabulous device who wants to get 

out of it, can’t get out of it for whatever reason, and either falls 

over or they are stuck in here. And Mary totally understands that 

this should be used, in most instances, with supervision. 

Sometimes nursing homes don’t have that supervision. So I 

think—what we did was, we went as far as we could go in terms 

of making—everything except for saying that it is not classified 

as—it is never classified as a restraint, but yet trying to be clear 

that it didn’t always have to be one, either, so that middle ground. 

And we did a lot in terms of educating the nursing homes, getting 

on calls and talking to the associations, getting this out so that the 

actual guidance, when someone is looking at, gee, how do I code the 

restraint in the MDS, they actually read that it is not always a restraint, and they have to do an individual assessment. 

So that is where we are. That happened after our meeting. So 

that is the first step. Now, actually there was a step prior to that. 

I know that there was a trademark concern that came up probably 

at the last hearing. I think we did resolve that issue. So those are 

the two issues in terms of resolution, we have come to resolution 

in terms of that. 

If you think, Mary, after looking at this that you might define 

something differently, we have put it out in draft form to make 

sure that nursing homes understand the clarifications. If they don’t 

understand, we will go ahead and revise it. 

The third step that we did, or that is in the works, is we are putting out a new version of the MDS. The Secretary ’s Advisory Committee on Regulatory Reform that Mr. Pence referred to earlier, we 

spent a lot of time on that committee as well. So one of things that 

came up was that the MDS itself was simply too burdensome. So 

with Tom ’s help, we reduced the actual burden on that by 20 to 

30 percent, we reduced the questions so the nursing homes would 

be able to answer it more quickly. 

Now, the new version of the MDS should roll out about 2004. 

And in that new version, the way that we currently code the Merry 

Walker is in one of five categories. The five categories are bed 

rails—two different types of bed rails, a trunk restraint, a limb restraint and chair prevents rising. 

Now the Merry Walker does not intelligently fall in any of those 

five categories, admittedly so. So we have put in our new instructions that even though we understand it shouldn’t be a chair prevents rising, we would like to code it there until 2004 when we will 

have a new category. We will probably have an ‘‘other’’ category, 

because there may be other things that don’t fall into those five. 

And we would like to make it as easy as possible for nursing homes 

to pick one that is the most appropriate. 

10

That won’t happen until 2004. But that is in the works to also 

be resolved. Of course, if it is not a restraint, you would never code 

it there. Elsewhere within the MDS, there is a section—it is an ambulatory device, a walker or a cane or a crutch. You may code it 

in both places. 

I think what I—and Mary, you can help me with this. I think 

where we are now, is that Mary would like us to do something 

more to get people out of wheelchairs and into the Merry Walker. 

I think that that might be—there may be some of that that is part 

of a restraint discussion, but I think the rest of it is really beyond 

the what is a restraint discussion and something that steps farther, 

that we haven’t really done brain storming on. That is certainly 

something that we could do with her, without your brilliant regulatory counsel in the room. 

But, at this point in time, I think that we have done, about as 

far as we think we can, given our concerns with the complaints 

that State surveyors have had as to restraints. 

Mr. SCULLY. Talking to Mary during the break, the vote, one of 

Mary’s concerns is, I was at a 95-bed nursing home yesterday in 

Little Rock. There are a lot of people in wheelchairs that could and 

should be in a more appropriate device, that they are not going to 

sit in a wheelchair all day. That may well be correct. And we have 

a lot of problems with nursing homes, both with payment and level 

of care and level of staffing. 

But I think that goes beyond how we someday incentivize facilities to use better devices, as different than a restraint. You can 

probably fall out of a wheelchair as well, but the issue is, as a statutory matter, anything that a person cannot get out of easily, has 

to be classified as a restraint. I think we have gone as far as—very 

far in clarifying that in most cases, it will be—I think Mary’s number 1 problem is it is hard to market it. It is a restraint. We have 

to fill out lots of paperwork. We have gone to great extents to make 

it clear to nursing homes and to our contractors and to the State 

surveyors that unless they say for this patient, it may be a restraint, and won’t be classified as such. 

Chairman MANZULLO. Okay. 

STATEMENT OF MARY HARROUN, M.S., LNHA PRESIDENT, 

MERRY WALKER CORPORATION 

Ms. HARROUN. I am Mary Harroun, the inventor of the Merry 

Walker. I am a geriatric psychologist, licensed nursing home administrator. I invented the Merry Walker 12 years ago. 

I discovered this about a year and a half ago when I was at an 

Alzheimer’s conference and had not kept up with on the MDS because I am not in clinical practice any more. Leslie did give to 

Barry a copy of all of the deficiencies. I believe we came up with 

30 deficiencies on the Merry Walker. I read through them extremely carefully and found out, gleaning through them, that there 

were 32 documentations required in order to use a Merry Walker 

in a nursing home if it is considered a restraint. 

I talked to a number of nursing homes that had actually used the 

Merry Walker and were cited as—that it was cited as a restraint 

when, in fact, they were not using it as a restraining device. I do 

have some problems with that. 

11

[Ms. Harroun’s statement may be found in the appendix.] 

Chairman MANZULLO. Let me take you forward. Based upon 

what Ms. Norwalk said on since the meeting we had in our office 

in July, okay, would you comment on what she said? 

Ms. HARROUN. I have not seen a copy of that, so I cannot—I have 

no knowledge of that. 

Chairman MANZULLO. Is this in draft form? 

Mr. SCULLY. She only has one copy. 

Ms. HARROUN. No, I did not receive this from you. 

Chairman MANZULLO. Our efficient Regulatory Counsel sent it to 

you. 

Ms. HARROUN. I did not receive it. So this is the first time that 

I have actually seen this. 

Chairman MANZULLO. Ms. Norwalk, the purpose of that is to advise nursing home administrators that this is not automatically a 

restraint? 

Ms. NORWALK. That is correct. 

Chairman MANZULLO. All right. Mary. 

Ms. HARROUN. That would be fine. 

Chairman MANZULLO. That was one of your goals in there. Go 

ahead. 

Ms. HARROUN. What we need to do is make sure the resident, of 

course, is appropriate to use the Merry Walker, which I have always advocated they need the assistance of one. 

Chairman MANZULLO. Okay. 

Ms. HARROUN. Or stand-by assist, whatever you want to call it. 

Chairman MANZULLO. Let me stop you right there at that point. 

Ms. Norwalk, what Mary said, that this device cannot be used by 

a senior alone, there has to be some person to assist them. Is that 

part of your guidance in the letter that went out? 

Ms. NORWALK. The guidance that went out purely addresses how 

it is that a nursing home fill out paperwork. So how it is that they 

code it, so that we can do a full care plan and assessment. It is 

part of the care assessment that the nursing home has to do for 

every single patient. 

Chairman MANZULLO. How many pages is this form? 

Mr. SCULLY. Well, in fairness because the nursing homes actually look at this, but we went through major nursing home reform 

a couple of years ago. We now have prospective payment for nursing homes. The way we both track quality, I note that we are going 

to have a public outcomes rating in every newspaper in the country 

November 12th of every nursing home, all this comes from the 

MDS data, but they also get paid on it. So when you are in a nursing home, there is a fairly thorough evaluation that is done on a 

regular basis to decide how you get paid. 

So depending on how sick, how old they are, what complications they have. We pay about $12 billion a year, $131⁄2 billion a year 

this year in payments for Medicare payments to nursing homes. 

It is always done based on the patient evaluation. So the forms 

that they fill out are not for regulations, they also determine the 

payment that they get. 

Chairman MANZULLO. Okay. 

Ms. HARROUN. I have a question. Since I have not been educated 

in the MDS because I have been out of the clinical area for 12 

12

years. The RUG, is that—those are based on payment. And from 

what I understand, and please correct me if I’m wrong, if a resident needs higher intervention in care, more nursing, they have 

decubitus ulcers, they can no longer walk, they are incontinent, 

they need assistance with ADLs, does the nursing home in fact get 

paid more money for that resident care or do they get paid—— Mr. SCULLY. Yes. Much like we went to DRG’s, which are diagnosis related groups in 1985 for hospitals, and a few years ago 

went to ambulatory payment codes for outpatients, RUGS are resource utilization groups. There are 88 of them. I may be wrong. 

And there are 88 categories. As a nursing home patient, they fill 

out a form about how mobile are you, do you have Alzheimer’s? 

What your various illness problems are. How many activities of 

daily living do you need help? It is done periodically during the 

nursing home stay. 

And basically that determines what we use to track quality, but 

it is also used for payment. So if a nursing home identifies the patient as having higher acuity and more illnesses and more trouble 

with various activities of daily living, they get paid more—there 

are 45 RUGS payments. 

Ms. HARROUN. If I were owner of a nursing home, God forbid, I 

would not be in there, wouldn’t it behoove me to run my residents 

right on the edge to receive higher payment for Medicare, or poorer 

care? If I have a resident sitting immobile, either in bed or a 

wheelchair, and they are probably going to develop a level 1, let’s 

start with a decubitus ulcer, it then goes up to level 4, I would receive more payment for that patient’s ulcer than if I kept them ambulatory in the first place and not ever allowed them to have a 

decubitus ulcer? 

