[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE PRESIDENT'S AND OTHER BIPARTISAN
PROPOSALS TO REFORM MEDICARE
POST-ACUTE CARE PAYMENTS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JUNE 14, 2013
__________
Serial No. 113-HL05
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
DAVE CAMP, Michigan, Chairman
SAM JOHNSON, Texas SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington
DEVIN NUNES, California JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois MIKE THOMPSON, California
JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut
TOM PRICE, Georgia EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida RON KIND, Wisconsin
ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota DANNY DAVIS, Illinois
KENNY MARCHANT, Texas LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio
Jennifer M. Safavian, Staff Director and General Counsel
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON HEALTH
KEVIN BRADY, Texas, Chairman
SAM JOHNSON, Texas JIM MCDERMOTT, Washington
PAUL RYAN, Wisconsin MIKE THOMPSON, California
DEVIN NUNES, California RON KIND, Wisconsin
PETER J. ROSKAM, Illinois EARL BLUMENAUER, Oregon
JIM GERLACH, Pennsylvania BILL PASCRELL, JR., New Jersey
TOM PRICE, Georgia
VERN BUCHANAN, Florida
ADRIAN SMITH, Nebraska
C O N T E N T S
__________
Page
Advisory of June 14, 2013 announcing the hearing................. 2
WITNESSES
Mr. Jonathan Blum, Deputy Administrator and Director, Center of
Medicare, Centers for Medicare and Medicaid Services........... 6
Mr. Mark Miller, Executive Director, Medicare Payment Advisory
Commission..................................................... 26
SUBMISSIONS FOR THE RECORD
American Hospital Association, AHA, statement.................... 63
American Health Care Association & National Center for Assisted
Living, statement.............................................. 69
American Medical Rehabilitation Providers Association, AMRPA,
statement...................................................... 75
Coalition to Preserve Rehabilitation, CPR........................ 84
HealthSouth, letter.............................................. 88
National Association for Home Care & Hospice, NAHC, statement.... 97
The Nebraska Association of Home & Community Health Agencies,
NAHCHA, statement.............................................. 103
The Visiting Nurse Associations of America, VNAA, statement...... 105
THE PRESIDENT'S AND OTHER BIPARTISAN
PROPOSALS TO REFORM MEDICARE
POST-ACUTE CARE PAYMENTS
----------
FRIDAY, JUNE 14, 2013
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to call, at 9:29 a.m., in
Room 1100, Longworth House Office Building, the Honorable Kevin
Brady [Chairman of the Subcommittee] presiding.
[The advisory announcing the hearing follows:]
HEARING ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
Chairman Brady Announces Hearing on
The President's and Other Bipartisan Proposals to Reform Medicare Post-
Acute Care Payments
The House Committee on Ways and Means, Subcommittee on Health
Chairman Kevin Brady (R-TX) today announced the fourth in a series of
hearings to explore bipartisan proposals, including those contained in
President Obama's Fiscal Year (FY) 2014 Budget to reform Medicare. This
hearing will focus on review of proposals to reform post-acute care
under the Medicare program. The hearing will take place on Friday, June
14, 2013 in 1100 Longworth House Office Building, beginning at 9:30
A.M.
In view of the limited time available to hear from witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing. A list of witnesses
will follow.
BACKGROUND:
In 2011, Medicare spending on Post-Acute Care (PAC), defined as
Home Health Agencies (HHA), Skilled Nursing Facilities (SNF), Inpatient
Rehabilitation Facilities (IRF) and Long-Term Care Hospitals (LTCH)
totaled nearly $62 billion. Medicare post-acute providers play an
important role in the continuum of care for Medicare beneficiaries,
providing recuperation and rehabilitation services to Medicare
beneficiaries recovering from an acute hospital stay. However, the lack
of placement guidelines for beneficiaries in PAC settings, the uneven
availability of PAC providers across markets, and multiple PAC payment
systems result in wide variation in the use, cost and quality of post-
hospitalization care for Medicare beneficiaries.
To address these and other concerns, the Obama Administration has
identified several policies to reform PAC within the Medicare program.
In the President's FY14 Budget, the Administration focused on five PAC
reform policies: (1) reducing market basket updates for HHAs, SNFs,
IRFs and LTCHs; (2) creating site neutral payments between IRFs and
SNFs for certain procedures; (3) modifying the criteria required for
IRF status (the so-called ``75 percent rule''); (4) establishing a SNF
readmissions program; and (5) creating PAC bundled payments.
The President's FY14 Budget estimates that these five policies will
save $94 billion over 10 years. However, the Congressional Budget
Office estimates these policies will save $53 billion. In addition to
the President's budget, several other bipartisan policy organizations,
such as the Bipartisan Policy Center, The Moment of Truth project and
the Medicare Payment Advisory Commission, have collectively made
recommendations to reform Medicare's PAC payment systems.
In announcing the hearing, Chairman Brady stated, ``The new
Medicare Trustees report confirms this important program remains in
deep financial trouble, with only 13 years left of solvency in the main
trust fund. Democrats and Republicans recognize one solution to
extending the life of Medicare is to improve how care is delivered to
seniors once they leave the hospital. Finding the right reforms in
post-acute care can both improve care for today's seniors and help save
Medicare for the future generations.''
Ranking Member McDermott stated, ``The Affordable Care Act put us
on a path towards reforming post-acute care and many promising ideas
are being developed and tested. As the Medicare Trustees' Report
illustrates, the Medicare program is stable and strong, however, we
should always look for ways to continue to strengthen it and improve
the quality of care for its beneficiaries. Improvements in post-acute
care are a better approach for reform than policies that merely shift
costs to beneficiaries.''
FOCUS OF THE HEARING:
The hearing will review proposals to reform post-acute care under
the Medicare program.
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Please Note: Any person(s) and/or organization(s) wishing to submit
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submit all requested information. ATTACH your submission as a Word
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by the close of business on Friday, June 28, 2013. Finally, please note
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For questions, or if you encounter technical problems, please call
(202) 225-1721 or (202) 225-3625.
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Chairman BRADY. Good morning. The subcommittee will come to
order.
And I want to welcome everyone to today's hearing on
bipartisan proposals, including those in the President's
budget, to reform how Medicare pays for care after patients are
hospitalized.
This is the fifth hearing for our subcommittee this
Congress and the fourth in a series focusing on bipartisan
proposals to reform Medicare and Social Security. I am proud to
say that today's effort is truly a bipartisan hearing, that the
Ways and Means Health Subcommittee staffs from both majority
and minority staffs have collaborated on this hearing.
Today's discussion focuses on reforming how care delivered
after a hospitalization in the Medicare program is paid for. We
will focus on five policies from the President's 2014 budget
that are also supported by several bipartisan organizations.
Our goal is to discuss the details around the following
specific policies: one, reducing Medicare market basket updates
for home health, nursing homes, rehab hospitals, and long-term-
care hospitals; creating site-neutral payments between
hospitals and nursing homes; establishing more stringent
criteria for rehab hospitals; tackling readmissions from
nursing homes; and creating bundled payments.
The President's budget estimates these five policies will
save $93 billion over 10 years, and CBO estimates these
policies would save less, $54 billion. These are real savings,
in any case, for a program that is facing bankruptcy in just 13
years.
The topic for today's hearing was chosen, in part, from
listening to my colleagues. Mr. McDermott, during our last
hearing, suggested that we may be cherry-picking proposals from
the President's budget that only focus on beneficiaries. Though
we still firmly support redesigning the Medicare benefit, we
know it is only one factor in the Medicare program that needs
reform, and we should look at other items in the President's
budget.
Today we are exploring after-hospitalization care because
it is in desperate need of reform. It has been over a decade
since Congress has made meaningful changes to the way after-
hospitalization care is reimbursed.
While we recently received some good news from the Medicare
Trustees Report, which noted the life of Medicare's main trust
fund was extended by 2 additional years, I think some
additional perspective is necessary. To me, 2 years is
equivalent to the Titanic hitting the iceberg an hour later. We
are still in deep financial trouble for this very important
program.
So I challenge this committee and our witnesses today to
think bolder. A question we should be asking ourselves is, how
can we extend the life of Medicare for an additional 10 years?
An additional 20 years? Perhaps an additional 30 years? Because
we owe it to current and future seniors to meet these goals.
These will require hard decisions, but making them now will
ensure a vibrant Medicare for generations to come.
