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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

 
CAN IMPROVED COMPLIANCE WITH THE REGULATORY FLEXIBILITY ACT RESUSCITATE 
                      SMALL HEALTH CARE PROVIDERS?
=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION
                               __________

                     WASHINGTON, DC, APRIL 10, 2002
                               __________

                           Serial No. 107-53
                               __________

         Printed for the use of the Committee on Small Business

                     U.S. GOVERNMENT PRINTING OFFICE
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________________________________________________________________________
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                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio                   DONNA M. CHRISTENSEN, Virgin 
PATRICK J. TOOMEY, Pennsylvania          Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota          TOM UDALL, New Mexico
MICHAEL PENCE, Indiana               STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 10, 2002...................................     1

                               Witnesses

Sullivan, Hon. Thomas, Chief Counsel for Advocacy, U.S. Small 
  Business Administration........................................     7
Nielsen, David, M.D., Representing American Academy of 
  Otolaryngology.................................................     8
Jones, Warren, M.D., Representing American Academy of Family 
  Physicians.....................................................    12
Evans, Zachary, President, National Association of Portable X-Ray 
  Providers......................................................    14
Harroun, Mary, President, Merry Walker Corporation...............    16

                                Appendix

Opening statements:
    Manzullo, Hon. Donald........................................    32
    Christensen, Hon. Donna Christian............................    35
    Ross, Hon. Mike..............................................    39
Prepared statements:
    Sullivan, Hon. Thomas........................................    40
    Nielsen, David...............................................    47
    Jones, Warren................................................    52
    Evans, Zachary...............................................    60
    Harroun, Mary................................................   215
Additional Information:
    Submission from Congresswoman Christian-Christensen..........   267

CAN IMPROVED COMPLIANCE WITH THE REGULATORY FLEXIBILITY ACT RESUSCITATE 
                      SMALL HEALTHCARE PROVIDERS?

                              ----------                              

                       WEDNESDAY, APRIL 10, 2002

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:06 a.m. in room 
2360, Rayburn House Office Building, Hon. Donald Manzullo 
presiding.
    Chairman Manzullo. The Committee will come to order. First 
of all, I want to thank the witnesses for showing up. I want 
the record to indicate that two weeks ago our office received a 
letter that Administrator Scully would be appearing at this 
hearing. And I want that letter to be made part of the record.
    Subsequent to that time, Mr. Scully has expressed a desire 
that he wanted to be on the panel by himself. And the Chairman 
of Small Business Committee sets the rules, not the witnesses. 
And one of the reasons that we like to put people from the 
Administration on panels with the people that are affected by 
Administration directives is the fact that the purpose of this 
Committee is to solve problems. We are problem-solvers.
    Mrs. Velazquez and I have had over 40 hearings. And in all 
of those hearings we have been in total agreement on every 
issue that was brought up at the hearings at the full Committee 
level. And the reason for that is the fact that we are here to 
represent small businesses, how they are affected by rules and 
regulations.
    We unfortunately had to issue an subpoena last night to Mr. 
Scully. The subpoena was duly served. Mr. Scully appeared in 
this Committee room approximately 15 minutes ago he advised our 
staff that notwithstanding the Congressional subpoena, that he 
was not going to appear today at this hearing.
    We, of course, will take every precaution necessary and 
every measure necessary, because we represent small 
businesspeople. And he did not like the fact that he had to 
appear at a table with lobbyists, end of quote. And we said it 
is important that you appear at the table with people who are 
affected by regulation. Tom Sullivan is part of the 
Administration; it does not bother him to be here.
    So it is very disheartening that the person who is in 
charge of making all the rules and regulations for the delivery 
of health care services, for Medicare and Medicaid, 
purposefully, willfully, intentionally is ignoring a subpoena 
of the Chairman of the Small Business Committee of the United 
States House of Representatives.
    This is extremely, extremely serious. But notwithstanding 
that, we are going to have the hearing. And I am going to 
encourage the members of the Committee to address their 
questions to the empty chair.
    Mr. Scully put his testimony on the table. His testimony 
will not be admitted into the record. The testimony of all the 
other witnesses will be admitted into the record, the full and 
complete written testimony. In addition to that, I am going to 
leave the record open for a couple of weeks. Anybody who wants 
to submit testimony to be part of this record can do so. Keep 
your comments to under two typewritten pages, and get those to 
Mr. Pineles, who is seated next to me.
    The purpose of this hearing is to complement what President 
Bush said on March 19, 2002. He is a Member of the 
Administration. He should be; he is a great President.
    But he stated that `every agency is required to analyze the 
impact of new regulations on small businesses before issuing 
them. This is important law.
    The problem is that it has often been ignored. The law is 
on the books. The regulators do not care that the law is on the 
books. From this day forward they will care that the law is on 
the books. We want to enforce the law.' End of quote. That is 
what President Bush said on March 19 of 2002.
    I concur with the President, the law must be enforced. This 
Committee will play its part in ensuring that the regulators 
comply with the law because it is important to small 
businesses.
    This is the first hearing to ensure that the regulators 
will care that the law is on the books. The Health Care 
Financing Administration, or HCFA as I will continue to refer 
to it, not by the new name--you know, you do not change the 
nature of a substance by giving it a new name. It is still the 
old name. Unfortunately, the old habits continue. I am not 
going to refer to it as the CMS, because they have not deserved 
the dignity of being given a new name unless they come up with 
a new product.
    Today's hearing focuses on HCFA's compliance with the 
Regulatory Flexibility Act, or RFA. In particular, the 
Committee will be examining HCFA's analysis, or more to the 
point the lack of analysis, in implementing the physician fee 
schedule.
    HCFA's failure to comply with RFA in developing the 
physician fee schedule is emblematic of an endemic problem at 
HCFA. The regulators do not care that RFA is on the books. From 
this day forward, HCFA will care that the RFA is on the books. 
And I may issue a subpoena every day to Mr. Scully to have him 
come here, and just for the purpose of showing up and asking 
questions, so he will learn that he is an unelected official.
    The purpose of this Committee, one of the purposes is 
oversight. We oversee, they show up; they do not determine the 
rules. The Committee is not interested in excuses or crabbed 
interpretation by lawyers at HCFA to avoid compliance with RFA.
    The Committee expects that HCFA, if it wants to demonstrate 
that it is a new agency, will comply with the RFA. HCFA should 
evaluate the cost of the regulations on small health care 
providers, and examine alternatives that are less burdensome to 
our health care providers.
    I would now yield to our ranking Minority Member for an 
opening statement.
    Ms. Velazquez. Thank you, Mr. Chairman. Today's hearing is 
the fourth in a series of hearings we have convened to examine 
the Center for Medicare and Medicaid Services, and its heavy 
impact on small businesses.
    We are here to hold accountable this very aloof federal 
agency for ignoring the law that requires it to reach out and 
involve small businesses in drafting the regulations that 
affect them the most.
    The Regulatory Flexibility Act has been in effect for more 
than 20 years. Yet federal agencies still feel free to ignore 
its mandate. Well, I want to ask the chief representative of 
CMS what he does not understand about following the law.
    Doctors and dentists in private practice are the 
quintessential small businesses. In fact, two-thirds of all 
doctors' offices employ fewer than 25 workers. Most dentists 
are solo practitioners with no more than four employees. This 
means that the great bulk of our medical serviceproviders lack 
the resources they need to absorb administrative burdens and costs put 
upon them by federal paperwork and regulation requirements.
    With Medicare the burdens are extreme. The senior health 
insurance compensation system has more than 10,000 pages of 
rules, policies, and regulations. The effect of this complexity 
should be obvious.
    A recent survey indicated one-third of doctors spend one 
hour on Medicare paperwork for every one to four hours of 
patient care. For dentists, this burden can be outright 
debilitating.
    And the end result is what should really concern us. These 
health care providers get fed up with the hassle and decreasing 
compensation, so they stop taking new Medicare patients.
    Making matters worse is the operation of the Centers for 
Medicare and Medicaid Services. This agency has been 
particularly delinquent in reaching out to small business 
during the development of regulations. This is one of the 
requirements of Reg Flex that the agency has chosen to ignore.
    Regulations can be fair, balanced, and provide the 
necessary protection to our health, welfare, and environment. 
CMS must work to determine the impact its regulations have on 
small businesses, explore the regulatory options for reducing 
that impact, and allow itself to be held accountable for the 
final choice on a regulatory approach.
    Mr. Chairman, I just would like to add that the action and 
behavior of Mr. Scully today are just incredible.a And the lack 
of respect to this Committee, and to you, and to all the 
members of this Committee. I do not understand why he cannot 
come and answer questions. Why is it that they are so hostile 
to small businesses?
    So I am ready, I am willing, I am prepared to work with 
you. And if we need to hold him in contempt, we will do so.
    Thank you, Mr. Chairman.
    Chairman Manzullo. We are going to change the rules a 
little bit. I am going to allow two more opening statements. I 
have invited Dr. Weldon to come and be on the panel today. I am 
going to have him give an opening statement. And then Dr. 
Christian-Christensen will also give an opening statement.
    Mr. Pascrell. I have a question.
    Chairman Manzullo. Yes, go ahead, Bill.
    Mr. Pascrell. Mr. Chairman, not as an opening statement, 
but a statement. We have an emergency situation in this 
country. In the last two months a disproportionate number of 
physicians have ceased being Medicare providers. This is a 
dangerous situation. And for this Administrator not to be here 
at the bequest, at the request of this Committee is an absolute 
travesty. And I want you to know personally that I look at it 
as a travesty. And I want you, as our Chairman, to do something 
about it.
    Chairman Manzullo. We will do that. Thank you. Dr. Weldon.
    Dr. Weldon. Thank you, Mr. Chairman. And I am honored to be 
able to join with one of my other physician colleagues in the 
House to speak on this issue. And I would imagine she may say 
the same thing that I am going to say.
    I practiced medicine for 15 years prior to being elected to 
the House of Representatives, and I still see patients about 
once a month at the VA clinic. And I made significant use of 
portable x-ray services in five nursing homes where I took care 
of my own patients in those nursing homes.
    In the typical scenario where I would use it, I would be 
seeing patients in my office, and I would get a phone call from 
one of the nursing homes. And I would get on the phone with a 
nurse, and the nurse would tell me that my patient had a fever 
and a cough, or had fallen and hurt their wrist or their arm or 
their knee. And I was really faced with a simple dilemma in 
that situation.
    And the simple dilemma was, do I put this patient in an 
ambulance and transfer them to my office, and try to evaluate 
them in my office? And then put them back in an ambulance and 
send them back to the nursing home, at a substantial cost? Or 
do I send them by ambulance to the emergency room, at 
substantially higher costs? Or do I call one of the portable x-
ray providers if I needed a film?
    And I found the portable x-ray service to be extremely 
helpful. They would typically be there in less than an hour, 
which was often quicker than they could get the x-ray in the 
emergency room, amazingly. And they would have it developed, 
and then they would have a radiologist calling me with the 
results of the x-ray, mind you at no additional charge, which 
is something that I could only get with extreme difficulty out 
of the hospital.
    Often the information was extremely valuable. It was no 
fracture, and we could begin a course of anti-inflammatory 
agents, splinting, Ace bandages. The results on the chest x-ray 
would be no evidence of pneumonia. Even if there was evidence 
of a pneumonia, if the patient was not in any distress I could 
begin an antibiotic regimen at the nursing home.
    The long and the short of it is I felt like these portable 
nursing services, or portable x-ray services were saving 
Medicare, in my particular experience, thousands and thousands 
of dollars a year on unnecessary transportation costs, 
unnecessary visits to the emergency room. They were extremely 
helpful to the patient. I mean, it is incredibly traumatic.
    My colleague from the U.S. Virgin Islands knows this. Take 
one of these elderly people and load them into an ambulance, 
transport them, it is extremely traumatic to them. And I found 
it to be nothing short of a cost-saver, hands down.
    And frankly, for those people here from CMS, I understand 
Mr. Scully refused----
    Chairman Manzullo. Excuse me, is anybody here from CMS?
    Dr. Weldon. Nobody is here from CMS, not a single person.
    Chairman Manzullo. Anybody here? Not one person here from 
CMS.
    Dr. Weldon. Well, this is disgraceful. Mr. Chairman----
    Chairman Manzullo. Just a second. Let the record, let the 
record show that we have approximately 70 people in the hearing 
room today, and that not one person here in this hearing room 
is from CMS, HCFA. [Laughter.]
    Could you conclude so we could----
    Dr. Weldon. Yes, I am sorry. I could go on and on about 
this, but you know, to me this is just----
    Chairman Manzullo. Well, let me make it easier for you. You 
can ask questions later on.
    Dr. Weldon. I will ask questions later on.
    Chairman Manzullo. Thank you.
    Dr. Weldon. Thank you, Mr. Chairman.
    Chairman Manzullo. All right. Dr. Christian-Christensen, 
Congresswoman Christian-Christensen?
    Ms. Christian-Christensen. Thank you. Mr. Chairman, I would 
like to submit my statement for the record.
    Chairman Manzullo. All the statements will be received for 
the record, with the exception of Mr. Scully's statement.
    Ms. Christian-Christensen. Thank you. At the outset I just 
want to express myextreme disappointment in what is happening 
here this morning. To me it says a lot about the willingness of HCFA to 
really reform and to be responsive to the needs of our providers.
    As we were walking down the hall today and talking about 
the hearing that we were about to have, which I want to take 
this opportunity to also thank you and your ranking Member for 
holding, for attempting to hold a hearing and hold CMS, or 
HCFA, more accountable. Because certainly we have had a lot of 
complaints and needs that have to be addressed on behalf of our 
small business.
    But as we were walking down here this morning, we were 
talking about the hearing and what we hoped to accomplish from 
this meeting. And it was not to be a confrontational meeting, 
it was to be a problem-solving meeting, with everyone at the 
table, as we have sought to do with other agencies. And so this 
is extremely, extremely disappointing. And it makes me wonder 
about how well the listening sessions are going. Because if the 
Administrator is not willing to be here and listen and dialogue 
with us, then I am not sure what is happening out here.
    But as my other colleague said, you know, this is a real 
crisis in health care that we are facing. Many of us are 
committed to increasing access for all Americans to quality 
health care. And what is happening in this case is exactly the 
opposite. Our seniors, our disabled, our poor, those who are 
most in need are not being able to access health care. And the 
providers are going out of business. They are opting out now. 
But this is a serious crisis that has to be addressed.
    I have another shot at this on Friday. I think I am going 
to make sure that the press is there. The Congressional Black 
Caucus Brain Trust is having a hearing, along with the other 
minority caucuses, on how well the Department is addressing the 
disparities in health care. CMS is our last panel. The Chief 
Operating Officer is supposed to be there. I am going to make 
sure the press is there, because at that hearing we will also 
be having community-based organizations who will be joining us 
on the panel. I want to see what is going to happen.
    I would also like to suggest that, as we do in every other 
instance, when we are having difficulty with someone on one 
level we go to the boss. And I would like to suggest that we 
call the Secretary in and have him come in, along with Mr. 
Scully, and begin to address some of these issues for us.
    So with that, I am going to not say any more.
    [Ms. Christian-Christensen's statement may be found in 
appendix.]
    Chairman Manzullo. Appreciate that very much.
    Ms. Christian-Christensen. And I look forward, I welcome 
our witnesses. I want to especially welcome my President, the 
President of the American Academy of Family Physicians, Dr. 
Jones, who was willing to join us, and all of our panelists 
here this morning.
    Thank you.
    Chairman Manzullo. Thank you. Congresswoman Napolitano, did 
you have a couple words in the opening statement?
    Ms. Napolitano. Let's go on with it.
    Chairman Manzullo. Okay. Thank you very much. The first 
witness will be Mr. Tom Scully. Do you have his bio here? Could 
you start the clock, please? Okay.
    Could you please state your name for the record?
    [No response.]
    Chairman Manzullo. Let the record indicate that the seat 
reserved for Mr. Scully that has the Honorable Thomas Scully in 
front of it is vacant.
    Let the record further indicate that this witness is under 
subpoena by the United States Congress. If anybody in here is 
from HCFA and you do not want to raise your hand, we will give 
you the opportunity to get on the phone and get Mr. Scully from 
down the hall or outside, where he may have secreted himself. 
And he is welcome to join this panel at any time within the 
next half-hour.
    Could you stop the clock, then? Thank you for your 
comments, Mr. Scully.
    The first real witness is a man who has done a tremendous 
job as the Head of the Office of Advocacy. He is also a member 
of the Administration that enjoys appearing on panels with the 
people that are affected by administrative rules and 
regulations.
    The purpose of this Committee is to solve problems, not to 
divide Administration and people affected by the Administration 
into separate camps or separate panels. That is why we like to 
have one panel, so we can have a good cross-discussion going 
on.
    And Mr. Sullivan, I look forward to your testimony. Thank 
you for your tremendous leadership that you have provided as 
the Head of the Office of Advocacy. Please.

