S. Hrg. 106-197 HOME HEALTH CARE: WILL THE NEW PAYMENT SYSTEM AND REGULATORY OVERKILL HURT OUR SENIORS? HEARING BEFORE THE PERMANENT SUBCOMMITTEE ON INVESTIGATIONS OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED SIKTH CONGRESS FIRST SESSION JUNE 10, 1999 Printed for the use of the Committee on Governmental Affairs U.S. GOVERNMENT PRINTING OFFICE 59-580cc WASHINGTON 1999 : ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,Congressional SalesOffice,Washington, DC 20402 ISBN 0-16-059620-3 COMMITTEE ON GOVERNMENTAL AFFAIRS FRED THOMPSON, Tennessee, Chairman WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut TED STEVENS, Alaska CARL LEVIN, Michigan SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii GEORGE V. VOINOVICH, Ohio RICHARD J. DURBIN, Illinois PETE V. DOMENICI, New Mexico ROBERT G. TORRICELLI, New Jersey THAD COCHRAN, Mississippi MAX CLELAND, Georgia ARLEN SPECTER, Pennsylvania JOHN EDWARDS, North Carolina JUDD GREGG, New Hampshire HANNAH S. SlSTARE, StaffDirector and Counsel JOYCE A. RECHTSCHAFFEN, Minority StaffDirector and Counsel DARLA D. CASSELL, Administrative Clerk PERMANENT SUBCOMMITTEE ON INVESTIGATIONS SUSAN M. COLLINS, Maine, Chairman WILLIAM V. ROTH, Jr., Delaware CARL LEVIN, Michigan TED STEVENS, Alaska DANIEL K. AKAKA, Hawaii GEORGE V. VOINOVICH, Ohio RICHARD J. DURBIN, Illinois PETE V. DOMENICI, New Mexico MAX CLELAND, Georgia THAD COCHRAN, Mississippi JOHN EDWARDS, North Carolina ARLEN SPECTER, Pennsylvania K. Lee Blalack, II, Chief Counsel and StaffDirector Linda J. GUSTITUS, Minority Chief Counsel and StaffDirector Mary D. Robertson, Chief Clerk (ID CMS Library C2-07-13 7500 Security Blvd. Baltimore; M3ry&mO_!£44 I . CONTENTS Opening statements: Page Senator Collins 1 Senator Cleland 4 Senator Domenici 6 Senator Levin 7 Senator Edwards 27 Prepared statement: Senator Torricelli 45 WITNESSES Thursday, June 10, 1999 Maryanna Arsenault, Chief Executive Officer, Visiting Nurse Service, Saco, Maine, representing the Visiting Nurse Association ofAmerica 11 Mary Suther, Chairman of the Board, National Association of Home Care, Washington, DC, and President and Chief Executive Officer, Visisting Nurse Association ofTexas, Dallas, Texas 13 Rosalind L. Stock, Vice President, Home Health Services, Home Health Out- reach, Rochester Hills, Michigan 16 Barbara Markham Smith, Senior Researcher, Center for Health Services Research and Policy, The George Washington University, Washington, DC 18 .. Kathleen A. Buto, Deputy Director, Center for Health Plans and Providers, Health Care Financing Administration, Washington, DC, accompanied by Mary R. Vienna, Director, Clinical Standards Group, Health Care Financ- ing Administration, Washington, DC 33 , Alphabetical List of Witnesses Arsenault, Maryanna: Testimony 11 Prepared statement 46 Buto, Kathleen A.: Testimony 33 Prepared statement 148 Smith, Barbara Markham: Testimony 18 Prepared statement w/attachments 132 Stock, Rosalind L.: Testimony 16 Prepared statement 88 Suther, Mary: Testimony 13 Prepared statement w/attachments 52 Exhibits *May Be Found In The Files ofthe Subcommittee 1. Memoranda prepared by Priscilla Hanley, Office of Senator Susan M. Collins and Karina V. Lynch, Counsel, Permanent Subcommittee on In- vestigations, dated June 8, 1999, to Permanent Subcommittee on Inves- tigations' Membership Liaisons, regarding June 10, 1999 hearing: Home Health Care: Will the New Payment System and Regulatory Overkill Hurt Our Seniors? 159 (III) IV Page 2. Excerpt of Medicare Payment Advisory Commission's—(MedPAC) Report To The Congress: Selected Medicare Issues, Chapter 6 Access To Home Health Services, dated June 1999 162 , 3. Statement of Rosalind L. Stock, RN, BSN, CHCE, Vice President, Home Health Services, Home Health Outreach, with attachments. (Statement reprinted in this hearing record with numerous attachments. Remaining attachments to submission retained in the files of the Subcommittee as Exhibit No. 3) * 4. Statement for the Record of the Home Health Services and Staffing Association 174 5. Statement for the Record ofthe Home Care Coalition 181 6. Submission for the Record of the Center for Medicare Advocacy, Inc. entitle The Faces ofthe Medicare Home Care Benefit * 7. Supplemental Questions and Answers for the Record of Maryanna Arsenault, Chief Executive Officer, Visiting Nurse Service, Saco, Maine, on behalfofthe Visiting Nurse Association ofAmerica 186 8. Supplemental Questions and Answers for the Record of Mary Suther, Chairman and Chief Executive Office, Visiting Nurse Association of Texas, Inc., Dallas, Texas, on behalfof the National Association for Home Care 188 9. Supplemental Questions and Answers for the Record of Rosalind L. Stock, Vice President, Home Health Services, Home Health Outreach, Rochester Hills, Micigan 191 10. Supplemental Questions and Answers for the Record of Kathleen