U.S. GOVERNMENT PRINTING OFFICE

67–561 WASHINGTON : 2000

HEARING ON RURAL HEALTH CARE

SERVICES: HAS MEDICARE REFORM

KILLED SMALL BUSINESS PROVIDERS?

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

WASHINGTON, DC, JUNE 14, 2000

Serial No. 106–64

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS

JAMES M. TALENT, Missouri, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

DONALD A. MANZULLO, Illinois

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVEN J. CHABOT, Ohio

PHIL ENGLISH, Pennsylvania

DAVID M. MCINTOSH, Indiana

RICK HILL, Montana

JOSEPH R. PITTS, Pennsylvania

JOHN E. SWEENEY, New York

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

EDWARD PEASE, Indiana

JOHN THUNE, South Dakota

MARY BONO, California

NYDIA M. VELA ́ ZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

CAROLYN MCCARTHY, New York

BILL PASCRELL, New Jersey

RUBE ́ N HINOJOSA, Texas

DONNA M. CHRISTIAN-CHRISTENSEN,

Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

DENNIS MOORE, Kansas

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

SHELLEY BERKLEY, Nevada

HARRY KATRICHIS, Chief Counsel

MICHAEL DAY, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on June 14, 2000 ............................................................................... 1

WITNESSES

Buto, Kathleen A., Deputy Director, Center Health Plans & Providers Health

Care Financing Administration, U.S. Department of Health and Human

Services ................................................................................................................. 3

Evans, Zachary, President, Mobile Medical Services ........................................... 6

Woods, Karen, Executive Director, Hospice Association of America ................... 8

Goldhecht, Norman, Vice President, Diagnostic Health Systems ....................... 10

Dombi, William A., Vice President for Law, National Association for Home

Care ....................................................................................................................... 12

APPENDIX

Opening statements:

Talent, Hon. James .......................................................................................... 34

Vela ́zquez, Hon. Nydia ..................................................................................... 39

Manzullo, Hon. Donald .................................................................................... 41

Prepared statements:

Buto, Kathleen A. ............................................................................................. 43

Evans, Zachary ................................................................................................. 52

Woods, Karen .................................................................................................... 56

Goldhecht, Norman .......................................................................................... 81

Dombi, William A. ............................................................................................ 87

Additional information:

Hospice of Acadiana, Inc. Written Testimony ................................................ 96

(1)

HEARING ON RURAL HEALTH CARE SERVICES: HAS MEDICARE REFORM KILLED

SMALL BUSINESS PROVIDERS?

WEDNESDAY, JUNE 14, 2000

HOUSE OF REPRESENTATIVES,

COMMITTEE ON SMALL BUSINESS,

Washington, DC.

The Committee met, pursuant to notice, at 10:04 a.m. in room

2360, Rayburn Office Building, Hon. James M. Talent (chairman of

the Committee) presiding.

Chairman TALENT. Well, let’s open the hearing. I will go ahead

and give my opening statement and if the ranking member gets

here, she can give hers. If not, we will recess just long enough for

the vote.

Today the Committee will be examining the fate of small businesses health care providers three years after the Medicare reforms

incorporated in the Balanced Budget Act of 1997. These reforms

promised us an improved ability to reduce waste, fraud and abuse

in the Medicare system and to achieve substantial savings. Certainly savings have appeared. Perhaps fraud and waste have been

curbed but there are some concerns that service for Medicare recipients is suffering as a result.

Over the past two years, many of us have read the newspaper

articles or seen the reports on television concerning the bankruptcies of major nursing home chains and the financial problems

of HMOs that provide significant Medicare services. Most recently,

we saw SIGNA Healthcare abandon Medicare services. The common reasons given revolve around the reimbursement and fee

schedules established by the Health Care Financing Administration after the 1997 BBA changes.

However, as significant and oftentimes disturbing as those

events were, a little noticed change was sweeping through the

health care industry and devastating the provision of care available, particularly in rural areas. Small businesses involved in the

provision of ancillary services to nursing facilities, hospices and

home health care patients were failing or reducing service in rural

areas at a record pace. These small businesses offered lab services,

physical therapy, occupational therapy, wound care, intravenous

therapy, portable electrocardiogram, x-ray, and pharmacy services

to rural areas.

These providers offer a range of medical services that a rural

nursing facility would find impossibly expensive to duplicate. Unfortunately, the providers are fast disappearing and it appears that

2

the reason may be the Medicare reforms enacted in 1997. Since the

enactment of BBA ’97, a number of previously covered ancillary

services have been eliminated. In addition, many other Medicare

services have been effectively eliminated in rural areas by the reduction or elimination of the transportation reimbursement rates.

Ancillary service providers for Medicare patients at a rural facility

now receive no reimbursement for travel to the facility and are

forced to either provide services at a loss or suspend service to

those facilities altogether.

At the same time, other provisions of BBA ’97 are taking their

toll. The Prospective Payment System was instituted in 1998 to

consolidate the billing of Medicare A services through nursing facilities. Facilities are billed directly and then reimburse the ancillary care providers. Unfortunately, this has resulted in some facilities taking advantage of their position as ‘‘gatekeepers’’ to extract

discounts from small providers. In addition, many facilities are increasingly slow in providing reimbursement.

This creates an addition strain on the system—ancillary providers faced with this situation refrain from providing service.

While this could be considered by some as good because it prevents

unnecessary use, it also creates a scenario for misuse. Services previously provided at bedside are now provided at hospitals, with the

added cost of ambulance transportation and the added stress to the

patient. We know these services are shifting to hospitals. Only last

year Congress acted to increase reimbursement to rural hospitals

in recognition of that added strain. The question is, have we only

treated the systems?

Today we will discuss these problems and I hope begin a dialogue to restore the small business sector of the health care industry. We have a number of witnesses who will testify.

What I will do is recess the hearing so that we can go and vote

and then come right back and we will start with our first witness.

[Recess.]

Chairman TALENT. I will recognize the gentlelady from New York

for her opening statement.

Ms. VELA ́ ZQUEZ. Thank you, Chairman Talent.

Today we examine the need for access to health care in rural

America and the unintended consequences that the Balanced Budget Act of 1997 created. In study after study, it has been determined

that those Americans living in rural areas tend to be poorer, older

and less insured. Indeed, nearly 22 million Americans live in federally designated areas where there is complete shortage of adequate

health care professionals or medical facilities. And to make that situation worse, those who often need health care the most—senior

citizens—represent one-fifth of the total rural population.

This is without a doubt a travesty for this country. However,

while the need is still great, the commitment by the federal government is diminishing. This is due in large part to the Balanced

Budget Act of 1997 that has hit small rural health care providers

especially hard.

Thus, small companies were paid through by a simple cost reimbursement system. Simply put, they were reimbursed for reasonable related to providing these services. In most cases, the costs

often involve transportation of critical important to these remote

3

sites but these expenses are only reimbursed on a fixed basis, regardless of how far they travel to get to the facility they serve.

Unfortunately, these companies are now forced to carry an extra

burden without proper compensation for reasonable costs of doing

business and it is for this reason that we must take all of these

issues into consideration, whether we are talking about patient

care or protecting small business, to ensure that every American,

no matter where they live, will have that continued access to basic

health care.

I have looked forward to the start of this hearing. I believe it is

important to reveal the unique issues revolving around access to

quality rural health care or the lack thereof. We are all interested

in hearing from the small businesses that provide health care services in rural areas and how we might be better able to continue

their growth and success.

It is not in the spirit of equality that America has promised all

of us to be denied the basic necessities shared by all only because

of where you live. Many of these people in these rural areas who

these companies service are farmers. Farmers have committed

their lives and their families’ lives to ensuring that each and every

day all of us have food for our families.

I look forward to working with Chairman Talent and the other

members of the Committee in seeking ways to mitigate the negative impact the Balanced Budget Act of 1997 has on our Nation’s

small businesses. We are faced with the serious dilemma with this

issue and we must find a solution to prevent a serious problem

from becoming a potential health care disaster for business and for

to people they serve.

Thank you, Mr. Chairman, and I look forward to hearing from

our panels today.

Chairman TALENT. I thank the gentlelady and without objection,

anybody who wants to submit other statements for the record, they

will be entered into the record. I have one from Mr. Manzullo and

I am sure there are other members, as well.

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

Chairman TALENT. We will go to our witness panel. The first witness is Kathleen A. Buto, who is the deputy director of health

plans and providers for the Health Care Finance Administration.

Thank you for being here.

STATEMENT OF KATHY A. BUTO, DEPUTY DIRECTOR, CENTER

HEALTH PLANS AND PROVIDERS, HEALTH CARE FINANCING

ADMINISTRATION, U.S. DEPARTMENT OF HEALTH AND

HEALTH SERVICES

Ms. BUTO. Thank you, Chairman Talent, Congresswoman

Vela ́zquez, for inviting us to participate in this hearing today to

discuss our efforts to support small businesses that provide health

care in America’s rural areas.

We understand that rural providers face unique challenges in

serving the medical needs of our beneficiaries. Assuring and enhancing access to quality care for rural beneficiaries is a priority

for us and we are committed to continuing to work with you to ensure that these unique needs are met.

4

In fact, we have established a Rural Health Initiative Group

within our agency to increase and coordinate attention to rural

issues in all areas of our work. Each of our regional offices now has

a rural issues point person and you and your provider constituents

can call directly to raise and discuss issues, concerns and ideas. A

list of these contacts is attached to my written testimony.

We are also working to enhance our relationship with the Small

Business Administration and ensure our policies are responsive to

the needs of small business communities, including those located in

rural areas. This cooperative effort includes training sessions for

our staff on small business issues—more than 100 staff were

trained last year by the SBA—cross-agency review of regulations,

and participation in forums that were held around the country by

the SBA ombudsman.

Let me move to some of the issues directly under the jurisdiction

of Medicare, because I know you are interested in those. We are

proceeding with several projects to evaluate Medicare coverage for

telemedicine services and, of course, this is particularly of interest

in rural areas, to find ways to get some of the more sophisticated

services available in urban areas more directly to rural beneficiaries.

