APPEARANCES:
Committee Members
G. KRISTIN CROSBY, M.D.
BRUCE DEVEREUX CUMMINGS
GARY C. DENNIS, M.D.
SUSAN DESMOND-HELLMANN, M.D.
RONALD W. DOLLENS
MICHELE M. EVINK
EUGENE ANTHONY FAY
JOHN FINAN, JR.
APPEARANCES:
LISA GIGLIOTTI, J.D.
THOMAS R. HEFTY
HEIDI MARGULIS
MARY M. MARTIN
HON. STEPHEN H. MARTIN
GARY S. MENDOZA, J.D.
NANCY H. NIELSEN, M.D.
DR. ERIK OLSEN
GARY B. REDDING
APPEARANCES:
JACK ROVNER, J.D.
JUDITH A. RYAN
LEONARD D. SCHAEFFER
PATRICIA OSBORNE SHAFER, R.N., M.N.
JUDITH G. SUTHERLAND
WILLIAM TOBY, JR.
KAREN B. UTTERBACK, R.N.
PATRICIA M. WALDEN
KERN C. WILDENTHAL, M.D.
APPEARANCES:
DOUGLAS L. WOOD, M.D., Committee Chair
Also Present
CHRISTY SCHMIDT
Executive Coordinator
Regulatory Reform Initiative
Office of the Secretary, HHS
JEFF BLOOM
C O N T E N T S
PAGE
Introductory Remarks and Swearing
in of Committee
Tommy Thompson
Secretary, HHS 9
Bobby Jindal
Assistant Secretary for Planning
and Evaluation, HHS 20
Statement of the Committee Chair
Douglas L. Wood, M.D. 25
Committee Member Introductions 36
Panel One: Perspectives from the Field:
Beneficiaries and Providers
Margaret Barron, M.D.
Providence Hospital 116
Christine Shamloo, R.N.
Washington Hospital Center 124
Sean Gallagher
Washington Hospital Center 129
Cecilia Moore
Washington Hospital Center 130
Eileen Mulaney
Carroll Manor Nursing Home 134
Michelle Holzer
Program Officer, Senior Health Insurance
Assistance Program (SHIP)
Maryland Department of Aging 141
Questions and Answers 150
C O N T E N T S
PAGE
Public Comment
Steve Hitov
National Health Law Program, Inc. 167
Diana Zuckerman, Ph.D.
National Center for Policy Research
for Women and Families 171
Robert Britain
National Electrical Manufacturers' Association 175
Robert Griss
Center on Disability and Health 178
Discussion 182
Panel Two: Perspective from the Government:
Overview of the Regulatory Process from
Legislation to Operations
David Cade
Office of the General Counsel, HHS 191
Linda Fishman
Centers for Medicare and Medicaid Services 204
Bill Hubbard
Food and Drug Administration 214
Questions and Answers 221
Panel Three: Perspective from the Office
of the Inspector General
D. McCarty Thornton
Chief Counsel to the Inspector General, HHS 242
Questions and Answers 252
C O N T E N T S
PAGE
Panel Four: Perspective from External Bodies
Jonathan Blum
Staff, Senate Finance Committee 271
Pat Morrisey
Staff, House Energy and Commerce Committee 274
John McManus
Staff, House Ways and Means Committee 279
Murray Ross, Ph.D.
Executive Director, MedPAC 285
Leslie Aronovitz
Director, Program Administration and
Integrity Issues, GAO 294
Questions and Answers 302
Overview of Second Day Work Plan
Douglas L. Wood, M.D. 306
AFTERNOON SESSION (12:53 p.m.)
DR. WOOD: We'd like to begin the afternoon with our first panel. The goal of this panel is to begin to hear the concerns of practitioners and beneficiaries. We've chosen several parts of the delivery system to highlight here, and as was commented on by the committee members earlier this morning, this is an opportunity for us to see whether also there are issues of integration.
Now, the way we'll structure this is to give each of our presenters and presenter teams -- there is a team -- 10 minutes for their presentation. I would appreciate it if you would write your questions and hold them for the end of the discussion, and then we'll have adequate time afterward for discussion.
I'm pleased to welcome to the meeting Dr. Margaret Barron. Some of us had the privilege of meeting Dr. Barron this morning in the emergency department next door. To her immediate left is Ms. Christine Shamloo, who is a nurse from the Washington Hospital Center. Also we're pleased to welcome from the Washington Hospital Center Mr. Sean Gallagher and Ms. Cecilia Moore, and then Eileen Mulaney is here from the Carol Manor Nursing Home, and I think some of you had a chance to see that. Then at the far end of the table is Michelle Holzer. Welcome. Michelle is a program officer in the Senior Health Insurance Assistance Program for the Maryland Department of Aging, and so she'll bring us also the state perspective.
So with that, let me invite Dr. Barron to share with us her perspectives about regulation in the emergency department and how much fun that creates for her everyday life.
DR. BARRON: Thank you very much for this opportunity. I thought I'd pick three of my favorite areas, and I thought I'd start out with CLIA. CLIA is the Clinical Laboratory Improvement Act, and this has been around for a number of years. Like many other things, it had good intentions, to make sure that people know how to do the tests that they're doing and interpret them. It's a patient care issue.
Well, it's gone a little bit too far, like many other things. I apologize for the nature of my audio-visual aids. I didn't realize I was going to be right after lunch, but they make a point.
In front of you, you have a little card that most of you have had experience with in your doctors' offices, and it's a card to test for fecal occult blood. It's a test that the average medical student learns the first day of their junior year.
DR. WOOD: I'm going to stop for just a moment and ask if I could interrupt you, Margaret, just for a short announcement by Mr. Jindal.
MR. JINDAL: I do apologize for interrupting. I promise you I will not do this again. I did want to apologize to the members of the committee. I am going to have to leave at this moment. I didn't anticipate having to do this. I just got a beep from my wife, however, and we're expecting our first child.
(Applause.)
MR. JINDAL: Thank you. The only difficulty is that this child is being born in Baton Rouge, Louisiana. So I'm about to go to the airport and find a flight home.
I do apologize. I did anticipate spending the rest of today and the rest of tomorrow with you. I will leave you in the very capable hands of your chairman and Christy and the rest of the staff. I do want to thank you on behalf of the Secretary and the entire Department. We've already gotten off to a great start this morning, and I'm only sorry that I won't be here for the rest of the afternoon and tomorrow to be with you. My wife thought you would understand.
(Laughter.)
MR. JINDAL: She did explain to me that I didn't have any choice but to be on the next flight home. I think they're about to give her medication, so I think her attitude may change a little.
(Laughter.)
PARTICIPANT: Good luck.
MR. JINDAL: Thank you.
(Applause.)
DR. WOOD: You have our best wishes, Bobby, and we're pleased that you understand the priorities of domestic peace and tranquility.
(Laughter.)
DR. WOOD: I appreciate your indulgence, Dr. Barron, but please proceed.
DR. BARRON: Thank you.
As I was saying, this is a straightforward test. The average medical student learns it the first day of junior year, the first day on the clinical wards. The average nursing student learns it, again, the first day in clinical medicine.
The test is classified as moderately complex. I have to certify that my physicians and nurses know how to do this. Now, the certification process -- first I have to give them a color-blindness test, and you have the 12 questions there, and I have to flip through this book. I mean, if they don't know they're color-blind on the first day of medical school, we've got problems.
After I do the color-blindness test, which takes about 20 minutes, the last panel I really like. You have to trace with your finger the path through the color points here. So after I've done the color-blindness test, then I have to give them the -- I didn't have all the pages xeroxed. There's a 15-question true and false test about the fecal occult blood test.
Now, all of this takes me at least an hour to do a test that's this simple. The sample is on one side, open the card, put on the drop, drop, drop, and I wait the specified three to five minutes, and I read it within 20 seconds. That's the test. I'm supposed to do that four times a year. I won't tell you how many times a year I do it because JCH might come back.
The next test is almost as simple, and you've all seen this in your doctor's office. It's a urine dipstick, classified as moderately complex. The nurses dip the stick. There's a little jar. Again, we have to do the color-blindness test first. They hold the stick up and they read it against the jar, and you have to wait the required number of seconds, which is written right here on the jar, 60 seconds for most of the tests.
We're supposed to do that four times a year. That is for 107 nursing employees and approximately 30 doctors. They're on the clock for this, so they're being paid, my time, the lab's time.
The glucometer test is even more simple. That's the one where you stick the finger, put it on the stick, and put it in the machine. For that one you don't even have to be color-blind to screw that one up. It's real simple. That one we have to test monthly for. It used to be quarterly, but now they have to do the test once a month. That's just a simple example.
When the commission came recently to do the certification process, they asked me to see my physicians' Gwyet competencies, and we had them. But I said to the reviewer, wouldn't you rather see the competencies to see if they know how to intubate a patient, put in a chest tube, open the laceration the correct way? "No, these are the only ones I have to ask you for."
Now, this should be part of credentialing. I should be able to credential someone for this, the same way we credential them to read an electrocardiogram. It doesn't need to be done once a year. If the test changes and the lab sends out a memorandum, then fine, I need to check and teach everybody again. But that's an example of regulatory burden that takes a lot of time and a lot of money to keep up with.
One of the other areas that we have is the EMTALA Act, the Emergency Medical Treatment and Active Labor Act, known to some of you earlier as COBRA. This was the anti-dumping law, which is now -- I think 1988 it started, 1987. Again, it was a good idea, it was a patient care issue. Bad things were happening to patients in emergency departments. But it's gone way too far again. The interpretation and application are overly broad.
A couple of years ago they decided that this act applies to any facility the hospital operates within -- I can't remember if it's a 5- or 10-mile radius. For example, we operate a clinic down on M Street, and they're about two miles from here. If a patient walks into clinic and they say, "I don't feel good," and they think the patient is having a heart attack, theoretically they're supposed to call me in the emergency department and arrange a transfer, get an accepting physician. Now, if they're calling me and it's my facility, no problem, they don't have to do that. They can get an ambulance and send the patient to me.
But that's not the closest hospital. The closest hospital is GW, and it makes more sense to pick up the phone and call 911, get the paramedics there and take them to the closest hospital. But if they do that without first calling GW, getting an accepting physician, they're in violation of the EMTALA Act. There's a ton of paperwork that's supposed to be filled out before the patient leaves, a copy of the chart, et cetera. Well, the paramedics are there and gone before that stuff is done, but you want me to sit there and wait while I fill out the paperwork.
There are some common sense aspects of EMTALA that have been completely bypassed. Another good example is the anthrax epidemic, and I call it an epidemic because it affected far more than the people who actually came down with anthrax. In the midst of all that, we had 170 patients in our department that first day after the announcement. I couldn't triage them away. I had to see every one of them, do the medical screening exam, even though they were there to say, "I just want to be tested for anthrax, I think I have anthrax." There's a difference, "I want to be tested for anthrax" versus "I think I have anthrax."
We couldn't send people away because of that Act. They had to be seen by a licensed person, independently licensed, either a physician or a physician assistant or a nurse practitioner. They had to have the medical screening exam done, and then we could say you're fine. But that's just an example that during a time of crisis that we couldn't use common sense and send people out and say follow up with your doctor. We couldn't even take care of the genuinely sick people we had that day, we were so overwhelmed. So EMTALA is another act that's got a lot of paperwork and regulation to it.
The last one was -- what was the last one? I forgot this morning. Oh, E&M guidelines, billing. The billing guidelines, I didn't bring those for you, but they're incredibly complex, especially for emergency medicine. There are five levels of service, 1 through 5, with 1 being a very simple thing -- I pinched myself and I need a tetanus shot. That's a level 1. I'm having a heart attack and I need to be admitted, level 5. Most of these things are common sense. But if you look at what you have to put down on paper, it becomes a game.
In order for me to bill a level 4 visit, there is a grid. I have to have X pieces of documentation from the organ systems, and I think for a level 4 I have to have 9 of 14 organ systems covered, even though you're coming in for your heart attack. I mean, I'm going to listen to your heart and your lungs and feel your belly, and then I'm going to get going, okay? You don't want me looking in your ears. But in order for me to get up to a level 4 or 5 visit, I have to put all these things down. You know, if you're 94 years old, I'm sorry but your family history is not relevant.
So there are things that you do to get to these levels of service that I have to document that, frankly, don't make any sense. You're documenting for billing, you're not documenting for patient care. If anybody is interested in that, I made the grids but I forgot to bring them. I can bring them over afterwards.
I think that's it.
DR. WOOD: Thank you very much.
Next, Ms. Shamloo.
MS. SHAMLOO: Good afternoon. Thank you for the opportunity to be able to speak to you about mandates and how they affect patient care. Specifically what I'm going to refer to is nursing care, the impact on the acute care facilities.
My role at the Washington Hospital Center is that I'm a clinical nurse specialist, and amongst my various and numerous duties, I am responsible for monitoring the utilization of restraints throughout our entire health care organization. When I was first given this duty, I will tell you that the entire division of nursing threw a party for me. They made a makeshift crown that they put on my head. I had no idea what I was getting into.
I will tell you that two years into this, my crown is severely sagging. Back in 1999 and 2000, both JCAHO and HCFA previously, now CMS, had put together some mandates, changes in regulation in relation to the use of restraints throughout health care organizations. Specifically in regards to behavioral management in the acute care facility, there were significant changes in the utilization of restraints.
I will tell you that our initial response to these mandates, because we were unable to interpret the mandates because we felt they were vague at the point in time that we got them, was to stop utilizing restraints, just to drop the number so we don't have to do the data collection on the 18 variables that are related to restraint utilization alone, on every patient that's restrained within our facility.
I will tell you at our health care facility alone, 1,200 patients are restrained every three months. There are 18 variables that need to be collected on each patient that we restrain. Imagine the amount of data collection that needs to occur to analyze the reasons why we're restraining and how to reduce those. So in response we stopped using them in our highest usage areas, specifically in our cardiovascular recovery room and our recovery room, where restraint utilization was about 100 patients per month.
I think that the mandates were well intended. I think we've seen very good results as a result of stopping the use of restraints. We benchmarked with other facilities first to find out what they're doing, if they actually could be in compliance with these regulations, or if, in fact, they were decreasing utilization of restraints, and we found out that those facilities were making progress, so we followed foot with them.
But my concern with the mandates is that we struggle with them so much when we get them. Why does there need to be that process where we have to take so much time to figure out what we need to do in order to accomplish the regulations, to meet those guidelines? If there are other benchmark practices that regulatory agencies take from best practices, I'm unaware of that communication occurring with health care facilities throughout the nation. I'm unaware of what those practices are.
It would be great if those mandates came along with some best practice facilities. If there are significant changes in regards to practice, for regulatory agencies to communicate with one another what those changes would be to inform the other agencies of what's coming down the pipeline -- I will give you an example.
In regards to restraining patients for behavioral reasons, we have to have a licensed independent practitioner come and see a patient face to face within one hour of the application of the restraint product. Well, we went back to joint commission and CMS and said who is a licensed independent practitioner? It says in your regulations that it's physician assistants, nurse practitioners, physicians, et cetera. They said yes, we are outlining those individuals, but you need to check with your state to see what they define as a licensed independent practitioner.
In Washington, D.C., physician assistants are not licensed independent practitioners. So for certification boards to be informed that this is going to be impacting licensed independent practitioners, who do you have in your area who is a licensed independent practitioner so we can communicate that out or you can communicate that out to the acute care facilities so that they can either make accommodations around it or address those with your regulatory agency. That would really be wonderful.
In regards to educating nurses, in our facility, along with obtaining data, I will tell you I calculated out for this committee how many hours it takes for nursing to do this per year, and my best guess -- and I think I'm going really conservatively -- is 9,033 hours, just in regards to restraints. That comes out to four full-time nurse positions that could be used otherwise in health care to provide patient care overall.
Also, to find out what educational type of materials are out there that would be in line with regulatory agencies, so that we don't need to struggle to find out what are the best educational materials that are out there, so that we can begin to educate our nurses and health care providers as soon as possible so that we can try and meet the mandates. Maybe to foster a relationship between regulatory agencies and benchmark practices to say, hey, we're thinking about doing this in regards to this issue of restraints, because deaths result from restraints. Would you be interested in being a benchmark, a best practices facility, for us to foster a relationship?
If that practice is already in place, again, I and my colleagues are unaware of it. So I think that communication is really a key in improving practices throughout the country, putting out mandates, getting everyone in line with regulations overall.
I can't think of anything else, but I hope these recommendations are helpful to find out where we can benchmark, to find out what materials are out there, help with interpretation of guidelines because they're vague. I think those key elements would be very helpful. When HHS had come in a couple of weeks ago, we went over documentation that we're completing that's comprehensive to meet many of our regulations, and we were surprised and HHS was surprised what we had in place, and we had some dialogue that maybe we didn't need to do all the double documentation that we do in order to meet the mandates, and maybe there's a communication piece missing there.
Also, again, to find out what's out there in regards to automation. How can we make data collection streamlined? How can we make it easy? What programs are out there that we could utilize that other facilities are utilizing in the nation in regards to data collection to meet these mandates? That would be a really great communication piece for acute care facilities throughout the country. I don't think we'd need to allocate as many resources as we do to trying to meet them, and I think it would be an overall win for patient care.
Thank you.
DR. WOOD: Thank you very much.
Cost reports. Sean?
MR. GALLAGHER: Thank you. I'm vice president for finance at Washington Hospital Center, and I'm here with Cecilia Moore, who is assistance vice president for patient financial services. Between us today, we'd like to talk about three aspects of the regulatory burden that have impacted us.
One is the volume of regulations that we have to deal with on a daily basis. Two is the volume of work papers that we have to prepare to comply with those regulations. Lastly, I'd like to talk about the clarity of the regulations and how important that is to us.
Cecilia is going to start out with how the volume of regulations impacts her areas.
MS. MOORE: I primarily run the business office at the Washington Hospital Center. I am responsible for the billing and the collection within the facility. That means that we deal with everything from the admitting of the patient through the collecting and the posting of payments.
I brought for you, just to glimpse at as much of it as I could, just some of the regulations, the books that house the regulations for my department. These include both admitting regulations, which would be the information that we have to have to register a patient. It includes one of the most labor intensive of forms, and that is the Medicare secondary payer information. We are often found asking 85- and 90-year-old people when was the day that they retired. Rarely do they know, but we are required to ask them each and every time they come into the facility. We are pleased that CMS recognized that that was such a burden to ask people and recently changed the policy from asking once every time they came in to once a month. However, it's still a very labor intensive process.
We also spend a great deal of our energy and our time trying to abide by all of the particular regulations that we are given. Most of my employees are high school graduates with some level of college. If, however, you read our policies and procedures, you will know that I should be hiring Ph.D.s, because that is exactly what it takes to understand a great deal of the information that we are given.
We then choose, because of the complexity of it all, we choose to try to use a fiscal intermediary for interpretation, and Sean will talk to you somewhat about the fact that we can get multiple interpretations constantly from our fiscal intermediaries, from anyone that we talk to. My business office is even more bombarded with policies, procedures, guidelines. For example, the business office is responsible for making sure that the coding is correct. We use the standard guidelines. However, Medicare sets the tone for the guidelines, and we get provider memorandums almost daily that update change, explain, give us some type of information relevant to the coding, the billing of some types of procedures.
To combat some of the information that we're given, and we're given so much of it, but to combat it, the hospital often has to buy editing systems. My hospital pays a great deal of money for editing systems just to be able to interpret, just to be able to follow the guidelines, just to find itself in some level of compliance relative to those guidelines. There's no other way to do it.
We look constantly for automation to help our staff understand these types of guidelines and to be able to move forward. We spend on average at least a day a month with an entire staff of over 200 people training at some point in time on some new Medicare/Medicaid regulation. It's a very costly endeavor for us, and it's a very complex endeavor. The amount of paper that we are asked to review, to understand, to summarize, and then to implement into reality, is just enormous.
With respect to the volume of work papers required to comply with the laws, I think many of you saw this morning the Washington Hospital Center's cost report work papers, starting from that first black binder over. As you can see, it's an extremely voluminous set of work papers and that is for one year's cost report. We estimate it takes our staff about 2,500 hours a year to complete those work papers, and this is in addition to the hours spent by staff throughout the institution to help us gather statistics and other information required to complete the cost report.
But at least as important as the volume of work papers and regulations is the ambiguity of regulations in some cases. You often have different agencies or even people within the same agencies responsible for enforcing the regulations having different interpretations of those regulations.
I'd like to share just one recent example that has impacted us at Washington Hospital Center. It started back in August of 1998 when we received a letter or we got word from our fiscal intermediary that they believed that we should not be charging for recovery room charges after certain diagnostic tests. We believed this position to be in error, so we wrote them a letter, a detailed letter, explaining our position and why we thought that we should be able to bill for these charges. And we wrote that letter to the manager of Medicare Audit and Reimbursement. We promptly received a reply from him agreeing with our position.
In June of 2001, we got another letter from the intermediary's fraud unit saying that we had billed these same types of charges inappropriately and asking for $142,000 in restitution for these charges. We promptly sent back the letter that we sent, another letter explaining again our position, and the reply we got from the Medicare intermediary explaining that why these charges were appropriately billed. Subsequently they took back the money anyway, and so we still will have to resolve that.
That's what we have to say for today. I'll be glad to answer any questions.
(Laughter.)
MR. GALLAGHER: Thank you for the opportunity to talk to you.
DR. WOOD: Well, we appreciate your comments and we'll be anxious to hear however many others of us will commiserate with that. I can give you some of my own examples.
Next I'd like to invite Ms. Mulaney to share her experiences.
MS. MULANEY: Thank you very much, and I too appreciate the opportunity to meet with you and to talk. I think Sean's story is going to be hard to beat, but I'll do my best.
I thought one way to experience another health care setting is to have experience it. I've brought papers with me and put them on your tables. They are a contract if you were admitting to a nursing home. I thought if we could go through them together, you might get the sense of how it feels if you're admitting to a nursing home. Let's say you had a hospital stay. Perhaps you've replaced a hip or a knee, and now it's time for you to come to a subacute unit. Or let's say, like our friend here, you're sitting here and you just got a call from your spouse who said, come home, your father is ready to go to the nursing home. His hip is ready to go to the subacute unit. And it's your chance to admit into a health care setting where we give subacute care.
Everyone that does come in, we have to sit down with them and sign a contract, a normal contract between our party who are going to provide services and you who are going to pay for these services or have your insurance company pay for these services.
So first we say, this is a contract. And we write it in very big, bold print because we want anyone who comes in to understand what they're signing and to be comfortable with it. We spend considerable time training people consistently about the regulations, about the factors in the contract. We have our nicest people doing this job, and it still is quite difficult.
So if you would come with me then, we have a contract. I have some paperwork here that our financial office would want to sit down with you and discuss.
