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| <title> - CURRENT HOSPITAL ISSUES IN THE MEDICARE PROGRAM</title> | |
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| [House Hearing, 113 Congress] | |
| [From the U.S. Government Publishing Office] | |
| CURRENT HOSPITAL ISSUES IN THE MEDICARE PROGRAM | |
| ======================================================================= | |
| HEARING | |
| before the | |
| SUBCOMMITTEE ON HEALTH | |
| of the | |
| COMMITTEE ON WAYS AND MEANS | |
| U.S. HOUSE OF REPRESENTATIVES | |
| ONE HUNDRED THIRTEENTH CONGRESS | |
| SECOND SESSION | |
| __________ | |
| MAY 20, 2014 | |
| __________ | |
| Serial 113-HL12 | |
| __________ | |
| Printed for the use of the Committee on Ways and Means | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| U.S. GOVERNMENT PUBLISHING OFFICE | |
| 20-998 WASHINGTON : 2016 | |
| ____________________________________________________________________ | |
| For sale by the Superintendent of Documents, U.S. Government Publishing Office, | |
| Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800 | |
| Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001 | |
| COMMITTEE ON WAYS AND MEANS | |
| DAVE CAMP, Michigan, Chairman | |
| SAM JOHNSON, Texas SANDER M. LEVIN, Michigan | |
| KEVIN BRADY, Texas CHARLES B. RANGEL, New York | |
| PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington | |
| DEVIN NUNES, California JOHN LEWIS, Georgia | |
| PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts | |
| DAVID G. REICHERT, Washington XAVIER BECERRA, California | |
| CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas | |
| PETER J. ROSKAM, Illinois MIKE THOMPSON, California | |
| JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut | |
| TOM PRICE, Georgia EARL BLUMENAUER, Oregon | |
| VERN BUCHANAN, Florida RON KIND, Wisconsin | |
| ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey | |
| AARON SCHOCK, Illinois JOSEPH CROWLEY, New York | |
| LYNN JENKINS, Kansas ALLYSON SCHWARTZ, Pennsylvania | |
| ERIK PAULSEN, Minnesota DANNY DAVIS, Illinois | |
| KENNY MARCHANT, Texas LINDA SANCHEZ, California | |
| DIANE BLACK, Tennessee | |
| TOM REED, New York | |
| TODD YOUNG, Indiana | |
| MIKE KELLY, Pennsylvania | |
| TIM GRIFFIN, Arkansas | |
| JIM RENACCI, Ohio | |
| Jennifer M. Safavian, Staff Director and General Counsel | |
| Janice Mays, Minority Chief Counsel | |
| ______ | |
| SUBCOMMITTEE ON HEALTH | |
| KEVIN BRADY, Texas, Chairman | |
| SAM JOHNSON, Texas JIM MCDERMOTT, Washington | |
| PAUL RYAN, Wisconsin MIKE THOMPSON, California | |
| DEVIN NUNES, California RON KIND, Wisconsin | |
| PETER J. ROSKAM, Illinois EARL BLUMENAUER, Oregon | |
| JIM GERLACH, Pennsylvania BILL PASCRELL, JR., New Jersey | |
| TOM PRICE, Georgia | |
| VERN BUCHANAN, Florida | |
| ADRIAN SMITH, Nebraska | |
| C O N T E N T S | |
| __________ | |
| Page | |
| Advisory of June 20, 2013, announcing the hearing................ 2 | |
| WITNESSES | |
| The Honorable Jim McDermott, Representative from the State of | |
| Washington..................................................... 7 | |
| Panel 1: | |
| Sean Cavanaugh, Deputy Administrator and Director, Center of | |
| Medicare, Centers for Medicare and Medicaid Services......... 9 | |
| Judi Nudelman, Regional Inspector General for Evaluation and | |
| Inspections, NY Region Office of the Inspector General, | |
| Department of Health and Human Services (OIG-HHS)............ 21 | |
| Panel 2: | |
| Amy Deutschendorf, Senior Director of Clinical Resource | |
| Management, Johns Hopkins Hospital and Health System......... 94 | |
| Toby S. Edelman, Senior Policy Attorney, Center for Medicare | |
| Advocacy, Inc................................................ 131 | |
| Ellen Evans MD, Corporate Medical Director, HealthDataInsights. 102 | |
| Ann Sheehy MD, Member, Public Policy Committee, Society of | |
| Hospital Medicine............................................ 118 | |
| SUBMISSIONS FOR THE RECORD | |
| Wisconsin Hospital Association, Statement........................ 156 | |
| Watertown Regional Medical, Letter............................... 161 | |
| Walter F. O'Keefe, Letter........................................ 163 | |
| Thomas M. Horiagon, MD MOccH, Letter............................. 165 | |
| Texas Organization of Rural & Community Hospitals, Statement..... 168 | |
| Sherry Smith, LCSW, Letter....................................... 171 | |
| Pocono Medical Center, Statement................................. 173 | |
| Patricia Windle, Letter.......................................... 176 | |
| Patricia Klaiber, Letter......................................... 180 | |
| New York StateWide Senior Action Council, Statement.............. 182 | |
| National Senior Citizens Law Center, Statement................... 186 | |
| National Kidney Foundation, Statement............................ 187 | |
| National Association of Urban Hospitals, Statement............... 190 | |
| Nathan Marra, Statement.......................................... 193 | |
| MRC, Statement................................................... 194 | |
| Missouri Hospital Association, Letter............................ 201 | |
| Meridian Health, Letter.......................................... 202 | |
| Medicare Advocacy Project, Statement............................. 204 | |
| Marion P. Cunningham, Statement.................................. 209 | |
| Knollwood Retirement Community, Statement........................ 211 | |
| Kirkland Senior Council, Statement............................... 213 | |
| Karen L. Buckley, Letter......................................... 215 | |
| Gundersen Health System, Letter.................................. 218 | |
| George L. Marra, Statement....................................... 222 | |
| Doreen Grossman, Letter.......................................... 224 | |
| Diane Walter, Letter............................................. 226 | |
| Denise Broccoli, Letter.......................................... 229 | |
| Connecticut's Legislative Commission on Aging, Statement......... 231 | |
| APTA, Letter..................................................... 233 | |
| AOPA, Statement.................................................. 236 | |
| American Coalition for Healthcare Claims Integrity, Letter....... 240 | |
| America's Essential Hospitals, Statement......................... 244 | |
| AMA, Statement................................................... 250 | |
| Alliance for Retired Americans, Statement........................ 255 | |
| AHCA, Statement.................................................. 257 | |
| Advocate Physician Partners, Statement........................... 259 | |
| ACMA, Letter..................................................... 266 | |
| AARP, Letter..................................................... 269 | |
| AAMC, Letter..................................................... 273 | |
| CURRENT HOSPITAL ISSUES IN THE MEDICARE PROGRAM | |
| ---------- | |
| TUESDAY, MAY 20, 2014 | |
| U.S. House of Representatives, | |
| Committee on Ways and Means, | |
| Subcommittee on Health, | |
| Washington, DC. | |
| The subcommittee met, pursuant to call, at 9:39 a.m., in | |
| Room 1100, Longworth House Office Building, the Honorable Kevin | |
| Brady [chairman of the subcommittee] presiding. | |
| [The advisory announcing the hearing follows:] | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman BRADY. Good morning. The subcommittee will come to | |
| order. Thank you all for joining us this morning. | |
| In every dollar hospitals spend on inaccurate Medicare | |
| audits and appeals, are dollars lost that should have been used | |
| to care for seniors. We are here to discuss the problems facing | |
| the hospitals today but also to find solutions to bring sense | |
| to our Medicare program and improved care for America's | |
| seniors. Today's hearing will examine hospital issues including | |
| those related to CMS's Two Midnight Policy, as well as audits | |
| and appeals. This is a bipartisan concern shared by many | |
| different stakeholders, the Medicare program itself, and | |
| lawmakers on this committee. | |
| In order to understand why CMS chose to pursue a Two | |
| Midnight Policy, we have to first explore the events leading up | |
| to the policy. After we review those events in today's hearing, | |
| Congress will be able to make an informed judgment about the | |
| merits of the policy and potentially pursue alternative | |
| solutions. | |
| Our first panel will educate us on the different aspects of | |
| inpatient and outpatient payments and services for hospitals. | |
| If we want behavior to change and improve outcomes, we need to | |
| change the incentives. | |
| Our second panel will feature national experts commenting | |
| on how Federal laws affect everyday medical practice. We will | |
| be hearing perspectives from across the spectrum of providers, | |
| auditors, researchers, and beneficiary advocates. As I have | |
| talked to stakeholders about current issues in the Medicare | |
| program, the Two Midnight Policy comes up over and over again. | |
| In listening to a variety of different perspectives, I have | |
| come to understand the following. There are misaligned | |
| incentives in CMS's inpatient and outpatient payment systems, | |
| but hospitals are not doing anything wrong. They are simply | |
| responding to the incentives. No matter if the service is | |
| inpatient or outpatient, hospital still uses the same equipment | |
| and the same medical staff to deliver care. Yet there are two | |
| vastly different payment systems, and the systems don't relate | |
| to each other in any way. They are based on different coding | |
| rubrics, and they pay for different things. And often all this | |
| is decided after doctors have provided care. | |
| Take for example, reimbursement for medical education. If | |
| the service is billed inpatient, the hospital qualifies for an | |
| extra medical education payment. However if the same service is | |
| billed to outpatient, the hospital doesn't receive any medical | |
| education money. So if you are a large teaching hospital and | |
| you could bill under either payment system, why would you ever | |
| submit the bill for anything other than inpatient | |
| reimbursement. It is all about the underlying incentives. | |
| Now let's examine the next piece of the puzzle, audits. I | |
| have heard from hospitals that audits are causing undue | |
| burdens. I have here from recovery audit contractors, or RACs | |
| as they are known, that they are simply responding to what CMS | |
| has defined as improper payments. Their emphasis on short | |
| hospital stays is due to, well, you guessed it, the underlying | |
| incentives. RACs are able to keep a percentage of any improper | |
| overpayments they recoup. Prior to the Two Midnight standard, | |
| there were no definitive rules governing which payment system | |
| was correct for short stays. I think we can all agree that RACs | |
| are an important program integrity tool. They are focusing on a | |
| legitimate discrepancy of Medicare payment. They, too, are | |
| responding to the incentives. | |
| Although an important tool, auditing also causes unintended | |
| behavior changes. We will hear from several of our witnesses | |
| today that around the same time the RAC short- stay audits were | |
| in full swing, there was also an unprecedented spike in | |
| outpatient observation services. Observation is meant to be a | |
| temporary tool allowing clinicians to closely monitor patients | |
| without using full-blown inpatient hospital resources. However, | |
| observation services are now being used as a tool to avoid | |
| certain adverse effects, including RAC audits, in some cases | |
| avoiding readmission penalties. | |
| The saga continues when we turn to the appeals process. | |
| Hospitals disagree with RAC audit denials for short stays. As a | |
| result, they appeal the decision. Hospitals have found a high | |
| level of success at overturning RAC denials at the | |
| Administrative Law Judge, or ALJ level. Same thing, responding | |
| to incentives, ALJ equals more likely to have an appeal | |
| overturned, so appeal every time. So much activity at the ALJ | |
| level has led to an extensive backlog of appeals. | |
| Earlier this year the Obama administration suspended the | |
| assignment of new appeals at the ALJ level. Again we see | |
| unintended consequences, denying providers their basic due | |
| process rights occurring as a result of poor incentives. We | |
| intended to have a witness from the Department of Health and | |
| Human Services here today to testify on behalf of the Medicare | |
| appeals process. Unfortunate Chief L.J. Nancy Griswold was | |
| unable to join us, but HHS is committed to briefing the Ways | |
| and Means member bipartisan manner on this important topic. | |
| At the conclusion of today's story, lies the heart of the | |
| issue, the Two Midnight Policy. In response to the inpatient- | |
| outpatient payment predicament, RAC audits, increase in | |
| observation stays, and backlog of appeals, CMS took its best | |
| shot at a solution, Two Midnight. Today we will hear from all | |
| of our witnesses on whether the Two Midnight solution is | |
| solving all or any of various problems identified in this tale. | |
| I commend my colleagues on this committee, members on both | |
| sides of the aisle who have introduced bills to pursue | |
| different alternatives to the Two Midnight Policy. My | |
| colleague, Mr. Gerlach, along with original co-sponsors, Mr. | |
| Crowley, Mr. Reed, Mr. Roskam, Mr. Kind, have offered a sound | |
| proposal for our committee to work from. | |
| Before I recognize Ranking Member Dr. McDermott for the | |
| purposes of an opening statement, I ask as always unanimous | |
| consent that all members' written statements be included in the | |
| record. Without objection, so ordered. | |
| Chairman BRADY. I now recognize ranking member Dr. | |
| McDermott for his opening statement. | |
| Mr. MCDERMOTT. Thank you, Mr. Chairman. | |
| This hearing today is really about serving the greater | |
| good. When this rule was proposed, the Two Midnight Rule, I | |
| submitted on the 22nd of July last year my comments about it, | |
| and much of what I thought was going to happen is now here, and | |
| we are going to hear about it today; and I am pleased that you | |
| are having this hearing. | |
| I would like to enter into the record that letter so that | |
| it gets in the record. | |
| Chairman BRADY. Without objection. | |
| [Document not provided] | |
| STATEMENT OF THE HONORABLE JIM MCDERMOTT, A REPRESENTATIVE IN | |
| CONGRESS FROM THE STATE OF WASHINGTON | |
| Mr. MCDERMOTT. In recent years hospitals have been asked to | |
| do more with less. We have slowed the rate of growth of their | |
| payments and asked them to work harder to improve quality and | |
| decrease unnecessary readmissions. Furthermore although | |
| Congress just delayed yet again the transition to the ICD-10 | |
| classification system, hospitals have had to take steps to move | |
| to the new system while continuing to implement the meaningful | |
| use requirements and participate in delivery system reform | |
| efforts. | |
| Many of these activities support the noble goal of | |
| improving care for patients that they serve, such as the | |
| accountable care organizations and the patient-centered medical | |
| home, while reducing long-term costs, but they require up-front | |
| capital investments. Hospitals are employing people and | |
| providing good and stable benefits for their employees, | |
| something other sectors should emulate. Hospitals are doing all | |
| of this in the face of a number of regulations and justifiable | |
| scrutiny. | |
| The Administration recognizes the sacrifice this sector has | |
| put forward. As an example, the Administration has made efforts | |
| to reduce the unnecessary regulatory burden. Just this month | |
| the Administration released Part 2 of the final rule to reduce | |
| unnecessary, obsolete, or excessively burdensome regulation on | |
| health care providers and suppliers. | |
| I commend CMS for walking a fine line between regulating | |
| provider conduct and attempting to make these things easier | |
| from a burden standpoint. This is the agency's second foray | |
| into the ensuring that regulations make sense and they serve a | |
| purpose. | |
| Unlike some of my Republican counterparts, I believe some | |
| level of regulation is necessary to ensure that we protect | |
| Medicare's finite resources for future generations. I think | |
| everyone in this room would agree that protecting Medicare as a | |
| bedrock institution of American life, thereby serving the | |
| greater good, does require some sacrifice. This necessary | |
| sacrifice must be shared and proportional. To that end I am | |
| among the first to call for reforms to the Medicare recovery | |
| audit contractor audit program, and I mentioned the letter that | |
| I put in. | |
| As a result I suggest CMS reconsider the policy in this | |
| regard. Now, of course, several stakeholders have raised | |
| concerns that the recovery auditor contractors will be | |
| overzealous in pursuing recoveries related to this policy. | |
| People knew it when it was put in. It is not that I believe | |
| that the RAC should disappear. They perform a critical role in | |
| protecting taxpayer dollars, but I do believe that the program | |
| needs reform from a fairness and equity standpoint, and I am | |
| pleased CMS has taken some affirmative steps in this regard. | |
| I have also been among the loudest voices calling for | |
| reform of some of the fraud and abuse laws to allow broad | |
| participation among providers and suppliers to participate in | |
| innovative partnerships that promote care coordination such as | |
| gain sharing and other shared saving programs while ensuring | |
| programmatic protections under the fraud and abuse laws remain | |
| in place. | |
| I have also introduced H.R. 4658, which would make a | |
| modification to the civil monetary penalty law to allow | |
| providers to more easily participate in care coordination | |
| programs. I have also introduced H.R. 3144, the Fairness For | |
| Beneficiaries Act, which recognizes that the three-day stay | |
| often has negative ramifications for the Medicare beneficiaries | |
| and would eliminate that requirement. | |
| Finally, as the author of the self-referral disclosure | |
| protocol provision included in the Affordable Care Act, I have | |
| been deeply involved with urging CMS to make certain changes to | |
| ensure overpayment disclosures made pursuant to the protocol | |
| can be settled in a timely and efficient manner. | |
| All in all, hospitals are making shared sacrifices. They | |
| are going through a period of unprecedented change. They have | |
| demonstrated a willingness to work with us as we move to new | |
| delivery system models, and they have taken some financial | |
| hits. I appreciate the work that hospitals do but also | |
| recognize that giving the improper payment rate on the Medicare | |
| fee for service program and the Medicaid programs, they must be | |
| subject to some scrutiny by various contractors including the | |
| recovery auditors. | |
| I think we would like to ensure that going forward, we will | |
| alleviate the regulatory burden where appropriate and ensure | |
| that Medicare dollars are being used in a way that sustains the | |
| Medicare program for future generations. Hospitals have | |
| demonstrated a willingness to work with us as a pursuit of | |
| these goals, and I think that we will hopefully from this | |
| hearing today be able to evolve some legislation. | |
| I yield back. | |
| Chairman BRADY. Today, we will hear from witnesses on two | |
| panels. Sean Cavanaugh, Deputy Administrator and Director of | |
| the Center for Medicare at the Centers for Medicare and | |
| Medicaid Services. | |
| Jodie Nudelman, the Deputy Inspector General for Audit | |
| Services at the Offices Inspector General of the Department of | |
| Health and Human Services. | |
| And on the second panel we will have Amy Deutschendorf, | |
| Senior Director of Clinical Resource Management at Johns | |
| Hopkins Hospital Health System. | |
| Dr. Ellen Evans, Medical Director of HealthDataInsights. | |
| Dr. Ann Sheehy, faculty on behalf of the Society of Hospital | |
| Medicine, and Toby Edelman, Senior Policy Attorney, Center for | |
| Medicare Advocacy. | |
| Mr. Cavanaugh, congratulations on your new position at the | |
| CMS. The Ways and Means Committee is happy to welcome your | |
| first congressional testimony in your new role, and Mr. | |
| McDermott promises to take it easy on you. | |
| You are now recognized for five minutes. | |
| And I should say both to those testifying and the members | |
| today, we have two panels. We are going to be tight on time. We | |
| are going to hold real fast to the five-minute rule. | |
| So, Mr. Cavanaugh, welcome. | |
| STATEMENT OF SEAN CAVANAUGH, DEPUTY ADMINISTRATOR AND DIRECTOR, | |
| CENTER OF MEDICARE, CENTERS FOR MEDICARE AND MEDICAID SERVICES | |
| Mr. CAVANAUGH. Thank you, Chairman Brady. As you point out, | |
| I just became Deputy Administrator at CMS a few weeks ago. | |
| However, I point out that I started my career in health care in | |
| this committee room working for a member of the Health | |
| Subcommittee. I have great memories of working in this room | |
| with colleagues from both sides of the aisle to improve the | |
| Medicare program, and I have deep respect for the role Congress | |
| plays and this subcommittee play in setting Medicare policy and | |
| doing appropriate oversight of the operations of the program. | |
| So it is an honor to return here today to this committee room | |
| representing the agency that administers Medicare. | |
| When a patient arrives at a hospital needing care, one of | |
| the critical decisions that physicians or other qualified | |
| professionals must make is whether to admit the patient for | |
| inpatient care. This decision is often a complex medical | |
| judgment taking into account the patient's medical history, | |
| comorbidities and other factors. However, as Chairman Brady | |
| pointed out, because of statutory requirements, Medicare pays | |
| hospitals different rates for inpatient and outpatient | |
| services. So the decision about whether to admit a patient has | |
| implications for provider reimbursement, for beneficiary cost | |
| sharing, and also for post acute care benefits the beneficiary | |
| may qualify for. | |
| Two years ago hospitals and other stakeholders were | |
| requesting that CMS provide additional clarity regarding the | |
| definition of inpatient care. Hospitals were growing frustrated | |
| with the administrative and financial burden incurred when | |
| recovery auditors denied a claim for services after care had | |
| already been provided. At the same time, CMS was hearing from | |
| its contractors that Medicare was reimbursing hospitals for | |
| inpatient care that should have been provided in a less costly | |
| outpatient setting. | |
| Some hospitals reacted to the scrutiny of auditors by | |
| treating more patients on an outpatient basis, often in an | |
| observation status. Some observation stays lasted three, four | |
| or even more days. This caused problems for beneficiaries | |
| because it subjected them sometimes to higher cost sharing | |
| under the Medicare Part B benefit, and it also disqualified | |
| them from the post acute skilled nursing facility benefit since | |
| they weren't accruing the three inpatient days they need for | |
| that benefit. | |
| In 2012, we solicited public feedback on possible criteria | |
| that could be used to determine when an inpatient admission is | |
| reasonable and necessary. We received a large number of | |
| responses, but there was not a consensus around any single | |
| approach. Last year CMS finalized a proposal that has become | |
