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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

    H.R. 4401, THE HEALTH CARE INFRASTRUCTURE INVESTMENT ACT OF 2000

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                      INFORMATION, AND TECHNOLOGY

                                 of the

                     COMMITTEE ON GOVERNMENT REFORM
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                                   ON

                               H.R. 4401

   TO AMEND TITLE XVIII OF THE SOCIAL SECURITY ACT TO PROVIDE FOR A 
MORATORIUM ON THE MANDATORY DELAY OF PAYMENT OF CLAIMS SUBMITTED UNDER 
      PART B OF THE MEDICARE PROGRAM AND TO ESTABLISH AN ADVANCED 
 INFORMATIONAL INFRASTRUCTURE FOR THE ADMINISTRATION OF FEDERAL HEALTH 
                           BENEFITS PROGRAMS

                               __________

                             JULY 11, 2000

                               __________

                           Serial No. 106-236

                               __________

       Printed for the use of the Committee on Government Reform

  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform
                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
72-933 DTP                  WASHINGTON : 2001
_______________________________________________________________________
 For sale by the Superintendent of Documents, U.S. Government Printing 
                                 Office
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                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
    Carolina                         ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
HELEN CHENOWETH-HAGE, Idaho              (Independent)
DAVID VITTER, Louisiana

                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                        Robert A. Briggs, Clerk
                 Phil Schiliro, Minority Staff Director

   Subcommittee on Government Management, Information, and Technology

                   STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois               JIM TURNER, Texas
THOMAS M. DAVIS, Virginia            PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon                  MAJOR R. OWENS, New York
DOUG OSE, California                 PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin                 CAROLYN B. MALONEY, New York

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
          J. Russell George, Staff Director and Chief Counsel
                Bonnie Heald, Director of Communications
                           Bryan Sisk, Clerk
                     Michelle Ash, Minority Counsel

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 11, 2000....................................     1
    Text of H.R. 4401............................................     2
Statement of:
    Christoph, Gary, Ph.D., Chief Information Officer, Health 
      Care Financing Administration; Joel Willemssen, Director, 
      Civil Agencies Information System, U.S. General Accounting 
      Office, accompanied by Gloria L. Harmon, Director, Health, 
      Education and Human Services, Accounting and Financial 
      Management Issues, U.S. General Accounting Office, and 
      Donald Hunts, Senior Evaluator, Accounting and Financial 
      Management Issues, U.S. General Accounting Office; Marcy 
      Zwelling-Aamot, M.D., treasurer, Los Angeles County Medical 
      Association, former president, Long Beach Medical 
      Association; David Sparks, senior vice president, finance, 
      Providence Hospital, Washington, DC, on behalf of the 
      American Hospital Association; Donald Kovatch, comptroller, 
      Potomac Home Health Care, Rockville, MD, on behalf of the 
      National Association for Home Care; Arthur Lehrer, senior 
      vice president, VIPS, Inc.; and Robert Hicks, chairman and 
      chief executive officer, RealMed...........................    30
    Lugar, Hon. Richard G., a U.S. Senator from the State of 
      Indiana....................................................    18
Letters, statements, etc., submitted for the record by:
    Christoph, Gary, Ph.D., Chief Information Officer, Health 
      Care Financing Administration, prepared statement of.......    32
    Hicks, Robert, chairman and chief executive officer, RealMed, 
      prepared statement of......................................   110
    Horn, Hon. Stephen, a Representative in Congress from the 
      State of California, prepared statement of.................    16
    Kovatch, Donald, comptroller, Potomac Home Health Care, 
      Rockville, MD, on behalf of the National Association for 
      Home Care, prepared statement of...........................    93
    Lehrer, Arthur, senior vice president, VIPS, Inc., prepared 
      statement of...............................................   101
    Lugar, Hon. Richard G., a U.S. Senator from the State of 
      Indiana, prepared statement of.............................    21
    Ose, Hon. Doug, a Representative in Congress from the State 
      of California, information concerning Boards of Trustees...   125
    Sparks, David, senior vice president, finance, Providence 
      Hospital, Washington, DC, on behalf of the American 
      Hospital Association, prepared statement of................    82
    Turner, Hon. Jim, a Representative in Congress from the State 
      of Texas, prepared statement of............................    27
    Willemssen, Joel, Director, Civil Agencies Information 
      System, U.S. General Accounting Office, prepared statement 
      of.........................................................    46
    Zwelling-Aamot, Marcy, M.D., treasurer, Los Angeles County 
      Medical Association, former president, Long Beach Medical 
      Association, prepared statement of.........................    74

 
    H.R. 4401, THE HEALTH CARE INFRASTRUCTURE INVESTMENT ACT OF 2000

                              ----------                              

                         TUESDAY, JULY 11, 2000

                  House of Representatives,
Subcommittee on Government Management, Information, 
                                    and Technology,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2154, Rayburn House Office Building, Hon. Stephen Horn 
(chairman of the subcommittee) presiding.
    Present: Representatives Horn, Biggert, Ose, Turner, amd 
Maloney.
    Staff present: J. Russell George, staff director and chief 
counsel; Bonnie Heald, director of communications; Bryan Sisk, 
clerk; Elizabeth Seong, staff assistant; Will Ackerly, Chris 
Dollar, and Davidson Hulfish, interns; Michelle Ash and Trey 
Henderson, minority counsels; and Jean Gosa, minority clerk.
    Mr. Horn. The Subcommittee on Government Management, 
Information, and Technology will come to order. We are here 
today to discuss proposed legislation that would set up a 
health care infrastructure capable of delivering immediate 
point-of-service information to health care providers and 
Medicare beneficiaries regarding their Medicare insurance 
coverage and reimbursements.
    Senator Richard Lugar of Indiana, who is joining us today, 
first introduced the proposal in the Senate as S. 2312, the 
Health Care Infrastructure Act of 2000. I have introduced a 
similar measure, H.R. 4401, in the House.
    [The text of H.R. 4401 follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Horn. The Federal Government currently provides 
insurance coverage to millions of workers and retirees under a 
wide array of complex programs. This legislation seeks to 
create a health care information architecture that could 
ultimately be used by all of the Federal Government's insurance 
plans. As proposed, S. 2312 and H.R. 4401 would set up a 
commission to oversee the design, creation and implementation 
of a system to handle only Part B of the Medicare program and 
the Federal Employees Health Benefits Program.
    Part B covers the payments for physicians, laboratories, 
equipment, supplies and other practitioners. In fiscal year 
1999 Medicare Part B fee-for-service expenditures were 
approximately $61 billion.
    The overriding goal of this proposed legislation by Senator 
Lugar is to streamline and simplify these programs for both 
beneficiaries and their health care providers, while ensuring 
beneficiaries that the privacy of their medical records is 
protected.
    At this point, since the Senator has a vote coming up in 
the Senate, I'd like to introduce the author of this 
legislation. We're delighted to have him as our first witness.
    The distinguished Senator from Indiana, Richard Lugar, 
welcome.
    [The prepared statement of Hon. Stephen Horn follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
  STATEMENT OF HON. RICHARD G. LUGAR, A U.S. SENATOR FROM THE 
                        STATE OF INDIANA