   STATEMENT OF THOMAS SULLIVAN, CHIEF COUNSEL FOR ADVOCACY, 
          UNITED STATES SMALL BUSINESS ADMINISTRATION

    Mr. Sullivan. Good morning, and thank you for the 
opportunity to appear before the Committee this morning to 
address the adequacy of CMS's compliance with the Regulatory 
Flexibility Act.
    Before proceeding, let me state that consistent with the 
Office of Advocacy's statutory independence, this statement was 
not circulated through the Executive Branch for comment. 
Because of this, these views do not necessarily reflect the 
position of SBA or the Administration.
    I thank the Chairman for accepting my complete written 
statement into the record. And I will now summarize just the 
key points to keep within the five-minute time limit.
    It is our goal at the Office of Advocacy that CMS more 
fully consider the consequences of their regulatory actions on 
small employers prior to finalizing their rules. That is, after 
all, the primary tenet of the Reg Flex Act.
    Recently the President singled out the Reg Flex Act in his 
small business plan. In a speech three weeks ago yesterday here 
in Washington, President Bush said, `I want to make sure people 
understand that we are going to do everything we can to clean 
up the regulatory burdens on small businesses.'
    The President then talked specifically about the Reg Flex 
Act, saying, `Already it is under current law. Every agency is 
required to analyze the impact of new regulations on small 
businesses before issuing them.'
    The President did not stop there. The Chairman read this 
part of the President's speech in his opening statement. The 
President said, `From this day forward, they, the regulators, 
will care that the law is on the books.' I was right there when 
the President said that, and no one in the Reagan Center 
clapped louder.
    Generally speaking, Advocacy believes that CMS should do a 
better job of following that law. Two recent rulemakings served 
to highlight Advocacy's ongoing concern with CMS's lack of 
compliance with the Reg Flex Act.
    In July, 1999, CMS's predecessor, HCFA, issued an interim 
final rule entitled `Medicare and Medicaid Programs, Conditions 
of Patients' Rights.' The rule contained standards for the use 
of patient restraints in hospitals. After reviewing the rule, 
Advocacy concluded that the one-hour restriction on the use of 
restraints was particularly burdensome on rural hospitals, 
primarily because it called for the treating physician to make 
a face-to-face assessment of the patientwithin one hour of 
initiating restraint or seclusion.
    Interestingly, the rule became the subject of a lawsuit 
filed in the United States District Court of D.C. In September, 
2000, the Court upheld the rule. But because HCFA failed to 
comply with the Reg Flex Act, the Court remanded the rule back 
to the agency for the completion of a regulatory flexibility 
analysis.
    The Court's decision reads, `The Secretary' the named 
Defendant was Donna Shalala, `did not obtain data or analyze 
available data on the impact of the final rule on small 
entities. Nor did she properly assess the impact the final rule 
would have on small entities.'
    The Office of Advocacy continues to insist that CMS 
complete the regulatory analysis, as ordered by the Court. This 
analysis still has not been done.
    Why do the analysis after the fact? Because if CMS can 
produce regulatory analyses of the rule's impacts on small 
health care entities for the one-hour rule, they can, and 
hopefully will, do it for others.
    The second rule making is the portable x-ray rule. On three 
occasions since 1998, the Office of Advocacy has filed comments 
with CMS concerning the agency's determination of payment 
policies as they apply to the portable x-ray and EKG industry.
    We believed that pursuant to the Reg Flex Act, CMS should 
have analyzed the impact on this industry separately. Only then 
would the agency have been in a position to decide whether to 
certify no impact under the Reg Flex Act, or whether to perform 
further analysis.
    I know that the portable x-ray rule will be discussed more 
by other witnesses on this panel. So I will conclude my 
statement by saying that Advocacy is working to implement the 
President's commitment towards a full agency compliance with 
the Reg Flex Act.
    We applaud the President's renewed emphasis toward 
Government accountability to the small employer community. My 
office has found that early consultation with small business 
works. And we are willing to work with CMS to ensure legitimate 
small business input.
    It is my hope and my desire that the Office of Advocacy and 
CMS will develop a working relationship that will result in 
better communication and better compliance with the Regulatory 
Flexibility Act.
    Chairman Manzullo. Thank you very much. Before we go to the 
next witness, do you know when the last communique was to, from 
your office to CMS was, on the portable x-rays?
    Mr. Sullivan. I am told by my counsel that the last letter 
to CMS was on December 28, Mr. Chairman.
    Chairman Manzullo. Okay, thank you.
    [Mr. Sullivan's statement may be found in appendix.]
    Chairman Manzullo. Our next witness is, is Dr. David R. 
Nielsen, M.D., who is a member of the American Academy of 
Otolaryngologists, ENTs. And he has written in their journal, I 
am not going to try to mention the name of that again----
    [Laughter.]
    Chairman Manzullo [continuing]. A very well-esteemed and 
well-respected surgeon. We look forward to your testimony, Dr. 
Nielsen.