| known as the Two Midnight Rule. The rule sets a physician | |
| expectation based benchmark for when CMS and its contractors | |
| will consider inpatient hospital admission and payment | |
| appropriate. | |
| CMS, as we crafted that policy, we were seeking to balance | |
| several principles that I think many of us share. We wanted | |
| criteria that were clear to providers. We wanted criteria that | |
| were consistent with good, sound clinical practice and | |
| respected physician judgment. We wanted criteria that reflected | |
| the beneficiaries' medical needs, and finally, we wanted | |
| criteria that were consistent with the efficient delivery of | |
| care to protect the trust funds. | |
| In November of last year, CMS announced a probe and educate | |
| strategy around the new standard in which the MACs are now | |
| conducting prepayment reviews on a sample of short stay | |
| inpatient claims from each hospital to determine compliance | |
| with the Two Midnight Rule. Claims for inpatient admissions | |
| that are not reasonable and necessary are denied, and the MACs | |
| work with the hospitals to educate them on this criteria. | |
| As part of this strategy, we also prohibited the recovery | |
| auditors from conducting any post-payment reviews of claims for | |
| the medical necessity of the inpatient status through March of | |
| 2014. We used this opportunity to engage in a dialogue with | |
| stakeholders on the Two Midnight Rule. As we began hearing from | |
| stakeholders that more time was needed to understand the | |
| policy, we extended the probe and educate strategy through | |
| September, and Congress subsequently extended it through March | |
| 31, 2015. We believe these extensions are allowing hospitals | |
| time to fully understand the benchmark and for CMS to learn | |
| more about how this policy is being implemented and understood | |
| by hospitals. | |
| In fact, preliminary data suggests that as a result of the | |
| Two Midnight Rule, the proportion of long outpatient stays is | |
| beginning to decline. However, in recognition of the continued | |
| calls from stakeholders for additional clarity around short | |
| stays, this year CMS is soliciting public input on two related | |
| issues. | |
| First, we solicited comment on the advisability of creating | |
| a Medicare payment policy for short stay inpatient cases. | |
| Specifically we requested public comment on how to define short | |
| stays and how an appropriate payment might be designed. These | |
| comments are due to the agency at the end of June. | |
| Second, we reminded the public that we are inviting | |
| feedback on creating additional exceptions to the Two Midnight | |
| Rule. We look forward to reviewing stakeholders' suggestions on | |
| these two subjects. Mr. Chairman, Ranking Member, I look | |
| forward to hearing this subcommittee's ideas regarding the Two | |
| Midnight Rule and the Recovery Audit Program. CMS is always | |
| looking to improve our policies and procedures, so we welcome | |
| this opportunity to hear from Congress and stakeholders. | |
| With that I would be happy to take questions. | |
| [The prepared statement of Mr. Cavanaugh follows:] | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman BRADY. Thank you. | |
| Ms. Nudelman, you are recognized for five minutes. | |
| STATEMENT OF JUDI NUDELMAN, REGIONAL INSPECTOR GENERAL FOR | |
| EVALUATION AND INSPECTIONS, NY REGION OFFICE OF THE INSPECTOR | |
| GENERAL, DEPARTMENT OF HEALTH AND HUMAN SERVICES (OIG-HHS) | |
| Ms. NUDELMAN. Good morning, Chairman Brady, Ranking Member | |
| McDermott and other distinguished Members of the Subcommittee. | |
| Thank you for the opportunity to discuss the Office of | |
| Inspector General's work to improve the Medicare program. | |
| My testimony today has three key takeaways. One, the Two | |
| Midnight hospital policy must be carefully evaluated. | |
| Two, CMS should enhance its oversight of the recovery audit | |
| contractors; and, three, fundamental changes are needed in the | |
| Medicare appeals system. | |
| I will begin with the Two Midnight Rule. The new policy | |
| provides guidelines for when hospitals bill for inpatient stays | |
| and outpatient services such as observation. These decisions | |
| have significant impact. They affect how much Medicare pays the | |
| hospital, how much beneficiaries must pay, and beneficiaries' | |
| eligibility for skilled nursing facility services. | |
| Prior to the policy, OIG evaluated the hospital's use of | |
| observation stays and inpatient stays. Our findings continue to | |
| be relevant. We found that beneficiaries were in observation | |
| and short inpatient stays for similar reasons, but short | |
| inpatient stays were more costly. On average Medicare paid | |
| nearly three times more for short inpatient stays than | |
| observation stays. Beneficiaries paid almost two times more. | |
| We also found that hospitals vary. Some hospitals use short | |
| inpatient stays for less than 10 percent of their stays. Others | |
| use them for more than 70 percent. Lastly, we found that some | |
| beneficiaries spent three nights or more in the hospital but | |
| did not qualify for the skilled nursing facilities under | |
| Medicare. That is because their stays did not include three | |
| inpatient nights. | |
| Switching to our work on recovery audit contractors, or | |
| RACs, we found that these contractors play a critical role in | |
| protecting the fiscal integrity of Medicare. In fact, in fiscal | |
| years 2010 and 2011, RACs identified improper payments | |
| totalling $1.3 billion. Most of the recovered improper payments | |
| came from hospital inpatient claims. However, we also found | |
| that CMS needs to enhance its oversight of RACs. | |
| Finally, OIG has found that the Medicare appeals system | |
| needs fundamental changes. We reviewed the third level of | |
| appeals which is handled by administrative law judges, or ALJs. | |
| Although this work predated the recent surge in appeals, our | |
| findings and recommendations are relevant to the current | |
| challenges. We found that ALJs decided fully in favor of | |
| appellants in over half of the cases and Part A hospital stays | |
| were most likely to receive favorable decisions. | |
| Several factors led to ALJs reaching different decisions | |
| than the prior level. One is that some Medicare policies are | |
| unclear. This leads to more favorable decisions for appellants | |
| and to more variation among adjudicators. In fact, there is | |
| wide variation among ALJs. Their rate of favorable decisions | |
| range from 18 to 85 percent. We also found that improvements | |
| were needed such as ALJs moving to electronic files and CMS | |
| increasing its participation at hearings. | |
| In closing, clear payment policies, strong oversight, and | |
| an effective appeals system are critical for Medicare to work | |
| well. CMS policy, the RACs, and the appeals system must each | |
| fulfill their important purposes. If they do not, | |
| beneficiaries, taxpayers and the Medicare program suffer. OIG | |
| is committed to continuing our efforts to improve Medicare. | |
| Thank you for your interest and for the opportunity to | |
| discuss some of our work. I will be happy to answer any | |
| questions. | |
| [The prepared statement of Ms. Nudelman follows:] | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman BRADY. Thank you, Ms. Nudelman. | |
| I think both witnesses have made the point that Two | |
| Midnight Policy, the inpatient, outpatient, the audits and the | |
| appeals all really work together, which is why we are doing | |
| this hearing all together. | |
| So, starting with Mr. Cavanaugh, I am interested to hear | |
| your thoughts on the barriers to compare inpatient and | |
| outpatient services. Obviously we should be trying to find the | |
| best quality of care at the right site with the most cost | |
| effective payment. | |
| So can you give me an example of a reimbursement | |
| difference, for a service that can be billed both inpatient and | |
| outpatient by a teaching hospital in a major city; what would | |
| be an example? | |
| Mr. CAVANAUGH. Well Chairman, as you pointed out in your | |
| opening statement, the outpatient payment system and the | |
| inpatient payment system are fundamentally different, and they | |
| start with different coding; so it is often hard to compare | |
| payments because we can't put the same claim through the | |
| outpatient system and the inpatient system. They are coded | |
| differently. | |
| But on the inpatient system, we tend to pay a fixed amount, | |
| meaning a DRG-based payment. That DRG-based payment will | |
| include adjustments for possibly IME, for DSH. It could include | |
| a readmissions penalty or a hospital-acquired condition | |
| penalty, but it tends to be a fixed payment for the types of | |
| patient and the types of service being delivered. | |
| On the outpatient side, it is more disaggregated, where we | |
| tend to pay per service. I think you heard from the OIG, and I | |
| think it is similar to data we have, that the magnitude of the | |
| difference in payment is quite substantial. The OIG mentioned | |
| that the short stay inpatient payments tended to be three times | |
| as costly to Medicare as the outpatient observation stays. That | |
| is consistent with data we have seen at the CMS. So that gives | |
| you a sense, that the systems for deriving the payment are | |
| different, and the magnitudes are quite different. | |
| Chairman BRADY. How do you address that? | |
| Mr. CAVANAUGH. I am not entirely sure how we address it. | |
| One idea that we received from stakeholders, and I know that it | |
| had some support in Congress, is to create a payment system | |
| that splits that difference, a short stay inpatient payment | |
| system and as I mentioned in my opening statement, we are | |
| soliciting comments on how to create such a payment system. I | |
| would say there are challenges. | |
| Some of the cases that come in as short stay inpatient | |
| payments already have very low lengths of stay. Chest pain DRG, | |
| for example, has a two-day average length of stay. So the | |
| question is how would you create a short-stay payment around a | |
| type of case that is already fairly short. Those are the sorts | |
| of technical questions that we are asking for public input in | |
| the proposed rule this year. | |
| Chairman BRADY. Thank you. | |
| Ms. Nudelman, you know, in your analysis do you think the | |
| Two Midnight standard will reduce observation stays or increase | |
| them, the length of them? | |
| Ms. NUDELMAN. Again, our analysis is prior to the Two | |
| Midnight stay, and it is difficult to predict how things will | |
| look. What we did find is that hospitals extremely vary and, | |
| therefore, it is important to look at all of the data because | |
| their starting point is very different, and so it may impact | |
| hospitals very differently. | |
| Chairman BRADY. Mr. Cavanaugh, thanks for your emphasis | |
| describing the different cost-sharing implications affecting | |
| our Medicare beneficiaries. It often gets lost in this | |
| discussion and the difference between inpatient and outpatient. | |
| It is unfortunate the Medicare program has such vastly | |
| different cost-sharing rules for our seniors or Medicare | |
| beneficiaries between the two benefits. | |
| This committee has focused earlier on the advantages of | |
| combining Medicare Parts A and B with the out-of-pocket costs | |
| to make sure we protect seniors in part because we are | |
| concerned about what seniors pay for cost sharing. | |
| So, can you give us your thoughts on combining Parts A and | |
| B and how that might be helpful in trying to contain those cost | |
| sharing challenges for seniors? | |
| Mr. CAVANAUGH. I recognize that one of the goals is to | |
| speak to one of the problems that we have here, which is that | |
| inpatient versus outpatient generates very different | |
| liabilities for the patient. I would want to hear more about | |
| the proposal that the subcommittee is considering, and we have | |
| technical staff at CMS who can come provide assistance to you | |
| in the drafting of the bill if required and if that would be | |
| beneficial to you. | |
| Chairman BRADY. So you have not taken a look at the | |
| proposed combining Part A and B in the President's budget or in | |
| earlier health care proposals? | |
| Mr. CAVANAUGH. We don't have a proposal on that at this | |
| time, but like I said, if the committee has a proposal, we | |
| would love to see it and learn more about it. | |
| Chairman BRADY. Okay. Okay, final question. Mr. Cavanaugh, | |
| even though CMS doesn't have a direct role in the ALJ level | |
| Medicare appeals that Ms. Nudelman talked about, CMS must still | |
| be part of the solution to solve the backlog. | |
| Does HHS have a working group to address Medicare appeals, | |
| and if so has HHS crafted recommendations to solve the backlog | |
| issues going forward? | |
| Mr. CAVANAUGH. Yes, Mr. Chairman. As you point out, there | |
| is an HHS-wide work group to address the backlog. CMS is part | |
| of that. I would be glad--we are in the process of coming up | |
| with recommendations. I don't believe they are finalized yet. | |
| Chairman BRADY. What is the timetable on that? | |
| Mr. CAVANAUGH. I think we could brief the committee on them | |
| fairly shortly. | |
| Chairman BRADY. Right. Thank you Mr. Cavanaugh and Ms. | |
| Nudelman. | |
| I now recognize Ranking Member Dr. McDermott for five | |
| minutes. | |
| Mr. MCDERMOTT. Thank you, Mr. Chairman. | |
| From a patient's standpoint you walk into the emergency | |
| room or whatever, and you get put in one of these statuses or | |
| the other. Does it make any difference to the patient, to the | |
| beneficiary, which status they are put in, as to how they are | |
| treated? | |
| Mr. CAVANAUGH. As to how they are treated, not from a | |
| benefit perspective; Is that the question? | |
| Mr. MCDERMOTT. Yes, I am talking about how they are treated | |
| as a patient. | |
| Mr. CAVANAUGH. I would hope not. I would hope that the | |
| patient is receiving all the services they need medically, that | |
| are medically indicated. | |
| Mr. MCDERMOTT. So then the difference is in the payment | |
| that is received by the hospital or that the patient has to | |
| make depending on which category they are in; is that correct? | |
| Mr. CAVANAUGH. Certainly the statute creates a stark | |
| difference between inpatient and outpatient care, yes, sir. | |
| Mr. MCDERMOTT. Give us the amount of difference for a | |
| hospital, what they receive and what the patient has to pay, so | |
| we get some idea of who is bearing the weight here. | |
| Mr. CAVANAUGH. The amounts both that the hospital will | |
| receive and that the beneficiary would be liable for would vary | |
| tremendously on individual circumstances, so I can't give you a | |
| precise answer. I would say that when we did a rebilling | |
| initiative where we had hospitals take short inpatient cases | |
| and rebill them as outpatient, which involves some work, we did | |
| find that the outpatient payment to the hospital was about 30 | |
| percent of what the inpatient payment would have been. | |
| Mr. MCDERMOTT. So they are getting 70 percent more if they | |
| bill them as an inpatient. Is that in Medicare payment for the | |
| DRG, the diagnosed-related group, or is it the indirect medical | |
| education payment and the DSH payment on top. | |
| Mr. CAVANAUGH. It includes everything. | |
| Mr. MCDERMOTT. Okay. So you are saying you are including | |
| everything? | |
| Mr. CAVANAUGH. Yes, sir. | |
| Mr. MCDERMOTT. So it is to the hospital's best interest to | |
| bring them in as an inpatient? | |
| Mr. CAVANAUGH. Certainly it generates more revenue. | |
| Mr. MCDERMOTT. From a revenue standpoint. Because we said | |
| it doesn't make any difference how they are treated as people | |
| and as patients, so the only difference is how much money the | |
| hospital makes off of it; is that correct? | |
| Mr. CAVANAUGH. Again, it certainly makes a significant | |
| financial difference. | |
| Mr. MCDERMOTT. Now, I have heard, and I think almost every | |
| member on this committee has heard from their hospitals, the | |
| usual assumption is that the RACs are overzealous and that | |
| somehow when we take them up to appeal, when we finally get to | |
| the appeal process, almost always it comes down in our favor. | |
| Could you give us the numbers of how many are overturned on | |
| appeal? | |
| Mr. CAVANAUGH. Certainly, Congressman. We had a report to | |
| Congress on the RAC program in the year of 2012, and in that | |
| report we showed that when the RAC denies a claim, when a RAC | |
| denies a claim, only 7 percent of those are ultimately | |
| overturned at some level of review all the way up through the | |
| ALJs. | |
| Mr. MCDERMOTT. Only 7 percent are overturned. | |
| Mr. CAVANAUGH. That is correct. | |
| Mr. MCDERMOTT. Where do the hospitals get the figure that | |
| they say, well, they are all overturned. When we finally go | |
| through this long, arduous process that is backlogged and | |
| everything else, it is always overturned. Where do they come up | |
| with that. | |
| Mr. CAVANAUGH. There could be two sources of the difference | |
| in these numbers. The first is any individual hospital's | |
| experience may vary tremendously. Some may have a better | |
| success rate. The other is, some of the numbers that I have | |
| seen quoted by the industry, they are using as the denominator | |
| only those that they choose to appeal, not all those that were | |
| denied, which a lower denominator would generate a higher rate | |
| of success. | |
| Mr. MCDERMOTT. Does it get to more than a half? | |
| Mr. CAVANAUGH. In the numbers that we have seen that CMS | |
| has generated, I haven't seen anything that would get that | |
| high, no sir. | |
| Mr. MCDERMOTT. The number I saw, I mean, you are holding | |
| back on the numbers you got. The ones that I have seen say 27 | |
| percent are the number that are overturned. | |
| Mr. CAVANAUGH. So, again, I don't mean to hold back the | |
| numbers. These are numbers that are in our public report to | |
| Congress, ultimately, and I will just state it as clearly as I | |
| can, of all the ones the RACs deny, only 7 percent are | |
| ultimately overturned. | |
| If you took a low number of the ones the RACs denied and | |
| the ones the hospitals chose to appeal, it would generate a | |
| higher overturn number. I just don't happen to know that | |
| number. 14 percent. | |
| Mr. MCDERMOTT. Fourteen percent? | |
| Mr. CAVANAUGH. I am being helped, yes. | |
| So it essentially doubles the rate, but it doesn't get as | |
| high as some of the numbers you may have heard from others and, | |
| again, an individual hospital's experience may vary. | |
| Mr. MCDERMOTT. Can you give us an explanation for why this | |
| problem? I mean, generally Congress doesn't run in and pass | |
| laws, and you don't make rules and regulations without there | |
| having been something to generate that. What is it that drove | |
| this in the first place? | |
| Mr. CAVANAUGH. I think it was a confluence of a number of | |
| factors. We were hearing from hospitals and beneficiaries who | |
| were really concerned about these long observation stays. That | |
| was causing confusion for beneficiaries including they didn't | |
| understand their status, and they also thought they were | |
| qualifying for the skilled nursing facility benefit. | |
| We were hearing from hospitals who thought just dealing | |
| with the RACs, with what the hospitals would characterize as an | |
| unclear standard for inpatient care was a difficult situation | |
| to put them in and all these forces came together, and that is | |
| why CMS solicited input and tried to make a clearer policy. | |
| Because our goal is not to have a successful RAC program or to | |
| drive down the number of overturned appeals. Our goal is to | |
| have hospitals understand the rules, agree with the rules, and | |
| bill correctly at the outset. | |
| Chairman BRADY. Time is expired. | |
| Mr. Johnson. | |
| Mr. JOHNSON. Thank you, Mr. Chairman. | |
| Mr. Cavanaugh, the value-based purchasing program which was | |
| enacted as part of ObamaCare is the Federal Government's most | |
| extensive effort yet to hold hospitals financially accountable | |
| for patient outcomes. Medicare compared hospitals on how | |
| faithfully they followed basic standards of care and how | |
| patients rated their experiences. In the first year of CMS | |
| value-based purchasing program, physician-owned hospitals | |
| demonstrated they thrive in delivering high-quality, low-cost | |
| care. Amazingly 9 of the top 10 and 53 of the top 100 hospitals | |
| were physician-owned hospitals. | |
| CMS also recently released data that summarizes the | |
| utilization and payments for procedures and services provided | |
| to Medicare. Based on this release of information, we have now | |
| confirmed what many of us have known for some time, and that is | |
| that, physician-owned hospitals are costing Medicare less than | |
| hospitals without physician ownership. | |
| And that doesn't consider all the cost savings associated | |
| with the higher quality of care they provide. The irony of all | |
| this is that the very law that created the hospital value-based | |
| purchasing program, ObamaCare, bans the same hospitals. This | |
| new accountability measure says they are some of the very best | |
| in the country. ObamaCare prohibits any new physician-owned | |
| hospitals from treating Medicare and Medicaid patients. This | |
| clearly discriminates against some of the most vulnerable | |
| patients in our health system. | |
| While the law permitted those physician-owned hospitals | |
| that received Medicare certification to be grandfathered under | |
| the law, it prevents these same hospitals from being able to | |
| expand to meet the access and quality demands in their | |
| community. This makes no sense, and it flies in the face of the | |
| Administration's own benchmarks for quality of care and cost | |
| savings. | |
| Mr. Cavanaugh, do you stand by the results of the value- | |
| based purchasing program which validates the quality of | |
| physician-owned hospitals? | |
| Mr. CAVANAUGH. Yes, the agency stands by the results of the | |
| value-based purchasing program. | |
| Mr. JOHNSON. Do you stand by the data released by CMS | |
| showing the cost differential between treating patients at | |
| physician-owned hospitals versus hospitals without any | |
| ownership by physicians? | |
| Mr. CAVANAUGH. I apologize, Congressman. I am not familiar | |
| with those data, but I am happy to look at them and review | |
| them. | |
| Mr. JOHNSON. I appreciate it if you would. I hope you all | |
| can support a bill that I have out there, H.R. 2027, which | |
| would establish a level playing field for physician-owned | |
| hospitals and ensure that patients will continue to have a | |
| choice in where they receive their health care. | |
| Mr. CAVANAUGH. Certainly we look forward to reviewing that | |
| legislation. | |
| Mr. JOHNSON. Thank you, sir. | |
| Thank you, Mr. Chairman. | |
| Chairman BRADY. Thank you. | |
| Mr. Thompson is recognized. | |
| Mr. THOMPSON. Thank you, Mr. Chairman, and thank you for | |
| holding this hearing today. I think this is something, as Mr. | |
| McDermott said, we are all hearing a lot about in our district. | |
| Mr. Cavanaugh, I would like to just revisit the issue of | |
| the reversed audits, and you had mentioned 7 percent. Mr. | |
| McDermott said that he hears from his constituents that every | |
| one of them are overturned. I am hearing that it is in the 40 | |
| percent from my hospitals, 40 percent and change and is there | |
| any way to qualify how these missed billing are done? Are they | |
| intentional? Are they mistakes? What is your experience? | |