    Senator Lugar. Thank you very much, Mr. Chairman. I'm 
honored that you have asked me to testify. I appreciate so much 
your contribution to our joint efforts.
    As you know, the primary goal of the Lugar-Horn bill is to 
build an advanced infrastructure to efficiently process the 
vast number of basic transactions that clog the pipeline and 
drain scarce health care resources in our country. We target 
immediate transaction, including point of service verification 
for insurance coverage, point of service screening for 
incomplete or erroneous claim submissions and point-of-service 
resolution of clean claims. This would include providing 
patients with an understandable explanation of their own 
payment obligations and coverage benefits before they leave the 
doctor's office.
    An advanced claims processing infrastructure would allow 
doctors to spend more time treating patients; it would enable 
doctors' offices and insurance companies to reduce the cost of 
claims processing; and it would give patients a more timely 
understanding of treatments and costs. Such an infrastructure 
would represent both a huge improvement in the quality of 
Medicare and a source of enormous annual savings for the 
program and the wider health care economy.
    The act is designed to spur Federal and private sector 
investment. For that reason, the bill would require insurers 
who participate in the Federal Employees Health Benefits Plan 
to apply the same technological innovations.
    Let me take a moment to describe the often complicated and 
confounding billing process that our senior citizens confront 
when they go to the doctor. As a senior, when you present 
yourself for care in the doctor's office, you produce your 
Medicare card, as well as proof of identification. The staff 
photocopies your card and gives you a clipboard of forms to 
fill out. Meanwhile, they call to verify your coverage with the 
insurer. By now, we all recognize that we need to arrive at the 
office early to fill out the forms.
    However, unlike private insurance, which allows the patient 
to pay a copayment and leave the office feeling relatively 
secure that their treatment has been paid for, seniors often 
have no idea what has been paid for or what they owe. In fact, 
it is not infrequent for seniors to be asked to sign a form 
that says, ``I understand that this procedure may not be 
covered by Medicare.'' They often assume that it will be 
covered and are quite disconcerted when a bill shows up.
    Adding to the confusion, seniors often must deal with the 
complications of the supplemental insurance. Beneficiaries 
receive a Medicare monthly statement, and receive statements 
from their supplemental insurer and they are likely to receive 
a statement from the doctor. Even a modest series of visits to 
a primary care physician and a specialist or two can yield a 
mountain of paperwork and unanswered questions for a Medicare 
recipient.
    I have had beneficiaries contact my office to say that they 
just don't understand their paperwork. Often they can't tell if 
their claim has been paid. The first thing my staff tells them 
to do is to call their doctor to verify that their claim has 
been filed. Sometimes it has not been filed.
    Many people would be surprised to learn that doctors are 
not required to file their Medicare claims right away. And some 
doctors hold on to claims and file once a month or, in some 
instances, even every 6 months. This is a commonly accepted 
practice and fits within current Medicare filing requirements. 
It adds to the uncertainty and worry of seniors that they 
cannot verify that the claim has been paid.
    I also have heard from doctors who are so frustrated by the 
system they forgo participation in Medicare altogether. 
According to estimates, I am told that each practicing doctor 
requires an average of two-and-a-half administrative staff to 
fill out paperwork. Doctors themselves spend an average of 2 
hours on insurance paperwork each day.
    I was pleased to see on June 20th HCFA announced that it 
will test simplified or have test-simplified coding guidelines 
for doctors. This would be a good step.
    I envision a system that would allow most claims to be 
approved before the patient leaves the doctor's office. A 
patient could submit a claim for tests and learn immediately 
not only if they qualify, but also the amount that Medicare 
would approve for payment and any balance they would owe.
    In addition, the doctor's office could immediately correct 
a claim filed to Medicare that was kicked back because of 
missing information. Not only would this allow the patient to 
leave the office knowing what Medicare would pay, it would also 
save the office the time and expense of refiling claims.
    Mr. Chairman, today nearly every industrial sector is 
involved in a race to apply new information technology to gain 
greater efficiencies. Yet government health care programs, 
which are enormously important to so many Americans, still use 
a patchwork of outdated technology.
    Creating an advanced infrastructure that is capable of 
immediately processing most health care transactions is a big 
task, but it is well within our technological capability. One 
only has to consider that for years we have been using credit 
cards to purchase items at almost any location in the world. 
With a single swipe and a few seconds for verification, we can 
purchase everything from groceries at the supermarket to a 
hotel room or restaurant meal on a different continent. None of 
us in Congress should be satisfied with claims that health care 
is too big or too complicated to undergo a similar information 
technology revolution.
    In fact, this concept is being advanced now in the private 
sector. Last fall, I saw it in action at RealMed, a growing 
high-tech firm in Indiana that specializes in real-time 
resolution of medical claims. I was impressed, first, by the 
simplicity of their product, but more so by the sweeping change 
it has brought to companies who have contracted with this firm, 
RealMed, to handle their bills. Representatives of RealMed will 
testify, I understand, on a later panel about their system and 
their findings before you this morning.
    But it is not hard to fathom the value for the Federal 
Government of the advances that RealMed was putting into 
practice. The HCFA spends nearly 1 in 8 Federal dollars. Real-
time processing of HCFA's 1 billion claims per year would 
produce an extraordinary monetary and efficiency savings.
    Given this potential, we need to put the government's best 
information technology talent to work on the problem. The 
Commission that our bill establishes was designed to harness 
the full intellectual resources of the Federal Government 
regarding the design of large, complex and distributed computer 
systems. Institutions such as DARPA, the National Science 
Foundation and NASA have been instrumental in putting the 
United States at the forefront of this technology.
    Of course, we can't talk about information technology 
progress without giving attention to the issue of medical 
privacy, by itself a policy issue of great importance. For 
several years, the Congress has been engaged in this debate and 
the committees of jurisdiction have been studying the options 
diligently. We have not yet formed a consensus. It is my hope 
we will do so in the near future.
    This is an issue that is crucial to the successful 
implementation of a modern medical infrastructure. Building 
such an infrastructure will require a nationwide standard of 
privacy because electronic payment systems will not know State 
borders. I hope that with your committee's experience in these 
matters, you are taking steps to provide recommendations on 
this important issue.
    There are other benefits that improving the health care 
payment infrastructure can bring to HCFA, to patients and to 
doctors. One of the foremost is better information about what 
the government is paying for or wasting its money on, and I 
think this is why HCFA has reacted positively to our bill.
    Cutting into the estimated $13.5 billion in annual Medicare 
fraud and the enormous costs of administration would benefit 
all Americans. Further qualitative targets can also be realized 
by better data management and an accurate accounting of the 
number of mammograms, flu shots, MRIs or hip replacements for 
which Medicare pays.
    Mr. Chairman, I appreciate the work and the interest that 
you and your committee have shown toward advancing this 
concept. I know that you share my concerns, and I look forward 
to working with you and members of the committee to ensure that 
the Lugar-Horn bill will serve the best interests of each 
individual in the Medicare health care continuum from patient 
to provider to payer.
    I thank you very much for this opportunity.
    [The prepared statement of Hon. Dick Lugar follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Horn. Thank you very much, Senator. It's a very good, 
succinct view of your legislation.
    I want to turn now to Mr. Turner, our distinguished ranking 
member--the gentleman from Texas, Mr. Turner.
    Mr. Turner. Thank you, Mr. Chairman.
    Senator Lugar, thank you for your testimony. This 
legislation that you and Chairman Horn have joined together in 
support of and advocacy of I think is very important piece of 
legislation. It has the potential to save millions of dollars 
in taxpayer money, and it is certainly, I think, noted by 
anyone who's had contact with the Medicare system that the need 
for improved administration and processing is a very 
significant need.
    I have heard a lot of complaints from providers over the 
years regarding frustration they have experienced with the 
system, and I know Chairman Horn has provided a lot of 
leadership for our committee, trying to implement technology 
and make government more efficient and more effective. And this 
certainly in keeping with that overall goal they know we all 
share.
    So I appreciate the fact that you have come over to our 
side this morning and testified before our committee, and we 
will look forward to working with you to be sure the objective 
is obtained.
    Thank you so much for being here, Senator.
    Mr. Horn. I thank the gentleman.
    Mr. Turner has a lot of rural hospitals in his area, and 
we're concerned about those, too; and I hope that the Senate 
and the House will be able to solve the problems for the 
disproportionate in urban America as well as rural America.
    I now call on the vice chairman of the subcommittee, Mrs. 
Biggert, the gentlewoman from Illinois. She has a very 
worthwhile bill that we will be looking at in a hearing in the 
next month. So she has a great interest in the Medicare 
situation also.
    Mrs. Biggert.
    Mrs. Biggert. Thank you, Mr. Chairman.
    And welcome, Senator Lugar, to our committee. I am really 
interested in cutting out the administrative costs and, 
particularly, in the issue of Medicare fraud. Maybe you could 
expand just a little bit on how this bill will be able to 
reduce the fraud, waste and abuse that we have found.
    Senator Lugar. I would just respond briefly that by having 
this audit trail from the beginning, with the resolution of who 
pays what and who gets what at the very beginning, the 
possibilities of the fraud that comes from claims that are not 
paid or claims that are unknown or paperwork that is lost or 
the refiling back and forth, rob the--in other words, at the 
moment of truth, the moment where the patient sees the doctor 
or the nurse, then we all know what the insurance got paid, the 
doctor got paid, the hospital got paid, and it's resolved.
    Now, conceivably, there could be fraud right at that 
moment, all of these people in collusion; but this is less 
likely. The fraud and abuse is more likely to occur in these 
interim weeks and months--the lost papers, the filed, the 
uncertainty of who is responsible.
    Mrs. Biggert. So we won't find that someone who claims that 
their office is in the middle of the Miami Airport, that 
location will no longer exist as a payment center?
    Senator Lugar. Not unless they have a patient there in the 
middle of the Miami Airport and an insurance company willing to 
vouch for both of them.
    Mrs. Biggert. Thank you very much.
    Mr. Horn. The gentleman from California, Mr. Ose, who has 
also rural hospitals and has a great interest in the Medicare 
program.
    Mr. Ose. Thank you, Mr. Chairman.
    Senator, welcome. I do have one question. I notice on the 
membership of the committee that there are Secretaries 
appointed to the Commission, and then there's a member from 
NASA, DARPA, National Science and the Office of Science and 
Technology, VA and the OMB. The question I have, as I was 
reading this material for this morning's hearing, was that we 
have trustees for Medicare right now, and there are four 
statutory appointments and two discretionary appointments.
    I'm curious, do you have any information as to whether or 
not those six people have looked at this issue in terms of the 
IT infrastructure that will allow us to get to the point that 
we're trying to get to?
    Senator Lugar. No, I do not, sir. I don't know what 
examination they have made, and it is a very important point. 
The reason for these members that are mentioned from these 
agencies is, they have a great deal of experience in this 
infrastructure technology. But clearly people who have 
responsibility for Medicare have got not only to sign off on 
this, but have got to shape it. So the governance has got to 
include these people, and hopefully they will be enthusiastic.
    I'm led to believe, having talked about this issue--
principally before the medical community, the hospital 
community, in my home State of Indiana, at various 
conferences--that there is, if not unanimous feeling that 
something like this should be done, but usually pauses, as this 
is really a very big subject and probably a multiyear business; 
but not objection, conceptually, to the idea that it would be 
ideal to know all of this at the moment of truth, the moment of 
service.
    Mr. Ose. I do want to compliment you and Chairman Horn for 
coming up with this proposal. I checked on my question that I 
just presented to Senator Lugar, and I went back into the 
trustee's reports from 2000, to the IT report, the data of 
which actually originated in 1997; I found no evidence that the 
trustees for OASDI have even looked at that question. So the 
bill has merit is what I'm reporting back to you.
    With that, I will yield back and get my phone.
    Mr. Horn. I know the Senator has a vote coming up, but Mr. 
Ryan has just joined us. We are delighted to have him, the 
gentleman from Wisconsin, a fellow Midwesterner.
    Senator Lugar. We've enjoyed having Mr. Ryan before the 
Agriculture Committee, and we share a feeling that's very 
strong about health care to rural areas and the extension to 
the communities there.
    Mr. Horn. Since I grew up on a farm, I am also very 
sympathetic.
    Mr. Ryan. This bill may be the only chance to get relief to 
the Midwest dairy farmers, so I applaud the effort.
    Senator Lugar. That was our last meeting.
    Mr. Horn. Well, thank you, Senator. We appreciate your 
coming over here.
    OK. We will now continue on Mr. Turner and my opening 
statement here.
    Just to note the overview that we hope to learn from those 
who would be affected by the Health Care Infrastructure Act 
whether this bill, as proposed, attains those goals. So we 
expect our witnesses to be very frank, and we would welcome 
expertise from those in the audience to please file with us a 
letter or a brief statement on this, because we will be marking 
up the bill within the next few weeks and it will move very 
rapidly.
    So our second panel after the General Accounting Office and 
others--second panel will include representatives of 
physicians, hospitals, home health care industries that provide 
medical services to Medicare beneficiaries. Among the 
witnesses, although we'll introduce them at the time, is Marcy 
Zwelling-Aamot, M.D., a practicing physician from my own 
hometown of Long Beach and former president of the Long Beach 
Medical Association.
    Although the private insurance companies that process 
Medicare claims declined our invitation, we're pleased to have 
Mr. Arthur Lehrer, the second vice president of VIPS, whose 
company is responsible for maintaining the information 
technology system of many of these contractors. In addition, we 
welcome Mr. Robert Hicks, the chairman and chief executive 
officer of RealMed, that was mentioned by the Senator, an 
Indiana firm that has developed an information system similar 
to that envisioned in the proposed legislation.
    So we're delighted to have all of you today, and Mr. Turner 
has some additional remarks, and then we'll proceed with the 
first panel after Senator Lugar.
    Mr. Turner. I'll just file my remarks for the record, Mr. 
Chairman.
    [The prepared statement of Hon. Jim Turner follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Horn. Without objection, and they will be in the record 
as if read.
    Any other opening statements you wish to be put in the 
record?
    All right. Well, let us start.
    Mrs. Biggert. Yes, Mr. Horn, I have an opening statement I 
would like to be put in the record.
    Mr. Horn. Sure, and we'll put that in as read. So, in other 
words, it's big print and people can read it easily.
    We will now have the first witness list that will come up 
and that is Gary Christoph, Ph.D., Chief Information Officer of 
the Health Care Financing Administration; Joel Willemssen, not 
new to this committee, he's been our major resource on Y2K for 
4 years. He's Director of Civil Agencies Information Systems, 
U.S. General Accounting Office. He's accompanied by Gloria L. 
Jarmon, Director of Health, Education and Human Services, 
Accounting and Financial Management Issues, U.S. General 
Accounting Office, part of the legislative branch; and Donald 
Hunts, the Senior Evaluator, Accounting and Financial 
Management Issues of the U.S. General Accounting Office.
    So next would be Marcy Zwelling-Aamot, M.D., treasurer, Los 
Angeles County Medical Association, former president, Long 
Beach Medical Association, and then David Sparks, senior vice 
president, Finance, Providence Hospital, here in Washington, 
DC; Donald Kovatch, the comptroller, Potomac Home Health Care, 
Rockville, MD, on behalf of the National Association for Home 
Care; Arthur Lehrer, senior vice president, as I have noted, 
VIPS, Inc.; and Robert Hicks, chairman and chief executive 
officer, RealMed.
    Let me explain how we do business here, our friends from 
the General Accounting Office know, but we will swear all 
witnesses to affirm that their testimony is the truth. And No. 
2, please don't read your statement to us. We've read them. 
Summarize it and keep it to about 5 minutes, 6 minutes, 7 
minutes, whatever. We'd like to, one, go through that formal 
testimony so we can have a dialog between you because we're 
interested in relating to your experiences, and please tell us 
line by line either now or in the next week or so as to where 
you think we could do something a lot better in either Senator 
Lugar's version or mine, which is generally his version also. 
So that's why we welcome your expertise here. So if you will 
stand up, raise your right hands, we will give you the oath.
    [Witnesses sworn.]
    Mr. Horn. The clerk will note that all the witnesses and 
their staff have taken the oath, and we will go down the list 
and start with Mr. Gary Christoph, Chief Information Officer of 
Health Care Financing Administration. He's done a very good job 
as we saw him through the Y2K bit. We're glad to have him here, 
and Mr. Christoph, it's all yours.