A. Buto, Deputy Director, Center for Health Plans and Providers, Health Care Financing Administration, Department of Health and Human Services 197 HOME HEALTH CARE: WILL THE NEW PAY- MENT SYSTEM AND REGULATORY OVER- KILL HURT OUR SENIORS? THURSDAY, JUNE 10, 1999 U.S. Senate, Permanent Subcommittee on Investigations, of the Committee on Governmental Affairs, Washington, DC. The Subcommittee met, pursuant to notice, at 2:05 p.m., in room SD-342, Dirksen Senate Office Building, Hon. Susan M. Collins (Chairman of the Subcommittee) presiding. Present: Senators Collins, Domenici, Levin, Cleland, and Ed- wards. Staff Present: K. Lee Blalack, Chief Counsel and Staff Director; Mary D. Robertson, Chief Clerk; Glynna Parde, Chief Investigator and Senior Counsel; Karina Lynch, Counsel; Priscilla Hanley and Felicia Knight, (Senator Collins); Linda Gustitus, Minority Chief Counsel; Michael Loesch (Senator Cochran); Ed Hild (Senator Domenici); Andrea Haer and Nicole Quon (Senator Specter); Laura Stuber (Senator Levin); Marianne Upton, Annamarie Murphy, and Angela Benander (Senator Durbin); Lynn Kimmerly, Jane Greares, and Donna Turner (Senator Cleland); and Lori Armstrong (Senator Edwards). OPENING STATEMENT OF SENATOR COLLINS Senator Collins. The Subcommittee will please come to order. Good afternoon. We thank all of you for being here with us today. America's home health agencies provide an invaluable service that has enabled a growing number of our most frail and vulner- able Medicare beneficiaries to avoid hospitals and nursing homes — and stay just where they want to be in the comfort and security of their own homes. In 1996, home health was the fastest-growing component of Medicare spending, consuming 1 out of every 11 Medicare dollars, compared with 1 out of every 40 in 1989. The program grew at an average annual rate of more than 25 percent from 1990 to 1997. As a consequences, the number of home health beneficiaries more than doubled, and Medicare home health spending soared from $2.5 billion in 1989 to $18.1 billion in 1996. This rapid growth in home health care spending understandably prompted Congress and the administration as part of the Balanced Budget Act of 1997 to initiate changes that were intended to make the program more cost-effective and efficient. There was wide- CD 2 spread support for the provision in the Balanced Budget Act of 1997 which called for the implementation of a prospective payment system for home health care. Until this system can be imple- mented, home health agencies are being paid according to an in- terim payment system, or IPS. In trying to get a handle on costs, however, Congress and the ad- ministration created a system that penalizes lower-cost, efficient agencies and that may be restricting access for the very Medicare — beneficiaries who need care the most the sicker patients with complex chronic care needs, like diabetic wound patients or I.V. therapy patients who require multiple visits. I accompanied a home health care nurse on a home visit once when I was in northern Maine, and we visited an elderly couple who were living in their very modest home, both of whom were in their eighties. The woman was being treated for a surgical wound that was not healing well as a result of her diabetes. She was con- fined to a wheelchair. I could see what a difference home health care made in their lives. For one thing, it allowed them to stay to- gether rather than having this woman be in a nursing home. I was offered by the nurse to observe her cleaning the wound, but I passed up that part of the visit. That visit brought home first-hand to me what an essential serv- ice good home health care is for our Nation's elderly. Unfortunately, the interim payment system is critically flawed. It effectively rewards the agencies that provide the most visits and spent the most Medicare dollars in 1994, the base year, while it pe- nalizes low-cost, more efficient providers and, I fear, their patients. None of us should tolerate wasteful or fraudulent expenditures, but neither should we impede the delivery of necessary services by low-cost providers. Home health care agencies in the Northeast and the Midwest have been among those particularly hard-hit by the interim payment system. As The Wall Street Journal observed last year, "If New England had just been a little greedier, its home health industry would be a lot better off now. Ironically, the region is getting clobbered by the system because of its tradition of non- profit community service and efficiency." Even more troubling, this flawed system may force our most cost- efficient providers to stop accepting Medicare patients with the most serious and complex health care needs. According to a recent survey by the Medicare Payment Advisory Commission, almost 40 percent of the home health agencies sur- veyed indicated that there