| Mr. CAVANAUGH. Certainly my experience, which actually | |
| predates my time at CMS, as I mentioned in my opening statement | |
| I have only been the Director of Center for Medicare for a few | |
| weeks, but I do have experience working in the hospital | |
| industry. My experience has been most of them are not | |
| fraudulent. It is misinterpretation---- | |
| Mr. THOMPSON. So they are honest mistakes, or they find the | |
| process is confusing, have trouble getting to where they need | |
| to be? | |
| Mr. CAVANAUGH. Certainly that is what I have heard from | |
| much of the industry. I would also say by monitoring these very | |
| closely, the agency has at times found suggestions of fraud in | |
| some areas; but I don't think that is generally what is driving | |
| this. | |
| Mr. THOMPSON. And is it pretty easy to recognize the | |
| mistakes vis-a-vis the fraud? | |
| Mr. CAVANAUGH. I would have to defer that question to my | |
| colleague who runs the program integrity side of CMI, CMS | |
| excuse me. | |
| Mr. THOMPSON. I would like to know that if you could. | |
| Mr. CAVANAUGH. We would be happy to circle back with you | |
| after the hearing. | |
| Mr. THOMPSON. Whichever it is, when a hospital has to go | |
| through the process of defending their claim, there is a lot of | |
| expense associated with that. | |
| Mr. CAVANAUGH. That is true. | |
| Mr. THOMPSON. Are you able to qualify that? | |
| Mr. CAVANAUGH. Well, we don't collect data on what the | |
| hospital's expense is, but certainly my experience---- | |
| Mr. THOMPSON. They hire, what, lawyers? | |
| Mr. CAVANAUGH. At times. | |
| Mr. THOMPSON. And they hire consultants---- | |
| Mr. CAVANAUGH. Or consultants. There is also just the time | |
| and---- | |
| Mr. THOMPSON. And all the opportunity cost. They are | |
| defending their billing practices rather than providing health | |
| care to patients? | |
| Mr. CAVANAUGH. Yes, Congressman. And, again, that is why we | |
| feel perfecting the appeals process is important, but what is | |
| more important is having very clear guidelines at the outset of | |
| how these cases should be billed. | |
| Mr. THOMPSON. And is there any way to minimize the cost to | |
| hospitals if their claim is reversed? They have to pay one way | |
| or the other, I guess. | |
| Mr. CAVANAUGH. Yes, if it is reversed. There are some | |
| things that we are doing. The recovery auditor contracts are | |
| being recompeted as we speak, and we hope to award new | |
| contracts this summer. In that process, as we set new terms | |
| with the appropriate auditors, we are trying to take steps to | |
| make things less burdensome for the hospitals. We are trying to | |
| revise the requests the auditors do for documents from the | |
| hospitals to try to limit that burden somewhat. | |
| We are trying to ensure that there is an exchange of | |
| information between the auditors and the hospitals so the | |
| hospitals can make their case before they have to file a formal | |
| appeal, that they can work with the auditor to explain why they | |
| think it was appropriate as an inpatient case. So we are always | |
| looking for ways to improve this. And I think there is---- | |
| Mr. THOMPSON. Does the process incentivize the auditors to | |
| go after more than they should? | |
| Mr. CAVANAUGH. I don't think there is an incentive for them | |
| to go after more than they should, and I think the very low | |
| overturn rate that I quoted suggests that they are largely | |
| going after the right types of cases, but again I would rather | |
| they have---- | |
| Mr. THOMPSON. That's its overturn rate that you quoted, the | |
| 7 percent. | |
| Mr. CAVANAUGH. Correct. | |
| Mr. THOMPSON. But if it is closer to what Mr. McDermott | |
| said, where they are all overturned, or even if they are what | |
| my hospitals are experiencing at about 40-some-odd percent, it | |
| is not quite as low. | |
| Mr. CAVANAUGH. If I believed that---- | |
| Mr. THOMPSON. They say there is lies; there is damn lies, | |
| and there is statistics. | |
| Mr. CAVANAUGH. I just wanted to agree with you, though, | |
| that if there were overturn rates of 40 to 50 percent, I think | |
| that would be indicative of a larger problem than just the | |
| guidelines. | |
| Mr. THOMPSON. What would that problem be? | |
| Mr. CAVANAUGH. I think it would indicate that the recovery | |
| auditors were not going after cases that were---- | |
| Mr. THOMPSON. Auditors are what? | |
| Mr. CAVANAUGH. That the recovery auditors, if they were | |
| getting over turned 40 or 50 percent of the time, it would | |
| indicate they were probably going after cases that were | |
| appropriately billed to start with but, again, that is not what | |
| we see in our data. | |
| Mr. THOMPSON. So Mr. Chairman, can we further examine that, | |
| because if that's the case, they are being incentivized or for | |
| some reason they are going after cases they shouldn't. | |
| Chairman BRADY. At some point today, I am going to | |
| recognize Mr. Roskam, but at some point today I would like Ms. | |
| Nudelman to weigh in. I want to reconcile the differences in | |
| the numbers. I may be missing something here. And at some | |
| point--I don't want to take Mr. Roskam's time. | |
| Mr. Roskam. | |
| Mr. ROSKAM. Thank you, Mr. Chairman. | |
| Mr. Cavanaugh, I just want to pick up on one of the themes | |
| that Mr. McDermott articulated in his opening statement where | |
| he said that he wanted to protect Medicare's finite resources, | |
| and I agree with that and you agree with that. I think one of | |
| the challenges is that there is a zero-sum game element to | |
| Medicare reimbursement right now, and so I want to draw your | |
| attention to an issue that I am sure is familiar with you. | |
| That is Nantucket Cottage Hospital. As you know, that was | |
| part of the process by which the Affordable Care Act was | |
| passed. There is I don't think any celebration in this in that | |
| it is a zero-sum game proposition. I come from Illinois, and my | |
| home state is losing under this equation. Massachusetts, based | |
| on this manipulation, will essentially get $3.5 billion over 10 | |
| years. You recognize that that is a problem, don't you? | |
| Mr. CAVANAUGH. I am familiar with the provision you are | |
| talking about, and I would just simply say CMS is faithfully | |
| executing the law as written. | |
| Mr. ROSKAM. You don't think that is a good allocation of | |
| resources, do you? | |
| Mr. CAVANAUGH. Again, I would just say that we are | |
| implementing the laws as required. | |
| Mr. ROSKAM. Well, if it takes from my state and gives to | |
| another state, and what it does is it manipulates the | |
| definition of a rural hospital so that now Nantucket is now | |
| defined as rural, which boosts everybody up, because you know | |
| these rules better than I do, the entire state of Massachusetts | |
| is the beneficiary of one hospital in a particularly luxurious | |
| area, is now redefined as rural and therefore poor. That is a | |
| manipulation, isn't it? | |
| Mr. CAVANAUGH. Congressman, I think you have accurately | |
| described the mechanism of what is happening; and, again, we | |
| are bound to implement the law. | |
| Mr. ROSKAM. But it is not a good idea, is it? | |
| Mr. CAVANAUGH. We are faithfully executing the law in this | |
| regard, sir. | |
| Mr. ROSKAM. Well, you recognize there is bipartisan support | |
| to repeal this, don't you? This is one of these areas where | |
| there is a tremendous amount of bipartisan interest in trying | |
| to get back to this. | |
| Senators McCaskill and Coburn have come alongside with one | |
| another. There is dozens of members of the House of | |
| Representatives, who have recognized this, and this is a | |
| situation where one state based on one statute is getting a | |
| disproportionate benefit, and it is not getting a | |
| disproportionate esoteric benefit. In other words, this isn't | |
| just simply borrowing from a future generation. This is saying, | |
| well, we are going to take from Illinois, and we are going to | |
| give to Massachusetts. That's a breakdown, isn't it? Isn't that | |
| a failure? | |
| Mr. CAVANAUGH. So, Congressman, the provision does involve | |
| some of the technical aspects of Medicare rate setting, and we | |
| have a lot of experts at CMS who we would be happy to bring | |
| down and provide you technical assistance if you have a | |
| legislative proposal in this request. | |
| Mr. ROSKAM. Well, is a technicality when a luxurious | |
| vacation area is categorized as rural, thereby boosting every | |
| other hospital in the state and having an adverse impact on | |
| many other states? | |
| I mean, so Massachusetts according to our staff that put | |
| this together in 2013 and 2014, is going to be receiving a | |
| benefit of $425 million. My home state of Illinois is down $62 | |
| million. Congressman Price's home state of Georgia is down $30 | |
| million. You just go on and on through the list. Congressman | |
| McDermott's home state is down $12 million. This is beyond just | |
| a technicality, wouldn't you say? | |
| Mr. CAVANAUGH. What I was suggesting is that it is a | |
| function of very technical parts of the rate setting within | |
| Medicare, and we are happy to look further into it and look at | |
| your bill and provide---- | |
| Mr. ROSKAM. Isn't that an over characterization to say it | |
| is a technicality? It is not just technically taking millions | |
| of dollars from my home state and these other states across the | |
| country to benefit one state through the boosting of this sort | |
| of hospital definition. | |
| And if that is a technicality, then I shudder to think what | |
| is a big deal. It is more than a technicality. Wouldn't you | |
| acknowledge that? | |
| Mr. CAVANAUGH. I didn't mean to suggest it was a | |
| technicality. What I was trying to say is that it was a | |
| function of technical aspects of the rate setting system. As | |
| you said, the provision has a meaningful impact on Medicare | |
| rates. | |
| Mr. ROSKAM. And wouldn't you technically think it is a bad | |
| idea? | |
| Mr. CAVANAUGH. Congressman, we are faithfully executing the | |
| law. If you have a provision to change it, we are happy to | |
| provide any technical assistance you might need. | |
| Mr. ROSKAM. Thank you. | |
| I yield back. | |
| Chairman BRADY. Thank you. | |
| Mr. Pascrell. | |
| Mr. PASCRELL. Thank you, Mr. Chairman. I think we can work | |
| together, I really do, to find solutions that work for | |
| hospitals and for patients. | |
| I have been hearing from hospitals in my state, Mr. | |
| Cavanaugh, about the various reporting requirements in programs | |
| that impact the work that those hospitals do. I don't think | |
| anyone here will disagree that there is much room for | |
| improvement in the RAC program, in policies related to short- | |
| term, as well as observation stays. However, we need to strike | |
| the right balance between ensuring that hospitals can comply | |
| and that Medicare has the ability to ensure program integrity. | |
| It sounds easy, but it is not. | |
| One area of particular interest to me is the increased use | |
| of observation stays and how it impacts the beneficiary. So I | |
| cosponsored along with Joe Courtney and Tom Latham, it is | |
| bipartisan, the Improving Access to Medicare Coverage Act which | |
| would allow observation stays to be counted toward the three- | |
| day mandatory inpatient stay for Medicare coverage of skilled | |
| nursing facility services. | |
| So here's my question then, Mr. Cavanaugh. A number of | |
| independent reports from Medpac, the HHS Inspector General, | |
| Brown University, very interesting study, indicated that there | |
| has been a substantial increase in the number of observation | |
| stay claims and a decrease in the number of inpatient stays. | |
| According to Medpac, outpatient observation claims grew by | |
| 88 percent from 2006 to 2012. A Brown University study found | |
| that the average length of stay in observation increased by | |
| more than 7 percent. Could you tell me what is contributing to | |
| this trend and the rise in observation stays? | |
| Mr. CAVANAUGH. Certainly. CMS is aware of the growth in | |
| observation stays as well. One of the things we believe is | |
| contributing to it is the behavior of some hospitals that want | |
| to avoid auditors reviewing whether an inpatient stay was | |
| appropriate. | |
| Mr. PASCRELL. Do you want to write that on the record | |
| please? | |
| Mr. CAVANAUGH. Excuse me? | |
| Mr. PASCRELL. What do you mean; what are the hospitals | |
| doing? | |
| Mr. CAVANAUGH. And again, this is anecdotal having talked | |
| to some hospital associations and some individual hospitals | |
| that some hospitals have decided they would rather take the | |
| patient in observation status as an excess of caution rather | |
| than risk having an inpatient admission subsequently denied. | |
| Mr. PASCRELL. And what does that lead to? | |
| Mr. CAVANAUGH. Well, first of all, what I think is | |
| unfortunate, as you point out, is if the patient should have | |
| been receiving inpatient care, they are not accruing the days | |
| they need to qualify for the post-acute skill nursing facility | |
| benefit. | |
| Mr. PASCRELL. And that is pretty troubling. Under the | |
| current law, under what exists right now, Medicare requires | |
| that a patient be classified as an inpatient during a hospital | |
| stay for three days in order to qualify for coverage in a | |
| skilled nursing facility after they leave the hospital. | |
| So, a number of Medicare beneficiaries have been cared for | |
| in the hospital on outpatient observation status rather than | |
| admitting them as inpatients, which has caused problems for | |
| Medicare coverage. That is serious. | |
| Mr. Cavanaugh, do you believe that the three-day inpatient | |
| stay requirement for Medicare coverage of skilled nursing | |
| facility services is appropriate? | |
| Mr. CAVANAUGH. Congressman, I think CMS shares your | |
| interest in trying to find ways to improve the use of skilled | |
| nursing facility benefit. I am pleased to tell you there is two | |
| examples of where we are exploring very specific alternatives | |
| to this. | |
| In the Affordable Care Act, the Secretary and CMS were | |
| given the authority to waive certain provisions of Medicare in | |
| order to test new payment and service delivery models. In the | |
| pioneer ACOs, which is run by the Innovation Center, and the | |
| bundled payments for care improvement also run by the | |
| Innovation Center, were running tests where participants in | |
| those models have waivers from the three-day prior | |
| hospitalization rule. We chose those environments in which to | |
| test this because we feel in those environments the providers | |
| have both a clinical and a financial, heightened clinical and | |
| financial responsibility, so we feel that it is the best | |
| possible environment to waive the rule without having excess | |
| utilization. | |
| Those tests are fairly new, and we are going to evaluate | |
| them very closely, and when we have data to share, we would be | |
| happy to share them with this committee. | |
| Mr. PASCRELL. Thank you. | |
| Thank you, Mr. Chairman. | |
| Chairman BRADY. Thank you. | |
| Mr. Gerlach is recognized. We will move to two-to-one | |
| questions so we can balance questions from now on. | |
| Mr. GERLACH. Thank you, Mr. Chairman. | |
| Thank you for testifying this morning to both of you. | |
| On this Two Midnight Rule issue, in staying with the | |
| questions that my predecessors here have just posed, I think a | |
| lot of this can be boiled down to some of the information that | |
| we get from our subcommittee staff that summarizes the issues | |
| for the hearing today, and let me read if I can from that | |
| because, again, I think it crystallizes on the Two Midnight | |
| Rule where we are, and ``For fiscal year 2014, CMS maintains | |
| 751 diagnostic-related group bundling codes for inpatient | |
| hospital payment. The outpatient payment system is focused on | |
| current procedural terminology, or CPT codes, that are | |
| maintained by the American Medical Association. The CPT codes | |
| map to ambulatory payment classifications, or APCs, for | |
| outpatient service reimbursement. For calendar year 2014, CMS | |
| maintains 813 APCs. There is no one-to-one matching of DRGs to | |
| APCs nor international classification of disease codes to CPT | |
| codes. Hospitals are responsible for knowing two different | |
| coding systems and two different payment systems for Medicare | |
| reimbursement.'' Seems to me that's the problem, isn't it? A | |
| patient comes into a hospital, presents with certain symptoms | |
| and certain complaints, but there is two different coding | |
| systems that a hospital is then required to utilize in terms of | |
| the reimbursement it will ultimately receive for whatever | |
| service is provided to the patient. | |
| So does not the answer lie obviously to a new methodology | |
| that somehow blends these codes or smoothens these two | |
| different payment systems, one outpatient, one inpatient, so | |
| there is a fair way to reimburse for the service provided, not | |
| the length of stay on an arbitrary basis. Mr. Cavanaugh? | |
| Mr. CAVANAUGH. Thank you for that question, Congressman. I | |
| do think in this year's rule in which we requested input on a | |
| short-stay inpatient payment system, we were suggesting that we | |
| are open to the kind of thing you are talking about, which is | |
| trying to see if the solution here is to minimize the payment | |
| differences. I don't want to prejudge the result of that. We | |
| are waiting to receive public comment on how that might look, | |
| but I think it is an openness to a step in the direction you | |
| are discussing. | |
| Mr. GERLACH. Is that openness towards getting to a system | |
| where again the reimbursement to the hospital is based upon a | |
| more simplified methodology, and the methodology that is tied | |
| to the nature of the service that is provided, not an arbitrary | |
| time period for which that patient is in the hospital? | |
| And I would also, Mrs. Nudelman, if you would also reply to | |
| that as well. | |
| Ms. NUDELMAN. I mean I defer to CMS and to Congress to make | |
| the policy, but I think the overall objective is going back to, | |
| you know, not paying vastly different amounts for beneficiaries | |
| that receive similar care. At the very least, a standardized | |
| crosswalk that crosswalks the outpatient and the inpatient | |
| procedures would be a useful tool. | |
| Mr. GERLACH. Well, typically an inpatient reimbursement | |
| would be about three times what an outpatient reimbursement | |
| would be, so there would be a fundamentally unfair situation | |
| where somebody is discharged from the hospital at 10 p.m. | |
| before the second midnight and therefore the hospital receives | |
| a third of the reimbursement for the services that were | |
| otherwise provided or could have been provided if you just kept | |
| the person three more hours and discharged him or her at 1 a.m. | |
| after the two midnights had passed by and get three times the | |
| reimbursement. | |
| So isn't there a fundamental flaw in just arbitrarily | |
| setting up a Two Midnight or any particular time period for | |
| determining reimbursement versus just the nature of the service | |
| that is needed to treat the patient, as Mr. Cavanaugh you | |
| alluded to some moments ago, that is the goal here, getting the | |
| patient properly cared for in the hospital setting, based upon | |
| the symptoms and problems and then the diagnosis that is made | |
| to deal with that. | |
| Mr. CAVANAUGH. I think, Congressman, it is fair to say CMS | |
| shares your goal. What I would caution you is anytime we create | |
| a new payment, there is a lot that goes into creating payment | |
| systems, and what you are articulating, I think, is a very | |
| worthy goal of a seamless payment system. It presents many | |
| technical challenges. However, again, we have expressed | |
| openness in our proposed rule to exploring payment solutions to | |
| this, so we look forward to hearing any ideas this subcommittee | |
| has, and we look forward to working with you on this. | |
| Mr. GERLACH. Thank you both. | |
| Chairman BRADY. Thank you. | |
| Mr. Smith. | |
| Mr. SMITH. Thank you, Mr. Chairman, and thank you to our | |
| panelists here today. | |
| It would seem the more regulations we have, the more | |
| difficult it becomes, at least to medical providers that tell | |
| me that it is more difficult to do their job and especially | |
| to--it becomes more difficult to do the right thing. | |
| And Mr. Cavanaugh, similar to concerns raised about the Two | |
| Midnight Rule, there is another regulation CMS announced it | |
| will begin enforcing this year pertaining to the 96-hour rule | |
| at critical access hospitals. This regulation requires, as you | |
| know, physicians to certify at the time of admission they do | |
| not believe a patient will be there more than 96 hours or must | |
| transfer the patient or face non-reimbursement. I understand | |
| CMS has walked back this rule, allowing more time to file the | |
| certification. Is that true? | |
| Mr. CAVANAUGH. That is true. We have provided guidance to | |
| some of the hospitals that we will allow the certification to | |
| occur anytime up to 24 hours before the bill is submitted, and | |
| I think that will be coming out more formally sometime soon. | |
| Mr. SMITH. Okay. I assume that you have received a good bit | |
| of feedback, as have I, from hospitals and physicians. Can you | |
| reflect a little bit briefly, if you might, on the kind of | |
| feedback you received that would have prompted walking the rule | |
| back a bit? | |
| Mr. CAVANAUGH. Certainly we got a lot of input about the | |
| timing and the burden and whether the trade-off between what we | |
| were seeking and what the hospitals were requesting, whether | |
| there was any loss in the assurances we needed that the patient | |
| was seeing the appropriate level professional, and I think | |
| hospitals made a convincing case that there was room for some | |
| adjustment in the policy. | |
| Mr. SMITH. It would seem that the rule is unnecessary and | |
| even arbitrary. How did you arrive at the actual number of 96 | |
| hours? | |
| Mr. CAVANAUGH. Sir, that part is in the statute. The | |
| statute requires that the physician make a certification that | |
| the expectation, when the patient arrived, was that they would | |
| need no more than 96 hours. | |
| Mr. SMITH. What is the background on that 96 number? | |
| Mr. CAVANAUGH. I apologize. I don't know the story there. I | |
| just know it is statutory based. | |
| Mr. SMITH. And CMS has not enforced it up until they | |
| finally decided to start enforcing that, is that accurate? They | |
| had not been previously? | |
| Mr. CAVANAUGH. Again, I apologize. I have been in the job | |
| for just a couple of weeks. I do know that the requirement does | |
| trace back to the statute. | |
| Mr. SMITH. Okay. I have introduced a bill, H.R. 3993, the | |
| Critical Access Hospital Relief Act of 2014, which would repeal | |
| the regulation, and I would certainly encourage the agency's | |
| support of that. I think it might even make a lot of folks' | |
| jobs more easy to carry out, and I know that we have got other | |
| burdens on the critical access hospitals such as the physician | |
| supervision, again arbitrary, hard to determine how that ever | |
| even came about in terms of a rule or regulation, and it is | |
| very discouraging for medical providers to be facing all of | |
| these regulations that, like I said earlier, make it difficult | |
| for the good actor to do the right thing. | |
| I know we have seen advertising on television about | |
| addressing fraud in Medicare/Medicaid and other areas, and yet | |