Mr. SCULLY. Well, you can say the same thing about any prospective payment system, whether it is hospital inpatient or outpatient. 

We track them pretty closely. I think we measure quality very 

closely. I think you are going to see it—I forget where you live, 

Mary, Chicago. You are going to see a full-page ad in the Chicago 

Tribune on November 12th, comparing on a number of quality 

measures, including bed sores, how every nursing home in the Chicago area compares.

So those that aren’t doing a good job, may theoretically get paid 

more for having sicker patients, but you are not going to look very 

good and you are going to have a hard time the next time a family 

tries to find a nursing home if you have the worst outcomes in Chicago. You are going to lose business. 

So you do, in fact, get paid for higher acuity, but it also shows 

up in your quality measurements. 

Ms. HARROUN. Now, the quality measures I also have a problem 

with, in that you are measuring in one section of that, under the 

long-term care section you have acute care and then long-term 

care. One section is measuring the amount of restraints used in 

that nursing home. 

If, in fact, Merry Walker is being considered a restraint, that will 

then take away the thrust of wanting to use the Merry Walker, 

even though—when they have to regard it as a restraint, because 

that is going to knock them down in the quality measures and 

show them that they are, in fact, a worse nursing home. 

13

Mr. SCULLY. If they are defined as a restraint, as we said earlier, 

we have gone to great lengths to make sure nursing homes know 

if there was a mistaken problem in the past where they thought 

that they would use a restraint, in the future that is not going to 

be the case. 

One of the measures of quality is number of patients in restraints, because that is one of major patient concerns over the 

years, is nursing homes that restrain patients for convenience and 

nothing else. And I think we have made it pretty clear that except 

for patients where this could be a problem, it is not a restraint. 

Chairman MANZULLO. At this point, the Merry Walker is no 

longer automatically considered a restraint? 

Mr. SCULLY. That is right. 

Chairman MANZULLO. And then, Mary, would your situation, you 

are going to have to—I think you are looking at a marketing aspect, as to which HCFA cannot get involved in, because everybody 

knows it is common knowledge in your statement that the fact that 

people are better off in the Merry Walker than they are in a wheelchair. Okay. 

Ms. Norwalk, at this point then, is there any more that CMS is 

planning on doing with the Merry Walker besides that advisory 

that you are putting out to the nursing homes? 

Ms. NORWALK. Just when we revise the MDS system when it 

comes out in 2004, we will have an additional category so that it 

is put in a more appropriate category than ‘‘chair prevents rising’’, so that it is coded more appropriately, so that people aren’t confused as to where it should go. 

Because clearly this is not a chair that prevents rising. 

Mr. SCULLY. That only kicks in if the nursing home itself determines for that patient it may be a restraint. Our goal here is to 

make it abundantly clear to every nursing home and every State 

surveyor for a patient who can, in fact, use this and get out of it 

themselves, which the vast bulk of patients can, it is not a restraint and they will never even get to the second category. 

Chairman MANZULLO. My question would be, when the term 

Merry Walker it will have the TM on there. 

Ms. HARROUN. R. 

Chairman MANZULLO. Are your questions answered? 

Ms. HARROUN. Yes. 

Chairman MANZULLO. Mr. Pence, did you have any question involving the Merry Walker? 

Mr. PENCE. No, Mr. Chairman. Thank you. 

Chairman MANZULLO. All right. I am going to excuse, Mary 

Harroun and Leslie Norwalk on this one-third of the hearing. 

Thank you so much. 

Mr. Scully, thank you for the hours you spent. Ms. Norwalk 

thank you also for the great job you have done on this. I am going 

to excuse Ms. Norwalk and Mary Harroun. And then let’s go on 

with the testimony. And, Congressman Pence, maybe you would 

like to introduce your constituents. This is on the CLIA. As soon 

as you introduce them, then I want to jump back to Mr. Scully if 

that is okay with you, Mr. Scully, to bring out the CLIA portion 

of your testimony. 

Mr. SCULLY. Sure. 

14

Mr. PENCE. Thank you, Mr. Chairman. Our next witness is a 

constituent of mine and a friend, and a professional with whom my 

family has enjoyed a warm relationship for over 25 years. 

Dr. Edward Probst hails from Columbus, Indiana. He is the immediate past president of the Indiana State Medical Association. 

He is a practicing dermatologist in my home town of Columbus, Indiana, and if I may say for the record, is more than any other physician in my home State most responsible for calling the particular 

changes which CLIA imposed on small practitioners to this Congressman’s, attention and therefore to this Committee’s attention. 

It is my privilege to recognize Dr. Edward Probst for an opening 

statement. And thank you for being here. 

Dr. PROBST. Was Mr. Scully going to speak at this point? 

Mr. PENCE. I think it was the chairman’s intention, from counsel, 

to recognize Mr. Scully immediately after my introduction, which 

I didn’t previously understand. So Dr. Probst, if you would hold 

your powder, Mr. Scully, you are recognized. 

Mr. SCULLY. I will be quick. I have a long history with CLIA. 

Just guessing from looking at this thick briefing book that the doctor does as well. 

I was involved in the first Bush Administration in the CLIA regulations. They were passed in 1988. There were some changes and 

the regulations were written when I was overseeing that HHS portion at OMB in 1992. 

So I got very involved with those, and a lot of the changes and 

I followed CLIA pretty closely since. I was also in the interim, 

when I was expelled from government for 8 years, I was on the 

board of SmithKline, which is now out of existence, a clinical lab 

company, their domestic U.S. Advisory board. So I learned a lot 

about CLIA and clinical lab oversight, some of which has changed 

in recent years. 

So there is no question that CLIA is complex. There is no question that CLIA can sometimes be difficult. But there is also no 

question that when CLIA was put in, it was because there was a 

significant problem with quality in clinical labs. 

Much of which has improved in the last 10 years, even from our 

own evaluations in the last couple of years, I can tell you our belief 

is that the quality of services in clinical labs has improved dramatically. 

Congress created a number of different thresholds. Most physician office labs are waived, they are on the waived services, physician lab services are waived from CLIA. That is generally a regular 

cycle of kind of self-certification. The dermatology issues and others, when you get into higher acuity, higher difficulty types of clinical labs, most of the—that is really when the clinical lab guidance, 

that is more difficult, kicks in. 

In some cases for dermatologist and others for things like melanomas, there is a much more thorough requirement. I am just 

guessing that the Doctor’s concern is, when you get to things like 

the melanomas or higher-acuity types of lab tests, it is more difficult lab tests. 

There are much more thorough requirements from CLIA in the 

statute. And my guess would be, most physicians would say why 

do I have to hire a highly-trained clinician or a highly-trained 

15

nurse to do these, I am a doctor I can do these myself. That was 

a lot of the concern in the late 1980s when this happened is if physicians did it themselves that would be the case. But in most cases 

it turned up going, for pure volume, it evolved over the years in 

to nonphysicians doing those labs and doing evaluations, there was 

a huge level of errors, which is why CLIA was passed for a variety 

of reasons. 

So your concern is, as you state in your opening statement, about 

a giant lab like SmithKline no longer exists, but there are three 

or four large clinical lab companies that do the vast bulk of clinical 

lab services for hospitals and physicians’ office should be treated 

differently from the average physician’s office. Generally they are. 

It is only for the really much more difficult and much more sensitive tests that are done, a lot of them are in dermatologist offices, 

that the higher threshold for regulatory oversight for CLIA kicks 

in. 

So I would say, I haven’t spent as much time as I did 10 years 

ago, so when you get to the details of this I might even, with the 

chairman’s approval, call upon my staffers who do this every day, 

to get into the more detailed questions about the regulations. 

Chairman MANZULLO. Dr. Probst, you are up. 

STATEMENT OF EDWARD L. PROBST, M.D., COLUMBUS, 

INDIANA 

Dr. PROBST. Good afternoon Mr. Chairman, Committee members, 

thank you for hearing testimony on CLIA, and a special thanks to 

Representative Pence for responding to my concerns. 

I am Edward L. Probst, a dermatologic physician from Columbus, 

Indiana and immediate past President of the Indiana State Medical 

Association. 

There are many results from the CLIA Act that Congress did not 

intend. That also have adverse effects on patients, physicians and 

care. These include physicians no longer offering crucial office testing, physicians limiting tests offered and physicians being overwhelmed by the paperwork of the Act. 

I will comment mainly on the latter, but the others are in the 

written testimony and the attachments. 

All physicians want accurate testing. This is not the issue. 

The attachment on page 1 is our office calendar of 46 requirement activities in addition to the daily requirements, which are in 

the attachments, and the additional paperwork for each test done. 

These binders that I brought show the results of these requirements in our office. Each requirement takes time. 

The few tests that I perform relate to the immediate direct care 

of the patient. Diagnosis of fungus tests, scabies, lice, etc, and are 

in the area of my training. 