 STATEMENT OF DAVID R. NIELSEN, M.D., THE AMERICAN ACADEMY OF 
             OTOLARYNGOLOGY--HEAD AND NECK SURGERY

    Dr. Nielsen. Thank you, Mr. Chairman, and members of the 
Committee. I want to thank each of you for the opportunity to 
testify today. And I concur with the spirit which you 
expressed, Mr. Chairman, about the purpose of this meeting.
    I am not a lobbyist. I am not an administrator. I am a 
private-practicing physician, and we felt that would be more 
useful to the Committee, and more useful to CMS, to have that 
kind of input, rather than simply lobbying activities.
    My name is David Nielsen. I am a practicing 
otolaryngologist. I have no Federal Government contracts. I 
currently work at the Mayo Clinic in Scottsdale, Arizona, but 
prior to that I was a solo private practitioner for 13 years. 
So I can assure the members of the Committee that I can speak 
personally about the concerns that we have about the burdens 
that are placed on small businesses and private practitioners 
in medicine.
    We have a common frustration with the barrage of burdensome 
Medicare regulations and guidelines, and the constant struggle 
that we face to remain compliant. Rather than talk about all of 
the issues that I have in my written testimony, let me get 
right to the meat of what it is that we want to share with you 
today.
    The RFA requires that each federal agency perform and make 
available to the public an initial and a final regulatory 
flexibility analysis of any rule that will have a significant 
economic impact on small businesses, including physician 
practices. It also states that in this analysis, the Agency 
must describe any significant alternative proposals that could 
achieve the rule's objectives at a lower cost to small 
entities, and explain why each alternative was rejected in 
favor of the final rule. This has not been done.
    Against a backdrop of dramatically increasing practice 
costs and falling reimbursement rates, federal regulations 
often have a particularly dramatic and significant effect on 
physicians. We are subject to a wide array of federal 
regulations, which includes, but is not limited to, the Health 
Insurance Portability and Accountability Act regulations on 
medical privacy and electronic transactions; Medicare and 
Medicaid fraud and abuse regulations, including the Starek 
Physician Self-Referral Laws, the Federal Anti-Kickback 
Statute, and the False Claims Act; the limited English 
proficiency guidance, and the associated need to provide 
interpreter services for the deaf, which is required under the 
Americans with Disabilities Act; and evaluation and management 
documentation guidelines.
    These are simply a few of the regulations that we struggle 
with.
    Let me give you some specific examples. As 
otolaryngologists who deal with speech and hearing and 
communication problems on a daily basis, I can assure the 
Committee members that there is no one more interested in good 
communications with our patients.
    However, the limited English proficiency guidance issued by 
the Department of Health and Human Services requires physicians 
who receive payment from Medicaid to provide, at their own 
expense, trained and competent interpretation and translation 
services for all of their limited-English-proficient patients.
    As an example, an otolaryngologist who practices in the 
state of Kansas would pay $70 per hour, often with a two-hour 
minimum, including transportation costs, for an interpreter. 
But Medicaid would only reimburse the otolaryngologist between 
$12 and $28 for that visit. That reimbursement not only does 
not cover practice costs, but can create hundreds of dollars of 
out-of-pocket expenses for a physician who wishes to treat 
Medicaid patients. And hence, people are dropping out of 
coverage, because it would not be unusual for someone who lived 
in an area where there was a large multi-lingual population to 
have more expenses for interpretive services than revenue in 
the course of the practice day.
    We acknowledge that the goals of this departmental issuance 
are laudable, but forcing small businesses to bear the burden 
of paying for an ever-growing crop of unfunded 
regulatorymandates threatens the financial liability of physician 
practices, and may ultimately threaten patient access to care.
    This is not about physician costs, and it is not about 
physician income. It is about access to care, which is being 
severely curtailed.
    In the context of the Medicare physician fee schedule, CMS 
could potentially take into account the high costs of 
compliance through the Medicare economic index, which is a 
component of the physician fee schedule update formula. 
Although CMS references this and has included the physician 
practice expense in the MEI, federal health care regulatory 
compliance costs are not explicitly taken into account, because 
the measures are based on price data which come from across the 
country, from the economy as a whole.
    Despite the RFA's requirements and CMS's own admission that 
physicians are small businesses and qualify for coverage, CMS 
did not engage in a full regulatory flexibility analysis in the 
final rulemaking and publishing of the 2002 Medicare Physician 
Fee Schedule. They do reference the rule.
    Moreover, CMS has an obligation to respond to all the 
comments which were submitted to the proposed rule, pursuant to 
the Administrative Procedure Act. CMS's failure to perform an 
analysis of the costs of regulatory compliance under the RFA, 
or to acknowledge the comments which were submitted, undermines 
the integrity of the regulatory process.
    In summary--I am going to run out of time here, but let me 
just summarize--we intended to do what you suggested, Mr. 
Chairman, which is to provide solutions. We really want to find 
a way to solve these problems. And we recommend the following.
    Number one. We urge that all House Members encourage their 
Senate colleagues to pass the Medicare Regulatory and 
Contracting Reform Act, H.R. 3391. And we want to specifically 
thank Representatives Toomey and Berkley, who are responsible 
for proposing the initial H.R. 868, from which I believe this 
came. And we are grateful for their interest and support of the 
legislation.
    Second, we recommend that Congress direct CMS and all other 
agencies to comply fully with the RFA in order to better 
protect small business entities, like physician practices, from 
the onerous and costly regulations which we now face.
    Third, we recommend that Congress expand the RFA to cover 
subregulatory issuances to help ensure that small businesses 
are not unnecessarily burdened. Right now we suffer from such 
issuances as program memoranda, contractor letters, guidance 
documents and coverage decisions, which are not technically 
regulations, and therefore they fall beneath the radar screen 
of the RFA. These create a significant regulatory burden to 
small businesses.
    And finally, we hope to remove the requirement that small 
business physicians be forced to arrange for, provide, and pay 
out of pocket for services for which they cannot be reimbursed.
    I would be happy to take any questions later on. And thank 
you, Mr. Chairman.
    [Dr. Nielsen's statement may be found in appendix.]
    Chairman Manzullo. Thank you very much. Congresswoman 
Christian-Christensen, would you like to introduce the next 
witness?
    Ms. Christian-Christensen. Thank you. As a family 
physician, it is my pleasure to introduce Dr. Warren A. Jones, 
a family physician and retired Navy Captain who is President of 
the American Academy of Family Physicians. He was elected in 
2000.
    He previously served on the Board. And the American Academy 
of Family Physicians represents more than 93,500 family 
physicians and family practice residents and medical students 
nationwide. He is a Fellow of the Academy.
    He is also Professor of Family Medicine at the University 
of Mississippi Medical Center, and Assistant Professor of 
Family Medicine at Howard University School of Medicine, and 
Deputy Director of the Mississippi Area Health Education 
Centers.
    He recently retired from his position as Medical Director 
of Tri-Care Military Health Program, the military's health 
insurance program. So he brings practice experience, as well as 
management of a health insurance program, to his testimony 
today.
    He previously served as Director of Medical and Clinical 
Services for the Pacific Region of Tri-Care. He has received 
numerous military honors, including the Defense Superior 
Service Medal and the Navy Commendation Medal for Superior 
Performance. And he has received the Meritorious Service Medal 
three times.
    It is a pleasure for me to welcome you, Dr. Jones, to our 
Committee.
    Chairman Manzullo. I think we need a man like him to be in 
charge of HCFA, don't you, Congresswoman? Would you second that 
nomination?
    Before we get into your testimony, Dr. Jones, Dr. Nielsen, 
where did you come from to be here today?
    Dr. Nielsen. I work at the Mayo Clinic in Scottsdale, 
Arizona, and I will be the new incoming Executive Vice 
President of the American Academy of Otolaryngology Head and 
Neck Surgery.
    Chairman Manzullo. And so you traveled all the way from 
Scottsdale to be here today?
    Dr. Nielsen. Yes, sir.
    Chairman Manzullo. And then, Dr. Jones, same question?
    Dr. Jones. I traveled from the Jackson, Mississippi area, 
sir.
    Chairman Manzullo. To be here today. And Mr. Evans, same 
question?
    Mr. Evans. Mr. Chairman, I traveled from Kansas City, 
Missouri.
    Chairman Manzullo. Okay. And Mary.
    Ms. Harroun. I traveled from Richmond, Illinois.
    Chairman Manzullo. Okay. And let the record indicate that 
these witnesses have traveled here at their expense. They had 
been advised in advance that Mr. Scully would be here. Perhaps 
we should get all your expenses and send him a bill, and have 
him pay it personally. But I do not know how that would go 
over. He just had to come from across the street.
    Dr. Jones, we look forward to your testimony. And could you 
pull the mike closer?