| I still think that all of these regulations are making it more | |
| difficult for the provider to do the right thing. I am not | |
| convinced that it is actually preventing fraud. I can | |
| appreciate the fact that there are limited resources, that you | |
| acknowledge that and that we are all trying to operate in a | |
| world of limited resources, and yet I think that many of these | |
| regulations are accomplishing the exact opposite of what they | |
| were intending to accomplish, and it is a huge burden and I | |
| would hope that the agency would really reflect on that fact as | |
| we do move forward. | |
| I thank you, Mr. Chairman. | |
| Chairman BRADY. Thank you. | |
| Mr. Kind. | |
| Mr. KIND. Thank you, Mr. Chairman. Thank you for holding | |
| this hearing. I want to thank our panelists for your testimony | |
| here today. | |
| Just to maintain the momentum of some of my colleagues, | |
| especially my friend from Pennsylvania. As I have been talking | |
| to a lot of our providers back home in Wisconsin over the Two | |
| Midnight Rule, their sense is that it is awfully arbitrary, and | |
| they are having some definitional problems too, as far as what | |
| constitutes inpatient care versus observational status, | |
| outpatient care. | |
| Has CMS, Mr. Cavanaugh, been working with the provider | |
| community to provide better definition or clarity in regards to | |
| those type of services, and what is the difference? I f they | |
| are in there under on observational status versus inpatient | |
| care, is there things you can point to that clearly | |
| distinguishes between the two types? | |
| Mr. CAVANAUGH. So, first on the first half of your question | |
| about whether we are working with providers. I would say we | |
| certainly are. I think it was a big part of our attitude, going | |
| into this year, as you recall, we suspended the recovery | |
| auditors looking at these cases for these purposes because we | |
| wanted to work with providers and we wanted to do it. So we | |
| have, as I said, the MACs going into each hospital and taking a | |
| small sample of cases and seeing whether they are complying | |
| with the rule. | |
| And in instances where hospitals are, they are left alone | |
| for the rest of this year. In instances where hospitals are | |
| having trouble understanding or in implementing the new rule, | |
| the MACs are working with them to educate them. | |
| So, I do feel like we have taken this pause in the recovery | |
| audit program, looking at these types cases, for the very | |
| reason you say which is to work with the hospitals and again, | |
| the origin of the rule was to respond to the request from the | |
| NG4 clarity. One of the things we may be look learning is that | |
| additional clarity is needed, or as we discussed, perhaps | |
| additional payment solutions are needed. We will wait to see | |
| how these discussions go. But I do think you raise an important | |
| point, that this is dialogue between us and the industry, and | |
| we do hope to learn quite a bit during this time. | |
| Mr. KIND. Well, are there clear distinctions that can be | |
| made between inpatient and outpatient status, observational | |
| status within the hospital setting? | |
| Mr. CAVANAUGH. Certainly observation status is supposed to | |
| be used for a short period for the purposes of determining | |
| whether a patient needs an inpatient level of care, and during | |
| that time, there ought to be diagnostic and other monitoring | |
| being conducted. I would hesitate to go any further into | |
| distinctions because I am not a clinician, but I think your | |
| point is well taken, which oftentimes these are based on | |
| complex medical judgments that are difficult to translate into | |
| payment policy. | |
| Mr. KIND. You mention that CMS is moving forward on a short | |
| stay payment rule right now, and you are starting to get some | |
| feedback, some comments on that. What are the various factors, | |
| just for the committee's benefit, what are the various factors | |
| that you are taking under consideration in putting that rule | |
| together? | |
| Mr. CAVANAUGH. The two questions we posed specifically in | |
| the proposed rule were, one, how would you define short stay | |
| cases, and there are examples of this. There are other payment | |
| systems out there that do use short stay payments, so it is not | |
| unprecedented, but it is a bit challenging here, as I mentioned | |
| earlier, in that some of the cases that are inpatient that are | |
| subject to RAC review are often already very short stay, even | |
| when they are legitimately inpatient, meaning they have an | |
| average length of stay of 2 days, so how do you--cases are | |
| typically 1, 2, or 3 days already, how do you carve out a short | |
| stay. | |
| And the second, and this has been the subject of several | |
| questions. The second question we posed to public was, how | |
| would you construct this new payment? I think questions have | |
| arisen, would it include the IME and DSH adjustments, and | |
| learnings like that, and I think these are real important | |
| issues where we need some pubic feedback before we move | |
| forward. | |
| Mr. KIND. Is uncompensated care or underinsured | |
| individuals, is that going to be a factor, too, in the short | |
| rule? | |
| Mr. CAVANAUGH. Well, the way that currently gets into | |
| Medicare payment is typically through the DSH adjustment, and I | |
| think that is the fair question of whether it should be part of | |
| this as well. | |
| Mr. KIND. Let me take you in a different direction. | |
| Obviously, recently, CMS did their physician reimbursement data | |
| dump that received a lot of attention, a lot of articles, a lot | |
| of focus, especially on some reimbursements that seemed outside | |
| the norm or other parameters than that. | |
| We hear from the doctors in the follow-up questions that it | |
| wasn't just them. There were multiple docs or whatever using | |
| the same code in order to submit the billing information. Does | |
| that sound plausible to you that, that is what, in fact, what | |
| is taking place and why some doctors are being reimbursed 12 or | |
| $14 million in a single year? | |
| Mr. CAVANAUGH. It is true that in certain instances | |
| multiple providers can bill under the same identification | |
| number. | |
| Mr. KIND. Why are we allowing that? | |
| Mr. CAVANAUGH. I will have to look into at that and get | |
| back to you, but I think there are legitimate reasons for that. | |
| Mr. KIND. I would like to follow up. It just seems if we | |
| are trying to bring greater transparency, allowing multiple | |
| providers to use the same code seems to work against that | |
| issue. It is something that I think we are going to have to | |
| address. | |
| Thank you, Mr. Chairman. | |
| Mr. CAVANAUGH. Be happy to look into that. | |
| Chairman BRADY. Thank you. | |
| Dr. Price. | |
| Mr. PRICE. Thank you, Mr. Chairman. | |
| I want to thank the panelists as well. I think this is an | |
| incredibly important topic, and as a physician for over 20 | |
| years, know that we often times don't put the patient at the | |
| center of these discussions, and it is sometimes hard to do, | |
| especially when we are talking about money. | |
| Mr. Cavanaugh, I was struck by the difference in the | |
| numbers that we hear recounted on the number of appeals that | |
| are either overturned or not, and your number of 7 percent | |
| astounds me because it is one that I have never heard before, | |
| so I suspect that includes all RAC audits that are done | |
| throughout the entire country. I don't want the answer to that, | |
| but I would like it in writing later. | |
| But I think the question that we really need to ask is, of | |
| those cases that hospitals have appealed, that are inpatient | |
| stays denied due to medical necessity, what percent of those | |
| are overturned at the QIC level and then at the ALJ level. Do | |
| you have those numbers? | |
| Mr. CAVANAUGH. I don't believe I have them handy, but they | |
| are, we can get them, and we will get them to you soon. | |
| Mr. PRICE. I would appreciate that. One, there is a | |
| hospital system in my area where 72 percent are overturned. 72 | |
| percent. So I would urge you to look at your testimony that | |
| says when you are however 40 percent or thereabouts, something | |
| is wrong, something is wrong with the system. | |
| I want to revisit that in a minute, but I want to touch on | |
| the Two Midnight Rule. When does--when a patient presents to | |
| the emergency room and is being admitted, when does the | |
| physician--when is there a physician that has to sign that says | |
| that this admission is medically necessary? | |
| Mr. CAVANAUGH. That says the admission is medically | |
| necessary? | |
| Mr. PRICE. And would qualify for the inpatient, for the Two | |
| Midnight? | |
| Mr. CAVANAUGH. The physician can give the order--or other | |
| qualified professional can give the order verbally but has to | |
| countersign it at some point. It doesn't---- | |
| Mr. PRICE. But the order has to be given at the time of the | |
| admission? | |
| Mr. CAVANAUGH. Yes. For a patient to become officially an | |
| inpatient, a physician or other qualified personnel has to give | |
| an order. | |
| Mr. PRICE. So we are asking our doctors to predict what is | |
| going to happen to that patient over the next two midnights; is | |
| that right? | |
| Mr. CAVANAUGH. It is based on a physician, the Two Midnight | |
| Rule is based on a physician's expectation, which this is | |
| expectation based on what they know at that time, and if a | |
| physician's expectation isn't fulfilled, meaning if the patient | |
| recovers or something else intervenes, the rule is not what | |
| happened but what the physician reasonably expected. | |
| Mr. PRICE. Wouldn't we be better off if we said that | |
| doctors and patients and families ought to be making these | |
| decisions and not CMS? | |
| Mr. CAVANAUGH. Well, again, CMS, we are trying to leave it | |
| largely at to a doctor's discretion, but we are also, as I said | |
| in my opening statement, we are trying to balance many goals | |
| here. | |
| Mr. PRICE. No, I got you. I got you. But many physicians | |
| out there will tell you that they don't feel that you are | |
| trying to allow them to practice medicine. Are there clinical | |
| studies or reports that back up the Two Midnight Rule? | |
| Mr. CAVANAUGH. I am not sure I understand the question, | |
| sir. | |
| Mr. PRICE. Are there any clinical studies, scientists that | |
| have done studies, and say, yeah, this Two Midnight Rule makes | |
| sense from the patient's perspective and being treated? | |
| Mr. CAVANAUGH. Again, we crafted the rule---- | |
| Mr. PRICE. Is there any clinical studies? | |
| Mr. CAVANAUGH. The Two Midnight Rule is relatively new. I | |
| am not aware of any studies of it at this time. | |
| Mr. PRICE. If you are, I would love to hear about it | |
| because I am not aware of any either. CMS contracts with these | |
| recovery audit groups to go get that money, right? | |
| Mr. CAVANAUGH. CMS contracts with recovery auditors to | |
| review improper---- | |
| Mr. PRICE. And you pay them a percent. | |
| Mr. CAVANAUGH. A contingency fee, yes. | |
| Mr. PRICE. And when they--when an appeal is overturned, do | |
| you go get that money back? | |
| Mr. CAVANAUGH. Yes, we do. | |
| Mr. PRICE. From the RAC. How much is that? | |
| Mr. CAVANAUGH. I am sorry? | |
| Mr. PRICE. How much money is that? | |
| Mr. CAVANAUGH. In total or any individual case? | |
| Mr. PRICE. Total. | |
| Mr. CAVANAUGH. I would be happy to go back and find that | |
| number. I don't know it off the top of my head. | |
| Mr. PRICE. Good. Okay, can different RACs have different | |
| criteria for what's medically necessary? | |
| Mr. CAVANAUGH. They are all supposed to tie to Medicare | |
| policy. | |
| Mr. PRICE. And what is the clinical input that RACs are | |
| required to have to define what is medically necessary? | |
| Mr. CAVANAUGH. If you mean, the RACs are required to have a | |
| medical director who is supervising all of their medical | |
| policies. | |
| Mr. PRICE. And do medical specialty societies have an | |
| opportunity to review all of that? | |
| Mr. CAVANAUGH. Of the work of the RACs? | |
| Mr. PRICE. Yes. | |
| Mr. CAVANAUGH. Not directly, sir. | |
| Mr. PRICE. All of this money that is used to comply with | |
| all of these rules and regulations cost money, doesn't it? The | |
| hospitals, it costs money? | |
| Mr. CAVANAUGH. Yes, sir. | |
| Mr. PRICE. Millions of dollars, maybe more. Where does that | |
| money come from? | |
| Mr. CAVANAUGH. Well, Congressman, I think you are getting | |
| at a point that I would concede right away, which is our goal | |
| is not to have a lot of these cases reviewed, not to have a lot | |
| of cases overturned. Our goal is to have clear policies that | |
| hospitals agree with and can comply with. | |
| Mr. PRICE. Comes from patient care though, right? Doesn't | |
| it? If the hospital has to put that money into complying with | |
| the rules from CMS that get more and more laborious, then that | |
| money is not going into caring for that patient, so when we | |
| hear one of our colleagues here say this really isn't affecting | |
| the patient, that is really not true, is it? | |
| Mr. CAVANAUGH. It is not a productive use of money, and it | |
| is why we are trying to reduce the need for this type of | |
| review. | |
| Mr. PRICE. Thank you very much. | |
| Chairman BRADY. Thank you. | |
| Mr. Renacci. | |
| Mr. RENACCI. Thank you, Mr. Chairman. I want to thank the | |
| panel. | |
| Mr. Cavanaugh, Mr. McDermott asked you a question about-- | |
| talked a little about three people entering the hospital, and I | |
| just was interested in a response. You said, ``I would hope | |
| that the patient receives all the benefits they are entitled | |
| to.'' I want you to keep that in mind when we go through a | |
| couple of questions I have for you. | |
| Due to the increase in the length of observation days, more | |
| and more Medicare beneficiaries are losing out on skilled | |
| nursing coverage. The OIG found beneficiaries had over 600,000 | |
| hospital stays that lasted three nights or more but did not | |
| qualify them for SNF services, skilled nursing facility | |
| services. | |
| I have spent the majority of my career, almost 25 years in | |
| the long-term care industry. I recognized the barrier to access | |
| that the current 3-day inpatient requirement has created for | |
| our seniors. For this reason, I have actually introduced | |
| legislation, H.R. 3531, the CARES Act that not only removes | |
| this barrier but also encourages hospitals and nursing | |
| facilities to communicate with each other before discharge. | |
| Mr. Cavanaugh, the seniors in my district are often unaware | |
| of the 3-day inpatient requirement, and furthermore, seniors | |
| and their caregivers are unaware whether or not their hospital | |
| stays was billed as inpatient or observation. So I want you to | |
| think about that patient that enters the hospital, and they are | |
| entitled to long-term care under Medicare, and they end up in | |
| this quagmire of in observation day, not an inpatient day, and | |
| quite frankly, they probably could go directly to a nursing | |
| home in many cases because the doctor is only sending them to | |
| the hospital because that is a requirement, and it is actually | |
| costing the Medicare system dollars to send them through to | |
| that hospital just to get them the path to that nursing home. | |
| So, if you think about that patient, and again, going back | |
| to your comment, ``I would hope the patient receives all the | |
| benefits they are entitled to,'' you send the, we send this | |
| patient into a hospital because it is a requirement, they go | |
| through 3 days, they have to, you know, to get to the nursing | |
| home. The doctor already says they belong in a nursing home. | |
| Again, I was in the industry for 25 years. I can tell you these | |
| patients belong in that nursing home, and they get caught up in | |
| this observation day, but here is the problem. Then they are | |
| sent to the nursing home, and when they are sent to the nursing | |
| home, for 2,000 of the hospital stays, Medicare did not pay for | |
| NSF services, and the beneficiary was charged an average of | |
| $11,000. | |
| So now we have this patient who started in the hospital, | |
| ended up in observation day, probably should have never went in | |
| the hospital if we had a different system that actually my bill | |
| would allow, lets them go directly into the nursing home | |
| because the doctor says that is the care that is needed. | |
| So, has CMS implemented any policies that would really | |
| decrease the instances in which seniors, and again, that is | |
| what I am talking about, that person you talked about, the | |
| benefits that they are entitled, where there were seniors who | |
| were caught off guard and left off on the hook for thousands of | |
| dollars in medical bills. | |
| Mr. CAVANAUGH. Congressman, I think you raise a very | |
| important issue and one that was one of the driving factors to | |
| us looking at the Two Midnight Rule. I tell you two things. | |
| One, one of the impacts we are seeing, at least preliminarily | |
| of the effect of the Two Midnight Rule, is we are seeing a | |
| decrease in these long observation stays, and I believe those | |
| are probably shifts to inpatient status so potentially helping | |
| the beneficiaries you are talking about, but you are also | |
| talking about a larger issue of whether these patients need to | |
| go through the hospital in order to--or should need to go | |
| through the hospital in order to access the skilled nursing | |
| facility benefit and as I mentioned to an earlier question, we | |
| are interested in exploring alternatives to that, too. | |
| We currently have a subset of the pioneer ACOs, several of | |
| whom have had the 3-day hospitalization rule waived so they can | |
| test whether there are safe and effective ways for patients to | |
| be admitted to the SNF without the prior hospitalization, and | |
| we are, this year, also allowing some of the participants, both | |
| hospitals and post-acute care providers to do that as well in | |
| our bundled payment initiative. So we are hoping we will gain | |
| clinical and financial evaluation results from that, that we | |
| can share with this committee and maybe apply to broader | |
| Medicare policy. | |
| Mr. RENACCI. You would then agree--it sounds like these | |
| studies will give us some of those answers, but you would agree | |
| sending somebody to the hospital and having the cost, the | |
| burden of that person in that hospital when it really could go | |
| to a nursing home might be a way of saving some dollars if we | |
| sent them directly to the nursing home? | |
| Mr. CAVANAUGH. We do feel there is potential there, but | |
| again, we are testing it, and I don't want to prejudge the | |
| results of these tests. | |
| Mr. RENACCI. All right. Thank you. | |
| I yield back. | |
| Chairman BRADY. Thank you. | |
| Mr. Crowley. | |
| Mr. CROWLEY. Thank you, Mr. Chairman. | |
| Thank you, Chairman Brady and Ranking Member McDermott for | |
| allowing me to join with you all at this hearing today. | |
| And welcome, Mr. Cavanaugh. Good to have you here. I know I | |
| speak for all my colleagues when I say we look forward to | |
| working with you in your new capacity, new role at CMS. | |
| Mr. CAVANAUGH. Thank you. | |
| Mr. CROWLEY. So, I represent parts of New York City, Queens | |
| and the Bronx. I know you are familiar with those areas quite | |
| well. We are fortunate to have a number of highly regarded | |
| hospitals and medical institutions, many of which are also | |
| academic medical centers, and I know you are familiar with all | |
| those as well. | |
| These hospitals and others across the country are | |
| struggling with the implementation of the Two Midnight Rule, | |
| and while I appreciate CMS' efforts to try and clarify when the | |
| patient should be admitted as an inpatient, I have serious | |
| concerns about the overall policy. Our New York hospitals | |
| focused primarily on providing the best medical treatment with | |
| great efficiency rather than on what time the patient is | |
| admitted. The Two Midnight Policy sets an arbitrary standard | |
| that does not always reflect the clinical judgment of the | |
| treating physician. | |
| Several months ago, Representative Gerlach and I introduced | |
| legislation to delay the enforcement of the Two Midnight | |
| Policy. I am glad that this delay was included in the most | |
| recent doctor's payment fix, and I thank the committee for all | |
| of its work in achieving that delay. But the problems with the | |
| underlying rule remain, and they need to be addressed. That is | |
| why our bill also orders the CMS to implement a new payment | |
| methodology for short inpatient stays that don't fit neatly | |
| into the divides of the Two Midnight Policy. | |
| I was very pleased to see that CMS' proposed Medicare | |
| inpatient rule for next fiscal year includes requests for | |
| feedback on establishing a short stay inpatient methodology, | |
| which could help both providers and beneficiaries. I hope that | |
| CMS will continue to work closely with hospitals and patients | |
| in establishing this process and in taking into account the | |
| costs associated with operating, teaching, and safety in our | |
| hospitals. It is important a new payment system protect | |
| graduate medical education and disproportionate share hospital | |
| payments. | |
| Now, I know the rulemaking process is under way, but can | |
| you comment at all on how you see this issue being addressed as | |
| you move forward, if there are any possible methods you have | |
| considered and are willing to consider? | |
| Mr. CAVANAUGH. Thank you, Congressman, and thank you for | |
| your kind words. I do know New York and the hospital industry | |
| there quite well, having worked there, and in one hospital and | |
| closely with many of the others. | |
| You are correct. First of all, you are correct that | |
| Congress extended, and based on your legislation, the pause in | |
| the RAC review of medical necessity of inpatient stays until | |
| March of next year. I think that does give us all, both | |
| Congress and the administration, some time to think about how | |
| the policy is working and whether there are additional steps | |
| that are needed to make a clearer payment policy that we can | |
| all agree on. | |
| One of those areas that we are going to spend a significant | |
| amount of time and resources on is exploring the possibility of | |
| a short stay outlier. I don't want to prejudge how we would do | |
| this because we are soliciting public input, but as I have said | |
| in response to several other questions, it is an intriguing | |
| idea, but it also poses, you know, real conceptual challenges. | |
| We are up to those challenges, but I don't want to under | |
| estimate them. | |
| One of the things I would point out is, if it is going to | |
| be an inpatient short stay thing, we are still going to need a | |
| definition of when inpatient care is necessary because you will | |
| still have a distinction between inpatient and outpatient. We | |
| are going to have the challenge of how do you create short stay | |
| payment when certain DRGs are already very short stay. But I | |
| know, as I said, there is some very great minds up in the New | |
| York hospital industry that I know are working on this, and | |
| they have been in touch with us, we have been in touch with the | |
| other association, so we eagerly await their input. | |
| Mr. CROWLEY. Thank you, Mr. Cavanaugh. I look forward to | |
| continuing to work with you in your new capacity, and I hope | |