were patients whom they previously would have accepted whom they no longer accept due to the IPS. Thirty-one percent of the agencies surveyed admitted that they had discharged patients due to the IPS. According to these agencies, the discharged patients tended to be those very patients with chronic care needs who required a large number of visits and were expensive to serve. As a consequence, these patients caused the agencies to exceed their aggregate per-beneficiary caps under the very complex formula in the law. I simply do not believe that Congress intended to construct a payment system that inevitably discourages home health agencies from caring for those seniors who most need the care. Last year's omnibus appropriations bill did provide a small measure of relief 3 for home health agencies. While I am pleased that we were able to take some initial steps to address this issue, I am very con- cerned that the proposal did not go far enough to relieve the finan- cial distress that cost-effective agencies are experiencing. As a re- my sult, I will soon join with colleagues in introducing legislation in the hope of remedying the remaining problems. These problems are all the more pressing given the fact that the Health Care Financing Administration was unable to meet the ini- tial deadline for implementing a prospective payment system. As a result, home health care agencies will struggle under the IPS for far longer than Congress envisioned when it enacted the Balanced Budget Act. Moreover, it now appears that Congress greatly underestimated the savings stemming from the BBA. Medicare spending for home health fell by nearly 15 percent last year, and the Congressional Budget Office now projects post-BBA reductions in home care spending at $48 billion in fiscal year 98-02. This is a whopping CBO three time greater than the $16 billion originally estimated for that time period. As a consequence, cost-efficient home health agencies across the country are experiencing acute financial difficulties and cash flow problems which will inhibit eventually, if not already, their ability to deliver much needed care, particularly to chronically ill patients with complex needs who need home health care the most. Some agencies have closed because the reimbursement levels under Medicare fall so short of their actual operating costs. Others are laying off staff or are declining to accept new patients with more serious health problems. This points to the most central and critical issue, and that is that cuts of this magnitude simply cannot be sustained without ultimately affecting care for our most vulner- able seniors. Moreover, these payment problems have been exacerbated by a number of new regulatory requirements imposed by HCFA, includ- ing the implementation of OASIS, the new Outcome and Assess- ment Data Set, sequential billing, IPS overpayment recoupment, and the new 15-minute increment home health reporting require- ment. One home health nurse told me she felt more like a lawyer billing by the hour than a nurse taking care of essential health care needs because of that new requirement. Today's hearing will examine how payment reductions under the IPS, coupled with these new regulatory requirements, are affecting home health agencies' ability to meet their patients' needs, because that is the bottom line. I think the following quote which was provided to me by the di- rector of a New York home health agency summarizes the problems faced by many providers. She wrote: "I have to prepare for Y2K and have everything ready by August 1. That has cost me $100,000. My accounts receivable are now tied up for 4 months due HCFA to sequential billing. has called a halt to sequential billing as of July 1, which is great. But I need 2 months' notice to change my computer system, and the vendors are not responding. I imple- mented OASIS. The first year cost $100,000, and now it is $50,000 a year maintenance. I spent time trying to get a surety bond. The time and effort cost me $8,000 to $9,000. Had I been able to get 4 one, it would have cost $216,000. I just spent $300,000 toward the payback of my recoupment of overcharges, which is $1 million. My rates have been cut by IPS by 30 percent, and my per-beneficiary cap is $2,200. And last but not least, the 15-minute increment will cost $20,000 to $30,000 to implement, and worst of all, I will prob- my ably lose all good nurses." This comment aptly reflects the concerns that I have heard from many home health agencies in my State as they struggle to cope with an onerous payment and regulatory system. I look forward to hearing the testimony of all of our witnesses today in our quest to better understand and then solve this problem which threatens the care that we provide to many of our elderly citizens. I would now like to call on Senator Cleland for any comments that