Consider the paperwork for a microscopic test done by me in my 

office while the patient remains in the exam room waiting for the 

results. 

Before CLIA, I would examine the patient, take a scraping, label 

the slide, carry the slide myself to the microscope, read the slide, 

return to the patient, record the results in the patient’s chart, in 

red, so we would know it is a laboratory test, explain the results 

to the patient and outline the treatment recommendations. 

16

What more could be required that would improve this service or 

the efficiency of its delivery? This was pre-CLIA. 

After CLIA—Note the CLIA laboratory requisition form which is 

on page 31 of the attachments requiring 14 entries, all of which are 

already in the chart. This is a requisition from me to me. It is a 

requisition to the laboratory, and that is still me. So it is a requisition from me to me required by the CLIA inspector. 

On page 32 of the attachment is the CLIA laboratory test requisition and report log, which is required to be at the microscope, 

with 10 entries that are already in the chart, and also on the requisition form. 

Then, I have to record my findings on each of those forms. Then 

I go to the exam room and record it in the patients record, which 

is where I think it belongs in the first place. What added value is 

this redundant and time consuming paperwork? In my opinion, 

none. 

Time for extra paperwork removes time from patient care. But, 

in addition to that, each of those pieces of paper has to be reviewed 

by a quality assurance person to be sure that the data is correct, 

which can only be correct if it were taken from the chart in the 

first place, because that is where the data originated. This must 

also be approved by the laboratory director, who must be a M.D., 

who would rather be seeing patients. 

And then, the M.D. laboratory director must create a summary 

that gets placed in the CLIA book. All of this is for the CLIA inspector. All of this is time away from the patients. 

Let me share two examples about time. Mrs. X, an older lady 

usually with multiple complaint was in my office. She did not require microscopic testing, and most people don’t. After evaluating 

and giving recommendations, I had time to ask her ‘‘Is there anything else you would like to talk about?’’ She said, ‘‘yes, I plan to kill myself today.’’ She was not kidding. 

I was the only person she was willing to tell that to. If I had been 

burdened with a lab test requisition, I might not have had time for 

concern, and Mrs. X would have died that day. 

Mr. Nathan S, and he said I can use his name, a farmer, was 

in my office for a skin cancer follow. No laboratory test was needed. 

I had time to inquire about him and his family as we finished. He 

said ‘‘no problems.’’ His wife, Joanne, said, ‘‘Nate can’t see well 

today.’’

He had an acute vessel occlusion. I made arrangements for immediate intervention, and his vision was spared. And it would have 

been lost otherwise. Time for needy patience, versus time for needless reduplicating paper. That is the question. 

The CLIA regulations prevent us from being the caring, compassionate physicians that we are. Please, remove the unnecessary red 

tape of CLIA, OSHA, HIPA, Medicare, et cetera, so we can do what 

we have been called to do, be caring, compassionate physicians. 

Thank you all for caring. I welcome any questions on my written 

or verbal testimony. 

Chairman MANZULLO. Thank you, Doctor. 

[Dr. Probst’s statement may be found in the appendix.] 

Chairman MANZULLO. Congressman Pence, did you want to introduce Dr. Davey? 

17

Mr. PENCE. Yes, Mr. Chairman. 

The Committee will now hear from the Dr. Patrick Davey. He is 

also a dermatologist with a practice in Lexington, Kentucky. Currently serves as chairman of the American Academy of Dermatology’s Association Quality of Care Task Force. 

He is a distinguished physician, well qualified to speak to the 

practical implications of the issues we are addressing today. Dr. 

Davey is an assistant clinical professor as well as of dermatology 

at the University of Kentucky. Where, in addition to top flight 

health care, I understand that they have a basketball program, although I have no proof of that. 

Dr. DAVEY. Well, Indiana used to have a basketball program. 

Mr. PENCE. I left that one open, Mr. Chairman. And I yield back 

to the chairman. 

Chairman MANZULLO. We look forward to your testimony. The 

goofy-looking clock is not part of CLIA. It is part of our time system here. When it gets to yellow, that means you have 1 minute. 

When it gets to red, that means you have no time left. 

Dr. DAVEY. I assumed that it was part of HIPAA. 

Chairman MANZULLO. Isn’t Indiana red also? 

STATEMENT OF PATRICK DAVEY, M.D., LEXINGTON, 

KENTUCKY FOR THE AMERICAN ACADEMY OF DERMATOLOGY 

Dr. DAVEY. Good afternoon, Mr. Chairman and Committee members. I want to thank you for inviting me to discuss CLIA for dermatologists and give you a national perspective on the issue, because I travel around the country a lot, and look at individual practices as part of what I do. 

I am a practicing dermatologist in Lexington, Kentucky. And in 

my practice, we have a nine-physician practice. We have a high 

complexity lab under the CLIA regulations which performs about 

15,000 biopsies a year, about 2,000 frozen section margins a year. 

So it is a little bit different than the perspective that we just got. 

So what I am going to tell you is what I see when I go around 

the country and look at dermatologists’ offices. I am also the chairman of the American Academy of Dermatology’s Quality of Care 

Task Force, and deal with this issue on a weekly basis, where we 

see mostly people who are confused about what goes under the 

CLIA regulations and what doesn’t go under the CLIA regulations. 

And finally, the other thing I do is I survey organizations for the 

Accreditation Association for Ambulatory Health Care, and I also 

teach new surveyors, so I am well aware of going in and doing surveys and accrediting facilities. 

I have a long-standing personal interest in quality improvement 

and management, and most of the papers that I have written, and 

also the talks that I give, deal with, how do you set up a quality 

improvement program in your office. In order to try to bring dermatologists up to speed on this issue. 

Most dermatologists are actually in a solo or small practice, 

about 46 percent. I am the exception in being in a large practice. 

The CLIA Act, of course, was passed in 1988, and was really a reaction to larger laboratories where there was a problem with pap 

smear testing, as Mr. Scully alluded to earlier. 

18

And the American Academy of Dermatology initially opposed the 

CLIA Act, and we advocated passage of legislation to exempt the 

physician office laboratories from CLIA. And really, since these exemptions, this has really failed. What we would like to do is to 

have some regulatory relief from the CLIA regulations. 

Now, what this really does, what CLIA is really doing is, it is impeding the ability of dermatologists to provide these services in 

their office to the patients as we heard from my colleague here. 

That is a problem. 

Most dermatologist’s office really have limited resource for the 

CLIA compliance. They don’t have the staff to be able to jump 

through all of those hoops that we are required to do with the 

CLIA, and we really are very patient oriented, we really want to 

spend our time with patients rather than spend our time trying to 

meet the regulatory requirements. The American Academy of Dermatology in 1993 developed a CLIA manual which I have here to 

show you. It is there for our members. Every time I lift this thing 

I get a hernia. You can see it is a fill-in-the-blank type of manual 

so that people can meet the CLIA regulations by filling in a blank. 

Since it has been passed, about 75 percent of dermatologists have 

stopped doing these tests in their office when you will look at our 

surveys. We are trained to do the tests in our training programs. 

It is something we are very good at, but it is something that we 

just can’t do because of the CLIA regulations. We can’t afford the 

cost and we can’t afford the paperwork that has happened because 

of CLIA. 

What we would like to see happen is that some of these basic 

dermatologic tests moved from a medium complexity level down to 

a waived or a physician performed type of testing. And we feel that 

this could be done without really endangering the quality of care. 

If you look, for example, the fungal culture that we saw here, that 

is a very simply test to perform. 

You go ahead and do a scraping on a patient, or you do clipping 

from toenails, you put it in there and you look at it. It is a color 

change that is going to happen. So you can do it is very easily to 

see if it is positive or negative based on that color change. It is also 

something that we had to learn for our board certification. We did 

that every day in our residency programs and for our board certifications, so we are very well aware of these types of tests. 

In my statement, I gave a number of other tests that we would 

like to see moved from these medium complexity down to a lower 

complexity. 

And hopefully, that is one of things that this Committee will be 

able to do for us. We would also like to have the Committee weigh 

in in support of Secretary Thompson’s Regulatory Reform Committee. We talked about that a little bit earlier. What this will do, 

it will give us this information from CLIA in plain English, and we 

do speak English in Kentucky. 

It also would increase the involvement of physicians in these regulations. That is one of the reasons I am here, because I am interested in the process, I wanted to be involved in it. And it would 

improve really the providers and also the people that are going to 

be going out and doing the inspections. It would improve their education with respect to CLIA. 

19

So that is why I am here. I would like to have the Committee 

look at giving us regulatory relief. Thank you very much for your 

time, and I would be pleased to answer any questions. 

[Dr. Davey’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you. Mr. Scully, you have a member from CMS at the table. 

Mr. SCULLY. Yes, Mr. Chairman. Judy Yost is the director of the 

CLIA division and certification. 

Chairman MANZULLO. What I would like to do is to give your response, or Mrs. Yost’s response, I guess, to the problems and/or 

suggestions of each of the physicians. 