  STATEMENT OF WARREN A. JONES, M.D., THE AMERICAN ACADEMY OF 
                       FAMILY PHYSICIANS

    Dr. Jones. Yes, sir, Mr. Chairman. And I would just like to 
say before my time begins that if you submitted him a bill for 
our expenses, we would only get paid 40 cents on the dollar.
    Mr. Chairman, Ranking Member Velazquez, Representative 
Christian-Christensen, my good friend and respected colleague, 
members of the Committee. We thank you for this wonderful 
opportunity to be here today to comment on the small medical 
practices and the impact on these practices across the country, 
especially those of family physicians and other primary care 
docs who work in our communities to take care of our patients, 
and to meet their needs.
    We particularly appreciate your interest in the CMS 
implementation of the Medicare physician fee update as it 
relates to the Regulatory Flexibility Act. We would suggest 
that the best solution to the problems created by the flawed 
formula that determines this update is enactment of the 
recommendations of the Medicare Payment Advisory Commission.
    You have already heard about the Academy and who we are. 
And I would just like to share with you that, in case you may 
not know, there are three Members of Congress who are members 
of our organization, including a member of this Committee. And 
we thank you for all of the leadership you provide in helping 
to make sure we meet the needs of our patients across America.
    I guess some of you may wonder why I am here. But it is 
important to point out that most of the members of the American 
Academy of Family Physicians can be characterized in their 
practices as small businesses. Moreover, recent studies show 
that the presence of a family physician in a rural community is 
a substantial economic stimulus.
    The study by the Santa Fe Health Policy Research for the 
Oklahoma State University Health Sciences Center found that, on 
average, each family physician will generate, both direct by 
and secondarily, an estimated 50 full-time jobs. And these jobs 
will generate over $1.1 million income annually for each of 
these communities. It is definitely a small business worth 
protecting.
    Mr. Chairman and members of the Committee, physicians and 
other health care practitioners have experienced a sharp 5.4 
percent across-the-board reduction in Medicare payments as of 
January 1. Although it is called a physician fee update, these 
cuts apply to all services in the more than one million health 
professionals, including therapists, advanced health 
professionals, nurse practitioners, chiropractors, and 
optometrists. And many of these provide services in their own 
individual offices and serve as small businesses.
    The Medicare Payment Advisory Commission has called for the 
elimination of the current update formula, and warned that cuts 
of the magnitude expected under this formula could raise 
concerns about the adequacy of payments and beneficiary access 
across our nation. And that is one of the things I wanted to 
talk to you about.
    I wanted to tell you a couple of stories, if I might. I 
want to tell you a story about a young family physician, Dr. 
Casey, who dreamed of being a family physician and entered 
medical school late in life. And her goal was to go back to her 
town in Kentucky, a small town, Pikeville, and take care of her 
neighbors.
    Well, while in medical school she had her second child, and 
then her third child, and came out with about $145,000 in debt. 
But she still went back to the small town, and she delivered 
care.
    But what she is finding now, after three years in practice, 
she found that she could barely meet her bills. But then she 
found that the income from Medicare patients decreased so 
dramatically that, at six years in practice, she is having to 
go into her savings to keep her practice afloat. With her own 
savings, she is subsidizing her practice.
    She now says that unless the Medicare fee schedule is 
fixed, she can only stay in practice two more years. She has 
limited taking any new Medicare patients. This is emblematic of 
what has occurred.
    And as you heard from the introduction, I now live in 
Mississippi. And one of my tasks will be to help to increase 
the number of health care providers in the Mississippi Delta 
and other areas in our state. But I can tell you that the 
current reimbursement schedule is a major disincentive to young 
people to choose health care, and to deliver care to the 
population that is most in need. It is going to be difficult 
for me to accomplish that task, and difficult for you to see 
that your communities are served.
    I will show you this. And I apologize for not having a copy 
for each of you right now. But this is a map that shows the 
United States and what is recognized as health service shortage 
areas. To give you an idea of the magnitude of family 
physicians as small businesses, this currently shows in red the 
areas that are considered small business, excuse me, 
underserved areas.
    But if these family physicians in practice now are unable 
to remain in practice, and they end up leaving their 
communities, the areas in red will now become health shortage 
areas.
    Chairman Manzullo. Doctor, could you show both of those 
pictures to the people that are in the back? Matthew, would you 
hold that up so the people who are visiting today can take a 
look at each of those?
    And again, the first map is?
    Dr. Jones. The first map is the state of primary health 
care underserved areas in the United States. And this is 
including family physicians and all other primary care 
provides. And if these small practices of family doctors would 
go out of business, these red areas would represent the 
underserved areas.
    In reality, these small practices deliver care where 
Americans live.
    What we ask you to do today, sir, is to continue what you 
are doing. Hold these hearings, hold CMS accountable, and be as 
responsive as possible to the need to make sure that we get the 
kind of appropriate reimbursement, not to make money, but to 
make sure we keep our offices open.
    When we have to lay off nurses and we have to lay off staff 
in order to be able to take care of our patients, we limit 
access. Seventeen percent of family physicians responded on the 
survey last year that they have limited Medicare access; they 
are not accepting any new Medicare patients. If we were to do 
that survey today, following the 5.4-percent decrease, I am 
sure it would be up to 25 percent.
    And with the continued negative growth rate that is 
projected under the current formula, we will get to a point 
where we will have a 17-percent decrease in reimbursement. And 
no small business can remain in effect and in practice with a 
negative growth rate like that.
    Thank you for the opportunity to be here, and I look 
forward to entertaining any questions.
    [Dr. Jones's statement may be found in appendix.]
    Chairman Manzullo. Thank you, Doctor. The exhibits will be 
made part of the record. I would like to work with you, and 
perhaps your association, afterwards to get enough color 
pictures of that to send to every Member of Congress with a 
dear colleague. I am sure Mrs. Velazquez would join with me in 
showing the critical area we are in with so many doctors that 
will be fleeing the practice.
    Thank you for your testimony.
    Our next witness is Zach Evans, who is with the National 
Association of Portable X-Ray Providers. He currently serves as 
the Chairman of the Board for the National Association of 
Portable X-Ray Providers; is a provider himself. We look 
forward to your testimony, Mr. Evans.

STATEMENT OF MR. ZACHARY EVANS, PRESIDENT, NATIONAL ASSOCIATION 
                  OF PORTABLE X-RAY PROVIDERS

    Mr. Evans. Thank you, Chairman, Ranking Member Velazquez, 
and distinguished Committee members. I also want to recognize 
Congressman Weldon. I believe that the proceedings here today 
will be of great interest to him.
    Mr. Chairman, I appear before you today under a cloud of 
fear: fear of reprisal from CMS for speaking to this Committee, 
fear of being punished by a federal agency that has targeted my 
industry for daring to tell the truth.
    Just five weeks ago our association testified before this 
Committee regarding CMS' illegal rulemaking against our 
industry. The day before the hearing, while John Cavalier, the 
President of our association, was here in Washington to meet 
with this Committee, his small business wassubjected to an 
unannounced audit by CMS.
    In light of the clear intent of CMS to intimidate 
volunteers who serve on the Board of Directors of the NAPXP, I 
wish to thank the Committee for offering to protect my identity 
in this hearing. In spite of risks entailed in speaking out, I 
feel strongly as a citizen and small business owner that the 
only way to combat this abuse is to bring full light to this 
matter. And that cannot be done from behind a screen, even if 
the screen is there to protect me.
    That an honest small businessman would need, might need 
such protection from his own government is unconscionable. When 
Members of Congress contact CMS regarding the data necessary to 
reach informed decisions regarding our industry, they are told, 
as you were told, Mr. Chairman, that it cannot be produced. In 
fact, it can and has.
    This data demonstrates a policy failure that has been 
devastating to the health care delivery in rural America. After 
Congressman Phil Crane received this stunning information, CMS 
realized what it had produced, and attempted to retract it.
    Now, in response to your request, Mr. Chairman, CMS claims 
that the same data produced last year is impossible to compile. 
How can CMS steadfastly hold that their policies are correct, 
when they also claim that they are unable to compile basic 
usage data?
    As we raise awareness of our situation, CMS targets us with 
a fraud alert. The February 7 fraud alert was followed by a 
March 20 CMS request for comments on improving the health and 
safety standards survey process, specifically for portable x-
ray services.
    Obviously, looking for irregularities within our industry 
has become a very high priority for CMS in the wake of our 
discussions with this Committee and others.
    While CMS aggressively seeks to uncover supposed fraud 
within the industry, they refuse to assist us in educating 
small business providers of our services, so that they might 
better serve the public and avoid improper activities. We have 
repeatedly requested either CMS speakers or responses to 
technical questions to assist us in complying with CMS 
regulations. Routinely, we are unable to get a speaker or 
answers to our questions.
    Obviously, preventing improper billing or fraud by 
interacting with us is not a priority, while catching someone 
at it is.
    Mr. Chairman, our role in health care delivery is 
relatively simple. We provide x-rays, EKGs, and other 
diagnostic services at the patient's bedside. We do so at a 
substantial savings to Medicare, over the alternative of 
transporting the patient to the hospital.
    CMS would have you believe that doctors carry EKG devices 
with them to nursing homes, family members of patients 
transport their loved ones to other facilities, or nursing 
homes purchase the equipment and provide the trained staff to 
provide these services themselves.
    We are fortunate to have two Members of Congress here who 
are also physicians today with us, Dr. Weldon and Dr. 
Christiansen. I ask these professionals, are the claims of CMS 
credible? Do they stand up to your personal experiences in the 
medical profession?
    CMS offers no data to support these assumptions. In spite 
of the clear statutory requirements contained in the RFA, 
SBREFA, the APA, and the Social Security Act, CMS refuses to 
consider the impact upon our industry of their rulemaking, 
consult with us during the rulemaking process, or in any way 
evaluate industry costs prior to setting our reimbursement 
rates.
    In his letter to you, Mr. Chairman, Mr. Scully states that 
the PEAC Committee is the appropriate body to review our 
industry costs, and the process is more efficient. We applied 
for a seat on that Committee and were denied.
    Mr. Chairman, counsels for both the Legislative and 
Executive Branches are of the opinion that CMS is engaged in 
illegal rulemaking pertaining to this industry. While CMS has 
no effort or expense in seeking to uncover fraud within our 
industry, they refuse to obey federal rulemaking statute.
    We know that small business providers will be prosecuted if 
they get caught in expanding, in the expanding CMS fraud net. I 
ask you, who will prosecute CMS? How can we be subject to 
penalties for improper billing, when the rulemaking that 
establishes the billing is illegal? When a federal agency 
refuses to obey the law, and then uses its might to punish the 
small businesses that dare to complain, where do they go for 
justice?
    In closing, Mr. Chairman, I want to thank this Committee 
again. I would also like to especially thank the two 
physicians. Congresswoman Christiansen and your staff have been 
most helpful. I appreciate the time that Dr. Weldon has given. 
As I know, he does not sit on this Committee. And I would 
formally request that this matter be investigated by the 
Committee on Government Reform, and specifically the 
Subcommittee which Congressman Weldon chairs, Civil Service and 
Agency Organization, as he deems appropriate.
    Thank you for your time. And I will be available for 
questions.
    [Mr. Evans's statement may be found in appendix.]
    Chairman Manzullo. Thank you very much. Could you, if you 
would not mind, take the seat here on the end next to your 
props? And Matthew, could you put Mr. Scully's sign down there 
at the end, and replace the signs? It will be a little bit 
easier for you to testify with your props there.
    Mr. Evans. Do I have to sit beside him? [Laughter.]
    Chairman Manzullo. Okay. The next witness is a constituent 
of mine from Richmond, Illinois. Mary is the President and CEO, 
and probably chief manufacturer, of Merry Walker Corporation. 
And we look forward to your testimony, Mary.