STATEMENTS OF GARY CHRISTOPH, PH.D., CHIEF INFORMATION OFFICER, 
    HEALTH CARE FINANCING ADMINISTRATION; JOEL WILLEMSSEN, 
   DIRECTOR, CIVIL AGENCIES INFORMATION SYSTEM, U.S. GENERAL 
 ACCOUNTING OFFICE, ACCOMPANIED BY GLORIA L. HARMON, DIRECTOR, 
HEALTH, EDUCATION AND HUMAN SERVICES, ACCOUNTING AND FINANCIAL 
 MANAGEMENT ISSUES, U.S. GENERAL ACCOUNTING OFFICE, AND DONALD 
 HUNTS, SENIOR EVALUATOR, ACCOUNTING AND FINANCIAL MANAGEMENT 
 ISSUES, U.S. GENERAL ACCOUNTING OFFICE; MARCY ZWELLING-AAMOT, 
M.D., TREASURER, LOS ANGELES COUNTY MEDICAL ASSOCIATION, FORMER 
PRESIDENT, LONG BEACH MEDICAL ASSOCIATION; DAVID SPARKS, SENIOR 
 VICE PRESIDENT, FINANCE, PROVIDENCE HOSPITAL, WASHINGTON, DC, 
ON BEHALF OF THE AMERICAN HOSPITAL ASSOCIATION; DONALD KOVATCH, 
COMPTROLLER, POTOMAC HOME HEALTH CARE, ROCKVILLE, MD, ON BEHALF 
   OF THE NATIONAL ASSOCIATION FOR HOME CARE; ARTHUR LEHRER, 
 SENIOR VICE PRESIDENT, VIPS, INC.; AND ROBERT HICKS, CHAIRMAN 
              AND CHIEF EXECUTIVE OFFICER, REALMED

