MEDICARE PARTIAL HOSPITALIZATION SERVICES RESTORATION AND INTEGRITY ACT OF 2000 -- HON. FORTNEY PETE STARK (Extensions of Remarks - October 12, 2000)

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HON. FORTNEY PETE STARK OF CALIFORNIA IN THE HOUSE OF REPRESENTATIVES Wednesday, October 11, 2000

Mr. STARK. Mr. Speaker, today, I am introducing legislation to restore a benefit in Medicare that has been destroyed. A benefit that is needed by about 100,000 Medicare beneficiaries who need outpatient mental health services to maintain their functional capacity and live lives that are as normal as possible. It is a benefit that was put into Medicare in 1990, but has now been almost completely eliminated by administrative actions of the Health Care Financing Administration (HCFA) that I believe have been and continue to be illegal. I have conveyed my concerns to HCFA several times, but without effect.

The history of this benefit is truly sad. In a report issued in January 2000, the GAO concluded that ``HCFA's implementation of the partial hospitalization benefit was not adequate.'' The GAO report details the mismanagement of this benefit by HCFA from the beginning, and I believe that the mismanagement continues to this day. That is why I am introducing legislation today to stop the mismanagement and restore this benefit as the Congress intended it to be.

Before 1990, Medicare covered partial hospitalization services provided by hospitals. Recognizing a broader need for outpatient mental health services, the Congress expanded the benefit in OBRA 1990 to include services provided by Community Mental Health Centers (CMHCs) as defined in Section 1913 of the Public Health Service Act.

The Congress was quite clear in its intent for this benefit, and the precise language of the statute reflects that intent. Section 1861(ff)(2)(I), as amended by Section 4162 of OBRA 1990, specifies the partial hospitalization benefit as services that are:

``Reasonable and necessary for the diagnosis or active treatment of the individual's condition reasonably expected to improve or maintain the individual's condition and functional level and to prevent relapse or hospitalization, and furnished pursuant to such guidelines relating to frequency and duration of services as the Secretary shall by regulation establish (taking into account accepted norms of medical practice and the reasonable expectation of patient improvement).''

The Congress did not know the specific eligibility requirements needed for this benefit, nor did it know the specific services that should be provided for each patient, depending on the functional status of the individual. Therefore, the Congress mandated that the Secretary promulgate regulations establishing eligibility guidelines and covered services--taking into account accepted norms of medical practice. The Congress expected--and required--the Secretary to promulgate regulations so that the public would have an opportunity to comment and participate in defining and establishing the standards for this benefit.

In March 1992, HCFA issued a manual instruction (IM 205.8)--not a regulation--that included the following language:

``In general, to be covered, the services must be reasonable and necessary for the diagnosis or active treatment of a patient's condition. The services must not be for the purpose of diagnostic study or they must be reasonably expected to improve or maintain the patient's condition and to prevent relapse or hospitalization.

It is not necessary that a course of therapy have, as its goal, restoration of the patient to the level of functioning exhibited prior to the onset of the illness, although this may be appropriate for some patients. For many other psychiatric patients, particularly those with long term, chronic conditions, control of systems and maintenance of a functional level to avoid further deterioration or hospitalization is an acceptable expectation of improvement. ``Improvement'' in this context is measured by comparing the effect of continuing treatment versus discontinuing it. Where there is a reasonable expectation that if treatment services were withdrawn the patient's condition would deteriorate, relapse further, or require hospitalization, this criterion is met.

Some patients may undergo a course of treatment which increases their level of functioning but then reach a point where further significant increase is not expected. Continued coverage may be possible even though the condition has stabilized or treatment is primarily for the purpose of maintaining the present level of functioning. Coverage is denied only where evidence shows that the criteria discussed above are not met, e.g., that stability can be maintained without further treatment or with less intensive treatment.''

Although this definition of the partial hospitalization benefit was not issued through regulations as required by the law, at least it was consistent with the intent of the law in substance, and the mental health community did not complain.