Before I recognize Ranking Member McDermott for the
purposes of an opening statement, I ask unanimous consent that
all Members' written statements be included in the record.
Without objection, so ordered.
Chairman BRADY. I now recognize Ranking Member McDermott
for his opening statement.
Mr. MCDERMOTT. Thank you, Mr. Chairman. I appreciate your
willingness to approach this topic on a bipartisan basis
because I suspect there is quite a bit we agree on.
Post-acute care is really a broad clinical term for all the
activities that come after the acute incident or acute
hospitalization. Their health is stable and the question is,
what do we do with you now? It is something everyone in this
room will have or has had at some point a chance to deal with.
It can be messy. It is sometimes the road to the end.
My experience with my parents living to 97 and 93 is I had
quite a bit of time to operate in this area. And when I came to
Congress, there was a group of about nine of us who would meet
at the back of the floor when we got off the plane from the
West Coast and discuss our experiences over the weekend of
dealing with the problems of our parents' post-acute care.
And there is no manual for this. You find yourself
stumbling around, trying to navigate a system, while you watch
someone you love declining. We all want the same thing for our
parents and any other loved ones who we have in this situation;
it is the best care possible. We want them to have the highest
quality we can get for them, but we also want it to be
efficient. So when we talk about reform, we have to remember
the people behind it.
This sector has a lot of challenges. Double-digit inflation
margins in several post-acute settings indicate that Medicare
payments far exceed costs. Some parts of the country--it is
true, 10 years ago, I remember a hearing just like this on this
issue--had unusually high use of post-acute care. So there are
concerns about utilization patterns and, certainly, fraud.
Providers operate in silos, creating disincentives to
coordinate care and improve transitions between settings. And I
am sure our witnesses will talk more about this, so I am not
going to belabor the point.
We can be happy that the Affordable Care Act has put
Medicare on a path toward post-acute reform. CMS is now testing
the concept of bundled payments, which could break down the
silos and encourage better-coordinated and more efficient
delivery of care.
Providers are starting down the path toward value-based
purchasing with pay-for-reporting and demonstration projects to
test that concept. The ACA has also provided new fraud tools to
weed out the unscrupulous providers and took steps to recoup
and rein in overpayments.
But more can and will have to be done. Right now, there are
billions of dollars of savings that can be had by further
reconfiguring payments to better match actual costs. And that
will help us address the extremely high Medicare margins of
post-acute providers.
Now, the real savings that will go toward a Medicare
physician fix rather than loading more costs onto beneficiaries
with incomes of $22,500 is really, I think, what we have to
begin thinking about. We can also find longer-term reforms, and
I look forward to hearing these ideas from CMS and from MedPAC.
While there are a whole lot of interesting concepts and
policy in this arena, we need to learn from the A.C. efforts
under way. We have put them in motion, and we are now watching
them. I don't think we should move too quickly, because we need
to let them see if they really work to ensure that models work
in a way that doesn't compromise access and provides high
quality for our beneficiaries.
And then, finally, as Chairman Brady did, I would like to
address something that the majority has raised. While we agree
on the need for post-acute reform and much of the problem, I
have to take issue with the notion that Medicare is broke and
that post-acute reform is the simple fix. There is no simple
fix to the question of increasing health care.
The Supreme Court made a decision yesterday that there is
no ability to patent genes. And what gene therapy is going to
do over the next 20 years, it is impossible for us to sit here
today and predict. Nobody predicted where Medicare would be
today 20 years ago or 40 years ago because medicine has
advanced, and it is simply impossible to have any kind of
system where you have it funded out there for 20 or 30 or 40
years.
Reform is a worthy goal in and of itself, but let's not
cloak it in alarmist rhetoric about the program's finances.
Medicare's finances are strong. The trustees just announced the
solvency, as you heard, is extended by 2 years. Medicare
spending per beneficiary--per beneficiary--grew at the low rate
of 1.7 percent from 2010 to 2012. And projected spending growth
will continue to be slower with the overall economy.
So let's agree that changes to the post-acute system are
needed, that we can improve quality for our parents and loved
ones as well as rein in overpayments. We don't need hyperbolic
statements to motivate to us action. We need to do it for our
families.
I yield back the balance of my time.
Chairman BRADY. Thank you.
Today, we will hear from two witnesses: Jonathan Blum,
deputy administrator and director of the Center of Medicare at
the Centers for Medicare and Medicaid Services; and Mark
Miller, executive director of the Medicare Payment Advisory
Commission.
Thank you both for being here, and I look forward to your
testimony. You will both be recognized for 5 minutes for the
purposes of providing your oral remarks.
Mr. Blum, we will begin with you.
STATEMENT OF JONATHAN BLUM, ACTING PRINCIPAL DEPUTY
ADMINSTRATOR AND DIRECTOR, CENTER FOR MEDICARE & MEDICAID
SERVICES
Mr. BLUM. Chairman Brady, Ranking Member McDermott, Members
of subcommittee, reforming Medicare's post-acute-care policy
should be one of our highest priorities to improve the delivery
of care and to reduce overall costs of the Medicare program. We
thank you for the opportunity to offer our thoughts and
perspectives.
Payment for Medicare post-acute-care services has
challenged the program for many, many years. Patients with
similar needs overlap the current silos of post-acute care. We
don't have a great definition for what constitutes a SNF
patient or an LTC patient, for example. We don't know what the
right mix of post-acute-care services are for a given
condition. As a result, post-acute care is one of our fastest-
growing areas.
Over the past several years, CMS has spent much time
analyzing geographic differences in health spending and
outcomes, particularly for the Medicare fee-for-service
program. Our work complements efforts performed by the
Institute of Medicine, the Dartmouth Atlas, and MedPAC.
While there are many drivers for these spending
differences, several conclusions are clear to us.
One, what really drives differences in Medicare fee-for-
service spending is what happens to the patient after he or she
leaves the hospital. For example, for a 30-day episode of care
for a common heart procedure, the costs across the country can
vary by a factor of two to one, with the differences being
driven by the degree of post-acute-care services provided and
whether there is a high probability for a hospital readmission.
Two, higher quality of care is not associated with this
degree of higher spending in some areas of the country. For
example, high overall spending levels of post-acute-care
services are not correlated with lower hospital readmissions.
Despite some arguments from the industry, more spending on
post-acute-care services over current levels will not
necessarily reduce spending in other health care channels.
Indeed, many of our highest-performing areas of the country, in
terms of quality and cost, use relatively few post-acute-care
services following a hospital stay.
In short, we have to pay for post-acute-care services in a
better way to improve the quality of care and reduce overall
costs. Developing these better payment policies will require a
combination of interventions and approaches.
Over the long term, we are hopeful that our new payment
approaches and pilot programs will lead to new care-delivery
models that better integrate post-acute-care services with
hospital services and community services to better manage
patient transitions and episodes of care. For example, we are
in the process of implementing four bundled payment models. Two
of them will have a distinct focus on aligning financial
incentives of post-acute-care providers with the overall cost
of care. We are confident these models will lay the groundwork
for a permanent payment policy.
We also believe that a key success factor for our more than
250 ACOs, or accountable care organizations, will be to
establish better models for delivery of post-acute-care
services. However, while we establish new models of payment and
delivery, we also believe that we must take incremental but
forceful steps to make our current payment systems more
accurate and to ensure that post-acute-care providers treat
patients that are most appropriate for their care setting.
Over the past several years, we have made changes to our
post-acute-care payment systems to rebalance them to have
stronger incentives to care for the sickest patients. We have
taken significant steps, some required by the Affordable Care
Act, to reduce spending where there is clear evidence the
program overpays relative to the cost of care.
And we have also put in place new requirements to ensure
that benefits are being provided consistent with clinical need
and care planning. For example, beneficiaries now receiving
home health benefits must be seen by a physician in a face-to-
face encounter to better ensure the integrity of the service.
This year's President's budget also proposes some
additional changes that we feel are very important to achieve
the President's goal of reducing Medicare spending by about
$371 billion over the next 10 years without compromising the
quality of the care the program provides.
Given the current growth trends and Medicare post-acute-
care payments, we believe it is very important to take more
steps, but careful steps, to further reduce spending to ensure
these payment systems remain sustainable while better serving
our beneficiaries.
I would be happy to answer your questions.
Chairman BRADY. Thank you, Mr. Blum.
[The prepared statement of Mr. Blum follows:]
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Chairman BRADY. Mr. Miller, you are recognized.