| that you have that same open mind approach when you are dealing | |
| with the committee and the chairman and the ranking member as | |
| well, so thank you for being here today. | |
| Mr. CAVANAUGH. Thank you, sir. | |
| Chairman BRADY. Thanks. Mrs. Black. | |
| Mrs. BLACK. Thank you, Mr. Chairman. I want to thank you | |
| for allowing a non-committee member to be here to listen to the | |
| testimony and have an opportunity to be able to ask a question. | |
| Ms. Nudelman, in your written testimony, you talk about | |
| some hospitals use a short stay inpatient for less than 10 | |
| percent, excuse me, of their stays and others use it over 70 | |
| percent. Did you find any tends when you were looking at these | |
| vast differences between how hospitals use these and whether | |
| there is any type of hospital, in particular, that uses them | |
| differently? | |
| Ms. NUDELMAN. Thank you for your question. As you know, we | |
| did see a lot of variation, but we did not look at whether | |
| there are certain types of hospitals that are more likely to | |
| use short inpatient stays. If the trend continues under the new | |
| policy, you know, this is a really important question to look | |
| into further. | |
| Mrs. BLACK. I certainly think that, that is one that would | |
| give us a lot of information because if you are using it for | |
| certain types of hospitals is it cardiac hospitals, were they | |
| looking at orthopedic, I think it would be very interesting to | |
| take a look at the wide variance that is there between 10 and | |
| 70 percent. | |
| And let me go to another area that seems to be a lot of | |
| variance, and that is, in your testimony on page number 5 | |
| underneath of the appeals, you note that about 72 percent of | |
| those who appeal are successful and yet we keep on hearing this | |
| number of 7 percent. There is a real disparity there. Can you | |
| break that down? There is something else there that we are not | |
| exactly understanding. | |
| Ms. NUDELMAN. Sure. Let me try to do that. I think what we | |
| are seeing is there is about six, most of the appeals from RACs | |
| are not appeals. Most of the RAC decisions are not appealed, so | |
| according to our statistics, about 6 percent of the RAC | |
| decisions are appealed. Now, once those are reached higher | |
| levels, about half of those are overturned, so that maybe can | |
| help reconcile some of those issues. | |
| Where the 72 percent comes into play is when we looked at | |
| the third level of appeals, the ALJ level, they overturn about | |
| 72 percent of hospital claims. That would include both RACs, | |
| that would include other issues than just the inpatient. | |
| Mrs. BLACK. So, just to be clear. | |
| Ms. NUDELMAN. Sure. | |
| Mrs. BLACK. About 7 percent, 6 or 7 percent, depending upon | |
| who is talking about that number, but somewhere in that range | |
| of those decisions that are made by RACs are appealed, and of | |
| those that are appealed, in this case of Part A hospitals, 72 | |
| percent of those prevail, correct? | |
| Ms. NUDELMAN. Overturn. | |
| Mrs. BLACK. Overturn. | |
| Ms. NUDELMAN. At the ALJ level. | |
| Mrs. BLACK. ALJ level. Okay. Well, that makes a lot more | |
| sense because there is a lot of disparity between 6 percent and | |
| 70 percent, and so that helps me to understand a little bit | |
| better about where those numbers are coming from. Thank you | |
| very much. | |
| Thank you, Mr. Chairman. | |
| Chairman BRADY. Thank you, Mrs. Black. | |
| I am now confused about the appeal process. Can I, I don't | |
| mean to intervene here for a minute before I go to Ms. Jenkins. | |
| But, so 94 percent of the claims identified as overpayments on | |
| appeal, 6 percent left half, almost half are decided in favor | |
| of the appeal, is that right? So the over payments, 97 percent | |
| of them, at the end of the day, are considered accurate. | |
| Ms. NUDELMAN. Just repeat that last part of your sentence. | |
| I just didn't hear that. | |
| Chairman BRADY. Of the RAC decisions on claims identified | |
| as overpayments, 94 percent aren't appealed. Of the 6 percent | |
| that are left, half are overturned, so---- | |
| Ms. NUDELMAN. That is according to our numbers. | |
| Chairman BRADY [continuing]. You are saying 97 percent of | |
| those overpayments are upheld? | |
| Ms. NUDELMAN. Yes. | |
| Chairman BRADY. Half of 6, 3, 94. | |
| Ms. NUDELMAN. Yeah. And that is prior to the surge, and | |
| that is in fiscal years 2010 and 2011, so that could also be | |
| part of the issue. | |
| Chairman BRADY. Is there a dollar figure attached to that? | |
| For example, you may not appeal a $10 overpayment but you would | |
| a $10,000 one. Does your analysis show of those that were | |
| appealed a higher dollar value of those? | |
| Again, Mrs. Black, I don't mean to jump, but you were | |
| leading down the right road. What do you know about that? | |
| Ms. NUDELMAN. I don't have the dollar values in terms of | |
| what is appealed in terms of dollar amounts. | |
| Chairman BRADY. Can you try to figure that out? | |
| Ms. NUDELMAN. We can. | |
| Chairman BRADY. Give us a little more texture about---- | |
| Ms. NUDELMAN. Absolutely. | |
| Chairman BRADY. Of that 6 percent, what do they look like, | |
| you know, and are the higher dollar values, are they in a | |
| certain area. And then 72 percent, tell me about that? | |
| Mrs. BLACK. That is of the hospitals, the Part A hospitals | |
| are 72 percent. So, according to what I am reading here, at the | |
| ALJ level, appellants were most likely to receive favorable | |
| decisions for Part A hospital appeals at 72 percent. | |
| And if I may, Mr. Chairman, just interject one other thing | |
| that I thought about that I keep hearing from these hospitals. | |
| Is the length of time it takes them to go from the original | |
| decision that is made by the RACs, to the time that they reach | |
| the ALJ level, can you give us an idea about how much time | |
| period there is in that typically? | |
| Ms. NUDELMAN. Sure. I mean, particularly now with the | |
| postponement of assigning appeals, which the--Omaha just put | |
| into place, and they are projecting just from what is publicly | |
| available that cases will not be assigned for at least 2 years, | |
| so that is pretty significant. | |
| Mrs. BLACK. So there is a cost to the facility in that time | |
| period where they are trying to appeal it and the payments, | |
| they have been taken back, so thank you very much. | |
| Chairman BRADY. No agreements, so Mrs. Black, thank you. | |
| And Ms. Jenkins, you probably never thought we would get to | |
| you. You are recognized for 5 minutes. | |
| Ms. JENKINS. Well, Mr. Chairman, I just thank you for | |
| allowing me to join you at today's subcommittee hearing, and I | |
| appreciate this panel for being here. | |
| These issues affect hospitals all over the country, and I | |
| have heard countless stories from Kansas hospitals, about the | |
| difficulties they face surrounding the Medicare program. | |
| Lawrence Memorial Hospital in Lawrence, Kansas has asked that I | |
| share their perspective on recovery audit contractors. | |
| The hospital currently has $4.7 million being withheld | |
| because of RAC audits. It has appealed nearly all RAC audits, | |
| and so far has demonstrated a 96 percent success rate in the | |
| appeals process. So, Lawrence Memorial has brought to my | |
| attention what is a valid concern that I am hoping you will | |
| take into consideration. The hospitals are forced to disallow | |
| Medicare days and discharges that are currently held up in the | |
| RAC audit process because of the massive backlog at the ALJ | |
| level of appeal, and the hospital is concerned that these | |
| audits, which are likely to be resolved in their favor, will | |
| not be completed within the 3-year window during which it can | |
| reopen a cost report window and count towards their meaningful | |
| use requirements. This is just one of countless hospitals in | |
| Kansas that is experiencing the immediate and similarly effects | |
| of the current flawed system. | |
| As we continue to discuss a way forward on this topic, | |
| please take this problem into account. Secondly, I would like | |
| to highlight a program with the 83 critical access hospitals in | |
| Kansas and others around the country and what they are | |
| experiencing. I received a letter from the Anderson County | |
| Hospital in Garnett, Kansas, and I would ask that chairman's | |
| consent to insert the letter into the record. | |
| Chairman BRADY. Without objection. | |
| [The information follows: The Honorable Diane Black] | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Ms. JENKINS. This letter details the hospital's problem | |
| with CMS' final OPPS rule for 2014 regarding outpatient | |
| therapeutic services at critical access hospitals and supports | |
| legislation that I have introduced to delay enforcement of the | |
| rule until the end of 2014. This rule, while well intentioned, | |
| is creating a regulatory hardship in rule setting. So the | |
| letter notes that CMS has disallowed physicians at a hospital | |
| based rural health clinic from meeting the direct supervision | |
| requirements, which makes it very difficult for Anderson County | |
| Hospital to be reimbursed by Medicare for services rendered. | |
| The most troubling part of the letter is that the hospital | |
| notes, that the physician supervision requirements have no | |
| impact on the quality of care and that the hospital will | |
| administer the outpatient therapy even without the Medicare | |
| reimbursement. This is a tale-tell sign of a misguided rule | |
| that has missed the point. | |
| So, Mr. Cavanaugh, is it your opinion that requirements on | |
| physician's supervision of outpatient therapy services at | |
| critical access hospitals are feasible and would CMS benefit | |
| from a delay in enforcement in order to revisit this rule? | |
| Mr. CAVANAUGH. First of all, thank you for telling us about | |
| the experience of these two hospitals. | |
| I don't have an opinion on the delay, but I am interested | |
| in the issue, and I am happy to look into it further outside of | |
| this hearing if you are willing to share that experience with | |
| me. | |
| Ms. JENKINS. Okay. We will follow up with you and would | |
| like to work with you to give these folks some relief and | |
| better care for Kansans. | |
| Mr. CAVANAUGH. I am more than happy to look further into | |
| it. | |
| Ms. JENKINS. Okay. | |
| Thank you, Mr. Chairman. I yield back. | |
| Chairman BRADY. Thank you, Ms. Jenkins. | |
| And before we dismiss the witnesses, Dr. McDermott and I | |
| would love to have both of you give us more perspective by | |
| letter of the 6 percent that are appealed for overpayments, the | |
| value of them relative to the other base of them, which are | |
| related to the two payment, Two Midnights Rule, any other | |
| insight you can give us on those. The numbers seem very low | |
| compared to what we have heard anecdotally, and we really would | |
| like to have more light shined on those areas if you don't | |
| mind. We'll follow up with you by letter, but we would love to | |
| have, I think the members would love to have that perspective. | |
| Mr. CAVANAUGH. We would be happy to do that. | |
| [The information follows: The Honorable Lynn Jenkins] | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman BRADY. With that, thank you very much, both of | |
| you, for testifying, and let's line up for a second panel. | |
| Thank you very much. I made the introductions earlier, so | |
| we will, for the sake of time, go right into testimony. | |
| Ms. Deutschendorf, you are recognized for 5 minutes, and | |
| welcome to all the second panel. | |
| STATEMENT OF AMY DEUTSCHENDORF, SENIOR DIRECTOR OF CLINICAL | |
| RESOURCE MANAGEMENT, JOHNS HOPKINS HOSPITAL AND HEALTH SYSTEM | |
| Ms. DEUTSCHENDORF. Chairman Brady, Ranking Member | |
| McDermott, and distinguished Members of the Subcommittee, thank | |
| you so much for this opportunity to testify today and share the | |
| Johns Hopkins experience on these important issues affecting | |
| hospitals in the Medicare program. | |
| I am Amy Deutschendorf. I am a nurse. I am responsible for | |
| assuring the appropriate utilization of clinical resources for | |
| our patients in the right care setting, and that includes care | |
| coordination in the readmissions reductions initiative. My | |
| remarks today focus on two major changes, the CMS definition of | |
| an inpatient the Two Midnight Rule, and also the agency's | |
| recovery audit contractor program, both of which are draining | |
| precious hospital resources which need to be redirected to | |
| quality patient care delivery. | |
| We know that the Two Midnight Rule was spawned out of an | |
| attempt to limit lengthy observation stays and add clarity to | |
| the definition of an inpatient, but unfortunately, the rule | |
| adds a new layer of complexity that not only does not meet that | |
| CMS objective but has created confusion and stress for our | |
| providers and our patients and has been operationally extremely | |
| difficult to implement. | |
| Our observation rate has increased by 33 percent as a | |
| result of the Two Midnight Rule. It has taken away physician | |
| judgment in the determination of hospitalization as an | |
| inpatient and has instead required our physicians to become | |
| soothsayers as they try to project whether or not a patient who | |
| presents to the emergency department with a myriad of symptoms | |
| and comorbidities and determine if they are going to require a | |
| greater than a Two Midnight stay. | |
| More importantly, under the Two Midnight Rule, we have | |
| patients who require the services that only a hospital can | |
| provide, sometimes in the intensive care setting, yet we are | |
| calling them outpatients in this new world. This concept belies | |
| any rationality and has created safety and quality of care | |
| concerns. | |
| Medicare patients are being billed differently than other | |
| patients for equivalent services. They are subject to paying | |
| deductibles and copays associated with Part A benefits which | |
| could be up to 20 percent of their hospitalization. They think | |
| they are coming in for hospital care and their Part A benefit | |
| covers that. We have had patients who have actually left and | |
| refused important diagnostic studies and medications as a | |
| result of increased financial risk. | |
| The Two Midnight Rule is especially devastating for | |
| academic and safety net hospitals. There has been a reduction | |
| in inpatient volumes as a result of the Two Midnight Policy | |
| which has redirected dollars for necessary hospital care to the | |
| outpatient system, causing a loss of payments for critical | |
| community programs, indirect medical education, general medical | |
| education, and disproportionate share payments at a time we | |
| need them the most. | |
| Since its inception, RAC has created enormous financial and | |
| administrative burden on hospitals as we struggle to respond to | |
| the plethora of medical record requests and to the denials and | |
| mount appeal processes. RAC has targeted short stays, again, | |
| the assumption that these stays are medically unnecessary. In | |
| truth, short hospital stays are good and reflect the efficient | |
| and appropriate management of care, some of which can be very | |
| intensive. | |
| Even though Hopkins has a rigorous compliance process for | |
| which we review every day of every single Medicare patient stay | |
| for medical necessity, RAC denied 50 percent of the medical | |
| records that were requested. We took 239 of these to discussion | |
| and immediately 135, almost 60 percent, were overturned at | |
| discussion even before the first level of appeal. The rest of | |
| our 92 percent are in the appeal process. | |
| The RAC program is costing American hospital millions of | |
| dollars in the administrative burden to manage the RAC | |
| requests, denials, and appeals processes, as well as the | |
| financial hit for revenue losses for care that was provided to | |
| patients. | |
| There are a lot of smart and committed legislators and | |
| policymakers who have put their heads around these issues to | |
| come up with solutions that are workable. Unfortunately, with | |
| each iteration and layer of new ideas come complexities and | |
| unintended consequences that seem to yield the opposite result. | |
| In the case of the Two Midnight Rule, Congress and CMS should | |
| consider reverting to an earlier time, that before October 1st, | |
| 2013, and should reinstate the determination of inpatient | |
| hospitalization based on physician judgment with one caveat, | |
| the patients who are hospitalized for greater than two | |
| midnights for medical necessity and medically necessary | |
| hospital services should be presumed to be inpatients. If we | |
| are thoughtful about RAC reform, the short stay problem goes | |
| away and alternative short stay payment policies become | |
| unnecessary. | |
| Congress should consider the formation of a multi- | |
| stakeholder collaborative working group to develop a sound | |
| alternative to the current Medicare audit program. We | |
| appreciate Congressman Gerlach's and Congressman Crowley's | |
| leadership as the lead sponsors of H.R. 3698 and Chairman | |
| Brady, thank you for your attention to this issue and holding a | |
| hearing on it. Having nearly half the members of this committee | |
| support this needed reform sends an important message to your | |
| hospitals and to CMS that this issue must be addressed. | |
| The Two Midnight Rule and the RAC program are draining | |
| precious time, resources, and attention that need to be more | |
| effectively focused on patient care. Johns Hopkins and | |
| hospitals around the country stand ready to work with Congress | |
| and CMS to support these efforts. | |
| Thank you so much for allowing me to testify. | |
| [The prepared statement of Ms. Deutschendorf follows:] | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman BRADY. Thank you. | |
| Dr. Evans. | |
| STATEMENT OF ELLEN EVANS, MD, CORPORATE MEDICAL DIRECTOR, | |
| HEALTHDATAINSIGHTS | |
| Dr. EVANS. Chairman Brady, Ranking Member Dr. McDermott, | |
| Members of the Committee, thank you very much for this | |
| opportunity to testify before you today. | |
| I am Dr. Ellen Evans, lead physician with | |
| HealthDataInsights, the Region D CMS recovery auditor. I am a | |
| proud graduate of the University of Texas Medical School, | |
| residency trained, board certified licensed family physician, | |
| with a certificate of added qualifications in geriatric | |
| medicine. I joined HDI during the RAC demonstration program. At | |
| HDI, I oversee all of our medical and clinical recovery audit | |
| activities. | |
| The recovery audit program is not focused on fraudulent | |
| payments. We review claims to ensure compliance with Medicare | |
| practices and also identify underpayments that are returned to | |
| the providers. This program is a critical component of Medicare | |
| operations because over $30 billion are improperly paid by | |
| Medicare every year. Since the recovery audit program was | |
| passed and implemented in a bipartisan fashion in 2006, over 8 | |
| billion improperly paid Medicare dollars have been recovered, | |
| as well as over $700 million in underpayments returned to | |
| providers. | |
| Recovery auditors identify the types of claims that are | |
| most at risk of improper payment by employing vast auditor | |
| experience and using Federal publications such as HHS, OIG, | |
| GAO, and CERT reports. Every issue a recovery auditor seeks to | |
| review is submitted first to CMS for a rigorous evaluation and | |
| approval process. Issues that are approved are posted to the | |
| recovery auditor's provider portal in advance of any activity. | |
| CMS has limited the recovery audit medical record request | |
| to 2 percent of Medicare claims for any given provider. All | |
| medical reviews are conducted by licensed and experienced | |
| clinicians who undergo extensive screening and comprehensive | |
| training. When a provider disagrees with an audit finding, the | |
| provider can initiate a discussion period before formally | |
| appealing the denial. This is in addition to the usual CMS | |
| appeals process. | |
| Though the program has proven to be cost effective, recent | |
| constraints have caused a significant decrease in recovery | |
| audit reviews. First, as part of the implementation of the Two | |
| Midnight Rule, a moratorium was placed on recovery auditors | |
| preventing auditing of short stay hospitals for 18 months. | |
| Second, CMS announced the program would be suspended until new | |
| contracts are in place. The award date is currently unknown. | |
| These two changes will result in over $5 billion of improper | |
| payments not being restored to the Medicare trust fund. | |
| Now, let me provide you some facts about the program. | |
| First, a recovery auditor is required to return all of its fee | |
| when a refinding is reversed upon any level of provider appeal. | |
| This means recovery auditors are incentivized to work | |
| accurately and precisely. Second, according to the most recent | |
| CMS report to Congress, only 7 percent of all recovery audit | |
| determinations have been overturned on appeal. Third, recovery | |
| auditors are accurate. An independent CMS validation contractor | |
| gave recovery auditors a cumulative accuracy score of over 95 | |
| percent. Finally, recovery auditors target improperly paid | |
| claims of all types, yet Medicare data has noted consistent | |
| high dollar errors for inpatient short stays. | |
| Based on this data, it is imperative to the longevity of | |
| the Medicare trust fund to correct inpatient short stays. That | |
| being said, we understand the frustration expressed by the | |
| hospital community surrounding the Two Midnight Rule. We want | |
| to work with CMS and the providers to bring clarity to the | |
| rules. As the committee moves forward on this important issue, | |
| I offer the following recommendations for the program. | |
| First, we support the ALJ appeal reforms outlined in the | |
| November 2012 HHS Office of the Inspector General report. | |
| Second, we support continued effort by CMS to offer providers | |
| front end education to increase provider knowledge of Medicare | |
| policies, and lastly, we support increased dialogue among | |
| recovery auditors, providers, policymakers, to improve the | |
| direction of the program. We are pleased to be a part of the | |
| dialogue today. | |
| The recovery audit program must continue to play a role in | |
| the Medicare program, especially in light of the recent | |
| increases in an improper payment rate. I appreciate the | |
| opportunity to appear before you all today and would be pleased | |
| to answer any questions that you may have. | |
| Chairman BRADY. Thank you. | |
| [The prepared statement of Dr. Evans follows:] | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman BRADY. Dr. Sheehy. | |
| STATEMENT OF ANN SHEEHY, MD, MEMBER, PUBLIC POLICY COMMITTEE, | |
| SOCIETY OF HOSPITAL MEDICINE | |
| Dr. SHEEHY. Chairman Brady, Ranking Member McDermott, and | |
| Members of the Committee, thank you for the opportunity to | |
| testify today on observation status, the Two Midnight Rule, and | |
| related issues. | |
| My name is Ann Sheehy. I am a physician at the University | |
| of Wisconsin Hospital in Madison, Wisconsin. I am a | |
| hospitalist, which is a physician who cares for patients | |
| primarily in an acute care hospital setting. I am also a member | |
| of the public policy committee of the Society of Hospital | |
| Medicine, an association that represents the Nation's more than | |
| 44,000 hospitalists. | |
| Observation care is often provided in the same hospital | |