Mr. SCULLY. If you don’t mind I will give mine quickly, and then 

let Judy answer appropriate questions. Certainly they raised some 

reasonable concerns. The Secretary’s Regulatory Relief Task Force, 

I think most of the staff from the organization has come from CMS. 

We are trying to simplify CLIA. 

We are trying to come up with clear education. We would be 

happy to get the doctor more involved, both of them much more involved. I think, for the most part, a lot of—I think in talking to 

Judy here, probably the biggest problem we have had is with dermatologists. Maybe we should spend more time with dermatologist 

trying to find out the deal with their specific problems, because the 

other major group that I think encounters CLIA the most, the pathologists, are generally pretty supportive and have been happy 

with the changes we have made. 

So maybe we haven’t spent enough time focusing on the specific 

issues with dermatologists, because most dermatologists, from 

what Judy has told me, and from other places today, dermatologists tend to do the more complex treatments, complex tests to get 

them under the scrutiny of more CLIA oversight, and they tend to 

fall into that category more than other doctors seeing patients on 

a regular physician practice. 

Pathologists generally don’t have that type of practice. So part of 

this may be specific to dermatologists, and there maybe other practice groups who have had problems with CLIA, but they seem to 

have specific and somewhat unique problems with CLIA. I am totally committed to spending more time to deal with some of unique 

challenges that we present for dermatologists. 

Ms. YOST. Just briefly. Thank you. I don’t think—— Chairman MANZULLO. What is your position at CMS? 

Ms. YOST. I am director of the division of laboratory services at 

CMS. But just to echo Tom Scully’s comments, I also want to say 

that we very much want to work with the dermatologists, because 

their issues are important. They are serious. They are unique. 

Chairman MANZULLO. Let me stop you at that point right there. 

Drs. Davey and Probst, have you had a relationship with, or the 

Academy had a relationship with CMS, it is not as tight as you 

would like it? Give us some concrete suggestions here so we can be 

able to follow the thread here on the suggestions. What would you 

like to see done? 

Dr. DAVEY. When you look at our practice, it really runs the 

gamut. We certainly have things that should fall under the high 

complexity, like biopsies, skin biopsies. My office, we—if you came 

into my office, we would biopsy you, and then we would process 

20

that, and we have our own dermatopathologists that would look at 

it under a microscope. 

My lab would meet the CAP, College of American Pathology 

standards in terms of what we are shooting for in that office. If you 

have a solo physician that is doing a scraping like this that is going 

to be scraping—— Chairman MANZULLO. Is that where the problem is? 

Dr. DAVEY. We have some tests that we feel should not be at the 

level of complexity that they are at. 

Chairman MANZULLO. Ms. Yost, your comment on that? 

Ms. YOST. Just I agree partly with the comment about the pathology. In regard to the—like the KOH and the fungus test from 

the DTM and so forth that are routinely done by dermatologists 

we—these tests were actually taken to the Clinical Laboratory Improvement Advisory Committee, which is a technical secretary’s advisory committee to the CLIA program, it is an ongoing program. 

Chairman MANZULLO. Do physicians sit on it? Dermatologists sit 

on that? 

Ms. YOST. There is not a dermatologist, but there are physicians 

represented on the committee as well as obviously laboratory experts and consumers. 

Chairman MANZULLO. So there is no dermatologist on CLIA? 

How many physicians sit on that committee? 

Ms. YOST. Well—— Chairman MANZULLO. How many people? 

Ms. YOST. There are about 20 people on the committee. And 

probably 4 or 5 of them are physicians or Ph.Ds.—and the rest are 

probably Ph.Ds in laboratory science. 

Chairman MANZULLO. Do you think it would help you if a dermatologist sat on that committee? 

Ms. YOST. They are certainly welcome to be invited to the committee. Obviously it is one of those cases where you have to have 

a balance between all areas of expertise. 

Chairman MANZULLO. I think it is obvious here that they are not 

represented at all. There is agreement that they should be. 

Mr. Scully, what would be the process to appoint somebody? 

Mr. SCULLY. I don’t know. But I assume I can probably take care 

of it. 

Chairman MANZULLO. Could you do that? Do you understand 

what he is offering here? 

Dr. DAVEY. I am very happy that he has offered that. 

Chairman MANZULLO. You bet. All right. So—I didn’t mean to interrupt you on it. 

Mr. SCULLY. My guess is that technically the Secretary, a lot of 

these, we have many advisory committees. The Secretary appoints 

them. 

I am sure I could talk to the Secretary, unless there is a statutory limit, if there is, when the next person comes off, we would 

be happy to appoint a dermatologist. 

Chairman MANZULLO. There you are. 

Dr. DAVEY. Thank you. 

Ms. YOST. Just to let you know, that the issues have been 

brought up before to the CLIA committee over the years, because 

of the concerns that have been expressed today, some of the same. 

21

And it was the committee’s opinion on several occasions, not just 

one time, that these tests still were of a complexity because of the 

complexity, the training and the quality control needed to do these 

particular tests, that they could not—the type of complexity that 

they were categorized in under CLIA could really not be reduced. 

Those things that could be have already been done like the KOH 

prep. That is being done for fungal elements. So it has been done. 

That doesn’t mean that we can’t evaluate that again, and obviously 

if there is a representative member on the CLIA, then obviously 

various arguments can be made. 

But there was a lot of testimony presented to that group, just so 

that you know that we have not ignored the whole issue over time. 

I think this is important to know. 

In regard to the very simple tests that you are doing, the more 

simple tests that you are doing outside of the tissues, I believe that 

we could probably work with you to reduce your paperwork. We 

really don’t prescribe that you have special forms to order tests, or 

to report results or to keep a log. You do need to document if you 

do quality control. But you can actually use the patient’s chart to 

order the test, and to report the result. You don’t need to have a 

separate piece of paper to do that. We have no requirements for 

that. 

So we will work with you to try and simplify that process. I will 

contact our State folks and get back with you. We would very much 

like to help you, because you don’t need to have those stacks of 

paper to do those routine types of tests, because you do them every 

day. 

You do need to do, periodically you need to check, a couple of 

times a year, to make sure that the test is working and document 

that. But you certainly don’t have to have ongoing paperwork on 

a daily basis for each patient. 

Mr. SCULLY. We would be happy to work to simplify this, in 

many areas of CMS and OSHA, which applies to them in many 

cases too, regulation. Sometimes the regulations we put out are significantly enhanced by consultants who make people generate 50 

times as much paperwork as they need. 

So we will do our best to clarify it and make sure that we put 

the minimum demands on them. 

Dr. DAVEY. Mr. Chairman, one of the other problems that we 

have is that there is not only CMS, there is two other Federal 

agencies involved in this, in the CLIA Act also. It is one of those 

cases where we get some piece of information from one part of that 

Federal agency, and another piece of information somewhere else. 

Chairman MANZULLO. Does that Committee try to coordinate, 

Ms. Yost, does that Committee try to coordinate CLIA with the 

other two agencies? 

Ms. YOST. Yes. All three agencies are represented. I, too, am on 

that committee as well. 

Chairman MANZULLO. Okay.

Dr. DAVEY. There is also a problem with interpretation of the 

regulations, which I understand completely, because tomorrow I 

am going to Greenville, South Carolina, to interpret regulations in 

an office. 

22

Mrs. CHRISTIAN-CHRISTENSEN. I was looking at the faces of the 

doctors. And, Dr. Probst, you seemed to be surprised to find out 

that you didn’t have to do all of that paperwork. So who is it that 

regulates that where you are? 

Dr. PROBST. The CLIA inspector said we must do it, these are 

the forms that we must use. We had no choice in that. It was not 

flexible. And when I persisted and ask why is this any better than 

what I am doing, I was told we need this so the inspector will have 

the information. 

We were given no choice. And this has been year after year after 

year. I am glad to hear that it doesn’t have to be that way. But 

how does that funnel down to us? 

Mrs. CHRISTIAN-CHRISTENSEN. This is the problem that I found 

with the carriers. I don’t know if the carrier has a role in setting 

those regulations in this particular instance. But they are interpreted differently. That has to be fixed. Because we have doctors 

that have moved from one area to the other. And they are just, you 

know, confounded by the—the difference in how the interpretations 

are done, and therefore, what they are required to do. It needs to 

be clear. 

Mr. SCULLY. These are slightly different. One is the surveyors 

generally, you can correct me if I am wrong, but for hospitals, nursing homes, home health agencies, and I am sure for CLIA, tend to 

be done, we pay for them and the surveys are done by State surveyors under contract to us. 

I can tell you that there are standards, paperwork requirements 

on how they interpret our guidelines do vary significantly State to 

State, and we can sometimes clarify. But the State is essentially 

our contractor, so it is an Indiana State employee, working essentially under contract to both the State of Indiana and Medicare, 

Medicaid for both. And they do the surveys under contract for us. 

On the carrier side, we discussed briefly before, we have 51 carriers, FIs, for part A and part B. We are trying to get that down 

to about 20 to 25. 

Mrs. CHRISTIAN-CHRISTENSEN. What can you do to make it uniform? 