And then I do have a package here to show our UB-92 billing and some MDSs which are attached, which is the clinical review of the resident, which has to match the billing in order for us to receive payment.
There's a Medicare determination act. If we find someone no longer needing the Medicare, we have an obligation to give them this piece of paper so they can appeal our decision.
Then the last package is a Medicaid application, which every state would have. Oftentimes in our position as a provider, we have to help a person apply for Medicaid assistance because they turn into perhaps what we would call a long-term care resident. They cannot go home. Their circumstances are such that they're going to need nursing home care for the rest of their life.
So if we were to admit, we'd get your name and we'd also ask you for the name of a responsible party. Most of the residents who admit to Carroll Manor really want a son or a daughter and they may even have guardian at this point taking care of them. So we'd need to get that name at this time.
We talk about the payment source. Let's say in this case it's going to be Medicare. We would advise them of what's in their per diem and what is not, any other charges. The biggest one we have is the hair/beauty salon. It's not a big item.
We talk about the payment of the bill, how that would occur, talk to them about how they could select a doctor, what doctor they would like to have.
We talk to them about their right to bring in a private duty nurse if they felt they needed that or wanted that.
We have to inform them that they have a right to have their bed held if they have to go back to the hospital. They can pay for that privately or, if they're in Medicaid assistance, they do get 18 days that are already paid for by the state government.
We have to alert them to the fact that if they have any complaints, they can go to the state or the ombudsman and give them their number and name.
We talk to them about their right to make a decision, about end-of-life decision making.
We talk to them about our right to transfer or discharge them, under what circumstances we would do that. Of course, it would only be if we could no longer help them in the improvement of their own care or if we closed our facility or if they became a danger to themselves or others.
We talk about the right to end this contract, our ability and our limitations on our liability, as well as changes in the law, what effect they might have.
There are a number of exhibits that we are required to advise somebody coming into a nursing home about. They are attached. They include the obligations and responsibilities of the representative, and we do have to walk that person, be it a son or a daughter or a guardian, through all the obligations that they have and that they're signing and what their signature does mean under the law with this contract.
We also talk about the schedule of charges, the Medicare and Medicaid, what do they cover. We do find that it's necessary to spend a considerable amount of time educating people on the Medicare program, the Medicaid program, third party insurance.
We offer them a physician's services and talk about the physician rotation service at Carroll Manor.
We do have to give them their rights and responsibilities as outlined in OBRA.
There is a form here for the bed-hold policy which they can sign in advance.
We also have to educate them about their legal right to decide about future medical treatment and ask them if they do have a durable power of attorney. If they have those documents, of course, we try to get them and pull them in at this time.
We ask them any information about their funding, if they'd like us to collect all that money and have it sent right to Carroll Manor, if we should take care of their funds for them or if they want, again, a family member to take care of them.
Then we have to inform them about the fact that their MDS data -- and that's the minimum data set -- all the assessment data that we are doing on any resident in the facility is transmitted over electronic wire or electronic forces to now CMS and to the state.
So that is the contract experience. Now, if there are questions raised during that, we do also at this point try to tell them that they will have CMS and the Centers for Disease Control and also our DelMarVa, which is our local peer review -- we're moving with them to a standing order for the flu and the pneumococcal vaccine. So we have put an additional paper in our contract advising them that we are moving to a standing order and that their giving us consent will be consent for the length of their stay at the nursing home.
We also have a copy of our valuables policy here so they can understand how we secure their valuables. We certainly encourage people not to bring them in if at all possible.
If you'll go through the contract, there are a number of cases where we cause them to sign so that we have evidence and they have evidence that they have been informed of these rights. But it's about an hour's process to take a person -- and this is a person who is clear and able -- through this contract. If you come in and you're not feeling well, your position or your disposition is I don't want to do that or I can't do it now or I really don't want to handle that or my son will handle that or I'll do it later. You see a lot of people wanting to postpone this action.
Once we do have the admission contract signed, the person may have to go in and meet with the folks in the financial office in order to clear up the benefit and the flow of funds and how that will all occur. I've got a regular checklist here that we go through in our financial office, so you'll see all the paperwork that we have to make sure is in place when somebody is coming into a nursing home. And they are things all the way from power of attorney, as we've discussed, documented burial arrangements, assignment of benefits to Carroll Manor, if they want to use our resident fund account, and all information of course on their insurance. And there are copies of the bed-hold agreement in this document as well.
The next package is a UB-92, and these are the billing forms that we send to the federal government. On the stay that we've got here as an example, we have a 100-day stay of a resident. We do file MDSs, and on the subacute unit we file a 5-day, followed by a 14-day, followed by a 30-day, followed by a 60-day, and followed by a 90-day. And that sequence would afford a 100-day stay, which is the benefit under Medicare.
These are filed according to the month you're in rather than to the stay. So it is difficult for the billing office to go through the clinical documents and to make sure that they put the number of days in the month according to the RUG category on the billing form correctly. For example, in this package I've given you, the billing for December, we have 13 days of the 5-day Medicare statement, and on the next month, which is January, we have 1 day remaining for the 5-day, and then 16 days for the 14-day statement, and 14 days for the 30-day statement. The next month we have 16 days for the remaining 30 days, 12 days for the next 60-days, and then the next month we have 18 days for the remaining, and then for the final MDS, we have 10 days, making the 100-day stay. So this is a very difficult operation, and the penalties to a provider for doing this incorrectly are quite severe. I appreciated your remark about a Ph.D.
I think that's enough, and I'll be here for questions. Thank you.
DR. WOOD: Thank you.
Michelle?
MS. HOLZER: Hi. My name is Michelle Holzer. I'm with the Maryland Department of Aging, and I'm here to represent our Senior Health Insurance Assistance Program, which we call the SHIP program. And I've given our brochure out to each of our panel members. I want to thank you for the honor and opportunity to have us all here today.
I'd like to tell you a little bit about the SHIP program and what we do, but first I want to ask for all the extra minutes from my panel. First of all, I can't see the traffic light, and second, I'm supposed to represent the 40 million Medicare beneficiaries out there, so I do have a lot to say.
(Laughter.)
MS. HOLZER: I'm also representing the 53 SHIP programs that exist in every state, Puerto Rico, Virgin Islands, and the District of Columbia. We train volunteer counselors, thousands of volunteer counselors out there, in all aspects of health insurance, Medicare, long-term care insurance, Medicare Plus Choice, HMOs, everything you ever wanted to know about health insurance but were afraid to ask. The buck stops with us. We're the place where they come when they need the answers to their questions that they can't get from anyone else. We're the ones who sit for hours on the phone talking to thousands of seniors.
And I've been doing this for 13 years, and I know I have spoken to thousands of seniors either individually, in person, on the phone, or through group presentations about all the aspects of health insurance, in addition to that, their financial situation, their medical situation, their relationship with their son-in-law and daughter-in-law, and everything else that the senior might want to tell me, they tell me and we do listen.
So I've also been able to do this program through my own personal situation of having aged parents. I think one group that we really didn't talk about were caregivers and family members. About a third of our phone calls are from family members who are trying to negotiate the maze of Medicare for their senior member, and I talked to as many younger people -- let's say my age -- who are taking care of their parents either hands on hand or through helping them figure things out, as I do the seniors themselves, because the senior oftentimes won't call us because they don't understand what they're being told. So they send their son and daughter who also don't understand the whole area of health insurance.
As I said, we train our volunteers. We provide claims assistance either on one problem claim or the folks who come in with their shopping bags and the cartons, which they do, full of claims notices, statements, MSNs, EOMBs, dunning notices, legal notices, and say what do I owe. What do I do with all of this? Half of them are not opened up because they're scared to open up all of these papers.
We counsel folks on what types of supplements they need in addition to Medicare, what Medicare coverage is or is not. We talk to folks about all areas of medical assistance, Medicaid. We call it medical assistance in Maryland, including programs such as QMB and SLMB for those folks who know about those programs for the dually eligible. We talk to them about prescription issues. We talk to folks who are not seniors, but about 10 to 15 percent of Medicare beneficiaries are disabled people under age 65. So we talk to those folks.
We do public education. We do professional education, appeals work, referrals, coordination, and advocacy. We meet seniors in their homes, in senior centers, fast food restaurants, libraries, lodges, community centers, grange halls. Wherever they are we meet them.
We form tremendously wonderful partnerships with CMS central office, the 10 regional offices. The carriers, the intermediaries, hospitals, providers' offices call us up to try to make sure that beneficiaries are being well served, to make sure that their claims are being paid appropriately, quickly for them all.
We talk to social workers, hospital discharge planners, community advocacy programs. Anyone who will listen to us we will talk to.
I know that much of the emphasis today has been on the provider side, but I want to give you a little bit from the beneficiary point of view, the 40 million beneficiaries who are out there.
I want to address about eight problems. I'm a former New Yorker. I speak quickly, so just hang on here with me. I'll take you through a little ride.
The first problem is just the pure vastness of information that's out there for someone to understand. If we think it's difficult for us to understand, imagine how it is for a Medicare beneficiary and their families. We play games with our beneficiaries. We play Medicare bingo. When we go to conferences with advocates like myself in the 53 SHIP programs, we occupy our time by seeing who can name as many acronyms as possible and do you know what they all mean. So we come up with the big words like the BBA, the BBRA, the BIPA, BBR, BUBBA, all those terms like that. Medicare Plus Choice has brought to us PLSs, PSOs, PPSs, fee for service, HMOs, something with an R that I can't remember, MSAs, I mean, a whole new alphabet soup out there. Social Security, SSI, SSDI. That's kind of easy. Again, I know home health care has its own areas. They have the OASIS. They have RUGs. You have RAPs. I mean, we sit around and it has been a tremendous alphabet soup out there.
It's difficult for all of us, and I would say at least 90 to 100 percent of the folks in this room are college graduates if not a lot higher. Try to explain this to Medicare beneficiaries and their families. I watched the folks walk out of here. I think I saw every person with a cell phone in their hand. A lot of our beneficiaries don't have telephones. So again, we have a really daunting task out there.
Some of our population -- imagine that 65-year-old senior going into Medicare who might have been with an employer group health plan previously now has Medicare as a primary payer and now they have their employer plan as a secondary payer. Or if not, now they have to choose between HMOs, if they're available, or whether they should go MEDICAP plans A to J, not to be confused with Medicare Parts A and B. So we have to explain all of that and explain all their choices. If there are HMOs in the community, we have to explain about the HMOs that are out there and explain all the changes that that plan may have from year to year to year.
We've had people in Maryland. We had seven HMOs at one time in Maryland. We're now down to one plan that's not statewide. The one plan has recently raised their rates $20 a month, which is significant, but I wouldn't say catastrophic. But what's buried in the voluminous paperwork that beneficiaries get who are in that plan is not only the changes in their premium but the imposition now of a $300 per hospitalization co-payment. So they lose that very important piece because they see the $20 per month increase in their monthly premium. So now we have to explain their rights about leaving that plan, what options they have, what open enrollment periods there are, what special enrollment periods, what their guarantee rights are, and it's tremendously confusing and daunting.
The information that's out there is excellent. There is excellent information for you and for me to read. The Medicare handbook and all of the CMS publications are terrific. The Internet sites are really great, but whether or not these are friendly for the people on Medicare I would say is questionable. I was talking to one lady -- I think she was about 84 years old -- about all the information she has gotten from CMS and the handbook, and we talked about the Medicare Website. We talked about what's available by telephone, and she said something about her disabilities. She was visually impaired, hearing impaired, and arthritic and how difficult it was for her to negotiate the telephone, to talk on these telephone trees and push the buttons and go through all of the menus and all that. She didn't have a computer and she said, honey, I'm blind, I'm deaf, I'm crippled, and I need help. So forget about being visually impaired, hearing impaired, and arthritic. She needed help because she had a lot of disabilities and she needed information and she needed it now.
So again, some of that information is available and wonderful, but whether or not it's getting to the people who need it in time is the question.
When is the last time you've all read your car insurance policies? Probably not recently. It's not fun reading insurance policies to any of you who sit down and read your insurance, your homeowner's. And when do you read it? You read it when you need to read it, when you have a fender-bender, when something happens in your house and you have a burst pipe. So when you're most vulnerable and most upset, that's when you start reading your materials.
The same thing with individuals on Medicare. They don't understand Medicare, and then when they get sick or are facing surgery, then they have to start understanding the coverage they have or maybe don't have. And it's not easy to buy health insurance coverage if you don't have it when you need it. Just like you can't buy fire insurance when your house is on fire, you can't buy car insurance right after you have that fender-bender to cover that fender-bender. You have to buy it pre-need. So again, if you haven't purchased that insurance because you didn't understand why you needed it, now all of a sudden you discover you need it. Now you have to get it. You're in a pretty pickle right then and there. So again, these are the folks that we're dealing with and some of the issues that we're facing.
Some of the other issues that we're facing regarding regulatory issues that perhaps you can address. I have many of them.
Skilled nursing facility. The appeals for skilled nursing facilities. First of all, people don't get the same rights regarding grace days as they do if they're a hospital patient, and if they get their HINN, their hospital issued notice of noncoverage, that tells them when they need to leave the hospital and what their rights are to appeal, and while it's being appealed, they will not be held responsible for that bill if it goes against them. They don't have those same rights as a skilled nursing facility patient under Medicare. I think that's real important.
DR. WOOD: Michelle, may I ask you to quickly summarize so that we can have an opportunity for questions for the other presenters?
MS. HOLZER: Okay, will do.
Homebound. Definitions for homebound. What does that mean?
Therapies. How much therapy is enough therapy? You have to make sure that you keep people up to their optimum function and not just arbitrarily cut off their therapy.
Areas that are not covered by Medicare. Presurgical testing. People don't know that those tests they go to prior to their surgery is not going to be covered. We need to tell people.
Mental health parity. There are different payment rules under Medicare for mental health treatment. It's 62.5 percent of the 80 percent, which turns out to be 50 percent rather than the 80 percent coverage. Again, many areas of definitions.
And I see that you have a tremendously daunting task ahead of you, and I commend you and thank you for the opportunity to have a few minutes of your time.
DR. WOOD: You've given us actually a lot to think about, and I think some of us have actually lived this in our own persons as we work with families, and we're grateful for that brief introduction. And I invite you to leave more detailed information with our staff so that we don't miss any of your points.
MS. HOLZER: Thank you.
DR. WOOD: I would like to take the time now to ask the committee members for specific questions of any of the presenters that have started so far.
I might take the liberty of asking the first question for Dr. Barron. If you're color-blind, do you ever get normal color vision back?
DR. BARRON: Can I phone a friend?
(Laughter.)
DR. WOOD: We can ask the audience.
(Laughter.)
DR. WOOD: We'll get the expert opinion here. Dr. Dennis will give us the consultation fairly quickly. I think the answer is actually no.
DR. DENNIS: The answer is no.
DR. WOOD: The reason I asked the question was from the perspective of the requirements when the requirements are written, obviously it's sort of like listening to the question about the retirement. I mean, once you retire, you pretty much retire, although I guess if you're young enough you could retire and unretire. But as we think about how we would make our recommendations, here are some very specific things we might actually do.
Tony?
MR. FAY: My name is Tony Fay. I have a question for Ms. Mulaney. Regarding the MDS forms that have to be filed with the intermediary and CMS, at one time it was my understanding that if those forms weren't filed precisely on those given days like the 5th day, the 14th day, the 30th day, then what they would do is not deny payment but they would automatically downgrade you to the lowest paying RUGs for that particular type of patient. Is that a true statement?
MS. MULANEY: What's true is that if you're delayed, if you're late, if you miss your ARD date, if you miss one of those dates or one of those form filings, then you're downgraded to the lowest payment possible.
DR. WOOD: Jack first and then I'll come to Dr. Nielsen.
MR. ROVNER: I also have a question for Ms. Mulaney. I'm Jack Rovner.
In the forms that you gave us, how many of the exhibits and so forth are a requirement of a CMS rule versus how many are your lawyers' trying to help you do risk management or a contract?
MS. MULANEY: "This is a contract" is our paragraph, and probably payment of the bill, in terms of the timing, we'd like the payment of the bill. The limitations of liability are ours, and that's about it. Everything is required information for the consumer in order to protect the consumer.
MR. ROVNER: Just to be clear, is it required by CMS regulation under Medicare as opposed to a state Medicaid regulation?
MS. MULANEY: I'd really have to go through every paragraph. But under OBRA, which covers both programs, there was a considerable -- and deservedly so -- concern for people entering nursing homes that they get good treatment and that their rights be recognized. A lot of this information requirement, as well as the self-determination requirement, apply to both programs.
MR. ROVNER: Thank you.
DR. WOOD: Dr. Nielsen?
DR. NIELSEN: I have a question for Ms. Holzer and a comment for Dr. Barron.
Ms. Holzer, what is the level of training of the people who work with you who have to give this information, what level of education, what level of in-service training, and so on?
And then as a follow-up to that, apparently there have been some concerns by GAO that some of the information given out by the SHIP program folks -- I'm sure not in Maryland, but perhaps in other states -- was confusing and inaccurate in and of itself. So let me just ask that.
MS. HOLZER: Every state program has different requirements, although we are working to standardize the requirements somewhat for volunteer counselors. There is a basic curriculum that we've all agreed upon in terms of the areas that need to be covered, the length of time.
Generally in Maryland I can say that we would do a three- to four-day basic training of our volunteer counselors. We team up our volunteer counselors with more experienced counselors. Each of our local programs have paid staff coordinators, in Maryland at least, and they work under their direction and their monitoring.
I've found that oftentimes it is difficult to get a well-trained veteran counselor and to bring them up to the level where they need to be brought up. There's a tremendous amount of information and changing information that we're dealing with. And we are talking about volunteers, and generally we're talking about senior volunteers also.
So again, we do constant and continual training and in-service training to try to bring to them new information and certainly try to stress to our volunteers that if they have questions that they feel they can't answer, they shouldn't answer and they should then bring that to the attention of their coordinator who's more able to answer that question.
But I would say for a volunteer spending time with us, it's going to take them a good six to nine months to really be working a lot in the program and have the experience to start really understanding all the intricacies out there.
And it is difficult to get good, well-trained volunteers. We generally don't have a requirement regarding their past education or work history. If they want to learn the information, we feel that we can teach them most of the information, and more importantly have them know when it's gone over their head. We do try to keep on top of our volunteers to make sure they are giving out good information and follow up a lot of their appointments to make sure that the problem has been solved, the person doesn't have any other questions. But it's a difficult job to train volunteers, to keep good volunteers in this program. It takes a lot of commitment.
DR. NIELSEN: And, Dr. Barron, just a follow-up. In Buffalo, we lived through all of these things that you cited, and we could all tell the war stories. But the one that I just cannot resist telling has to do with the glucometer. At my hospital, which is a major teaching hospital, we were unable to convince the hospital to put glucometers on the floors, and the reason is exactly what you cite. It's the handling of the equipment, the repeated calibration of the equipment, the repeated training of the personnel. They simply could not afford to do that. Therefore, we cannot get an immediate finger-stick glucose in my hospital. We cannot get it. It is simply preposterous.
DR. WOOD: Mr. Finan?
MR. FINAN: I'm just curious. For Ms. Shamloo and Dr. Barron, you all gave some excellent examples of regulatory requirements that you or your staff spend a lot of time on. You live in the trenches, which is very important to us. Is there anything in any of that that you believe adds value from your perspective? Any of the restraints or the tests that Dr. Barron described? I'd just be interested in your views about that. Is there some portion of this that you believe really does add value to the care of the patients, or is it all worthless? And should we rely on just the professionalism of the staffs to see that proper care is rendered and things are done properly?
DR. BARRON: I think it all depends on the complexity of the task. A task this simple I don't need regulations for. If it's a very complicated procedure, then I do think you need some type of formal testing, and in that sense going through some of these things did make me look at whether or not people did know how to do all these tests. We realized that we should at least do this once no matter how simple the test is, but once was enough.
MS. SHAMLOO: In regards specifically to restraints, there was extreme value. I worked harder. I thought harder than I ever had to about any clinical practice issue in the past. I have gone as far as researching hospitals to find out what alternatives they're attempting. I went to Target and I bought a whole kit of toys.
I will tell you one anecdotal story where I had a 33-year-old who had the mind of a 3-year-old. He was in the holding area for surgery and he was on standby. He was a very large, 6-foot-4, 300-pound man who didn't have very much patience for standby surgery. I was supervisor on the evening by a fluke. I was called emergently, along with security, because he had become severely agitated and started swinging at everyone. In the past our initial response would have been leather restraints, although we don't have those in the facility anymore, but we used to apply four points on an individual like that.
I walked into this situation. Security was about to do so. I turned around and I said, Bryan, and he looked at me. I started singing Row, Row, Row Your Boat, and he stopped the behavior. I then said, please, someone, get me my kit of toys. I gave him a Crayola coloring book, a box of crayons. That gentleman sat there for another hour and a half waiting for his surgery and did not need restraints.
In regards to the recovery areas that I had mentioned earlier, we dropped our utilization of restraints from 100 restraint products per month to 20 to 30 per month.
But I think the piece that was really important and to really drive home with individuals is how can we get to that point without it being so painful. We're trying to provide patient care and run a viable corporation that is in compliance with regulatory agencies. That is a very daunting task that I don't even think Bill Gates has to work with. So if you can make this any easier by developing relationships with us to give us as much information as we can possibly get in order to make it an easier process for us, we'd greatly appreciate it. I think the intentions of all of these mandates and regulations are very good. Just the process, I think the communication piece is what we really need to hone down on at this point in time.
DR. WOOD: Mr. Toby?
MR. TOBY: Thank you, Mr. Chairman. I have two questions, one for Dr. Barron and one for Ms. Moore and Mr. Gallagher.
Dr. Barron, I heard your pain and plea for rationality in the process with CLIA. By way of background, in 1992 I had a role in implementing CLIA, and I just want you to know that we tried to not be as strict in the regulatory process as we were, but we were hounded by Congressman Dingell. It was his brainchild and he cared deeply about it and told us very specifically. There was very little leeway for the providers.
Anyway, my question goes to the idea of credentialing, which you mentioned I believe. I would just hope that you can tell us what part of the process you believe there should be this implicit and explicit trust in the provider so that we don't have a lot of documentation or have to prove. If you can just tell us explicitly where in that process and leave it with us. You don't have to tell us now, but it would be nice to have that information because I think that's very important. I like credentialing and I like deeming. I think both issues can help reduce the burden.
With respect to Ms. Moore and Mr. Gallagher, I'm the oldest person on this committee I believe. I spent 20 years actually applying standards that I didn't write to cost reports and to providers. So on the issue of automation, which I'm very interested in, you had mentioned that that would help you somewhat. Most claims are filed by Medicare at least electronically.