For example, in February we initiated a project with Columbia

University to explore how teleconsultations in urban New York

City and rural Upstate New York affect patient care and outcomes.

Additionally, we are working with the Agency for Healthcare Research and Quality to assess the cost-effectiveness of telemedicine

services and the need to expand telemedicine beyond current payment regulations. We are anxious to share our results with Congress and we look forward to doing that later this year.

We have already implemented the majority of provisions in the

Balanced Budget Act of 1997 that assist rural providers. Working

together, Congress and the Administration last year enacted the

Balanced Budget Refinement Act, which includes a number of reforms and other changes to the BBA that address some of the

BBA’s unintended consequences. A number of these refinements

are particularly helpful to providers in America’s rural areas and

their patients. We also have taken a number of important administrative actions to assist rural providers that complement the legislative changes included in the BBRA.

The BBRA allows more hospitals to be designated as critical access hospitals or rural referral centers. It holds rural hospitals

harmless for four years during the transition to the new outpatient

Prospective Payment System. It extends the Medicare-Dependent

Hospital program, which assists small rural hospitals serving mostly Medicare patients, for five years. And it gives sole community

hospitals an enhanced annual update for fiscal year 2001.

For skilled nursing facilities, it provides an immediate increase

in payments for facilities that treat high-cost patients. It creates

special payments to facilities that treat a high proportion of AIDS

patients and excludes certain expensive items and services from

the PPS consolidated billing requirements.

Importantly, BBRA provides an across-the-board increase of 4

percent in fiscal year 2001 and 2002 and gives nursing homes options on how their rates are calculated. It places a two-year moraVerDate 11-MAY-2000 09:26 Feb 22, 2001 Jkt 070375 PO 00000 Frm 00008 Fmt 6633 Sfmt 6602 E:\HEARINGS\67561 pfrm02 PsN: 67561
5

torium on the physical and occupational therapy caps that were included in the BBA, which appeared to be presenting particular

problems for patients in these facilities.

BBRA also delays a scheduled pay cut for home health agencies

until after the first of the year 2001 under the Prospective Payment System for home health services. It provides an immediate

adjustment to the per-beneficiary limits for certain agencies, and

gives assistance payments to help cover some of the costs associated with collection of data as part of the home health PPS system.

It excludes durable medical equipment from consolidated billing.

And we have taken a number of administrative steps to help

rural and other providers. For example, we are making it easier for

rural hospitals to be reclassified and to receive payments based on

higher average wages in nearby urban areas. We are using the

same wage index that is used to calculate in-patient rates for the

Outpatient Prospective Payment System and we are postponing the

expansion of the hospital transfer policy, which we understand has

had an adverse impact on rural hospitals.

We are extending the time frame for repaying home health overpayments from one year to three, with the first year interest-free,

and we are postponing the requirement for home health agencies

to obtain surety bonds. We will refine the classification system for

skilled nursing facilities in a budget-neutral way to increase payments for medically complex patients.

We are also redoubling our efforts to more clearly understand

and actively address the special circumstances of rural providers

and beneficiaries through our rural health initiative. We have been

meeting with rural providers, visiting rural facilities, reviewing the

impact of our regulations on rural health care providers, and conducting more research on rural health care issues.

We are participating in regularly scheduled meetings with the

Office of Rural Health Policy in the Health Resources and Services

Administration to make sure that we stay abreast of emerging

rural issues and we are working directly with the National Rural

Health Association on a number of issues and to evaluate rural access to care issues and policy changes.

Our goal is really to engage in more dialogue with rural providers and ensure that we are considering possible ways of making

sure rural beneficiaries get the care they need. We are looking at

best practices and areas where research and demonstration

projects are warranted and we want to hear from those who are

providing services to rural beneficiaries about what steps can be

taken to ensure that they get the care they need.

We are committed to ensuring rural beneficiaries continued access to quality care and we are all concerned about the disproportionate impact that policy changes can have on rural health care

providers.

We are grateful for the opportunity this hearing provides to discuss these important issues and to explore how we might address

them in a better and more responsible manner.

I thank you again, Chairman Talent, for holding the hearing and

I would be happy to answer your questions.

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

6

Chairman TALENT. We will have questions in a few minutes,

after the other witnesses have testified and I thank you for being

here.

Our next witness is Zachary Evans, who is the president of Mobile Medical Services from St. Joseph, Missouri. Thank you for

coming such a long way, Mr. Evans, and we would love to hear

your testimony.

STATEMENT OF ZACHARY EVANS, PRESIDENT, MOBILE

MEDICAL SERVICES, ST. JOSEPH, MO

Mr. EVANS. Thank you, Mr. Chairman and distinguished members of this Committee. I would like to request at this time that

my entire written statement be entered into the record.

It is a pleasure to have the opportunity to testify before you

today on an issue of great importance to our industry and small

business owners nationwide.

As Chairman Talent said, my name is Zach Evans and I am the

president of Mobile Medical Services, Incorporated. I am also the

immediate past president of the National Association of Portable Xray Providers.

My small business was established in 1992 and is located in St.

Joseph, Missouri. I currently employ five individuals on a full-time

basis.

I appear before you today to explain the dramatic impact upon

my company and others like it across the country of severe cuts in

Medicare reimbursement rates. These reductions, mandated by the

Balanced Budget Act of ’97, have hit small businesses the hardest

and have, in turn, forced small businesses to cut back on nonprofitable services.

This impact is particularly alarming because it has ultimately

led to a reduction in essential medical services for thousands of

Americans, particularly those in rural areas.

In essence, what are seeing are the early symptoms of a potentially fatal disease that afflicts our Nation’s health care delivery

system. The reduction in Medicare reimbursement rates mandated

by BBA ’97 has resulted in the complete elimination of profit margins for small business providers of some vital services, particularly

in the rural areas.

As a provider of medical services which are transported to the

patient’s bedside, reimbursement rate reduction has forced me to

view nursing facilities or private homes that are located in rural

areas as financially unsound clients. This means that I and other

small business providers of portable x-ray services cannot afford to

provide a service which is not only safer, more comfortable and convenient to the patient but less expensive for Medicare.

It is profoundly ironic that as companies such as mine are forced

to deny service to rural patients because of Medicare cost-cutting,

the only alternative, transportation by ambulance, significantly

drives up Medicare costs.

These service cut-backs to rural areas must be viewed as the

early warning signs of a more far-reaching problem. As small business providers are forced to shrink their service area to remain solvent, rural patients and facilities will be forced to spend more to

obtain these medically necessary services. This cycle of cost-cutting

7

leading to higher costs for poor services is potentially lethal to the

health care delivery system as a whole.

Perhaps the most dramatic cut mandated by the BBA was the

total elimination of the transportation fee for portable EKG services. Clearly if a service provider receives no transportation reimbursement for a service, traveling long distance to rural facilities

is simply not economically feasible. In my company’s case, I lose an

average of $50 for every EKG I perform. This average includes

service to local facilities. If I were to calculate our losses based on

distance traveled, you would see a steadily rising column of red

ink, increasing with every mile we travel to the facility or home.

I am no politician but I do feel that I understand voter sentiments sufficiently to predict the obvious. Americans would be appalled to learn that EKGs will not be available to elderly rural patients simply because they reside outside of the more profitable

urban and suburban areas.

I can say, however, that Americans would be proud to learn that

you, Mr. Chairman, led the fight last year to reinstate the EKG

transportation rate. For that effort, I would like to take this opportunity to thank you on behalf of the providers and patients alike

for standing up for this vital cause. I hope that with your strong

voice on our side, we may prevail this year and obtain the EKG

transportation rate before more patients who are denied this basic

care.

Unfortunately, EKG services only represent a small portion of

the portable x-ray business. What has happened regarding EKG

services is now spreading to the x-rays. My company once offered

24-hour-a-day, seven-day-a-week service to all patients. We have

been forced to cut our services to patients located 25 miles distance

or more, to between an 8 a.m. and 3:30 p.m. Monday through Friday. Additionally, we are currently turning down all new requests

for services outside of a 25–mile radius.

This represent a massive reduction in services, yet we are currently considering dropping these remaining facilities altogether.

For our company alone, that decision would deny vital medical

services to approximately 15 homes with an average of 80 beds

each or a total of 1,200 patients.

1,200 patients denied service from one small company in Missouri. I know that dozens of other small business portable x-rays

providers are either considering or have already enacted similar

cuts. I have to stress that these service cuts will not save my company or others like it without some form of rate increase. These

cuts can only slow our losses somewhat. Without a rate change,

portable x-ray services will inevitably vanish, leaving ambulance

transportation, with its higher cost and lower patient satisfaction,

as the sole alternative.

By the actions of the chairman last year and through many conversations with the Small Business Committee staff, I know that

this Committee is truly supportive of the Nation’s small business

community. I sincerely hope that all members of this Committee

will join us in calling for reasonable solutions to this critical problem.

Thank you again for the privilege of sharing my views and experiences with you today.

8

[Mr. Evans’ statement may be found in appendix.]

Chairman TALENT. Thank you very much.

Our next witness is Karen Woods, who is the executive director

of the Hospice Association of America. Miss Woods?

STATEMENT OF KAREN WOODS, EXECUTIVE DIRECTOR,

HOSPICE ASSOCIATION OF AMERICA

Ms. WOODS. Thank you. Good morning, Mr. Chairman and members. I am very proud personally and professionally to be able to

represent hospice agencies, to represent the patients that they care

for and their caregivers.

The Hospice Association has been very concerned about the

changes that occurred with BBA ’97. Our main focus is looking at

accessibility and quality of end-of-life care and feeling that all of

us deserve quality end-of-life care and we have certainly seen this

hampered by changes in BBA because of the way it has affected

how hospice operation can work.

This is a national issue and it seems to be doubly impacted upon

rural hospices because of all the information that we have heard

already, just information on the ability to hire staff, to maintain

that staff, to provide that service on an appropriate reimbursement

rate.

Currently, only 20 percent of Americans receive terminal care

from hospice programs. When you consider that as a national average, again you can certainly say that in a rural area, that is going

to be much less than 20 percent. This means that most people are

dying with a terminal illness without the care and support that

they need and that families are not provided support following the

death.