Mr. SCULLY. To be fair, we are trying to make it more uniform. 

We just went through this with outpatient drugs where different 

parts cover and pay for things. We want to make it more uniform, 

but when it is too uniform then you get complaints that you are 

not sensitive to the practice patterns in Indiana versus Seattle. The 

carriers do have some flexibility and I think should, to either cover 

and pay for, reimburse or allow differences between Indianapolis 

and Seattle. 

On the other hand, we need to have a lot more consistency. I am 

trying. We have medical directors in each one of these plans. We 

now have monthly meetings with them. We try to get them to have 

more consistency. 

But we try to find the right level of Federal mandate to say you 

are consistent and also leave different practice patterns to physicians and hospitals that have different practice patterns in different regions. But nobody is ever happy. But we are trying to do 

the best that we can. 

23

Ms. YOST. As part of the regulatory reform issue, since that was 

brought up earlier, I wanted to mention also we are in the throes 

of publishing final CLIA regulations, which actually are more balanced and more fair than the ones that we have now. 

But, as part of that, we are going to be doing extensive training 

and education of not only the laboratories but our surveyors as 

well. So I understand your concern. And we will certainly continue 

to work to kind of mediate that a little bit. 

You also have to be aware that some States have their own laboratory licensure programs which may be more stringent than 

CLIA, in which case we can’t interfere with that. 

Chairman MANZULLO. Mr. Pence. 

Mr. PENCE. Thank you, Mr. Chairman. I have only been in Congress for 21 months. And I have probably found this hearing more 

fascinating than any hearing I have been involved in since being 

in Congress, which is not saying much. 

But, this has really been fascinating. I can’t help but feel that 

we have opened some lines of communication here that are very 

valuable and very helpful. 

That being said, in your written testimony, Mr. Scully, you pointed out that you have worked hard to streamline procedures, improve flexibility, all of things we have been talking about in an ad 

hoc way today, reducing the burdens. 

You also wrote that we are working to take into consideration 

the tremendous amounts of feedback we have received on the 1992 

rule, so that we can publish a streamlined final rule in the near 

future, the focus being especially helpful for small business labs 

that many Medicare beneficiaries rely on. 

I think it is very helpful that the Chairman, in his style, kind 

of getting to a core issue here. Obviously there is, it seems as 

though the panel lacks an important perspective, from the dermatology profession, and would add my urgent encouragement that a 

seat be found very quickly for this particular part of the medical 

profession, that as you point out, Mr. Scully, seems most beleaguered by CLIA in your experience. 

But, I wanted to give you an opportunity also to speak, to elaborate on your written remarks. What is the status of that streamlined final rule? What might be the time line for that? And is there 

still time for, whether it is one of our two witnesses today or someone else representing dermatology, to participate in helping to develop that new streamlined final rule? 

Mr. SCULLY. I believe I shouldn’t put this heat on my former 

agency, OMB, but I signed the final rule I think last week. It is 

in the process of going through the administration. I don’t think it 

is particularly controversial. Well, maybe it is, I don’t know. But 

I haven’t had a fight with anybody about it so far. I think it is 

probably going to be pretty well received and was strongly supported by most of clinical lab groups. The pathologists, I didn’t personally talk to the dermatologists. But if there are subsequent 

problems, we are happy to go back. This is a fairly major rule. But 

we can go back, we have—it is a huge agency, my budget is about $560 billion. 

We have many rules going through. We can make technical 

changes in lots of areas when we need to do it. So if there are other 

24

things to do it, that make sense we will do it. But the rule, I believe, should be out in next couple of weeks in final. 

Mr. PENCE. We will look forward to going over that and getting 

feedback from not only our witnesses but other folks affected by it. 

I guess my last comment is more of an encouragement. I will 

yield back to the chairman that I think the—and I am not speaking 

on behalf of the witnesses, but I think that the attitude that you 

reflected, Mr. Scully, and Ms. Yost, is very admirable and very 

much appreciated. 

Although I will comment that from my vantage point, our witnesses were reacting with, if I can say a degree of incredulity, as 

Mrs. Yost described what actually was required and what is not required. It suggests to me that not only are we dealing with the fact 

that there are other arms of the government involved at the table 

here, but that I—it seems to me, and we are still early in an administration, but I guess I would encourage Ms. Cost and others 

charged in administering the CLIA law to—I am picking up a philosophy here that is one that as you make other comments of trying 

to accommodate small operators and create rules that make sense, 

and allow people to use existing systems, it is entirely possible that 

there may be a philosophy in the Washington CLIA shop that has 

not yet invaded the culture of the State offices. 

I guess, that is what I would like to most encourage you to do, 

not just in Kentucky and Indiana, but to communicate to the State 

offices, what may, in fact, and probably is, in fact, a different governing philosophy that should animate at the State operations that 

administer CLIA. And I would encourage that. 

Mr. SCULLY. One of the problems which having such a program 

of Medicare and Medicaid is that things fall through the cracks. 

When I first took the job last year, I met with the heads of all of 

major clinical lab companies in New York for an emergency meeting for a rule they really wanted out. And they met with me and 

they told me this rule had been sitting around for 3 years. And 

their argument sounded reasonable. I went back to Washington 

and said, what is the deal with this reg? 

And everybody said, well, nothing. I said, well, nobody—it had 

been sitting around for 2 years and hadn’t gone out. So sometimes 

there is a lack of communication. We put that rule out last year, 

and it was very helpful to clinical labs. For some reason, in the 

Medicare program, clinical labs is a very small piece. 

And to Judy’s credit, this probably doesn’t get as much attention 

from me or other people who are administrators. And so it is good 

to have these focused on occasionally where we are missing things 

to get these issues raised up and we can cut through them. 

But we are clearly committed to doing that. And when you see 

the final CLIA rule that comes out, it will be helpful. If it is not, 

we will go back to work and try to make it better. 

Chairman MANZULLO. Thank you. We appreciate that, Dr. Probst 

and Dr. Davey. And did you want to say something? 

Dr. PROBST. If I may, sir. I am here as the past president of Indiana State Medical Association representing all physicians. I happen to be a dermatologist, and I think because of that, the response 

was that only dermatologists have problems with CLAI. This is not 

true in Indiana. 

25

My testimony related only to requisition because I only had a 

short time. My written comments and attachments reflect that all 

physicians have problems. Wet mounts, microscopic urinalysis, various stains for bacteria, the whiff test for bacterial vaginosis, are 

several tests mentioned by physicians who have added their letters 

to my testimony. 

I am not coming from a dermatologic position. Indiana physicians 

in all practices are not doing tests that should be done in the office 

to better serve patients and save them time and inconvenience. 

I am not reflecting the position of dermatologists. I am reflecting 

the position of all physicians in Indiana and the patients there who 

are not allowed to have the tests in the office, for tests that are 

best done there. 

Thank you for allowing the additional comments. 

Chairman MANZULLO. The record will note that. Okay. 

Dr. Davey, Dr. Probst, and Mrs. Yost, you are excused. Thank 

you for your testimony. 

Then I would like to have Mr. Tim Tryslit, and Mr. Terry Kay 

have a seat. Well, we are two for two. 

This third issue here has been with us for some time. Several 

months ago when we had a hearing involving the portable x-ray 

providers, Mr. Scully at that time said that he would like to have 

this matter resolved within 90 days. 

There have been a lot of discussions going on with the industry. 

But I would—before I turn this over to Dr. Weldon who has got 

some base questions to ask with regard to the portable x-rays, Mr. 

Tryslit, could you please, spell your last name, for the record and 

give your position. 

STATEMENT OF TIM TRYSLA, POLICY ADVISOR, OFFICE OF 

THE ADMINISTRATOR 

Mr. TRYSLA. T-R-Y-S-L-A. I am a policy advisor, like Leslie, in 

the office of the administrator. 

Chairman MANZULLO. And Mr. Kay. 

STATEMENT OF TERRY KAY, DIRECTOR, DIVISION OF 

PRACTITIONER SERVICES 

Mr. KAY. K-A-Y. I am a director of the Division of Practitioner 

Services. 

Chairman MANZULLO. Okay. Dr. Weldon. 

Dr. WELDON. Mr. Chairman, I want to again thank you for indulging me and giving me the opportunity to be here. I certainly 

want to also extend my thanks to the ranking member in supporting me, having the opportunity to be here, joining with the 

panel in asking questions. 

And I certainly appreciate the hard work of the President of the 

United States and Secretary Thompson and Mr. Scully in terms of 

doing everything that they can to make sure that America’s seniors 

get quality health care. 

Before I get onto the portable x-ray issue, which I had some 

questions about, I just want to say as a clinician, I still see patients 

once a month at the Veterans Clinic in my district, to bring the 

tried and true bedside diagnostic techniques of doing scrapings of 

fungal lesions of scabies and lice lesions. 

26

Every doctor has a microscope in their office. To try to bring all 

of that stuff under the regulatory burden of a bureaucracy to me 

is absolutely insane. Any physician who is licensed and accredited 

to practice in their given specialty, in my opinion they shouldn’t 

have to justify it to a bureaucracy that they are doing it correctly. 