 STATEMENT OF MARY HARROUN, PRESIDENT, MERRY WALKER CORPORATION

    Ms. Harroun. Thank you very much, Mr. Chairman.
    Chairman Manzullo. Could you pull the mike a little bit 
closer to you?
    Ms. Harroun. And members of this distinguished Committee.
    Back in 1990, I invented the Merry Walker after having 
spent 20 years in the nursing home industry watching my 
residents melt away under the guise of restraints and sitting 
in wheelchairs. Twelve years ago I invented a product known as 
the Merry Walker, which is a registered trademark, and is 
honored by being protected with two U.S. patents.
    When I was in the nursing home business, industry, as a 
geriatric psychologist and licensed nursing home administrator, 
I looked around at my residents and I said, you all walked 
once, why aren't you walking any more? And they were sitting in 
wheelchairs at that time, with Posey belts. And now today, 
because of CMS, they are now still in wheelchairs, under the 
guise of chair alarms, which forbids them from standing because 
this horrible, screeching, loud, buzzing noise occurs behind 
them every time they go to stand up.
    Physical therapists have said it takes three weeks for an 
elderly person sitting in a wheelchair to never, ever walk 
again. That is intolerable.
    My issue with CMS is the minimum data set, which is done on 
all 1.8 million residents in nursing homes, hospitals, and VA 
facilities. That is done upon entrance; it is maintained every 
three months. There are 500 questions that are posed to fill 
out this assessment, of which thenCMS somewhere here in this 
area has a large database.
    There are 500 questions. There are 17,000 nursing homes. 
And there are 1.8 million people suffering because of the MDS.
    My issue started last summer. Actually, Merry Walker, we 
had some discussion back in 1994 as to whether it was a 
restraint. I discussed it with Lois Steinford, who was Chief of 
the Nursing Home Survey Process for HCFA. She has since 
retired. But she stated that Merry Walker is an enabler, and a 
piece of adaptive equipment very worthy of praise, and it does 
the job of getting elderly ambulatory, and keeping them 
ambulatory.
    I did not pursue it any further. When the MDS was brought 
out in 1995, I got a copy of it on my desk, I read through the 
format of the assessment and saw no problems. It was not 
interfering with my product. I did not agree with it, but never 
mind.
    Last summer I was at the Alzheimer Educational Conference 
in Chicago, and Mary Lucero, a geriatric psychologist, as I am 
also, of geriatric resources, gave a full-hour seminar on the 
benefits of the Merry Walker ambulation device. Many of her 
attendees of that seminar ended up coming up to my booth 
afterwards saying, `We can't use the Merry Walker.' I am going, 
`What? Why can't you use it?'
    Ended up calling the North Carolina Public Health 
Department. And in my fax machine I received page 3158 of the 
MDS Users' Guide. I did not even know this was available, 
because I am not in that aspect of the field any more.
    I read from this lovely publication, under `Devices and 
Restraints. Intent to record the frequency over the last seven 
days which a resident was restrained by any of the devices 
listed below at any time during the day or night.' And we have 
a definition of a restraint, which is a mechanical device, 
equipment attached to or adjacent to the resident's body that 
the resident cannot easily remove, and that restricts freedom 
of movement or normal access to one's body.
    We have full bedrails. We have other types of bedrails. We 
have trunk restraint and we have limb restraint. Then we get 
down to the fated clause of chair prevents rising. And I will 
read.
    `Any type of chair with a locked lapboard or a chair that 
places a resident in a recumbent position that restricts 
rising, or a chair that is soft and low to the floor (that is, 
bean bag chair); includes lap cushions (that is, lap buddy, 
Merry Walkers).'
    I obviously contested that immediately with CMS, and have 
had no result. We have received statements that I feel are 
untrue, citing regulations that do not exist. So I am here to 
appeal to you to intercede on behalf of the 1.8 million people, 
to allow them the possibility of getting out of wheelchairs, 
and saving Medicare billions of dollars against decubitus 
ulcers and unnecessary fractures.
    Thank you.
    Chairman Manzullo. As part of your testimony, could you 
demonstrate how that latch works, and how it has been 
denominated as a restraint?
    Ms. Harroun. Anybody who normally walks with the assistance 
of one person is the candidate to use Merry Walker. Most of the 
people in wheelchairs are able to get up and walk in the Merry 
Walker.
    This cross-bar, which seems to have CMS in a problem, I 
have to have this closed securely, because I have to hold onto 
it. And they are able to walk, walk, walk. When they get tired, 
they simply sit down.
    Chairman Manzullo. Explain the significance of the legal 
definition of restraint on the nursing homes, and why those 
machines are not in nursing homes. You can resume your chair 
and speak into the mike.
    Ms. Harroun. The objection that CMS has to the Merry Walker 
is the front latch mechanism. And they are claiming that 
cognitively-impaired people are unable to open that front gate.
    Anybody with an Alzheimer-type dementia is totally impaired 
from doing anything in the abstract. They cannot open a 
doorknob, they cannot use the commode by themselves, they can 
hardly feed themselves, because those things are in the 
abstract.
    Because the latch mechanism on the Merry Walker happens to 
be in the abstract is basically there for their safety. Merry 
Walker needs to be deemed an adaptive device, and that is what 
they are not doing.
    [Ms. Harroun's statement may be found in appendix.]
    Chairman Manzullo. Thank you. Dr. Christian-Christensen?
    Ms. Christian-Christensen. Thank you. I would like to 
first, submit some documents for the record. One of them is a 
letter that Congresswoman Nydia Velazquez and I wrote to 
Administrator Scully on the issue of the x-ray audit that took 
place on the day that they were testifying here. It was, this 
came out of the blue. It was something that they thought had 
been resolved, or at least was put on hold. And while the 
testifying was taking place, they were being audited.
    In addition to that, they were meeting here that week, and 
they asked for some, for CMS to send some, a representative to 
explain some of the regulations to their membership. And they 
refused to go. So I wanted to submit that for the record.
    And also some documentation from some of my own 
constituents on the problems that they have been having, and on 
which we want to meet with CMS.
    Chairman Manzullo. The documents will be received and be 
made part of the record without objection.
    Ms. Christian-Christensen. I want to commend Ms. Harroun, 
is it?
    Ms. Harroun. Yes.
    Ms. Christian-Christensen. On the wheelchair. In fact, if I 
could just tell a quick story about a person that, I had a 
constituent who was in the VA hospital who was in a wheelchair. 
And we were able, with working with the American Legion, to get 
that person home, into an area where he could have assisted 
living. The wheelchair failed to come.
    We were called and worked to get this wheelchair to come, 
get to the Virgin Islands from the VA in Puerto Rico. I thought 
it had been resolved. I was in a little restaurant one day, and 
this old man came in to me, walking. And he introduced himself. 
It was the same person. The wheelchair never came.
    Ms. Harroun. Good. Good.
    Ms. Christian-Christensen. He was walking with a cane. So 
this is a really great invention, I guess I would call it. I 
hope we can work to get it approved.
    I wanted to ask Mr. Sullivan a couple of questions. Your 
last statement said it is your hope and desire that the Office 
of Advocacy and CMS will develop a working relationship that 
will result in better communication and action on the issues 
that are of concern to the Committee.
    I mean, how do we make that happen? This is not the first 
time that you have been here. We have gone through this over, 
you know, several times. How do we make that happen?
    Mr. Sullivan. Congresswoman, we keep trying. We keep trying 
over and over again, to the extent that we need to write more 
letters that clarify their reluctance to comply with the 
Regulatory Flexibility Act. We will do that. To the extent that 
we work with OMB in a signed memorandum of understanding that 
clarifies exactly how agencies are supposed to comply withthe 
Reg Flex Act, we will do that.
    Ms. Christian-Christensen. Did you and OMB make any headway 
after your last meeting here?
    Mr. Sullivan. Yes, we have, Congresswoman. We have actually 
signed a memorandum of understanding to share information that 
leads to a decision-making by OMB when it comes to rules.
    So to the extent that we document non-compliance with the 
Regulatory Flexibility Act, we then make available that 
analysis, and a response or lack of response to that analysis 
to Dr. John Graham, when they make a decision on whether or not 
a regulation should move forward.
    So the simple answer to your question is, we keep trying. 
And we try with the help of this Committee, and any other help 
that we can, to convince CMS that it is to their benefit to 
adequately consider the impact on small business.
    Ms. Christian-Christensen. Are there any suits pending 
right now? I cannot remember from the last hearing. Are there 
any suits against CMS to which you have filed an amicus?
    Mr. Sullivan. As to whether or not we have filed an amicus 
brief on pending suits, the answer is no. But there is still 
outstanding the court decision that orders CMS to do the 
regulatory analysis that is in my written statement. We will 
continue to try and work with this Committee to make sure that 
CMS does that regulatory analysis and complies with the court 
decision.
    Ms. Christian-Christensen. Does anyone else want to add 
anything to how do we make them comply? Because it is getting 
very frustrating, Mr. Chairman.
    Dr. Nielsen. Mr. Chairman and Congresswoman Christian-
Christensen, it was our intent, as we came here today, to be 
here testifying in the spirit which you mentioned at the 
beginning, Mr. Chairman. Our intent was that our testimony not 
be an attempt to accuse, or to malign, or to embarrass anyone; 
but rather, an opportunity for us to sit around the table, 
express the reality of what we face, and work toward some 
common conclusions and results.
    In fairness to Mr. Scully and to his administration, much 
of what we are complaining about, or much of what we see as a 
problem, was inherited by him and by his administration. And we 
have had assurances from Secretary Thompson and from Mr. Scully 
that they intend to sit down with us and work with us on this.
    And so my contribution would be that we continue to try to 