STATEMENT OF MARK E. MILLER, PH.D., EXECUTIVE DIRECTOR,
MEDICARE PAYMENT ADVISORY COMMISSION
Mr. MILLER. Thank you.
Chairman Brady, Ranking Member McDermott, and distinguished
Members of the Subcommittee, I would like to thank you for
asking the Commission to testify here today.
MedPAC's work in this area has been guided by three
objectives: to assure that the beneficiary gets high-quality,
coordinated care; to protect taxpayers' dollars; and then to
pay providers in a way to achieve those two goals. MedPAC has
been trying to move the payment systems away from fragmented
fee-for-service that encourages volume growth and discourages
coordination toward systems that focused on payment and
delivery that are organized around patient need.
But post-acute-care reform is difficult. There are few
clinical guidelines regarding the services that are necessary,
and as you have already heard, there are wide variations in the
utilization of services. For example, in McAllen, Texas, there
are seven times more home health services per person than the
national average. In Miami, there are five times more home
health services than the neighboring county.
Related to that, there is not a uniform way to assess
patient needs or outcomes. Some of our payment systems require
a common assessment instrument, but they are different in each
setting, and we cannot compare outcomes and needs across
setting. And some settings don't have an assessment instrument.
This is extremely important. It encumbers the process of
linking payment to quality and the process of developing a more
rational payment system.
Another issue is that providers select the patients they
care for. And on the one hand, this really makes sense; you
want to pair up patients with providers who can provide the
necessary care. But in our payment systems, this means
providers can select patients for financial reasons. We believe
that, over time, certain SNFs in home health, skilled nursing
facilities, and home health agencies, have focused on basic
rehab patients and avoided medically complex patients because
the former are more profitable than the latter.
As Jon has mentioned, we pay different rates for similar
services and similar patients. This creates incentives to move
patients across payment systems, involving unnecessary
transitions and additional costs. For example, long-term-care
hospital payments are generally higher than acute-care hospital
payments for the same patient, but a recent analysis suggests
that as many as 50 percent of the patients in long-term-care
hospitals could be treated in different settings.
If you think in terms of time frames, MedPAC's efforts in
the past and in the short term have been focused at improving
fee-for-service and encouraging movement to better systems.
This involves reforming the underlying payment system to pay
providers fairly; limiting and reducing payment rates to
protect beneficiaries out of pocket, and the taxpayer;
expanding program integrity to focus on bad actors; and linking
payment to quality.
Let me illustrate a couple of these principles. The
underlying skilled nursing facility payment system, as I have
mentioned, encourages providers to take basic rehab patients
and avoid medically complex patients. We have recommended
changes that would pay the provider more accurately based on
the patient that they take.
We also believe that the original base rates for skilled
nursing facilities were set too high, and this has contributed
to very high profit margins for more than a decade, currently
running about 14 percent. We have recommended reducing the
payment rates to be more consistent with the level of effort.
Now, if you think about these two ideas together, this
allows you to lower the rates but not to harm the agencies that
are taking the most complex patients. We have made similar
recommendations for home health.
In the near term in order to encourage a more coordinated
system, we have called for a unified assessment instrument that
can be used to assess the patient regardless of what setting
they go to. We have recommended for skilled nursing facilities
with excessive readmission rates back to the hospital. And we
have just begun our discussions of a site-neutral payment
system for long-term-care hospitals and acute-care hospitals,
but those discussions have just begun.
In the long run in order to move to more fully coordinated
care, we have recommended demonstrations to bundle payments
around hospitalizations and post-acute care. And we have given
extensive guidance to both Congress and the CMS on the design
and implementation of two-sided risk accountable care
organizations.
In closing, I think what the Commission is looking for is a
post-acute-care system with a unified patient assessment
instrument, a payment that matches resources to needs, but puts
the provider at risk for unnecessary services, but then clears
out unnecessary fee-for-service rules to allow that provider to
determine the ideal mix of post-acute-care services.
Thank you for your attention. I look forward to your
questions.
Chairman BRADY. Thank you, Mr. Miller.
[The prepared statement of Mr. Miller follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman BRADY. To both of you, the last time Congress
mandated comprehensive reform of Medicare payments was in 1997
with the Balanced Budget Act. We are considering changes and
reforms to extend the life of Medicare similar or greater in
magnitude to those reforms. Many believe Congress took reform
too far in 1997 and consequently gave back some of those
reforms in 1999 and beyond.
So a broader question in the beginning: How does Congress
aggressively pursue reform that extends the life of Medicare
without repeating some of the mistakes of the past?
Mr. Blum.
Mr. BLUM. So, a couple points.
I mean, one, I think Congress should recognize that there
was many changes made to the Affordable Care Act to reduce
spending on post-acute-care savings. Of the Medicare savings
that were included in the Affordable Care Act, home health,
skilled nursing, all the different payment systems did
experience payment reductions.
I believe that over the long term what we need to do is to
shift the system, as Mark suggested, to ensure more accountable
total care models. And I think what Congress can do is to
provide clear direction, clear roadmaps for how that system
should change over time.
The President's budget set a goal or a target for post-
acute-care bundling by 2017. Really, our intent there is to
send a clear signal, give a direction of how the health
delivery system should move.
We also feel in the interim that we have to take other
payment steps in the short term to ensure that our payments are
more accurate relative to the cost of the care. The President's
budget has several ideas how to achieve that.
But I think the most important thing long term is to ensure
that we can achieve more of a site-neutral payment or realign
the incentives of post-acute-care providers----
Chairman BRADY. Got it. All right.
Mr. Miller.
Mr. MILLER. The things I would say is you want to probably
move in steps. So when you are taking rates down, because they
are overstated, you move in a series of steps over time.
As I said in my opening comments, you try and also get the
underlying payment system to follow the payments to the complex
patients so that you are not taxing the facilities that are
going after the most difficult payments.
And then I agree with the comment over here that if you can
get to payment systems that are more population- or episode-
based, you give the provider flexibility and allow them to move
the resources around, as long as you have protected the risk to
the program.
Chairman BRADY. Mr. Miller, you referenced MedPAC's work on
neutral payments in your original testimony. We have a real
interest in that area.
Why have you focused on that policy area? How important is
it that we pursue that?
Mr. MILLER. I think the Commission believes it is very
important. This has been a problem that has been around for 15,
20, 30 years. When I started, people talked about it, and it is
still--I think the fundamental problem is twofold.
One is, at the seams of these payment systems, you create
odd incentives. So if one payment system pays more than another
for the same service or the same patient, then people begin to
behave in ways that are not clinically driven and, instead,
driven to maximize payments. And you get behaviors that affect
the beneficiaries out of pocket and behaviors that affect the
program expenditures, but you also stimulate changes in the
environment.
We think that some--ambulatory care--one second, off-
point--we think that that payment has stimulated purchase of
physician practices, for example.
One quick, well, you know, wrap up, the Commission has
talked about site-neutral payments in the ambulatory setting,
with more of that coming out in our report today. Here, we are
looking at the site-neutral payment between hospitals and long-
term-care hospitals and just beginning to think about some of
the relationship between the in-patient rehab facility and
skilled nursing facilities.
Chairman BRADY. Tell us about the unified assessment tool
that you referenced in your testimony, how does that work? How
far along is it? What kind of insight does it provide us as we
are looking at reimbursement issues?
Mr. MILLER. And I may throw this over to Jon because he
will probably know more about what the current state of play
is.
But the fundamental situation is, and particularly in post-
acute care, the two things you are generally looking for is the
diagnosis and condition of the patient, but beyond that what
you want is their functional status--their ability to walk,
their ability to do things like that.
What we have are these instruments in different settings
that measure that different ways. And, in some settings, they
don't have a consistent instrument. And that means you can't
compare the patients across settings and figure out whether the
payments and the outcomes are calibrated.
There was a demonstration done by CMS. And we had called
for this a long time back, that an instrument needed to be
created. And CMS developed one and did a demonstration. And my
view of it is that demonstration is pretty promising in saying
that you can measure patients consistently across a lot of
these categories.
Its status, et cetera, I would hand off.
Chairman BRADY. What is the status, Mr. Blum?
Mr. BLUM. The status is that we have spent the past several
years demonstrating, working with providers, the CARE tool. We
feel confident that the CARE tool shows promise in how we push
it out to all our different payment systems. Through our Center
for Innovation Projects, we intend to use the CARE tool, to
some degree, to assess how patients fare once you integrate the
payments.