On February 11, 1994, the Secretary published an Interim Final Rule implementing the partial hospitalization benefit. The language of the Interim Final Rule mirrored the language of the statute:

``(a) Partial hospitalization services are services that--
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(1) Are reasonable and necessary for the diagnosis or active treatment of the individual's condition;

(2) Are reasonably expected to improve or maintain the individual's condition and functional level and to prevent relapse or hospitalization; and

(3) Include the following:'' (list of services).

This Interim Final Rule did not do what the Congress expected--it did not provide clear eligibility and coverage guidelines, taking into account accepted norms of medical practice. However, it did at least implement the partial hospitalization benefit through regulations, as required by the statute. Following publication of this Interim Final Rule, the 1992 manual issuance continued in force providing more specific instructions and guidelines.

Because HCFA did not involve the mental health community in establishing eligibility and coverage guidelines, HCFA's rules were inadequately defined and unclear. The GAO reported that:

``HCFA initially gave its contractors little guidance on, or explanation of, the program beyond the implementing language of OBRA '90. As a result, contractors struggled to understand the parameters of the partial hospitalization benefit in the first years it was in effect. Our discussions with contractors and HCFA regional offices show that contractors raised concerns over such issues as:

.whether partial hospitalization could cover organic conditions such as Alzheimer's, which are unlikely to improve;

.whether the benefit was available to only those patients with previous psychiatric treatment, or even further limited to only those who had previously been psychiatric inpatients;

.which specific services could be billed to Medicare as partial hospitalization services;

.how frequently services had to be delivered for Medicare to consider a beneficiary's treatment program as partial hospitalization; and

.the level of physician involvement required for services provided to the patient.''

Without clear eligibility and coverage guidelines, HCFA invited fraud and abuse into the program. Expenditures for the benefit mushroomed, and HCFA's contractors began to notice claims for large amounts. For example, GAO reported that a CMHC in Washington came to the attention of its fiscal intermediary because of claims in excess of $10,000 per beneficiary per month. That CMHC operated residential board and care facilities with live-in aides who assisted residents with everyday needs, such as cooking, cleaning, and transportation. The CMHC was billing Medicare up to $100 per hour, per patient, for these services. Another example GAO reported was in Montana, where CMHCs interpreted the partial hospitalization benefit to mean that all CMHC services were covered, and were submitting claims for day care services provided by the CMHC. Other examples reported by GAO include:

.Day care and geriatric care programs were being billed to Medicare as partial hospitalization.

.Arts and craft activities were being billed as occupational therapy or patient education.

.Family counseling services were being billed when there was not evidence of family member participation.

.Long-term psychiatric patients with controlled symptoms were being monitored in partial hospitalization programs for years.

GAO reported that in 1994, one HCFA regional office expressed its concerns about lack of understanding of the partial hospitalization benefit and perhaps misrepresentation of the benefit, but HCFA did not follow up on the concern. By 1995, another HCFA regional office became alarmed about the rapid increase in applications received from new CMHCs, particularly when telephone calls and site visits to CMHCs already participating in the program reached disconnected telephone numbers, private residences, and nonmedical businesses. Still, HCFA did not issue regulations defining the requirements for the facilities and has not issued such regulations to this day. In a statement at a Congressional Town Hall meeting on CMHCs in Houston in March 1999, a representative of the CMHCs stated: ``I am not aware of any other Medicare provider that is certified and regulated in the absence of regulations, based upon shifting standards set out in internal transmittals. The provider community for some time has advocated for formal rulemaking to develop clear and measurable certification standards with industry, clinician and patient input.''

Costs of the partial hospitalizaion benefit mushroomed. In 1993, costs of the benefit were about $60 million; in 1994, about $105 million; and in 1995, $145 million.

Finally, HCFA acted. In July 1996, HCFA issued another manual instruction (Transmittal A-96-2) that severely narrowed the coverage criteria for the partial hospitalization benefit as follows:

``Partial hospitalization may occur in lieu of either:

.Admission to an inpatient hospital; or

.A continued inpatient hospitalization.

Treatment may continue until the patient has improved sufficiently to be maintained in the outpatient or office setting on a less intense and less frequent basis. This is an individual determination.''