| beds as inpatient care, and to a physician and a patient, the | |
| care provider is indistinguishable but is considered outpatient | |
| not covered by Medicare Part A. Many Medicare beneficiaries ask | |
| how they could be outpatients when they are staying overnight | |
| in a hospital. Many ask me to change them to inpatient, which | |
| is something I cannot do under current policy. The centers for | |
| Medicare and Medicaid services describes observation as a well | |
| defined set of services that should last less than 24 hours, | |
| and in only rare and exceptional cases, spend more than 48 | |
| hours. | |
| We published our University of Wisconsin Hospital data in | |
| JAMA Internal Medicine last summer. The average observation | |
| length of stay at our hospital was 33 hours, and almost 1 in 6 | |
| of our observation patients lasted longer than 48 hours. We | |
| also had 1,141 distinct observation codes. We concluded that | |
| observation status for hospitalized patients was markedly | |
| different from the CMS definition I just stated as mean length | |
| of stay was longer than 24 hours, observation stays beyond 48 | |
| hours were common, and the number of diagnoses codes showed | |
| that this was not well defined. | |
| These numbers demonstrate that observation care in real | |
| clinical practice is vastly different than how CMS intended | |
| observation to be. Any attempt to reform observation policy | |
| must recognize how far observation status has strayed from what | |
| observation should truly mean, and this problem is getting | |
| worse with more beneficiaries disadvantaged by observation. The | |
| most recent MedPAC report documented 28.5 percent increase in | |
| outpatient services from 2006 to 2012 with a 12.6 decrease in | |
| inpatient discharges over the same time period. | |
| As the committee is aware, CMS recently established a new | |
| policy to determine observation and inpatient status. As of | |
| October 1, patients staying less than two midnights with some | |
| exceptions were to be observation, and those two or more | |
| midnights would be inpatient, although full enforcement has | |
| been delayed through March 31st of 2015. | |
| The Two Midnight Rule has presented new challenges in | |
| observation care. For example, a Medicare beneficiary may be | |
| hospitalized with pneumonia and is improved enough to leave the | |
| hospital after 40 hours of care. If that patient happens to get | |
| sick and present to our hospital Tuesday at 1:00 a.m., this | |
| means I would discharge them at 5:00 p.m. on Wednesday, a one | |
| midnight stay, but if the same patient becomes ill at 10:00 | |
| p.m. on Tuesday and needs the exact same 40 hours of care, I | |
| would discharge him at 2:00 p.m. on Thursday, a two midnight | |
| stay. Thus the time a patient gets sick, not different clinical | |
| needs, may determine the patient's hospital status and | |
| insurance benefits. | |
| This is not just a theoretical finding. In a second JAMA | |
| Internal Medicine publication last year, we found that almost | |
| half of our University of Wisconsin Hospital less than two | |
| midnight encounters would have been assigned observation status | |
| instead of inpatient by virtue of time of day of presentation. | |
| Clinically, the Two Midnight Rule hurts the new population | |
| of patients, those staying less than two midnights. As an | |
| example, a patient with diabetic ketoacidosis may be sick | |
| enough to require intensive care unit admission and an | |
| extraordinary amount of services that can be lifesaving, | |
| certainly a level of care that cannot be delivered safely as an | |
| outpatient. Yet these patients can improve quickly, sometimes | |
| in 24 to 48 hours. Now a short stay, even in the intensive care | |
| unit, can be considered outpatient. | |
| The RAC program was well-intentioned, and Medicare fraud | |
| and abuse cannot be tolerated, yet we need more transparency | |
| and oversight of Medicare's current auditing programs. The | |
| reality is the RAC program costs all of us. In a recent 1-year | |
| period at the University of Wisconsin Hospital from October of | |
| 2012 to September of 2013, we appealed 92 percent of RAC audits | |
| for medical necessity, and we have won every single appeal that | |
| has been cited as of May 14 of 2014, which is already two- | |
| thirds of these cases. | |
| Essentially, our hospital pays to repair these cases in | |
| order to prove we were right the first time, but the RAC pays | |
| no penalty for generating this work. These are Medicare dollars | |
| that hospitals spend not on direct Medicare beneficiary care, | |
| but on a process of defending themselves against RAC auditors. | |
| In addition, the Federal Government ultimately pays for | |
| unchecked RAC activity in the appeals process as evidenced by | |
| the current OMHA case backlog. The RAC system generates a large | |
| number of these payment denials at no consequence to the RACs | |
| but at a direct cost to the Federal Government. | |
| To again consider the patient with diabetic ketoacidosis | |
| needing intensive care for less than two midnights, why would I | |
| not just claim inpatient status? Because this case is counter | |
| to the current observation rule of two midnights and is highly | |
| vulnerable to audit. This means an auditor who never met the | |
| patient in question, a year or more after the patient | |
| discharges home, may decide to question my judgment as a | |
| physician and audit. Provider autonomy and ability to do what | |
| is right can be trumped by the RAC system. | |
| In conclusion, observation status certainly merits reform | |
| and the Two Midnight Rule is not the answer. The Two Midnight | |
| Rule and observation status in general negatively impacts the | |
| delivery of good patient care. We need common sense solutions | |
| that most importantly consider the original intent of | |
| observation policy. I would caution, however, that observation | |
| reform will not be successful unless there is concrete reform | |
| of the Federal auditing programs that enforce observation | |
| rules. The Society of Hospital Medicine looks forward to | |
| working with the committee on identifying workable solutions to | |
| problems associated with observation care and the Two Midnight | |
| Rule. | |
| [The prepared statement of Dr. Sheehy follows:] | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman BRADY. Thank you. | |
| Ms. Edelman. | |
| STATEMENT OF TOBY S. EDELMAN, SENIOR POLICY ATTORNEY, CENTER | |
| FOR MEDICARE ADVOCACY, INC. | |
| Ms. EDELMAN. Mr. Chairman and Members of the Committee, my | |
| name is Toby Edelman. I am a senior policy attorney with the | |
| Washington, D.C. office of the Center for Medicare Advocacy. | |
| The center is a not-for-profit, nonpartisan public interest law | |
| firm based in Connecticut that provides education advocacy and | |
| legal assistance to Medicare beneficiaries. | |
| We are very pleased to be invited to testify today about | |
| the impact on Medicare patients of outpatient status and | |
| observation status. Six years ago, a woman called our office | |
| with a Medicare problem. She had spent some time in the skilled | |
| nursing facility, but the facility told her that Medicare Part | |
| A would not pay for her stay because she had not been an | |
| inpatient in an acute care hospital for 3 days. She asked how | |
| that could possibly be true, after all she had been in the | |
| hospital for 13 days. It turned out that the hospital had | |
| called her an outpatient for all 13 days. | |
| The Wisconsin woman had no way of knowing she was an | |
| outpatient in observation status. She was in a bed in the | |
| hospital for 13 nights, she had diagnostics tests, received | |
| physician and nursing care, medications, treatment, food, a | |
| wristband. Her care was indistinguishable from the medically | |
| necessary care she would have received if she had been formally | |
| admitted as an inpatient. | |
| As in most hospitals, she was intermingled with inpatient, | |
| so even the physicians and nurses providing care to her didn't | |
| know whether she was an inpatient or an outpatient, and the | |
| hospital was not required by CMS rules to inform her that she | |
| was an outpatient or the consequences of that status. But | |
| solely because she was called an outpatient in observation | |
| status, Medicare Part A did not pay for her post-hospital care. | |
| Medicare limits payments to SNFs who are hospital patients, who | |
| are called inpatients for 3 consecutive days, not counting the | |
| day of discharge, what we call the Three Midnight Rule. | |
| In the past 6 years, the center has spoken with literally | |
| hundreds of families from all over the country with similar | |
| experiences. It is a very rare day that goes by that we don't | |
| hear from at least one person and usually more. I would like to | |
| describe the more recent case and the consequences. A 90-year | |
| old man living at home with his wife had a fall. He went to the | |
| urgent care center and the physician there advised him to | |
| immediately go to the hospital because of a hematoma on his | |
| leg, was growing rapidly. The daughter who called me told me | |
| that as her father was being wheeled into the operating room, | |
| the hematoma burst. He had emergency surgery to evacuate the | |
| hematoma and remained in the hospital for four midnights, all | |
| outpatient. From the hospital, he went to the skilled nursing | |
| facility for rehabilitation, stayed for 18 days, and went home. | |
| If the man had been formally admitted to the hospital as an | |
| inpatient, Medicare Part A would have paid the entire bill for | |
| his 18-day stay. Medicare Part A payment is comprehensive and | |
| pays for room and board, nursing care therapy, drugs, | |
| everything that the patient needs during that stay. Medicare | |
| pays 100 percent of the cost for the first 20 days in the SNF, | |
| and beginning on Day 21, the resident pays the copayment, up to | |
| 100-day maximum number of days in the benefit period, but | |
| because her father that been called an outpatient during his | |
| entire four day stay, Medicare did not pay, Medicare Part A did | |
| not pay. The man had to pay out of pocket the SNF charges. For | |
| room and board, the charges were 4,573 days, $73 for the 18-day | |
| stay. In addition, he had to pay Medicare Part B copayments for | |
| all of the therapy he received daily, and he had to pay for his | |
| prescription drugs. | |
| An administrative law judge found that the man's primary | |
| care physician supported an inpatient admission, and she also | |
| found that he had not been informed of his outpatient status; | |
| nevertheless, she upheld denial of Part A payment for his SNF | |
| stay solely because he was, as she described him, hospitalized | |
| as an outpatient. Obviously, from the perspective of patients | |
| and their families, what is happening makes no sense. When | |
| patients need to be in the hospital for the diagnosis and | |
| treatment of acute care conditions and when they are getting | |
| medically necessary care they need in the hospital for multiple | |
| days and nights, they do not understand why they are called | |
| outpatients and why their care in the SNF will not be covered. | |
| You have heard from physicians and hospitals this morning | |
| about why calling hospitalized patients outpatients is causing | |
| hardship for them, and some of the issues that we have been | |
| discussing this morning are very complex, but the solution for | |
| Medicare patients is simple and straightforward. H.R. 1179 | |
| counts all the time in the hospital for purposes of satisfying | |
| the Three Midnight Rule. As of last week, there were 144 | |
| cosponsors. There is a companion bill in the Senate, and the | |
| bills are bipartisan. | |
| The legislation is supported by a broad ad hoc coalition of | |
| 30 organizations, and I have attached our comment fact sheet to | |
| the end of my testimony with all of our logos on top. | |
| We urge the committee to quickly move on this legislation | |
| as you consider these other far more complicated issues. | |
| Thank you. | |
| Chairman BRADY. Thanks, Ms. Edelman. | |
| [The prepared statement of Ms. Edelman follows:] | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman BRADY. Thank you all for your testimony. | |
| Ms. Deutschendorf and Dr. Sheehy, do you think RACs | |
| disproportionately target high value inpatient claims? | |
| Ms. DEUTSCHENDORF. Yes. | |
| Dr. SHEEHY. Yes. | |
| Chairman BRADY. In the appeals of those, could you give us | |
| what you think is the true cost of appeal. My assumption is, | |
| high value claims are more complex, there is more of the files | |
| reviewed. You are obviously bringing in medical professionals | |
| as well as appeals processing. In a case like that for a | |
| hospital, what is the true cost of that appeal roughly? I am | |
| sure it varies, but---- | |
| Ms. DEUTSCHENDORF. So we actually when RAC was proposed | |
| several years ago as a permanent part of the program, we | |
| actually went through a process to estimate the cost of an | |
| individual appeal. You have to add into that, all of the costs | |
| associated with the medical record requests, the issues in | |
| terms of loading this into software because of the mountain, | |
| and for a hospital like Hopkins it could be 600. | |
| And then you have got 50 percent of those that may be | |
| denied, so then the tracking and everything that goes along | |
| with that. So there is all of that prior work, then there is | |
| the estimation of time it is for our nurses to review the | |
| cases, our physicians to review the cases. | |
| Chairman BRADY. What do you think that cost is overall? | |
| Ms. DEUTSCHENDORF. So we estimated it was about $2,000 an | |
| appeal at the first and second level, but then when you get up | |
| to the ALJ level that requires another add on because you need | |
| attorney support with that as well as physician advisor support | |
| during that time. | |
| Chairman BRADY. What do you think that cost is? | |
| Ms. DEUTSCHENDORF. I could probably get back to you, but I | |
| would say it is a couple of thousand dollars per, at the ALJ | |
| level. | |
| Chairman BRADY. In addition? | |
| Ms. DEUTSCHENDORF. In addition. | |
| Chairman BRADY. After the first two steps; and the third | |
| step? | |
| Ms. DEUTSCHENDORF. We as a health system spent about $4 | |
| million just gearing up for the RAC process to add on the | |
| additional personnel it would take to manage that process. | |
| Chairman BRADY. Is that compliance and appeal? | |
| Ms. DEUTSCHENDORF. Compliance, appeals and medical records | |
| and just managing and tracking the whole process as well as | |
| software. | |
| Chairman BRADY. Thank you. | |
| Dr. Sheehy, do you have an estimate on the cost of an | |
| appeal on a high value claim. | |
| Dr. SHEEHY. Yeah. I don't have an estimate on a single | |
| appeal, but I can say the resources our hospital puts forth in | |
| the whole auditing process, we have multiple nurse case | |
| managers that their entire job is to determine status and | |
| assist physicians in helping to determine the proper status. | |
| Once an appeal is made, we have a team of lawyers, our CMO, | |
| two utilization review physicians, and multiple other nurse | |
| case managers staff, whose job is to fight the appeals process, | |
| so anyone looking at those numbers of staff can calculate that | |
| this is a costly endeavor to our hospital. | |
| Chairman BRADY. Okay. Did both of you hear Mr. Cavanaugh | |
| describe one solution as short stay outlier approach? Do you | |
| have a view on whether that helps, hurts, doesn't solve the | |
| problem? | |
| Dr. SHEEHY. I think you know, we have been talking about | |
| different solutions, and obviously I think CMS did intend the | |
| Two Midnight Rule to fix a problem in observation status. They | |
| recognized there were issues with the current observation | |
| policy. I think now we have seen the Two Midnight Rule also has | |
| issues, and we would hope that the there would be more | |
| consideration of policies going forward, thinking about the | |
| true definition of what observation truly means, a very short | |
| stay, a patient, a very well-defined subset of clinical needs | |
| prior to going forward and coming up with a new plan. | |
| We would also strongly advocate for a pilot. I think with | |
| the Two Midnight Rule is evidence of rolling out a policy | |
| across the country with unintended consequences. I think a | |
| pilot would be of great benefit. | |
| Ms. DEUTSCHENDORF. I would agree with that, with everything | |
| Dr. Sheehy said. One of the statements that was made earlier | |
| was there was disparity between the cost of observation stays, | |
| and I would submit that one of the reasons for that is the true | |
| definition of what observation used to be, and that was a | |
| period of time to help determine whether or not the patient | |
| needed hospitalization as an inpatient or could be sent home. | |
| Those short stays in observation would be very less costly. | |
| By the time they need to be admitted, those are patients that | |
| require extensive diagnostic studies and extensive treatment, | |
| and sometimes those patients turn around in less than two days, | |
| and so we should not be penalized for being efficient in our | |
| ability to manage those patients as an inpatient. | |
| Chairman BRADY. Thank you. | |
| Ms. Edelman, you made a point that drew my attention. You | |
| were making the case that if outpatients return to the | |
| hospitals within 30 days their return isn't a readmission | |
| because they were originally labeled as outpatient, and some | |
| portion of the report at the client hospital readmissions | |
| reflects the fact that many patients are called outpatients. | |
| Any idea how frequent that is, what percentage of the reported | |
| decline that might represent? | |
| Ms. EDELMAN. We don't have data that would indicate what | |
| portion of the readmitted patients are not called readmitted | |
| because of observation, but actually the only reason that we | |
| have ever heard from families told by the hospitals that they | |
| are using observation status is the Recovery Audit Program. | |
| Nobody has ever actually brought up the hospital | |
| readmissions issue, but we know that is now in effect, so it | |
| obviously has some impact because if somebody returns to the | |
| hospital as an outpatient, that does not count as an inpatient, | |
| and a penalty would not be applied. | |
| Chairman BRADY. Dr. Evans, when there are costs associated | |
| with the hospital appealing, especially in high value inpatient | |
| claims and they are overturned, the RAC returns the commission. | |
| Is that correct? | |
| Dr. EVANS. That is correct. | |
| Chairman BRADY. Do they share in the cost of that appeal at | |
| all? | |
| Dr. EVANS. Well, the cost of our work doing that appeal and | |
| the work doing the review initially. | |
| Chairman BRADY. But having lost that claim, does the RAC | |
| reimburse some portion of the cost? | |
| Dr. EVANS. Well, we are paying back all of the funds that | |
| were used on our part to do the work. | |
| Chairman BRADY. Right. That was because it was an improper | |
| determination up front, but do you share in the cost? So you | |
| don't receive your commission. | |
| Dr. EVANS. There is a financial penalty that occurs. There | |
| is not a payment for any of the costs of the hospital, so I am | |
| not aware of the---- | |
| Chairman BRADY. So, the impact is you return the | |
| commission, but you don't share in the cost of the lost appeal? | |
| Dr. EVANS. We pay our portion of attending the appeal, and | |
| the provider pays their portion. | |
| Chairman BRADY. Say that again. | |
| Dr. EVANS. We pay our portion of attending the appeal, and | |
| the provider pays their portion of attending the appeal. | |
| Chairman BRADY. Okay. Win or lose, that is how it is | |
| divided? | |
| Dr. EVANS. That is correct. So when we win there is not any | |
| difference either. | |
| Chairman BRADY. Okay, I will finish with this. Listening to | |
| testimony today, there are an isolated number of short stay | |
| DRGs that may be problematic that was discussed earlier. In the | |
| oversight of the RAC program, did CMS ever intervene to stop | |
| audits so they could insert a targeted payment approach to | |
| quickly and easily solve the problem of the short stay DRGs? | |
| Dr. EVANS. And you said a targeted DRG approach? | |
| Chairman BRADY. Yeah. | |
| Dr. EVANS. They haven't intervened. The intervention has | |
| been to stop the short-stay reviews with the Two Midnight Rule, | |
| but there has not been an intervention and I think what we have | |
| heard said today is there is a lot of variety, a lot of | |
| difference across providers in the rate of improper payment, | |
| for outpatient versus inpatient care, and I think we have also | |
| seen discussion that we need to look at where we go forward. | |
| So for instance, CMS is proposing in the new contract, that | |
| we have a variation in the amount of medical records that are | |
| reviewed based on the providers' outcomes. So if we have a | |
| provider who has a very low rate of improper payment, we would | |
| expect to decrease as we go forward their number of records | |
| looked at. If we have a provider who has a higher rate, we | |
| would expect to increase that going forward. So CMS is looking | |
| at that, and so I think what I would say is we want to | |
| collaborate with you, and I think this opportunity to share | |
| information is very good; and I look forward to be involved in | |
| continuing this sort of information exchange. | |
| Chairman BRADY. Okay, thank you. | |
| Dr. McDermott. | |
| Mr. MCDERMOTT. Thank you, Mr. Chairman. | |
| There was a Senator by the name of Daniel Patrick Moynihan | |
| who said there are a lot of simple answers around but we need a | |
| great complexifier and the fact is that we have a very complex | |
| question here, and the next level is going to be, it seems to | |
| me, even more complex because you have all agreed that the | |
| patients get treated the same whether they are observation or | |
| inpatient. The patient gets what they are supposed to get. So | |
| what we are discussing here is who pays how much to whom, and | |
| it is a question of whether the beneficiaries get charged more | |
| or the hospitals get less money. That seems to be where we are. | |
| And one of the issues that has come up here, Ms. Edelman, | |
| is one that I would like to hear your thoughts about. There has | |
| been a talk about the different cost sharing between Part A and | |
| Part B, and people are suggesting that we roll Part A and Part | |
| B together, and that, that somehow will eliminate or alleviate | |
| or something in this whole process. I would like to hear from | |
| you as a patient advocate what you think will happen to | |
| beneficiaries if we roll the A and B together generally but | |
| also specifically in this outpatient observation status, | |
| because I think we don't want to make another step that makes | |
| it even worse. I mean, we were trying to fix a problem with | |
| what we did, so give me your ideas. | |
| Ms. EDELMAN. Thank you for that question. | |
| Simplifying the program, a complex Medicare program would | |
| be helpful. The problem with the Medicare redesign proposals | |
| that we have seen that combine Part A cost-sharing obligations, | |
| is that they also prohibit other insurance like Medigap | |
| policies that provide first dollar coverage and so the | |
| consequence is that these combined Part A-Part B cost-sharing | |
| obligations would shift costs to the patients. The idea of that | |
| is, in fact, to make people pay more out of pocket on the | |
| assumption that they will be more careful healthcare consumers, | |