But I'm just wondering, since you still have this huge pile of paper that you brought forth today, in this process of cost report and applying standards and what have you and communication back to CMS, do you see any role where the Internet could be helpful to you and reduce your burden to some extent? I know it has a lot of issues dealing with privacy. I know it has a lot of issues dealing with how do you protect beneficiaries' identification and what have you, but have you thought about it? Do you envision the Internet being helpful in reducing your burden?
MS. MOORE: Well, on the billing side, we have in fact a fiscal intermediary and CMS and the hospitals have all started to look in deep detail relative to that. While we're looking at HIPAA and trying to make sure the confidentiality is taken care of, we're also looking at the processes that could be more streamlined.
Medicare, I have to say, is one of the most computerized claims processing systems. However, there are a great deal of exceptions to the routine electronic claims processing. So what we're working on is trying to figure out how we can eliminate some of those exceptions to the electronic process. Most of that includes the confidentiality thing.
We believe that the Internet is going to be the thing that helps us get where we're going, that helps improve the process and makes the information more accessible to all of the population, both the claims processing population, the patient population, and all of that.
MR. TOBY: Thank you.
One last question. You mentioned, Mr. Gallagher, that I guess when CMS finds that you made a mistake, they take the money back. You mentioned that. In the past, we used to allow providers actually to work out a repayment schedule. Many providers used to say to me at least when there was a dispute about money, because the providers need to keep the money in many instances while the dispute is worked out to some resolution -- however, we didn't ever allow a provider to do that unless we allowed a payback schedule. But many times we would just take the money out of the next payment, which often hurt the provider very badly. With the next cycle of payment, we'd just take it back to make sure we got our money. So I'm just wondering if you have any ideas about whether or not there can be more flexibility in the system while you keep the money and work out some payment schedule so that we don't hit you in the next round when you're due a payment.
MR. GALLAGHER: And that's what happened in this instance. As I said, they just took the money out of the next payment. I do think that if there's a dispute, there could be a much better opportunity to work that dispute out before the money is taken out and at least get some level of agreement or have an opportunity to air out your differences. You're not going to always agree with Medicare, but generally speaking, you can come to some type of agreement, either that you have a disagreement that's going to have to go to an appeal or an explanation as to why the Medicare intermediary has a position that's different than yours. In that case, there might be a justification for the intermediary to take back the money if it's not paid within the prescribed time period. But I think what's key is to have the communication and opportunity to have both sides heard before money is arbitrarily taken back.
MR. TOBY: Thank you.
DR. WOOD: Mr. Mendoza?
MR. MENDOZA: Dr. Barron, you commented upon the need to document for billing rather than the need to document for patient care. Do you have a sense for the scale of that problem both as an administrative burden and also to what extent the need to gather data sets compromises the clinical treatment because it takes time that would otherwise be spent dealing with the immediate concern?
DR. BARRON: I don't think it compromises clinical care. The physicians just don't do it. So the bill is lower. If they think it's silly, they're not going to ask the question, and then I don't bill for it.
What was the first part, please?
MR. MENDOZA: I think you answered it.
DR. BARRON: I was explaining we have an electronic medical record, and there actually is a function on there where at the end of the charting process, the physician can push a button and it will calculate the E&M score based on what the physician has pointed and clicked on. I didn't even show the physicians how to use that because I don't want them to play a game where, oh, I answer three more questions and I can get a level 4 out of this. You should be charting what you need to chart and not playing a billing game. But in many places that's what it is.
DR. WOOD: Heidi?
MS. MARGULIS: Mr. Chairman, I think my question is more a point of information that we've heard incredible stories, case studies, today and gotten some questions answered, but I don't know that all of us could come up with the appropriate or some of the same recommendations for change. I'm wondering if each of the panelists will be submitting after today, for the record or with staff, their recommendations for changing those issues and regulations and activities that they presented to us today so that we have a plethora of options for consideration.
DR. WOOD: I think it's an important point. We, in fact, would invite each of you to send to staff some specific recommendations, although I've been writing a few myself actually listening to these.
I'm going to turn around and ask a question to the committee, and it's going to be about the EMTALA issue. What we heard Dr. Barron describe was actually an extension of the original EMTALA law to other areas.
Now, I'm not a lawyer. I should say it's the first acknowledgement of my many limitations. But I understand that the actual law has never changed. Is that true? So all my attorney colleagues across that end of the table? It hasn't changed.
But I think what has changed actually then becomes the impact of judicial interpretation. So then after cases are decided, somewhere we need to understand the process by which then a judicial interpretation is then turned back into regulation that extends EMTALA if we're going to find the fix to the problem that we heard about today.
DR. BARRON: No. It has changed and Dr. Dennis knows this really well too. The law has been changed multiple times since 1987. It was updated in 1994 and again in 1997. Right, Gary?
DR. DENNIS: It has to do with the interpretation. The law itself hasn't changed. It's like regulations have been reinterpreted. I think that that is what this committee can look at. You don't have to go back and change the regulation. Of course, a lot of interpretations have to do with, in fact, what Congress is interested in or even what the OIG is interested in. In fact, sometimes it may be the OIG that influences what that interpretation is because it's felt that for some reason it should be applied in a certain way and it's not being applied. So I think we need to discover all of those issues. We have to put them on the table and then begin to sort through them and try to come up with a better interpretation.
DR. WOOD: Well, that's specifically why I asked the question. It's a very good example of where what starts out as something that could be relatively simple starts getting complex as we go through the iterations. And as we try to figure out then where we need to make suggestions for improvement, we will need all of our good help of trying to specifically identify the very precise areas where we need to try to do things actually.
Tony, I'll give you the last comment and then we need to move on to public comment.
MR. FAY: Just a final comment on EMTALA. This is how one regulation can affect another regulation. One of the things that has caused EMTALA to become more expansive is that CMS has changed the definition of what is provider-based. So now that more things are under that provider-based umbrella, then by definition more things are subject to EMTALA.
DR. WOOD: I want to thank our presenters this afternoon for giving us very good insight and giving us several things to consider and again invite your specific suggestions for us.
The next panel actually is one of a period of public comment. Now, earlier today we actually asked people to sign in for their opportunity to comment, and we have several people who have signed in. I'd like to invite each of them for 5 minutes to share their particular comments with us. There's either a microphone in the middle of the room or, if you prefer, you may use the microphone at the podium.
As we begin, I'm going to start down the list of people who actually signed in, and I'll do it in the order of sign-in. Then after that, hopefully, if there's time remaining for any public members who have arrived late, we'll try to accommodate comments that you might want to make as well.
So to lead, Mr. Steve Hitov. Good afternoon. Welcome. And as you start, would you please tell us your perspectives, that is, who you might represent and the point of view you might represent?
MR. HITOV: I will.
Good afternoon. I would like to thank you for this opportunity to address the advisory committee. My name is Steve Hitov and I am the managing attorney of the Washington, D.C. office of the National Health Law Program. My remarks today are made on behalf of my organization and the National Senior Citizens Law Center, the Center for Medicare Advocacy, the Center on Disability and Health, and the Medicare Rights Center. In addition to this statement, we will be submitting written comments about this undertaking.
Each of the organizations that I have mentioned supports the desire of this committee to ensure that the regulations of the Department of Health and Human Services are as effective as possible in improving the quality of health care and access to that health care. We also support the articulated goal of HHS to create a culture of responsiveness to consumers.
Given those goals, however, I find myself in the position of having to deliver a message that I fear may cause some discomfort. We are deeply dismayed at the composition of this committee, not for the quality of its members which is unquestionable, but which we believe is severely unbalanced with regard to consumer participation. As you are certainly aware, at the moment only three committee members could be said to represent the consumer perspective. We question whether such a distribution complies with section 5 of the Federal Advisory Committee Act which requires that committees like this one be balanced among those with an interest in the subject matter at hand. Unfortunately, missing from this committee's ranks is an adequate and unconflicted voice for low income consumers, including seniors, the millions of children affected by HHS regulations, pregnant women, single mothers and fathers, consumers with disabilities, the immigrant community, and the limited English proficiency community.
The absence of these consumer voices on this committee is especially disturbing in light of the reasons underlying the existence of the very regulations you are charged with reviewing and the statutes on which they are based. Programs like Medicaid and Medicare and the State Children's Health Insurance Program were enacted by Congress for the benefit of consumers, not providers. As recognized by previous speakers, the regulations promulgated under those programs are not gratuitous but rather often respond to identified problems. And in many cases they were designed to protect this country's most vulnerable populations.
This committee surely recognizes that there will often be a tension between provider burden and consumer protection. This is especially true in certain areas critical to the protection of the consumer. These include the form and content of written notices, data collection practices, including race, ethnicity, and primary language data, quality assurance and oversight, and appeal rights.
Indeed, in this committee's request for public input published three days ago in the Federal Register, the words "unduly," "excessive," and "unreasonable" were used eight times in three pages with regard to the types of burdens that this committee is charged with identifying. These are inherently judgmental terms. What may seem excessive to a provider, for example, may strike the consumer as the bare minimum necessary.
Given these inherent tensions, any conclusions of this committee will be devoid of credibility if the decision making process does not include strong consumer voices at every step. The opportunity for public comment is not enough. The consumer must be adequately represented during the undoubtedly difficult give and take that can be anticipated as this committee decides on its ultimate recommendations to the Secretary.
In light of these comments, we have two immediate suggestions.
First, as one of its first acts, the committee should suggest to Secretary Thompson that he either expand or reconstitute the committee to include many more consumer voices than currently are present.
Second, the committee should ensure that its future meetings are much more accessible and much better advertised than this one. Meeting nearly a mile away from the nearest Metro station is not likely to afford access to people with disabilities, the elderly and the poor, who are the groups most likely to be affected by any recommendations that this committee may ultimately make. Nor are notices in the Federal Register or on the HHS Website likely to reach consumers. Rather, in the future this committee, once it has been reconstituted to include the consumer viewpoint, should make certain that its meetings are publicized in the popular media and held in locations accessible to those whose interest will be affected by your conduct.
Thank you again for taking the time to listen to these comments and for your anticipated attention to the issues we have raised.
DR. WOOD: Thank you, Mr. Hitov. We appreciate your comments. You might not have been here this morning for the Secretary's comments. I would let you know that the Secretary has indicated already he is looking at the committee membership in consideration of its expansion with the points that you have raised. So we've heard that and are all listening too. Thank you, sir.
Next I'd like to invite Dr. Diana Zuckerman to either microphone.
DR. ZUCKERMAN: I also thank you for the opportunity to speak today. I'm Dr. Diana Zuckerman. I'm the President of the National Center for Policy Research for Women and Families. We're a nonprofit, nonpartisan organization that uses medical and scientific research information to advocate for programs and policies to improve the health and well-being of adults and children.
There's no doubt that there are unnecessarily burdensome, inefficient regulations that interfere with the quality of health care in our country. And your mission to reduce the burden of excessive paperwork, while keeping protections in place, is one that certainly my organization shares and that's absolutely essential if we're going to improve health care in our country.
But I have to agree with our previous speaker that you have 27 members on this advisory committee that can provide many different important perspectives on health issues, but that you have been noticeably absent in terms of members that are full-time consumer advocates working on health issues and particularly on FDA related issues.
Consumer advocates have a great deal of information that they can share and they tend to know where a lot of problems lie, and although I have no doubt that the members of this committee also have come across many, many problems, I think that the perspective of consumers needs to be better represented. And I appreciate that the Secretary plans to respond to that.
I also want to say that patients' points of view, of course, are very important but patients often do not have the information that they need about regulations to really have the big picture of what needs to be done.
So consumer advocates who are knowledgeable about the FDA as well as about Medicare and Medicaid are really an essential perspective for this committee, and they deserve to be included, of course, on the committee itself. Unfortunately, the focus on field hearings for this committee I think will also tend to exclude consumer advocates from many of the Washington, D.C. based consumer organizations that don't have the resources to send representatives across the country for all the field hearings. So I'm concerned that those kinds of advocates will not be able to provide the information that you all need when you're gathering information.
So as you consider your task, I urge you to look also beyond the many regulations that could be less burdensome and also look at the ones that need to be strengthened and that sometimes seem burdensome because they're not working appropriately. There are many regulations that just need to be enforced better or enforced differently in order to be effective, and I'd like to give just one example.
The example I'd like to give are advertisements for prescription drugs, whether they're direct to consumer advertisements or advertisements for physicians. Here's the Ladies Home Journal filled with ads that I challenge anybody in this room -- anybody in this room -- to be able to read the risk information on the back of this very attractive ad. And this is what advertising is all about. It's to persuade you to buy a product, not to provide objective information about the advantages and disadvantages of that product. I would say that most people in this room could not read the back of this without a magnifying glass, and even if you could read it, you wouldn't want to because it's really set up in such a way that it's not exactly user friendly. Nobody would want to read this.
Now, this may seem like a minor issue but we know that billions of dollars are spent on these advertisements and they add to the cost of prescription drugs, and they also add to the cost of medical care as many patients come looking for and asking for drugs that perhaps they don't need and drugs that may even be harmful for them. And many of the people in this room know that it can be a burden on physicians also who are bombarded with requests for drugs from patients, drugs that may or may not be really appropriate for them.
So this is just one of the many examples that I think the consumer reps from consumer organizations have talked a lot about in the past few years. They understand the regulations currently. They understand that those regulations are inadequate and inadequately enforced.
Then I'd like to make just one final comment because I know it's time to stop.
I'm sure you all agree that regulatory reform should be done in public with meetings like this. It's already been mentioned this is not exactly the center of Washington. In fact, I've lived here 20 years, had never been to this hospital, had no idea where it was, and had a little difficulty finding it.
You also may not all realize that this meeting was announced the day after Christmas, again not exactly a time to announce something if you really want attention and you want people to come. So although the room is full, perhaps it would have been even fuller if announced at a better time.
So I urge you to embrace public attention and discussion, to encourage the press to cover your meetings. I think it's important to attract media coverage as well as participation from a wide range of people from across the country.
Thanks very much and I have copies of my statement.
DR. WOOD: Very well. Thank you.
Mr. Robert Britain.
MR. BRITAIN: Thank you. Good afternoon, everybody. My name is Bob Britain. I'm Vice President of the National Electrical Manufacturers Association, which is referred to as NEMA. NEMA represents manufacturers of diagnostic imaging and therapy systems equipment, for example, x-ray imaging, computed tomography, diagnostic ultrasound, radiation therapy, magnetic resonance, and nuclear imaging equipment.
I'm going to have to drastically summarize this statement, but I have brought the written text that you can have later.
First we would like to raise an issue involving the Food and Drug Administration. Before focusing on this issue, we would first like to acknowledge the significant improvements that have been made at the Center for Devices and Radiological Health over the last four or five years.
One of the positive changes at the FDA's Center for Devices and Rad Health was the third party pilot program for reviewing most class 2 products. This third party review program is an FDA administered program that permits certain medical device products to be reviewed by FDA-approved third parties to standards that are established by FDA. Final product clearance, however, is done by FDA.
Both the industry and the FDA are pleased with this program. By tapping outside expertise, the third parties are able to consistently review products significantly faster than FDA, and by reducing the volume of applications that require complete review by the FDA, the agency can shift resources to other priority health matters. And that pleases FDA. This program has been a win-win for all involved.
NEMA believes that it's time to replicate the success of this third party review program with a voluntary FDA pilot third party inspections program. As you may know, by law FDA is required to inspect medical device establishments at least once every two years. In practice, however, FDA inspects medical device establishments once in five to seven years. This situation is not good for the FDA, the medical device industry, or patients.
Why would companies volunteer to participate in this kind of a program and why would they be willing to pay to have themselves inspected more frequently? The answer to that lies in one key development, the proliferation of different medical device regulatory regimes around the world. Today the facilities for global American medical device manufacturers are not only inspected by FDA, but by inspectors from Europe, Canada, Australia, Japan, China, and other nations as well. Many of these inspections involve examining the same criteria at each facility. This involves costly, multiple, and often redundant inspections. This is a significant and increasing regulatory burden for manufacturers. As a result, we believe many of the manufacturers would be interested in participating in a program that would permit properly accredited third parties to conduct a single inspection but, on the basis of their accreditations, to facilitate the approval of the facility by multiple national health agencies, including FDA.
The second issue NEMA would like to raise for your consideration involves CMS. NEMA is concerned that the CMS coverage and reimbursement decisions could have a profound adverse impact on the access of patients to the benefits of new and improved medical imaging technologies. We at NEMA know that the medical imaging products and services that NEMA companies provide must satisfy CMS if they are to be made available to the elderly and the disabled who rely on Medicare for their health insurance. We also understand the need for the insurers like Medicare to maintain processes to make coverage decisions on new medical procedures and services, to grapple with questions of utilization and services and patient indications and the appropriate site of care. We also understand the complexities of the various payment systems CMS uses to set prices for these medical procedures and services, but we are concerned that these coverage and payment processes result in delays in beneficiary access to appropriate medical technologies.
I'm just going to summarize since I'm being asked to stop.
We are in the process of looking at this and we hope to provide you a process in which CMS might be able to take leading edge technologies that get through FDA that don't produce the kind of data CMS needs. We are going to try and package the proposed solution and by March 3rd hope to have this for you to look at, and I hope you will give it some consideration. And I thank you.
DR. WOOD: We appreciate your comments.
Next I'd like to invite Mr. Bob Griss to share his comments.
MR. GRISS: Hello. My name is Bob Griss. I'm the Director of the Center on Disability and Health in Washington, D.C., and a co-chair of the Consortium for Citizens with Disabilities Health Task Force.
I noticed that the word "consumer" is used quite freely by most of you to represent the groups that you serve, but in fact you also represent other stakeholders. I feel we have to be critical of our loyalties in the system that we're operating. As other commentators have said, I think we need more consumer representation on the committee to raise the critical issues that you need to be thinking about.
We heard in the panel a very embarrassing description of how fragmented our health care system is and what burdens it does impose on providers as they try to document the eligibility of the clients they serve and the services that they provide for payment, to say nothing of the quality of the services that they provide that the payers should be interested in. And this type of inefficiency is worthy of public attention.
But I think that the focus that we heard this morning from Secretary Thompson to come up with immediate solutions is very problematic because any little change has ramifications, as the panelists said, that are often very unintended. So we need to focus on the larger system and how it impacts on the efficiency, equity, and quality of care and not just focus on immediate solutions that the Secretary can run with because we don't want to spend any more money, and we recognize that we are relying more and more on the marketplace to ration care.
I heard some discussion this morning on the subject of quality. We want to improve quality. And I'm a consumer advocate, but I'm actually quite nervous when I hear the focus on improving quality. The reason is because in a market system one can provide high quality for one individual and ignore all the other people who it is less profitable to serve. I think the focus needs to be on the system, the health care system, and how we equitably distribute our limited resources in effective ways. This is not just dealt with by focusing on maximizing professional judgment about maximizing quality.
Therefore, I think we need to focus also on other systems like health care systems where universal health care is the norm and see what kind of regulatory burden exists in those systems because they may actually contain some of the solutions that we claim to want for consumers.
I think that's about all I wanted to say. Just that I would like my comments to be included on the Internet because I think that the proceedings here need to be accessible to all, and so transcripts of materials and comments should be there.
I hope this process is actually a constructive one for the society because I'm afraid that with the desire to not add dollars to the health care system, that the real battles are taking place over regulations and an advisory committee that is trying to make recommendations on reducing regulatory burden I'm afraid is possibly putting the emphasis in the wrong place.
Thank you.
DR. WOOD: Thank you very much.
Because there was a little bit of confusion about the sign-up process, there are no other names that we have on the list of people who signed up earlier wishing to make comments, but we do have some remaining time. So I would like to ask if there are any other members of the public audience who are in attendance who would like to make comments to the group.
(No response.)
DR. WOOD: Seeing none, we appreciate comments that we have heard.
Christy reminds me that the statements that all of you have brought will be up on the Website. So they will be available for others to see, and so we want to reassure you about that.
I'm also reminded that the full transcript of the meeting will be on the Website ultimately as well. The time of that will be obviously as quickly as it can be transcribed by staff.
Now, I want to take a little bit of time and ask the committee members, having heard the last comments and then the ones before, if there are any areas of concern or if there are any specific comments that any of you have so far about areas that we might want to begin to identify activities or if it raises for you questions about how we should structure work. Gary?
DR. DENNIS: Well, just in terms of structuring work, there are a lot of important issues. What I can see from this particular day is that not only did we have a very good panel focusing mainly on hospital issues, but we also had a lot of interest from the public. With more information getting out earlier, we will probably have even more of an interest. Wherever you have a hearing or a meeting, it doesn't matter. There should probably be a lot of comment.
But it would be good to structure, just as you did today, the meeting so we focus on the subcommittee issues so that if you have three subcommittees, at least at one of those, you would have one of those subcommittees presenting and trying to elicit more comments about those areas that we feel are a priority for those subcommittees. I'm not sure what you ultimately will decide to do, but I think that might make it an efficient use of our time because we could actually hear the same thing over and over again and never get anything decided. But I think that if you let the subcommittees do some of the work in between, have them make their recommendations, have the public comment on them, then we can come to some conclusions.
The second thing is that I think the representation on this particular advisory committee is pretty good, but I think you probably should have more consumer representation and maybe invite someone from the Hispanic community to be represented as well on this group now, as well as there are various consumer groups, other groups that represent the senior citizens. So you could probably add three. I think you could add three more people, could you not? I would add three and try to add them in the underrepresented areas, maybe like Kaiser Family Foundation or some group that will add to our body of knowledge, true experts on issues that affect consumers but also clearly have the voice of consumers.
DR. WOOD: There are a couple of other options we might consider. We actually have already talked with Bobby and you have heard him reflect those recommendations on to the Secretary, so I think we will be expanding the committee.
But as we've done this in a couple of other areas, I've had some involvement with some projects where we've tried to work on measures of quality for cardiovascular care, and in trying then to make sure that we could incorporate the different groups that would be affected, we created an advisory committee who worked alongside the regular committee. The advisory committee actually was kept in the process by sending them all of the agenda materials ahead of time, as well as all of the outputs of the meeting. They were invited to come to the meeting and to participate. They weren't voting members, but our expectation was that they would maintain contact with their respective constituencies and keep us informed about the response of their constituencies as we were going forward. So one of the concepts that we might consider is for us to create an advisory committee of consumers.
And as I have thought about this over the last few days, having looked at some of the feedback from some of our listening sessions, one of the thoughts to me was actually somewhat like the problem I addressed this morning. For what I do to have face validity, it's got to pass the mother-in-law test in my mind. I mean, I have to go back and be able to explain to my mother-in-law why we did and what we did and how it's going to make it easier for her to get her benefits and make sure that she understands how the program works.