    Mr. Christoph. Thank you, Mr. Chairman. Chairman Horn, 
Congressman Turner, other distinguished members of the 
committee, thank you for inviting me to discuss the Health Care 
Financing Administration's information technology and 
architecture and H.R. 4401, the Health Care Infrastructure 
Improvement Act of 2000.
    We appreciate the opportunity to be here today to share our 
information technology plans and our vision for achieving the 
goals that are espoused in H.R. 4401. I have prepared some 
written remarks that I ask to be included for the record, but 
I'll briefly discuss the key points.
    Assuring access to health care services for our 
beneficiaries is a priority for our agency. The need for 
cutting edge, modern information technology and a strategic 
information technology vision are critical to this mission. The 
health care industry is becoming, as others have noted, 
increasingly data and technology intensive. The demands on our 
outdated information technology architecture are greater than 
ever before. Clearly we must modernize and expand our 
information technology capabilities in order to meet today's 
needs and tomorrow's challenges successfully.
    Medicare is already the most highly automated, most 
efficient and fastest payer in the health insurance industry. 
Our costs are low, roughly $1 to $2 to process each claim, and 
over 90 percent of Medicare claims today are processed 
electronically and paid on average within 15 days after 
receipt. We have been able to achieve this despite our archaic 
information technology environment. Nonetheless, there is an 
urgent need to update our systems.
    We learned a great deal about how to proceed last year when 
we successfully met the year 2000 challenge. Now with our 
resources no longer committed to that effort we are refocusing 
on the technological promise of the new millennium. Our 
comprehensive modernization plan will support more efficient 
operations and our systems will be easier and less expensive to 
maintain. It also will help us develop innovative ways to 
manage data, to be more responsive to new initiatives and to 
support efforts to improve health outcomes for our 
beneficiaries.
    Your legislation, H.R. 4401, Mr. Chairman, includes some 
interesting provisions that could benefit beneficiaries, 
providers and our program management. We strongly agree with 
the bill's information technology service concepts. Our target 
IT architectural goals for the whole agency include central 
core relational data bases, standard interfaces, modular 
applications, real-time claims processing and security and 
privacy controls fundamentally built in so as to enable 
Internet communication amongst and between HCFA, its contractor 
partners, providers and beneficiaries. Thus we have much in 
common in our plans with what you propose in H.R. 4401.
    However, the legislation's mechanisms and means raise some 
concerns about potential program integrity problems and other 
serious unintended consequences that we need to better 
understand. I look forward to discussing these with you further 
today.
    We must ensure that any proposal to modernize Medicare's 
information technology environment maintains Medicare's strong 
beneficiary privacy protections, strengthens our ability to 
identify, analyze and respond to fraudulent schemes, and 
carefully takes into account our own legacy systems. Past 
experience teaches us that our systems modernization efforts 
must proceed incrementally, that we need to build modularly, 
plan meticulously, manage with prudence and savvy and above all 
not bite off more than we can chew.
    Equally important is incorporating the requirements set 
forth in the Clinger-Cohen Act and the so-called Raines rules 
into our internal systems governance processes to help ensure 
that our decisionmaking is sound and disciplined. In addition, 
we must ensure that our agency has the resources to attract and 
recruit the information technology talent and subject matter 
experts we need to successfully implement these system changes.
    We are already making substantial progress in modernizing 
our Medicare systems architecture. To facilitate more efficient 
operations, as well as develop innovative and secure ways to 
manage and access data, our ultimate goal of course is to 
improve the health outcomes for the more than 39 million 
Americans who depend on the Medicare program every day. We 
realize that undertaking such a large system modernization 
effort is by no means a simple task, but with careful planning 
and by taking incremental steps I am confident we will meet 
this challenge successfully.
    We welcome your continued input as we move forward and we 
do appreciate your continued interest. I am happy to answer any 
questions you may have.
    [The prepared statement of Mr. Christoph follows:]
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    Mr. Horn. Thank you, Dr. Christoph. The fine resume that 
precedes you will be automatically in the record when we called 
your name, and we'll do that with all witnesses because you 
bring a great amount of expertise to this hearing.
    I now bring the next principal witness, who is Joel 
Willemssen, the Director of the Civil Agencies Information 
System of the U.S. General Accounting Office, and he has a lot 
of his experts here, as I have noted earlier, and we appreciate 
very much your testimony, and we dreamed up last night, oh, a 
few other projects you might want to do in relation to this and 
get them done by last week if you will. We're all busy. We know 
you will do a great job. So go ahead and tell us your view in 
the General Accounting Office.
    Mr. Willemssen. Thank you, Mr. Chairman, Ranking Member 
Turner, members of the subcommittee, thank you again for 
inviting us here to testify today. Joining me is Gloria Jarmon, 
who's responsible for our financial management and overpayments 
work at Medicare. As requested, I'll briefly summarize our 
testimony.
    H.R. 4401 has worthwhile objectives and would offer 
benefits to providers and beneficiaries. Specifically, 
implementation of the real-time claims processing system 
proposed in the bill would lead to decisions on authorized and 
denied claims being provided immediately. However, most 
Medicare claims could be paid more quickly using current 
processes by eliminating existing mandatory delay in paying 
claims. A drawback to eliminating this mandatory delay is that 
the Medicare Trust Fund would lose some of the interest it 
currently earns. Beyond this, there are a number of other 
challenges that would need to be successfully addressed to 
implement the proposed system.
    First, before an implementation decision is made, it's 
particularly important to demonstrate that a system can be 
designed that provides the safeguards necessary to minimize 
improper payments. For example, any new real-time system for 
all claims would have to find a way to accommodate existing 
processes such as claims examiners reviews that are suspended 
because claims did not pass certain edits. Further, because a 
real-time system can be vulnerable to code manipulation through 
repeated submission of fraudulent claims until they pass the 
system's edit, it would be prudent to have appropriate controls 
to screen providers using the system.
    Second, technical and cost risks should be considered and 
analyzed before embarking on design and implementation. For 
example, analyses covering costs, benefits, risks and the 
adherence to HCFA's guiding systems architecture are essential 
to reducing the risks of this proposed system.
    Third, as recognized in the bill, computer security must be 
adequately addressed in any proposed system. GAO and the 
Inspector General have previously reported on HCFA's lack of 
effective computer security controls.
    Fourth, developing a system to be initially used for 
Medicare part B and then to also be used for the Federal 
Employees Health Benefits Program and potentially other Federal 
health benefits programs would be very challenging. These 
programs have substantially different underlying program 
requirements which would make designing a single system for 
them quite difficult.
    Fifth, the role and composition of the commission 
identified in the bill as responsible for developing and 
implementing the proposed system needs to be carefully 
considered. Namely, issues such as how the proposed system 
would affect HCFA's and existing contractors' systems 
development and maintenance activities and how to ensure that 
appropriate health care and financial management expertise is 
included in the commission would need to be addressed.
    In tackling these implementation challenges, it's 
instructive to keep in mind HCFA's experience with a prior 
system development failure in the mid-1990's. Mr. Chairman, as 
I testified before you in May 1997, this system known as the 
Medicare Transaction System [MTS], was plagued with schedule 
delays, cost overruns, and the lack of effective management and 
oversight. Ultimately, HCFA terminated the MTS contract after 
it had spent about $80 million but had not received one line of 
software.
    Two key lessons came out of that experience: One, that 
major projects such as MTS must be managed as investments with 
periodic assessments of costs, benefits, risks, and other 
alternatives and, two, that a phased approach to major projects 
can reduce the risks inherent in any large computer development 
effort. Such lessons could be valuable in considering how to 
best proceed with the development and implementation of a real-
time claims processing system.
    That concludes a summary of our testimony. Thank you.
    [The prepared statement of Mr. Willemssen follows:]
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    Mr. Horn. Thank you and I assume the rest of your 
colleagues will also be helping to respond on questions and 
there's nothing else to be said on the basic presentation.
    Mr. Willemssen. Yes, sir.
    Mr. Horn. Let us now move to Marcy Zwelling-Aamot, who's 
the former president of the Long Beach Medical Association and 
now the treasurer of the Los Angeles County Medical 
Association. We're delighted to have a true professional on the 
firing line with us today and we look forward to your 
testimony. It will also be sprightly I realize.
    Dr. Zwelling-Aamot. Thank you, Mr. Chairman, and thank you, 
committee, for the privilege of allowing me to testify today. 
This bill is a well-intended bill but it is grossly misguided 
and I would like to speak to the issue of claims data versus 
clinical data.
    The unintended consequences of submitting claims data is 
that we make bad conclusions. It has been said garbage in, 
garbage out. As a clinician I treat patients. I treat human 
beings, I do not treat coded representations of persons. And 
yet that is the data that the system currently compiles. Making 
a larger system a real-time based system is a wonderful 
thought, but inherent in it is the danger that the data that 
you collect is just bad data and that the conclusions then are 
wrong. That's what happens today.
    Making that system faster, while I'll tell you as a 
clinician it would be wonderful to get paid on time, it would 
be wonderful to be able to decrease my staff. They must have to 
submit claims, quote, legitimately but I would suggest to you 
that the duplicitousness of this system is not the provider, 
the provider as a physician, a hospital, or as home health 
agency, but the system itself. The system is the fabricator 
because it doesn't work.
    Remember the only reason that I contact HCFA is for 
reimbursement purposes. That data, however, is used for a 
multitude of purposes, some of them quite dangerous. For 
instance, epidemiologically, we make statements about our 
Nation's health based on this data. I'd like to give you a 
perfect example, if you will, of why that data is really not 
good data.
    Just last week a patient in my office with abdominal pain 
came in and we realized that all her tests were completely 
normal. So I took the time to speak with her only to find that 
her pain was probably of a somatic nature and was probably 
because of some abuse that she had received as a child. Her 
father had recently died, these things were coming to the fore. 
We spent 30 to 45 minutes. I got her to the proper clinicians, 
that being a psychiatrist and a psychologist, and now it's my 
duty to code that visit. Do I code it abdominal pain? Somatic 
pain? Depression? Abuse? My choice as to how I might select 
that code will then delegate what's in that patient's file from 
here on out.
    We talk about the privacy issues. I'm not a particularly 
private person in the sense that if somebody's going to say 
something about me I don't mind as long as it's true, but 
imagine that the government has data that is not true. How 
dangerous. It may prevent a patient from getting insurance 
later in their life, it may prevent them from getting a job. 
Bad data is far worse than no data.
    I might also note, Mr. Chairman, that because the coding 
system's purpose is only the exchange of dollars, I would not 
code depression for that patient, even though it was a very 
important part of her medical problem, and the reason is 
because by just adding depression to the code, my reimbursement 
becomes 60 percent of the allowed. Now it has often been said 
that physicians are not good business people. I conclude that 
that is probably correct, but our common sense has not gone 
astray, and so we don't code some of these things. We could 
talk if you have any questions later about how that data is 
collected in terms of how many lines of data are transmitted to 
HCFA and what they do with the data and the need for us to get 
the right code on the right line so the right procedure is 
compensated, but again I stress to you, Mr. Chairman, that the 
purpose of our communication with HCFA at this point in time 
and every other insurance company is based on claims 
reimbursement data which does not represent the clinical 
condition.
    What I would like this committee to do is to take a step 
back and realize that we really must start over in terms of the 
data that's collected in real-time at the time of the patient 
visit in an ICU. We should not conclude that patient has high 
blood pressure. We should specifically state what that blood 
pressure is. The conclusions also come later, not in the making 
of the code.
    Myself, I treat people, not numbers. And unless you have 
the winning lottery number as a physician I'm just not 
interested in coded systems. I think they're dangerous and I 
think that our country as a whole deserves more accurate data.
    I'll summarize with a TV show that I saw this morning, Good 
Morning, America. I was pleased to see Dr. Lila Nautergal, who 
was my mentor at NYU, talking about estrogen. Throughout her 
testimony on the TV she kept alluding to the fact that we don't 
have good data, we don't have good data, breast cancer is 
plastered across the front pages of our paper and yet we don't 
know what causes breast cancer. We make surmises, we make 
guesses, again based on a coded system that's based on claims 
and we don't have the data. We have 250 million people in this 
country, we have tons of data in doctors' offices. It never 
gets put into any computerized system. It never gets melted 
down into any particular clinical code, and it sits unutilized 
in our offices and in files.
    I thank you again for the opportunity to speak to you on 
this matter and I'll answer any questions when they come.
    [The prepared statement of Dr. Zwelling-Aamot follows:]
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    Mr. Horn. Thank you very much. We appreciate your 
testimony.
    Next is David Sparks, the senior vice president for finance 
of Providence Hospital, the oldest hospital in Washington, DC, 
speaking on behalf of the American Hospital Association. Mr. 
Sparks.
    Mr. Sparks. Thank you, Mr. Chairman. I'm David Sparks. I am 
the senior vice president of Providence Hospital. I do 
represent the American Hospital Association's membership of 
nearly 5,000 hospitals, health systems, networks and other 
health care providers. On behalf of AHA, I'd like to thank you 
for inviting us to comment on H.R. 4401, the Health Care 
Infrastructure Investment Act of 2000.
    Providence Hospital is a 380-bed facility located in 
Northeast Washington. We have a 240-bed nursing home and 
several outpatient clinics that we operate. We complete and 
bill for more than 108,000 encounters every year, of which only 
14,000 of those are inpatient. At any point in time, we are 
managing approximately 36,000 accounts, and we bill both Part A 
Medicare and Part B for the hospital.
    In addition, we also bill approximately 50,000 physician 
bills every year, and those all get billed to the Part B 
carrier. We also participate in the Medicaid program, Blue 
Cross and Blue Shield programs and over 111 managed care 
programs. Each of these programs has their own requirements for 
billing, payments, eligibility, medical reviews, but Medicare 
is by far the most prolific with over 135,000 pages of rules.
    The rules by which we must play have become very complex. 
They result in reams of procedures and require extensive 
standardization, but Medicare is by far the fastest and best 
payer that we have today. Yet there can be improvements made in 
the Medicare system.
    Mr. Chairman, we commend the legislation's intent to reduce 
improper payments. This legislation, however, proposes a 
wholesale change of the Medicare billing and payment system 
which may result in unintended or adverse consequences.
    As a hospital administrator that deals with Medicare, its 
fiscal intermediaries, I know increased standardization and 
improved automation not only would ease the paperwork burden of 
hospitals but reduce billing errors. Proposed systemic 
technology change of a program that serves almost 40 million 
Americans, however, will be incredibly complex. It will be 
fraught with challenges and it will be difficult to execute.
    There are incremental solutions to reducing erroneous 
claims and assisting providers with the myriad of rules with 
which we must adhere. We could greatly enhance our ability to 
submit clean, concise claims to the intermediaries if we had 
access to the logic for Medicare edits or to a common working 
file and were able to run electronic claims checks on our bills 
prior to submission for payment. Currently, the fiscal 
intermediary returns the bills to us if a discrepancy is found 
during electronic claims checks, resulting in many more man-
hours spent in determining the error and then resubmitting the 