Considering the issue of low population density in rural areas, it

makes it inherently difficult to deliver services and specifically

with such a targeted area—people with a terminal illness—to get

the care where it can be provided, and that care is in the patient’s

home.

The rural health agenda, some information that we have provided was telling us that rural Americans are faced with issues

that create barriers to care because of an inadequate supply of primary care physicians, as well as other health care providers, such

as nurses, home care aides, social workers and counselors, and that

is a reality. And those particular disciplines are the heart and soul

of a hospice home care team.

In conversations with providers that we represent, we have been

getting information about the impact and some of the things I am

going to list are just in broad terms what they are feeling. Definitely the shortage of nurses, home care aides, therapists and social workers, making it very, very difficult to recruit and then

maintain these people. And the Medicare benefit is defined in a

way that the hospice programs are required to provide certain core

services where they cannot contract with people; they have to be

full-time employed, and this is very difficult when the supply is

low.

There has also been a decrease in the hospice market basket updates and that obviously has affected every aspect of hospice care

and the services provides.

9

Insufficient reimbursement barely allows them to maintain appropriate wage and benefit packages for their staff.

There is definitely a lack of funding for innovative modalities,

such as telehealth care. Now certainly when the Medicare benefit

was designed, telehealth, telemedicine did not exist, but in an, I

will say, restrictive per diem rate, there is no edge and no give for

new technologies.

Hospice programs are faced with restrictive regulations that in

some areas prevent them from contracting with specialized nursing

services. There may be one particular procedure that normally the

day-to-day functions of a hospice nurse does not need to address,

but because of regulation, they are restricted from contracting with

a specialist to do so.

They are required to have their home care aides supervised only

by a registered nurse. It would be nice if a licensed practical nurse

could do that. It would certainly allow for a little freedom and less

expensive staffing.

There is also restrictive regulatory definitions of service areas.

Mileage and driving time are the criteria. The criteria is not the

quality outcome. It makes it very difficult and sometimes almost

impossible for a hospice program to provide service in a rural area.

We were talking to a program in Nevada and there is an hour

drive time. That is the limit. If they cannot make it to the patient

in an hour’s drive time, they cannot service the area. And in the

rural area, that is probably not quite halfway to a routine visit.

We have had a report from some members in the southwest region of Kansas and they were talking about the domino effect of

BBA ’97. Just this past May, on May 31, the regional hospital center closed its home health agency and the home health agency, in

turn, needed to close its hospice program. Their concern is there is

a county without any home care services. They said if this was an

urban area, competition would certainly move in and they would

have patients referred to other agencies as they closed their doors.

There is no one to turn the care over to, so these patients are left

unattended. To be left unattended in your last dying weeks without

the support and care of a hospice program I think is a criminal act.

We have added some information in an appendix to our comments and I would just like to go through those. These are some

suggestions, recommendations that we have and actions that we

would think would be good to take.

Looking at funding grant programs for training therapists, medical social workers, nurses and home care aides and other hospice

personnel with a focus on providing home and community-based

practice in areas where shortages exist.

Would like to amend a particular section of the Social Security

Act to include a provision allowing specialized high-tech nursing

services to be provided by contract under the direction and supervision of a hospice.

Would like to see legislation enacted that would allow LPNs, especially in rural America, to supervise home health aides and certainly under the general supervision of a registered nurse.

Would like to see federal programs that finance hospice services

to adjust reimbursement to allow for appropriate wage and benefit

levels for all clinical staff.

10

Would like to see clarity in the definition of hospice multiple site

service areas and certainly looking at uniform reasonable and an

up-to-date policy that focusses on the ability to provide quality

care, rather than imposing arbitrary and ineffective time and distance requirements.

Would like to see legislation clarified around the issue of telehealth and have that as a service provided by a hospice and that

Medicare should provide appropriate reimbursement for technology

costs for rural hospice providers. And I was pleased to hear that

HFCA is looking at that very issue.

And we would like to see the restoration of the reductions in the

market basket updates that were enacted by BBA ’97 and also the

1999 Omnibus Appropriations Act.

And I thank you and again thank you for your attention to this

very important issue.

[Ms. Woods’ statement may be found in appendix.]

Chairman TALENT. I thank you and your members for your service to people.

The next witness is Norman Goldhecht, who is the vice president

of Diagnostic Health Systems from Lakewood, New Jersey.

STATEMENT OF NORMAN GOLDHECHT, VICE PRESIDENT,

DIAGNOSTIC HEALTH SYSTEMS, LAKEWOOD, NEW JERSEY

Mr. GOLDHECHT. Thank you, Mr. Chairman and members of the

Committee. I ask that my entire written statement be entered into

the record.

I appreciate the opportunity to appear before you today. My

name is Norman Goldhecht and I serve on the board of directors

of the National Association of Portable X-Ray Providers as the regulatory chairman. I am also an owner of a portable radiology company in New Jersey.

Mr. Chairman, the portable x-ray industry has been seriously

threatened by the passage of the Balanced Budget Act of 1997. We

are now truly seeing its effects and they are devastating to small

business. Our industry is made up of predominantly small businesses, small businesses that cannot withstand the razor sharp

cuts in revenue we have experienced over the last several years.

There are three areas that I would like to focus on this morning.

I do not wish to sit here and simply complain about the problems

my industry is currently enduring. I want to offer some suggestion

as to how we might move toward resolving our problems, thus ensuring that we survive the massive changes to the Medicare system

currently under way.

The three topics I wish to focus on are as follows. A rural modifier, transportation of EKG, and consolidated billing.

As far as the rural modifier, portable x-ray providers service

many skilled nursing facilities, SNFs, and home-bound patients

that reside in rural areas of this country. We must travel considerable distances to and from these sites to offer these patients our

valuable and cost-effective services.

Our industry has been one of the first cost-saving alternatives for

the Medicare system. Based on a 1995 cost report performed by the

Center for Health Policy Studies, the average charge to Medicare

was appropriate $87 for a typical x-ray performed by a portable xVerDate 11-MAY-2000 09:26 Feb 22, 2001 Jkt 070375 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 E:\HEARINGS\67561 pfrm02 PsN: 67561
11

ray provider. The average cost to transport that same patient by

ambulance was $420. If the patient is admitted to the hospital, the

cost rises to thousands. It should also be noted that the transportation portion of our fee is prorated among the number of patients

we see per visit. The ambulance fee is per patient.

We are recommending an additional fee when our services are required in a rural area. We understand that this is an established

practice in other areas and we feel that the additional travel that

is required would warrant such a request. The fee would be reimbursed in the form of a special CPT code only to be used and billed

when a provider performs services in a rural area.

Transportation of EKG service. Currently we do not receive any

additional reimbursement to travel to a nursing facility when performing an EKG. This reimbursement was taken away from an industry when the Health Care Financing Administration deemed

CPT code R0076 a noncovered service. The service had previously

been covered.

My current reimbursement for the EKG technical component is

$16.49. This is the same reimbursement that a physician’s office or

a hospital receives if they were to perform the test in their office.

Each time an EKG is performed, we must dispatch a technician

who must travel anywhere from five to 50 miles or more. Clearly

this does not cover the expense of the exam.

We feel the simple solution is to reinstate EKG transportation as

a covered service.

Consolidated billing. The pending onset of consolidated billing is

a major issue facing our industry. We have been working with several agencies to seek a resolution. The BBA mandated Prospective

Payment System, PPS, and consolidated billing for skilled nursing

facilities. The basic premise of these acts is that they take away

the control of the billing aspects of our members and give them to

the nursing facilities.

While consolidated billing has been delayed, PPS has been in effect for over a year and we have seen the effects. Under PPS, residents that are Part A patients of a SNF have to be billed directly

to the SNF and the SNF will reimburse the x-ray provider for the

service. The problems that we have encountered are that the SNFs

sought large discounts and have delayed payment from 90 to 180

days and in some instances, due to the large number of nursing

home chains that have declared bankruptcy, we have never received payment.

This has put the small businesses in our industry in financial

difficulties, and while PPS only represents a small portion of the

work that is performed by our providers, it has given us a look into

the future of consolidated billing.

Consolidated billing will require our members to bill the SNF for

the services performed to the residents that are currently being

billed to Medicare Part B. This will certainly cause the small businesses a hardship. The SNFs will demand discounts from our current fee schedules. The consolidated billing requirement of BBA ’97

requires that all ancillary providers performed in the SNF be billed

directly to the SNF, rather than the provider billing Medicare directly.

12

Although consolidated billing has been delayed, the principles behind the system cause serious problems with the small businesses.

Medicare currently pays providers within 21 days of receiving a

valid claim and pays interest when they do not pay promptly. Additionally, a provider never has to be concerned about receiving reimbursement or having to give a discount in order to provide services.

The onset of consolidated billing would cause providers to wait,

on average, 90 days or up to 180 days or even longer for payment.

The SNFs would also require the providers to give discounts for the

added billing expense that they would incur.

The main objective of consolidated billing was to reduce fraud

and abuse. It was to make the SNFs the gatekeepers of services

performed in their facilities so that they might monitor the billing

that is being done. This is a budget-neutral issue, as the amount

of money the government is paying is only being transferred from

the providers to the SNFs.

This is why we have suggested the voucher system. This would

require the providers to submit a bill at the end of each month to

the SNF for all services performed. The SNF then would have to

sign off on an approved voucher and the provider then could bill

Medicare and receive payment directly. This would accomplish a

needed compromise. The facilities verification would cut down on

fraud and abuse while allowing the providers to receive payment

directly and promptly. It should be noted that if the SNFs receive

payment directly from Medicare for services that the provider has

delivered, they would have a direct interest in having more services

performed. If they require providers to discount their services, they

would receive additional funds, meaning the more services performed, the more revenue to the SNF. Since the SNF is a requester

of services, they control how many services are to be performed.

The voucher system is a budget-neutral solution which allows us

to solve the problems that can arise with consolidated billing while

still accomplishing the government’s main objective.

Thank you, Mr. Chairman and members of the Committee, for

the opportunity to address you today. I would be happy to answer

any questions.

[Mr. Goldhecht’s testimony may be found in appendix.]

Chairman TALENT. I thank the gentleman.