| but what we know will happen is that people will avoid | |
| medically necessary care because they won't be able to afford | |
| it. | |
| Medicare beneficiaries already spend a much higher | |
| proportion of their income on healthcare than younger people, | |
| and half of the Medicare beneficiaries have incomes of $23,500 | |
| a year. They really cannot afford to pay more out of pocket, | |
| which would happen as a result of a number of these redesign | |
| proposals that we have seen. | |
| Our program with a couple of other programs, Medicare | |
| Rights Center and California Health Advocate submitted a | |
| statement to this committee a year ago about concerns, about | |
| the Medicare redesign proposals. I would be happy to submit | |
| that for the record. | |
| Mr. MCDERMOTT. How would the rolling of the two together | |
| affect this whole question of observation versus--or would it | |
| just be there would be no question anymore. It would just be a | |
| patient in the system? | |
| Ms. EDELMAN. Well, it would depend upon how the specifics | |
| of the redesign worked and how people would have to pay. Right | |
| now if people are in-patient, they pay the inpatient | |
| deductible. If they are outpatients, they pay the full cost out | |
| of pocket for the nursing home care and Part B copayments and | |
| medications and it is not clear what would happen with a | |
| combination of those two. | |
| Mr. MCDERMOTT. Does the three day stay that has to be there | |
| to go into the nursing home, what happens to that? | |
| Ms. EDELMAN. That is still in the statute unless that gets | |
| repealed. That has been in the Medicare statute from the | |
| beginning. | |
| Mr. MCDERMOTT. So if they are in the hospital and the | |
| hospital calls it an observation, they do not get the credit | |
| for going into the nursing home? | |
| Ms. EDELMAN. They do not get, the three midnights do not | |
| stay, so the woman in Wisconsin who was in the hospital for 13 | |
| days, consecutive days, as an outpatient did not have a three | |
| day qualifying inpatient stay. | |
| Mr. MCDERMOTT. And rolling the Part A and Part B together | |
| would not change that? | |
| Ms. EDELMAN. Wouldn't change the three midnight rule. That | |
| is still there. | |
| Mr. MCDERMOTT. You know what we are trying to do. How would | |
| you design what we should do at this point? | |
| Everybody's saying we should call a committee together or | |
| something, but I would like somebody to put something on the | |
| table and say, if anybody has an idea what we should do in this | |
| situation, I would like to hear it. | |
| Ms. EDELMAN. Well, for the simple issue of qualifying for | |
| skilled nursing facility care, the H.R. 1179 does it by just | |
| counting all the time. It doesn't deal with whether observation | |
| makes sense or doesn't make sense. It doesn't deal with | |
| recovery auditors. It doesn't deal with all of these much more | |
| complicated issues. It just says if you have been in the | |
| hospital for three nights, the time should count. | |
| And I would just say when Medicare was enacted in 1965; the | |
| average length of stay in an acute-care hospital for people age | |
| 65 and over was 12 plus days. The average length of stay now in | |
| the acute care hospitals for people 65 and over is 5 plus days. | |
| The three midnight rule is a problem considering how medicine | |
| is practiced today. | |
| Mr. MCDERMOTT. Thank you. | |
| Chairman BRADY. Thank you. | |
| Mr. Gerlach. | |
| Mr. GERLACH. Thank you, Mr. Chairman. | |
| Ms. Deutschendorf, in your testimony you basically say that | |
| the Two Midnight Policy now requires physicians to abandon the | |
| medical assessment component of the medical necessity test when | |
| determining the appropriate setting of care and instead imposes | |
| a rigid time-based approach. Can you elaborate or expand on | |
| that a bit? | |
| Ms. DEUTSCHENDORF. So for our providers what happens now is | |
| the patient presents to the emergency department, and now they | |
| are faced with this question, do you expect that the time this | |
| patient will require hospital services will be greater than two | |
| midnights, which to Dr. Sheehy's point, could be depending on | |
| whether that patient arrives one minute before midnight on the | |
| first midnight and then stays 24 hours and one minute in the | |
| second midnight, or whether they would need to be hospitalized | |
| for up to 48 hours. | |
| A lot can happen in 48 hours, and what we have found since | |
| October 1, is that we have tripled the amount of patients who | |
| have started out as an outpatient and has been converted to an | |
| inpatient after or just before the second midnight because, in | |
| fact, we got it wrong. Because we really don't know. Patients | |
| present to the emergency department with a myriad of problems, | |
| some of which are going to respond rapidly, some of which will | |
| not respond rapidly, and there is no way of knowing that, and | |
| we are doing the right things. | |
| We do have an army of case managers and utilization | |
| management nurses who now have to run around the hospital | |
| looking for patients who have crossed the first midnight to see | |
| if these patients will require medically necessary services | |
| beyond the second midnight so that we can get than converted. | |
| We have been instructed by CMS that if the patient is going to | |
| cross the second midnight, they want them to be converted, even | |
| if they are going to go home in the next twelve hours. It is | |
| logistically a very difficult policy to implement and has | |
| required a lot of financial increases as a result of that. | |
| Mr. GERLACH. H.R. 3698 would require the Secretary of HHS | |
| to establish a new methodology for utilization in situations | |
| involving the shorter stays in hospitals. We got some idea from | |
| Ms. Edelman about what she'd like to see relative to that kind | |
| of new methodology. | |
| Could I have quickly the other three of you, please give us | |
| your thoughts as a follow-up to Mr. McDermott's question, what | |
| specifically change-wise and what kind of new methodology ought | |
| to be employed so that there is a fairness, an equity in terms | |
| of how hospitals are reimbursed for those that come in in a | |
| very short-stay kind of situation. Dr. Sheehy, can we start | |
| with you? | |
| Dr. SHEEHY. Thank you for that question. | |
| I think it is a very complicated topic, and I think a | |
| simple answer is probably difficult to give. I think getting | |
| back to the principles of observation being a triaging | |
| definition, it was always meant to be a definition where | |
| someone needed a few additional hours to determine whether they | |
| should be fully admitted as an inpatient or discharged home. | |
| I think we need to get back to the principles of that | |
| definition and come up with a methodology that respects that | |
| definition. I think we also need to think about the difficulty | |
| as a provider I have telling a patient who is staying overnight | |
| in a hospital, getting inpatient nursing care, getting | |
| intravenous medications and tests in a hospital setting, how I | |
| could explain that to that patient that they are an outpatient. | |
| I think getting back to the heart of what observation really | |
| means, I think is what we need to focus on coming up with a new | |
| policy. | |
| Mr. GERLACH. And then you added that you thought that | |
| should be done on a pilot basis first to really test the idea | |
| to see if it really in a practical way is working before you | |
| expand it to the entire system? | |
| Dr. SHEEHY. That is correct. I think we will see the | |
| unintended consequences in any policy. I think we will | |
| understand better how a policy should be audited and do it on a | |
| smaller scale so hospitals across the country are not investing | |
| a lot of money on a whole new plan that has a lot of issues. We | |
| can figure out those issues and tweak the plan before it is | |
| implemented nationwide. | |
| Mr. GERLACH. Dr. Evans, do you have a quick answer to that | |
| even though you look at it from the RAC perspective? | |
| Dr. EVANS. Well, first from the RAC perspective, again, I | |
| have said I think the collaboration and discussion is very | |
| good, and I think that the idea that there is some changes that | |
| can be made are good. If there were a pilot we would be willing | |
| to be involved in that. I would say I am here for the recovery | |
| audit work, but I am very interested in this personally. If | |
| after the meeting or something you wanted to talk to me as a | |
| taxpayer, I am a physician---- | |
| Mr. GERLACH. You are not having heart palpitations right | |
| now or anything? | |
| Dr. EVANS. No, I am not. I love this. I think it is really | |
| excellent to have this discussion. It is what I am doing my | |
| work for so that this would sort of happen. I am running over, | |
| okay. | |
| I just wanted to say I have been medical director of | |
| skilled nursing facilities and worked at the MAC and now at the | |
| HDI, and I have got a lot of ideas, but I think we would | |
| support this type of reform, and we could offer discussion and | |
| support afterwards. | |
| Thank you. | |
| Mr. GERLACH. Thank you. | |
| Chairman BRADY. Thank you. | |
| Mr. Kind. | |
| Mr. KIND. Thank you, Mr. Chairman. | |
| And I want to thank our panelists for an excellent | |
| presentation today and Dr. Sheehy, a special welcome to you. I | |
| have had the opportunity back home to visit UW Hospital System | |
| and the clinics, and I have always been very impressed with the | |
| quality of care, the outcome, the measurements that are being | |
| established back home. But you are probably sensing a source of | |
| frustration coming from this dais. This is some tough, | |
| complicated stuff, and we are trying to wrap our head around it | |
| and we are listening to you try to thread the needle on | |
| different statuses on observation, inpatient, outpatient. | |
| As policymakers, we are going to have a hard time being | |
| able to provide direction at this level of expertise or | |
| knowledge that is required of it. It is really kind of a source | |
| of frustration that we have with the overall healthcare payment | |
| system that we have in our country today. This is fee for | |
| service. It is this coding. It is this payment based on how | |
| much is done, not how well it is being done, and there are | |
| tools in place right now; and many of us have been pushing hard | |
| and been very inpatient to move to a more value, quality | |
| outcome-based reimbursement system. If we can get those | |
| financial systems I think aligned right, we are going to | |
| unleash a heck of a lot of innovation in the health care | |
| system. Knowing what those benchmarks need to be, where those | |
| measurements are, and then figuring out how to meet them. | |
| Because the truth is we don't have so much a budget deficit | |
| problem here in Washington as we have a healthcare spending | |
| problem, and that is what we are wrestling with. There are only | |
| a few options that we can go down the road with. One is greater | |
| cost shifting, you know, having patients bear more of the risk | |
| of higher costs. We see that with voucher proposals or what | |
| have you, or you are going to have some indiscriminate provider | |
| cuts being made, and the provider community obviously isn't | |
| going to be very happy with that. We see this with | |
| sequestration and pushing those hospital cuts out for infinity | |
| it seems at this point. | |
| Or we need to be working with the provider community to | |
| establish those quality measurements and then align the | |
| financial incentives so it is value based and no longer | |
| observational status or all these technical definitions that | |
| just weigh us down, and it is just exhausting having these | |
| conversations and getting the feedback from patients and | |
| providers alike. | |
| So, I guess it is just a general question. Dr. Sheehy, I | |
| can start with you. If anyone else wants to chime in. Ideally | |
| where do we need to be going with the healthcare payment system | |
| of this country right now so that we are not having hearings | |
| like this talking about inpatient or outpatient or | |
| observational status and trying to figure out what the best | |
| policy is in addressing it? | |
| Dr. SHEEHY. Well, thank you for the question, and thank you | |
| for all the work you do for the State of Wisconsin on | |
| healthcare. | |
| I would be more than happy to work with you in the future | |
| on these issues going forward. I think it is very complicated, | |
| I think there is certainly a role for quality measures in | |
| physician payment, and I think as hospitalists we are trying to | |
| figure out exactly how we fit into that payment model. | |
| Going forward, though, I think, you know, I am from a small | |
| town in Wisconsin as well, I grew up near Madison where I work, | |
| and what I do on a daily basis is take care of patients in the | |
| hospital. Some of these patients might have been my neighbors | |
| or maybe a middle school teacher, and I think if we can get | |
| back to thinking about these are Medicare patients, they have | |
| worked their whole lives, and what is the right thing to do for | |
| them, I think we are going to find those solutions. | |
| Mr. KIND. Ms. Edelman, I am concerned about the impact on | |
| the beneficiaries, the patients out there. It seems like they | |
| are getting caught and often not to their knowledge and just | |
| based on definitions that are applied to them and then the | |
| increased out-of-pocket expenses which they experience which | |
| creates a tremendous hardship and yet within the Medicare | |
| system itself, we have seen beneficiary payments come down | |
| dramatically in recent years, and hopefully that is | |
| sustainable, and hopefully that is due to some of the reforms | |
| that are taking place in the delivery system but also some of | |
| the new payment models out there. | |
| How much concern do you have right now in regards to the | |
| cost shift that you are seeing with the beneficiary community? | |
| Ms. EDELMAN. The cost shifting in the observation status is | |
| considerable, and we know that some people really do not have | |
| the money to pay for the nursing home care out of pocket when | |
| they are told what the cost is, and they go home and then what | |
| we hear is a couple of days later they have another fall, they | |
| break a hip, they are back in the hospital. So the costs to the | |
| system are very intense. | |
| We know families are contributing huge amounts of money to | |
| pay for out-of-pocket costs because Medicare is not paying for | |
| the nursing home. So we have heard of a nephew being asked to | |
| bring a check to the nursing home today for $7,000 for his aunt | |
| to get care. People are doing that, families are kicking in | |
| money that they may not really have. We have heard of families | |
| cashing in life insurance policies that were intended for | |
| burials because they need to get the nursing home care. So it | |
| is having a tremendous impact on Medicare beneficiaries and | |
| their families trying to pay these high costs. | |
| The average private rates are like $250 a day, but I was in | |
| the nursing home in Boston last month, and the private rates | |
| were 450 to 480 a day. Most people can't pay that. | |
| Mr. KIND. Thank you. | |
| Thank you, Mr. Chairman. | |
| Chairman BRADY. Thank you. | |
| Mr. Smith. | |
| Mr. SMITH. Thank you, Mr. Chairman. | |
| Ms. Deutschendorf, in your written testimony you referenced | |
| the Medicare Audit Improvement Act, H.R. 1250, obviously | |
| supported by numerous members of the House. I am wondering if | |
| you could reflect a bit on an alternative that I happened to | |
| introduce, H.R. 2329, the Administrative Relief and Accurate | |
| Medicare Payments Act. Have you reviewed that bill, and could | |
| you reflect on that at all? | |
| Ms. DEUTSCHENDORF. I have not, but I would be happy to | |
| respond in writing. | |
| Mr. SMITH. All right. You bet. Thank you very much. | |
| Mr. SMITH. Ms. Edelman, what do you believe is the cost-- | |
| well, first of all, do you believe that Medicare beneficiaries | |
| are very familiar with the financing or the various--I mean, we | |
| have heard a lot of technical things. I started to keep a list | |
| here, and I lost it amidst the paperwork here of just | |
| terminology and funding strategies and schedules of payments | |
| and so forth. How familiar are seniors with that type of thing? | |
| Ms. EDELMAN. I think most people have no idea of what the | |
| terminology is or what it means. | |
| Mr. SMITH. And do you believe that there is a cost to that, | |
| given the existence of that disconnect with patients and, I | |
| mean, I don't believe we could really expect them to be | |
| familiar with all of these intricate details of a funding | |
| system. Is there any possible way just to have a system to | |
| where seniors are more familiar with what is going on with the | |
| funding, so not that it has to be out of pocket, but so that | |
| they can perhaps know more what their options are? | |
| As you pointed out in your testimony, that they were | |
| considered an outpatient, but yet they were in the hospital for | |
| so long and certainly thought that they were an inpatient; what | |
| do you think the alternatives should be? | |
| Ms. EDELMAN. Well, there are some bills that would suggest | |
| giving information to people to tell them, at least give them | |
| information that they are outpatients and a couple of states | |
| have passed laws, Maryland and New York, requiring that people | |
| should be informed that they are outpatients and what the | |
| consequence is. | |
| But unlike other Medicare systems, they don't have an | |
| opportunity to contest their outpatient status. Generally if | |
| somebody goes into the hospital as an inpatient, the person | |
| immediately gets a form Your Rights As a Medicare Patient and | |
| if the hospital wants to discharge the person, and the person | |
| thinks I am really not ready to go, there is an immediate | |
| appeal to a representative of the Medicare program to make a | |
| decision. | |
| In observation status there is no due process right for the | |
| Medicare patients. There is nothing they can do, so giving them | |
| information is helpful, but we also need to give them an | |
| opportunity to say I should be called an inpatient, not an | |
| outpatient. | |
| Mr. SMITH. Would you agree that the more the government has | |
| gotten involved, that the more expensive healthcare has become? | |
| Ms. EDELMAN. Well, I don't know if the cost of the | |
| Government has been the cause of health care becoming | |
| expensive. Certainly before the Government was involved a lot | |
| of people didn't get health care, so it has been critically | |
| important. Medicare is a very important program for older | |
| people, and most older people love their Medicare program. | |
| Without it they wouldn't get the health care they need. | |
| Mr. SMITH. Okay, thank you, Mr. Chairman. I yield back. | |
| Chairman BRADY. Mr. Pascrell. | |
| Mr. PASCRELL. Mr. Chairman, I would just like to make a | |
| couple of points in response to my friend, Mr. Roskam's | |
| comments in the last panel about state budget neutrality, which | |
| is interesting to define, and how it affects what we are | |
| talking about. | |
| New Jersey is in a unique position because my state is an | |
| all-urban state with no rural or critical access hospitals. I | |
| would like to point out that the permanent adjustments have | |
| always been based on the national budget neutrality, always. So | |
| this includes adjustments for critical access hospitals and | |
| there ironically are 53 critical access hospitals in Mr. | |
| Roskam's state of Illinois. I think we need to make that clear. | |
| Now, Ms. Edelman, your organization has done a significant | |
| amount of work in the area of observation stays, and you worked | |
| directly with a number of beneficiaries who have run into | |
| problems with the way they were classified. I think you have | |
| defined that. In your experience, do beneficiaries generally | |
| know whether they are classified as inpatients or under | |
| observation status, in your experience? | |
| Ms. EDELMAN. Most patients do not know that they are in | |
| observation, and the Medicare program does not require | |
| hospitals to tell them. The only time---- | |
| Mr. PASCRELL. Do they have a right to know that? | |
| Ms. EDELMAN. Well, they should have a right to know it. | |
| Yes, they should. They should know and the consequence. | |
| Mr. PASCRELL. When do patients generally find out what | |
| their status is? | |
| Ms. EDELMAN. Usually at the time of discharge. | |
| Mr. PASCRELL. When they pay their bills? | |
| Ms. EDELMAN. Bring the checkbook to the nursing home | |
| because Medicare---- | |
| Mr. PASCRELL. That's what I figured. | |
| Ms. EDELMAN [continuing]. Will not be paying. | |
| Mr. PASCRELL. You mentioned earlier observation status is | |
| particularly problematic when Medicare beneficiaries need care | |
| in a skilled nursing facility after leaving the hospital. | |
| Because Medicare won't cover these services unless, unless, a | |
| patient has been classified as an inpatient for at least three | |
| days. Am I right so far? | |
| Ms. EDELMAN. Yes. | |
| Mr. PASCRELL. Ms. Edelman, in the cases your organization | |
| has handled, what is happening to observation status patients | |
| in need of care at a skilled nursing facility after leaving the | |
| hospital? | |
| Ms. EDELMAN. Some are not going because they can't afford | |
| it. Some are going and paying out of pocket and trying to | |
| appeal later through the Medicare summary notice form that they | |
| get, trying to appeal through the administrative process. But | |
| many of the people that I have spoken to do not pursue the | |
| appeals. They give up. It is just too complicated and too time | |
| consuming, and they give up. | |
| Mr. PASCRELL. Are many of these seniors paying out of | |
| pocket? | |
| Ms. EDELMAN. Yes, they are paying out of pocket, and their | |
| families are as well. | |
| Mr. PASCRELL. So, Mr. Chairman, in conclusion if we don't | |
| identify and respect the right to know, and we had a Patients | |
| Bill of Rights, which is part of the reform process that we are | |
| now going through, then we defeat the purpose of what we are | |
| doing. | |
| Seniors, anybody, has a right to know what status they are | |
| in, what that implies, and how much it is going to cost them | |
| eventually if they don't get out of that status or if they | |
| don't cross over. I think that this is serious business, I ask | |
| you to bring us to attend to it, and there is legislation here | |
| which is bipartisan, and I hope that you will do that, and | |
| thank you for the hearing. | |
| Chairman BRADY. Thank you. | |
| Mr. Renacci. | |
| Mr. RENACCI. Thank you, Mr. Chairman, and I thank the panel | |
| for being here. | |
| It is interesting because I think we are really talking | |
| about the problem, and then there's the symptoms of the | |
| problem. The problem is the hospital readmission reduction | |
| program, and quite frankly the policy that was written was | |
| probably, the thought was good, the outcomes are becoming bad | |
| because when a patient enters the hospital, they are either | |
| classified as observation. They are not admitted. There's all | |
| kind of things. They are outpatients. We are putting them in | |
| classifications. Why? Because we don't want to be penalized for | |
| the reduction program if you are in the hospital. | |
| And again, I am not blaming the hospitals in that sense. | |
| They are trying to survive, too. But, quite frankly, who is | |