claim correctly.
    We've also found that incremental solutions to some of 
these problems are more beneficial than full-scale system 
redesigns. In 1991, the Health Care Financing Administration 
launched a program to do just that, the Medicare Transaction 
System. Unfortunately, after several years of time and money, 
the effort has failed. HCFA discovered that wholesale change is 
extremely difficult, at best, for a system with more than 40 
million beneficiaries in a diverse care setting around the 
country and where rules and system requirements change 
periodically.
    Standardizing practices around the country would also 
enhance the ability to reduce erroneous claims. Many hospitals, 
health systems and providers must constantly be aware of the 
rules under which care can be administered. Even so, some 
providers, who even follow the rules to the best of their 
ability, are penalized for events out of their control and for 
information which they do not have access to.
    The Health Information Portability and Accountability Act 
of 1996 [HIPAA], addresses several of these items in the 
proposed legislation. It requires the development of standards 
not only for confidentiality of patient information, but also 
for a number of common health care transactions involving 
electronic billing and payments not only to Medicare, but to 
many of the commercial payers. One of the outcomes we would 
expect to see as a result of some of these HIPAA standards is 
fewer improper payments.
    AHA is working closely with the Department of Health and 
Human Services, HCFA and Congress to address concerns about 
privacy and safeguarding personal information regarding a 
patient's medical record information. The administrative 
simplification standards replace the numerous nonstandard 
formats currently used for certain transactions with a single 
uniform set of electronic formats.
    In conclusion, we understand and agree with the need to 
reduce erroneous bills and claims, and AHA stands ready to 
assist. However, wholesale replacement of the Medicare billing 
system would only add levels of confusion to an already complex 
situation.
    The goals of this legislation of processing claims 
correctly and accurately and timely is one that we all want to 
attain. For us, it would mean less manual intervention and time 
chasing claims, approved efficiency and timelier payments. For 
the government, it would mean paying an accurate bill in a 
timely manner and being good stewards of the public's funds.
    We can do this by continuing to work with HCFA in assisting 
in their efforts to streamline the system in a manner that 
makes sense for patients, hospitals and Medicare.
    Thank you very much.
    [The prepared statement of Mr. Sparks follows:]
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    Mr. Horn. Thank you and next is Donald Kovatch, the 
comptroller of Potomac Home Health Care in Rockville, MD, on 
behalf of the National Association for Home Care.
    Mr. Kovatch. First, I'd like to thank you for the 
opportunity to testify related to this bill.
    My name is Don Kovatch. I'm currently the comptroller for 
Potomac Home Health in Rockville, MD. Previously, I worked for 
a midsized church-affiliated--church and hospital-affiliated 
home health agency, and prior to that, with a large chain of 
home health agencies. I'm also a member of the National 
Association for Home Care's Financial Manager's Forum, the 
national association of the Nation's largest home health 
organization, with nearly 6,000 home health Medicare providers.
    Home health Medicare claims processing is highly complex, 
with many technical rules subject to rapid change. Since the 
majority of home health agencies are small businesses, many are 
unable to keep up with these changes. I feel that changes can 
be made to the Medicare system to facilitate more accurate 
claims submission, allowing home health agencies to continue to 
provide the stellar care that beneficiaries are accustomed to 
receiving.
    The amount of paperwork required by a Medicare program to 
submit a claim for a home health agency is enormous. Upon 
admission to the agency, the home health agency must complete 
an OASIS assessment of the patient, which often consists of 
over 120 questions.
    Next, the home health agency must complete a HCFA Form 485, 
which duplicates much of the information on the OASIS 
assessment. Additionally, all visits to a patient must be 
tracked, not only by discipline, but also in 15-minute 
increments and compiled onto a UB-92 bill.
    The home health agency is also responsible for obtaining 
physician signatures, signed on patient orders, prior to 
submitting a claim to a fiscal intermediary.
    Finally, the Medicare bill is submitted. However, it is 
subjected to medical review by the fiscal intermediary.
    The medical review process is often a complex task which 
seldom results in more than--in additional work for both the 
home health agency and the fiscal intermediary. In my 
experience, the most common problems found in the medical 
review process are bills being sent prior to having an actual 
doctor's orders received and written. That is not to say that 
the doctor has not ordered the visits or that the visits not be 
done, but just the logistics problem with getting the orders 
back in.
    The second issue has been improper notation of end of care 
on the 485 itself, which again is a logistics problem.
    Many of these issues and errors can actually be easily 
avoided with the following recommendations. If these 
recommendations are adopted the Medicare claims submissions 
process will become significantly more effective and 
streamlined.
    First and foremost is capital support for electronic 
recordkeeping. Under the current Medicare payment system for 
home health, technology such as point-of-care assessment, 
electronic billing and care planning are out of the reach of 
many agencies. This funding would not only improve the 
effectiveness of the home health agency, it would also greatly 
improve patient care.
    Second, we'd like to establish a standard for electronic 
submission of doctors' orders and establish timetables for 
medical review of claims. This is especially an issue with my 
agency when it affects our cash-flow and our ability to meet 
payroll.
    Fourth and fifth, we would like to allow for resubmission 
of technical error claims. A benchmark has already been set for 
this in the physician arena, where physicians are allowed to 
resubmit claims that are denied on a technical basis; that's 
not the case in home health.
    And finally, we'd like to be able to directly appeal 
technical denials instead of troubling the beneficiary with 
their authorization to do so.
    We applaud the chairman and Senator Lugar for putting forth 
the Health Care Information Investment Act of 2000. Also, we 
feel the following changes would make the legislation more 
effective in improving Medicare payment process and patient 
care: financial assistance to providers to implement electronic 
capabilities. The systems that home health agencies would 
require under this bill require often very expensive and at 
times are out of reach for many agencies. These anticipated 
costs should be made a part of Medicare reimbursement.
    Second, provider representation should be included on the 
Health Care Infrastructure Commission. We feel that in order 
for the Commission to be exposed to hands-on experience 
provider representation should be included on this board.
    Again, I'd like to thank you for the opportunity and for 
your support in home health and for the opportunity to address 
this legislation. We stand ready to assist you and your staff 
in all of your efforts, and at this time, I'd be glad to take 
any questions you may have.
    Mr. Horn. Thank you very much.
    [The prepared statement of Mr. Kovatch follows:]
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    Mr. Horn. Our next presenter is Arthur Lehrer, the senior 
vice president, VIPS, Inc. You might explain what V-I-P-S means 
in this context.
    Mr. Lehrer. V-I-P-S is simply the name of our company. It 
no longer has an acronym meaning behind it.
    Mr. Chairman and members of the committee, I'm pleased to 
be here on behalf of my company and to comment on the proposed 
bill, H.R. 4401. I will summarize my written statement in some 
fairly brief comments.
    The processing of Medicare Part B claims is faster and much 
more efficient than 30 years ago. In fact, the cost of 
processing a Medicare Part B claim 30 years ago averaged 
approximately $3 per claim. Today, after 30 years of inflation, 
most carriers process a Part B claim for less than $1.
    The current environment supports electronic and paper 
receipt of claims. Services are audited, services are edited. 
Medicare coverage provisions are automatically checked. More 
than 80 percent of all of the Part B claims are received 
electronically, as Dr. Christoph noted. The overwhelming 
majority of these claims are processed from start to finish 
without human intervention. In fact, approximately 85 percent 
are adjudicated within 2 to 3 days. After that time, the claims 
are intentionally held for approximately 12 more days before 
payment is issued. This waiting period is commonly referred to 
as the ``payment floor.''
    The question that gets asked most frequently is, were the 
claims processed correctly, and it's where I want to spend some 
of my time. The best I think we can say is that based upon the 
information presented on that Medicare claim, the claims were 
technically paid correctly.
    We in the claims technology business have built complex 
editing and auditing modules. Those who are involved in 
provider practice management systems have spent the same time 
building systems that edit those claims prior to submission, 
designed to pass those edits of claims systems.
    A clean claim as defined by HCFA and by Congress is not 
necessarily a legitimate claim. The rules to create a clean 
claim are well-known and documented. The challenge for the 
health care industry in general and Medicare Part B program 
specifically is to determine if, in fact, the services 
represented on the bill were actually performed as stated for 
the reasons indicated to the beneficiary identified. If 
everything on the claim is filled out properly, a system that 
makes payment decisions, as the one being proposed, with split-
second speed may have less chance of detecting attempts to 
defraud it. The cost of recovering improper payments is far 
greater than the cost of preventing the payment in the first 
place.
    My company has developed technology that takes advantage of 
the time that claims wait on the payment floor to statistically 
review aberrant payment patterns and prompt human review where 
appropriate.
    My remaining comments will be divided into three areas: 
improper payments, the deploying of technology and 
confidentiality, and a couple of general comments on the actual 
Commission organization.
    As proposed, the system would be designed in such a way as 
to provide real-time claim processing. I suggest that, as 
presented, it brings technical innovation that is desperately 
needed to the Medicare community, and it would provide for much 
more rapid disbursement of payment to providers. If the goal of 
the bill is to reduce improper payments, we would recommend 
that the Commission consider during its study designing or 
selecting prepayment audit and antifraud technology to guard 
against improper payments. We would also recommend mechanisms 
to prequalify providers and suppliers, based upon prior 
experience with those providers and suppliers.
    If, on the other hand, the goal of the bill is simply to 
reduce the time to payment, then we would recommend that the 
payment floor be suspended.
    Patient confidentiality is a critical topic. It has been 
the subject of many discussions regarding use of the Internet 
and other standard identifiers. At the same time, technological 
solutions must be developed to allow the split-second 
processing of these claims transactions while protecting the 
integrity of the Medicare program. These are not necessarily 
compatible objectives.
    If the Commission is to proceed as proposed, we would 
recommend representation from HCFA's technology group. We would 
believe that this bill could develop and complete the 
activities intended, it can be accomplished technically; our 
concern is that if we spend 3 years designing it and 7 more 
implementing it, we will have an outdated solution when we're 
finished.
    We should be equally concerned that we have the right 
objectives and we've crafted the right solution to meet those 
objectives.
    I'd be pleased to continue to work along with you and your 
committee, Mr. Chairman, in providing information as you 
proceed. Thank you.
    Mr. Horn. We thank you.
    [The prepared statement of Mr. Lehrer follows:]
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    Mr. Horn. And our last presenter is Mr. Robert Hicks, the 
chairman and chief executive officer of RealMed, based in 
Indiana.
    Mr. Hicks. Thank you, Mr. Chairman. Good morning.
    My name Robert Hicks. I'm chairman and CEO of RealMed Corp. 
We're an Internet-based, business-to-business health care 
technology company located in Indianapolis, IN. I greatly 
appreciate the opportunity to speak to the distinguished 
members of the House of Representatives Subcommittee on 
Government Management, Information, and Technology.
    I also have submitted our remarks. I will not just read 
them. I will probably highlight them for you and then explain 
the testimony.
    I'd also like to thank Senator Lugar and Congressman Horn 
for their leadership in exploring ways to deploy new technology 
to create efficiencies and cost savings for the Federal 
Government through H.R. 4401, which we've been discussing 
today.
    RealMed is a company which was founded with the idea of 
fixing something that was broken. We evaluated first the 
private health care claims industry in the United States and 
decided that the disparate steps that are required to process 
health care claims was basically a broken system. Parts of it 
were improving, parts of it were not.
    Our company today has about 200 FTEs, 160 employees and 40 
contractors, working full time on implementing our solution on 
a nationwide basis. When we founded the company back in 1996, 
there were a number of questions we posed to look at and say: 
How can we make this system better?
    We asked, What if the resolution of a health care claim 
occurred in seconds at the point of care and was painless due 
to its simplicity; wouldn't that benefit the payer, the 
provider and the member?
    What if the burdensome cost of health care claims 
administration could actually be reduced by 50 percent without 
requiring any replacement of existing systems or significant 
infrastructure technology investments by a payer and/or 
provider?
    What if you could deliver an EOB, or explanation of 
benefits, to a patient in seconds at the point of care while 
they were still standing in the office and could remember the 
services which were actually performed?
    What if providers could be told when they would be paid, 
and receive their money in less than a week, much like a 
merchant does today when they sell a shirt out of their store 
and they receive their reimbursement for a credit card payment?
    What if we could actually help reduce fraud and completely 
eliminate errors in submitted claims, based on the system?
    RealMed set about to trying to solve that issue, first for 
the private sector, and is now looking at doing this in the 
Federal Government sector. In 1999, we went live with our 
first--or what we believe to be the Nation's first Internet-
based electronic claims resolution aired platform. What that 
means is we do four basic things in our system today.
    We do real-time claims eligibility, which means we access 
the payer's data bases with up-to-the-minute information and 
that takes about 5 seconds. We actually submit the claim from 
the provider's office, the provider does, and sends it against 
the claims engine of the payer system. So it does not replace 
or replicate their claims engine; it actually utilizes their 
existing infrastructure.
    A message is then sent back to the provider, which enables 
the provider to know whether the claim is going to be resolved, 
whether it's going to be pended on the payer's system for 
further review or whether it will be rejected. Then an 
explanation of benefits appears which can be delivered to the 
patient so the doctor can actually collect from the patient, or 
at a minimum, it allows them to tell the patient how much is 
owed on behalf of that bill.
    We have five major clients today which include Anthem 
Insurance Co.'s, which is the dominant payer in about 8 States; 
CareFirst, which is right here in the District of Columbia, 
Maryland, northern Virginia and Delaware; Healthcare Services 
Corp., which includes Blue Cross-Blue Shield of Illinois and 
Texas; North Carolina Blue Cross; and importantly, Mr. Horn, 
WellPoint out in California.
    We are rolling our system out in major cities across the 
country on a private basis first and are intending to look at a 
pilot program with HCFA to prove that this could work. We do 
not believe we will be a sole source provider. We believe there 
are several others working on similar solutions that will be 
competition for us.
    Our system effectively allows the physician's office to 
work directly with the payers, in this case, potentially a 
fiscal intermediaries system, and allows them to correct claims 
before they're submitted. It does not allow them to gain the 
system. It does ensure confidentiality, and that would have to 
be further detected and studied in the committee, but it 
effectively allows the provider to input the claim and fix it, 
correct any errors and submit it online. It also allows the 
payer to send messages back to the provider to tell them what's 
wrong with the claim and also to send other messages, i.e., 
sending them a real-time message which also is intended to help 
improve the claims resolution process and the delivery of 
messages from the payer.
    Our system does not replace infrastructure. It doesn't need 
to. I guess the point is, we don't need to say that we will be 
replacing a system. Whatever HCFA would be doing could continue 
and this is simply an integration into that system, much like 
the ATM network or the Cirrus Plus network integrates with 
mainframe legacies systems at a bank.