So we are at a point where we feel confident within the
CARE tool that it still needs refinement, but we believe that
it holds tremendous promise, as Mark said, to assess patients
across different care settings. And CMS plans to deploy it for
the first time through our payment innovation----
Chairman BRADY. Would you, by letter, share with us how the
tool works and methodologies----
Mr. BLUM. Absolutely.
Chairman BRADY [continuing]. For arriving at it and the
status of it? That would be very helpful.
Mr. BLUM. Absolutely.
Chairman BRADY. One of my concerns, that you referenced
earlier on, is that we don't have criteria in the SNFs and
rehab hospitals, and we are getting to bundling payments. But
my impression has been that CMS has had the requirement and
direction from Congress for many years to develop these
criterias and to move toward bundled payments. I guess my
overall question is, why is it taking so long?
Mr. BLUM. Well, I think, to me, there are several
challenges.
Number one is that post-acute-care marketplace has been
established over time very differently across the country.
Different parts of the country have a different mix of
services. So defining one unifying definition to what an
episode is is challenging, given the current marketplace.
The other challenge, is who gets the money? Does the
hospital get the money and then decide where the patient goes
and then pays the provider, versus having a locus of payment
being more with the post-acute-care provider system.
Those are very important questions that we are testing.
Through our current work on bundled payments, we are, for the
first time I think, really establishing common payment
episodes, testing four different models. And there really is no
off-the-shelf model that we know of that CMS can simply put to
our payment systems.
We are working very collaboratively with the hospital
industry, post-acute-care industry, to define those episodes.
And I think for the first time, the agency is building the
infrastructure, not for just micro-tests but for large-scale
transformation, to move to a more integrated post-acute-care
system.
So it is challenging, to be sure, but we feel confident
that for the first time the industry, the health care delivery
system, is building the platform to develop a very extensive
bundled payment system.
Chairman BRADY. Thank you, Mr. Blum.
Before I recognize Mr. McDermott, at some point, Mr.
Miller, during the hearing I hope you will address the
President's budget's focus on market basket updates. MedPAC has
included rebasing as part of your recommendations, as well. At
some point, I would like to hear why.
Mr. McDermott is recognized.
Mr. MILLER. If you don't get to that, make sure that you
come back to me.
Chairman BRADY. Okay.
Mr. MCDERMOTT. Thank you, Mr. Chairman.
One of the issues--we have made reforms since 1997. It was
called the Affordable Care Act. And that has made real changes
in what is going on, I think. And we shouldn't ignore the law
of the land, as the Supreme Court has now described it.
One of the questions that Mr. Brady raises and I would like
to follow a little bit is, if you look at the numbers, it is
Florida, it is Texas, it is Mississippi, it is Louisiana, it is
Oklahoma, where there is higher home health use and aberrant--
they are outliers in the system.
Explain to me from a clinical point of view why that is.
Why do you have that part of the country that has this outlying
status, while all the rest of us are kind of clustered in the
middle?
Mr. BLUM. I think there are many reasons for the extensive
variation that we see in health care spending. And I think you
really have to break it down by different payment systems and
different spending categories. There is no one uniform rule----
Mr. MCDERMOTT. I think it is 25 counties in those 5 States
are the furthest out. It is very clustered. So is it just who
is practicing in those counties? Is that what is going on?
Mr. BLUM. I believe, and based upon our work with law
enforcement, there is tremendous fraud going on in certain
parts of the country, particularly with home health areas. That
has been an extensive focus for our work, to reform payments,
to do more HEAT Task Force, working very closely with our
partners in law enforcement.
To respond to the variation, that a payment solution or an
integrated payment bundle is not going to be the only solution
that I believe that we need to consider. For different areas of
the country, for different sectors, there are different
responses. Some might be law enforcement responses, some might
be better coverage policies, some might be payment reforms, but
there are different reasons that drive different spending
variations.
And I think the home health example that you cite,
particularly in some parts of the country, are not due to
payment incentives but due to fraudulent behavior.
Mr. MCDERMOTT. I remember when we had this debate in 1997.
The State of Washington had an average of 17 home health visits
per year, or per patient, and Louisiana had a 125 or 140 or
something. And it was very hard to see what the difference was,
I mean, why that was going on.
So you are telling me that same thing is going on now, 15
years later, and we haven't figured out a way to get to it. Is
that a fair estimate of where we are?
Mr. BLUM. I think that it is clear to us that the higher
uses of home health services, particularly in the areas of the
country that you cite, are not correlated with better quality
of care or lower hospital readmissions. The parts of the
country that we see that have really managed readmissions well
use relatively few home health services compared to the areas
that you cite.
So the long-term strategy really is to build the global
payment incentive, but the short-term strategy is to respond
through fraud and abuse controls, payment reductions, to ensure
that we both control the integrity of the payment system
against the long-term vision.
Mr. MCDERMOTT. Let me ask you about the--now, Mr. Brady has
asked about the issue of an instrument to measure who should go
where. And we have this rule, this 3-day rule. And I have never
understood what the clinical basis for the 3-day rule was. Is
there such a clinical basis?
Mr. BLUM. Well, my understanding is that the 3-day rule is
set by statute. It was set a long time ago. And I believe that
the rationale when Congress established the 3-day rule was to
ensure that patients who are discharged to a skilled nursing
facility have a high clinical demonstrated need for therapy
services.
Mr. MCDERMOTT. And that requires 3 days in the hospital to
establish that; is that correct?
Mr. BLUM. Correct.
Now, that is a statutory requirement. And we are very
interested in testing models that give more flexibility to the
3-day stay. But our belief is that those should be tested in
contexts where we have global payment accountability, to ensure
that we don't overuse services.
But, you know, within those contexts, like ACOs, for
example, we are very interested to test more flexibility for
the 3-day stay, to give more clinical discretion to discharge
direct, for example, to the skilled nursing facility. But it
has to be with a common assessment tool, to our belief, and
also in a global payment arrangement.
Mr. MCDERMOTT. Now, tell me the difference, if two patients
are standing here before us, and one of them is going to go to
a nursing home because they--or they need skilled nursing
care--they both need skilled nursing care. One of them goes
into the hospital and gets admitted, and one of them goes into
the hospital and goes into observational status.
What is the difference? And who pays for what? Would you
please explain that for me?
Mr. BLUM. Sure. Well, I think we are definitely seeing a
growing trend in outpatient observational services.
Mr. MCDERMOTT. You have a huge spike.
Mr. BLUM. Huge spike. And there are different reasons for
that. And I think some hospitals argue that it is because of
the RAC, recovery audit reviews, to ensure they get it right
the first time. Some argue that a patient walks into the ER,
has no place to go, doesn't merit an in-patient stay, but the
physician doesn't feel comfortable sending that patient home.
But it is clear to our rules that to qualify for the 3-day
stay, the observation services do not count, that the in-
patient stay does count.
Chairman BRADY. Thank you.
Mr. Johnson is recognized.
Mr. JOHNSON. Thank you, Mr. Chairman.
Mr. Miller, MedPAC is focused on both reducing market
basket updates and rebasing for home health and skilled
nursing. Can you articulate why MedPAC has focused on rebasing
in addition to market basket reductions and the Obama
administration has only focused on market basket reductions?
Mr. MILLER. Okay. There are a couple of sets of arguments.
So, on the skilled nursing side, as I said, there has been
a decade of very high profits. There does not appear to be a
relationship between profitability and patient characteristics.
What drives cost does not seem to be very clear.
And when we look at the data, we can organize the data into
efficient providers, providers that have low cost and high
quality, and they can make higher profits at lower payment
rates. We also noticed that, in managed care, many managed care
plans don't pay at these rates for skilled nursing facilities.
So our argument is, don't continue to inflate a rate that is
already too high; stop inflating and reduce the rate. And that
is what we call rebasing.
But our concern, and this is what I tried to say in my
opening 5 minutes--and I am trying to answer your question, Mr.
Chairman, as well--our concern is, let's make sure that if
there are certain skilled nursing facilities that are focused
on the most complex patients, that we are also changing the
underlying payment system so that the dollars move to those
kinds of providers, so when the rate is reduced, that you don't
harm the facilities taking the complex patients.
Now, just let me--one other thing. On home health, the
story is a little bit different. In home health, when the base
rate was created, there were about 30 visits provided over 60
days, and the base rate was based on 60 days. Over time, home
health agencies now provide about 22, 20-some-odd visits per 60
days. They are tilted a little bit more to more skilled visits,
but it was based on many more visits.