he might have. OPENING STATEMENT OF SENATOR CLELAND Senator Cleland. Thank you very much, Madam Chairman. I cannot tell you how much I appreciate your having this hearing to flesh out some of the challenges that we in the Congress and HCFA and those involved in caring for our elderly citizens and our dis- abled have under the current system and under the current law. We have all read the stories about the toll that the Balanced Budget Act has taken on patients across the country, headlines like "Medicare Cutbacks Prove Painful," "Nursing Homes Shun Some Medicare Patients," "Patients Face a Limit on Benefits for Ther- apy," and so on. Let me just say that the Balanced Budget Act of 1997 has pro- duced some positive results. We do have a balanced budget, and — Medicare's fiscal health has been extended for many years but at a cost. BBA has brought with it unintended consequences, and these consequences have a decidedly human face, as our distin- guished panelists well know. It is the face of the Nation's most vul- nerable elderly citizens, Madam Chairman, as you point out, and their caregivers. It is the face of the 73-year-old cancer patient who relies on a feeding tube and I.V.s and who cannot find a nursing home that will accept her because her medical needs are too costly. It is the face of the 67-year-old woman who lost her leg to diabetes complications and received an artificial limb but was stopped short of her goal of walking with only one cane, because she hit her $1,500 a year physical therapy limit. And as someone who spent a lot of time in physical therapy, I am a cosponsor with Senator Grassley to lift this limit, because I happen to believe not only in home health care but in physical therapy and rehabilitation as well. It is the face of children and parents of patients who must make the difficult choice of whether to care for their loved ones at home or seek care in a nursing home. It is the face of some of you in this room, the nurses and other dedicated employees of home health care agencies, who have devoted your lives literally to caring for the sick. I think many of you are really unsun—g heroes who serve in some of the most rural areas of the country a place like my State, the State of Georgia, has so many rural areas in need of your care. Many of you manage the sickest and most frail patients with no means of payment other than Medicare. — 5 Last July, the Small Business Committee on which I serve held a hearing on home health care and whether it can survive the new BBA regulations. At that time, I stated that the government should allow us to make every effort to allow Medicare recipients to live in their own homes. I can remember after being wounded in Viet- VA nam, I spent a year and a half in military and hospitals and rehabilitation facilities, but ultimately, I wanted to be in my own home. I guess that is what has made me a passionate devotee of home health care. However, despite good intentions, those of us in government can sometimes become part of the problem we seek to correct. I think the interim payment system is such an example. Congress enacted the IPS to encourage providers to cut costs while becoming more — efficient a very laudable goal. In practice, however, we are seeing efficient agencies being driven out of business while some less well- managed agencies have been able to survive. Many of you know that story. Last summer, we heard that 800 small and medium-sized home care agencies had been forced out of business by BBA regulations that was just last summer. That number has now jumped to more than 2,000 agencies driven out of business. How many patients are being denied services now? How many patients are being forced into nursing homes, at a higher cost, I might add, to our government, because 2,000 of America's home health care agencies have been forced to close their doors? All of — — us the Congress, agency owners and employees and HCFA must work—together on this critical issue. We all have the same objec- tives to keep Medicare solvent, to weed out fraud and abuse in the system, and more importantly, to carry out Medicare's mandate to ensure that our most vulnerable citizens have access to the health care they need. Madam Chairman, I welcome this hearing, and I look forward to the information that will be provided today by the distinguished panelists, and I hope we can come to some kind of consensus here about the answers that are needed in the best interest of America's senior citizens. Thank you. [The prepared statement of Senator Cleland follows:] PREPARED STATEMENT OF SENATOR CLELAND I want to thank the Chair and state how important this hearing is. All of us have read front page stories about the toll the Balanced Budget Act is taking on patients across the country. The headlines say it all: "Medicare Cutbacks Prove Painful," "Nursing Homes Shun Some Medicare Patients," "Patients Face a Limit on Benefits for Therapy." Le—t me say that the Balanced Budget Act of 1997 has produced some positive results we have a balanced budget, and Medicare's fiscal health has been extended —by many years. But the BBA has brought with it unintended con- sequences and these consequences have a decidedly human face. It is the face of the Nation's most vulnerable elderly citizens and their caregivers. It is —the face of the 73-year-old cancer patient who relies on a feeding tube and I.V.'s and who cannot find a nursing home that will accept her because her medi- cal needs are too costly.