Our last witness is Mr. William A. Dombi, Esquire, who is the

vice president for law of the National Association for Home Care.

Thank you, sir.

STATEMENT OF WILLIAM A. DOMBI, ESQ., VICE PRESIDENT

FOR LAW, NATIONAL ASSOCIATION FOR HOME CARE

Mr. DOMBI. Thank you, Mr. Chairman and Ms. Vela ́zquez and

members of the Committee for the opportunity to testify here

today.

The question posed in this hearing is whether Medicare reform

has killed small business providers. With home health agencies,

the answer is an unqualified yes. Home health care is a dying

breed in this country at this point as a direct result of the Balanced

Budget Act and the institution of payment reforms with the Medicare home health benefit.

13

Mr. Talent, in your State of Missouri, Health Care Financing Administration statistics indicate that 79 home health agencies have

closed since the Balanced Budget Act, which represents more than

a third of the agencies in that state, but the updated numbers are

103. So we have an accelerating pace of closures. In addition, 32

out-of-state home health agencies are no longer servicing residents

in the contiguous areas between the state of location and the State

of Missouri.

With respect to home health in the Virgin Islands, it has become

the virgin island. You do not have home health agencies available

to provides services on all of the islands. And each of your states

is in a similar position, both in metropolitan but in particularly

rural areas.

Rural areas are subject to closures due to the changes in reimbursement, primarily for two reasons. One, Medicare, with its

changes in reimbursement, did not respect the differences between

rural home health agencies and nonrural home health agencies.

The reason is that the system was designed with the concept of

averaging and we all know that the only way averaging works is

if there is only one participant in the process because with averaging, there are people above and below the line and rural home

health agencies are generally below the line. They have costs which

for years have been documented to be 12 to 15 percent greater than

the cost of nonrural home health agencies. The level of utilization

of services has been documented to be over 15 percent greater due

to the nature of the patients served in those rural communities.

Home health agencies, by definition are small businesses, 94 percent by HCFA’s definition are small businesses. And for rural home

health agencies, when we speak rural, we speak of float planes in

Alaska. In Montana we talk of snowmobile delivery of services and

in the Delta we talk of boats just transporting people from house

to house.

When we look at the definition of rural, the nearest McDonald’s

is 100 miles away, and that is a long way to go to get a hamburger

and you are not going to get home care delivered out into those locations.

The policies and practices of the Health Care Financing Administration have added to the problems. In one respect, they tout their

successes relative to rural health care providers, but they do not

mention home care rural health care providers in that respect. In

virtually every case where a home health agencies has a debt with

the Medicare program as a result of the reimbursement changes,

the Health Care Financing Administration has opposed reorganization of that debt in bankruptcy court. They have institutionally opposed the use of the compromise authority they have on any of the

debts.

And, as a result of that, public health agencies and local taxpayers throughout the Midwest and the rest of the country have

been forced to subsidize the Medicare program. Small business

owners have subsidized them for years and have closed down as a

result of that, as well.

The Prospective Payment System for home health begins October

1, 2000 if everything goes on schedule and I know this Congress

and the home care industry and the Health Care Financing AdminVerDate 11-MAY-2000 09:26 Feb 22, 2001 Jkt 070375 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HEARINGS\67561 pfrm02 PsN: 67561
14

istration hope that PPS is the solution to the problem caused by

the IPS of the Balanced Budget Act, and I think the answer to that

for rural small home health agencies is: no. It is a perpetuation of

the problems caused by the Interim Payment System. It still works

on the basis of averages. And despite the authority that Congress

specifically gave to the Health Care Financing Administration to

recognize geographic differences in home health service delivery,

the Health Care Financing Administration has failed to put in

place a rural differential and that will lead to further deterioration

in the foundation of delivery of home care services.

Why is there a need for a differential? Well, in Washington, D.C.

a home health agency will drive probably four to five miles to get

to a patient’s home. In Northern Virginia the same and in the

areas of Baltimore, the same in Maryland. But when you are in

Montana, you are driving two and a half, three hours between patients’ homes. Productivity levels are significantly lower.

Home care is a local service. Unlike the closure of rural hospitals

where patients were then transported by ambulance to the rural

hospitals, you are not going to transport the patient to a home care

setting. You transport home care to that patient.

In addition, with prospective payment at this point in time, the

Health Care Financing Administration still refuses to allow the use

of telehealth services within the prospective payment method that

is being offered to the home health agencies. No flexibility is being

provided to them.

Additional problems—labor and workforce, and part of those are

due to Health Care Financing Administration policies. Hospitals

are allowed to reclassify their location for purposes of wage index

adjustments when the hospital competes with metropolitan-based

hospitals for the same labor force. Home health agencies, under the

current system and the prospective payment system, are not allowed to do that.

And finally, a HCFA policy that is causing great problems in

rural areas is their definition of what is an allowable branch location. A branch location, by definition, cannot be more than one

hour away from the parent sites and in order to perform supervision and oversight of the branch, you cannot rely upon electronic

transmissions. In other words, telephones, fax machines, email and

everything else cannot be considered in determining whether a parent home health agency can adequately supervise a branch site.

Branch sites will allow rural home health agencies to expand

their territory, expand their patient base, which is necessary to

survive under the prospective payment system. With a rural home

health agency, one single patient at $12,000 of cost and $3,000 of

reimbursement on the episodic 60–day basis will bankrupt that

home health agency, and that is due to the small size and adverse

selection by coincidence that will occur for those rural home health

agencies.

Within this testimony, I have offered several solutions. We need

to change the branch office definition. We need to bring in a rural

home health agency differential in terms of reimbursement. We

must make the wage index applicable to home health agencies, the

same way it is applicable to the hospitals. And we have to create

some workforce flexibility to respect the fact that rural areas and

15

small businesses providing home health services do not have a

labor control that you see with larger employers across the country.

I plead with you to try your best to give rural home health agencies the opportunity to serve rural patients. We have a dying breed

and by next year, if the system continues as proposed, we will not

have a foundation for home health services to provide to the rural

communities to restore. Thank you for your time.

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

Chairman TALENT. I appreciate that testimony. Go a little bit

more into the branch office for me, if you will. HCFA is discouraging home health agencies from establishing branch offices. Is

that what is going on?

Mr. DOMBI. The Health Care Financing Administration actually

has a variety of policies on this issue, depending upon what regional office that you are dealing with and varying interpretations,

as well. But predominantly, the interpretation begins with the

question: Is the branch office more than 60 minutes away from the

parent site? And if it is, it is presumptively a nonqualified branch

office.

They have made occasional exceptions and there have been some

recent—— Chairman TALENT. And if you are not qualified it means you cannot provide service out of that branch office?

Mr. DOMBI. You cannot locate a branch there and provide services and receive Medicare reimbursement. And as it comes to the

question of oversight and supervision of the branch by the parent

office, you have to have staff from the parent actually go to the site

of that branch on a regular ongoing basis and the parent’s staff

must be capable of also seeing the patients served by that branch

in order for there to be considered adequate supervision.

Chairman TALENT. Is the concern fraud or something here? Is it

the quality of service or what?

Mr. DOMBI. We have asked the question how do you assess the

appropriateness of supervision and oversight if the branch is 10

miles away and frankly, we have not yet received an answer to

that question because we think the answer should be the same answer that is applied when it is an hour away or two hours away

or three hours away.

So we do not know the rationale. We suspect that the rationale

is more that branch offices traditionally with HCFA were actually

unknown entities. They did not have a formal reporting mechanism

for branch offices, so they did not have a formal oversight mechanism for branch offices, either.

Chairman TALENT. Do you want to comment on that?

Ms. BUTO. Yes. Actually, the chairman was right. I think the

concern about branch offices did grow out of a concern about a variety of things coming together. One of them was whether the

branches really were providing bona fide home health services

under the conditions of participation. And then you get into issues

is it such as, just an office and you have unsupervised staff; is this

really a home health agency? Is it really tied to an entity?

This set of requirements came out of that concern and some of

them were looked at by the Inspector General’s office and other

oversight agencies that pointed out this concern.

16

So Mr. Dombi is right that this is something where the regional

offices have some discretion and that we are, I am told, working

with the industry to try to come up with more uniform standards

that can be applied. There is an underlying issue of whether the

branch itself, in fact, is a real part of the home health agency or

whether it is an unsupervised office that really would not meet

Medicare conditions of participation for quality and supervision. So

that is really where it comes from.

Chairman TALENT. One of the reasons I ask about this is because

it seems to me one area of some relief here is to be pretty ruthless

in eliminating requirements that raise costs and do not have any

relationship to quality.

In other words, in a field where the problems are so severe and

the money constraints are so great, every dollar that we waste with

some stupid regulation that says a branch office can only be an

hour away, it cannot be one hour and five minutes away, is really

almost criminal because we do not have the dollars to waste.

I am not saying he is right. One of my complaints about HCFA

over the years has been almost a nonchalance regarding how much

money may be wasted in filling out a form or some regulation that

does not accomplish anything and I wonder if you share that sense

of urgency at all.

Ms. BUTO. Oh, absolutely. And I think definitely the point about

the right balance and allowing branch offices because they are

needed for access purposes is a good point and I think we have to

figure out how to do that in a way that everybody is confident that,

in fact, this is a home health agency or a branch of a home health

agency and I believe that it is possible to do that without having

unwarranted requirements that simply waste money.

If I could just comment on one other thing that Mr. Dombi said.

I know that the numbers show that a number of home health agencies have closed or consolidated, and we frankly do not know how

many of them have consolidated versus really closed.

We and the inspector general’s office and the GAO have all

looked at and we have also been in touch with our state health insurance counselors, who, like ombudspersons, who take complaints

from beneficiaries about access to home care and we are not finding

that has been a major problem.

In many of the areas where these agencies have closed and there

has really been a relative handful of states, those states tend to be

the states where we had a doubling or so of agencies within the

last few years and they are the ones where disproportionately we

are seeing a reduction. But I just wanted to address the issue of

the closures because many of them are consolidations.