So when I'm thinking about it from the advisory committee perspective then, my thought is can we create a group of people that we could then bounce things back against and say give us your reaction to this. We can make the recommendation on to Mr. Jindal and the working group, but that's how I've thought about it. So if there are any of you who have a different idea or think we should take a different approach, give me your thoughts.
Ms. Shafer?
MS. SHAFER: You know, I hadn't thought of that idea and I think that's good merit maybe to be able to bounce things off of another body separate from ourselves. But a lot of work is going to be happening in subcommittee, just looking at the initial draft, and I think those subcommittees is a place where you can involve more consumers in a wider representation.
DR. WOOD: Jack?
MR. ROVNER: I tend to agree with what Ms. Shafer just said. I don't know, having an advisory committee to the advisory committee may just get us too much.
But I do like the concept because -- and it's an invitation, if I can do that, to our consumer advocate speakers -- I'm very concerned and interested to know how you cut through the maze of information overload because I'm looking at this contract that we got, I look at all the notices that are required and things like coming out in HIPAA. I remember getting the blitz of GLBA notices, which I doubt everybody read them when they got them. And keeping in mind the population that Medicare/Medicaid serves, are we really achieving anything by blitzing people with paper and information? I'm very interested to know if there is a better way to deal with the kind of problems that Ms. Holzer articulated I thought very well. I think that's something that I certainly would be very interested to hear.
DR. WOOD: Judy?
MS. RYAN: I would just like to share an observation about one other set of principles that kind of was discussed this morning. The question was raised in what way do regulations add value and ought we just to consider relying on professional clinical inference. Some of the work that's been done in the quality arena would suggest that the complexity of the decision making in medical and health care and other aspects of long-term care have become so great that clinical inference and the human mind no longer singularly have the capacity to deal with all of those variables and that we have to look to building systems to prevent error, while in the past we've been primarily socialized to deal with expert practitioners and clinical inference.
But then in my mind that also related to comments that were made about we're documenting for payment purposes or we're documenting for compliance purposes. And maybe the principle that says we talk about focusing on the building of systematic supports for the delivery of care and services not primarily for documentation of compliance or, in other words, the direction we try to set is to move away from regulatory compliance to one of professional self-regulation. Just thoughts.
DR. WOOD: I will come back to that a little bit later because I think it is something we should probably consider for the larger framework, that is, how we set a framework for future performance, because I do think we could actually change the way that the system works by changing the measurement system to make it really align more with what our objectives are.
Mr. Toby?
MR. TOBY: Mr. Chairman, I just have two comments to make. One is that I very much agree with what Dr. Dennis said about perhaps enlarging the committee, and I think you've thought about that long and hard. As Ms. Zuckerman spoke about FDA issues, which are very, very complicated, and as I look around this room, I have spent all my professional life in Medicare and Medicaid, and as I heard all the other members of the committee speak, it was heavily weighed for those issues of course. Medicare is the largest payer in our system, so it's not surprising and its effect is incredible.
But I think as we enlarge -- and you talked about the subcommittee idea -- I think we do need more FDA expertise around this table. I think definitely so.
I also would like to say, as I heard the other three public speakers talk about our work and what we're in business to do, I think it's very important for those speakers to keep in mind what the purpose of this committee is. This committee is not in business to fix all the problems in the American health care system. We have a lot of problems in the system. I have represented this country abroad in England, in France, at international meetings and I can tell you we have incredible deficiencies. We're not a universal system, but this committee is not in business to fix that.
We are in business to deal with a very difficult and specific problem of really easing the burden of providers on the existing system, and I don't think we have to apologize for that at all. And I think it's very real, as you heard the providers talk today about the negative effect of our regulations. So I would just hope that we would keep that very much in mind that we're not in business to fix the entire health care system.
DR. WOOD: I'll go over to you, after that, Mary.
MS. MARTIN: I just want to echo Bill's comments. We can't fix everything overnight. We have a huge mandate as it is, and I think we do need to focus. I agree with Bill.
DR. WOOD: We'll have to work harder prioritizing.
Sue?
DR. DESMOND-HELLMANN: Yes, just two comments. The first one is about the question about regulatory compliance because I guess it goes back to the trust issue that we talked about when we talked about our mission. I think when we talk about streamlining complex regulations, it ought to be synonymous to talk about regulatory compliance and quality, and if there's a regulation that's there for compliance reasons only that doesn't drive quality, that's a problem. So I think those are some of the questions we ought to be asking, and if there's any diminution in quality because of an absence of compliance, then I think we're not doing our job correctly. So that would be one point I would make.
And the second point is I just wanted to echo the comment about FDA that I do think that the committee could use additional voices on the FDA side of the regulatory equation and put in a pitch for consumer advocacy, trained consumer advocates who really can add an enormous amount of value. In my job we've worked very closely for a number of years with consumer advocates who have given us an awful lot of added value in many things we've done in terms of interactions with FDA.
DR. WOOD: We are pretty close to being on schedule, and so the schedule now includes a 15-minute break. So we'll reconvene at 3:00 p.m.
(Recess.)
DR. WOOD: For the next panel, we need as a committee I think to come to a little better understanding of how it is that the regulatory process works; that is, how you go from legislation to regulation in the various programs. So we have asked people from various parts of CMS and the FDA to actually teach us about the process of regulation, and in that understanding then, I think as a committee we'll actually make better recommendations and we'll understand the process better.
So I am particularly pleased to welcome this afternoon Mr. David Cade, who is from the Office of General Counsel, Ms. Linda Fishman from CMS, and Mr. Bill Hubbard from the FDA. We will ask them to share their insights and I hope we will have some time for discussion and asking questions for each of them afterwards, but I would appreciate it if you would hold your questions. So David, could I invite you to begin?
MR. CADE: Well, good afternoon, distinguished members of the committee, and to the general public, I welcome you. As Dr. Wood said, I just wanted to take a moment this afternoon to walk through general fundamentals of the APA and the rulemaking process.
But before I get started, let me also introduce Judy Rosenberg, who will be assisting me. She is at the podium today assisting with today's presentation. She's one of our staff attorneys from our CMS Division, formerly the Health Care Financing Division, of the Office of General Counsel.
As Dr. Wood said, this presentation basically lays out the foundation for the laws that govern the regulations and therefore regulation reform. I don't think this presentation should give you too much to feel bogged down in the regulatory process, but I think it's something that you should keep in the back of your mind as you think through the varying rules and regulations that you'll be considering to recognize that there is a process that we have to go through in order to make changes or to implement new laws.
This presentation will discuss the Administrative Procedures Act, the APA. The APA touches on practically everything that this department and most departments in the federal government do. Hopefully after the presentation, you'll have a basic understanding of the mechanics of the APA, you'll have a greater appreciation of the different types of rules under the APA, and you'll have a basic legal foundation as you embark on your regulatory reform work.
The Administrative Procedures Act, for those who like statutes, can be found at 5 United States Code at sections 551 through 559.
Now, the act was passed by unanimous vote of both houses of Congress and signed by President Truman in 1946. It originated in the 1930s as a response to President Roosevelt's New Deal and the perceived unchecked power of administrative agencies. The act seemed to represent a compromise between the American Bar Association, which recommended abolition of some of the independent regulatory agencies, and the Attorney General's Committee on Administrative Procedure.
Now, on this side you'll see a quote from the Attorney General at the time the APA was passed. The quote is from a letter the Attorney General sent to the chairman of the Senate Judiciary Committee. The quote illustrates how the APA was intended to serve at least three purposes: one, to ensure that the public has a voice in how the bureaucracy regulates; two, to create uniform standards so that most federal agencies follow the same process for issuing the regulations; and three, to allow federal courts to serve as a check on agency power by creating a process for judicial review of agency rules.
On this slide, you see a definition of the rule as defined in the APA. As you can see, the definition is extremely broad. Just quoting from a section of it, "any agency statement of general or particular applicability and future effect." That's incredibly broad. It shows that practically everything that the Department does is governed by the APA.
Now, although everything the agency does can be viewed as a rule under the APA, not all rules are the same. There are several rulemaking options under the law. Some rules are required to go through the process of notice and comment while others do not. This slide shows you the different options available for rulemaking under the APA. Each option has its own legal standards as I will discuss.
Now, one of the best know and most common rules is the notice and comment rule, or the NPRM, notice and comment rulemaking. This type of rulemaking is used when the agency is creating major new programs or establishing new binding norms. Now, in our estimates in 2000, the Department published approximately 100 notice and comment regulations. Historically almost two-thirds of the regulations are issued by two agencies in the Department, CMS and FDA, who are on the panel with me today. Historically about 38 percent of the regulations are from CMS, formerly HCFA, and 38 percent are from FDA, the remaining 24 spread out over the remaining agencies.
Generally speaking, the notice and comment process involves four basic steps.
First, a notice of proposed rulemaking is published in the Federal Register. This is usually after the passage of legislation or a new program initiative, and the agency is initiating rulemaking.
Second, the public gets an opportunity to submit written comments on the proposed rule to the agency.
Third, the agency issues a final rule which shows that public comments were considered. The consideration of the public comments is the important piece to this that shows that throughout this process the public is inherently involved throughout every phase of the rulemaking process, and when the agency reaches that fourth point and issues the final rule, it must respond to the public comments. It must explain how it is dealing with the comments that it has rejected, and in essence, it must provide a basic rationale as to why the rule stayed the way it stayed or changes that the agency proposed to make.
Now, in fact, the notice and comment rulemaking process is a lot more involved than the four basic steps that I had outlined previously. So before you is a graph of the notice and comment process in its real world steps. Lest you think this looks like health care reform, it is not designed to do that, but it is designed to show you that there are some integral key steps that you don't normally see in the basic four blocks that we showed previously.
The first step, as I said earlier, is the proposed rule phase, and that's when the agency is going to issue its proposed rule. It's going to draft the rule.
After the draft rule is completed, the rule first has to go through departmental clearance.
Once the rule is cleared by the Department, most of the rules that we deal with today, and I think the ones that you're most concerned about, are cleared by OMB.
Now, there's an executive order, 12866, which requires OMB to clear all significant rules. Significant rules include rules that affect the economy by $100 million or more, as well as rules that raise novel or legal policy issues. As I said, most of the Department's rules do fall into this category.
OMB reviews significant rules to ensure that the cost of the regulation to the general public does not outweigh its benefit. OMB also considers the impact of the regulation on the federal budget. Agencies are required to prepare impact analyses of the NPRMs that attempt to analyze the benefits and costs of the proposed rule, and by executive order, OMB has 90 days to conduct this review.
Now, aside from the impact analysis, there are many other requirements with which the agency must comply. For rules that include collections of information such as rules including application forms or questionnaires, agencies must comply with the Paperwork Reduction Act, by justifying that their collections are the least burdensome possible.
For the rules that have a significant impact on a substantial number of small entities, the agency must prepare a regulatory flexibility analysis, which is commonly known as REGFLEX. The agency must analyze the potential impact of the regulation on small businesses and whether there are any regulatory alternatives that are less burdensome to small entities, and if so, why the agency did not choose such alternatives. The REGFLEX analysis must be submitted to the chief counsel for advocacy at the Small Business Administration who is charged with reviewing the agency's analysis and can file comments directly. The chief counsel, however, cannot prevent the promulgation or the publication of any final rule.
We will continue with these internal rules. There is another one. For rules that impose mandates on state, local, or tribal entities, there's the Unfunded Mandates Reform Act which requires agencies to prepare a written cost/benefit statement for any NPRM that results in an expenditure by state, local, or tribal governments in the aggregate or by private parties in excess of $100 million in any one year.
There are also numerous existing executive orders with which the agency must comply. During OMB review, OMB staff ensure that the agency has complied with the existing federalism executive order, as well as the consultation and coordination with Indian tribal governments executive order. Many of you may know that OMB Director Daniels has pledged to Congress that rulemaking proposals by any agency that were not subject to proper and adequate state and local consultation will be returned to the agency for review.
Now, once OMB has completed its review, the notice of proposed rulemaking is published in the Federal Register. Publication triggers the second phase of notice and comment rulemaking, and that's the comment phase. Although the APA does not address the length of the comment period, the Department has a practice of allowing 60 days for comment and CMS is required by law to have a 60-day comment period for most rules. OMB has also encouraged agencies to use 60-day comment periods. And many of you know from some of the more significant regs from the agency, there have been occasions where the agency will extend the comment period to allow for more comments to come in.
Agencies are required, as I said earlier, to respond to comments received in the final rule. The courts have stated that the responses must allow a court to understand what major issues of policy were vetted by the informal proceedings and why the agency reacted to them as it did. That's the key point of the judicial review. If comments raise alternative options, the agency must explain clearly why it rejected those options.
Agencies often receive substantial comments, and one example recently is the privacy rule that generated over 50,000 comments for the agency. Now, as I said, the agency doesn't need to respond to each comment individually, but they do need to respond to categories of comments to have a thorough response.
Now, we've reached the third and the final phase of the notice and comment rulemaking process in the final rule phase. This phase is very similar to the proposed rule phase internally to the Department as it works to get the rule out to the public in final form. It again involves departmental clearance. OMB, once again, has 90 days to review the significant rules, and at the end of the process, a final rule is finally published in the Federal Register. By law, most rules cannot become effective until 30 days after publication.
Special Contract with America laws also impose new requirements to allow Congress to review and overturn, if necessary, major rules. In fact, those laws, which were the provisions used to overturn the OSHA ergonomics regulation earlier last year require that agencies must wait at least 60 days for major rules to become effective. Here the major rule is defined to include: A, effect on the economy by $100 million or more; B, rules that result in a major increase in cost or prices for consumers, federal, state, and local government agencies or geographic regions; or C, rules that have a significant adverse impact on competition, employment, investment productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises in domestic or export markets.
A little caveat to note is that rules which grant an exemption or relieve a restriction can become effective immediately.
So as you can see from this slide, there are several steps involved in releasing a new regulation to the public, but each step, I think you'll agree, has a lot of merit and value throughout the process.
Now, in addition to the notice and comment rulemaking, which I said is the most common to our agency and one that I think is probably most familiar to you, is also a process called interim final rulemaking. Interim final rules are not discussed in the APA. However, the practice follows recommendations made by the Administrative Conference in 1995. In interim final rulemaking, the agency issues a rule without notice and comment and then modifies the rule, as appropriate, following post-promulgation comments. Interim final rules may be used when there is good cause under the APA. Good cause is defined where a comment period is impracticable, unnecessary, or contrary to the public interest. In some cases, courts have found a public health emergency to constitute good cause. In other cases, Congress has specifically required that the agency issue an interim final rule.
If an agency issues an interim final rule without good cause, the rule can be struck down on procedural grounds. Nevertheless, some courts have used their equitable power to allow the agency to cure the procedural defect by treating the interim final rule as a proposed rule, providing an opportunity for public comment.
Agencies may also engage in a process known as direct final rulemaking when a rule is not controversial or it's routine. In this process, the agency publishes a rule in the Federal Register with a statement that unless an adverse comment is received within a specific time period, the rule will become effective on a particular date, at least 30 days from the date of publication. However, if an adverse comment is filed, the rule is withdrawn and the agency may publish the proposed rule under normal notice and comment procedures. This process is generally used where an agency believes that the rule is noncontroversial and adverse comments will not be received. So far, there have been no legal challenges to this process in federal court, and I gather for most of you who deal with FDA and CMS regulations, perhaps this is not the kind of rulemaking that you see us do very often.
(Laughter.)
MR. CADE: Interpretive rules are exempt also from the notice and comment process of the APA. They are still considered rules under the APA, but they need not be published in the Federal Register. They are not subject to public comment and they do not have a delayed effective date. Interpretive rules are generally used where an agency is either interpreting or filling in the details of its own regulation or merely reminding parties of existing law or interpreting statutes without creating any new rights or duties.
This is not a bright line between interpretive and notice and comment rules. The D.C. Circuit, the foremost authority on administrative law short of the Supreme Court, has stated that distinguishing between the two types of rules must be on a case-specific basis.
In addition, there has been some recent line of cases, both in the D.C. Circuit and the Fifth Circuit, stating that when an agency wants to alter a longstanding interpretive rule, it has to go through notice and comment. Again, this is a recent line of cases that our agency and all agencies I think are following very closely.
Now, like interpretive rules, statements of policy are also exempt from notice and comment rules under the APA. These rules may be issued immediately without the necessity of public comment. Policy statements advise the public prospectively of the manner in which the agency proposes to exercise its discretionary power. These policy statements allow the agency to announce its tentative intent for the future without necessarily binding itself. Policy statements are often used to advise the public of how an agency plans to exercise its enforcement powers, by way of an example.
This slide here shows you a quote from one of the D.C. Circuit decisions defining a statement of policy. The quotation shows how a statement of policy is generally not binding and how it is not intended to create a binding rule creating uniform standards for all members of the public.
Finally, rules of agency organization, procedure, or practice are also exempt from notice and comment rulemaking. These are rules that govern an agency's internal procedures. For example, the name change from HCFA to CMS, that we did not too very long ago I guess, would be an example of a rule of agency organization.
I know that was a perhaps lightening-quick run-through of anything and everything you wanted to know about the APA. It's actually a little more complicated than that, but as a general primer for you, as I said, to keep in the back of your mind that there are many ways to look at rolling out or changing rules to the general public. It's something that you would want to keep in the back of your mind as you think through what changes you want to make, and I hope that this was just enough of a flavor to let you know that the process does exist. There are rules that govern. It's not just the APA but OMB and the general public that are involved in the process.
I guess we will take questions at the end of the panel. Thank you.
DR. WOOD: Thank you very much.
Linda?
MS. FISHMAN: Although I'm not a lawyer by training, I've been at CMS since the end of June, and I feel like I'll be one by the time I end my service at CMS.
(Laughter.)
MS. FISHMAN: I'm learning all this as well.
Before I get started, I'd like to introduce some of the staff who are from CMS who have been very much involved in the development work getting us to the first meeting, and I'd like you to become familiar with them because they'll be working on the commission's work throughout its tenure.
Paul Hughes is at the back of the room. He is in the Office of Strategic Planning and is on loan to Christy Schmidt.
Joelle Oishi is sitting along the wall and works for the lady next to her in our Office of Communications and Operations Support that we call OCOS. We have a whole division that does nothing but manage the flow of paper throughout the agency, which I found to be quite mind-boggling when I got there.
Next to Joelle is Jackie White. She's the acting Director of OCOS, and is responsible for the 100 or so FTEs who actually work on developing regs and managing the paper flow throughout the CMS, as well as its interaction with the rest of the Department.
And next to Jackie is Peggy Sparr who is the staff person at our Center for Beneficiary Choices and is also on loan to the reg reform commission.
I thought I'd take a few moments to go through all the activity that CMS has been involved in since the Secretary and the energetic administrator, Tom Scully, have come on board. They both have common goals in that they want to streamline the Medicare requirements and most of my remarks here are going to be about the Medicare program. I've a few Medicaid things to say but will get there later.
They wanted to bring a certain openness and responsiveness to the regulatory process and to make certain that regulations and paperwork are sensible and predictable.
The major management challenge for CMS is to continue to run the day-to-day operations of the program at the same time as trying to address the important changes in regulation that you and the Secretary, as well as Tom Scully, want to make. As we run the operation pretty much on a shoestring, no one can afford in HHS to waste scarce resources, and that extends from providers and physicians, also to CMS and HHS staff, and we are very keenly aware of the resources that we have available.
I'd like to say welcome to the first step toward Medicare reform. As you know, for several years, we've been talking about reforming the Medicare program and this past summer when the President came out with his principles of how to strengthen the Medicare program, among them was making the agency a better place, more responsive to providers, more transparent, if you will, in how we go about conducting our business.
Now, it is true, as Mr. Cummings pointed out earlier, we've had about 700 legislative provisions affecting the Medicare and Medicaid program since 1996, and the lady from the Washington Hospital Center I believe was absolutely correct in that we do put out probably a piece of paper a day for providers. This past year, we had 417 letters of instructions and program memoranda, and that excludes any instructions for our managed care plans, as well as excluding to the Medicaid Director. So that is a little over one a day and you have to work weekends as well.
We published 144 regulations last year in 2001. So the volume of what we do and the scale of what we're involved with is absolutely enormous, and to someone coming from outside, as I did in June, it is almost overwhelming as to how to kind of wrap your hands around what we are supposed to be doing.
As I said, the Secretary and Tom Scully have been very frustrated by layers of bureaucracy and the unresponsiveness, the complexity of the program, and embarked on a variety of measures starting in the spring of 2001 to kind of move us toward more rationality, if you will. First off, he referred to it this morning. We changed our name and we also are changing the way that we do business.
We have reorganized the agency around our lines of business by creating the Center for Beneficiary Choices. That houses the Medicare managed care programs, as well as our Office of Demonstrations and Research, as well as our beneficiary outreach and all our beneficiary programs.
We have the Center for Medicare Management which houses the contractor part of our business. We have about 21,000 contractor employees who run the Medicare and Medicaid programs, and those are kind of separate from the employees in Baltimore and Washington, D.C. The Center for Medicare Management also houses the fee for service program, hospital payments, long-term care hospitals, nursing homes, home health agencies, and so on.
We have a Center for Medicaid and State Operations. That's our relationship with the states in terms of operating the Medicaid programs, as well as our survey and certification function.
And we have an Office of Clinical Standards and Quality which looks at coverage decisions, quality initiatives, and so on.
We've also taken a step toward implementing better internal management systems, and we're about to start an internal audit process or what is in place. There is a health care general ledger system called HIGLAS being put in place that basically is taking our computer systems -- there are about 50 of them -- and integrating them into one unified system. We're starting to get that off the ground as well. As I started my remarks, I saw Ruben King-Shaw come in, and he's sitting across the wall with Jackie White and is in charge of the operations of the program and implementing those improved internal management systems.
We've also established key contacts in both Baltimore and Washington for every state Medicaid program. There is an individual in Baltimore that every state governor can call or governor's office may call and have questions asked and answered in prompt ways.
Also, while seemingly perhaps unimportant on the surface, both the Secretary and Tom Scully made a very strong pitch to answer our letters in a more prompt fashion. Just as an example, I gather at the time this administration came in, there were about 100 open letters that hadn't been answered, and every one of them was overdue. Today we have 14 letters open and only 3 of them are overdue. I must point out that the Secretary alone has received about 600 letters since the administration has begun. So we have a policy now where we answer the Secretary's letters in 10 working days. While that doesn't sound like a huge commitment, it's very difficult to move a letter through such a huge bureaucracy and answer questions in a meaningful fashion. So we're out doing that kind of stuff as well.
On provider outreach, we have the open door sessions that continue on. The Secretary mentioned them this morning that this commission will not particularly affect how they operate, but there are 11 groups. All of them have met at least once. They're on a schedule to meet once a month, and they basically involve virtually every provider group, as well as there is a group for disabled persons that has been meeting, as well as for minority health. There is a rural health group as well. In fact, there's one going on today I believe on home health agencies. There are several scheduled tomorrow, as a matter of fact.