do that. If this is not the right venue, let's find another 
one. But we stand ready to meet whenever and wherever to openly 
discuss the reality of these situations, and find solutions for 
them. We did not intend in any way for this to be a 
confrontational situation.
    Mr. Evans. Thank you for letting us have this moment. I 
agree with the gentleman that spoke before me, that HCFA did 
inherit some of these problems. But I will tell you that the 
new CMS has effectively closed their ears. They do not, they do 
not want any conversation.
    Before, they at least talked to us. They listened to us. 
And they may say yes occasionally, once in a blue moon; but 
they at least said no, and we knew where we stood.
    It is out of control. It is completely out of control.
    Ms. Christian-Christensen. Mr. Chairman, I know my time is 
up right now, but I get the sense that perhaps Mr. Scully, 
Secretary Thompson did not understand the complexity of the 
nature of HCFA and what they were going to have to deal with. 
You know, I really think it is out of control.
    Chairman Manzullo. Dr. Weldon.
    Dr. Weldon. Thank you, Mr. Chairman. And I want to again 
thank you for providing me with the opportunity to join with 
your Committee and your colleagues on this very important 
hearing.
    Mr. Evans, if you could just answer a few questions for me. 
I understand there have been several audits of your industry 
throughout the country. Representing your industry today, can 
you comment on the outcome of those audits in terms of the 
numbers or percentages of portable x-ray companies that have 
been found to be over billing, or double-billing, or engaging 
in any kind of fraud in the Medicare program?
    Mr. Evans. Sure. To give you statistics of the whole 
industry is a pretty tough thing to do, because obviously not 
all portable x-ray providers belong to our association. I can 
tell you that within our industry, we have done anything and 
everything to try to make sure that we are compliant. We have 
had conversations with CMS on how to be more compliant, how to 
avoid fraud.
    I think that what is happening is that we do not order the 
x-rays, Doctor. We do not know who to bill, unless the skilled 
nursing facility, or SNF as they are called, tells us who to 
bill. The rules are so confusing that a lot of the time the 
finger gets pointed back at us.
    I will tell you that I was personally audited recently, 
within the last few years. I came through, you know, clean as a 
whistle. In fact, they said there was a $29 problem, so to 
speak, and we came back and showed them that there, in fact, 
was not a $29 problem. There was not an issue there. But as far 
as statistics, I cannot tell you exactly.
    Dr. Weldon. So you do not keep track of the number of 
audits for your members, and----
    Mr. Evans. No. We have----
    Dr. Weldon. The reason I ask you the question is, Medicare, 
CMS has really not provided us any data to support the claim 
that would justify a fraud alert for your business. And so I 
was wondering if you had any information as to how much fraud 
is out there.
    Mr. Evans. I think that every, I think that every industry, 
be it, and I do not care what industry it is, I think that 
every industry has some dirt.
    I can tell you that the President of our association was 
just recently audited, as I said in my testimony. His came back 
clean. And his was a federal audit, not a state audit.
    Dr. Weldon. Now, I wanted to get into that a little bit 
with you. You implied in the opening comments that his audit 
was some kind of a reprisal from CMS?
    Mr. Evans. It sure appears that way to me. I have got to 
tell you, in my testimony my fear is, as far as I am concerned, 
well-founded. I have instructed my staff that if CMS walks in, 
or the state walks in, that I am out of town and they will have 
to come back. That they do not have all the records there to be 
able to go through it.
    I am very fearful that they are going to come in and audit 
me. I am very fearful, not only for myself, but for the members 
who we represent.
    Dr. Weldon. How are you typically reimbursed? If you get a 
call from a nursing home to go do an x-ray or EKG, do you bill 
through Part A or Part B? Either one?
    Mr. Evans. The skilled nursing facility has to instruct us. 
There is no way for us to go in and know whether this is a Part 
A patient, in other words a patient that has spent three days 
or more in the hospital and has been released back into that 
facility, and is still under the Part A care; or if it is a 
Part B patient, and the Part B patient is there under, has not 
been in the hospital and is there for just normal care.
    We have no control over that. And I think that that is one 
of the reasons why this is so hard to track. That is one of the 
reasons why we have looked for exclusion from PPS.
    It is my understanding that CMS has said we want to treat 
everybody the same within a group. We are not treated the same. 
We are in the physician's fee schedule, and we are the only 
people within the physician's fee schedule that are not 
excluded from PPS.
    Dr. Weldon. Dr. Jones, as I understand it, CMS is scheduled 
to put through another 5-percent reduction for reimbursement, 
and then possibly another reduction after that.
    Is that what you were alluding to when you showed those two 
maps? If these things progress onward, more and more providers 
in your association would have to just start refusing to see 
Medicare patients? It just would not be profitable at all for 
them to see these people? Is that the concern you are raising?
    Dr. Jones. Thank you very much for the opportunity to 
answer that question, Congressman Weldon.
    The formula is so flawed that Mr. Scully was quoted 
himself, on the 2nd of February of '02 in The Milwaukee 
Journal, as saying that the formula is, quote-unquote, screwed 
up and exceedingly harsh. And if he is saying that as the head 
of the Agency, it shows that it really needs to be addressed.
    The problem is that it is scheduled for 5.4 percent this 
year, 5.7 percent next year. And it is the formula that is tied 
to the GDP, and not tied to the expense of the office for 
seeing patients, as you know.
    So the problem is, what we see occurring is that this 
negative rate of reimbursement, this negative growth will make 
it such a disincentive for our best and brightest to look at 
coming into health care and for those who are currently 
practicing, to continue to see the Medicare population, which 
is our most needy population, those that are elderly and those 
that are infirm.
    And we just cannot afford to have that happen. We need to 
have this formula fixed. The regulators are saying it is beyond 
regulatory control. And if it is, then we need to now look at 
getting some help from Congress.
    Dr. Weldon. It is in the statute in the '97 budget 
agreement, Congress has to fix it. Thank you, Mr. Chairman.
    Mr. Evans. Congressman Weldon, Mr. Chairman, may I make 
another statement?
    I would just like to say that the 5.7-percent decrease that 
Dr. Jones spoke about translated to our industry as a roughly 
12-percent decrease in revenue. If this other 5.4 percent goes 
into effect, we are gone. In fact, we have, we have providers 
in California that are already going by the wayside.
    Added on this with the situation with the prospective 
payment system, and us being under that system, in October the 
skilled nursing facilities are taking a 17-percent cut in their 
revenues. They are paying us for Part A patients; they will no 
longer be able to afford to pay us.
    While the situation with physicians is a critical 
situation, and I agree with it, we are about gone.
    Chairman Manzullo. Thank you. Go ahead, Dr. Nielsen.
    Dr. Nielsen. Mr. Chairman and Congressman Weldon, the 
extent of this goes far beyond that. It has not been too many 
weeks since the announcement of the expected decreases over the 
next five years were announced. And I do not remember the exact 
numbers, but it was approximately 5.5 percent two or three 
years in a row, and 2.8 at the end. And when you add those up, 
you are talking about a 20-point-something-percent reduction. 
And in a small business private practice, where overhead may be 
50 percent, that is a 40-percent cut in pay.
    It is not about physician pay, but physicians who have to 
pay out of pocket to treat patients will stop treating them. 
And although this is a map of primary care, we have regions of 
the country where specialists such as our head and neck 
surgeons, who have to provide very comprehensive care for head/
neck surgery cases with long global periods and extensive 
follow-up, are unable to afford to do it. They simply stop 
providing the care.
    And as a lot of insurance companies adopt Medicare fee 
schedules and global periods, it extends way beyond Medicare. 
Then it becomes your entire insured population. That cost 
shifts all of the specialty and tertiary care to regional 
medical centers and academic institutions, who can no longer 
bear the burden. And pretty soon we are going to start losing 
teaching institutions.
    So the ramifications of this go far beyond primary care, 
and far beyond the kind of mapping that you see here that Dr. 
Jones presented.
    Chairman Manzullo. Thank you. Ms. Napolitano.
    Ms. Napolitano. Thank you, Mr. Chairman. I think we can 
probably spend weeks really getting complaints, if you will, on 
HCFA. And I come back from the state level, where we went 
through this ad nauseam.
    The issue then, Mr. Chairman, is, will you set up a meeting 
with Secretary Thompson, and maybe get to the bottom of how can 
we work together? Not being punitive, not being aggressively 
charging anybody with dereliction of duty or whatever. But get 
to the point now. We are facing a critical state.
    Chairman Manzullo. We have remedies to take care of people 
who obstruct truth from coming forth, and that is the purpose 
of this Congressional hearing. We will pursue those avenues 
vigorously.
    I think it would be a good idea for us to send a letter to 
Secretary Thompson, who is a marvelous man, and explain to him 
that somebody under his watch is not doing his job.
    Ms. Napolitano. Or explain why he is not doing his job to 
the satisfaction of this Committee.
    But I think it goes beyond. I can tell you that some of my 
providers have been, especially home health care providers, 
nursing home providers, and some of my dentists are complaining 
to me about their not being able to treat patients. They are 
cutting down repeatedly because of, the statement has been 
because of the lack of reimbursement, and they have to keep 
their door open.
    So you cannot blame them. And we are not really helping the 
people who need it the most, that will not have the access to 
this assistance. And whatever can be done, we are with you, Mr. 
Chairman. And I think the rest of the Committee understands the 
severity of the issue. It is not going to get better, and we 
need to act expediently as possible.
    Thank you.