And, again, here is a situation where the profit margins
for the home health agencies have been very high for a decade.
And so, once again, we have suggested that the rate should come
down. And, just like I told you on the skilled nursing facility
side, alter the underlying payment system so you don't harm the
home health agencies that take the complex patients.
I am sorry that was so long.
Mr. JOHNSON. That is all right.
Nearly a decade ago, when CMS implemented the modified 75
percent rule, it did so partly based on the high number of
relatively simple joint replacement cases being treated instead
of less intensive settings.
Isn't it true that the number of these types of patients
treated in IRFs has declined substantially? And isn't it the
case that IRFs are treating more medically complex patients
than they were 6 or 8 years ago?
Mr. MILLER. It is true, those types of patients have moved
to skilled nursing facility and home health settings in the
data that we see. In-patient rehab facilities are treating a
different mix of patients over time as a result of--I think it
is actually the 60 percent rule. That used to be the 75 percent
rule.
Mr. JOHNSON. So we cut their reimbursement because they are
treating more complex cases?
Mr. MILLER. I think, actually, their margins are still in
the 7, 8 percent range, if I am not mistaken. I think that what
went on there is there were strong incentives given to have a
different mix of patients as opposed to a rate reduction.
Mr. JOHNSON. What can Congress do to make sure that
patients are getting the right care in the right setting?
Mr. MILLER. I think what both of us have been saying is,
you know, like your 3-day rule question and the 75 percent
rule, or 60 percent rule, whichever it is at the moment, these
are all things that, you know, we as Congress and Jon as CMS
have to put in place because you have this fee-for-service
system and you are sort of chasing these payment systems
around, which are all siloed.
I think Jon was saying and I think the Commission would
agree, if you could get to a more bundled payment, either on an
episode basis or a population basis, you could step back from
these rules, have the provider decide what the actual mix of
services is, as long as the Government's risk has been--and the
beneficiary's out-of-pocket risk has been managed for the
episode or for the population.
Mr. JOHNSON. Thank you for your response.
Mr. Chairman, I yield back.
Chairman BRADY. Thank you, Mr. Johnson.
Mr. Kind.
Mr. KIND. Thank you, Mr. Chairman.
I want to thank our witnesses for your testimony.
I think this is an important hearing. I think there is
tremendous opportunity to enhance the quality of care in the
post-acute-care setting, at a substantial cost savings as well.
But it is frustrating, because this is really a subset of a
larger issue that we are trying to get at, overall health care
reform. I think MedPAC has done a good report, and CMS has been
dialed in on the utilization variation that exists throughout
the country and certain outliers, as Dr. McDermott just pointed
out.
My question is whether or not we can address that issue
with a scalpel as opposed to a hatchet, as opposed to just rate
reduction, so that we are not penalizing those areas that
aren't overutilized and still producing great results, and
whether or not we have the wisdom to distinguish between the
two.
I mean, I reviewed again last night MedPAC's report of
March of this year, page 199. And you highlighted Wisconsin
being way below the national average on episodic care and yet
producing great results. And the fact that 25 counties with the
highest utilization had an average utilization of 88 episodes
per 100 beneficiaries.
If the policies to reduce fraud could lower utilization
just 18.5 episodes in those areas, it would have declined by
290,000 episodes, or about 80 percent, at a cost savings of
close to $800 million in 2011 alone.
You indicated, Mr. Blum, that there may be some fraud
involved with that, but there is also, I would assume, a high
concentration of providers in those areas, too, which is
driving a lot of the utilization patterns, as well.
Is that part of what is going on in these outlier areas, is
the intense concentration, and therefore you are going to get a
lot more episodes of care and prices being driven that way?
Mr. BLUM. I think it is clear in our data, and I think this
is also mirrored in data by MedPAC, the IOM, that there are
certain parts of the country that use a distinctively different
mix of services, particularly for post-acute-care services, and
seem to have the same outcomes, if not higher outcomes. And our
data that we see for a given DRG episode of care, that total
cost over a 30-day episode can vary from a factor of two to
one, sometimes even more.
And it is really the post-acute-care services, not what
happens to the patient in the hospital per our payment rates,
but what happens after that patient leaves the hospital. Is
there a high probability for readmission?
There are parts of the country that demonstrate that the
program can do a lot better overall to reduce hospital
readmissions, better manage care transitions. But if you run
the correlation between post-acute-care spending, even
controlling for the patient risk, there is no correlation for
the quality of the care that the patient receives that we can
see.
So I think there is tremendous opportunity to change the
payment system over time. It will take a transition. But what
is clear is that certain parts of the country use relatively
few post-acute-care services and seem to have better outcomes,
measured by readmissions, for example.
Mr. KIND. Well, it seems like we need better data, too. And
it sounds like the Center on Innovation has been dialed in on
this.
Are there any comparative effectiveness research studies
going right now in post-acute-care settings to get us better
evidence-based practices and protocols out there?
Mr. BLUM. I mean, I think, to our analysis, there is some
very good work that says when you really target those services
really well--a home health visit for the patient that has just
been discharged--that there are better outcome. We need to
figure out what can be scalable, and that is the work that the
Innovation Center is doing.
But it is clear that some parts of the country really have
figured this out well, and we need to understand that and then
disseminate it through more parts of the country.
Mr. KIND. I think the key is trying to figure out what the
proper setting is, what the proper treatment is, to get better
results at a better price.
Mr. BLUM. Absolutely.
Mr. KIND. I mean, that is really the name of the game here.
You have just mentioned the four bundled payment models
that you are moving forward on right now. But it is my
understanding that, even under the bundled payment being
tested, it typically retains the existing fee-for-service
payment rates with kind of a virtual bundle above that.
Isn't that kind of counterintuitive to where we need to go?
Mr. BLUM. Well, I think we are testing different models.
And I think we are also testing how fast we can establish these
models.
And similar to the accountable care organization model, a
very quick way for us to move forward, given our current
infrastructures, payment systems, and just the marketplace
realities, is to continue to pay on a fee-for-service basis but
then do kind of post-episode, post-year-end reconciliations to
determine savings and quality of care.
But the tradeoff really is speed versus----
Mr. KIND. Do you know, of the $15 billion we have been able
to recapture under the ACA on Medicare fraud, how much of that
came from the PACS, post-acute-care setting?
Mr. BLUM. I don't have that number offhand. But what I can
tell you, Congressman, is that a lot of the fraud that we see
in the program really comes from those providers that are very
mobile: home health, durable medical supplies. And, really,
that is, you know--we see less fraud in permanent institutions.
Mr. KIND. Okay. Thank you.
Thank you, Mr. Chairman.
Chairman BRADY. Thank you.
Mr. Roskam.
Mr. ROSKAM. Thank you, Mr. Chairman.
Mr. Miller, a couple minutes ago, you mentioned that we
shouldn't be taxing those providers going after the medically
complex patients. Isn't that sort of implicitly what is
happening with the 75 percent rule? In other words, there is
this burden that is being placed upon these institutions; it is
a limitation upon them.
Shouldn't we move away from the 75 percent rule, you know
what I mean, and just make sure that it is something that is
not revisited?
Mr. MILLER. I want to deal with two things, because the end
of your comment I agreed with, but I wanted to do the set-up at
the beginning.
I think the intent of the 75 percent rule is that the in-
patient rehab facilities were taking patients that didn't need
to be there, that could have been treated elsewhere. And so I
think the intent of the rule, clunky and, you know, regulatory
as it was, was to do that.
Now, to the second part of your question, I think, which
is, yes, I think that objective is to get away from rules like
that. And, again, I think you are hearing a fairly consistent
message, which is, set the payment, allow the provider to
manage within that patient, and if it is a couple of days in
the IRF and then 2 weeks of home health versus a different
patient has a different mix, fine. But the payment has been
tied to what the patient needs, and then the exact mix the
provider will execute.
Mr. ROSKAM. What I am hearing from a Tier 1 rehab facility
in my district is sort of the--really the heartache of stories
of, look, we can't care for this person, who desperately needs
our help, based on our census. And so I am sensing from you,
look, let's move away from this.
Mr. MILLER. Move away from that, but also remember those
rules. It is not that each and every patient has to meet that
criteria; 60 percent of the patients have to meet that
criteria.
So there is some flexibility to pick up a patient that you
say, well, they might be on the other side of the line, but I
am going to take them because of their need because my overall
census, to use your word, falls within the rule.