Chairman TALENT. Well, let me go into that and get this on the

record with you because ever since the Congress passed the act of

’97, I have been myself besieged with home health care providers

and I am sure everybody in this Committee has had the same experience and these are people who we know in the communities we

represent and know to be credible people. I mean they may be mistaken but they are not walking into my office and lying to me

about the situation. Anybody can be mistaken.

And over and over again, and I know every member of Congress

has had this experience, and I guess what I am trying to say to

17

you is that is so inconsistent with the response that really there

is not a problem, which is kind of what you just said.

Now I appreciate your candor and I do not want to jump down

your throat for it. In fact, it is almost a relief to me that—it would

be a relief to me to believe that the agency believes there is no

problem. I would rather believe that than that you know that there

is a problem and you just do not care about it. Do you know what

I mean? At least we should be able to establish whether there is

a problem or not but I have just been told over—obviously, it is anecdotal; my office does not have the capability of conducting an empirical survey or anything—that, in fact, they are closing down;

they are not able to provide the same level of service. People have

to be suffering out there.

Is there anybody here who has not had that experience?

Ms. BUTO. I did not want you to think I was saying there was

not a problem for home health agency providers. I think the interim payment system has been a problem for many home health

agency providers and some of it has been because it is based on a

cost experience in the past.

So essentially what it did is it said let’s take your cost experience

that occurred several years ago and you may have grown in terms

of the number of visits you provide and so on. We are going to essentially roll you back to that earlier period and set tight limits

based on what your experience was back then, on what your overall

cost was that will be recognized. There is no question that I think

that has had an impact.

What I was addressing was the beneficiary impact as we know

it and has been surveyed by GAO and others, but I do think and

we are quite anxious to move to the prospective payment system

where we believe by paying on an episode basis, the system will be

better for home health agencies, it will provide the greater flexibility for them. They will not be under the same kinds of constraints and there will be more ability to move.

I was interested to hear Mr. Dombi say if we continue on the current path, I guess I am wondering if he is not favoring going to the

prospective payment system because I actually thought he was.

But I do believe that the October 1 system will be better. It will

not be perfect. Some of the things we have done to really scale back

on recovery of overpayments are designed to help home health

agencies so they do not face drastic reductions. So I did not want

to leave you with that impression.

Chairman TALENT. It seems to me logical that there will be a

tendency on the part of the facilities to want to overuse services

and then make some money back through discounts from the providers, particularly since they are complaining that they are not

being compensated enough. Do you think that that is going to be

a problem?

Ms. BUTO. The home health agencies, you mean——

Chairman TALENT. As I understand the PPS and somebody correct me if I am wrong, you are going to be billing through the

skilled nursing facilities. Is that correct?

Ms. BUTO. Oh, you are talking about the consolidated billing.

Chairman TALENT. Yes.

Mr. DOMBI. That does not apply to home health services.

18

Chairman TALENT. Okay. It applies to the other ancillary services.

Ms. BUTO. Yes. It would be things like x-rays, as the gentleman

was saying, would be billed through the skilled nursing facility and

as he said, it has already been billed that way for the prospective

payment for skilled nursing facility.

Chairman TALENT. Are you concerned about the phenomenon

they are talking about the skilled nursing facilities, in effect, driving—using it as an extra revenue producer for them? In other

words, they will overuse services, try to create discounts with the

ancillary providers and then they get to keep what is left. So, in

effect, we achieve the opposite of what we want. We get services

overused and we also have the pressure on the small businesses.

Ms. BUTO. Well, of course, first of all, we have not put this system in place because it is one of the more difficult—it involves both

skilled nursing facilities and all these other providers having to— we have to have a way to collect those claims and actually validate

them.

We are hearing a lot of this kind of concern. I just want to tell

you on the other side, and we do not know exactly what is going

to happen, but both we and the oversight agencies have this among

the things we will be monitoring the most closely to see what actually is going to happen.

But the concern on the other side, that led to the enactment of

the consolidated billing provisions, was that we were getting billed

without much oversight by the nursing facility which had the patient by a number of different suppliers—physical therapy, DME,

x-ray, et cetera, suppliers providing things like supplies that are

used in their nursing home.

In addition to Medicare, there often was a Medicaid payment involved because many of these individuals get both nursing home

coverage through Medicaid and Medicare.

What was found in a variety of different surveys by oversight

agencies and our auditors was duplicate payment, payment that

was very hard to trace to medical necessity, and I think the general

recommendation that came out of those studies was we need an accountable entity here that looks at what is being provided to that

patient and it ought to be the facility.

So I understand what the gentleman is saying about the potential that the facility will try to get discounts and so on. We understand that. I think we are going to be concerned about access to

these critical services if that really seems to be a problem.

On the other hand, HCFA, as you know, is constantly barraged

with criticism for setting prices. We do not know what prices are,

we cannot predict what the marketplace is going to do, and that

is why we are moving to these kinds of systems where we give

more of that flexibility to providers to make those trade-offs and

try to really strike the best bargain for their patients.

Chairman TALENT. What about Mr. Goldhecht’s idea of like a

voucher where the facility would still have to approve—that is how

I would understand it.

Mr. GOLDHECHT. Correct.

Chairman TALENT. They would approve your billing but they

would be paid directly.

19

Ms. BUTO. And again they would be paid on a fee schedule, as

I understand it, that we set.

Again I think we would have to go back to one of the underlying

premises of the PPS, which is did we want to give the facilities

more of that control or do we want to continue setting the price

and sort of guaranteeing a price to every supplier?

HCFA is behind and supports the idea of turning that decisionmaking over to the facility, but we are obviously going to worry

about access issues. That is where we are, and no one has raised

the voucher issue before to us and we would certainly be glad to

take it under consideration as we think about possible changes in

the system, but that is a new idea.

Chairman TALENT. Let me raise two more issues before I recognize the gentlelady from New York and they are related. Parts of

the testimony today just seem to me to be again so inherently plausible and I want to get your response to it.

One of them is the concern about ending reimbursement for the

cost of transportation or travel really for an EKG service that we

have heard about today. So now we are in a situation where—I

guess this is Mr. Goldhecht’s testimony—the current reimbursement for the EKG technical component is $16.49 and that is what

you get regardless of how far you have to travel to give this EKG.

Mr. GOLDHECHT. Right.

Chairman TALENT. So it just seems to me that obviously the cost

for small businesses are going to be greater if you have to travel

two hours to administer the EKG than if you can do it in five minutes. And if the reimbursement schedule or system does not recognize that, it is flat out obvious that you are going to be underpaying for certain kinds of EKGs.

Why isn’t Mr. Dombi right in saying the same thing about the

need for a rural differential for home health? If you calculate on

an average, you are obviously going to be underpaying people who

have greater costs to provide the service.

Now, what is HCFA thinking, that they will just cost-shift or

something or that the average is high enough that they can share

it? And then the problem with that is if you are a rural provider,

you do not have any lower cost services. You are traveling to everybody you are serving.

Ms. BUTO. The issue that you are raising and that——

Chairman TALENT. Ms. McCarthy just wrote two words here: gas

prices, which is something that we are all thinking about now and

you might want to talk about that, also.

Ms. BUTO. Well, let me directly address that. Medicare does not

routinely pay for the cost of transportation and whether we should

or not, and I think this Committee would say we should—for instance, if a rural physician as to travel, we do not pay his gas costs.

A rural nurse-practitioner, et cetera. We do not do that as a rule.

The issue of whether we should I think is a legitimate question.

It would require a change in the law and not just for home health,

but for a variety of other areas of the Medicare program. I think

you can argue that this would be true for a whole variety of providers and suppliers who must travel distances to get to individuals.

20

On the issue of the EKG transportation fee, we originally established that to recognize basically the van costs and the need to

transport large equipment, as we do for portable x-ray, to remote

locations or to other sites.

In the time since we established that fee, EKGs have become a

lot more portable. I had a life insurance examination recently and

the technician brought over the EKG and the blood work tools and

so on in a briefcase.

Recognizing the issue of mileage, which you are raising, the

original point of that transportation fee was to recognize the fact

that large equipment or delicate equipment needed to be transported by van, and that is how we established the rate.

And the other thing that has happened since then is that because an EKG is more portable, nursing facilities and other providers now have more of this equipment on hand than they did

when the rate was originally established.

So that is the rationale. I understand your point about gas and

transportation and mileage, but that is really not the way that fee

was established.

Chairman TALENT. Mr. Evans wants to say something.

Mr. EVANS. I would like to make a comment on Miss Buto’s information she gave you.

While technology has shrunk and made things lighter and more

portable, the costs have also gone up. I am sure that before you got

these new timers, the old timers were probably big and bulky and

a lot different than what you have now.

My concern is that not only has the cost gone up for the technology; you still have to transport that in some way. You still have

to transport that piece of equipment some way. It is more cost-effective for us to put all of our equipment into one unit and have

it go from site to site in one unit. However, in our case, if we have

an EKG 20 miles to the north and an x-ray 30 miles to the east,

we actually take that equipment out of that, put it in one of the

smaller vehicles and let a technologist go do this other exam.

So I guess my point is we try to be very, very cost-effective and

watch the dollars that Medicare is giving us. I used to own a home

health agency and went through some of the problems Mr. Dombi

was speaking of. It seems to me, and this is my own viewpoint,

that the people that are still in business today, they went back, as

Miss Buto talked about, going back and looking at the numbers of

what happened years ago, not based on whether gas prices rise or

your business grows or whatever. It seems to me that the only

home health agencies that are still in business are the ones that

raised the prices, that had high costs back years ago.

My concern is overall that we stop looking at this through rosecolored glasses and actually look at what is happening in rural

America and make the changes based on what is happening in

rural America.

Mr. GOLDHECHT. Mr. Chairman, I just want to clarify something

Ms. Buto had said. She had mentioned that the equipment got

lighter and easier, more compact and that nursing facilities might

get it. Well, I can tell you first-hand that I do not know any nursing facilities that own EKG equipment. Most of the larger chains

21

have gone bankrupt and they are not looking to make any capital

purchases.

That being said, the volume, the sheer volume of a typical skilled

nursing facility does not warrant them buying a piece of equipment

that they might use three times a month. That is why they have

a service like us. And whether the equipment has gotten lighter,

less expensive to purchase, the cost of transport is the cost of

transport. That has always been the case.