    We attempted to parallel our system with how the ATM 
network was built. We found five early adopters of the 
technology wanted to examine a proof-of-concept phase where we 
could actually go out and show that it works, which is a 
technology proof of concept. It's also a business model proof 
of concepts, i.e., will the provider use this system, will they 
actually invest in a computer when in many cases they don't 
have it today?
    It is a challenge, but to get them electronically 
connected, a couple of things needed to happen. There needed to 
be an Internet revolution, which we're experiencing today. 
There also needed to be a technology expense reduction so that 
the average cost of a computer today is probably one-third of 
what it was 4 years ago; and that's an important thing to know, 
that providers will have the technology infrastructure to be 
able to make a system like this work. We think that's an 
important consideration.
    We agree with every one of the panelists that Medicare 
claims have reduced in cost over the past several years and 
probably is the least expensive and potentially the quickest 
payer. It also tends to represent the highest number of claims 
in any doctor's office that we work with, and for that reason, 
the doctor's care greatly about reduced paperwork on that 
number of claims.
    The fraud reduction aspects of the bill, I think, are 
extraordinarily important. Claims administration savings are an 
important component. They pale in comparison to the fraud 
reduction expenses that can be saved, to the extent our system 
could actually affect that type of problem.
    How does a system which delivers an explanation of benefits 
or a statement of services to a provider--I'm sorry, to a 
member--actually help reduce member fraud--provider fraud, 
excuse me. Delivering an explanation of benefits to a member or 
a patient while they're in the office and can remember the 
services that were provided would potentially eliminate many 
claims that could be submitted by a provider that are not real.
    In addition, various digital certification methodologies, 
identifications and the use of some form of a ``smart card'' or 
a ``swipe card'' can also help, much like in the credit card 
industry, identify that that person is actually the person who 
they're supposed to be. The use of a driver's license along 
with that card would also be a very useful verification. So we 
believe that this could have a major impact on the fraud 
reduction goals of the bill.
    There are numerous studies that have occurred on how much 
claims cost, how much the loss of float would cost the 
government by paying faster. In our experience in the private 
sector, we find that the administrative savings are generally 
about three times as great as the loss of float. We don't 
anticipate that it would be as great of an impact for the 
Federal Government because they do it more efficiently. We do 
believe, however, the fraud reduction--because in the Federal 
Government it's such a greater significant issue, we think we 
could have a major impact, or this solution could have a major 
impact in the Medicare arena.
    I will be available for questions, and I too would offer 
our support to work with the committee on any further 
discussions that they'd like to have.
    [Note.--The publication entitled, ``Solutions for the New 
Pace of Healthcare,'' may be found in subcommittee files.]
    [The prepared statement of Mr. Hicks follows:]
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Horn. Well, thank you very much. That's a very helpful 
presentation.
    We're now going to go to questions from the Members. There 
will be 5 minutes for each of us and then we'll alternate 
between the majority and the minority. So let me start in for 
the first 5 minutes.
    Mr. Christoph, I was particularly interested in--divisions, 
I don't think, between you and Senator Lugar and myself are 
that far apart, but your comment was particularly pertinent, I 
think, that replacing a computer network as large as the Health 
Care Financing Administration too quickly could result in 
another debacle; and I think that's a point well taken.
    Have you prepared a master plan for your Health Care 
Financing Administration project that includes key tasks and 
milestones and timeframes?
    Mr. Christoph. Yes, sir. In the sense that we have prepared 
an IT vision, we have laid out the broad plan of where we want 
to take the agency's information technology. We don't have a 
set of time lines or plans that are in that level of detail.
    As you're aware, we've spent the last several years working 
very hard on Y2K, and some of these efforts have had to take a 
back seat to that effort, but we have laid out a 30,000-foot 
view. We're in the process of taking that down to a lower view. 
Our friends at GAO have been very careful to ask us to develop 
integrated project plans and to go to that level of detail.
    We have engaged in a variety of incremental projects at the 
lower end as we start experimenting to try and achieve some of 
the goals, and for those, we do have timetables and plans. For 
example, we've developed a beneficiary data base prototype 
which we expect to be operational as a fully implemented 
system, one integrated place for all the beneficiary 
information, within about the next 8 to 10 months.
    Pieces are on schedule to be built into this, but for an 
overall time line, I can't answer that because some pieces of 
the picture we have sketched out are only now being painted in 
in detail. So as we proceed, we will be finalizing that and 
developing more careful plans.
    Mr. Horn. Well, how specific are some of your tasks or 
milestones?
    Mr. Christoph. Some are very specific, down to, you know, 
what data elements will be in data bases, when those will be 
delivered. Eight to 10 months is to have that prototype 
operational, and this is a departure from the present legacy 
kind of data bases that we have. It relies on modern 
technology, relational data bases and essentially instant 
access to any of the utilities or applications that need to 
drive that data.
    Mr. Horn. In terms of how you pay for the computerization 
and recomputerization, that needs an appropriation, doesn't it? 
It doesn't come out of the people's premiums for Medicare. It 
acts like Social Security, and that's what we modeled it on; is 
that correct?
    Mr. Christoph. That's correct. We have an administrative 
budget which--the payments for the health care come out of the 
trust funds, and there is a separate appropriation for our 
administrative budget, and that's what pays for whatever 
management of the current program or any improvements.
    Mr. Horn. What's your estimate on what this might take to 
update your whole computer system?
    Mr. Christoph. What we are trying to design is an 
architecture that is not built of--we don't want to replicate 
existing stovepipes either with new stovepipes or bigger 
stovepipes. What we're trying to design is a system which is 
continually evolving as technology evolves. In that sense, it's 
kind of hard to put an overall price tag on it. To renovate 
some of these very large systems certainly will cost in the 
hundreds of millions of dollars.
    As one of the other panelists pointed out, the regulations 
and the rules that govern Medicare are extremely complex, and 
these systems are unlike any of the commercial systems that are 
out there that health insurance companies use. So it will be 
very expensive to build completely new systems; and again, as 
something that's being done over time and incrementally, we 
won't know exactly what the final outcome will be for the whole 
system.
    Mr. Horn. When you impose new requirements on the providers 
and the carriers or the HMOs, does the agency ever give them 
updated software?
    Mr. Christoph. We provide--we make available to providers 
free or low-cost software so that they can electronically 
submit claims. The main claims processing software that we use, 
of course, is operated by the carriers or intermediaries. We 
provide other information to the providers. We publish the 
rules and the tables and the payment, the codes; all of those 
things are made available. We want to facilitate as much as 
possible the providers' ability to submit good, clean bills.
    Mr. Horn. Are there intermediaries that the Medicare 
administration doesn't really feel that they're doing the job 
they should do? And what can you do about it?
    Mr. Christoph. We have--since the program's inception we've 
relied on carriers and fiscal intermediaries to do essentially 
all of our claims processing work. We've outsourced, in 
essence, the main line of our business, which is the claims 
processing.
    We've been struggling within the last few years--and Y2K 
helped us immensely in that--to get a handle on exactly what 
happens at the carriers and fiscal intermediaries. I can say 
that we have developed a much clearer picture of how claims are 
processed. We have established finer grains of control.
    Yes, I would say that some fiscal intermediaries and 
carriers are more proficient at performing their tasks than 
others. The larger ones certainly have more IT resources and 
more ability to operate, but I'd hesitate to beat up on any 
particular one.
    I think what we need to do is to provide increased 
oversight, more involvement in the process. As you're well 
aware, the more attention you pay to an activity, the more 
attention the people who are performing the activity pay to it 
as well, and they do a better job. We've been trying to do the 
same thing with our carriers and fiscal intermediaries.
    I think that's the answer, for us to simply pay better 
attention, and as a consequence, we'll manage them better.
    Mr. Horn. Thank you, and I have exceeded my time so the 
gentleman from Texas has 7 minutes for questioning.
    Mr. Turner. Thank you, Mr. Chairman.
    Dr. Christoph, you were referring to your 26 carriers or 
intermediaries. Are there some things that we could do to 
encourage those intermediaries to adopt better technology, 
things like Mr. Hicks is talking about? Are there some ways we 
could encourage that?
    I mean, obviously you've alluded to the fact that there are 
some intermediaries that are doing a lot better job than 
others. You didn't want to specify which one. Is there any way 
we could increase the efficiency of those intermediaries or 
incentives that we can have that would make them more 
innovative in terms of making the system work a little better?
    Mr. Christoph. I believe the innovation is going to have to 
come from our direction. The difficulty we face, we have been 
gradually reducing the number of standard claims payment 
systems and forcing carriers and intermediaries to use one of 
our standard systems.
    When the program began, we had over 130 carriers and 
intermediaries, and the health claims industry was largely a 
paper process. As automation came along each of them automated 
their own, and HCFA was dealing with on the order of 100 
individual systems that had been developed locally at each of 
those contractors.
    We have been forcing them to reduce down to just a few 
systems, and our goal is to get down to one Part A and one Part 
B system. The idea there is, if we're only dealing with a few 
systems, we can manage them better, we can manage them more 
tightly; and it also would enable us to make changes that would 
be widespread and concurrent. So it's our direction that's 
going to push innovation.
    One of the things that actually hurts innovation is the 
fact that we deal with all of these contractors as cost 
contracts. Title 18 specifies that we contract with insurance 
companies on a cost basis. In a day when most of these 
contractors were nonprofits, that made a great deal of sense, 
but many of those contractors are no longer nonprofits; and any 
business nowadays, if they're in there looking for profits, 
have to maximize the return. If we're looking at a cost 
contract, by definition, there's no profit in it.
    So it's difficult for us to incentivize contractors to make 
changes. I think contract reform in a sense would help us 
because it would enable us to give greater incentives to the 
contractors.
    Mr. Turner. Mr. Willemssen, what do you think about that 
suggestion, that we need to have more incentives for the 
contractors and move away from the cost base reimbursement?
    Mr. Willemssen. I think that is something that could be 
explored and I would agree with Dr. Christoph's comment about 
the gradual movement to more standardization of those systems. 
That's really been an instrumental element in helping achieve 
that.
    For Part B, HCFA and its carriers are down to four standard 
systems and by 2003 expect to be down to that single standard 
system that Dr. Christoph mentioned. So I think that will also 
go a long ways to assisting in standardization.
    Mr. Turner. Dr. Christoph, how long do these carriers have 
the contract? What period of time are they awarded for?
    Mr. Christoph. I'm not a contract specialist. I believe 
that the contracts are basically annual but renewable. Any 
contract term changes need to be through bilateral 
negotiations, but I believe every year we renew these 
contracts.
    Mr. Turner. You mentioned that originally there were 130 
carriers or intermediaries and we're down to 26 carriers now, 
is that correct, or 23?
    Mr. Christoph. It is on the order of the low twenties for 
the number of carriers. We've got something less than 60 
contractors total now. Over the years many of the contractors 
have voluntarily, largely for their own business reasons, 
decided to leave the program. This results in a declining pool 
of contractors able to take business over from leaving 
contractors and presents greater difficulties for us because 
we're not sure what kind of excess capacity is there to accept 
business from a contractor that's leaving. So there are a 
number of areas of risk that contract reform would help us on, 
perhaps increasing the pool of people we could go to.
    Mr. Turner. Thank you. Thank you, Mr. Chairman.
    Mr. Horn. Thank you, and I now yield 5 minutes to the 
gentlewoman from Illinois, Mrs. Biggert.
    Mrs. Biggert. I don't get 7 minutes, Mr. Chairman?
    Mr. Horn. Seven minutes. You're a good bargainer, Vice 
Chairman.
    Mrs. Biggert. Mr. Kovatch, I appreciate all that you do for 
home health care. In one of my former lives I was chairman of 
the board of the Visiting Nurse Association of Chicago. So I 
spent quite a few years involved in that and in fact was the 
chairman when we celebrated our 100-year anniversary.
    Unfortunately, shortly after that, because of mergers with 
Home Health Care and with other groups and particularly with 
hospitals, we decided to turn over the business to the 
University of Chicago, but the major reason was because we 
found that in the billing procedure, and how difficult that 
was, we ended up subsidizing Medicare and Medicaid to the tune 
of $2 million. We were very fortunate to have a high endowment, 
but knew that after, well, several years that we would run out 
of funds to do that, and I think that the problems that you 
have talked about in the home health care association industry 
were present then, and I can see that it has continued, that 
certainly one of the biggest problems that we had then was 
getting the doctor's approval and particularly now when home 
health care is much more prevalent because of the acute care 
that they have to provide and when people are coming out of the 
hospital so soon.
    So why is it that there's this problem and isn't it--
wouldn't it be that just using the letterhead or a special 
stamp or the doctor's name and Medicare identification number 
would be enough to satisfy that requirement?
    Mr. Kovatch. That is still the requirement to obtain the 
doctor's written approval. It isn't that the doctor hasn't 
given verbal approval prior to care. That's not necessarily the 
issue. It's more getting the doctor to physically sign off on 
the orders themselves, which we're currently required to do 
prior to billing. So, yes, that would help greatly if we could 
just use the doctor's verbal approval as approval to bill.
    Mrs. Biggert. And the other problem that we had, too, and I 
saw really a reduction in the amount of service, and certainly 
one of the requirements for being on our board was to go out 
with the visiting nurses periodically on visits and I think 
once you do that you're really hooked into the system to see, 
going from the Robert Taylor homes in Chicago to the high scale 
North Side and visiting these patients. I found that, and could 
understand why our nurses, particularly when there was such a 
limitation placed on the days of service that Medicare or 
Medicaid would pay for, that our nurses refused to end the 
service, and that's how we really got into subsidizing some of 
this because they found the patients were in such need of such 
care that they could not give up going to see them and of 
course then we had to pay for it.
    And I know that the physician fills out a form that has a 
definite beginning and a definite end of the service. Has there 
been any change of that or how complicated is it to request an 
extension of this service?
    Mr. Kovatch. That's actually very complicated, and with the 
prospective payment system coming on board it's probably going 
to become more of an issue. One of the things on our wish list 
was to increase the amount the prospective payment system was 
going to pay to the home health agencies by about $500 million. 
With PPS a lot of agencies are going to be tasked to see 
patients with a certain amount of reimbursement and cutoff 
basically at that point, and that is going to be a challenge 
for a lot of agencies.
    Currently we're having to subsidize our home health 
business with our private duty business, with the profits from 
our private duty business.
    Mrs. Biggert. I think there were a lot of agencies that got 
into this business thinking they could make a profit and found 
it was a difficult business to be in but one that's certainly 
most needed.
    Mr. Christoph, I think that Mr. Kovatch in his testimony 
had--written statement had talked about the denial of claims 
for technical errors and it differs in the home health care 
than for physicians or hospitals, both of which can fix and 
resubmit, but I know when I was in this that so many claims 
were turned back because of technical errors and could never be 
paid whether the time ran out or not. Is that true?
    Mr. Christoph. Actually Medicare accepts claims for a very 
long time. I believe it can go up to 18 months that a claim can 