We also have open listening sessions across the nation. In fact, that's why Tom Scully couldn't be with us today. He's in Mississippi. He's conducting an open listening session with providers in that state, and I'm told the schedule is absolutely amazing in terms of his commitment.
We've also started a group of in-house experts looking at various issues. We hear your concerns and, for example, OASIS and MDS have been mentioned today. We have internal working groups of staff looking at how we do those forms, what purpose they serve, what the questions mean, how we're using the information, and starting to think about how we can streamline those in terms of our own analysis.
We have stepped up centralized provider education. Our contractors receive 24 million calls a year about how to navigate the Medicare program, and so they absolutely funnel that kind of information up to us about what they're concerns are.
And we've expanded our educational Website called the Medicare Learning Network. We are trying to focus very much on self-education for providers. There are frequently asked questions and answers with CMS responses attached, and I'm told this Website gets about 100,000 hits per month from various providers.
On regulatory reduction, as many of you know, there was a great deal of legislative interest in this issue last year. The House of Representatives passed a bill, but it languished in the Senate. I am told that regulatory reform will be taken up again next year in the Senate, so it's possible that there will be some legislative activity.
But that hasn't stopped us. Many of the provisions in the House-passed bill Tom Scully and the Secretary have adopted already in a voluntary fashion. For example, we are publishing our rules and regulations one day per month. It's the fourth Friday of every month, which ruined a lot of people's holiday vacations when rules came out on December 28th, and I think in November, they came out the day after Thanksgiving. So I don't know if that timing was so great. But rules are published once a month.
We are also pilot testing something called the provider update and it also has been called the compendium which is a prospective schedule of the rules that we are going to publish in the next 90 days. So the first one came out on October 1. There's one on January 1. It not only has the prospective schedule of rules, but we have a retrospective listing of every regulation, program memorandum, and other type of letter that we've published in the past 90 days. The idea was to make the process predictable and sensible. I know that Tom Scully has been fond of saying now people don't have to pay lawyers $500 an hour to read the Federal Register every day. So hopefully that level of predictability will serve us all well.
And we're trying to investigate electronic rulemaking as well to make our rules more accessible.
Now, because regulatory reform legislation did not pass, one thing that the agency really wanted this past year was contractor reform to modify our relationships with contractors. And that had to be done through legislation. Unfortunately, as I said, legislation did not pass, but we expect to pursue our goals of reforming how we do business with our contractors to make them have more of a business- like relationship and to change the rules which, at least it's my understanding, are much more restrictive than other federal contracting rules at this point.
In terms of beneficiaries, we've embarked on a pretty aggressive program of helping beneficiaries become better informed about their health care choices and more active in making health care choices. As the Secretary noted this morning, we expanded our 1-800 Medicare number so that you can call 24 hours a day, 7 days a week. We have had an explosion in the number of phone calls that we've received.
We also have had an advertising campaign, if you will, or an information campaign, the tag line of which was Helping You Help Yourself. It was a $30 million campaign starring Leslie Nielsen. You may have seen it on TV. It was played at least I know during the World Series which is about the only thing I saw. It advertises the 1-800 number. It advertises the Medicare and You handbook, and it advertises the use of our Website. I should also point out that there was a series of advertisements for television also in the Spanish language that played on Spanish television as well. And there was a print campaign that was also very effective we thought.
We're trying to improve our Web-based decision tools as well. Those of you who have visited our Website may be familiar with Dialysis Compare where you can look up dialysis facilities and their characteristics according to the ZIP code where you or a family member may live. We have Nursing Home Compare, and we're also doing a lot in the health plan area with Health Plan Compare as well.
Finally, quality was discussed this morning as a great interest of this group, and I know that both the Secretary and Tom Scully feel very strongly about the need to put information in the hands of seniors and family members about quality measures for providers. We have just initiated a five-state demonstration project to look at quality measures in nursing homes. These are agreed-upon, easily understood measures that we hope to expand to all states so that one can look up nursing home measures or they're published in the paper across the nation. We intend, over time, to expand this to other areas as well, for example, home health agencies eventually and hospitals and so on.
With that, I'm going to stop. It gives you a little flavor of how we've been running ourselves 24 hours a day and turn to Mr. Hubbard.
MR. HUBBARD: For those of you not familiar with FDA, I'll say a little bit about what we do. We regulate about a trillion dollars worth of manufactured products a year, a very wide array, foods, OTC drugs, prescription drugs, generic drugs, cosmetics, vaccines, blood, x-ray machines, telephones, televisions, animal drugs in foods, nutrition labeling, cell phones, dietary supplements, and biotechnology among other things. We do that with a budget about equivalent to the Fairfax County School Board across the river here, or for those of you from the Midwest, the Milwaukee School Board, which we believe is a pretty good bang for the consumers' buck.
The agency was started at the turn of the century mostly as an economic matter to set up a fair playing field for economic fraud, people putting things like sawdust in flour, but it evolved over the century into more of a product safety agency.
Generally, for your purposes, we're divided mostly into pre-market and post-market activities. We pre-approve drugs and food additives and vaccines and some other products, medical devices, and regulate foods mostly as a post-market matter. So in the pre-market area, obviously the people think FDA is important to get products to the market, to give patients access to new products, and to ensure that industry is both competitive and its innovation is protected. In the post-market area, we inspect manufacturers usually through something called good manufacturing practices, and we also set other federal standards that we inspect against.
So what is regulatory reform in the FDA context? It's eliminating unnecessary rules. It's reducing burden on industry. It's speeding products to market. It's permitting use of cheaper alternatives in some cases, such as over-the-counter drugs and generic drugs. It's improving information to consumers, to reduce medical errors to provide better information to people. It's improving the safety. Regulatory reform can be improving the safety of products by increasing regulation, by doing new regulations that actually improve safety.
And what have we been doing in the past in terms of reform? We've accelerated our review of drugs and devices in recent years. In fact, now the United States has drugs approved as fast or faster than anywhere in the world and with the same high standards that consumers expect, thanks to an innovative user fee program that Congress enacted in 1992.
We have eliminated a number of unnecessary requirements. We've gone back in the last few years and gone over all our regulations and reduced our regulations by more than a third. So regulations that looked like this 10 years ago now look like that. And that's still a lot but it's not that. So we believe that we have made some progress in reducing that sort of unnecessary regulation. Many of these regs were probably good things in 1940 and 1950 and 1960 but weren't necessary in 1990 or 2000.
We've attempted in recent years as a reform matter to do more outreach to patients and consumers and industry groups so that they can better understand what we're doing. As part of that, I think that we've tried to increase our transparency. It was once difficult to find out the status of reviews of drugs and devices and that sort of thing and where studies were being done and things like that, and thanks largely to the AIDS community, but cancer activists and others, I think we have become much more transparent. We also have a Website now that we believe is remarkably revolutionary in its ability to give access to information about the FDA. It's been voted by two recent surveys as among the best in the federal government. So we believe that transparency is an important activity.
In 1997 Congress finished a long and torturous three-year process of overhauling our statute, and it resulted in something called the Food and Drug Modernization Act. FDAMA, it's called, in the vernacular. That made many, many changes in terms of reform that people have wanted.
Now, where are we taking reform next? First, we need to reinvent our inspections. We're supposed to inspect most manufacturers of our products every other year. We do it less than 10 percent, and we've got to find some innovative ways of reforming that process because the credibility is drifting away for inspections.
And the same is true of imports. The import authority for FDA was actually enacted in 1896 initially, and it basically says an inspector can look at a, say, barrel of molasses. Well, that was fine in 1896. It's kind of hard to look at some of the products that come in today and expect a visual inspection to do much good. In fact, for most of the century, only a few thousand imports came in, but with the recent explosion in globalization in recent years, we now have about 7 million FDA regulated imports each year, and we have 150 inspectors at the border to look at them. You don't need to be a mathematician to figure out that we don't look at but less than 1 percent of imports. And that's a real area for reform.
We need to reform management risk. In the past, people thought, well, you approve a drug or a device. It's on the market. It's there. You're done. What we're learning more and more is that there's a life span of a product. In case of a drug, there are some drugs we have had to pull back off the market or the manufacturer has because we've not been able to manage the risk. And we believe that some of these drugs, particularly for certain patients, could or should have been left on the market so that patients would have access, but the manufacturers feel they must pull them for liability reasons or FDA feels it must pull them for safety reasons. We believe there needs to be some reform in that area.
We also need to use IT more. We've tried to move toward electronic applications of products so that these large boat loads of paper don't arrive. And the Secretary is urging us to do more bar coding that he mentioned this morning, the use of bar codes in a hospital setting to not only ensure more efficiency in use of devices and drugs but also for reduced medical errors. So we will be looking at that.
Now, there are barriers to reform. It's very difficult to reach a consensus in the FDA context because you do get this constant tension between the cost of regulation and the potential risk of deregulating. As David said earlier, the regulations process is very difficult. I was telling the Secretary's folks recently that the bar coding rule, if things go well, might not be finalized until the second Bush term, and in the world of Washington, when we're thinking about the next administration, it's way, way off. So it takes a long time to collect this information.
Just to do the economic analysis on a bar coding rule will take us six months and cost us $100,000. We have to do that. If we can't say what this thing is going to cost hospitals and drug manufacturers and others, we can't even begin to write a regulation. So it's very time consuming.
I'll close now with a few ideas about what you may hear because we've been hearing them pretty much permanently and probably will hear them pretty much permanently from here. First of all, you're killing people, FDA, so speed up drug approval. Or you're killing people, FDA; slow down drug approval.
(Laughter.)
MR. HUBBARD: You need to use more non-FDA reviewers and inspectors. It's a more efficient. It's the way to go. Or you can't use these people. You must have a dispassionate scientific workforce that is not beholden to the person they inspect or whose product they review.
You need to limit all this darned drug advertising. It's causing prescription prices to go up and unnecessary prescriptions to be written. Or why are you trying to limit the First Amendment, FDA? People have a right to say what they want to say. And in fact, advertising is good because it educates physicians about what drugs are good.
And drug and device manufacturers ought to be change their product once it's been approved. They should be able to make these particular little changes because it makes them more innovative and more efficient. And how dare you let these people change these products because it introduces error and mistakes and danger and death into these products.
So those are the sorts of things we hear, and I think you'll hear them when you get around the country.
The last thing we passed out is one example of the information that we've done. We have been attempting to relabel many of the products we regulate. I hope you're familiar with the nutrition facts label on foods, which we're very proud of. This is the over-the-counter drug label which we finished the regulations on two years ago. They're effective in May. Now, I think the good news here is that if you go in a store, you'll find about half of the products now have the new label six months before they're even required by law to have them. We feel good about that. I think it means people are voting with their feet, that we've probably gotten it right. And I think it's self-explanatory that the new label we think is a big improvement over the old label.
We're doing the same thing with the physician label, and we think this sort of information will be a real benefit to patients and consumers and, in the cases of physician labels, even to doctors. Even doctors tell us they can't read the physician label, and I'm sure some of the docs here will agree with that.
So with that, thank you.
DR. WOOD: I appreciate the comments that each of you have made and would invite members of the panel to ask now questions or clarification. Mr. Redding?
MR. REDDING: I have a question for Mr. Cade and then a question for Ms. Fishman.
Mr. Cade, is the interim final rulemaking process one that happens -- how often does that happen, rather, I guess is the question. I assume that that's the process that was undertaken for the upper payment limit regulation. And if that's the case -- a two-part question -- then has the permissibility for good cause been challenged?
MR. CADE: I don't remember specifically, working from your last question up, if it's been challenged and if it was the basis. I don't know. We can get that information for you.
But on balance, most of the regulations that the agency issues, particularly from these two agencies, from CMS and from FDA, more often than not are the notice of proposed rulemaking, the notice and comment variety, and not the interim final. We have on occasion issued interim finals. And as I said, sometimes the statute specifically requires it, or sometimes there is found to be good cause and the agency will go forward.
But with regard to the upper payment regulation, I don't recall if any cases have been filed against the agency on that action. Obviously, if they did, the court would test whether or not the good cause exception was followed.
MR. REDDING: Thank you.
Ms. Fishman, my question for you is actually a request. If you could expand a little bit on the opening listening sessions that you said Mr. Scully was in Mississippi for. A little bit more information about those, if you would.
MS. FISHMAN: There are two kinds of listening sessions, in a way. One is what we call open door forums. Those are meetings. They can be conference phone calls or they can be in person, for example, in Baltimore or in Washington, D.C. where groups are invited in simply to talk to a senior staff person at the agency. The open door forums are staffed by political appointees or very, very senior career staff. Tom Scully staffs two of them himself. He has, I believe, the nursing home group and one other that escapes me right now. But he comes to a lot of the meetings and it's simply to establish relationships with individuals and groups who are interested in kind of saying what's on their mind.
We have 11 of them. We've added a few. They range from a hospital group to a rural health group, as I said, nursing homes. There's a physician group. Ruben is in charge of that one. End-stage renal disease. We've added disabled. We have one on drugs and pharmacies that met recently for the first time.
These individuals who come to the meetings raise issues and we actually try and resolve some of the problems they've had. And we've had some successes. Much of, I think, the MSP work is a result of one of the open door groups.
Tomorrow you're going to hear from Dr. Barbara Paul who heads something called the PRIT, the Physicians' Regulatory Issues Team. That is a type of open door forum, but slightly different than what Ruben does.
Tom Scully also travels very extensively throughout the country and meets oftentimes with a Congressman or Congresswoman or a Senator present and talks to different provider groups and also gets a lot of feedback about how CMS is doing that way and will come back with a whole laundry list of things that people in the agency are then charged to work on.
DR. WOOD: Let me start with Dr. Dennis first.
MS. SCHMIDT: Can I just add something to what Linda said, because we've worked together on this. There are going to be some of those things that come out of the listening sessions that are going to be appropriate to refer to this committee so you get a sense of those. We're trying to not add on to things or duplicate things. So as those are identified in both kinds of listening sessions she described, they'll be fed into this organization.
DR. WOOD: Dr. Dennis.
DR. DENNIS: Yes. First of all, that was an excellent overview, all three of you.
Mr. Cade, though, I'd like to get some more input into the interpretive rules. It appears that some of the changes that have occurred recently in rules that affect the practice of medicine in particular have been subject to interpretation. My question is twofold. One is such interpretations are usually determined by whom? Who makes the decision in order to have an interpretation of a rule? And can interpretations result from requests outside of the agency?
MR. CADE: The development of an agency policy, if you will, or the interpretation of a particular regulatory provision is developed in much the way I outlined in the slide. The agency charged with it, whether it's CMS or FDA or any of the other many agencies within the Department, will work through its internal process within the Department and with the other relevant federal agencies to come up with the agency policy.
The question that you raise, whether or not that interpretation is one that can be issued as an interpretive rule, as a statement of agency policy, or must go through notice and comment, is an issue that we look at in the Department and with OMB to determine whether or not it meets the APA standard for notice and comment or whether or not it meets the agency standard for good cause or whether or not it truly is a simple statement of agency policy which we can issue without notice and comment. So two parts of your question, how is it developed, who make the decision, the decision lies within the agency that's responsible and will be signed off throughout the Department clearance process.
The second part of your question is how is it rolled out. Because people do differ. We may say it's a statement of agency policy, and someone may say, oh, no, you've really crossed the line. This is truly rulemaking and you should have gone through notice and comment. That's where the courts come in if there's a challenge, in response to Mr. Redding's question.
But as we noted in one of the slides, the courts do look at it on a case-by-case basis as we look at it on a case-by-case basis. And our role in the counsel's office is to make to sure that there is a legal justification to support not only the basis for the decision that's made but also the proper vehicle that's used to roll it out whether it's an NPRM or a final rule or a direct final rule.
DR. DENNIS: So depending on the agency, it may be a different internal process?
MR. CADE: Yes, but it is something that is still worked through throughout the Department because there are many organizations within the Department that have an aspect of a particular program.
DR. WOOD: Mr. Cummings?
MR. CUMMINGS: Yes, thank you.
I'd like to commend Mr. Cade for a very elegant overview of the regulation. I had two questions that came up as you were going through that, one having to do with OMB, and let me be quick to acknowledge that you are the counsel for HHS, but we'll just pretend all these other folks aren't here so I can ask you a question about OMB and also about your reference to the REGFLEX process.
With respect to OMB and the cost-benefit analysis that's supposed to inform its deliberations, do you know to what extent, if at all, it looks at, let's say, in the case of providers the cost for training, for collateral documentation, audit trails, and so forth that may be associated with that as opposed to just, say, completing the form or, say, the cost to the patient in terms of time delay, psychic stress associated with that? Is that something you'd feel comfortable addressing?
MR. CADE: I don't know the level of detail and analysis that OMB engages in. This is within their scope and domain. But when the regs are issued as notice and comment and we get comments on those aspects of a particular regulation, it is something that the agency must respond to and typically does when they issue the final rule.
MS. SCHMIDT: I maybe can add a little bit to that, having done some cost estimates or reviewed and helped on cost estimates. We try the best we can to be able to take into account training costs, audit costs some. I haven't seen that quite as much. What's much more difficult is the psychic costs that you have cited, and we've brought those up several times to OMB. That's just something that's really open to debate among a lot of economists about when you get to a benefit of a regulation and can you measure the psychic benefit of the good or the protection, for example. So the tendency is to note that that psychic cost or psychic benefit might be there, but we don't try and quantify it.
MR. CUMMINGS: Could I ask my second question?
DR. WOOD: Yes, please do your follow-up.
MR. CUMMINGS: With respect to the REGFLEX reference, I was not familiar with this heretofore. Can you amplify a bit on that in terms of, if I heard you correctly, a reference to allow small organizations to be treated in a different fashion?
MR. CADE: Not so much in a different fashion. It's the Regulatory Flexibility Act, and it is designed to look at the impact on small businesses and other entities.
MR. CUMMINGS: What's a small business or other entity?
MR. CADE: I don't know the act's definition by heart, but it does define -- and it's actually in the law -- what is defined as a small business. I can get that initial information to you. I don't remember specifically.
But the point of the regulatory flexibility analysis is to make sure that beyond -- as one may think that the agencies or large agencies are simply regulating in large business areas. So there's a particular problem that forces us to look at the impact throughout the business community, throughout the economic environment. So it forces the agencies to drill down.
Oh, great. Thank you, Judy. It's good to have good lawyers in the room.
(Laughter.)
MR. CADE: We can make a copy of this for you, but it does define small business. I won't read through the whole thing for you because I will leave it for you, but it does pick up not only small organizations, it picks up there the nonprofit enterprises and also adds small government jurisdictions which would pick up the towns, townships, and school districts. So we'll leave a copy of this for you. I think there's a table that you'll have tomorrow morning.
But again the point is to make sure that the agencies, as they are regulating in a particular market area or for a particular purpose, drill down into the economic community to make sure that they look at and understand the impact that their policies will have on all entities that play in or would be possibly affected by the regulation that's being offered.
MR. CUMMINGS: I think there are a number of us here who would be very interested in seeing that as we, at least in our minds, may think of a three-person internist group as a small business or a 15-nurse home health agency and so forth.
MR. HUBBARD: My recollection is they use the SBA definition which is 500. These days that's a fairly large firm. What we do at FDA routinely is send regulations to the Small Business Administration on the assumption that they're going to be the best national representative of a small business and clear them through them, so at least you know you have sort of a small business vetting process.
MR. CADE: Right. In fact, all the major regulations go that way to the SBA.
DR. WOOD: Mr. Dollens.
MR. DOLLENS: Thank you, Mr. Chairman.
Mr. Hubbard, would you characterize for me I guess the energy you think the agency is bringing forward really to two principles? One is you mentioned FDAMA a little earlier, the whole concept of what least burdensome looks like in terms of showing safety and efficacy, and then secondly, the energy around global harmonization and mutual recognition agreements specifically.
MR. HUBBARD: I'm not familiar enough with the least burdensome provision to have a literate discussion with you. I know a lot of effort has gone into implementing that FDAMA provision and we could certainly get someone -- as a matter of fact, I think someone here with me could probably catch you after this and knows it real well, but we won't take the time of the committee.
On globalization, I assume you mean harmonization?
MR. DOLLENS: Yes.
MR. HUBBARD: This is the issue, for the rest of the committee, of how we're harmonizing standards with other countries. The agency has been putting increasing amounts of resources in recent years into -- it's the principle of when you develop, say, a drug or device in Europe, why not meet the same standard, use the same forms and otherwise get it on the market in the same way you do in the United States. And there's been a fairly intensive effort in the drug area, and in a slightly different way in the device area, to move in that direction.
My own view is we're many, many years away. Progress is made very year. It's very incremental, but it's baby steps. One day it will be big steps. The baby steps add up. But I don't personally see a truly harmonized system in the next decade, and I think it would take an extraordinary amount of effort to do that. But I do think in given areas, particularly in drug development, there is more and more moving of this to the same so that a company that's doing research, for instance, knows when it finishes a study, it basically satisfies the needs of various governmental entities.
But the ultimate goal of such of an idea would be that once a product is approved in country A, it's automatically approved in other countries. I don't think we're going to see that anytime soon, and that may be a reform idea that you would like to tee up before the committee.
MR. DOLLENS: And mutual recognition agreements specifically?
MR. HUBBARD: I think again you've got me in an area -- I'm not as familiar with the specific MRAs. We've been working on some in certain areas, particularly for inspections in the device area, as you know, but I'm hesitant to give too much information. I'd rather get back to you on that more specifically.
I think the same thing is true there. When we sit with our counterparts in other countries, they say this is the standard under which we would inspect this firm. And we say, well, why are you missing that, that, and that? And they say, well, we don't think we need that, and we say, we do. So it sort of gets down to a disagreement among the scientists. And that's the sort of thing that ultimately needs to get resolved one way or the other.
DR. WOOD: Mr. Fay.
MR. FAY: Thank you, Mr. Chairman.
My question is for Linda Fishman. Thank you for being here. I would like to point out I think CMS does a good job of promulgating regulations. They're, by and large, predictable and you know what's going to happen.
But an area of great concern I think for the industry and potentially physicians as well and perhaps even beneficiaries are what we characterize as subregulation which are these interpretive guidelines that take the form of program memoranda and program transmittals. I think you mentioned there were 417 of those that were issued last year that don't go through the APA procedures. I think a lot of hospitals and physicians feel like they're sort of bombarded by these things coming out every day. I know that Tom Scully has put the word out of let's get these more on a cycle where they're predictable, and I think that's very laudable as an initial step.
Do you ever -- and perhaps that's not the right way to phrase the question, but do you think it could be feasible that perhaps we could get to an environment like we have, let's say, for federal income tax purposes where CMS would publish an annual master Medicare guide of how you're going to bill, how physicians are going to document, and everything that would be effective for a whole year and eliminate the need to promulgate -- not even promulgate, but issue the subregulatory guidance on a frequent basis? Thank you.