—It is the face of the 67-year-old woman who lost her leg to diabetes complications who received an artificial limb, but was stopped short of her goal of walking with only one cane because she hit her $1,500 a year physical therapy limit. It is the face of the children and parents of patients who must make the difficult choice of whether to care for their loved ones at hom—e or seek care in a nursing home. It is the face of some of you in this room today the nurses and other dedi- 6 cated employees of home health care agencies who have devoted your lives to caring for the sick. Many of you are unsung heroes, who serve in some of the most rural areas of the country, who manage the sickest, most frail patients, with no means of payment other than Medicare. Last July the Small Business Committee, on which I serve, held a hearing on home health care and whether it can survive the new BBA regulations. At that time, I stated that the government should make every effort to allow Medicare re- cipients to live in their own homes for as long as possible. However, despite good intentions, those of us in government can sometimes become part of the problem we seek to correct. The Interim Payment System is such an example. Congres—s enacted the IPS to encourage providers to cut costs by becoming more efficient a laudable goal. In practice, however, we are seeing efficient agencies being driven out of business, while some less well managed agencies have been able to survive. Last summer we heard that 800 small- and medium-sized home care agencies had been forced out of business by BBA regulations. That number has now j—umped to more than 2,000 agencies. How many patients are being denied service how many patients are — being forced into nursing homes because 2,000 of America's home health agencies have been f—orced to close their doors? — All of us the Congress, agency owners and employees, and HCFA must work together on this critically important issue. We all have the same objectives: To keep Medicare solvent, to weed out fraud and abuse from the system, and most impor- tantly, to carry our Medicare's mandate to ensure that our most vulnerable citizens have access to the health care they need. I welcome this hearing. I look forward to the information that will be shared today, and hope that we will get answers that are in the best interests ofAmerica's senior citizens. Senator COLLINS. Thank you very much, Senator Cleland. I am now pleased to yield to the Senator from New Mexico, Sen- ator Domenici. OPENING STATEMENT OF SENATOR DOMENICI Senator Domenici. Thank you very much, Madam Chairman, for conducting this hearing. I wish I could stay longer, but I will just be able to be here for half an hour or so. I heard your opening remarks, and I would like to say that I think you have covered almost every issue that I would have cov- ered, and I commend you for raising those and laying them on the table. Some of those issues must be resolved. Some involve over- regulation by HCFA. I hope this hearing will send a signal to them that where changes can be made, they ought to do so. It is patent and obvious in my State, where I have a task force on health issues, that home health care, in an effort to save money, has become entangled in a web of new rules and regulations that for some who have spoken with me, it is almost impossible to de- liver the kind of care that they want to deliver. In addition, costs are not coming down. As you place all those burdens on, the costs of keeping businesses going, whether they are nonprofits or profit- making, are going up, and payments are coming down. Obviously, in a State like mine and perhaps yours, Madam Chairperson, we have a lot of rural areas, and rural areas have a very difficult problem not only because there are so few patients and such big distances, but also payment was presumed to be an average of the high costs and the low costs, and essentially, most of the rural ones are high-cost and long-term need patients, so the rural home health care facilities, if they are isolated and have just rural areas, cannot make it because what we figured as a cost is just out of kilter with the reality of the abundance of high-cost pa- tients.