But, again, that is clunky and not the ideal place to be.
Mr. ROSKAM. And even the 60 percent, that is not driven by
any data, is it? I mean----
Mr. MILLER. Well----
Mr. ROSKAM [continuing]. What is the argument for 59? What
is the argument against 58?
Mr. MILLER. Oh, the actual percentage. My understanding of
how the rules got set up is that clinicians came together and
sort of looked at what types of patients needed to be in these
types of facilities and struck a rule. Whether it is 60 percent
or 75 percent, I don't think there is a lot of science in that.
Mr. ROSKAM. Right. And the other thing is, the clinicians
were induced based on what? Either we are going to make a rule
or you are going to make the rule, so come up with the rule?
Mr. MILLER. Hit me one more time?
Mr. ROSKAM. In other words, there is one thing to say,
let's come up with some sort of artful way. There is another
thing to say, there is going to be a rule that is going to be
imposed, come up with the percentage. Do you follow me? How
they are prompted and the environment in which a rule is
created.
So I am not necessarily satisfied that even this 60 percent
rule is something that they would come up with on their own.
They were told, look, there is going to be a number, on the bus
or under the bus. You write the number, or we are going to
write the number.
Mr. MILLER. And I will say this. And I understand your
thinking here, and it is thinking that was very consistent with
my own. But, for example, I don't know how many years ago now,
I am going to say 7 or 8 years ago, the Commission has been
pushing on the need for criteria for long-term-care hospitals.
I have many times sat with the industry and said, where are the
criteria? And it has been pulling teeth.
And the criteria, bluntly, that have come forward are, in
many instances, very self-serving. They basically codify
exactly what is out there.
Mr. ROSKAM. Right. I have heard some of that. I get that
vibe.
Mr. Blum, just quickly, CMS is proposing to pay rehab
hospitals a nursing home rate based on certain types of
conditions. What animates your hope that that is ready for
prime time? And if you are proposing to do that as a cost-
saving measure, what are you proposing to reduce in terms of
regulations to allow them to administer that service at that
price?
Mr. BLUM. Well, I think, as Mark and others have said,
there are clear areas where we can see overlap, where patients
with similar needs, similar clinical characteristics, are
treated in different silos of payment that we currently
operate. And I think what we are trying to get to is payment
that is neutral.
And what I believe the President's budget says, for a very
small step, to neutralize the payment, given the payment
differences, for conditions that we see a lot of overlap. This,
to me, as small step until we get to a more permanent, longer-
term payment policy.
I think it is a fair question for Congress to ask; well,
how do we assess that the patients are kind of treated
similarly? I think one area for consideration is that, if this
change were authorized, to direct us to use the CARE tool as a
step to ensure that we do see consistent outcomes.
But I personally would frame this policy as one small step
towards site-neutral payments, but one that we are comfortable
proposing.
Chairman BRADY. Thank you.
Mr. Pascrell.
Mr. PASCRELL. Thank you, Mr. Chairman.
And thank you to the witnesses. You have been clear,
succinct.
I am astounded, Administrator Blum, as to how candid you
have been, not just today, about fraud in the system. And I
wasn't going to talk about this, but the amount of money, when
we know that health care is part of the entire economy, and it
is growing, that we are losing every day because of these
mobile, for instance, providers.
Do we know who they are?
Mr. BLUM. I think we are much better able today than
previously to spot fraud before it happens. And one of the
things that we have built at CMS that was mandated by the
Congress was what we called the fraud prevention system, where
we now, before claims are paid, we can spot patterns, we can
see things, we can refer them to further investigation.
But I think, to us, the key is to use claims systems much
more smartly, more wisely, so we can spot behavior that is
problematic. Because we know that behavior that is fraudulent
isn't isolated, that it moves; once we bring in law enforcement
resources, that it tends to move.
So we have to be smarter, we have to get away from pay-and-
chase, and much more about predictive data----
Mr. PASCRELL. Most of the fraud is still on the side of the
providers, not the folks that are getting the care; isn't that
correct?
Mr. BLUM. I think, traditionally, we have been focused on
the providers. I think there are some instances where the
beneficiaries are complicit, whether they know it or not, that
their IDs got stolen. But I think, to us, we have to move away
from the past pay-and-chase system and move toward a smarter,
wiser system to stop payments before they happen.
Mr. PASCRELL. One of the elements of the Affordable Care
Act--I had a personal interest in it, a professional interest
in it--is the Innovation Center. I think it is very, very, very
critical in terms of moving forward, as you have used the term
before, both of you.
I am very excited about the promising payment and delivery
reform models that can transform both Medicare and Medicaid, as
CMMI takes time to test and evaluate these models.
While I understand that the Innovation Center is an
important avenue for us to collaborate with health care
providers and partners in the private sector to improve how our
health care system works, I strongly advocated for the
continuing care hospital pilot in ACA, and Congress ultimately
authorized the pilot with the goals.
Now, can you tell me what the status specifically is of the
implementation of the continuing care hospital model?
Mr. BLUM. We are happy to provide you with a more complete
response through writing. But my understanding is that our
bundled payment models, the four models that I talked about,
permit the same kinds of care model that I think the
legislation calls for. So we believe that the spirit, the goals
of the continuing care hospital model are being established
through our bundled payment systems.
We are working with a wide range--I think it surprised us,
the interest--of hospitals' post-acute-care providers. We plan
to test more models over time. We have four that we have now
established. I think the goal is----
Mr. PASCRELL. But we haven't implemented them, correct?
Mr. BLUM. They are in the process of being implemented, and
our target is to have them up and running by October 1st.
Mr. PASCRELL. And the Congress directed CMS to test the
model. CMS does not have the discretion on this matter, as I
understand it. To be clear, Section 3023 mandates that the
Secretary implement the CCH pilot as well as the national
bundling pilot.
Can you tell me when we expect CMS to begin pilot testing
the CCH model?
Mr. BLUM. I think what I can say to you today is that there
are four models. To me, they include the spirit of that
language. And I will be happy to get back to you with a more
precise answer.
Mr. PASCRELL. Thank you very much.
And I yield back. Thank you, Mr. Chairman.
Chairman BRADY. Thank you.
Dr. Price.
Mr. PRICE. Thank you, Mr. Chairman. And I want to thank you
as well for holding this hearing.
And I want to thank our witnesses.
I always like to try to talk about patients, and just as a
little, maybe a non sequitur, but there is an urgent issue, Mr.
Blum, as you well know, with the whole issue of DME and going
to phase two and round two of the competitive bidding model,
that many of us believe--in fact, a letter was sent to Ms.
Tavenner, signed by a 226 bipartisan group from Congress, to
urge a delay in this, because real people in real communities
across this land, we believe, are going to be harmed in very
specific ways. And so I would draw your attention to that
letter and urge you to take that message back to Ms. Tavenner,
please.
A delay of 6 months, we believe, would be a zero cost,
because the current requirement is to have it done by the end
of the year, so we can move toward a positive system, market
price purchasing system.
I do want to follow up on the issue of fraud, obviously, 25
counties that have the highest level of fraud. And the
providers get whacked with this. There is a significant number
of just fraudulent actors, not even providers, who take the
Government for significant amounts of money and then move on
when they get identified.
Mr. Blum, do you know what that percent is?
Mr. BLUM. I think it is hard for us to quantify what a
precise rate of fraud is. The Congress did direct us to try and
calculate that. What we do know is that there is a substantial
number, too high a number, to our minds, of bad actors that
bill the system.
We are moving the system from the pay-and-chase model. We
are trying to find those actors. But I do agree with you that
it is a small percentage but that it is one that creates
vulnerabilities that we have to respond to.
Mr. PRICE. Most of the providers out there that are trying
to care for these patients in oftentimes very, very difficult
situations and decreased reimbursement that has challenged them
to a significant degree are just trying as hard as they can.
Reducing market basket updates. It seems to me that
modifying this payment that CMS is talking about is being done
more with the budget in mind as opposed to patients in mind.
And what are your metrics that relate to being able to
determine the cost of compliance with the regulations and the
rules for the folks? Is that part of your equation for what you
pay in a market basket?
Mr. BLUM. Well, I think the main metric that we look to is
margins and how are the Medicare payment rates relative to the
cost of care. And what we see in all of our post-acute-care
payment systems, SNF and home health and in-patient rehab, is
very high margins.
Mr. PRICE. But what is a margin that CMS finds acceptable?
How much?