be submitted. So I think there's quite a long time available. 
Also, all of our carriers and intermediaries provide a great 
deal of assistance to providers to try and ensure claims are 
submitted correctly the first time. We're engaged in a very 
large training effort to try and assist providers. We 
appreciate that that's a difficulty; 90 percent of the claims 
that we get electronically are paid promptly within 14, 15 
days. So it's the smaller percentage that encounter these kind 
of technical errors. We try and build into the systems checks, 
edits, policy edits to ensure that the claims are paid 
correctly. We are very sensitive to the program integrity 
issues. So when something gets denied for a technical error, 
it's part of our program to try and make sure that the claim is 
well justified.
    Overall, I think the program works pretty well given its 
complexity, but we're always trying to improve it and 
particularly working on provider education.
    Mrs. Biggert. I think in the home health care though the 
beneficiary has to initiate the appeal rather than the 
provider; is that correct?
    Mr. Christoph. I can't answer that. I'm not familiar with 
that area. We can find out and get back to you though.
    Mrs. Biggert. Thank you. Well, I'm on the yellow so I guess 
I'll have to yield back, Mr. Chairman. Thank you.
    Mr. Horn. Thank you very much. I see the distinguished ex-
ranking member from New York and member of the subcommittee and 
5 minutes to 6 minutes for questions.
    Mrs. Maloney. OK. I just want to compliment the chairman 
for keeping on making government work better and being more 
responsible, and this is one approach. I just would like to ask 
every member of the panel if they'd like to comment on it.
    There's a lot of fraud that takes place in Medicare. We 
read about it all the time. I met with the IG once. We met 
actually together with the IG and they talked about all the 
money that they brought in when they did investigations, and 
all the time when you pick up the paper you read about another 
Medicare fraud. I would like to know if you have any ideas in 
addition to the bill before us, No. 1, whether you think this 
would help and, No. 2, what would you do to stop Medicare 
fraud? I mean this is a great program. It helps a lot of 
people, but every time you read about Medicare fraud it really 
undermines the effectiveness of the whole system and takes away 
the faith of people in the system. I would just like to throw 
that out. If you were sitting up here and you had the 
opportunity to write these oversight bills, what would you do 
to make sure that we don't have the type of the fraud that has 
existed in the past and which this tries to attack? Anybody 
have any ideas?
    Dr. Zwelling-Aamot. I'll suggest an answer to that. The 
system itself is the fraudulent part. It is the fabricator of 
the truth. The data you collect is just not accurate data. You 
cannot make clinical decisions based on claims data. And what 
is called fraud or duplicitousness is really not that at all. 
It's just perhaps an error in translation in taking a clinical 
situation and trying to make a code out of it, remembering that 
the only reason to do that in the first place is for 
reimbursement purposes. So by its very undertaking, the system, 
while it's not fraud because it's not purposeful in that sense, 
the system just does not collect the right data. So even after 
investigation, when someone goes into a physician's office to 
look at medical records and they claim fraud, it's not fraud. 
It's another interpretation.
    We treat patients, not codes. This system deals with codes, 
codes to translate into reimbursement, and that's a very 
dangerous precedent, and I implore the committee to look at 
this at its very most basic point of integrity of data.
    Health care is a science. What we do is based on science 
and bad science is not what this country represents. The health 
care in this country and the good health of our patients is 
implicitly necessary for the increase in productivity and for 
good lives, and the government as the collector of that data 
must bear the responsibility of the integrity of that data.
    So in answer to your question, Mrs. Maloney, the first 
thing we need to do is to collect the right data. We need a 
relational data base. We need to better define the product that 
physicians sell and that patients purchase, and then you can 
development a reimbursement system based on reality.
    Mr. Sparks. I would just like to add that--I will give you 
an example of what might be considered fraud and yet is really 
not, and it deals with having all of the standards available to 
the providers.
    There's this thing called local medical review policies 
which allows each intermediary around the country to establish 
what they believe are the appropriate diagnoses that support a 
clinical test, and they vary from place to place. In the last 
year we underwent an audit to look at our--a particular lab 
test and the particular lab test had--we had a book from our 
laboratory that had all of the diagnoses that supported that. 
But when we looked at it we ended up getting denied for a 
number of those. The test was syphilis. The diagnosis that we 
had used was organic brain syndrome. It was a valid diagnosis 
code that supported the test, but it was in Virginia. It was 
not from the Maryland intermediary. So all of those tests in 
one jurisdiction were covered under the Medicare program and in 
another jurisdiction were not covered.
    So I think part of the problem that we face is we need to 
have standardization of the information that we're dealing with 
in order to bill.
    Mr. Hicks. Mrs. Maloney, you asked whether--do we think 
this system actually addresses the fraud. I would comment in 
part to say I don't think any one system will eliminate the 
fraud. I think different things can help. One thing that we 
can--one industry we can borrow from for some learnings is the 
credit card industry. The credit card industry experiences a 
fraud rate which is substantially below what the Medicare fraud 
rate is projected to be. That doesn't mean we're accurately 
able to really track fraud. If we could really accurately track 
fraud we could probably eliminate it.
    The one thing about this kind of a system is that it 
creates a point of encounter where the service provider 
actually delivers the equivalent of a bill or a statement of 
services to the recipient of the services. That recipient of 
the services is probably the best person to determine whether 
those services set forth on that bill were actually performed 
and to do it timely. So that is certainly one thing----
    Mrs. Maloney. Right now do they send the services back to 
the person who got them?
    Mr. Hicks. In certain cases----
    Mrs. Maloney. Not in certain cases. In some cases they 
don't.
    Mr. Lehrer. In almost all they do.
    Mr. Hicks. But it's usually at a much later date. For 
example, and again I can speak to the private sector better, 
but in the private sector many times it's 6 or 8 weeks later, 
and if it's in our house that bill never gets opened or that 
statement of services never gets opened. Further, it doesn't 
necessarily say that it is a bill, so you may not pay attention 
to it until you've got somebody breathing down your neck to pay 
a bill.
    So I guess the point is getting it timely, if somebody said 
they gave you a blood test and you received a bill onsite and 
it said blood test, you know----
    Mrs. Maloney. Mr. Hicks, I just want to understand it. What 
happens usually is someone goes to the doctor and gets the 
blood test and they don't get the bill then, they get it like 
what, 2 months later?
    Mr. Hicks. Potentially 2 weeks later, potentially 8 weeks 
later. It depends on the timing. In Medicare it may be 
different and I think some of the others----
    Mrs. Maloney. Whereas with the credit card you know right 
then and there.
    Mr. Hicks. With the credit card you know right then and 
there. In addition, there are other aspects of fraud that can 
occur. In the credit card industry, if somebody steals your 
card, you have the ability electronically to shut them out of 
the system immediately. We have all experienced being 
potentially shut out of a system, and I guess the concept is if 
through a combination of a point of encounter system, through 
membership IDs, through unique provider IDs and some antifraud 
gaming provisions that you can build into the system through 
the gateway, which is what our expertise potentially is here, 
you start eliminating and cutting back on the fraud. I don't 
believe you eliminate it.
    I believe you also need the ability to do statistical 
analysis and I kind of like the idea of Mr. Lehrer, who said 
treat certain providers who have a track record and you've 
studied them statistically. The chances of that person 
committing fraud may be less than somebody who's done it 
before. So if you can evaluate patterns of activity, that's 
another way of whittling away at this.
    Mrs. Maloney. We're not doing that now? We're not doing 
patterns of activity? If I could just throw in for personal 
experience, I know my time is up, the red is on. I've had 
constituents call me or come to see me or mail me information 
or even forms for services that were billed to government that 
they never received. You know, some of them are wheelchairs or 
this, that and the other, and I just take it and mail it into 
the Medicare fraud to followup and see if there is any truth to 
it or whatever. That's happened to me I'd say roughly 10 times.
    Then there's another issue that many of the doctors are 
telling me that the reimbursement rate is far lower than what 
the reality of the cost of their services is, which is another 
totally important issue that we need to look at. But I think 
that anytime that there is fraud like this it just destroys the 
whole system.
    I know you had a comment, Ms. Jarmon.
    Mr. Christoph. Congresswoman Maloney, I'd like to say a 
little bit about what Medicare is doing because we are very 
concerned about the issue of program integrity, making sure 
that claims are paid correctly, that claims are correct, and 
from my standpoint as Chief Information Officer I appreciate 
that there is a need to have the information at hand that we 
can mine and look for that kind of fraud. Our systems are 
antiquated. The purpose of H.R. 4401 is to advance the state of 
art in our systems that would enable us to do this kind of 
statistical data mining that is very difficult nowadays because 
our information systems aren't built to allow the easy sharing 
of information.
    One of the things that we're doing, our flagship data base, 
the national claims history file, is probably the biggest 
mountain of claims information in the world, but it's very 
difficult to get an answer out of that. We have to code up a 
special program to go and access it. It may take 3 months to 
get an answer out of that data base. We've prototyped a new 
version of that data base that gives us an answer in 20 minutes 
to an hour and that's because we can access the information 
more readily.
    The analogy between doing health care claims and credit 
cards I think is a false one because the transactions are 
inherently very different. A credit card transaction, all you 
need is an amount and a payer ID and a cardholder ID and you 
can look at some patterns very quickly. Health care is a much 
more complicated program, developing the tests, trying to do 
these statistical analyses, much more complex problem. I have 
looked at this myself and it's a very complex undertaking.
    Our goal is to build an infrastructure to enable us to do 
those kinds--ask those kind of questions and detect program 
integrity problems.
    Mrs. Maloney. Even with an antiquated computer system or 
whatever, I think the IG at the Medicare Department, in the 
reports that I have read, has been the most successful in 
correcting and bringing in revenue that was owed the government 
in various ways.
    Mr. Horn. I think Ms. Jarmon wants to comment on that and 
then we go to Mr. Ose for 10 minutes.
    Ms. Jarmon. We at GAO have been resolved in reviewing the 
studies that have been done by the IG and trying to estimate--
their attempts to estimate improper payments in Medicare fee 
for service and I just wanted to say that HCFA has several 
initiatives underway and you will never be able to determine of 
course what the total fraud rate is because like Dr. Christoph 
mentioned, it is complex and there are some pretty 
sophisticated fraud schemes, and things like kickbacks and 
collusion are very difficult to measure and to control, but one 
of the things that we think is important is that there be an 
analysis of these improper payments that are identified from 
the IG's study to determine the cause of those improper 
payments, determine where the risk is, where is the fraud 
occurring and what can be done to address it, to address it for 
improving internal controls and things like that, and many of 
the problems that they find in their study where they come up 
with an error rate of about 8 percent seem to relate to medical 
necessity and documentation not being provided. So there needs 
to be this additional analysis related to those issues.
    Mrs. Maloney. Thank you. My time is up.
    Mr. Horn. Gentleman from California, Mr. Ose, has 10 
minutes.
    Mr. Ose. Thank you, Mr. Chairman. I first want to make sure 
I understand, Dr. Christoph. According to your resume, you came 
to HCFA as CIO after the MTS contract was terminated.
    Mr. Christoph. That's correct.
    Mr. Ose. I also want to suggest to the other members of 
this committee that perhaps Dr. Christoph's service at Los 
Alamos was ended too soon.
    Mr. Willemssen, I always enjoy reading your testimony and 
having the opportunity to visit with you. I mean I marked this 
baby up, as you can see, last night reading it. The question I 
have relates to the current trustees of the system obviously, 
and maybe, Dr. Christoph, you could chime in here, have a 
responsibility to make sure that the system stays up to date 
and current. I'm still trying to find out whether or not those 
six individuals ever in their trustee meetings discussed 
updating our IT infrastructure so we can accomplish payments 
for processing in a timely fashion. Are you aware of any such 
discussion?
    Mr. Willemssen. I will have to check on that, Congressman. 
I don't have the answer to that question at hand, but we will 
get the answer for you.
    [The information referred to follows:]
              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Ose. Let me ask Dr. Christoph then since he's kind of 
had that job. Have you ever sat with those six individuals, the 
purpose of which was to have this very discussion we're having 
here today?
    Mr. Christoph. The short answer is no, but my belief is 
that the trustees are focused mostly on the financial health of 
the Medicare system and have not been involved in the details 
of payment operations. So I believe that--I have only been 
there 3 years. I don't know the history and we will have to 
check and see if they have been involved, but my expectation is 
that their focus is in the other more policy areas about the 
longevity of the program and how the trust funds are 
performing.
    Mr. Ose. I would suggest to you that management includes 
all of these areas, and I would hope that one of the things you 
might take back is any interest in having the trustees look at 
this as part of their managerial umbrella.
    The second question I have is, as it relates to the common 
working file, if I understand correctly, the system exists in 
such a way that it is hard to divine from the common working 
file any epidemiological data that would allow HCFA or anybody 
else to analyze certain issues. Now you have got a prototype 
you have worked on that apparently indicates a much compacted 
process by which you can get epidemiological information. 
Correct me if I'm wrong.
    Mr. Christoph. No, I don't believe I said that. The common 
working file--in fact, our whole Medicare claims payment 
operation is focused on claims payment. It was not designed to 
collect medical information to be used for epidemiology. It is 
often used for that because the other data just doesn't exist.
    It is a huge repository of medical claims information; that 
is correct. However, people study it because it's the best data 
we have around. It is a proxy at best for doing epidemiological 
studies. There are other efforts under way in other parts of 
the government dealing with telemedicine, the government 
computerized patient records effort. These are all focused on 
trying to develop better health information and that is very 
different from claims information.
    We are under numerous restrictions to collect only the data 
we need to perform our function. So we collect the claims 
information focused on trying to make sure we pay claims 
accurately and efficiently. The other information that is there 
is kept by local hospitals as part of the health records that 
they maintain. My understanding is Mayo Clinic has a huge 
repository; they computerized all their patient information, 
their medical records, and are able to mine that effectively 
for epidemiological studies.
    Mr. Ose. In effect, what you're saying is, you only have 
the codes that come in on the claims submittal rather than the 
underlying symptoms, if you will, that might be the basis for 
the--I can't even talk today--the basis for the analysis.
    Mr. Christoph. That's correct, we collect information 
that's relevant to a claim. It includes procedure codes, codes 
for diagnoses, information about who the beneficiary is, who 
the provider is. But the detailed medical information, there 
may be supplemental medical information attached to the claim 
to enable us--to help us to see whether it's medically 
necessary; but in general, no, we don't collect that 
information if it's not necessary for the payment of a claim.
    Mr. Ose. If I understand correctly then there are 26 or 
28--there are different numbers in the different testimony, 
there are 26 to 28 carriers who process Part B claims on behalf 
of the Health Care Financing Administration.
    I want to go back. I think it was either Mr. Hicks or Mr. 
Kovatch or Mr. Sparks who commented on the analogous situation 
in the credit cards. You have suggested that it's not a clean 
analogy. How about the securities industry where you have four, 
five or six major securities brokers with offices around the 
United States, all of whom are matching customers with stocks, 