MS. FISHMAN: I was very much intrigued by your idea that you talked about earlier about the once-a-year kind of how-to guide, as you called it. We actually have a model of that, a little bit, in how we deal with the managed care health plans where we have gone to a manual on a yearly basis. We are assembling all the letters of direction in one place and issuing them at one time. So the fact that you brought that up, Mr. Fay, made me think that perhaps we could start exploring that alternative.
DR. WOOD: Go ahead, Ms. Shafer.
MS. SHAFER: For Ms. Fishman. It seems like what I've heard so far is a lot of confusion is because of the way things are interpreted and different messages. That might happen from things coming out from CMS but from the different carriers or contractors that you have. So how do your efforts or your visions for contractor reform now -- would that lead you to a more unified message getting out to the public?
MS. FISHMAN: Well, one of the things we would expect is to diminish the number of contractors that we now have so that we'd be dealing with fewer of them. I believe we have something like 49 of them now, and there has been some discussion that perhaps a number more around 20 would be a more realistic number in terms of arriving at some consistency. In order to do that, we need some legislative help in terms of how to compete the contracts, what kinds of benefits, if you will, that we can write into the contract and so on. We have a proposal that we worked with Capitol Hill on last year.
DR. WOOD: Mr. Toby and then I'll come to Dr. Wildenthal.
MR. TOBY: Mr. Chairman, I have a question of Ms. Fishman. First, I have a compliment I guess, and I also have a question.
MS. FISHMAN: I'll take compliments.
(Laughter.)
MR. TOBY: This morning Chairman Wood asked us to identify our biases, and my bias was very simple and that was to do no harm. So I want to congratulate CMS for this past June of undoing the enormous harm that the 1997 reorganization of the old HCFA took place. Under that reorganization, with one stroke of the pen, it really actually undid all of the good that Len Schaeffer had done in 1791.
(Laughter.)
MR. TOBY: I'm sorry. In 1979. Following Len Schaeffer's reorganization of the place to make it a place that's friendly to providers and beneficiaries, we had another 20 years of making improvements upon it.
So we got it all right, and then 1997 came along and the reorganization. At that point in time, it pained me because it was a matrix organization, and no provider unless they were very astute knew who to go to within CMS to get a problem resolved. That's one of the problems that Secretary Thompson actually inherited, an enormous, I guess, crescendo of complaints when he took over because everybody was mad. They didn't know to whom to go. So congratulations for doing that.
One of the dynamics -- the question -- of the government is that every time there's a new administration and you get new orders -- and Secretary Thompson, of course, wants to make CMS and all agencies within HHS more friendly to the public and to providers -- those agencies usually get very much behind what the Secretary is doing. I would suspect, without knowing the facts, that within CMS at this point of time that you have a lot of activity underway with respect to looking at Medicare forms, for example, to make them more readable and reasonable. I would suspect that because so many Medicare Plus Choice plans have left the program. I know Tom is very busy trying to get them to stay in the program. So I would assume that you have underway some kind of initiative, in terms of Medicare Plus Choice burden reduction. I'm just wondering if you can give us a sense of what's really happening internally which has implications, of course, for this committee.
MS. FISHMAN: Yes. As a matter of fact, I had a whole list of administrative accomplishments we've made in the Medicare Plus Choice program since this new administration, but I didn't think I'd have time to go over many of them. I think Heidi, for example, sits on the committee and might be able to tell you some of them.
But we have systematically looked at what kinds of things we can do administratively to make the program simpler and more attractive in which to participate. I think while we have just started the process, we have a longer way to go. One of the things, for example, I mentioned was the kind of compilation of all the program letters into a manual. We send those out for the health plans to review, and we take feedback from them and we change them in order to make it so that everyone understands what the rules of the game are.
I am personally very impressed with how the staff at the Center for Beneficiary Choices meets on a very regular basis with all the leading organizations that represent health plans and we routinely hear their concerns, which are often three typewritten, single-spaced pages long. But nevertheless, we have a system in place -- I just did not describe it -- about how to bring those plans along.
Now, payment levels obviously we cannot adjust without some kind of legislative action, but on the administrative side, I think we've made great strides.
DR. WOOD: And I'll give Dr. Wildenthal the last question.
DR. WILDENTHAL: Could you tell us a little more about what happens after you have cleared a rule and it goes to OMB? Is there a dialogue and negotiation back and forth? Is this a problem? And should we be worried about that or recommending something about that?
MS. FISHMAN: Gee.
(Laughter.)
MR. CADE: Maybe Linda and Bill could answer the middle part of your question of whether or not it's a problem.
(Laughter.)
MR. CADE: But from the lawyer's point, vis-a-vis process, there is a lot of dialogue that goes back and forth. As you can tell from the general outline, OMB is tasked with looking at particular aspects of the rule for its impact not only in the public sector, but also its impact in relationship with other federal agencies. So while the development of regulation within the Department might not be aware necessarily of a collateral effect in Treasury or someplace like that, it is OMB's responsibility to link that together to make sure that the government is speaking with one voice when the regulation is ultimately rolled out. So yes, you can imagine that in that regard, there is a level of give and take throughout the process of educating OMB and as they educate us for our different perspectives as we work to get the rule out.
Whether or not it's a problem, as I said, I will leave to others to discuss. I will simply say that it is something that we work on. It is something that we spend a lot of time working to make sure that we get the regulations out that are necessary.
MS. FISHMAN: Eventually we get them out.
MR. HUBBARD: Well, I think you've got to judge how important rulemaking is to solving problems. I think most regulations, in the FDA context, from conception to an effective date of final rule take four, five, six years. To this Secretary, that's a long time. But remember, it goes twice. From the proposal, it goes to OMB. Then you get thousands and thousands of comments you have to analyze. Then you write the final one. It goes back to the Secretary and back to OMB, and that is a very long process. But I don't think trying to suggest that any of that be dispensed with is going to be very fruitful. The real question is how can it all be streamlined so that the steps happen in some sort of sense of expeditiousness.
MR. CADE: I guess one way that I would look at it is there are steps in the process to make sure that every voice is heard, and they perform a critical function in that regard. But as you look at what your task is, keep in the back of your mind that there is this process. I don't know, as Bill said, where you look to streamline, or perhaps, therefore, the thing to focus on is what's the value added, and it's not just as you see here, the Department, CMS or FDA or any of the other agencies, but that there are other federal agencies that are also involved in this. So perhaps that's the way to look at it.
As you think of a particular issue that you're focusing on, a particular reg or rule that you're focusing on, the issue may not be so centrally focused on one particular agency because we are integrated into the whole fabric of the administration, and so there are other factors that might be competing along with that. So as much as we would be the face and the voice of the particular reg because it's ours, just you should know that the administration is behind any of the regs that we issue and it's a larger issue, more complicated issue.
DR. WOOD: I want to thank very much our panelists, Mr. Cade, Ms. Fishman, Mr. Hubbard, for an enlightening presentation.
I'm prepared to welcome next to the committee session Mr. D. McCarty Thornton, who is the Chief Counsel to the Inspector General.
Now, the discussions that we had around the table this morning actually reflected that though CMS in particular might be the object of many areas of unhappiness, it may not be so much the regulation that is the problem but the interpretation or the enforcement of the regulation that might be more of a problem. So what we hope to accomplish in this session is to help to flesh out more of what happens to the regulation after it is implemented and someone has to make sure that not only the intent of the law is enforced but that where regulation is then promulgated, that in fact the requirements of the regulations are enforced as well.
So I'm particularly happy to be able to welcome Mr. Thornton to the table to address those particular concerns and again help educate us all so we're a little smarter about this process. So thank you for coming.
MR. THORNTON: Thank you very much, Dr. Wood. I'm Mac Thornton, Chief Counsel to the Inspector General at the Office of Inspector General at DHHS, and we want to thank you for the opportunity to address your committee regarding the reduction of the regulatory burden on health care providers and to share our ideas on this subject with you. My statement is being passed around.
The regulatory structure of the nation's health care programs, and Medicare in particular, and resulting burden placed on health care providers is an extremely important issue but also complex and one that defies quick fixes. As such, it must be addressed by all of us, providers, program managers, oversight and law enforcement officials such as myself and the Congress to find manageable and efficient solutions.
I will first describe the role of the OIG in the Department; second, offer principles and a framework for addressing the issue of regulatory burden generally for your consideration; third, identify some Medicare infrastructure regulations that need to be addressed in our judgment; and four, discuss education and outreach to health care providers.
First, the role of the Office of Inspector General. The OIG's mission is to prevent and detect fraud, waste, mismanagement, and to promote the economy, efficiency, and effectiveness of HHS programs and operations. This core mission of ours is carried out through a nationwide program of investigations, audits, and evaluations related to the operation of HHS programs.
The OIG is well known, of course, for our investigations, which are designed to identify and, if appropriate evidence exists, to refer for prosecution cases of fraud. However, our most substantial commitment of resources lies elsewhere and is also far broader in scope. Our comprehensive audits and evaluations are designed to detect program problems in the early stages, if possible, and to define their nature and magnitude. When we find problems, we recommend specific corrective actions to the appropriate policy makers within the Department. We have a long track record of conducting studies and providing advice on such matters. For example, we have performed extensive work on home health care and made recommendations to move from a cost-based to a prospective payment system. We also monitored the accessibility and quality of such services after the payment system was changed. The same can be said for our work in nursing home services access and quality assurance. Thus, our interest in regulatory reform goes well beyond the narrow focus of fraud and abuse and extends to the economy, efficiency, and effectiveness of HHS programs.
We're involved in the departmental regulatory review process in that we can offer comments for regs issued by other components of the Department, and in addition, we have responsibility for a small number of regulations at Title 42, part 1000 of the Code of Federal Regulations. These regs concern primarily our administrative sanction authorities, as well as the safe harbor regulations under the anti-kickback statute.
Topic two, general principles. Medicare provides excellent quality health care coverage to almost 40 million aged and disabled Americans. Also, the vast majority of Medicare health care providers we know are honest, hard-working professionals dedicated to the care of their patients. However, because of the vast amounts of money involved, over $220 billion annually, there are significant vulnerabilities to fraud, waste, and abuse. But concern regarding this latter issue should not interfere with the mission of the Medicare program to provide high quality health care to its beneficiaries.
Therefore, our suggestion is what is needed above all in crafting regulatory policy is balance, balance among the three objectives of meeting the beneficiaries' health care needs, protecting the financial integrity of the program, and minimizing burdens placed on providers. Only by focusing on all three can we run an effective program that meets the expectations of all involved. To accomplish these objectives, it's critical that the policy be expressed in clear and understandable language and the policy be effectively and proactively communicated to the provider community.
A, meeting beneficiaries' health care needs. The beneficiaries have a right to expect prompt and high quality health care. They should feel confident they are obtaining that health care from legitimate, qualified providers. They should be able to obtain timely and understandable information about their benefits and health care choices.
B, protecting financial integrity. In order to ensure that resources are available for providers to receive full and fair reimbursement, which they should receive, and that beneficiaries receive needed care, the financial integrity of the trust funds must be protected. All parties need to work to minimize erroneous claims. In addition, fraud, waste, and abuse should be prevented when possible and remedied when it does occur. Medicare is funded by both taxes paid by participants and their employers, as well as revenue from the general treasury, and all of us have an obligation to protect the financial viability of the trust funds so the program will be there for future generations.
C, burdens on providers. As I indicated, from our work in our investigations, audits, and evaluations, we know that the vast majority of health care providers are honest, hard-working professionals. They need to be able to do what they were trained to do, that is, deliver health care, and not be subject to unreasonable administrative or regulatory burdens. They have legitimate concerns about program complexity, inconsistency, burdens, and hassles associated with the Medicare program.
Sometimes there may appear to be a conflict among these three objectives for sound regulatory policy. It might seem, for example, that buttoning a program down to prevent the wastage of funds through intentional fraud or to stop losses due to careless management will require several layers of regulation, including reporting requirements, independent reviews, accounting, record keeping, training, independent validation, and the like. However, such detailed regulatory requirements often breed inefficiency, burden, time delays, and errors. The answer to this dilemma is balanced, carefully weighing the needs of program beneficiaries and providers and protecting the financial integrity of the program.
Here's an actual example of how this analysis can be applied. Under prior law, home health care for a beneficiary could not commence until a physician had completed a written and rather elaborate plan of care and provided it to the home care agency. Physicians and agencies were put under paperwork and time pressure, making it more difficult for beneficiaries to get the immediate care that they might need. The CMS consulted with OIG in designing a new process in the context of the home health prospective payment regulation. Under the new process, the physician has options such as telephonically authorizing care or providing a simplified written prescription and then providing the complete plan of care later. This new process enhances beneficiary access to care, reduces the burdens on providers, and does not create any unintended potential for fraud and abuse since the physician remains in control of what services are ordered.
Topic three, Medicare infrastructure regulation. Keeping in mind the broad principles that I've just discussed, we should first focus on the infrastructure of the Medicare program. After all, providers relate to the Medicare program basically through the Medicare contractors and the appeal systems for claims disputes. Any attempt to lessen provider burdens and frustrations needs to carefully examine these key functions.
A, improving policy and process among the contractors. CMS administers the Medicare program with the help of approximately 50 contractors, Part A intermediaries and Part B carriers, that handle claims processing and certain payment safeguard functions. OIG has issued a number of reports on the contractors. While the Medicare statute dictates much of how CMS obtains and uses contractors to help administer the Medicare program, some improvements could be accomplished through regulatory reform. Contractor and claim processing procedures could be substantially standardized. For example, contractors' methods for determining and dealing with overpayments could be standardized. Differences among contractors regarding coverage and payment policies could be made more consistent. Medical review and utilization parameters could be more standardized and predictable. All of these steps are important in view of the fact that many health care professionals and enterprises provide services in the jurisdiction of more than one contractor.
In addition, to reduce burdens and frustrations on providers, it is critical that the contractors have the ability to provide timely and correct answers to provider questions. As part of the Department's basic responsibility to express policy clearly and proactively, contractor personnel who relate to providers must be adequately trained and be readily accessible to providers.
B, reforming the Medicare appeals process. Without derogating at all the work of the people involved, the current framework for conducting Medicare claims appeals is ineffective, untimely, and confusing. While fundamental reform may require new legislation, again many improvements could be made through a regulatory action. The OIG has made several policy recommendations to CMS intended to correct certain structural problems such as establishing an appeals process that is dedicated to Medicare and not mixed with Social Security issues; ensuring adequate resources for each level of the appeals process; providing adequate time for a fair and effective process, but ensuring timely and efficient resolution of appeals; providing the opportunity for CMS representation at higher levels of appeal; reviewers to use the same standards which, believe it or not, they do not now; developing regulations or detailed specifications for conducing appeals and modernizing the appeals processing mechanisms.
Topic four, provider outreach and education. As noted above in discussing general principles, sound regulatory policy must be expressed in clear and understandable language and must be effectively and proactively communicated to providers. Health care providers have been vocal in their desire for training and education that will help them understand Medicare rules and regulations. The OIG has frequently made recommendations to CMS to provide additional training on matters that we have discovered to be problematic in our audits and evaluations. The need for continuing training is prominent in the recommendations that we have made in our payment error rate study in each of the last several years.
Specifically, we have recommended that CMS continue to, A, direct that Medicare contractors expand provider training and further emphasize the need to maintain medical records containing sufficient documentation, as well as how to use proper procedure codes when billing Medicare for services provided; B, highlight to Medicare providers the specific procedure codes and DRGs that have the highest incidence of error in OIG audits, as well as those codes and DRGs identified by Medicare contractor payment safeguard projects; and C, refine Medicare regulations and guidelines to provide the best possible assurance that the medical procedures are coded correctly and sufficiently documented.
Now, while the education of health care providers is primarily the responsibility of CMS and the Medicare intermediaries and carriers, the OIG also has an important role which can be summarized briefly as follows.
In recent years, we have embarked on a major initiative to promote voluntary compliance with Medicare program requirements with a goal of reducing erroneous claims. In order to accomplish this goal, we have worked with the health care industry, group by group, to develop model voluntary compliance guidances. They contain recommended steps that health care providers may voluntarily take to improve adherence to Medicare rules. The OIG guidances are very specific in identifying risk areas for a particular health care industry sector. Nine health care industry sector guidances have been issued to date and more are under development.
Another important element in our guidance initiative has been the advisory opinion process. Here, it's through this process that parties can obtain binding legal guidance as to whether an existing or proposed health care transaction runs afoul of the Medicare and Medicaid anti-kickback statute, the civil money penalties law, or the program exclusion authorities. Also, since 1997, the OIG has promulgated nine new safe harbors to the anti-kickback statute and clarified or modified seven existing regulatory safe harbors. These OIG issuances have all been published in the Federal Register and are available on our Website. It's cited in my statement.
Finally, the OIG's final audit and inspection reports, as well as our annual work plan and other issuances, are published on this Website. Health care providers and other interested parties are regularly advised of new OIG issuances through a free list server on our Website, which currently has approximately 9,000 registered subscribers.
In conclusion, the Medicare provider community should not be subject to burdensome or costly regulatory policy. I hope that the suggestions provided here from the OIG will be useful in making the program better for Medicare beneficiaries, protecting the financial integrity of the program, as well as reducing burdens on providers. The examples that I have given show that such a balance of objectives is usually possible. That is what we in the Office of the Inspector General will be looking for in this regulatory reform initiative, and we look forward to this group's proposals.
Thank you very much.
DR. WOOD: Thank you, Mr. Thornton.
Are there questions from members of the committee. Mr. Cummings, please begin.
MR. CUMMINGS: Yes, thank you, Mr. Chairman.
I think all of us here would agree that the balance that you described at the outset on page 2 comports with our thinking too, that meeting beneficiaries' health care needs, protecting the integrity of the program, and minimizing burdens on providers, and though it was mentioned this morning, I think all of us are aware that there is a problem, albeit it perhaps not involving anyone in this room, with fraud and abuse. But I think many of us heard about or spoke to the problem that much of the work that goes on now is not in balance, that physicians and other providers are spending their time as they document, particularly around E&M code issues, for example, are thinking about compliance. They're thinking about billing. They're thinking about litigation. It's almost immaterial what really is in the best interest of the patient.
So the question is, at what point, if at all, do you and your counterparts at CMS get together and talk about are we in balance? And if the answer to that is yes, does that discussion also ever include, as part of that analysis, providers or beneficiaries of those services to, again, assess whether that balance is being met or not?
MR. THORNTON: As I said, we have the opportunity to comment and participate whenever HHS engages in a formal rulemaking. We don't comment through the public record, but before a rule is submitted to OMB, we get the chance to sit down with CMS and talk to them about their rules. Many of their rules we don't have any comments on. Sometimes when rules are proposed, we are looking at them from the point of view of is there an adequate protection from fraud and abuse in the rule. Is it structured in a way that's efficient? Are the burdens on providers too great? So the burden on providers has been a part of the discussion for a long time. Whether it's been an adequate part, that's an open question.
DR. WOOD: Mrs. Ryan?
MS. RYAN: In your recommendations regarding provider outreach and education, you've talked about the need for continuing training and the recommendations that you've made related to your payment error rate studies. Have you considered OIG's role in the development of vendor standards which would encourage the development of software that would help us to develop systems and systematic reduction of those rules. Sometimes the number of persons that we're trying to deal with in terms of continuing education around documentation and coding, issues of turnover, issues of changes in regulations are just overwhelming. But if there could be some of the kind of same attention that you've given to the compliance guidelines and others that might help to incent the vendor community to develop such software support, I think it might be helpful.
MR. THORNTON: Well, thank you. We have not gone into the business, as it were, of reviewing and approving vendor software, but in our guidances we really recognize that that's a way that providers can get the education they need for their people and move towards complying better and reducing their risks of errors for sure.
MS. RYAN: And I'm even speaking to the specificity of clinical documentation systems as well.
DR. WOOD: Mr. Rovner and then we'll come to Dr. Nielsen.
MR. ROVNER: This may be an unusual area, for me anyway, and I think this may be one where we need more regulation. Before HIPAA hit everybody's radar screen, I used to read all of your advisory opinions. I haven't had time to keep up with them anymore.
But one thing that struck me in most of the advisory opinions for fraud and abuse is that most of them your agency finds that there's a technical violation, but it's okay. It really doesn't threaten the program.
When we look at how fraud and abuse affects the delivery system, the ability to put together efficient delivery mechanisms and so forth, it has a major impact on planning and development. Can you enlighten us as to what we as a committee might be able to do or recommend in terms of how you can turn advisory opinions, some of which tend to focus on the same areas, into a way to develop regulations and regulations in the safe harbor area that are actually usable in terms of business planning and delivery planning? Some of them tend to be very narrow which makes it difficult to actually rely on them as a source for solving business development problems and delivery problems.
MR. THORNTON: The advisory opinions are mainly under the anti-kickback statute, of course. And I'm pleased that you've read most of them. I hope you don't take them to bed at night because they're not that interesting.
But in any event, we have two basic types of advice under the kickback statute. The advisory opinions are for specific parties who come with a specific transaction and we're obligated by statute to promptly give them an answer on their particular problem. We post those all on our Website. They're public, and anyone can use them as guidance, but the only people who can rely on them legally for approval of their business transaction are the people who submitted the request. And we have approved the great majority of situations that have been brought to our attention.
We have something else. The safe harbors are intended to give absolute immunity to people who meet the terms of each safe harbor, and those are promulgated as official regulations that go through the entire APA process. And I think that there are now 24 of them. The most recent one was for ambulance restocking. So now we're getting into some fairly specific -- I don't want to say arcane, but small areas, so to speak.
At the beginning of every year, we publish something in the Federal Register asking the provider community for ideas for more new safe harbors, and I think most of the last nine that I referred to in my statement to you were ideas that came to us from the provider community.
Now, I can't pretend to have a say that having a statute like the anti-kickback statute and having this degree of advise is a complete answer to preventing the payment for referrals, which is what the anti-kickback statute is all about. It does involve a lot of paper, but that is what Congress has set out for us and that's where we are.
Did I answer your question?
MR. ROVNER: Yes.
DR. WOOD: Dr. Nielsen?
DR. NIELSEN: Yes. Thank you very much. It's nice to know you're from the government and you're here to help us. I've heard that before.
(Laughter.)
DR. NIELSEN: That was not meant personally at all.
I began to be very uncomfortable as I heard discussion about developing software. I'm a physician. I have a large practice. I have a small staff. To be in compliance, to even play in the Medicare sandbox is extremely difficult and extremely expensive, and it has developed, as everybody around here knows and you know better than I, I am sure, into an industry to advise physicians how to not run afoul of the OIG to the point where there was terrible advice being given, advice that a physician came forward and said we are being given advice to maximize our income in a way that is not right. And that physician was right to come forward.