In my view, neither the process nor the substance of this new mandate is consistent with the law. HCFA issued this new limitation on the benefit through a manual instruction, not a regulation, in clear violation of the law. Medicare law requires in not one, but two places that the Secretary publish regulations defining this benefit. First, as I mentioned previously, section 1861(ff) requires that the Secretary publish regulations defining the partial hospitalization benefit, and section 1871 requires the Secretary to publish regulations for all Medicare policy. Indeed, section 1871(a)(2), which was enacted in 1965 in the original Medicare statute, provides:

``(2) No rule, requirement, or other statement of policy (other than a national coverage determination) that establishes or changes a substantive legal standard governing the scope of benefits, the payment for services, or the eligibility of individuals, entities, or organizations to furnish or receive services or benefits under this title shall take effect unless it is promulgated by the Secretary by regulation under paragraph (1).''

I find it troubling that those charged with enforcing the law ignore the law and proceed as though the law does not apply to their actions, but only to the actions of others. We must change the culture in HCFA and in HHS that repeatedly issues manual instructions in violation of the law.

The substance of the 1996 HCFA ruling was also inconsistent with the law. Nothing in section 1861(ff) limits the partial hospitalization benefit to services ``in lieu of either:

.Admission to an inpatient hospital; or

.A continued inpatient hospitalization.''

However, in issuing this new ruling, HCFA relied on a technical inconsistency in the statute. Although the partial hospitalization benefit is defined in section 1861(ff), section 1835(a)(2)(F) provides that a physician must certify that the individual would require inpatient psychiatric care in the absence of such services. Despite HCFA's February 11, 1994 regulation to the contrary, HCFA issued a manual instruction limiting the benefit to the level of the physician certification requirement provided in section 1835.

Based on the new HCFA instruction that severely limited the benefit, HCFA and the Inspector General began intensive investigations of partial hospitalization claims, and not surprisingly, they found that high percentages of the claims did not meet the new standards. When HCFA severely restricted the benefit, programs suddenly found themselves out of compliance. HCFA and the Inspector General then proclaimed that there was widespread ``fraud and abuse'' in the partial hospitalization benefit. HCFA has been seeking repayments of substantial amounts paid to mental health programs that had been operating on the basis of the earlier published regulation and the manual instructions that were consistent with the regulation and the law.

We need to refocus our attention on the beneficiaries who use the partial hospitalization benefit. In 1997, about 88,000 Medicare beneficiaries were using this benefit. About 60 percent of them were disabled beneficiaries, under the age of 65, and about 60 percent of them were dually eligible for both Medicare and Medicaid. The beneficiaries who need and use this benefit are among the poorest and most disabled beneficiaries in the entire Medicare program. They need our help and our protection, and they need these services.

My record of fighting fraud and abuse in Medicare is long. I hate fraud. We must do everything we can to eliminate fraud in Medicare, including any fraud in the partial hospitalization benefit. But the way to eliminate fraud is not to eliminate the benefit itself. By that standard, it would be easy to eliminate all fraud in Medicare. We would simply eliminate the program! No, instead, we must take steps to address those areas of the benefit where fraud has been found, but we must also restore this benefit for those Medicare beneficiaries who need it.

Today, I am introducing legislation, ``The Medicare Partial Hospitalization Services Restoration and Integrity Act of 2000,'' that would restore the partial hospitalization benefit as the Congress intended, while also taking steps to limit fraud in the benefit.

First, the bill would require a face-to-face visit with a physician to certify the need for the services.

Second, the bill would tighten the language regarding ``individual activity therapies'' ((ff)(2)(E)), using limits already in the statute for other approved services (requiring the services to be directly related to the therapy program).

Third, the bill would tighten the survey and certification requirements in (ff)(3) for community mental health centers.

And fourth, the bill would correct the technical flaw in the statute, which HCFA has used
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to limit the benefit, making the physician certification language under section 1835 the same as that defining the benefit in section 1861(ff).

To address HCFA's lack of publishing regulations, the bill would require a negotiated rule making process to define the benefit, establish quality of care standards, and establish survey and certification standards for CMHCs.

I am introducing this bill now so that interested parties can study it over the adjournment period and suggest improvements. I will reintroduce the bill early in the new Congress, with appropriate refinements. For the sake of some of the most vulnerable in our society, I hope we can enact this kind of legislation early in 2001.
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