| getting hurt here but the patient? So let's look at the | |
| unintended consequences. We have patients that go into a | |
| hospital. They are the sickest of sick, we know they are coming | |
| back, and we have an issue there. It is one of the reasons why | |
| I introduced H.R. 4188, a bill that requires the Secretary of | |
| HHS to adjust the payment methodology to account for certain | |
| disparities really in patient population. This adjustment will | |
| really make a huge difference to hospitals across the country | |
| and the 9 million duly eligible beneficiaries that rely on | |
| these hospitals for critical care needs. We need to make sure. | |
| There are patients that are going to come into a hospital that | |
| are going to go back to the hospital, and those hospitals are | |
| being penalized. This bill would at least help that issue. | |
| Now, on the other side, I still have a problem when you | |
| take a patient who quite frankly doesn't need to go to a | |
| hospital, should be going directly to the nursing home, but we | |
| have another policy that says you have to go to the hospital | |
| first, and you have to spend three days in that hospital and | |
| then that patient goes to that hospital and, of course, they | |
| spend three days. They don't know whether they are observation, | |
| they don't know whether they are inpatient. | |
| Then they come out, they go to a nursing home, and then | |
| they are penalized because in many cases they ended up as an | |
| observation status. That is a problem, too. That is why we | |
| talked earlier about the bill I introduced to eliminate the | |
| three-day stay. Let's face it, there are some patients that | |
| have to go in the hospital, but there are some that could go | |
| directly to the nursing home, and I question why we would ever | |
| be paying you know, up to $11,000 to have someone stay in a | |
| hospital for three days versus going into a nursing home where | |
| my statistics show the average stay is around 27 days. Quite | |
| frankly it doesn't make sense. We are spending money that is | |
| not necessary. | |
| Ms. Edelman, I would ask you, you know, do you think the | |
| elimination of the three-day hospital stay is good policy? | |
| Ms. EDELMAN. Well, I think it ultimately is what makes | |
| sense because as I said, the length of stay in hospitals has | |
| gone down so much that the three days is a very large portion | |
| of what time people actually do spend in the hospital. | |
| The long-term care commission endorsed elimination of the | |
| three-day stay and so this is where I think as Congress is | |
| considering post-acute care reforms, which is a topic of | |
| discussion now, this should certainly be part of the | |
| discussion. We want to make sure that people are, that there is | |
| not a lot of gaming in nursing homes, so we want to be careful | |
| of that possibility; but this is where it needs to go to | |
| eliminate it. It doesn't make sense with the way medicine is | |
| practiced today. | |
| Mr. RENACCI. And I don't know if there is anyone else on | |
| the panel that when we talk about H.R. 4188, which is a bill | |
| that really takes a look at these hospitals where there are | |
| readmissions for the sickest of sick, the poorest of poor, if | |
| we shouldn't have an adjustment for those. Is there anyone? | |
| Ms. DEUTSCHENDORF. So, as I stated in my opening comments, | |
| and thank you for asking, I am responsible for the readmission | |
| reduction program for the Johns Hopkins Health system and our | |
| hospital. We have been at this for 4 years, and we are working | |
| really, really hard to implement all of the strategies that | |
| were suggested in the demonstration projects and at an academic | |
| center such as ours where we take care of some of the sickest | |
| patients in the country who are transplants, who are duly | |
| eligible, et cetera, we have not been able to move that ball. | |
| And, in fact, it is all about numerators and denominators, | |
| but as you take out the short stays out of the denominator, and | |
| your patients are sicker, your readmission rates go up. Despite | |
| what we are doing, and we do have some successes, but we have | |
| not been able to move that. So having that bill with taking out | |
| transplants, end stage renal disease, substance abuse, and | |
| psychoses and some of the other things, would certainly help | |
| us. The other thing that we have really learned about this has | |
| to do with patient's values, beliefs and preferences, so it is | |
| very important that we share this responsibility not just with | |
| the providers but also the patients. | |
| Mr. RENACCI. Thank you. | |
| Mr. Chairman, I yield back. | |
| Chairman BRADY. Thank you. | |
| Mr. Reed. | |
| Mr. REED. Thank you, Mr. Chairman. | |
| I am way over here, so I appreciate, I will give you a | |
| different angle here to look at. I wanted to come today, and | |
| thank you Mr. Chairman, for holding this hearing, and thank you | |
| to the panelists. | |
| This is something I am very concerned about coming from a | |
| rural section of the State of New York. My rural hospitals in | |
| particular are struggling to deal with these issues as well as | |
| many others, and I wanted to just read for the record a letter | |
| I received from one of our hospital directors at Jones Memorial | |
| Hospital in Wellsville, New York. She wrote, Dear Tom, Jones | |
| Memorial is a sole community hospital in rural upstate Western | |
| New York. Jones has an average daily census of 20 patients. As | |
| many rural New York state hospitals, Jones has limited | |
| resources and actively trying to keep costs down to the overall | |
| healthcare system. Then she goes on. She writes in 2012 Jones | |
| began receiving draft program audit notices. The cases dated | |
| back to 2009, they received a total of 240 inpatient claim | |
| denials. To date Jones have appealed and won approximately 197 | |
| of those claims. Of the 240 claims, 18 were not successful on | |
| appeal. | |
| The rest of the cases are still pending, so pretty good | |
| outcome in regards to challenging these requests. But this is | |
| what she said that really stuck out to me in the letter. Jones | |
| Memorial with an average daily census of 20 has to employ three | |
| full-time RN case managers to make sure that someone is here | |
| the majority of the time to ensure compliance with the Two | |
| Midnight Rule. These same case managers spend a lot of their | |
| time working on appeals for the RAC audits. We also have three | |
| billing and medical records staff that spend 30 percent of | |
| their time on RAC audits and appeals. The dollars being | |
| expended for a small hospital are unsustainable. | |
| Now when I hear Eva write me that letter, and I know Eva | |
| very well, Eva Benedict, does a great job there at Jones | |
| Memorial, my concern is this. How are these rural hospitals | |
| going to sustain themselves if they have to take on those | |
| administrative cost burdens that we just articulated there and | |
| keep the doors open and comply with this complexity coming out | |
| of Washington, D.C.? Does anyone on the panel disagree with me | |
| that in particular our rural hospitals are at a distinct threat | |
| as a result of the burdens that are coming out of this | |
| ambiguity? Dr. Sheehy. | |
| Dr. SHEEHY. I can answer that question. My primary practice | |
| location is a University of Wisconsin Hospital which is a | |
| tertiary care referral hospital, but I also am privileged at | |
| one of our community hospitals and practice there. It is a | |
| small hospital and I agree with you. I think that the burden on | |
| smaller hospitals is enormous. I also think a lot of these | |
| smaller hospitals have contracted with, there are private | |
| companies now who will actually do what your hospital has | |
| described. Instead of hiring their own nurse case managers to | |
| do this, they will hire a private company now and pay them a | |
| lot of money to look at these claims for them and I think the | |
| cost is enormous. The cost to fight this process and to kind of | |
| learn how to do these audits and appeals, it is staggering. | |
| Mr. REED. Anyone else share that sentiment or oppose that | |
| sentiment? Because I agree with you, those are dollars that | |
| otherwise could be going to the community in regards to | |
| servicing their healthcare needs as opposed to complying with | |
| the administrative burdens. Do you have any idea, here's a | |
| hospital with 20 average daily census, and they have got | |
| essentially five full-time workers focused on filling out | |
| paperwork. How can we do better? Yeah, ma'am. | |
| Ms. EDELMAN. I just want to say one thing about that. That | |
| hospitals are spending an enormous amount of time and money | |
| trying to make these inpatient-outpatient decisions. | |
| The first thing they do is buy InterQual, which is a | |
| proprietary computer program. Then they are hiring staff just | |
| to make these decisions, and the American Case Management | |
| Association, which is part of our ad hoc coalition supporting | |
| H.R. 1179, did a survey of their members. These are the | |
| hospital discharge planners. Three quarters of the hospitals | |
| reported hiring staff just to be making inpatient-outpatient | |
| medical necessity decisions. A third of them had spent more | |
| than $150,000 and this is a couple of years ago, on that staff. | |
| Then they are also using an outside secondary reviewer. The | |
| company that we know of used to report on its Web site how many | |
| medical necessity cases they had done. Since 1997, they had | |
| done 4 million. If they are charging we think maybe $200, $250 | |
| a case, that is a lot of money to go out of the Medicare system | |
| which should be designed for providing care to people, but it | |
| is only to make the decision whether people should be admitted | |
| as inpatients or called outpatients, and the care is identical. | |
| It really makes no sense. | |
| Mr. REED. Thank you. | |
| My balance has expired, and I thank you for that input. | |
| Chairman BRADY. Thank you. | |
| Ms. Black. | |
| Mrs. BLACK. Thank you, Mr. Chairman. | |
| Again thank you for allowing me to sit here with the | |
| committee and ask questions. | |
| I want to go back to the issue of the ALJs and the amount | |
| of overturned cases and we just hear--I know this is a complex | |
| situation, and we hear these numbers that keep floating around, | |
| and there is a report that I want to submit for the record, and | |
| it is from the Inspector General. The improvements are needed | |
| at the Administrative Law Judge level of Medicare appeals. | |
| Chairman BRADY. Without objection. | |
| Mrs. BLACK. Because there are some good pieces in here as | |
| well. But, Dr. Evans, I want to start with you on this question | |
| because our members are hearing at least 70 percent number that | |
| the providers win these appeals at the ALJ level. I understand | |
| that there are two different ways that the ALJ adjudicates | |
| cases, and can you please explain how the RAC's view of the | |
| overturn rate and how these numbers can deceive when looked at | |
| out of context? | |
| Dr. EVANS. Yes. The report you refer to, the data that is | |
| in there is from 2010, and that was early on in the Recovery | |
| Audit Program. Now, I haven't done the analysis, and I would | |
| say that I think it is good that this has been brought up here, | |
| and I think there is some further investigation of the data | |
| that can be done among the different experts like OIG, et | |
| cetera. | |
| But that data is from 2010, and at that time we were | |
| getting no information about any kind of ALJ hearings. We have | |
| attended a few in the demonstration, but we weren't hearing, | |
| and we were asking about those. What we found out was that they | |
| were 89, 90 percent. You know, the add quick has that | |
| information, but they were huge numbers. They were on the | |
| record. The on the record in general is a high overturn rate. | |
| It is pretty much they are all overturned. All of the | |
| contractors across CMS have data that shows that, and in fact | |
| CMS had done a study with one of the contractors, where the | |
| attendance of CMS at the hearing makes a difference in the | |
| outcome of those hearings where the Medicare rules and | |
| regulations and the medical record compared to the claim is | |
| reviewed. | |
| So I think it is an area that can be looked at, but I think | |
| that is part of the difficulty. If you look at the last study, | |
| the 7 percent overturn across the board is the most current | |
| data that we have. | |
| Mrs. BLACK. Could those who are providers weigh in on this | |
| from your perspective as well, of your cases that get to the | |
| ALJ level? Dr. Sheehy, let me go with you first. | |
| Dr. SHEEHY. Thank you for that question. We have little | |
| data on our ALJ Level 3 appeals at this time. The majority of | |
| our appeals are turned over in Level 1 or Level 2. I will just | |
| comment that I think the 2010 data, I think the RAC process and | |
| observation care has evolved so enormously in the last four | |
| years that I think it is worth looking at a new set of data and | |
| a new set of numbers. | |
| We know that the RAC recovery rate, the recovery rate for | |
| back to the Government has increased. We know that the number | |
| of RAC audits have increased. This is why the OMHA has now put | |
| a hold on further audits and appeals. We know this is a lot due | |
| to RAC denials and so I think we really do need to look at a | |
| fresh set of numbers before we start thinking about a 7 percent | |
| number. | |
| I can speak on behalf of our hospital. We appeal almost | |
| everything, and we win almost everything. The number that I | |
| cited in my testimony we appealed in our last one year, we | |
| appealed 92 percent of the audits that the RACs made, and we | |
| have already won two-thirds of them. The rest are in Level 1 or | |
| Level 2 of appeals, so our history is that we will win almost | |
| 100 percent of our appeals. I think there are a lot of | |
| hospitals out there that are similar. | |
| Mrs. BLACK. That is a good piece of information. Thank you | |
| so much. | |
| Others want to weigh in on that? Yes? | |
| Ms. DEUTSCHENDORF. We just have 10 cases at the ALJ level | |
| that have just made it there, and part of that has to do with | |
| the delay in the actual recoupment, so we were able to take 239 | |
| cases of our 430-some denials directly for discussion, and we | |
| spent a lot of time preparing with legal and also with our | |
| physician advisors and went straight to the medical directors | |
| of our RAC, and 135 of those cases were overturned just at the | |
| discussion; and the remainder of those are in the appeal | |
| process now. So that is a 50 percent, or a 55 percent overturn | |
| rate just at the discussion level. | |
| I just want to say one other thing. We had 108 cases denied | |
| for intensity modified radiation therapy. All 108 of those | |
| cases were overturned at the discussion level, again because | |
| these were medically necessary services that the RAC really was | |
| not able to really understand why these cases were brought | |
| forward. | |
| Mrs. BLACK. Thank you. | |
| And, Mr. Chairman, thank you so much for this hearing. It | |
| just seems to me that one of the things that I have learned | |
| from this hearing is that this certainly needs to have more | |
| oversight, more investigation to find out just how the program | |
| is working, because I am so concerned as being a nurse for over | |
| 40 years, that the care that we are giving and, Dr. Sheehy, | |
| please every time you give a testimony, use that example of a | |
| diabetic ketoacidosis because it is so compelling to make the | |
| case for how you just don't know what that patient is going to | |
| need when you receive them into the hospital. | |
| Thank you so much, Mr. Chairman. I will look forward to | |
| more hearings. | |
| Chairman BRADY. Thank you, Ms. Black. | |
| I just have an inquiry, again, thank for all the witnesses, | |
| in the first panel again from Dr. Evans we heard repeatedly | |
| that RAC audits aren't a problem. 94 percent are not appealed. | |
| Of those who are only about half are returned. Percentage-wise | |
| this is a very small amount. Not a big problem. That is at odds | |
| with what we hear from our local hospitals in a major way. | |
| And what I think I just heard from Dr. Sheehy and Ms. | |
| Deutschendorf is that is old data, that current appeals are | |
| much greater than that, and the overturn rate is substantial as | |
| well; and, while they may be a small percentage, these are more | |
| of the high-value claims, so proportionately more important, | |
| probably more expensive to appeal. Is that correct, in a | |
| nutshell? Well, what other perspective should we bring to this? | |
| Dr. SHEEHY. I think that is a correct assessment. Just | |
| another data point, in the OMHA letter to hospitals, one of the | |
| numbers they cited, which I think this is why I think this is | |
| old data, they said in January of 2012, the OMHA was hearing | |
| about 1,250 appeals a week and at the end of 2013, they were | |
| getting 15,000, so I think the rate has just accelerated over | |
| two years; and I think that number tells you how audits have | |
| changed, how our practice has changed. | |
| Chairman BRADY. Because the Inspector General's report was | |
| from 2010 and 2011, you are saying. Ms. Deutschendorf. | |
| Ms. DEUTSCHENDORF. So I would agree with that, that the | |
| appeals have mounted as hospitals have been able to change | |
| their processes and also that they have rigorous utilization | |
| processes that they are also ensuring that they are meeting the | |
| compliance and meeting the regulatory requirements for Medicare | |
| review of inpatient stays. | |
| We in our compliance program, we self deny almost $4 | |
| million a year in Medicare days that we feel we cannot justify | |
| for medical necessity. So we feel that anything that we appeal | |
| is justifiable. So anything that is denied by RAC, we will | |
| appeal. | |
| Chairman BRADY. Got it. | |
| Dr. McDermott. | |
| Mr. MCDERMOTT. I am like you, a little by confused by what | |
| I am hearing here, but it seems like what you are saying is | |
| that the RACs operate like the fishermen in my district. They | |
| go out and throw a great big net, and that is where the 12,000, | |
| you jump from 1,500 at the end of one year to 12,000 in the | |
| next. You will say, you have got a lot of stuff in there, most | |
| of which turns out to be not justified because they are going | |
| on volume. You are saying that the RACs are going on volume, | |
| and they got a lot of by-catch, and they have to throw it back | |
| because it doesn't work. | |
| Ms. DEUTSCHENDORF. That is exactly right. They cast a very | |
| broad net, and then what is really considered improper, we | |
| would respectfully disagree that those are not improper | |
| payments, and we are appealing all of them. So, we are | |
| appealing 92 percent. It is almost exactly the same as what Dr. | |
| Sheehy has said. | |
| Mr. MCDERMOTT. Thank you. | |
| Ms. EDELMAN. If I could just say one thing, if it is so | |
| complicated for hospitals to do these appeals, you can imagine | |
| what it is like for beneficiaries doing it on their own. There | |
| is one gentleman from Chicago that I talk to every couple of | |
| months, and he is in his 80s. He is homebound. The last | |
| conversation we had he was describing his cancer and the | |
| therapy he is having, and he is trying to do this appeal for | |
| his wife. It is very difficult for beneficiaries if they even | |
| get to that stage to appeal their outpatient status. | |
| Chairman BRADY. Yeah. Thank you. | |
| On behalf of Dr. McDermott, I would like to thank our | |
| witnesses for their testimony today, and I appreciate the | |
| continued assistance getting answers to the questions that were | |
| asked by the committee. These are challenging issues, | |
| interrelated, facing CMS, this committee, and our hospital | |
| providers. | |
| My view is we have to address them head on in order to | |
| ensure seniors are treated fairly and do not face unnecessary | |
| charges, and it is equally important for providers and | |
| taxpayers to get these issues straightened out, so I look | |
| forward to working with all the witnesses and Members of the | |
| Committee to do just this. | |
| As a reminder, any member wishing to submit a question to | |
| the record will have 14 days to do so; and if any questions are | |
| submitted to the witnesses, I ask that the witnesses respond in | |
| a timely manner. With that, the subcommittee is adjourned. | |
| [Whereupon, at 12:32 p.m., the subcommittee was adjourned.] | |
| [Submissions for the record follow:] | |
| Wisconsin Hospital Association, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Watertown Regional Medical, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Walter F. O'Keefe, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| < | |
| Thomas M. Horiagon, MD MOccH, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Texas Organization of Rural & Community Hospitals, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Sherry Smith, LCSW, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Pocono Medical Center, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Patricia Windle, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Patricia Klaiber, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| New York StateWide Senior Action Council, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| National Senior Citizens Law Center, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| National Kidney Foundation, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| National Association of Urban Hospitals, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Nathan Marra, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| MRC, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Missouri Hospital Association, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Meridian Health, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Medicare Advocacy Project, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Marion P. Cunningham, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Knollwood Retirement Community, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Kirkland Senior Council, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Karen L. Buckley, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Gundersen Health System, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| George L. Marra, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Doreen Grossman, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Diane Walter, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Denise Broccoli, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Connecticut's Legislative Commission on Aging, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| APTA, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| AOPA, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| American Coalition for Healthcare Claims Integrity, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| America's Essential Hospitals, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| AMA, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Alliance for Retired Americans, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| AHCA, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Advocate Physician Partners, Statement | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| ACMA, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| AARP, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| AAMC, Letter | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| <all> | |
| </pre></body></html> | |