U.S. GOVERNMENT PRINTING OFFICE

72–933 DTP WASHINGTON : 2001

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

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: (202) 512–1800 Fax: (202) 512–2250

Mail: Stop SSOP, Washington, DC 20402–0001

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

BOB BARR, Georgia

DAN MILLER, Florida

ASA HUTCHINSON, Arkansas

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

HELEN CHENOWETH-HAGE, Idaho

DAVID VITTER, Louisiana

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

CHAKA FATTAH, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

HAROLD E. FORD, JR., Tennessee

JANICE D. SCHAKOWSKY, Illinois

———

BERNARD SANDERS, Vermont

(Independent)

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

THOMAS M. DAVIS, Virginia

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

JIM TURNER, Texas

PAUL E. KANJORSKI, Pennsylvania

MAJOR R. OWENS, New York

PATSY T. MINK, Hawaii

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

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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

(1)

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:]

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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:]

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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

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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

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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 LugarHorn 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:]

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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?

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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.

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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:]

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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.

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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

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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.

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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 deVerDate 11-MAY-2000 08:00 Jul 20, 2001 Jkt 000000 PO 00000 Frm 00076 Fmt 6633 Sfmt 6633 C:\DOCS\72933.TXT HGOVREF1 PsN: HGOVREF1
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pression 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 proVerDate 11-MAY-2000 08:00 Jul 20, 2001 Jkt 000000 PO 00000 Frm 00084 Fmt 6633 Sfmt 6633 C:\DOCS\72933.TXT HGOVREF1 PsN: HGOVREF1
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gram 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

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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.

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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 enVerDate 11-MAY-2000 08:00 Jul 20, 2001 Jkt 000000 PO 00000 Frm 00111 Fmt 6633 Sfmt 6633 C:\DOCS\72933.TXT HGOVREF1 PsN: HGOVREF1
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gine 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.

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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:]

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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

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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.

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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?

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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.

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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.

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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 exranking 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 governVerDate 11-MAY-2000 08:00 Jul 20, 2001 Jkt 000000 PO 00000 Frm 00124 Fmt 6633 Sfmt 6633 C:\DOCS\72933.TXT HGOVREF1 PsN: HGOVREF1
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ment 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.

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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

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adays 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.

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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:]

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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

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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.

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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

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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

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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

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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?

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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

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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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