some on a 24-hour settlement basis, some on a 72-hour 
settlement basis, varying payments, varying receiving entities 
such as IRAs, pension plans, individual holdings and the like? 
It would seem to me that the infrastructure, at least the basic 
infrastructure, exists that could be moved over in a successful 
effort to comport with the chairman's bill. Is that accurate?
    Mr. Christoph. Actually, there is an accurate piece to the 
analogy. Everything you describe is a transaction, OK, in the 
sense that medical claims are transactions. There are pieces of 
that that, yes, apply, but the analogy breaks down when you 
look at what's behind the transaction, OK? If you're 
transferring money, Medicare has something like 1.3 million 
providers, huge disparity in large numbers of people that we 
make payments to.
    Mr. Ose. Isn't that an issue for the carrier and not for 
Medicare or HCFA because you're only dealing with 26 or 28?
    Mr. Christoph. We end up trying to oversee that program. 
You can think of HCFA as managing these 20-odd subsidiaries 
that carry out this business. There is a structure for the 
claims. We do it very efficiently to do the transactions. The 
difficulty and where the analogy breaks down is in the 
complexity of the program, the policies, what claims can be 
paid, looking behind the claims where necessary to the 
supporting medical information for the medical review to ensure 
that the service was medically necessary.
    It is a transaction, yes, but a very complex transaction; 
and it's the claims processing--VIPS can talk about how large 
their system is. It's several millions lines of code, and that 
mostly does these policy edits looking to determine what is the 
proper payment.
    Mr. Ose. I want to go to these policy edits then because I 
noticed in Mr. Sparks's testimony, and he reiterated it this 
morning, the desire to have access to the logic underlying the 
edits themselves, and I was unclear. Are you talking about the 
rationale that management uses to create certain edits, or are 
you talking about the actual software program that has the 
``logic,'' that substantiates the edits? I was unclear which of 
those you were addressing.
    Mr. Sparks. I think that the providers really want to get a 
clean bill. So in order for us to get a clean bill, we need--
there are edits that are done at HCFA after we have submitted 
the bills, or at the intermediary, that we don't have access 
to; nor do we have access to the common working file, both of 
which would help in our ability to provide cleaner claims on a 
timely basis.
    Mr. Ose. But is it the software processing logic that 
you're after, or is it the rationale that management uses to 
impose this or that edit?
    Mr. Sparks. The software logic.
    Mr. Ose. I was unclear on that.
    Mr. Chairman, I see my time has evaporated. I had a huge 
number of questions just from Mr. Willemssen's testimony, not 
even to mention the others. If I could submit the questions in 
writing--I regret that it will be a rather substantive number 
of questions, but I would appreciate the chairman's indulgence.
    Mr. Horn. We would appreciate it if you would give a 
response. We'll put it in the record at this point.
    Mr. Ose. I have them for all of you. So don't worry about 
it, you won't be left out.
    Mr. Horn. I'm going to go back now to starting over with 5 
minutes, now that everybody's had their say on some of this; 
and what I'd like to do on my 5 minutes--and we will just start 
down at this end and give Mr. Christoph a rest--if you had a 
wish list, what are the two top changes you would like to see 
made in Medicare and in the Health Care Financing 
Administration requirements to streamline the system or to make 
things easier?
    Mr. Hicks, what are your top two?
    Mr. Hicks. Actually, the system that is outlined sort of 
closely aligns with our vision of what we think the system, the 
HCFA system, can do long term. Two of the most important 
components of that, I believe, are the delivery of a settlement 
or an explanation of benefits to the member while they're in 
the doctor's office. That's first and foremost.
    Second, providing the edits, etc., online to the doctor 
while they're using the system is what this entire concept 
encompasses. I mean to be able to look at that online, I agree, 
is a very important function in the system.
    So if you ask for the most important components of what we 
would be advocating, it's those two things.
    Mr. Horn. OK.
    Mr. Lehrer.
    Mr. Lehrer. I think the two things that would support 
reducing the inappropriate payments that the Health Care 
Financing Administration could act on would be an ability to 
combine history information, that is, the patient history.
    We talked about the national claims history file. The 
reality that an ambulance trip that doesn't result in a 
hospital admission is not verifiable today, that is, the 
ambulance could get paid even though no one ever went anywhere 
is a concern. So I think having combined history, as Dr. 
Christoph described, in the prototype history file is a major 
advancement.
    Innovations again to the standard processing systems that 
support or today support the underlying Medicare claim 
processing need to continue and need to be encouraged.
    Mr. Horn. Mr. Kovatch, two, and if we can keep it short, I 
just want to get your thoughts on the record.
    Mr. Kovatch. First, to provide financial assistance to home 
health providers. Most home health providers are small agencies 
and unable to purchase the electronic systems that would be 
necessary to speed payment along.
    Second, to establish time lines for the fiscal 
intermediaries in responding to medical reviews and completing 
medical reviews. This is a huge problem with a lot of agencies, 
especially my own, because we're at times unable to meet 
payroll and cash-flow.
    Mr. Horn. Mr. Sparks.
    Mr. Sparks. Standardization of policies, procedures, 
medical criteria, as well as access again to the software, so 
that the hospitals and nursing homes can do their own edits in 
submitting clean bills.
    Mr. Horn. Dr. Zwelling-Aamot.
    Dr. Zwelling-Aamot. Not surprisingly, again, my first wish 
would be legitimate data. I think the system must support 
legitimate data, and while all these comments are very well 
taken, when the data itself is not legitimate, the whole system 
breaks down.
    Second, I would agree that standardization is very 
important, particularly in the physician's office where we 
don't have the financial means to address the thousands of 
different issues that various insurance companies and the 
government ask us to address.
    Mr. Horn. Ms. Jarmon.
    Ms. Jarmon. From the financial management perspective, I 
would encourage HCFA to continue to analyze the result of the 
improper payment study, so they can understand, even on a sub-
national basis, where errors are occurring--by contractor, by 
provider.
    And then also, second, address the computer security issues 
and privacy issues that are related to this; and I'm sure Joel 
will talk more about those.
    Mr. Willemssen. Mr. Chairman, from a systems perspective. 
First, as HCFA and its partners become increasingly automated, 
they must retain and actually increase their focus on computer 
security matters, especially if they go to a more Internet-
based architecture.
    Second, linking back to your question earlier, I think it's 
very important for Dr. Christoph and HCFA to fill in the 
details behind how he intends to achieve his vision from a task 
deliverable and milestone perspective.
    Mr. Horn. Dr. Christoph, do you disagree or agree with some 
of the ones that have been in the hurricane heading in your 
direction?
    Mr. Christoph. I agree with a number of them, if I can 
state my two wish lists.
    Mr. Horn. Absolutely.
    Mr. Christoph. Actually, I've interpreted them a little 
differently in the sense that I have some requests for help 
from Congress.
    My two wish lists, Mr. Hicks mentioned individual 
identifiers as being critically important. I think one of the 
things that would go very far in helping us deal with program 
integrity issues would be a national public key infrastructure. 
This requires Congress' delicate hand in dealing with a number 
of very sensitive privacy issues, and I think that's something 
that if your committee can work on that, would be very helpful.
    Second, a moratorium on changes in the Medicare program 
would give us time and ability to focus on modernization 
efforts that we need to undertake in order to provide the kinds 
of things that many of the panelists and your committee have 
asked for.
    Mr. Horn. This is very helpful, and since my colleague from 
California has a few more questions, how about if you do it in 
4 minutes, and then I can wind it up.
    Mr. Ose. I will attempt.
    I'm sitting up here cheering on this moratorium on changes. 
Mr. Willemssen, you noted in your testimony--on page 13 of the 
draft, you noted two things about the Medicare coding system, 
one of which is that the coding system changes every year. I 
cannot imagine why you would change the coding system every 
year and I'm interested in being educated.
    Who makes such a decision and why?
    Mr. Willemssen. Well, in part, there are sometimes changes 
in the law, sometimes changes in regulations, sometimes changes 
in prevailing medical practice and what kind of techniques may 
be used; and it adds up to a great number of changes. But I can 
definitely see Dr. Christoph's point that if he had a 
moratorium coming out of Y2K, where all their attention was on 
that, then he could be in a more proactive posture to address 
the kinds of issues that have been discussed today.
    Mr. Ose. Here's the thing that just drives me nuts, that 
the codes get changed--the standard in the industry evolves 
over time, and I recognize that; to the extent that occurs, 
clearly the codes have to change. But if we have a wholesale 
changing of codes on an annual basis, we end up with doctors 
and other providers who are in a position of perhaps being 
tired 1 day or being in a hurry 1 day, and they make a mistake 
on a coding.
    The Department of Justice picks that up in a regular audit 
and says, Wait a minute, we've got waste, fraud and abuse and 
all of a sudden I've got people like Mr. Sparks, or others 
whose business is to provide service, spending millions 
fighting a waste, fraud and abuse action.
    Now, I mean, we had--I don't remember who it was that 
recommended having prequalification for providers and the like, 
which is probably too logical for us to ever consider; but in 
the sense that the system is complex, I mean--Dr. Christoph, 
you're the expert here. How do we address this?
    And I can't help but think that the codes are one area that 
we need to focus on. Correct me if I am wrong.
    Mr. Christoph. We have been--actually, some of the codes 
that we use are industry standard consensus codes. And the 
standardization here to all use the same set of codes.
    Mr. Ose. So you end up with, like category 100 is this DRG 
and category 200 is this DRG, and you might get 203, 204 as you 
differentiate among the specialties.
    Mr. Christoph. Exactly. There might be 100 codes that deal 
just with various kinds of operations in the chest cavity.
    Mr. Ose. Well, if that's the case, why don't we take the 
codes and change the system so that we anticipate an evolution 
over a 5-year period of time and make the code large enough so 
that based on past history, whatever might occur within a 5-
year period of time, we don't have to change the basic 
structure of the code from a 1,000 or 10,000 code to a 20,000, 
30,000, 40,000, 50,000. It just seems to me like we're moving 
in inches when we can move in leaps on a 5-year basis instead 
of an annual basis.
    Mr. Christoph. Again, those codes are industry consensus 
standards that Medicare uses, so--one of the sets of codes is 
actually maintained by the AMA, so we don't try and create new 
codes. We add codes if there's new procedures, OK, as new 
technology----
    Mr. Ose. All I'm saying is that the structure of the code 
itself, if it is a three-digit code, you only have one basic 
categorization and 99 options. If it's a four-digit code, you 
have one basic categorization and 999 options. If it's five 
digits, etc.
    Why don't we make that leap so that we have sufficient 
flexibility in the code that we don't have to change the basic 
architecture?
    Mr. Christoph. You're talking like in area codes and ZIP 
codes where we have run out of room, and I believe we are--
there is enough room in there for new additional codes; there 
are a lot of unused numbers. But I agree with your point, there 
needs to be room in there to handle additional codes.
    Mr. Ose. So you say we're moving in that direction or we're 
there already, or we're moving in that direction?
    Mr. Christoph. I would have to rely on the experts that 
maintain those codes, but I believe that there is room for 
additional codes.
    It is like the library indexing system, Dewey decimal. You 
can always add books in the middle. If you have to, you can go 
to decimal points and add codes there.
    Mr. Ose. You got my concept. So on a practitioner's side, 
how does it work?
    Dr. Zwelling-Aamot. Much different.
    There are a variety of different codes. There are 
diagnostic codes, there are billing codes, and for the hospital 
there are DRG codes.
    I personally worked for various hospitals to try to enhance 
their DRG coding or make it more accurate. I started that job 
at--we will call it ``year zero,'' and I educated the staff and 
the nursing staff to do the coding as to what they might look 
for.
    Mr. Ose. You need to shrink. The chairman is giving me the 
eye here.
    Dr. Zwelling-Aamot. The long and short of it is, there was 
a 30 percent error rate when I initiated the job, and 5 years 
later there was a 30 percent error rate. The codes do not 
adequately describe what it is we clinicians do for our 
patient; and as such, they're an unfair representation and, as 
I said earlier, lead to really bad conclusions.
    Mr. Ose. Mr. Sparks from the hospitals.
    Mr. Sparks. We do have problems with standardization of 
supporting diagnosis for codes. As I indicated before, you have 
lab tests for which you have to provide valid diagnosis, and 
those are not standardized in the country. I think we need to 
look at standardizing those.
    We also need to look at--in a 3-year period, we have three 
directions from the intermediary on how to submit our lab 
charges. One year they told us, don't bundle anything; the next 
year they said, bundle only this; and the next year they said, 
unbundle these things. Every year for a 3-year period this has 
changed.
    Mr. Ose. This is from your carrier or from HCFA?
    Mr. Sparks. The direction is coming from HCFA to the 
carriers.
    So we need to have standardization. If we're going to do 
it, let's do it one way and not have a change every year.
    Mr. Ose. What about that, Dr. Christoph?
    Mr. Christoph. I firmly believe in standardization, and 
that's a direction we definitely want to go in.
    Mr. Ose. Your testimony said you had been here 3 years, and 
Mr. Sparks is saying in that 3-year period we've had three 
changes--or two changes, excuse me.
    Now, are you driving this or is somebody else driving this?
    Mr. Christoph. The area that I think the changes come from 
deals largely with policy which is outside of my realm of 
competence. I'm an IT person who is trying to provide the 
infrastructure to allow operations to occur, and I can't speak 
to the policy areas that lead to some of those changes.
    Mr. Ose. Mr. Chairman, you have been very generous with 
time, and I've eliminated two questions from my list, but I'm 
still going to give you a list.
    Mr. Horn. I thank the gentleman. He always asks excellent 
questions.
    We now have a vote on the floor. I have one more short 
question of Mr. Christoph.
    To what degree do we have, in Medicare, prior approval of 
nonemergency treatments? It seems to me that might simplify 
some of the problem. If you had a preapproval, it just makes 
sense. Why we have to think of each case, I'll never know; but 
what is the situation?
    Mr. Christoph. I believe the situation we have is that when 
Medicare is submitted a claim and that claim must come after 
the service is delivered, then Medicare begins its processing 
effort. We don't have, in a sense, a Medicare beneficiary 
because they are eligible. There are many things that they are 
eligible for; in a sense, they know they have Medicare in back 
of them, supporting them, whether a specific procedure is 
covered or not.
    I think that's what you're looking for, is there a way of 
generating some kind of clearance so that a doctor would know 
up front whether or not this procedure will be covered. I think 
that is something that is possible to do. It might well be one 
of the targets, and we look forward to working with your 
committee to see if those things can be done.
    Mr. Horn. Well, I agree with you, and I'm delighted.
    Let me note here that we've had a number of staff that have 
helped with this hearing: the Professional Staff Member, 
Director of Communications, on my left and your right is Bonnie 
Heald for this hearing; the head of the whole staff is J. 
Russell George, staff director, chief counsel; Bryan Sisk, our 
clerk; Elizabeth Seong, staff assistant; Will Ackerly, intern; 
Chris Dollar, an intern; Davidson Hulfish, intern; and minority 
staff, Trey Henderson is the counsel; Jean Gosa, the minority 
clerk over there in the corner; and the official reporter of 
debates is Melinda Walker.
    We thank you all for what you have done to make this a very 
successful hearing; and on behalf of Senator Lugar and the 
subcommittee and myself, I want to thank each of you for the 
insight and candor that you have brought to this situation. 
You've played a very important role in the legislative process, 
and frankly, we have a lot of work to do in order to refine the 
bill.
    I'd certainly appreciate it if you could in the next week--
if driving away or on a plane, you could say, ``Gee, I really 
wanted to do that'' and send it to either Mr. George or myself. 
I can see that we have a lot of work to do, and I think your 
testimony will be taken to heart as we reconsider some of the 
bill's provisions.
    And so thank you for coming and sharing your wisdom with 
us. Thank you very much. And we're adjourned.
    [Whereupon, at 12:10 p.m., the subcommittee was adjourned.]

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