    Chairman Manzullo. Thank you. Let me put this into the 
record. The number of times that I can think of off the top of 
my head where we have had members of the Administration along 
with small businesspeople.
    We had somebody from the VA along with a constituent of 
mine complaining about when the VA went into the laundry 
business. And that particular match, the VA came in, the 
shortest statement I have ever heard. They said as soon as we 
got your letter, take our word, as of June 30 last, the VA is 
out of the laundry business. We saved about 200 jobs in my 
district alone.
    We have a match with somebody from the National Parks 
Service, and a camp owner from Denali in Alaska. And as a 
result of that, Denali National Park decided not to go into the 
hotel business. We saved about eight small businesses that had 
campgrounds outside.
    We had a match with Mr. Barreto, who has been nothing but 
fabulous with the SBA, is doing a great job, and Dr. Graham 
from OMB. It was a pretty tense meeting. But it brought the 
parties together, along with the owner of Albany Travel, over 
the size standards. As a result of thathearing bringing the 
people together, new size standards were promulgated almost 
immediately. Albany got their $600,000 loan and were able to stay in 
business.
    Again, Hector Barreto came in with people from the industry 
with regard to the subsidy rate. And our policy here is 
whenever anybody testifies from the Administration, if there is 
somebody with the witness that knows the answer better than 
they do, that individual just scoots up to the table, identify 
them self for the record, and answers the question.
    Dr. Blanchard testified, it was about three weeks ago, 
extremely productive hearing, all going to the resolution of 
that issue.
    We had a match with somebody from the Federal Prison 
Industries, with the lady from Ohio, dealing with electronic 
harnesses. And as a result of that, Federal Prison Industries 
went out of the business of making electronic harnesses and she 
got her contract.
    We had a match with the Defense Logistic Agency when two 
Major Generals were here, and a lady from Phoenix, Arizona. As 
a result of that hearing, the importation of most of those 
black berets stopped. We got a $50 million set-aside for small 
businesses and helped save her business in Phoenix, Arizona.
    We had a match with the National Park Service and the folks 
at West Yellowstone, Yellowstone, Montana. As a result of that 
valuable testimony, it went into the record on the impact on 
small businesses.
    We had a match when I held a field hearing in Santa Fe, New 
Mexico, with the people who run the Los Alamos Lab, along with 
members of the six Pueblos, the Indian tribes, and others who 
were seeking contracts. As a result of that, one person who was 
complaining was put in charge of overseeing all contracts at 
Los Alamos, with an initial start of $50 million being set 
aside for small business involved in construction.
    That is how we do business in this Committee. And I think 
for Mr. Scully to wield his arrogance, to think that he cannot 
sit down with these nice people. I mean, to me it just defies 
logic that a person can remain a part of the Administration and 
come here, and stiff a Congressional Committee, ignore a 
Congressional subpoena, when our only purpose here is to save 
the jobs of small businesspeople.
    And it has always been within this spirit that we have 
worked on this issue. And I would say if Mr. Scully is 
somehow--he is missing an opportunity, I think, to redeem 
himself and the organization. Now what you have here is an 
antagonistic group of people.
    I really think that Mr. Scully should resign. He should 
resign his office immediately. Anybody who does not take the 
time to meet with people, to take the input from the people 
most affected, is doing a disservice to the seniors of this 
country, and to the poor who rely upon Medicare services. And 
the sooner he does that, the better. I mean, we need to get on 
with the tremendous problems that are affecting this 
Government.
    It was in the last Administration where the Doctor 
Hulsebus, it was three brothers, from Rockford, Illinois were 
savagely and brutally attacked by HCFA that said they owed 
$250,000 in chiropractic overpayments as a result of 
extrapolation. We took on HCFA at that time, and brought them 
out to Rockford, had a meeting and found out that they did not 
even know what an x-ray was. They had no idea. How can you say 
that an adjustment by a chiropractor was not medically 
necessary when you did not look at the x-rays? As a result of 
that, that entire fine was lifted. It got down to eventually 
$1500. HCFA insisted on appealing the remaining $1500 on that, 
and they were persuaded not to do that, and to drop the appeal.
    This is an agency that has, my understanding, 4,500 
employees. I do not know what they do. They contract with 81 
different companies, including Wisconsin Physician Service that 
does my area. They are some of the worst people, who know 
absolutely nothing about medical care. They have 81 different 
sets of regulations, 81 different sets of standards. Totally 
confusing the medical industry. Demoralizing people who spent 
years in college for the purpose of healing. And many of those 
are here in this room today.
    I just think when I look upon the tremendous amount of 
sacrifice, and the witnesses here, and the time that you have 
put in for the practice of healing. You came here today to heal 
some of the wounds that have arisen because of the 
intransigence of the Health Care Financing Administration.
    They are not here today. Perhaps at the next hearing we 
will have a new Administrator.
    Mr. Davis, did you have any questions?
    Mr. Davis. Yes, sir.
    Thank you very much, Mr. Chairman. Let me apologize for not 
hearing the testimony, but I think I got a good drift of what 
has been taking place. Plus I think the fact that I have been 
associated with health care now for about 30 years, and have 
spent about 15 of those as a health planner, and represent a 
district that has 24 hospitals in it, four medical schools, and 
the biggest medical center complex in the country, as well as 
about 35 or 40 nursing homes and about 25 or 30 community 
health centers, I spend a great deal of my time listening to 
the woes of people who have interacted with HCFA. And also 
having some understanding of why HCFA was created in the first 
place, to try and handle, or get a handle on, what was called 
the spiraling runaway health care costs.
    I kind of understand a little bit of what has taken place. 
And I agree with you, it is one of the most complex of all 
agencies probably within the Federal Government. And I guess 
the one question--and I have heard these arguments and 
discussions many, many times, as I am sure most of us have, and 
all of us probably have--what would your recommendations be to 
us in terms of what it is that you think we really can do, and 
need to do, to try to get a, a balance on this problem? That 
would be my question to the panel.
    Ms. Harroun. I am Mary Harroun, Congressman Davis. I live 
in your general area. I am a Chicago person.
    I have before me a very ragged-tagged book of nursing home 
regulations. They are there. They were passed in 1990. If HCFA, 
CMS, would just mandate that their surveyors follow these 
regulations, providing the highest quality of care possible to 
our residents in long-term care. They are written. They do not 
follow them.
    Mr. Davis. Follow the rules.
    Dr. Nielsen. Congressman Davis, one of the things that I 
recommended was passage of the Medicare Regulatory and 
Contracting Reform Act. And one of the most important 
provisions of that Act is a provision that engages us in 
compliance education.
    Physicians want to be in compliance. Nobody wants to be 
audited, nobody wants to have their reputation ruined, or their 
office sacked, or their records reviewed. And we want 
education.
    So to the degree that we have to deal with this extremely 
complex issue, as you mentioned, and we are going to have 
difficult regulations whose executive summaries run into the 
hundreds of pages, help us to educate ourselves so that we can 
comply. And let's reduce those burdens that are unnecessary.
    We are being asked to bear the burdens financially for, for 
a provision of services that we think are good, but we do not 
have the resources to cover. If we are going to make those 
services necessary, then we have to provide the resources to 
cover them.
    I come from a family of 10 children. And if one of us 
misbehaved, it was not my father'spattern to spank all of us 
just so that he made sure he got the right one in there somewhere. And 
that is the way physicians feel. If there is a problem, don't spank all 
of us. Let's find the problem, and let's weed it out.
    Dr. Jones. And with all due respect, I am number nine of 
12, and we all got spanked whether we needed it or not. 
[Laughter.]
    But Mr. Davis, I appreciate the opportunity to offer you 
two suggestions, as a Committee.
    I would like to ask your support for the legislation that 
was introduced by Representative Nancy Johnson, preserving 
patient access Preserving Patient Access to Physicians Act, 
H.R. 3882.
    The good thing about that is it would affect the MedPAC 
recommendations and remove reimbursements for expenditures away 
from the GDP. To me, that is the reasonable way to do it.
    Some people say it costs too much. My question is, can we 
afford not to do it? It is the right thing to do.
    And it is interesting to me that CMS found a way to 
increase the reimbursement for Medicare Plus Choice. It seems 
as though they wanted to ensure that there was money there to 
make sure that everyone had an HMO, but not put money into 
physician reimbursement to make sure that everyone had a 
physician. There is a disconnect here for me. Your support in 
helping to make sure this happens, and getting Medicare to do 
all they can, getting CMS to do all they can from the 
regulatory component would help us tremendously.
    Mr. Evans. Congressman Davis, thank you for asking the 
question. My name is Zach Evans, and I am with the portable x-
ray providers.
    Our industry is 85 percent, 85 to 90 percent dependent on 
Medicare. We cannot turn Medicare patients away and look for 
other sources of payment.
    Like I said before, we are, if we do not get a bill passed, 
and it is a bill which Congressman Phil Crane and Chairman 
Manzullo have sponsored. It is H.R. 3094, which will help fix 
our industry.
    Is it a total fix? No, sir, it is not. Do I think that, 
that the things that we have mentioned here, all of us have 
mentioned here today, will help? I think they will. But I think 
it is going to take more than that in the long run. I think it 
is going to take an honest effort by Mr. Scully and his 
organization to respect this Committee and respect the small 
businesses that are out there. Because I do not see any respect 
today.