But, moving on to the issue of the portable x-ray. As you know 

I have mentioned this previously at the previous hearing, that, I 

practiced internal medicine for 15 years before I was elected to the 

House. I was one of a small group of physicians in the community 

of Melbourne, Florida, that continued to track their patients once 

they were admitted to a nursing home. 

And I found the use of portable x-ray to be a tremendous time 

saver, a cost saver and a suffering saver in that patients would fall, 

patients would have a cough, I would be concerned about a fracture, I would be concerned about pneumonia. Rather than transporting them to my office and having them to go through that ordeal in an ambulance; or worse, having to transport them to the 

emergency room with a tremendously increased burden of cost associated with that, I found the portable x-ray to be, I thought, just 

a win-win all around, good for the patients, good for me. 

The quality of the response I would get from the portable x-ray 

providers was superior to what I got at the hospital, and compared 

very nicely to what I had—we had a large medical group, so we 

had radiologist rights in the building we were in. So if I brought 

the patient to my office, I could get an x-ray report over the phone 

from the radiologist in my building. 

But if I brought the patient to the emergency room, it was hours 

and hours. And frequently I would have to go down to the hospital 

radiology department and thumb through x-rays to find the x-ray 

on my patient, whereas with the portable x-ray at the nursing 

home, I got a phone call from the radiologist. 

But, I have some concern about the set-up code. It is my understanding that the set up code which is the Q code for the portable 

x-ray industry, was established in 1992. And the law required that 

the set up code be reviewed every 5 years. And according to what 

I have been told, under the previous administration, and so far 

under this administration there has not been a review. There has 

not been a review in 10 years. And the requirements of the law 

have not been fulfilled. 

Is that correct? Has there been a review of the set-up code, cost 

and reimbursement? 

Mr. SCULLY. Maybe I will ask Terry to answer that. 

Mr. KAY. All right. At this point it has not. We have been working over the last—since the last hearing with representatives from 

the portable x-ray industry to, you know, get this review. Kind of 

in a nutshell, the way our review works is that we work with an 

outside sort of privately established Committee, which has been 

formed by the American Medical Association, of about 30 specialty 

groups and some others, some nonphysician groups, and they review requests. 

You know, they look at what staff is needed to do a service, what 

equipment, what supplies and sort of what resources are required 

to do these services. 

Mr. WELDON. So it has not been done? 

27

Mr. SCULLY. Because I am sure you know, Congressman, Dr. Weldon, we have about $66 billion of physician payments we make 

every year for physician and related services. And every year we 

go through the resource utilization committee, to figure out how 

these codes move around. 

As we have tried to explain, the portable x-ray providers get paid 

from that pot. So we have, in fact, if the new physician fee schedule, which is something we didn’t mention, their rate, is in direct 

response to your interest, they, in their new fee schedule, the draft 

anyway which is going to go final for January 1st, they are the single biggest increase in the pot. Their rates go up about 8 percent 

before you do the pro rata cut that we have been talking about. 

Dr. WELDON. The physician reimbursement? 

Mr. SCULLY. For the overall portion of the portable x-ray supplier, I believe is the largest percent increase in the physician pot, 

it is about 8 percent. But the underlying expense code of that, 

which is the part that is just the set-up fee, which is about $11 or 

something, the idea when they bring the machine up to the nursing 

home, they bring it inside to set it up, they get paid roughly $30 

for the x-ray, varies by area, but roughly $100 for transporting the 

x-ray machine, and then the set-up fee, which is about $11. 

That particular subcomponent, what they get paid for, is reviewed under a practice expense advisory committee. So we have 

reviewed the rate and changed the rate for next year, as a direct 

result of your input. But the set up fee, the $11 out of the $150, is still under review. 

Dr. WELDON. I was told that the it was under review and that 

it was had been determined to be appropriate. Is that true? 

Mr. KAY. No. 

Chairman MANZULLO. Doctor, would you yield a second? 

Dr. WELDON. You are the chairman. I yield. 

Chairman MANZULLO. Is anybody here from the industry that 

would like to put some input into the statements that were just 

made by CMS? Any correction or anything? 

Mr. HALSEY. This just came up yesterday. I am Steven Halsey 

representing the National Association of Portable X-ray Providers. 

Chairman MANZULLO. Do you want to have a seat here? It is up 

to you. If you want to refute something that was said or add to it, 

or perhaps Mr. Kay was in the process of saying something and I 

cut him off. 

Mr. HALSEY. It is not a prepared statement. I think that there 

is some clarity issues that are important, if I can make a brief 

statement. 

We have been working with the people at the table, and I want 

to say for the record that since your last hearing in May, Mr. 

Chairman, which I think brought about the meetings that we have 

undertaken, meetings face to face, conference calls, and individual 

telephone conversations, I do want to state that on behalf of Mr. 

Scully and Mr. Tryslit and Mr. Kay, they have worked in good faith 

to try and get a clearer understanding of the problems in the industry, and how we might go about positively affecting what is simply a disastrous spiral in in the bottom line of the companies. 

So while I don’t think it is appropriate, or not at this time with 

the preparation that I have, to talk about some of the very specific 

28

items such as the Q code, the review to our understanding, it has 

not been reviewed, it is required by law. 

But, I do want to state that these people have been working for 

a number of months in good faith on this issue. But, the reality is, 

we have absolutely zero effect after 5 months. 

And I know for a fact that during these 5 months, there are a 

number of companies who have gone out of business. There are 

more that are going out of business. There was a witness who testified before this Committee in May. I spoke to him yesterday, he is 

laying two people off tomorrow. 

Chairman MANZULLO. We are also joined by? 

STATEMENT OF NANCY TAYLOR, OUTSIDE COUNSEL TO THE 

NATIONAL ASSOCIATION FOR THE SUPPORT OF LONG TERM 

CARE 

Ms. TAYLOR. Nancy Taylor. T-A-Y-L-O-R. 

Chairman MANZULLO. What is your position? 

Ms. TAYLOR. I am outside counsel to the National Association for 

the Support of Long Term Care, which also represents many portable x-ray providers. 

Chairman MANZULLO. Did you have a comment on the statement 

that some of the CMS people made? 

Ms. TAYLOR. Yes. We have a letter for the Committee as well, 

which recognizes that this is a complex issue, and the National Association for Portable X-ray has done a great job. We have worked 

with them at CMS. 

There two parts of the code that provides transportation money 

to portable x-ray providers. One is the transportation code, we have 

been working very closely with CMS to update the fee. The second 

part, which is the set-up code, requires providers to get adjustments from the Physician Advisory Coding Committee. We could 

not get on the schedule to seek air increase for September. We 

have now asked that we be on the schedule in January. 

I wish that the CMS administrator could do something about 

that but he can’t. 

Dr. WELDON. Well, if I can reclaim my time, Mr. Chairman. That 

was actually the question I was leading up to, to Mr. Scully. Can 

you have the Physician Advisory Committee put the set-up fee on 

their agenda when they meet again? 

Mr. TRYSLA. Congressman, we have actually have that feed up 

for January. They have asked us to look at our top priority of 

codes, and this is going to be one of those priorities. 

Mr. SCULLY. As you can tell, I actually don’t do any work myself. 

I am just the front man. 

Mr. KAY. Could I just elaborate on that? The Practice Expense 

Advisory Committee that we have been working with has been very 

busy over the last few years revising all of the services and the fee 

schedules. There are over 7,000 services that we pay. This year 

alone, we just reviewed 1,100. They, in the last meeting that occurred in September, said that they would, you know, look at the 

next 50 that we asked them to do. 

So, Mr. Scully, you know, certainly has the authority at this 

point, you know to put this on the top list of priorities for review. 

So it is a private, independent group. But, they——

29

Mr. SCULLY. The way it works, Doctor, as you probably know, is 

they—a lot of these committees, we basically take all of the affected 

parties, put them in a room. And if we are going to increase payments for portable x-ray, then theoretically it comes out of the pot 

of somebody else. 

So all of the providers get in the room and we discuss and debate 

what the relative priority of various payments for physicians, labs, 

other things are. And usually in 95 percent of the cases we take 

those recommendations. But they are in fact recommendations to 

me and the secretary, and we can change them if we like, and we 

do occasionally. 

But we would be happy to put this on the top of the list, and I 

will certainly do so. 

Dr. WELDON. I appreciate the dilemma that you face. My primary concern, just so you understand, is if this industry goes away, 

you are going to pay more money. And your quality of service is 

going to be worse. 

You may not be able to tell that is happening, because the fig- ures are so gigantic. If emergency room services are $20 billions 

next year, to pick a figure out of thin air, if they are $20.02 billion, 

you are not going to notice that that increase is due to the fact that 

you put a much smaller industry that was costing you less out of 

business. 

And the concern I have, just so you understand, is just what this 

gentleman was talking about. I have got portable x-ray providers 

telling me that based on the reimbursement schedule, they are not 

going to be able to stay in the business. And my perspective as a 

clinician utilizing the service, was that it was very, very good for 

seniors, and it was good for clinicians, and it was also good for you, 

in terms of providing better quality at reduced costs. 