I'm just getting highly uncomfortable as we're developing more and more industries to help us do what physicians really want to do, which is to see a patient in the office, take care of that patient, render good care, keep a medical record that is used to communicate the care of the patient, not to communicate to some auditor what I'm billing. I need to be able to justify what I'm billing unequivocally. But the medical record has become tragically a vehicle for communication with regulators and not a document to record what is going on with this patient and the thinking that goes into that. I really feel compelled to make that impassioned plea that you remember that some of us are out there trying very hard, and we really don't want to hire another consultant or buy another software package or go to more seminars to learn how to do what frankly many people do very, very well.
After that tirade, I do have a question.
(Laughter.)
DR. NIELSEN: The question deals with EMTALA specifically. I missed the very first part of what you were saying because I went out to speak with Mr. Cade to see whether I should address this question to him or to you or to both, and I believe the answer that I got was probably to both.
There was a lot of discussion this morning about EMTALA and how it is the feeling around the country that the original intent of EMTALA has morphed into something really quite different, and there was a little bit of confusion this morning -- or maybe there was only confusion in my mind -- but I heard some differing opinions as to how that has happened. Part of it seems to be interpretive guidelines. Part of it seems to be enforcement. Apparently not much true regulatory change, as I understand it.
If we were to look at EMTALA as something that was agreed upon as something that has, indeed, morphed into something that does not help patients in the way that it was clearly intended to keep a poor patient from being dumped on another facility, how would we go about saying that? What would be the simplest way of simply saying that? Would we have to trace it through OIG, through judicial decisions, see what the regulatory changes have been, if they've been interpretive guidelines? So assist me in understanding. If in fact this were an issue, what would be the quickest way to get from A back to A where it started?
MR. THORNTON: Okay, thank you, Doctor.
In terms of your first comment about our being here to help you, I'd have a hard time convincing you that our investigations are here to help you. But I hope you've educated you all a little about what the OIG's actual larger effort is.
And I hear you about the medical record. I know that when we make judgments about medical records, such as in our error rate study, we don't have federal employees in a big building downtown doing that at all. It's all done by medical professionals expert in the field. I think that for the most part we look to the degree of medical documentation which is called for by good medical practice. To the extent that the regulatory structure requires the physician to add more to the medical record than what good medical practice would indicate, then a question needs to be asked about how necessary that really is. So I hear you loud and clear on that.
Let's talk about EMTALA. EMTALA's basic statutory enforcement structure is that there can be a termination proposed by CMS against the hospital. That almost never happens because the CMS concern about a matter is usually readily fixed by the hospital in terms of training personnel who made a mistake in turning away a patient inappropriately or putting up the rules and the rights for patients in the emergency room, things like that.
CMS sends most of its cases involving violations to us, to our office, because we're the people who make the judgment as to whether to propose a civil money penalty in a particular case of up to $50,000 per instance of an illegal dump. Now, in terms of the numbers, since 1986 there have only been about maybe 20 civil money penalty cases per year involving EMTALA. In the late 1990's, it got as high as 50 to 60 a year for three years, and now it's back down to below 30. We get several hundred. This year we're estimating 600 cases from CMS of which we will take action only in a very small number of cases.
I'm the person who makes the judgment about these cases ultimately, and I can tell you that I'm satisfied that any case that we actually embark on a civil money penalty is not one of these cases of a misunderstanding between the patient and the medical provider or the receptionist in the emergency room or not, gee, a sign wasn't posted the way it was supposed to be posted. We put those in the piles of hundreds and hundreds that we don't take action on. We look for cases for an enforcement action where the person had a medical emergency, didn't get the screening, was asked for a deposit before they would get a screening, things like that. That's where we try to limit our enforcement action.
Now, CMS recently made some changes to the EMTALA regs earlier this year in the context of the physician payment update reg which expanded the reach of the EMTALA statute way beyond the emergency room to satellite facilities around the cities that were billed through the hospital's provider. I think that that's a fair thing for you all to reevaluate frankly. I'm not here today to take a position on that, but whether all facilities a hospital might own and use its billing number for are really legitimate places for a person to go who has a medical emergency is a fair question I would say. So I think that much of the policy which I heard about that providers have a problem with is a function not of the statute, which I agree with you the basics of the statute are sound and the reach of the statute has been expanded quite a bit.
DR. WOOD: We're a little bit behind schedule, but I would like to accommodate two final questions. First, I'd like to recognize Mr. Bloom, and then I'll give the last question to Mr. Schaeffer. Then we need to move on.
MR. BLOOM: Thank you. The question will be real quick.
Are you familiar with the current OIG investigation into the FDA's new drug approval process that's currently being conducted?
MR. THORNTON: Personally I'm not.
MR. BLOOM: The reason I'm bringing it up, just for the committee, is for information. I believe the report is supposed to be finished early this summer, and it would probably be rather useful information for this committee to have. So if we could find out an update on that or even if we could get something in process, that would be very useful.
DR. WOOD: We'll make a note of that and we'll get that.
Len, last question.
MR. SCHAEFFER: I wanted to compliment you on the very rigorous presentation.
MR. THORNTON: Thank you.
MR. SCHAEFFER: I'm very impressed by all the things you do in addition to your audits and investigations. But the fact is that those audits and investigations do go on, and from the point of view of government employees, they inspire fear because the worst thing that can happen is an OIG report that says this department or this group of people didn't do something. On the other hand, you have the ability to enforce fines and other penalties, and so people outside of government fear what you do. So although you're all nice guys, there's an awful lot of activity inside government and outside government that is focused on avoiding a negative finding from an OIG investigation. An awful lot of activity. Dr. Nielsen mentioned that.
It's my observation that one of the reasons we have this sort of slavish interpretation, people bending over backwards to apply things that on their face may be a little dumb or may not appear to be the most appropriate way of doing business is fear of some third party coming in and issuing a negative report or a big fine or taking back a whole lot of money.
One of the things that I think Dr. Barron mentioned this morning was the notion of can't we use common sense. I just wonder if you have any comments on what degree of freedom or what ways we could encourage people to use common sense when, if my observation is correct -- and it may not be, but to the extent it is correct, when indeed people are telling themselves, I can't use common sense, I got to go by the book or these guys, whoever they are, are going to come in and take a lot of money away. Or worse yet, the thing that doctors fear more than anything else is the embarrassment of some adverse finding in the newspaper or among their colleagues. I mean, it's terribly embarrassing to have a negative report, independent of what the fine is.
So the question in my mind for you is to what extent do you have ideas that would allow people to inject so-called common sense, which basically means, here's the rule, its application right here is pretty dumb. We don't really want to give everybody a color blindness test once a month, so we're not going to do it. That's inconsistent with the rules. Is there room for common sense?
MR. THORNTON: Well --
MR. SCHAEFFER: Thank you.
(Laughter.)
MR. THORNTON: I appreciate your bringing up the question of fear of prosecution because we're very concerned that that has been overdone. And if I could talk about that for just a minute.
Honest providers should not fear unjust prosecution for several reasons. Under the law that we help enforce, providers are not subject to civil, administrative, or criminal penalties for innocent errors or even negligence. Our primary tool is the Civil False Claims Act and it only covers offenses that are committed with actual knowledge of the falsity of the claim, reckless disregard, or deliberate ignorance of the truth or falsity of the claim. The False Claims Act does not cover mistakes, errors, or even negligence.
Now, if a provider does submit an erroneous claim, even negligently, that does not subject the provider to penalties under the laws that we operate under. If a claim is submitted in error, there may have to be an adjustment as to the amount paid by the program but not with penalties. In fact, most of the adjustments about erroneous claims, 99 percent or so, are resolved at the carrier and intermediary level. They don't ever make it to OIG. We have plenty to do without jiggering and making sure that all of the errors specifically with providers are made accurate. Our attention is devoted to where there is knowledge. As was referred to earlier, there are people out there who are trying to rip off the Medicare program. We're very mindful of this distinction between errors, mistakes, and negligence on the one hand and fraud on the other.
I'd also like to talk about, just briefly, the coordination of law enforcement efforts. There's the Department of Justice. There are the Medicaid state fraud control units. There's the OIG. There is a coordination mechanism for all of this, and it was established in 1996 by the HIPAA legislation. That legislation put in a management structure to coordinate this, and if there are instances of more than one law enforcement agency operating with respect to a provider, we'd like to hear about that because that's not the way it's supposed to happen.
It's not supposed to happen that providers are held for penalties where there is just negligence or something less, and if that happens, we'd like to hear about that too.
But it's important that the fear, the rumors, the secondhand knowledge not overly influence what you all conclude about the law enforcement effort if, in fact, you conclude anything. Please, if you are going to look at this area, make your conclusions based not on rumors and generalizations about health care enforcement officials and their motives that you might hear about. Make those judgments on the basis of facts and of actual examples. And we would like to interact with you on that because we do want to put an end to this abnormal sense of fear. We don't ask for fear. It doesn't accomplish anything. It just makes people afraid to do business with Medicare. That is not what we are asking for.
What we are asking for basically is for the rules to be clear and for people to file right-coded claims and that errors are adjusted at the carrier and intermediary level. There always will be a few probably who are out to rip off the program, and that's really what our job is. We really don't want to have anything to do with most of you. Honestly.
(Laughter.)
MR. THORNTON: And I assume that we won't.
DR. WOOD: We'd like to be friends, though.
MR. MARTIN: I gather the feeling is mutual.
(Laughter.)
MR. THORNTON: I think that's what we should be aiming for. But this is a start of a dialogue between the Office of the Inspector General and your group. And Dr. Wood, I thank you for the invitation, and we look forward to a continuing relationship with your committee.
DR. WOOD: We appreciate the discussion and dialogue very much, Mr. Thornton. It's from my perspective a very good start. We have gone past time a little bit, but the discussion was in fact quite good.
While we're welcoming to the table our next panel to finish the day, I need to make a couple of other announcements. But thank you again, Mr. Thornton.
MR. MARTIN: Mr. Chairman, I realize that we're past, but I just wanted to verify something and clarify. The question was as to flexibility on the common sense front as to whether something applies or not. I believe because you said you want there to be a specific rule, a clear rule and to follow that, then the answer has to be no to the question that was asked.
MR. THORNTON: Oh, no. The answer is absolutely yes.
MR. MARTIN: Thank you.
DR. WOOD: Well, that will leave us something to discuss.
I'd like to welcome to the table now several guests. Jonathan Blum of the Senate Finance Committee, Pat Morrisey of the House Energy and Commerce Committee, Dr. Murray Ross, who's Executive Director of MedPAC, and Leslie Aronovitz, Director of Program Administration and Integrity Issues in the GAO.
There is a lot that has been going on elsewhere, and we do not want to repeat or duplicate effort. So before we get too much farther in this process -- Linda Fishman earlier today talked about legislation that is in place, and you have two congressional staff members here who can give you a good perspective. Then from the perspective of both the GAO and MedPAC, there is a considerable amount of work that has been underway there which we thought would be helpful to share with you.
While they're preparing, let me make what I consider to be an unfortunate announcement, but our support contractor's computer and printer walked off after lunch from a conference room in the back. So the hospital security and police have been notified. But if any of you saw anything suspicious, would you please let one of our staff members know or the hospital security staff know.
MR. TOBY: May we stretch for a moment?
DR. WOOD: Yes. As a matter of fact, you may stand up and there are some refreshments over here at the side table that I invite you to partake of while we're getting the group organized.
(Pause.)
DR. WOOD: As I mentioned earlier, I'm pleased to welcome for the last session of the day some folks who have been working on lots of different things. I understand from a discussion with staff that certain aspects of the bills that at least in one case have passed one house of the legislature and another are sort of constantly in flux. So what you will hear today I think is a very good perspective of what has happened in the legislative arena. In fact, I think it is a good point for us to think about our future direction.
Mr. Blum to my left of the Senate Finance Committee will begin the discussion and then Pat Morrisey from the House Energy and Commerce Committee will follow.
I'm sorry. Mr. McManus, where are you? I didn't see you there. I remember you from my earlier visits, and I apologize for missing you actually. But welcome as well.
So Jonathan, you get to lead.
MR. BLUM: Well, thank you, Dr. Wood. I want to thank all of you for coming to Washington to help us form this debate on how we can try to reduce paperwork in the Medicare program specifically.
The first point that I want to make is that trying to find ways to reform CMS is one of Senator Baucus' top priorities. During staff briefings for Medicare with Senator Baucus, he always asks how can we fix CMS. We've pretty much come to the conclusion that four areas need to be addressed with CMS reform.
The first question is we hear from providers that they get too inconsistent answers from CMS, from the contractors, from the IG's office. So trying to find ways to bring more consistency to how providers interact with the program.
Second, we've heard from beneficiary groups, from provider groups that the current Medicare appeals process is broken. It takes far too long to resolve appeals. We want to find ways to reduce these time frames.
Third, we've heard from providers that there is too much inflexibility currently in the program to pay back overpayments. Oftentimes providers get a demand letter from CMS or the contractor saying you owe us $200,000 tomorrow. Pay up. And providers want more flexibility in trying to pay back these overpayments.
Fourth, we've come to the conclusion that in order to fix CMS, you have to fix the contracting process, that CMS needs to have contractor reform in order to truly fix the program.
But during these discussions last year, we sort of faced three constraints in trying to come to policy conclusions on how to fix these four problems.
The first constraint that we faced last year is there's a true lack of data on how we can fix things. While we hear horror stories from providers, we don't have good data on how to address some of these concerns. MedPAC, GAO, and CBO have been doing some very important work for us, but still don't have clear data on how we can fix these problems.
The second constraint that we faced is pretty much anytime that you loosen the controls on CMS and give more breaks to providers, you run the risk of trust fund solvency questions. The past couple of years we've seen the Medicare trust funds become more and more solvent over time, and we are very concerned about giving more flexibility to providers at the cost of the Medicare trust fund. So we want to find ways to help providers to help beneficiaries but, at the same time, not threaten Medicare solvency.
The third constraint that we faced is that this program is a national program, but at the same time, it has local flexibility built into it. So when you want more consistent answers across the country, you need to preserve the fact that this program is very local, that it has rules for rural providers in rural states. We want to preserve that local flexibility.
So last year with Senator Baucus, Senator Grassley, Senator Kerrey, Senator Murkowski, we developed Senate bill 1738, the MARSHA bill we're calling it, that would do four things.
Senate bill 1738 would require that CMS focus more time, more energy on beneficiary education and provider education rather than just provider enforcement efforts.
Second, the bill would take first steps towards fixing the appeals process. It doesn't fix it, but it takes steps towards that end.
Third, it grants CMS a flexibility to pay back overpayments granting a provider up to three years to pay back current overpayments.
Fourth, it grants CMS new contracting authority to instill more competition with the contractors in order to have a more dynamic process rather than a cost-based process that's in our current law.
With that, I'll turn it over to Patrick and to John.
One last thing. As far as timing on our bill, we had hoped to pass this bill last year, but due to some of the stimulus debates that were going on, our work got delayed. So our hope in the committee is to pass a bill very quickly this year. Dates haven't been set for sure but sometime this spring, hopefully, we'll have a markup and try and pass this bill out of the Senate this year.
MR. MORRISEY: Thank you. We're very pleased to see the Secretary undertake this effort, and I'm very proud to be here today to talk about the Energy and Commerce Committee's role in reducing regulatory burdens and complexity.
As many of you may know, our committee has placed a great deal of emphasis on this issue in recent years. A little over a year ago, many of the committee members, when they came back, as the new session of Congress began, indicated that they wanted to make regulatory relief and reducing complexity one of their top legislative initiatives.
After Congress had passed HIPAA in 1996, the BBA in 1997, the BBRA in 1999, BIPA in 2000, I think many members of Congress were realizing that the shear volume of legislation was starting to significantly contribute to the complexity of regulations that providers have to navigate from. Four major pieces of legislation in five years. So finally, in 2001 members of Congress wanted to take a step in a different direction, and that's why we began an effort to try to focus on how we could reduce regulatory complexity.
The first thing that we undertook during that effort was to reach out to the true stakeholders in the Medicare process. Those are providers and patients. So we sent out a survey to tens of thousands of providers and beneficiaries, and we were able to obtain over 3,500 responses. Those responses were revealing. Lack of data was clearly a problem in recent years as we were trying to put different pieces of legislation together, but in the informal survey that we took, we were able to learn a number of things which I'd like to tick off right now.
One, provider enrollment. Form 855, which we all know about, was very difficult to work with and had been revised frequently in recent years.
Two, there were fundamental inconsistencies between the conditions of participation and the payment rules. So if you're a provider trying to navigate your way through the system, it became very difficult because if you complied with one rule, then you could be in violation of another.
Three, it was more difficult to work with the government system than that with private insurers. That's what we heard from the providers.
Four, providers had found it extremely difficult to obtain consistent information from carriers, fiscal intermediaries, and CMS.
So when we heard this and we knew about the decline in the regulatory environment in recent years, we set about to change that. Now, for the total amount of time that Congress has spent dealing with regulatory matters, it can be quite staggering. Much of our time in recent years is spent in response to a lot of the regulations that are issued over at CMS.
So this year we wanted to change the dynamic, and we were fortunate to work with the administration who put a great deal of time and effort into changing the environment under which providers and beneficiaries operate. That trust relationship that we're starting to develop matters significantly because when Congress begins to have trust in the administrative branch, then they do not feel the need to legislatively micromanage how payment rules and conditions of participation will operate.
So we began to work very closely with them, and in fact our committee and also the Ways and Means Committee sent a series of letters to CMS and to HHS starting to focus on areas that could really improve the environment for providers and beneficiaries. And we were pleased to see that they started to take those suggestions into account, and we've really developed a good working relationship with them.
But in addition, we knew that some legislation was needed. So all of this year, after we obtained the survey information back, we had an open stakeholder process where we worked with literally hundreds of different providers and we were able to put together a piece of legislation. Once again, we worked in close conjunction with the Ways and Means Committee to move a good quality product through, taking some of the items that Jonathan had mentioned as well and a couple other additional matters as well, things that may seem like small items, but ultimately for providers will have a tangible impact on how they do business on a daily basis, something as simple as how long should it take for an interim final rule to be finalized. Well, we know from some of the Medicaid rules and the drug pricing rules, we know from the Stark self-referral rules that these interim final regs, which have the effect of a final regulation, were in effect for a long period of time, and there was so much uncertainty on the part of providers. So that's a little step, but it's very positive.
Also, we ensured that providers receive a general written response from CMS within 45 days. One of the complaints we heard most often is that there was a significant inconsistency between carriers and FIs or that you get three different phone calls saying three different things from three different people. So we set about to change that.
We hope that the legislation that we passed in the House will get taken up in the Senate quickly because these are important reforms that should be enacted right away. But also, these are reforms that are only a first step. They're a down payment on fundamental reform.
Regulatory relief is important but the only way we'll really be able to significantly reduce complexity in the Medicare system will ultimately be to move to a system modeled after FEHB because only when you move away from the administratively dictated, price administered system, you can have more flexibility and you can have providers and plans based upon what they bid. That's ultimately the direction that we're hoping to move here in Congress, and we really commend this process because we think this provides everyone with a tremendous opportunity to work with the committees and most importantly to work with the administration on this critical project.
DR. WOOD: Patrick, thank you.
John McManus.
MR. McMANUS: Good evening. My name is John McManus. I am maybe not recognized. I'm wearing a pink sweater today.
(Laughter.)
MR. McMANUS: We're still on recess there and we're just getting geared for another fun year of Medicare reform. I know you guys will all love that.
We're delighted that the Secretary has initiated this working group on regulatory reform. I think it really recognizes the need to make change and to do it quickly.
As Patrick said, part of the regulatory complexity derives from the fact of Congress' micromanagement of the program. When you pass four of five significant bills -- we neglected to mention the 1998 bill which had some home health and ESRD issues in that -- that will result in enormous regulatory complexity. Right now there are over 130,000 pages of regulations in Medicare. That includes, of course, program memoranda, things of that nature, carrier manuals, and all these kinds of things that providers must confront. It's really incomprehensible and it's gotten to be an unworkable situation for most of the people who are out there serving the Medicare beneficiaries.
So Mrs. Johnson, as the new subcommittee chairman, took regulatory reform as her number one leading issue for 2001. We held a series of hearings that was followed by a bipartisan Johnson-Stark letter. We hadn't done a lot of things bipartisan in the Ways and Means Committee in a while. It was significant that we sent a 17-page detailed letter of recommendations to the Secretary on what they could do administratively with the support of the Ways and Means members. That was followed by legislation which we introduced in August and then moved through the process, and eventually, working with the Commerce Committee, it passed 408 to 0.
I was delighted to hear that Jonathan wants to move a bill in the Finance Committee. We were a little disappointed that we were unable to get that done. I think when you pass a bill 408 to 0 and your concern is what is the impact on the trust fund and the answer is zero, when we had a zero cost from the CBO, we wonder why things can't move in the Senate. It's very frustrating for us, but we're delighted to hear that we may get some action on that this year.
(Laughter.)
MR. McMANUS: In that context, using the zero score as the structure in which we sort of analyzed all the proposals out there, because many of the provider systems have no rules and regulations and they just do whatever they want. Obviously we can't do that and we don't want to violate the taxpayers' trust in the program and those of us who have to oversee the program. That really weeded out a lot of the bad proposals that were out there.
Working with Energy and Commerce, we came up with a very comprehensive bill, regulatory reform, for example, consolidating promulgation of regulations to once a month. Right now the providers are confronted with random regulations coming in day to day, a progression of regulations from a proposed rule to interim to final. As Patrick mentioned, eight years and nine years waiting for the Stark self-referral law to become law was a bit frustrating and very confusing. Lawyers made a lot of money out of that structure, but I don't think a lot of providers were able to do it.
But the basic thrust of the legislation was to create a more collaborative relationship with the providers and with the agency. Right now there's a confrontational feel that a lot of the fraud and abuse provisions which Congress enacted in HCFA -- or CMS, I should say. Call me Scully. Is that the new acronym we're using?
(Laughter.)
MR. McMANUS: It's been a long day for you guys. I wanted to try to lighten things up here a little bit.
(Laughter.)
MR. McMANUS: Where was I?
(Laughter.)
MR. McMANUS: We were trying to create a working relationship with the providers so that, for example, we would have an education process for small providers. It's very important to Chairwoman Johnson that people could open their book and say, what am I doing wrong, what are the types of things I need to do? A lot of the small agencies, like a home health agency, have got 10 nurses and 1 one person running it, and maybe the wife with a high school degree is doing the books. They don't understand, when they get a 300- and 400-page regulation in the door, how to comply with that. And if they get someone to go out there, as they do in the states with a lot of the OSHA regulations, and say this is what you should be doing. This is how you're supposed to be filling out these OASIS forms, these types of things. Just making more of a working relationship because people want to do the right thing generally, but they don't know how to sometimes. It's very complex.