I have been in business for 15 years. I can tell you that the difference between what I paid for an EKG machine 15 years ago and

what I pay today is negligible. That is not going to keep me in business or put me out of business. The cost that it takes me to send

somebody down the road five miles, 50 miles, 75 miles, that is what

is killing my business.

Chairman TALENT. Because they are not administering EKGs

when they are driving a van or a truck or something.

Mr. GOLDHECHT. Right.

Chairman TALENT. Is there a private pay segment of the market?

And if so, what do they pay?

Mr. GOLDHECHT. I am happy you asked that question. What is

the problem with our industry is that specifically portable x-rays,

we have been designed for the skilled nursing facility. You and I

can go to a radiologist’s office, a hospital, and get an x-ray. It is

much cheaper that way. But the skilled nursing facilities cannot

send their patients out. It is much more costly.

So any act that Medicare changes the reimbursement or takes

away reimbursement affects 100 percent of our business. We do

not, unlike laboratories or ambulance companies that do work for

hospitals, do work for private physician’s offices, they can offset

some of that cost. We do not have that.

Chairman TALENT. So there is no private pay. There is not anybody paying privately for EKGs.

Mr. GOLDHECHT. Right.

Mr. EVANS. Excuse me just a minute. If you do not mind, Norman, I am going to interject here.

In my case, yes, I do have some private payers that we work

with for EKGs.

Chairman TALENT. What do they pay for a comparable—— Mr. EVANS. Depending on the client, as we negotiated our con- tracts, $100 to $175. However, and I want this to be part of the

record because I think this is very important, we are 85 to 90 percent dependent on Medicare.

Chairman TALENT. Sure.

Mr. EVANS. I do not have that many private patients.

Chairman TALENT. What I am getting at is Medicare is paying

$16 and a private pay is paying $100 to $175.

Mr. EVANS. Correct. And just to be accurate here, the transportation was bundled into that $16 rate.

Chairman TALENT. Isn’t that a suggestion that maybe we are

undercompensating, Ms. Buto? If the private sector, which—as I

understand, you had a problem with fixing prices. I always restrain

myself. I tend to get mad at HCFA and then I say, you know, in

the first place, a lot of it is Congress, not HCFA. And in the second

place, it is very difficult to plan prices and all the rest of it for a

22

segment of an economy. I mean planned economies tried it for

years and it was very difficult, so you have a very difficult job.

I mean to the extent there is a private pay market and they are willing to pay $100 to $175 for what you are paying $16 for, it suggests to me that you are below the competitive rate.

Ms. BUTO. Maybe, but I would like to know where that comes

from and how widespread it is and the reason is that we have not

really had any complaints, from skilled nursing facilities, who use

these portable x-ray providers, that they cannot get them at this

rate.

Again, it is a tough thing for us to get into if, in fact, the service

is willing to be provided at the rate and I think what I hear people

saying is maybe they can provide it at this rate, but they are concerned that deeper discounts will be required if we go to this bundling, consolidated billing approach, that will further erode what

they are getting.

I would like to see the information from the private payers. It

may be something we need to look at.

Chairman TALENT. I recognize the gentlelady from New York. I

appreciate the Committee’s patience.

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman.

Ms. Buto, I am concerned about the statement that was made by

Mr. Dombi. He made reference to the fact that your agency does

not respect the differential in terms of rural and urban areas and

that you failed to put in place a rural differential in terms of reimbursement. What is your comment regarding that?

Ms. BUTO. This prospective payment system and the interim payment system are very, very driven by the way the statute is written. If there was a rural differential in the statute—and I do not

know; maybe during the discussions on the legislation, that was

discussed—if there was one in it, it would be there.

There are other areas where, for instance, physician payment,

there is a rural bonus that is provided to physicians in rural areas

and undeserved areas. There are very specific areas.

The other thing he mentioned, which is being able to reclassify

your wage index so that you get higher payment, in hospitals, rural

hospitals can reclassify to an urban area, get a higher wage index

and get higher payment that way. That is not available—he is

right—to home health agencies.

Again, that is something that is driven by the statute and statutory changes could be made along those lines, but they have not

been considered before, that I know of. Maybe they were and I just

was not aware of it.

And, again, it is the kind of issue, just like the gasoline issue,

that I think affects more than just home health, affects more than

just portable x-ray. It is an issue that would need to be looked at

for rural providers more generally.

Ms. VELA ́ ZQUEZ. Yes?

Mr. DOMBI. If I might respond to that. In fact, the Congress did

look at the issue and specifically in the prospective payment statutory language said that the Health Care Financing Administration

or the Secretary of HHS, in designing a prospective payment system, has the authority to reflect geographic variations between

home health agencies.

23

The system that has existed up until now for home health agencies has been a per-visit cost reimbursement system with cost limits. Since 1979, the first year of those cost limits, the Health Care

Financing Administration has had a difference between a rural cost

limit and an MSA, a metropolitan statistical area cost limit, and

there is no specific language in the statute that mandated that.

So they have both regulatory power from preexisting practices

and statutory authorization to do so and we have, in the discussions and in the formal comments we have given to HCFA relative

to the prospective payment system, have said that they should consider a distinction between the rural and the nonrural home health

agencies.

I would like to go on the record for one thing just for Ms. Buto’s

sake. We still do support moving to a prospective payment system

away from the interim payment system but the difference is minor.

It is a difference of the degrees of temperature in hell because the

interim payment system is home care hell for our constituents and

the prospective payment system promises to offer a solution for

some of the providers of services but I do not believe that the solution is there for the rural small home health agency.

Everywhere I go—in fact, yesterday I was in Idaho and the question that was raised to me when I was explaining the prospective

payment proposed system was, ‘‘How will it affect we in the rural

areas?’’ And my answer was, ‘‘You would have no different system

than you have anywhere else.’’ One last remark in case I do not have any other opportunity. My

understanding is Ms. Buto is leaving the Health Care Financing

Administration and I would like to take a little bit of leave here

and give her my thanks for all the work she has done with the

Health Care Financing Administration.

We have had our differences of opinion over the 18 years I think

that you have been there but I have always found her to be receptive, professional and certainly rational in her positions. So I would

like to thank her for that and wish her successor well.

Ms. BUTO. Thank you.

Ms. VELA ́ ZQUEZ. You wanted to say something more?

Ms. BUTO. No, I was just going to say that I misunderstood what

he was saying. And he is right about the interim payment system.

And he is right about the issue of the cost limits in the past. I

thought he was talking about the interim payment system, where

there the structure was a regional per-beneficiary limit. It was very

structured and we may have had some flexibility there. I thought

we followed the statute pretty closely in order to get it done in just

a few months. It had to be done in about four months.

So he is right that in terms of the comments we have gotten on

the new system, we are looking at issues like this.

Ms. VELA ́ ZQUEZ. Ms. Buto, why does Medicare reimburse rural

areas at a lower rate than urban?

Ms. BUTO. Well, a lot of what Medicare is doing now and even

some of the new systems are based on historical costs and on

wages. The fact that it is harder to actually go out and attract professionals to an area does not really get factored into that so much.

So what we look at when we do these surveys of wages is wages

paid, and wages have been in many respects lower across the

24

board, although there are definitely exceptions, in health care in

rural areas versus urban areas. So that is what you are seeing.

What Medicare, and the Congress has actually done a lot of this

over the years, is to try to look at evening that out. In some respects, the Medicare Plus Choice Program, the HMO program that

we have in Medicare, looked to raise the payments in rural areas

well above what we were paying our regular fee-for-service providers to try to attract HMOs to serve those areas. It has not, unfortunately, succeeded the way I think people had hoped it would.

In the physician payment area, the geographic adjustment factor

where you adjust the geographic costs actually is not a total adjuster, and that was done, again, to give more money to rural

areas.

So if you look at various ways in which Medicare pays for services, there are many instances where special provisions were attempted to be made for rural areas—the bonus payments for physicians, et cetera.

I think fundamentally what I guess I have concluded over the

time I have been there and, as Bill said, I have been there quite

a long time, is it is very hard just to get changes in the number

of providers who are willing to serve areas based on reimbursement. It helps, but it does not seem to be the whole solution and

I know that people are really struggling with how can we get telemedicine services and other things into the system so they will

broaden the access?

Ms. VELA ́ ZQUEZ. One area that we care about on this Committee

is regulations. Can you explain to us what has your agency done

to monitor how regulations from the Balanced Budget Act of 1997

have affected the small rural health care providers?

Ms. BUTO. We have done and we hope to issue soon an analysis

of some of our findings. We have done fairly extensive both anecdotal gathering up of information from our regional offices.

We basically said to them, look, we cannot wait for data. That

takes too long. We need to hear the stories that you are hearing

out there of what is happening to providers. We have gathered that

information together.

We have actually looked at things like Bureau of Labor Statistics

has information on a monthly basis on hours worked in various industries and we have looked at that and home health and SNF and

so on, to see whether it appears there is any change. Whether you

can directly attribute it or not, we wanted to know if there were

changes in the way services are being delivered.

We have now a capacity to look at cash or payments that are

being made on a daily basis to providers through our contractors

and we actually set that up during the Y2K exercise so that we

could monitor what was actually happening in case there was a

breakdown somewhere.

So we are trying in a number of ways to look at current indicators of what the impacts are by area, including rural areas. Rural

areas are probably at the top of our list of vulnerable areas, as well

as inner city areas. That is one of the areas we are concerned about

and one of the reasons why we really supported, in the BBRA, a

number of the changes that would allow rural providers to have eiVerDate 11-MAY-2000 09:26 Feb 22, 2001 Jkt 070375 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 E:\HEARINGS\67561 pfrm02 PsN: 67561
25

ther better reimbursement or a less drastic change in their reimbursement in some cases.

So it is an area, as I said in my testimony, where we want to

continue to focus. We have two senior people at HCFA, executives,

Tom Hoyer in the central office of HCFA and Linda Ruiz in the Seattle Regional Office, who are contacts, our rural outreach executives, who we tasked with meeting both with rural providers and

also gathering the data and analyzing it for us across the board so

we can see what is happening.