Let me just get back to the issue. I just want to make sure that 

I understand this correctly. You have not determined that the setup fee at this point is adequate? You do not have a position on 

that? 

Mr. SCULLY. Correct me if I’m wrong. We have not reviewed a 

change in the set-up fee alone. 

Dr. WELDON. So in front of this Committee, you are not saying 

it is inadequate or adequate? 

Mr. SCULLY. I don’t think we have come to that conclusion yet. 

I think, in looking at the other two components which are transportation, and the overall fee for doing the x-ray, where we have 

made—I don’t think, the final rule should be out on November 1st, 

but the draft rule is pretty clear, that we have made some substantial increases in those areas. I think it was the biggest single increase in the physician fee schedule, but it probably isn’t going to 

take care of all of their concerns. 

Obviously, I am particularly concerned about making any additional changes up or down on the fee schedule that are really dramatic in the context of a negative 4.4 percent update. If we manage 

to fix that in the next 2 or 3 weeks, it will be a lot easier—I can 

tell you the anesthesiologists, the oncologists, many of the people 

think their practice expenses are off and they need higher payment. In the context, everybody is going down negative 4.4 percent, 

and everything is a zero sum game, it is difficult to make changes. 

30

They are going to go up next year. It is not due to the set-up component. But the set-up component is $11, the transportation 

component varies, but it is about $100, and $30 is the x-ray. 

Roughly. 

Mr. KAY. Roughly. 

Mr. SCULLY. We will keep looking at the set-up component. 

Dr. WELDON. Just so you understand. I am one of the people in 

this body who is trying to get you a better top line to deal with. 

Mr. SCULLY. I would hope so. 

Dr. WELDON. To help you in all of those areas. I do want to just 

cover the transportation issue. There is some regional issues associated with that. They vary by carrier. And I believe you delegate 

that issue to the carriers to make a decision; is that correct? 

Mr. SCULLY. Yes. 

Dr. WELDON. In the southeast, as I understand it, there is quite 

a bit of variability. And I have some serious concern the Florida 

carrier is under reimbursing this. And I would like you to look into 

this for me in the near future and get back to me about this. It 

is not unique, I believe, to Florida. There are some other States. 

It is one of the concerns I have. When you do delegate some of 

those reimbursement decisions to carriers, that sometimes they 

make good decisions and sometimes they make bad decisions. 

So if you could please get back to me on that I would very much 

appreciate that. 

Mr. SCULLY. I will tell you what I have done. I was traveling in 

Arkansas yesterday, but my crack staff, Dr. Trystla told me that 

you were concerned about Florida. 

Dr. WELDON. How did he guess? 

Mr. SCULLY. I think he heard from your staff. And, apparently 

one of the concerns—when this came up 2 years ago before I got 

to HCFA, now CMS, I believe that we actually discussed with the 

industry coming up with national rates for transportation. The 

ideas may vary among the industry, they decided that they didn’t 

want to do that, they wanted to keep regional rates, which are set 

by the carriers. 

I heard from Tim yesterday, that our carrier, which is First 

Coast in Florida, had not been, for whatever reason, particularly 

helpful in arranging a meeting with the portable x-ray suppliers. 

I called the CEO of First Coast last night. He didn’t know anything 

about this. And I asked him to specifically meet with him and have 

his staff meet with them, and tell me what—they would decide 

what the appropriate rate is with First Coast, which is the Florida 

carrier. 

But I will get back to him, and as soon as he meets with them 

and the industry will—it is for the industry to go in and make the 

argument about having a higher rate. 

Dr. WELDON. Great. Mr. Chairman, I want to thank you so much 

for giving me the opportunity to be here. And I want to thank all 

of the witnesses, including, the impromptu witnesses for the input 

that they have helped us with. 

I just want to, before I yield back, I would be very happy to linger. I just want to underscore, that I think this is a valuable service for seniors. I am determined to do everything I can to make 

sure that it remains a viable service for senior citizens. 

31

Chairman MANZULLO. Thank you. The problem is that as what 

happened in Rockford, Illinois, the carriers went out of business. 

And it is costing the taxpayers a tremendous amount of money to 

do the same service that the portable x-ray people did, that—the 

portable x-ray people charge a fraction, by the time you figure 

when Ma had to go to the hospital, and one of those Caravans 

picked her up, it wasn’t an ambulance, a special vehicle, and she 

was gone 4 hours. And that—that was the guy’s only run. She was 

the only one in the van. She sat in the emergency room. I mean, 

the cost to the taxpayers is horrendous. And it continues. And my 

question, and Mr. Halsey, I am sorry to really put you on the spot. 

Forgive me for putting you at the table. 

Mrs. Taylor, I don’t apologize for that, you raised your hand, you 

came up here on your own. We run this Committee a little bit differently than some committees, but the purpose is to resolve issues. 

And that is why we are here. 

Is there anything that we can do between now and January to 

prevent the further closing of these extremely important home xray businesses? I mean, is there—my understanding of the statute, 

Mr. Scully, is that you can have an interim payment system, that 

would at least keep these home x-ray providers alive, fulfilling that 

purpose, because they can get the finest ruling in January, but if 

they are all out of business, it wouldn’t do much good at that point. 

Mr. SCULLY. Well, Mr. Chairman, the suggestion——

Chairman MANZULLO. I am sorry. Interim rate adjustment. 

Mr. SCULLY. Tim and Terry can jump in. The biggest variable, 

which is carrier priced, and varies by region, as you mentioned, is 

transportation. What we are planning to do is send out, I think it 

is just about to go out, a memorandum to all of the carriers, asking 

them to review this. 

I think the message they will get from that is not to review it 

down. 

Chairman MANZULLO. If they are like Wisconsin’s Physician 

Service they * * *

Mr. SCULLY. Well, not all of them are like that. We have been—

I have been trying, as you know, and I hope again in the next couple of weeks that we will. And there is bipartisan and bicameral 

support for carrier and contractor reform. We are trying to come up 

with the 20 best contractors. 

Chairman MANZULLO. So are you going to ask them——

Mr. SCULLY. To go back in and review the transportation payment. 

Chairman MANZULLO. Are you going to ask them to mark it up 

higher? 

Mr. SCULLY. Well, we ask them to go back and review its appropriateness. That is probably 75 percent of the actual fee is the 

transportation cost. So if we send out a program memorandum saying we think there is a problem here, please go back and review 

it, cull this criteria, tell us why you set it at the rates you did, review that rate, get back to us, the general—they generally follow 

our guidance and go back and look at it. 

Chairman MANZULLO. Mr. Halsey, would that satisfy your inquiry? 

32

Mr. HALSEY. Mr. Chairman, I want to applaud the effort and 

point out that the program memorandum that is being discussed 

came about through these organizations working with CMS. I know 

we all bash an agency such as CMS with vigor and frequency. 

We applaud that. That will, over a period of time, impact individual providers that are dealing with individual carriers. And we 

think that is outstanding. But we still would love to see the—when 

we talk about the highest rate, which this is statistically true of 

the overall update, we are talking pennies for patient. We might 

be talking 7 or 12 cents per patient. While that is appreciated, it 

isn’t going to make any difference. These companies are going out 

of business. Our one request statutorily, and this is in response to 

the questions that the Committee put before Mr. Scully—— Mr. SCULLY. If we can get into the weeds a little bit on this. 

There are three—I am rounding off. Three basic components. The $11 set-up fee, which is a practice expense and has to go through 

a formal—there is a Federal rate for that. That has to go through 

a formal panel, which varies the rates relatively to other practice 

expenses and other doctors. There is a $30 x-ray fee, which is the update, again a relatively small piece we are talking about. Then there is the roughly $100 

transportation fee. 

There is only one set locally, the transportation fee. It is by far 

the biggest component. If the carriers change that that will have— the other two pieces which are smaller are a part of a much more 

structured developmental national rates. 

Chairman MANZULLO. Would you agree with that? 

Ms. HALSEY. I am still stuck with the fact, and it was answered 

formally to Dr. Weldon’s question. The statute clearly states that 

these are to be reviewed every 5 years. The answer is it has not. 

We are asking for an interim adjustment in recognition of the fact 

that this $11 rate was set 10 to 12 years ago. 

I think it is reasonable to say. 

Chairman MANZULLO. Which figure are you looking for? 

Mr. HALSEY. The data we provided to the Agency places it between normal hours and after hours in the high twenties to low 

$30 rates, and that is in cost. And I understand it is not strictly 

cost-based now and that is appropriate. But certainly if we—what 

we are looking at is something over 100 percent increase is appropriate on the only data that exists, and that is the date that was 

compiled by our industry. 

So what we are saying is in the absence of the legally mandated 

5-year review and any data that has been put forward by CMS, it 

doesn’t seem reasonable to set an interim adjustment until—and if 

in January they can get this going and everything else—let us be 

clear; in January it doesn’t mean it is over, but an interim adjustment which is legally possible from the Secretary’s office would 

give these small businesses the hope to say—because that is what 

we are talking about. They need a sign from this Agency that says 

I need to stay around. 