On the contracting reform, I agree with Jonathan. It was critical to making the agency work better. It was an initiative of the Bush administration. We thought it was important that it go with the regulatory relief bill. We want to get rid of -- if I can use the Japanese word -- the keiretsu system where you have a cozy relationship between the government and the providers and move to a more competitive bidding relationship who are not nominated by the providers and they don't have 30-year contracts with the government, but something that comes up every five years and people have a chance to bid on that structure and they're not regulated into the whole Part A and Part B fiscal intermediaries and carriers, but they can participate in the whole, entire program, which makes sense. After all, this health care is getting more integrated.
The appeals issue is a critical one for our chairman, Bill Thomas. We passed a bill in 2000 which still hasn't been implemented. We're quite frustrated with that. We worked with the Energy and Commerce Committee. They brought a lot of good ideas to the forefront on how we could make the policies which were passed but not yet implemented work better, for example, making sure that the independent QWIX, as they call them, who are reviewing medical necessity, have the type of independence and expertise to make good decisions.
Secondly, on extrapolation, that's been a big concern of many of the providers that someone would see these three or four plans were billed wrong and they'd extrapolate over a large number of claims. We thought that was critical that there had to be a high degree of payment error before you could use the extrapolation process.
Lastly, we had a number of provisions in the bill dealing with medical technology and how that's incorporated into the Medicare program. For example, the creation of a council of technology innovation. So someone who deals with coding is talking with the people who are dealing with the coverage and so forth and the FDA coordinates more with CMS as you have two structures for going through the review and approval process before technology actually gets to the senior is paid for.
It was a very comprehensive bill. It came out at a zero score, passed 408 to 0. We think it ought to get done. We think it's the beginning of the process. A lot of the things that are in the legislation frankly could be done administratively. I think you folks will have a good chance to make those recommendations yourselves, and with your help, we can get those enacted and into law and out there helping the providers.
My boss, Chairman Thomas, has once said, what is politics? He defines that as the process of deciding who gets what, when, and how. When you look at the Medicare program, the who, there are really three groups, the providers, the taxpayers, and the beneficiaries. This is a big thing that can be done for all three of those groups, but in particular the providers who are serving the beneficiaries. We think it ought to be done now and as soon as possible. Thanks.
DR. WOOD: Thank you, John.
I'd like to move on now to get the MedPAC and the GAO perspectives. So I'd invite Dr. Ross to lead and then Ms. Aronovitz.
DR. ROSS: Thank you. I'm pleased to be here on behalf of the Medicare Payment Advisory Commission.
Somewhere in your copious briefing materials is a copy of our report that came out in December, and I guess my job this afternoon is to say enough about it to get you to read it.
(Laughter.)
DR. ROSS: Unlike John, I would like thank the Senate for its lack of action in November and December because as executive director I was living in fear that at the last minute legislation would come along and make this thing that we had worked on for two years moot.
(Laughter.)
DR. ROSS: But that's the difference between self-interest and national interest.
Our charge from the Congress -- and I'm roughly quoting here -- examine the complexity of the Medicare program and the burden it imposes on patients, providers, and health plans.
Some folks envisioned us doing kind of an accounting, a page count. We took a little bit different tack. We wanted to assess the sources of discontent with the Medicare program and its regulatory regime. We wanted to look for some common themes, and we wanted to provide some sort of broad brush set of principles for ways to address those. We took a two-pronged approach, both empirical and analytical, and I'll talk briefly about those.
Our empirical approach. Maybe that's not quite the right word. First of all, we started off and we did a whole series of site visits. We went out to various hospital systems, home care providers, physicians' practices, and did kind of soup-to-nuts meetings, asking them from admitting a patient to discharging to sort of burying the books, what's your involvement with Medicare like. What works? What doesn't work? We asked folks to compare things with private payers. Where is Medicare a better payer to deal with? Where is it a worse payer?
The themes that emerged from those were variability. Medicare's coverage is all over the lot, so people would tell us what's working in one state is not working in another. They talked a lot about what I would term low value activities where you are being required to administer for the sixth time in eight weeks a Medicare secondary payer form to an 80-year-old widow. Information overkill, whether that's through Medicare's patient assessment instruments or other things. And then ultimately what makes Medicare different from other payers. Well, Medicare carries the big stick, and this is something I know you've talked about a lot today and it's concerns about investigation, prosecution that may or may not be overblown but are, nonetheless, out there.
We tried, in the course of the summer, to solicit input from a broader group of people that we couldn't get out to see. We published a Federal Register notice asking for testimony for a hearing that was scheduled, unfortunately, the week after the terror attacks in September and was never held.
One thing of interest, however, is that in response to our Federal Register notice, we got something like two dozen letters. I personally was expecting on the order of at least 1,000. So there's a lot of complaining out there, but when it comes to actually sort of jotting things down and documenting problems and helping us think up solutions, we had a little less feedback.
I'd also note one other thing concerning our site visits. That's something we do routinely at MedPAC to help us to provide information to a lot of the activities we undertake. We did a lot of work on rural health care last year, which also involved site visits. The first thing we heard from most providers again pertained to regulatory burden not to payment, which is usually what I hear about from the trade groups in town.
For our analytical approach, we wanted to first think about Medicare's goal and what are some of the sources of complexity that are involved in either attaining that goal or perhaps preventing us from attaining it. The goal -- and I think something to keep in mind with every discussion -- is that we're trying to ensure access to high quality care for something like 40 million beneficiaries in 3,000 counties, all without imposing undue financial burdens on either taxpayers or beneficiaries. That's a pretty tall order.
The sources of complexity that we identified that come up in meeting those goals. First of all, it's scale and scope of the Medicare program. There's no private payer out there who comes close to the number of people, the number of services, the geographic coverage that Medicare offers.
The history of Medicare, that dates back to the split between Part A and Part B, introduced a lot of complexity and burden both on the provider side, as well as on the beneficiary side.
The means of handling claims payment and claims processing again has a historical antecedence that we argue later is perhaps no longer needed.
The introduction of prospective payment. This is something that was begun in the early 1980s and was going gang-busters with the Balanced Budget Act to try and reduce spending growth under the Medicare program. What that has meant, however, in terms of regulatory burden, is a lot of the implicit factors that were buried inside cost reports and reasonable charges we now have to make explicit. We have to collect information we didn't have to collect previously. We have to assess patients to try and assess resource needs. We have to do something about risk adjustment for Medicare Plus Choice plans.
The changing marketplace that Medicare confronts, accommodating new technology, handling behavioral response whenever Congress enacts a new law and CMS implements it. Providers inevitably respond to it which leads to additional feedback which usually leads to either additional legislation or additional regulation.
We've had an expansion of objectives for the program. We're very explicitly making quality of care an objective of Medicare now in a way it wasn't in the past. We have very explicitly made a choice of private health plans a goal that was not one, let us say, 10 years ago.
And then as my colleagues from the Hill have alluded, a principal source of complexity in Medicare is the political process that constantly changes the rules, and we've had legislation almost every year to keep feeding that particular fire.
In thinking about these sources of complexity, we tried to distinguish what we term the irreducible from the reducible sources. The irreducible are those factors that can't go away, I guess, without compromising our objectives. We're not going to reduce the scale and the scope of the Medicare program, I don't think. Prospective payment systems are going to be around for the foreseeable future, and as policy makers, we can't do anything about technical change and the dynamics in the marketplace.
Instead, we could look at the reducible factors that are out there where Medicare could reduce burden and maintain its objectives. There's a number of arenas that one could think about. I'll just go through two that we thought about.
One is on information collection. We've dealt with in some of our previous reports with respect to patient assessment, particularly in the post acute care arena. I know that CMS is addressing a number of others to stop collecting information that either isn't needed for payment purposes or isn't needed for quality monitoring purposes.
But we focused our report on the interaction between providers and Medicare. This is the face of Medicare to the provider world, whether it's dealing with the fiscal intermediaries or the carriers. I wanted to run through just briefly our recommendations. I have to leave you something to read.
We made seven recommendations, the first of which is to eliminate local descriptions of policy and regulation, that is, to get rid of local medical review policies, and to move to a standardized system of claims processing and to give CMS the authority to contract as necessary to achieve this goal. This, we hoped, would get rid of contradictory or inconsistent coverage decisions out there. Hopefully, one would move to something that's a little bit more science-based about making those decisions and a little bit less random.
We recommend that Medicare provide binding and timely written guidance to plans and providers, basically allow good faith efforts to comply with regulations, and to reduce those, you know, I called three different phone numbers and got three different answers. We would like to cut down on that.
We recommended reducing routine administrative requirements when good performance is sustained. There's typically a philosophy of you do everything all the time, whether it's auditing or anything like that. Instead, we ought to be a little bit more strategic in our approach there and trying, as much as possible, to focus administrative requirements on places and providers where we believe there to be problems.
We recommend improving consistency and eliminating redundancy in enforcement activities. I heard Mr. Thornton speak earlier, bring us the documentation that these are all coordinated, and I can't say that they're not, but I will tell you that is a theme that we heard over and over and over. So again, if there's not a reality to be addressed there, there's certainly a perception that people get multiple visits. Why do I get audited by three different entities? And I'm no sooner done with one then the next batch is in the door.
We recommend that Congress give CMS reasonable timelines and resources to develop and test regulations. I'm not quite sure how you implement this one if you do legislation every 12 months because I don't know where the timelines come in. But clearly it's an agency that has been overwhelmed in the past couple of years by the demands put on it and our commission has recommended several times expanding the financial resources and also making the timelines appropriate.
We recommend that obsolete regulations be sunset. We're told that there's already a process in place for doing that, but a reasonable perusal suggests that if there is, it's not working.
(Laughter.)
DR. ROSS: I won't bother to go through the examples, but a variety come to mind, whether it's the ACRPs that Medicare Plus Choice plans are required to file that are predicated on having commercial enrollment when, in fact, you no longer have to have commercial enrollment to be an MplusC plan. I'm sure you will, over the course of your deliberations, get a long list of obsolete regulations.
And where they cannot be sunset, perhaps they can be modified. In a world where you go from cost-based payment to prospective payment, you may need a different set of information to come out of your Medicare cost reports than you needed before. That's not to say you get rid of them, but perhaps you can streamline them if you're interested solely in financial performance rather than documenting claims.
And, finally, we recommended giving CMS the resources to modernize its program administration. I guess you can hear that plea over and over, to give the agency more resources.
So thank you.
DR. WOOD: Ms. Aronovitz?
MS. ARONOVITZ: Thanks so much for inviting me here today. I really appreciate to be able to talk to you about GAO's role in assisting the Congress in meeting their agenda in regulatory reform.
When we think about regulatory reform in the current environment, we really think about two things in the Medicare program. The first is to develop systems and approaches to run the Medicare program as efficiently and as effectively as possible. That goes without saying. But it's important because the systems and approaches that are currently ongoing leave a lot of room for concern, and we're hearing that concern over and over again.
The second one is to minimize the burden on participants, and that's all the participants in the program.
But to translate that, I would say that GAO's efforts to assist the Congress this year and the last few years actually have been really in two areas, and one is in contracting reform, and the other area is in communications and interactions with providers and beneficiaries.
In the current debate on regulatory reform, when you hear John and John and Pat talk about their efforts, what really is the most stunning aspect of their efforts is really to try to get the kind of information that would help them make good decisions and therefore good legislation.
I am very concerned about the quality and quantity of information that we have right now to make the kinds of decisions and legislation that you need to have. We find that over and over again. Information is golden. There's a lot of data out there. There's not that much information. I'm sure you are aware of the 6-year-old who is going to impress her father and started watching a baseball game. The phone rang and the father left and asked the daughter to keep watching the game to give him some information. When he came back, he said, what's the score, and she said, 6-4. And he said, great. Who's winning? And she said, 6.
(Laughter.)
MS. ARONOVITZ: That's data. That's not information. And too often we find ourselves in situations like that where we have some information.
The other problem with information is that there's a real time lag between legislative initiatives and CMS initiatives. We find that our role is to try to fill that gap and provide empirical data and objective data in the most timely way we can.
I'd like to just spend a few minutes -- and very few because it's a very late hour -- to tell you some of the projects that we've worked on recently and some of the efforts that we have ongoing that we think will be pretty important in assisting the Congress in their decision making process.
There's a document that I think you've been referred to or have, and we call it 18 questions. But basically the reason why I thought it was such an interesting document -- and actually it really involved no special substantive work on GAO's part except from a collection standpoint. I think the IG and Justice and CMS were really instrumental in helping us put this together. But basically this is 18 questions that the Senate Finance Committee asked us, and it's basic information about issues that underlie MERFA at the time.
For instance, there were legislative provisions that talked about education. Well, no one actually knew, or at least it wasn't generally known, how much money was being spent for education to educate providers at the time and how that money was divided between the Medicare safeguard program and general funds to educate providers. There's a lot of information that I think people want to know and is out there, but not always aggregated in the right format or put in a form that really provides fundamental information.
So the 18 questions -- sometimes we call it 20 questions. It felt like we should have written 20. It took us a lot of effort to get it out. But basically it was to just provide a fundamental understanding of the definitions of some of these issues. What is the appeals process? Are physicians, just from the empirical data that's out there, leaving the program in droves? What is the condition of provider education or many other issues, the extent to which repayment plans are actually being used? We're talking in a lot of this legislation about extending repayment plans or making it easier for providers to pay back money that was due the government. So we tried to answer some of those questions in an objective way.
A few years ago we undertook a study looking at CMS' relationship with its contractors and how it oversees the work of its contractors. We felt that there was a lot of work needed for CMS to do a better job in overseeing its contractors. There's a very little known chapter in that big study in 1999 that deals with contracting reform, and I think we set out the fundamental issues that we think are necessary in any type of contracting reform.
We've now moved past that discussion. I think most people agree that contracting reform is necessary. We're getting to many really tricky issues that have to do with liability and time frames and cost and how you would bid and who could bid and what the reality of a contracting reform proposal would be, how it could be implemented. So there are a lot of new concerns that I think we're trying to deal with right now.
We're completing a study that we haven't written yet, but we have reported out a lot of our findings in testimony. They have to do with how CMS communicates with providers through answering their questions on the phone, through their periodic bulletins, and also on their Websites. And I think you have copies of our testimonies. We found stunning issues, stunning problems. I was shocked. I think actually in the call centers the accuracy rate for CMS giving providers accurate and complete information was worse than the IRS giving taxpayers information. You know, that's saying something.
There are some caveats associated with that that I think are pretty important. That is, when providers call these phone numbers to get information about the status of claims, CMS does a very good job. They seem to be able to say here's where your claim is in the payment cycle. That's about 80 percent of the claims. So I don't want to imply that every call that CMS gets they have problems with, but the ones that are essentially substantive questions on how to bill Medicare, there's a lot of work that needs to be done.
The questions we asked were not trick questions. They were ones that we took right off the contractors' Websites under their section called frequently asked questions.
(Laughter.)
MS. ARONOVITZ: So these are ones that had been problematic. And the people on the other end, the service representatives, should have known the answers. So there is some real work that needs to be done in that area.
I think actually both Johns and Pat mentioned some other areas that they were very concerned with and that their bills highlight. We're currently trying to provide additional information in those areas.
One involves the whole issue of safeguard burden. In other words, what I just talked about is the day-to-day communication between providers and CMS, but now we're talking about the type of hassle or burden that providers say they feel when they're targeted or subjected to a pre-payment or a post-payment complex medical review. And that's where they have to supply documentation to justify their claims. There are some really hot issues associated with that. Extrapolation is one. People feel very much burdened. Also, they feel that there are major equity concerns. They have major equity concerns with the manner in which auditors go about extrapolating.
We are in the process of looking at that whole process because CMS has done some major things along the lines of streamlining and smoothing out the safeguard process in terms of the way they interact with providers. I don't think these initiatives are very well known, and in fact, there is a gap between the type of legislative initiatives that are still being addressed in these bills and some of the activities that CMS is engaged in pretty heavily to try to fix the problem. So hopefully we'll be able to report in the spring the progress that contractors are making in this area and maybe ameliorate some of the concern in that area.
We're doing a study on the appeals process. Providers are very concerned. They're very confused about how to appeal. One thing we heard, which was very stunning, was that providers are saying that the reason they appeal as often as they do is they're trying to understand better the reason for their original claim's denial. In other words, the communication is not clear enough to help providers bill correctly. So they need to appeal until they finally hear an explanation of why their claim was denied in the first place. We're really looking at the impact of the current appeals process on providers and beneficiaries, possible weaknesses in the process. We're looking at the anticipated impact of BIPA on fixing some of those concerns and also on other improvements that could be made.
Another study -- and this is the last one I'm going to talk about because I think this is pretty important also -- really deals with the coverage decisions for new procedures and devices. As you know, there's a national process by which a decision could be made about whether Medicare will cover a new device or a new procedure. Each contractor also has their own local process -- and I think Murray referred to that in terms of his report -- where you can make individual decisions, contractor by contractor, as to whether you're going to cover certain things.
And what's also not known is that every year when the CPT codes and the HCPC codes come out, there are hundreds and hundreds of codes that get assimilated into the payment system without any formal process, and we need to understand the extent to which that happens and the rationale that underlies the different pathways, why things get decided or covered for the reasons they do. So we're doing this comprehensive study.
These are major studies, but we're convinced that if we don't have our answers at least by June and our preliminary results by March, that we're going to miss the boat. So we're really working very hard to try to get these studies completed.
So I guess if I had to sum up in terms of GAO's role, I would say that we try as hard as we can to supply objective, comprehensive, and timely information so that people can have true facts to make good legislation.
DR. WOOD: Thank you.
MS. ARONOVITZ: Thank you.
DR. WOOD: The time for our adjournment is rapidly drawing near.
I have one homework assignment to give the committee members, but there are at least a few minutes for questions, if there might be any. We'll start with Mr. Fay.
MR. FAY: Thank you, Mr. Chairman.
I'd like to direct my question to Dr. Ross. Dr. Ross, thank you for coming here. An excellent report, by the way.
I know that the Medicare Payment Assessment Commission is very frustrated by the lack of timely data as far as their margin analysis and so forth. I know that the industry has been very concerned about cost reports and the need for them going forward especially when hospitals and other providers go under full PPS schemes. In the alternative, there are those who would suggest some kind of a gap-based cost report with departmental charges and departmental cost so that you could get to margin data might be a better and a much faster way of allowing hospitals to report their financial results. Does MedPAC have a view on this or do you have just any informal thoughts?
DR. ROSS: We have had these kind of proposals brought to us and we're continuing to try to assess. The challenge is to have something that is not only administratively easier but provides you with similarly reliable information for the pieces that you continue to need and also that, at least in principle, could be used for a variety of facility-based providers not just hospitals but skilled nursing facilities and home care providers.
I guess two points, one of which is one of the barriers that seems to be out there is the difference in hospitals by type of ownership and what's going to work in some arenas and may or may not work in others. For better or worse, the cost report is standardized.
Second is one wants to reduce the complexity and the burden, but we also have to take into account the costs of getting from here to there. And if you've got an arena where you have a lot of fairly settled issues, do you want to just try and streamline a little bit, or do you want to try something completely different? We have made no decisions and we continue to be amenable to thinking about different ways to get at the financial performance information that we'd like.
DR. WOOD: I recognize Ms. Gigliotti and then I'll recognize Mr. Steve Martin.
MS. GIGLIOTTI: One quick comment, two really quick questions.
Mr. Chairman and Mr. McManus, is it possible to get a copy of the Ways and Means letter to the Secretary?
MR. McMANUS: Of course.
MS. GIGLIOTTI: And my second question is very similar to that. The bills that were referred to, if they could also be collected as part of testimony today and posted on the Web or whatever you do. I think it would be not only a good resource but appreciated.
Thank you and I commend all of you for the research you've done in this area.
DR. WOOD: Mr. Martin.
MR. MARTIN: Yes. Jonathan Blum. Several times in your remarks you said that though you had many folks coming forward with presentations of the problems and the horror stories as Ms. Aronovitz referred to them, you hadn't had any solutions brought to you. You said that several times. No remedies. I was just wondering. It sounds to me as if the House committee had come up with what they thought were some remedies. Do you have access to that information?
MR. BLUM: Yes. I should clarify my remarks. I think I was trying to make the point that we've heard a lot from providers about horror stories out there about IG investigations, about getting demand letters from the IG's office. The point I was trying to make is that there's no systematic way to analyze this data. There's no summary data available that certain states, for example, have twice the rate for demand letters than other states. There's no systematic way to analyze those horror stories across the country. So we felt pretty frustrated the past year in trying to figure out a way to analyze that data without just making policy by anecdote, but making policy with firm, hard data and firm, hard analysis.
Going back to your point about solutions, our bill is based very closely on the House Ways and Means and the House Commerce bills that came out of the committees this past year. So our bill is very similar to that. We worked very closely with the Commerce Committee, for example, trying to find solutions. But the point I was trying to make is that there is no way to do a good analysis across the country where the problems are and how to fix those problems. We have good solutions we think, but not perfect solutions.
DR. WOOD: Very well. I'd like to thank our guests particularly for letting us know of the great amount of work that's been done both at MedPAC and the GAO and the legislative work.
The last comment I would make is that we would be extremely interested in knowing from especially our legislative staff which fixes they think would be easily administrative and would not require an actual legislative fix.
(Laughter.)
DR. WOOD: Now, before we end with some comments about things like where dinner is tonight, I need to give you a homework assignment. Now, through the day I think it's been apparent to all of us that the amount of work that we have in front of us is huge. We are only going to be successful if we can focus on a few things, and that means we have to make some decisions. The reality of the charge and the reality of the amount of work and the reality of the time have to be, then, carefully balanced, and we will have to decide how we want to do the work and we'll have to decide on what our priorities will be. Tomorrow is that decision day so that we can plot the rest of the work over the next few months.
So your homework assignment is to look behind tab V, particularly in terms of some of the things that we put in about the subcommittees and how we want to organize work, and think about your best suggestions about how we want to do that. As I said earlier this morning, we are all going to have to do our part and the subcommittees are going to do a fair amount of that work. It's very clear, in order for it to be manageable, we can't do it here at the large committee.
We left it so that we will depend on your input tomorrow. We've tried to give you some thoughts about direction and some of the things that the staff and I have thought about. But we have not developed any preconceived ideas about how we should proceed, and that's where we will depend on your considered advice and expertise. So after we enjoy a nice dinner together tonight, then we have a little homework to do.
We are adjourned for the night.
(Whereupon, at 6:02 p.m., the meeting was recessed, to reconvene at 8:00 a.m. on Tuesday, January 8, 2002.)