Thank you. Thank you, Mr. Chairman.

Mr. BARTLETT [presiding]. Thank you.

We will now turn to Ms. Christian-Christensen.

Ms. CHRISTIAN-CHRISTENSEN. Thank you, Mr. Chairman.

I want to thank the witnesses for being here this morning and

particularly for the recommendations that you have offered so far

as to how to address this issue.

Having been a family physician in the Virgin Islands, I feel like

I have been beat up by HCFA almost all my life. I am particularly

interested in the testimony and the responses to the questions that

have been made so far.

We closed our home health care agency, as you said. I have

looked at hospice when I was a practicing physician and because

of issues like the kind of staffing that was required—you cannot be

temporary—we do not have a hospice. Our skilled nursing facility

is struggling, struggling. And I am not even sure where to begin.

Let me ask, I think I heard Mr. Dombi say that all of the flexibility that was available to HCFA was not being utilized. Do you

feel that even though the Balanced Budget Act has put a lot of restrictions and caused you to have to implement new policies supposedly to reduce fraud, do you think that HCFA, Ms. Buto, has

exercised all of the possible flexibility with regard to rural and

small businesses?

Ms. BUTO. We have tried, and I am sure people here will tell you

that we have not gone far enough. I think certainly in the home

health prospective payment system, we are really trying to make

sure that what we are doing here is making sure that beneficiaries

can get access to good quality services and we want to be able to

pay agencies more for more complex cases and to give them more

flexibility to serve those individuals.

We got a lot of comments on the rule, the regulation that we proposed. They were good comments. We have made a number of

changes to accommodate concerns that were raised. So we are hoping—that regulation is very much on schedule—that home health

agencies will look at it and say you have made some appropriate

changes to accommodate our situation. I am hoping that that will

be the case and that that will be the case for rural and small home

health agencies.

Ms. CHRISTIAN-CHRISTENSEN. The interim payment system is

probably the issue that my home health agency talks to me most

about and what you are doing is delaying—well, the interest is forgiven for the first year. You are delaying the payments. But I just

have the sense that it is still going to be an inordinate burden on

the home health care agencies and don’t you think we ought to forVerDate 11-MAY-2000 09:26 Feb 22, 2001 Jkt 070375 PO 00000 Frm 00029 Fmt 6633 Sfmt 6602 E:\HEARINGS\67561 pfrm02 PsN: 67561
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give those—wouldn’t that be a better remedy? I realize that for

those—— Ms. BUTO. There is no question that it would be a better remedy

for those agencies. I cannot give you a definite answer on that because the federal debt collection rules require us to collect those

overpayments and I am one of those people who has to sign off and

am liable if I do not—— Ms. CHRISTIAN-CHRISTENSEN. When I was a physician I was always told it is not the carrier, it is not HCFA, it is the Congress

that is doing this.

Ms. BUTO. These are federal debt collection rules. I am not saying that this is entirely the Congress. These are rules that we have

to live with, as federal agencies.

Ms. CHRISTIAN-CHRISTENSEN. Would you like to—— Mr. DOMBI. Yes. Within the Federal Debt Collections Act is authority for the Health Care Financing Administration to compromise any debt that is owed back to the Medicare program and

they have institutionally chosen not to apply that authority to the

interim payment system debts, which would seem to be the first

type of debt that you would, because these are cost- reimbursed

providers that delivered care to patients who happen to have needs

that exceeded the level of limits that were imposed through the

Balanced Budget Act.

So the compromise authority is there and we would gladly take

any assistance that we could get from this Committee to convince

the Health Care Financing Administration to use the authority it

has to compromise rather than to close a home health agency. The

option that they are offering right now, is pay back money when

you have no money coming to you because you are still cost-reimbursed, or close.

And we have seen the actions in bankruptcy courts, as well,

where the Health Care Financing Administration’s position is close

rather than compromise. We have had bankruptcy courts offer to

the Health Care Financing Administration the opportunity to take

$1 million on a $1.5 debt and the Health Care Financing Administration said, ‘‘No, close them down.’’

Ms. CHRISTIAN-CHRISTENSEN. So there is an administrative remedy that you can pursue.

We did attempt; I think we will try again and we would be willing to work with others to do that.

I guess this question again is for Ms. Buto. The Balanced Budget

Act of 1997 attempted to reduce Medicare reimbursement rates in

an effort to save money for Medicare. Has HCFA performed any

studies or are any studies planned that will assess the savings or

costs to Medicare by the new PPS?

Ms. BUTO. The upcoming PPS or you mean what has already

been saved as a result of the changes in the BBA?

Ms. CHRISTIAN-CHRISTENSEN. The one that is in place.

Ms. BUTO. The interim payment system. Oh, yes. I think the

most recent public document that is probably worth this Committee

taking a look at is the summary from the Trustee’s report of the

Medicare Trust Fund, which actually looks at what is happening.

You know, the short-term solvency has been extended to 2025

largely due to changes that have arisen as a result of the Balanced

27

Budget Act, which is, of course, one of the intended consequences,

but I think one of the issues that was a surprise to us and is certainly a surprise to providers is that Medicare actually spent less

in 1999 than it did in 1998 for the first time in its history. That

was unexpected. Again, a lot of that is associated with, if not entirely due to, changes that were made in the statute for Medicare

payments.

Home health is one area where the most dramatic change occurred, if you look at it, but our actuaries say that spending in a

lot of sectors, including hospitals, was less than expected and we

also saw—we did not see changes we have seen over time, like an

increase in the case mix or the complexity of cases that are billed

to us in hospitals. We did not see any increase. So the actuaries,

in consultation with other experts, attribute that to the effort of a

lot of the oversight agencies, like the GAO and the OIG, efforts to

look at fraud and abuse.

Ms. CHRISTIAN-CHRISTENSEN. Are you looking at also, Miss Buto,

at ways to address the staffing issue for hospices? Is HCFA looking

at ways to address that? Because in a rural area where you have

maybe a physical therapist at a hospital that could provide the

service at a hospice and you are not allowed to use it, there is just

no way to provide the hospice service. Are you looking at ways to

address that, also?

Ms. BUTO. You know, the hospice program is one area where I

think we are willing to look at a variety of issues around both the

structure of it and I think some issues were raised around the

wage index, as well. We are willing to look at that.

The most important thing that I think will be helpful in this

evaluation is that Congress required hospices to begin submitting

cost reports last year. I know that costs have gone up in a variety

of areas, like drugs, for instance, pharmaceuticals, we just do not

have the data to show what those costs have been.

We will now have, probably at the end of this year, or the beginning of next year, enough data to begin to look at what the actual

costs are, and that will help us in any reevaluation of hospice.

Ms. CHRISTIAN-CHRISTENSEN. I yield back my time, Mr. Chairman.

Mr. BARTLETT. Thank you very much.

Mrs. McCarthy.

Mrs. MCCARTHY. Thank you.

I sit here with fascination because here we are on the Small

Business and you have a doctor and a nurse, a nurse that actually

has done a lot of home care over her career. But I understand also

the issues of the rural areas very, very strongly and the hospice

and everything else, I can only relate to when I did private duty

nursing and how hard, and I live in a suburban area, how hard—

we had a hard time staffing a patient. I mean it was really quite

difficult. We had a bunch of friends work together and we went in

as a team. So dealing with that issue, just on the rural area, I do

not know how you do it.

Obviously we in Congress all had good intentions on the Balanced Budget Amendment, and we did, but it is a mess. When we

talk about rural areas, I talk about suburban areas, I talk about

28

my hospitals, my home health care agencies that I have worked for,

somehow this has to be addressed.

And I know what we did, putting rules and regulations down to

you, has been really a mess but my concern is even though we are

trying to work together and you are certainly implementing and

work with the small businesses to try to clarify a number of things,

knowing how government works, it takes too long and that is my

concern because the bottom line, as we sit here and discuss this,

is the patient. That is the bottom line and it is going to be the patients that are suffering.

I think as we try to address this. Hopefully we can do that, especially for small businesses. I find the majority of small businesses

that have been in the health care system are good people and they

are there to take care of those. But my concern is, especially the

traveling that has to be done in the rural areas, we did not take

that into account. Unfortunately, Congress does not think of an

awful lot of things when we write those, even though we try to

reach out to as many people, but I do not think anybody thought

it would be the disaster it has become. And I am hoping that we,

as a Small Business Committee, will be able to work with those

committees to make this the right thing.

Health care is, in my opinion, in an uproar right now, on every

level, on every single level. An awful lot of us have been trying to

come up with answers but unfortunately, there is not an answer

for everybody.

What I am hoping out of this Committee hearing is that we will

be able to facilitate the movement a little bit faster so businesses

do not go out of business. I sit here and I listen to every single one

of your testimonies and I have probably been in the situation

where even I was in a nursing home at one time and we had to

bring in an outside x-ray.

Now, of course, they did not have to travel that far but I think

what people do not understand is how important it is not to transport the patient to a hospital, not to take that elderly patient out

of a nursing home setting, to be able to have it there in the surroundings.

And I do not think any of the things that we have done—maybe

they did not work with nurses; I do not know. We probably could

have given you an earful on every single level. But we have to

come up with solutions. We have to save our small businesses. We

have to make sure there is no fraud and abuse. We all agree with

that. But who suffers in the end? Our business people and our patients.

And with that, I yield back the balance of my time.

Mr. BARTLETT. Thank you very much.

I have a question, I guess for Mr. Dombi first and then anyone

else who would like to comment. At some point as we raise the cost

of doing business for our small businesses that provide health care,

at some point they are going to fail. And if you are talking about

home health care, if they cannot get care at home, then they are

going to move into a hospital where care is very much more expensive. Is this happening?

Mr. DOMBI. At a recent hearing, I believe of the House Budget

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dicating that they are seeing an increase in the number of patients

that normally would have been in home health care and extended

lengths of stay.

Now traditionally, the Health Care Financing Administration

tries to monitor these things but they are four or five, maybe 10

years behind statistically, so they may not see that. But certainly

those are the reports.

The other thing which we find quite fascinating is I believe for

the first time in the history of the Medicare program, the expenditures under the skilled nursing facility benefit now exceed the expenditures for the home health benefit.