    If that had been me, and I ignored a subpoena, I would be 
in the pokey right now.
    Ms. Harroun. That is right.
    Mr. Evans. Thank you.
    Mr. Davis. Well, I thank you all very much. And Mr. 
Chairman, it seems to me--yes?
    Mr. Sullivan. Mr. Congressman, I actually would like to 
answer how Congress can help come to a solution, in addition to 
having these hearings which are intended to be productive.
    As far as the Office of Advocacy is concerned, we do need 
your help to help convince CMS that compliance with the Reg 
Flex Act is more than simply running a bunch of numbers. When 
CMS complies with the Reg Flex Act, and they consider their 
consequence on small business, they will learn what Dr. Weldon 
has already learned, and what he brought before this Committee. 
That is that if you consider the impact on transportation 
costs, and you consider what portable x-ray providers do, you 
actually save the Medicare system money.
    Mr. Davis. Well, I thank all of you for your answers. And 
Mr. Chairman, it seems to me that you do a pretty good job of 
spanking. [Laughter.]
    Chairman Manzullo. Dr. Christensen.
    Ms. Christian-Christensen. I am sorry that I did not get to 
this before, but this was something that was shared with us at 
one of our roundtables. And it shows you what happened to 
Medicare payments, which is down all the way at the bottom of 
this. And this is what, where practice costs are.
    In actuality, what happens is that there is at least a $20 
billion shortfall in the payments over just the last, since 
1997. A shortfall of $20 billion over the last five years. The 
costs are going up, and the discrepancy is just really large.
    And one of the problems with this is, and correct me if I 
am wrong, but whatever Medicare does, all of the other 
insurance companies follow.
    Mr. Evans. Very correct.
    Ms. Christian-Christensen. So what we are seeing here is 
the beginning of a process of getting rid of small business 
health care providers. Because the other insurance companies 
are going to follow. There is just going to be no way for them 
to stay in business.
    I know it sounds bad to hear that providers are not going 
to serve Medicare patients, but they just cannot. And it is 
going to get worse, because this is just the beginning.
    Mr. Chairman, I feel like there is a war going on against 
small health care practitioners. I felt it before I came here, 
I feel it even more now. The references made by Dr. Jones about 
the HMOs versus the practitioner, but I feel like they are 
trying to get rid of all of us and let the big corporations, 
you know, continue to make the money. You know we cannot let 
that happen.
    Chairman Manzullo. I have a final question that is 
technical, Mary, so I am going to read it, if you do not mind.
    `It seems clear that in a wheelchair muscles degenerate. 
But with the assistance of the Merry Walker, those same muscles 
are used and preserved.
    `In the Sunday Washington Post, Mr. Scully announced that 
HCFA would begin rating nursing homes. The data to be used to 
rate nursing homes will come from the MDS, that is the minimum 
data set.'
    This was originally a question for Mr. Scully, but since he 
is not here, I will ask you. I guess you are in his chair. Here 
is the question.
    Since the Merry Walker is deemed to be a restraint and 
nursing homes are discouraged from using restraints, and are 
sometimes penalized for doing so, do you believe a nursing home 
would receive a poorer rating for using the Merry Walker than a 
nursing home that places residents in wheelchairs?
    Ms. Harroun. Yes, Mr. Chairman. In my research of this MDS 
wrongful tort suit describing the Merry Walker as a chair that 
prevents rising, I----
    Chairman Manzullo. They actually took your trademark name--
--
    Ms. Harroun. That is correct.
    Chairman Manzullo [continuing]. And took out the 
capitalization----
    Ms. Harroun. That is correct.
    Chairman Manzullo [continuing]. And used it as a generic 
name in their manual.
    Ms. Harroun. That is correct.
    Chairman Manzullo. Anybody else would have been sued for 
doing that.
    Ms. Harroun. Yes. And there is no way I can sue them. We 
have already pursued that. Because they made no money. You can 
only do a trademark lawsuit when there is money to be made.
    Chairman Manzullo. I just hope, I just hope people realize 
the significance of what they did to you. It is the same as if 
somebody took the name Xerox----
    Ms. Harroun. And put it with small letters, and `do not use 
it,' basically.
    Chairman Manzullo. And they used your device, with Merry 
Walker spelled the same way, they did not put the trademark on 
it, or service mark, in small letters, and used it as an 
example of what they do not like.
    Ms. Harroun. Right.
    Chairman Manzullo. Okay.
    Ms. Napolitano. Mr. Chairman, isn't that defamation of a 
product?
    Chairman Manzullo. I do not know what it is. I think it is 
defamation of Congress that these guys do not show up.
    Ms. Harroun. Yes, exactly. The thing is, they have now come 
across, in their latest writings, which they--when I wrote to 
them the 1st of August, we have got two answers here coming 
forth. I will answer your question in a second.
    Chairman Manzullo. Go ahead.
    Ms. Harroun. I did write Tom Scully, Jeane Nitsch, Fred 
Gladden, and Steve Pelovitz. I copied them all on the same 
letter, showing them Merry Walker was a registered trademark, 
it was a patented product. And it is certainly not a chair that 
prevents rising. I mean, I went into that in detail.
    They wrote back on the internet, on a question/answer on 
the internet stating that Merry Walker is not--they used the 
trademark. Do you want me to read that?
    Chairman Manzullo. That is all right, you can just----
    Ms. Harroun. All right, I will just say it. They said that 
Merry Walker, although it is not a chair that prevents 
standing, it is still a chair that restricts freedom of 
movement. That is, residents' access to steps--this is nursing 
home regulations--to the commode, to transferring to another 
chair, or into their bed. There are no regs on steps in nursing 
homes.
    Chairman Manzullo. Because there are no steps.
    Ms. Harroun. We have things called elevators in nursing 
homes. Yes, what a unique idea. And there is no such thing as 
transferring to a chair regulations, or to a commode, or to 
bed. That is why they are in the nursing home.
    Chairman Manzullo. So they made a reference to regulations 
that do not exist.
    Ms. Harroun. That do not exist, that is correct. And it was 
not my say-so. I did have a witness of an expert on these 
rules. And there are none.
    Now, in answer to your question, I did contact all the MDS 
minimum data set coordinators of all the large nursing home 
chains. Marriott, Manor Care, all of them. There are like 20 of 
them. Got hold of all the MDS coordinators and asked them how 
they are able or not able to use the Merry Walker because of 
what the MDS has written.
    None of them can use the Merry Walker. None of the large 
corporations handling the majority of our nursing home 
residents are allowed to use the Merry Walker because of the 
MDS.
    Chairman Manzullo. So because HCFA will not correct the 
miscategorization, a nursing home that allows seniors to 
deteriorate will fare better under Mr. Scully's rating than a 
nursing home that attempts to keep seniors active and healthy.
    Ms. Harroun. That is right. So Merry Walker will never be 
used in nursing homes under this new policy, because they will 
be cited and they will get negative ratings.
    Chairman Manzullo. Mary, a final question. How many of 
these have you manufactured and put into the market?
    Ms. Harroun. There is about 100 a month over the last 12 
years.
    Chairman Manzullo. So that is, what, about 15,000? Would 
that be correct?
    Ms. Harroun. About. And there is 1.8 million people that 
could use them.
    Chairman Manzullo. Have you ever had a liability suit 
against you for this machine?
    Ms. Harroun. I have never. And I never even had a viable 
FDA med watch, in 12 years.
    Chairman Manzullo. Okay. This has been a very interesting 
hearing.
    Let me say this. Mr. Scully's not showing up here, in my 
opinion, my wholehearted opinion, this is not indicative of the 
President's office. We have worked with numerous agencies. In 
fact, I was in China the first week of January as the Chairman 
of the American/Chinese Parliamentary Exchange.
    And we sat down with Undersecretaries of Commerce, and 
state and national security councils, USTR's office. I mean, 
there was more than a briefing. It was, it was for the purpose 
of making sure that when I went there, we would present the 
same message. And I met with the President of China, an 
extraordinary hour-and-25-minute meeting.
    But everything that we did, and the reason I bring that up, 
it was totally in concert with everything that we want to do 
with the Department of State, the National Security Council, 
the Department of Commerce and the USTR's office. It was done 
purposely, to make sure that they were not only notified of 
what they were doing, but they helped us set the agenda. 
Because I believe that the branches should work together.
    And that is why I am very disappointed that we have this, 
this total disconnect that is going on. This Committee does not 
have the reputation for doing anything other than trying to 
solve, solve problems.
    We will deal with Mr. Scully appropriately, swiftly, 
according to the rules. And I just want to thank you for coming 
long distances, paying your own way. Very impressive witnesses. 
I thank God that there are people like you that are out there, 
that are carrying the torch, especially to the two M.D.s that 
studied long and hard and continue to stay in the profession, 
even though it becomes more and more discouraging.
    This Committee is adjourned--I am sorry, Mr. Davis?
    Mr. Davis. Yes. Before you adjourn, I just want to commend 
you. I mean, very seriously. I mean, of course this Committee 
does not necessarily have jurisdiction over HCFA, and this is a 
serious--I mean, this is a gut-wrenching complex. I mean, it 
really is.
    I mean, I see people come in my office and virtually cry. I 
have had nursing home operators and home health agencies; 
people who I am wondering if I am going to be able to keep them 
from cracking up before they leave.
    I just want to commend you for this hearing, and for the 
depth of analysis of a problem and of an issue that we have 
been able to explore today. And, and pledge, also, support for 
your continuing effort as you attempt to deal with HCFA and the 
Administration, to try and help us move towards some resolution 
of a big problem facing an awful lot of people throughout the 
country.
    So I commend you for that.
    Chairman Manzullo. Thank you, Congressman Davis. This 
Committee is adjourned.
    [Whereupon, at 11:49 a.m., the Committee was adjourned.]
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