Mr. BLUM. We don't have a defined standard, but I think
when we see margins that are in the double-digit rates, that
gives us very strong concerns that our payment rates are too
high relative to the cost of care.
Mr. PRICE. Is CMS the one defining the cost, or are the
folks actually paying the bills defining the cost?
Mr. BLUM. Well, we have cost report processes where we
collect costs based upon the costs of care that are submitted
to us by CMS. But it is really the cost of--excuse me, to CMS.
But it is really the cost of the care provided to that
beneficiary.
We have to be mindful that our regulations don't--I mean,
are smart, that are wise. We have taken regulations off the
books in the last couple of years to create more flexibility.
But, to our analysis, when we see margins that are in the
double-digit rate, that is a clear signal that the program
overpays relative to----
Mr. PRICE. And I appreciate that. I think it is important
for people to make certain that we are hearing what is being
said, and that is that the Federal Government believes that
there is a certain amount of a margin that is correct and a
certain amount that is not. Many of us find that fairly
chilling.
I want to move to the issue of the unified assessment rule
and this CARE tool that is being considered. Do you know the
cost of the compliance with this CARE tool that is being set
up?
Mr. BLUM. One thing that we do hear from providers that
have tested the CARE model, that there are many questions, too
many questions. And we don't have a set number of questions in
mind. We are very, I think, open to refining the tool based
upon----
Mr. PRICE. But do you know the cost--is there a target cost
to the provider that CMS is looking at for compliance with the
CARE tool?
Mr. BLUM. Not that I am aware of. But I think our goal is
to make sure of two things: number one, that we, the Congress,
MedPAC, all of us, can assess patients that are treated in
different settings to assess, does it make sense for this
patient to be in home health versus SNF----
Mr. PRICE. It is a different question, though, Mr. Blum.
The providers have to comply with what you dictate. And if
there is a cost to that compliance, if that is not being
factored into what you are paying, then you are not paying
attention to what happens out there in the real world.
Mr. BLUM. What I can say is that all of our payment systems
today require an assessment. SNF has their own system. Home
health has their own system. IRF has their own system. So that
is, to my analysis, already built into the system.
Our goal is to simplify. Many post-acute-care providers
both own SNF, home health, and long-term-care facilities, for
example. So, hopefully, one common assessment should reduce
provider burden, particularly those that have multiple care
settings.
Mr. PRICE. Thanks, Mr. Chairman. I look forward to
following up.
Chairman BRADY. Thank you. Thank you, sir.
Mr. Buchanan.
Mr. BUCHANAN. Thank you for holding this important hearing.
And I also want to thank our witnesses for taking their
time today.
Mr. Blum, with regards to in-patient hospitals that provide
rehab, I want to go back to the 60 percent rule. How do we
know, from your standpoint, that it is not working? I guess
that is the first thing.
And the second thing, I am just concerned about a lot of
patients. I am from Florida. It is a big issue in our area. I
am very concerned about patients having access to quality care
and that a lot of them might be exempt as a result of going
from 60 to 75 or whatever that number might be. So I would ask
you that question.
Mr. BLUM. I think our starting principle for post-acute-
care payment systems is that we recognize that each of our
payment silos has a distinct need and a distinct focus in the
care delivery system. And so we feel that all of them are
important and that serve beneficiaries well.
We also know there is overlap. And given, as Mark
described, differences in cost of care--quite significant
between those patients, for example, who are treated in a
skilled nursing facility and those in an in-patient rehab
facility--that while we develop this longer-term strategy, that
we need to do more to ensure that patients get treated in the
right care setting, given the payment differentials.
Mr. BUCHANAN. But you are confident that people will have
the same quality of care in terms of access to facilities by
raising that bar?
Mr. BLUM. Well, I think we know there is overlap, we know
that quality varies across the country. As during the previous
question, the question was, how did the agency come to the 60
percent? That was done with the collaboration of clinical
input. And I would say that if the Congress chooses to
authorize this policy to change the 60 percent to the 75
percent, one thing the Congress might want to consider is to
make sure that change does have clinical validation and input.
But we do think it is appropriate for us to take some more
incremental steps to make sure patients are treated at the
right place at the right time while we develop more of the
longer-term strategies.
Mr. BUCHANAN. And, Mr. Miller, in your written testimony,
you conclude that post-acute-care spending has doubled since
2000. What are the biggest contributors to that, based on your
statement?
Mr. MILLER. I think, you know, at a conceptual level, I
think probably the biggest contributor is how difficult it is
to define the need for the service. And so it is very hard to
decide when to start and when to stop.
If you want to get more mechanical about what is going on,
the underlying trends, there has been in some of the post-
acute-care providers a large influx of providers, and I think
that that is, in part, because some of the rates are so
attractive, that people come in. You have more users of the
service and more services per user. So if you think about the
growth-driving factors, that is what has been happening in a
lot of the environments.
But I think the fundamental concern is the payment rates
have been set very high in some of these settings and providers
have come in.
Mr. BUCHANAN. Mr. Blum, real quick, I want to echo a little
bit what Dr. Price mentioned about competitive bidding. I can
tell you that it is a big issue. I have talked to a lot of
people across the State of Florida. But I have one person in my
district, they are looking at a 40 percent cut on one product
that they sell. Talking about 500 employees; probably going to
have to lay off half of them.
This is a big issue all over Florida. I know that Dr. Price
mentioned there are 227 Members on a bipartisan basis. Someone
like myself that has been in business 30 years, the whole
concept of competitive bidding or bidding, you have to make
sure these are legitimate bids, and ``legitimate'' meaning
people can deliver based on what they are talking about under
these contracts.
But there are a lot of people that are going to be
negatively affected with this bidding process if this isn't
done in the proper way. And I know locally we are talking about
a lot of jobs, not just in my district but across Florida,
because of this process.
And I hope that you guys--and I just don't know how you cut
someone 40 percent. That is not staged in a whole industry, and
this is just one industry. So I would just like to have you
respond quickly to that.
Mr. BLUM. We understand that the competitive bidding model
is a transition and one that is complex and one that is a
significant change from the current way that the Medicare
program pays for durable medical supplies.
I would say there are three things why we think this
program is so vitally important. Number one, the program
currently overpays relative to what we know private payers pay.
The program will save substantially relative to the current
payment rates.
Number two, I think, going back to the fraud issue that was
raised previously, by working with a better-screened set of
suppliers, we are confident that we can reduce the error, the
fraud that historically we have seen in the program.
And I think, number three, what I would say is, we have
tested this program in nine parts of the country. And the
arguments that we are hearing today we heard before we started
the nine areas of the country: Beneficiaries would go without
supplies, there would be waits for supplies. That hasn't
happened. And we have tracked this program more carefully than
the Medicare program has tracked ever before. We have not seen
the disruption that the industry argued would happen back in
2011. That gives us great confidence we can move forward.
We will pledge to work with this committee, with the
Congress to share the same data we look at, 100 percent claims
analysis, to ensure that our beneficiaries have the supplies
they need and have the best possible care delivery.
Mr. BUCHANAN. Thank you, Mr. Chairman.
Chairman BRADY. Mr. Smith.
Mr. SMITH. Thank you, Mr. Chairman.
And thank you to our witnesses here today for sharing your
insight and your recommendations.
As well, I am concerned about the sustainability of
Medicare and want to look at not only the short-term but the
long-term solutions so that we can see Medicare in a more
sustainable fashion.
We know that there is a large difference in terms of
delivery to urban areas compared to rural areas. Obviously, I
represent a very rural constituency. And I want to ensure the
changes we make to Medicare do not further limit access to
critical services to people living in rural areas.
Mr. Miller, when MedPAC was looking at ways to reform
payments to post-acute-care services, did you research whether
these reforms would impact access to our rural communities? And
if so, how?
Mr. MILLER. We did.
And we recently, I think it was in June 2012, did a fairly
extensive report on rural services, access, quality, that type
of thing. And when you look at service use, whether we are
talking about physicians, hospitals, skilled nursing
facilities, home health, ESRD drugs--we looked at a range of
different things--the utilization rates between urban and rural
areas are not all that different.
The only real place that we found a difference is, in the
most frontier counties of the country, there is a lower home
health utilization rate. But everything else, pretty
consistent.
Mr. SMITH. Can you elaborate on ``most frontier counties''?
Mr. MILLER. I may get this wrong. I think it is six persons
per square mile, something like that.
Mr. SMITH. Okay.
Mr. MILLER. And I may have that all wrong. I can tell you,
just not this second.