Chairman MANZULLO. Did you want to respond to that, Mr. Kay 

or Mr. Scully? 

Mr. SCULLY. I guess the way I have looked at it, as he said, the 

only evidence out there so far is industry data. And it is a relVerDate 0ct 31 2002 16:15 Nov 13, 2002 Jkt 082598 PO 00000 Frm 00036 Fmt 6633 Sfmt 6602 E:\HR\OC\A598.XXX A598
33

atively small amount of money, in all candor. But on the other 

hand, it comes from a $66 billion pot of money that every time one 

goes up, others come down. In the context of making adjustments 

in that budget-neutral pot the physicians are very angry about 

right now, I have been hesitant to make any radical changes, even 

though this is a small amount of money. 

The much bigger variable is transportation and it doesn’t really 

count against that pot. So if a local carrier decided to go out and 

say we were going to pay $120 for transportation instead of $100, 

they just do that and it doesn’t come out of the rest of the pot. So 

it looked to me as a more workable solution. We are happy to keep 

looking at the $11 but we have to come up with independent data 

other than what the industry gave us. 

Chairman MANZULLO. The only reason, going to Dr. Weldon, that 

I would suggest that you increase it is the fact that it is obvious 

by any test whatsoever that you would be saving millions of dollars 

instantly by not sending these seniors in these caravans, tying up 

drivers for 4 hours. This is so simple; that if they get a modest adjustment on the cost of the x-ray, you won’t—you will save immediately millions of dollars. 

I use my mother as an example, because that is exactly what 

happened there. I would suggest—I mean, I can’t force you. It does 

two things. We need to save this profession so they are around here 

in January; otherwise they are going to be gone. And the second 

thing it does is it automatically saves money. 

Mr. SCULLY. We will aggressively keep looking at it. I think we 

have made a lot of changes in the policy. I think there is a strong 

likelihood the biggest component will go up. And to be honest with 

you, Mr. Chairman, there are very few things out of that $265 billion pot that I wouldn’t structure differently if I could. There are 

a lot of crazy things in the budget. 

Mr. WELDON. Mr. Chairman, I would ask you to yield to me for 

a minute. Are you saying, Mr. Scully, for you to provide an interim 

rate adjustment upward now for the setup fee for the portable xray providers, that you have to adjust somebody else down to find 

the revenue for that? 

Mr. SCULLY. It depends. My belief is that that is correct because 

basically within the physician payment pot for anything we set 

rates for, which includes the general physician payments and the 

national—anything on the RBRVS scale—the physician gets 36 

bucks for an office visit. If we decide to raise anesthesiologists’ practice expenses or raise oncology payments, it comes out of the 

pot someplace else. And that is what this $11 setup fee is in the 

$66 billion pot that is in the national rate schedule. 

On the other hand, when you leave something to carrier discretion and they make the changes during the course of the year, they 

can raise the rates temporarily it doesn’t have an impact on anybody else. So the transportation fee can be raised locally without 

any impact on any rates; is that correct? 

Mr. WELDON. Just so I understand, you know the reason I am 

bringing up this setup fee is it has been frozen at a 1992 level. 

And, you know, we have had some inflation since then. And are 

there other fees in that same pot that have been frozen at the same 

level for the last 10 years? 

34

Mr. KAY. There are some that have actually gone down in the 

last 10 years. I was going to say basically this service—because you 

know, to date anyway, we haven’t had data that sort of met the criteria that we use to establish these rates. Essentially the payment 

rate is—carried over from the previous charge based system. It 

used to be the reasonable charge system. And the new fee schedule 

was implemented in 1992, so we sort of used the average rate that 

was being paid at that time. And since then we have applied the 

updates over the years. So the various adjustments that have been 

made to the fee schedule have been applied to that rate. 

Mr. SCULLY. So it has gone up a little bit but not that much. 

Mr. WELDON. Before yielding back, I just want to say I am very 

concerned about the fact that the input I am getting from industry 

is the setup fee on this, the cost to the carriers, and I understand 

they can make it up on transportation perhaps, but I think there 

should be a basis in fact and a basis in logic and a basis in reality 

for the reimbursement schedule. And if the setup costs associated 

with these small businesses are 100 or 200 percent higher than the 

current Medicare reimbursement schedule, then I think it is very, 

very timely that we review this. And if at all possible, I would like 

you to provide an interim update for this service in the weeks and 

months ahead, and I would highly encourage you to do that. 

I am happy to yield back. 

Chairman MANZULLO. Mr. Kay, are you saying there is something flawed with the data that has been given to you by the industry? 

Mr. SCULLY. I have gone through this now with the $17 billion 

outpatient rule which has moved payments for drugs in the country 

up and down. As a matter of course, we generally try to come up 

with independent third-party independent data. 

Chairman MANZULLO. You don’t have any other data; is that correct? 

Mr. KAY. Right. 

Chairman MANZULLO. So I mean, there has been no review in 5 

years. You have no independent data on your own, and you could 

take the data of using my mother as an example. I mean, this is 

so simple. I mean, this is so simple. We are going into the flu season. And if my mother were still alive, I think I would lock that 

door there and post a guard and instruct you, Mr. Scully, to increase that schedule right away so she doesn’t—so she wouldn’t 

have to get into one of those ambulances, go out where it is cold, 

and sit in a waiting room with a bunch of sick people at a hospital. 

I mean, you could prevent that. It is so simple. 

And these people are knocking on your doors. You have physicians all over the place saying, this is not an issue of money, this 

is an issue of safety and health of these patients. And people in 

nursing homes have no business being carted to a hospital and set 

in a waiting room with all types of germs and things when the reason they are there is perhaps probably because their doctor thinks 

they have pneumonia in the first place. I mean, we really need an 

answer on this thing. 

I mean, can’t you just—what does it take? I mean, you could 

make it an administrative rule, Mr. Scully, to say that at least 

until January, which is only, you know, 21⁄2 months from now, 23⁄4

35

months from now, we are going to increase that x-ray component 

just so these guys can stay alive. I would implore you to do that. 

Mr. SCULLY. Mr. Chairman, I think this thing has gotten a lot 

of attention in the Agency. I think there is a high likelihood that 

certainly with some carriers and some regions, the payment is set 

by region, which is the biggest piece. My biggest concern, to be honest with you, and a lot of physicians don’t put two and two together, that if you ask Congressman Weldon, Dr. Weldon—I think 

he is an internist—can we increase any other fee in the pot? And 

by the way, we are going to cut your office visit for your next doctor’s office visit by 50 cents—. 

Chairman MANZULLO. So you would have to cut another? So the 

result of this hearing today is you are going to encourage the State 

providers to up the transportation fee to help these guys out in the 

interim. 

Mr. SCULLY. We are going to tell them to do the right thing, but 

hopefully they will understand that they are supposed to review 

this thoroughly and, like I did with the CEO of the Florida health 

plan, when we find problems where we are not getting any satisfactory communication with our carriers from the industry, we will 

call them up and make sure they get a thorough hearing. 

Chairman MANZULLO. Anybody else have anything they want to 

add? 

Ms. TAYLOR. We are just very anxious for this program memorandum to get out. So hopefully it will get out very soon. 

Chairman MANZULLO. Is there anything they can do? 

Mr. SCULLY. I think the program memorandum is just about out 

the door. And if it isn’t, it will be after this hearing. 

Chairman MANZULLO. We are 3 for 3 today. Thank you so much, 

Mr. Scully. This is the sixth hearing we have had on CMS. 

Mr. SCULLY. First on CMS. 

Chairman MANZULLO. First one on CMS. But I don’t think—let me 

put it this way. To the physicians out there and the providers, I 

can’t tell you how much they appreciate your sitting down at a 

table like this with the people that make the decisions and the policy people. The dermatologists were actually shocked that they sat 

at the table with the person that said, come, be a part of this 

group. 

I am shocked, pleasantly, pleasantly surprised, amazed it could 

be—I don’t want to say this easy—but this is a process that we use 

to try to resolve things. You know one of our goals on the Small 

Business Committee is to bring down the cost of health care insurance and one of the ways we do that is to try to help you make 

CMS more efficient. 

Mr. SCULLY. I will tell you, because I share your goal. As I told 

you before, we created 11 open-door policy groups with the same 

intent. I think we have had over 3,000 people on these calls. And 

once a month with every one of these groups—the hospitals, rural 

hospitals, nursing homes, home health agencies—last week I had 

one with pharmacists, last week I had one with three health providers, and we had about 40 people in Washington and something 

like 1,200 on the phone, and we go through all these issues and 

people bring up gripes and complaints and we try to fix them. 

36

So maybe we should invite you to come co-chair one with me at 

some point. 

Chairman MANZULLO. I would look forward to that after the election. Thank you again so much and this meeting is adjourned. 

[Whereupon, at 4:25 p.m., the Committee was adjourned.]

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