And I believe we have a public policy in this country to deinstitutionalize people and keep them integrated into the community and

when you see a rise in nursing home expenditures, it explains

somewhat maybe some lengths of stays in hospitals but it also explains the effect on home care beneficiaries.

This year it is projected that there will be three-quarters of a

million less users of Medicare home health services than in 1997

and those patients have to go somewhere because they are the

most expensive patients. That is why they are having access problems.

I was pleased to hear Ms. Buto say that they have not found in

their studies any major problems in access because I believe just

last year the Health Care Financing Administration was saying

they have not found any problems at all, so at least we have made

it into the problem category to some extent. But I know the Inspector General’s office is concerned about access issues. I know that

the General Accounting Office is. I know MedPAC is concerned

about it. And I know that Ms. Buto and Tom Hoyer and others are

also very concerned about access problems because they are growing, rather than shrinking.

Mr. BARTLETT. Ms. Buto, who has the responsibility of monitoring home health care reimbursement and the effect that that

has on these providers closing and therefore moving patients into

other facilities which are very much more costly—which would

therefore defeat the very thing we started out to accomplish, and

that was to reduce health care costs?

Ms. BUTO. I do not actually buy the notion that they are moving

from home health into skilled nursing facilities. Again we are, and

I would be interested to see if Mr. Dombi has information on this

but——

Mr. BARTLETT. Are they just dying at home, then? Because if

they are not getting the care at home, they are going to go somewhere for care or they will just die at home.

Ms. BUTO. I guess what I was trying to say earlier is that many

of them are still getting care at home. One of the changes in the

Balanced Budget Act was that venipuncture alone, the need to

have a blood draw, is not now, under the law, and probably really

should not have been, a reason for getting home health care with

all the aide services and so on.

A number of people were affected by that change in the law and

there is no question about that. However, we did make sure that

they could get lab services provided to them to have blood draws.

30

But as to the issue of who is responsible, it is our responsibility.

We need to know whether there is an impact on beneficiaries, who

are the number one reason why we are here, of any reimbursement

change, and that is the reason why I was describing earlier that

we have the regional offices both looking at anecdotes, where they

think there is a problem, or an individual case or they think some

agency might be affected adversely, and reporting those to us and

in addition, looking at other indicators that could tell us what is

happening out there as a result of the reimbursement changes.

We have invited the National Rural Health Association and they

have agreed to help us survey rural providers on a systematic basis

to get information they have in rural communities about the impacts of the Balanced Budget Act and NRHA has agreed to work

with us on that. They are also helping us develop information for

beneficiaries in rural areas, so that we can find out from beneficiaries if they are having problems.

So it is our responsibility. There is no question about it. Other

agencies, and the industry itself, also pay very close attention and

gather information and collect surveys, but it is principally our responsibility to make sure that beneficiaries get access to care.

Mr. BARTLETT. We have had testimony from several witnesses indicating that they are now providing services at less than cost, that

they do not have the ability to cost-shift because they do not have

enough private pay patients to cost-shift, and they are telling us

that they cannot continue this forever, that if they do not get some

relief, they are going to have to shut down.

Now if they shut down, then the patients that were getting care

at home are going to be moved into a more costly facility. You are

saying that that is now not happening.

Ms. BUTO. I am saying I do not know if it is happening.

Mr. BARTLETT. But they are telling us that it is imminent that

it is going to happen. Can this problem be solved through the agency or does this require a congressional action to solve this problem?

Ms. BUTO. I guess what I would like to say is that the new home

health—and I think you are talking about home health agencies

here—I believe will be a major improvement over the situation that

they are now operating under. Again it may not be perfect; Congress may want to look at making additional changes.

There also is something looming. I think the additional 15 percent reduction that is in the statute, that was postponed until January, I believe. Obviously we are looking at that and I am sure you

are looking at it, too, to see whether that is going to create more

difficulty for home health agencies. But we ought to take a look

and see what the reaction of your constituents is to the new system, which we think will be an improvement and will make their

lives easier.

Again, if it is not enough, we may want to both consider more

changes.

Mr. BARTLETT. Mr. Evans.

Mr. EVANS. I just wanted to make one comment that I think is

a common thread, whether you are talking about home health,

portable x-ray or hospice. With all the changes that are coming

down the pike and the changes that you do not know when they

are going to be enacted or you think they are going to be enacted

31

or you plan for them to be enacted, there is no way to plan. There

is no way to run your business and to plan.

We have five vehicles that need to be replaced. They have an average of 204,000 miles on them. The highest mileage one has

350,000; the lowest has 95,000 on it. We cannot plan. We cannot

plan to change equipment because we do not know what the next— we know what is planned from HCFA, for instance, consolidated

billing they are saying now is January 1 of 2001.

Will it happen? We do not know. It was supposed to happen January 1 of 2000. The common thread is you cannot plan.

And one other comment I wanted to make as far as where these

patients are going, I think you hit the nail on the head. They are

going to the hospitals. And the problem is that when these hospitals get them, because of PPS and how it affects the SNFs, not

necessarily the home health agency but the SNFs themselves,

these patients are not—the SNFs do not want them. The skilled

nursing facilities do not want a high chronic or acute diseased patient. They cannot afford to under this system.

So you hit the nail on the head. It is a problem. It is a big problem.

Mr. BARTLETT. My last comment and question has to do with a

systemic problem that has been bothering me. Apparently in health

care, we as a country have given up on what is the usual procedure

for improving quality and reducing costs, and that is competition.

In health care, rather than competition, we appear to be turning

to practices that we have applauded the failure of in other countries.

What we are trying to do, as I see it, in health care in containing

costs is simply to use a combination of rationing and payment at

below cost. I talk to a lot of people who run nursing homes and the

Medicaid payments are less than their costs. I talk to people in

hospitals. The Medicare payments are less than their cost and the

only way that they can stay in business is to cost-shift.

Now when they cost shift, I as a taxpayer am still ultimately

paying the bill and it is a false economy to believe that by costshifting, we can reduce the cost of health care because providers

cannot remain in business being reimbursed at less than the cost

of doing business. They tried that for 75 years in the Soviet Union

and it did not work.

And I am wondering how we got off track and how we concluded

that we could not provide better health care at less cost with competition and why we had to turn to the practices that have failed

other countries; that is, the practices of rationing and reimbursement below cost. Where did we go wrong and how do we get back

on track?

Mr. EVANS. If I could make one comment, I also own a

cardiopulmonary stress test that we go into doctor’s offices and perform and just to add onto what you said, Mr. Bartlett, when we go

a physician’s office and a physician’s office is owned by a hospital,

that hospital does not want us around. They do not want, even if

it is cost-saving, they do not want us there.

It seems to me like everybody, and I do not care whether it is

HCFA or a hospital or whoever, everybody is very protective of

their own territory.

32

I echo what you are saying. I agree with what you are saying.

Ms. BUTO. Can I comment on that, as well? Medicare has had a

very hard time using competition. We were given authority in the

Balanced Budget Act to competitively bid durable medical equipment services and we also were given authority to do—and these

are both demonstrations; they were not across the country—limited

demonstrations. The other was competitively bid our contribution

to an HMO, or HMOs in an area.

The HMO provision was set up in such a way that we had three

advisory committees advising us on the design and the method for

doing the competition. We took their advice. The advisory committee was chaired by an executive at GM and included people like

Mr. Reischaurer, former CBO director, and Chip Kahn, who used

to be Ways and Means staff director—a number of people who

know a lot about health care. That committee has now essentially

had its authority at least frozen for the moment by Congress for

a couple of years. We cannot start the demonstration because of

concerns coming from that local area.

The other demonstration was more successful. We were sued by

the industry and prevailed, ultimately, in the lawsuit. But we had

a full and open competition. We were able to meet with beneficiaries. We continue to meet with beneficiaries. They are very satisfied. And we were able to get a lower price but we had to actually

go through court to sustain the ability to do a pilot project to do

competition.

So, I think there is a legitimate concern on the part of people in

the health care community when Medicare does competition. We

are the 900-pound gorilla and I understand that. I think we have

to do it carefully, openly. It ought to be fully visible to the public.

But we have found it extremely hard because of local concerns and

concerns about what will happen to whole groups of providers if we

engage in competition.

But I agree with you. It is something we feel very strongly we

ought to be trying more of in Medicare.

Mr. BARTLETT. I appreciate that there are problems and you

identified those problems, but the very fact that we recognize that

it is very difficult to provide competition in health care, I think,

speaks to a fundamental problem of how did we get here when nowhere else in our society do we have problems providing a better

product or a better service with better efficiency and lower cost

through competition and we are now admitting that we cannot do

that in health care.

I am just wondering, where did we go stray and how do we get

back on track because I just have to believe the delivery of health

care has to be amenable to the same forces that operate everywhere else in our society, and that is that competition always does

two things. It makes the service or product better and it makes it

cheaper. And we have not found that true in health care and I just

think that rather than nibbling at the margins of the problem, we

need to get back and take a broad look at how we got to where we

are, which is not where we ought to be. We should not be rationing

and we are rationing. And we should not be forcing providers to

provide health care at less than cost because that simply results

in cost-shifting and there is zero economy in cost-shifting because

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we, as the taxpayers, end up paying the costs anyhow because we

are not going to have people sitting on the curb dying.

So I just hope that in our desire to fix the system that we now

have, which is clearly broken, that we spend some time in looking

at how we got here and what do we need to do to get back to where

we have true competition, where we will have improved quality

and lesser costs because that works everywhere else in our society.

And I just hate to see us trying to do in our country what failed

in the Soviet Union for 75 years, and that is a centrally controlled

system. It did not work there, it is not working here and it is not

going to work for the future.

So we would solicit your help in helping us to understand where

we went wrong, because I think that here, as in most cases when

we have problems in our society, they began where I am sitting,

not where you are sitting—where we went wrong so that we can

try to get back to where we ought to be.

Well, I want to thank you all very much for a very good hearing

and unless there are additional comments from the panel, we will

adjourn the Committee. Thank you very much.

[Whereupon, at 12:15 p.m., the Committee was adjourned.]

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