Mr. SMITH. Okay. Thank you.
Mr. MILLER. The thing to keep in mind that I want to get
across to you and the committee, it is not about urban and
rural. If you go to Louisiana, the highest utilization rates in
the country in Louisiana, Texas, areas like that, it is urban
and rural. If you go to South Dakota, you have low utilization
urban and rural. It is much more a phenomenon of practice
pattern and sort of entrepreneurial service utilization than it
is an urban and rural phenomenon.
And I just want to get this last thing in here. I am sorry,
I know you want to go again. But, you know, our view is, if you
find a problem and you think that there is an access issue,
target the solution to that, as opposed to saying, okay, here
is a payment for anybody with ``rural'' in their name and then,
you know--for example, in home health agencies, the rural
margin is actually higher than urban. So our point is really
about targeting it to access problems.
Sorry.
Mr. SMITH. Okay. Thank you.
Mr. Blum, in your opinion, would any of these proposals be
detrimental to providers in rural communities?
Mr. BLUM. I think we always have to be mindful of that and
to make sure that beneficiaries throughout the country have
access to quality services.
As Mark said, home health, for example, that we see high
margins consistently throughout the entire industry, for-
profit, not-for-profit. So that gives us confidence that we can
lower payments without compromising quality of care.
But I think it is a fair demand that Congress should put on
the agency to monitor what happens to beneficiaries realtime
with these payment changes. I talked about the work that we
have done on dialysis care, for example.
So I think, if Congress were to adopt these policies, one
recommendation that I would have is for Congress to demand CMS
to monitor what happens realtime to make sure the quality of
care throughout the country is not compromised.
Mr. SMITH. Okay. Thank you.
I yield back.
Chairman BRADY. Thank you.
Mr. Gerlach.
Mr. GERLACH. Thank you, Mr. Chairman.
Gentlemen, let me go back to this 60 percent rule issue
just so I can get some clarity in my mind over it.
As I understand it, the in-patient rehabilitation
facilities receive their reimbursements based upon a
prospective payment system. Is that correct? That was
transitioned into being somewhere around 2000? Is that right?
Mr. BLUM. [Nonverbal response.]
Mr. GERLACH. Okay. So if that prospective payment system is
properly structured, in terms of identifying the types of
services that would be necessary for a patient with a certain
diagnosis, and the bundling of the care that goes into that
payment mix is appropriate, why is there a percentage rule at
all as to how many patients overall that facility has that
might be Medicare-eligible for certain services versus a
patient that comes in needing rehab for a broken leg because of
a motorcycle accident who is 23 years old? Why is there any
percentage rule applied in any way, as long as the PPS payment
system is appropriately structured?
Mr. MILLER. I am sure Jon has things to say here, too, so I
will try to keep it short.
The issue that you always get with a prospective payment
system is, if you set up a payment, what a provider may do--and
I am not saying all of them do it--may try and figure out how
do you maximize payment with minimum amount of effort. And so
you have a set of categories, you classify a patient, you
assign a dollar, but if I can figure out how to get a lower-
severity patient in there, I can increase my revenue.
And this isn't just in-patient rehab facilities. You see
this throughout the post-acute-care setting. I mentioned
earlier, home health was built on the assumption of 30 visits.
They are now delivering 22, on average.
So, in a sense, and this is what is clunky and unhappy
about these silos and fee-for-service, is you will observe
patterns and then you will put in criteria trying to reorient
the incentive structure for the provider.
Mr. GERLACH. But, on that point, if I can--and, Mr. Blum, I
would like your comment, too. On that point, you are saying
that the provider is trying to, based on that payment
structure, determine what the nature of the patient is coming
in to get the service and trying to get a less-severe patient,
from a health care conditions situation, into the facility,
knowing you are going to get a better reimbursement out of
that, versus taking on a more----
Mr. MILLER. Complicated.
Mr. GERLACH [continuing]. Complicated situation.
Mr. MILLER. Uh-huh.
Mr. GERLACH. But the point still stands. As long as
whatever the service is being provided meets the criteria, what
difference does it make overall to the total patient mix?
Whoever the patient is that comes into that facility needs a
certain amount of care for a certain condition.
Mr. BLUM. I would agree with you.
Mr. GERLACH. And if the bundling payment is a fair payment
for the service provided, why is that an issue for you as to,
what, it is 60 percent, 75?
Mr. MILLER. It is whether it is fair based on who is coming
in at that point in time versus when it was fair when it was
set up. So you may have set it up and said this is the mix of
patients and here is the payment, and then you find yourself 5
years down the road and there is a different mix of patients in
there but the payment has continued to reflect the higher
complexity. That is the problem.
Mr. GERLACH. Mr. Blum.
Mr. BLUM. I would agree with what Dr. Miller just said, is
I think that if we have payments that were neutral to the
patient's conditions, that it shouldn't matter which setting
that they would be served in. But because we have such
differentials in payments between skilled nursing facility
payments versus in-patient rehab versus hospital, in order to
protect the trust funds and also to ensure patients get served
in the best setting, we have to think about these criteria,
like the 75 percent rule, to make sure that the right patient
gets treated at the same time.
The rules also say that, for an in-patient patient, they
have to withstand very intensive therapy, they have to
withstand, you know, very intensive services. So we have to
have determinations of who goes to the right place at the right
time, both to make sure that the care is appropriate, but,
given the payment differentials, that the trust funds are
protected.
We believe over the long term we need to move away from
these more crude and clunky measures like 3-day stay, 75
percent rule. If we can figure out what the right mix of site-
neutral payment is long term--we don't have that definition,
and no one does that I am aware of right now--that we can phase
out some of these more clunky definitions.
But until we can figure this out longer term, then I
believe we need to have these definitions, but can test ways to
relax them, so long as we have total cost accountability built
into the system.
Mr. GERLACH. Okay.
And real quickly on home health care, if I can--and I would
like to have both your comments.
I had a constituent that went in for 3 days of home--or had
3 days of home health care services. He was billed $1,500 for
the services and turned that over to CMS. And the CMS folks
reimbursed the home health care agency $3,000 for those 3 days
of care--in essence, reimbursed the agency double what they
billed for the service. And the explanation we got from CMS was
that, well, over the course of a 30-day episode of care, a pro-
rational reimbursement amount was $3,000.
Why are you paying double what is billed in this system?
Why don't you have it in your regulations, it is that 30-day
episode of care that determines the amount or what is billed,
whatever is less?
Mr. BLUM. I think that is a helpful suggestion. I would
have to become more familiar with this case. We do have short-
stay outlier mechanisms in our home health payment system. But,
as Mark said, the current home health payment system is based
upon a visit assumption that is no longer valid.
CMS is working, consistent with the Affordable Care Act, to
rebase the home health payment system. So I hope that our
future payment system won't have the effect that you just
described.
Mr. GERLACH. Thank you.
Chairman BRADY. Thank you.
Mr. McDermott, for a brief follow-up.
Mr. MCDERMOTT. Mr. Smith asked a question, and I want to
just follow up a second.
On the home health care issue, the ACA gave you the ability
to put a moratorium on any more organizations in an area. Have
you used that anyplace in the United States? If not, why not? I
would like to hear your answer to that question.
Chairman BRADY. And briefly, please.
Mr. BLUM. We have not used it yet. We continue to receive
recommendations from the industry associations, law
enforcement, but we have not used it yet.
Mr. MCDERMOTT. So you have not used it.
Mr. BLUM. Yet.
Mr. MCDERMOTT. Thank you.
Chairman BRADY. I want to thank both of our witnesses and
our Members here, as well, for their testimony today and the
questioning. Your experience and ideas on how to reform
Medicare's payment for after-hospitalization care to keep the
system solvent are appreciated.
As a reminder, any Member wishing to submit a question for
the record will have 14 days to do so. If any questions are
submitted, I ask the witnesses to respond in a timely manner.
Chairman BRADY. With that, the subcommittee is adjourned.
[Whereupon, at 10:47 a.m., the subcommittee was adjourned.]
[Submissions for the Record follow:]
American Hospital Association, AHA
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American Health Care Association & National Center for Assisted Living
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American Medical Rehabilitation Providers Association, AMRPA
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Coalition to Preserve Rehabilitation, CPR
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HealthSouth
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National Association for Home Care & Hospice, NAHC
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The Nebraska Association of Home & Community Health Agencies, NAHCHA
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The Visiting Nurse Associations of America, VNAA
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