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Congressional Testimony
July 19, 2000, Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 6214 words
HEADLINE:
TESTIMONY July 19, 2000 DR. ROWEN K. ZETTERMAN PRESIDENT ELECT AMERICAN COLLEGE
OF GASTROENTEROLOGY HOUSE COMMERCE HEALTH AND ENVIRONMENT
IMPACT OF BUDGET CUTS ON HEALTH CARE
BODY:
July 19,
2000 Prepared Statement of Dr. Rowen K. Zetterman President Elect American
College of Gastroenterology Representing: American College of
Physicians-American Society of Internal Medicine I am Dr. Rowen K. Zetterman,
and I appear here today in my capacities as President-Elect of the American
College of Gastroenterology (ACG), and as the Chair of the Board of Regents of
the American College of Physicians- American Society of Internal Medicine. I am
also one of the ACP-ASIM's representatives in the House of Delegates of the
American Medical Association, but my testimony today is not on behalf of the
AMA. In 1997, Congress enacted major reductions in Medicare spending as part of
the Balanced Budget Act of 1997 (BBA 97). As a result of these reductions and
inappropriate payment policies from the Health Care Financing Administration
(HCFA), quality and access to care for millions of beneficiaries is being placed
at risk. Today, my testimony will focus on three specific BBA-mandated
reductions that are of particular concern to the specialty of internal medicine
and to gastroenterologists: - HCFA's inappropriate application of a site of
service differential for certain procedures done by gastroenterologists that are
provided less than 10 percent of the time in the office. - Reductions in overall
Medicare payments to physicians. - Reduction in payments to teaching
institutions. Site of Service Differential for Certain Procedures Done By
Gastroenterologists HCFA's application of a site of service differential to
endoscopic procedures done less than 10 percent of the time in the office is of
great concern to gastroenterologists. My testimony on this issue reflects the
particular concerns of the gastroenterology community, including ACG, about the
site of service differential. As an umbrella organization representing all
internists, subspecialists as well as generalists, ACP-ASIM is addressing
broader issues relating to the impact of the BBA 97 cuts and HCFA's policies,
rather than more narrowly focused issues like the site of service differential
for certain GI procedures. However, as explained later, ACP-ASIM has no
objections to the legislative remedy that the ACG has developed for the site of
service problem for gastroenterology. HCFA has applied a "site of service"
differential to physician payments for a number of years. Prior to HCFA's 1997
proposal, Medicare reduced the practice expense component of the physician's
professional fee when an office procedure was performed in a hospital or in the
ambulatory surgery center. "Office procedures" were those services provided more
than 50 percent of the time in the office. This rule meant that diagnostic
flexible sigmoidoscopy, which is performed more than 70 percent of the time in
the office because no anesthesia is required, was subject to the site of service
differential. Diagnostic colonoscopy, which does require anesthesia, is seldom
performed in the office so the HCFA rule did not apply. HCFA's 1997 proposal
changed the site of service rule markedly, and introduced two distinct fee
structures for the same professional service. Typically, a lower fee is paid to
the physician if a service is provided in the hospital or ASC, and a
significantly higher reimbursement applies if the same procedure is provided in
the office setting. This policy is not applied consistently across the family of
GI endoscopy. ACG and other GI organizations immediately objected to this change
in policy. Nevertheless, in January, 1998 HCFA implemented this bifurcated fee
schedule and through a four-year phase-in, the spread between the higher
(office) fee and the lower (hospital/ASC) fee has grown markedly with each
successive year. (See Table I) Identified Codes Include Major Colorectal Cancer
Screening Procedures--This Fix Would Help Remedy Underutilization of Medicare
Colorectal Cancer Screening Benefit; HCFA's Site-of- Service Rule Has a
Disproportionately Heavy Adverse Impact on Gastrointestinal Procedures The
impact of this rule is particularly felt with respect to gastrointestinal
procedures. These procedures require sedation of patients and, while very safe,
particularly in older patients, it is essential to ensure access to
resuscitation equipment, facilities and personnel for those rare events in which
complications occur. Similarly, it is essential that there be some
credentialling and review of adequacy of training. In all of these services,
well over 90% are being done in non-office setting, i.e. hospitals or ASCs:GI
services are the major portion of the small number of Medicare procedures which
have fewer than 10% currently being performed in the office, but to which HCFA
still has applied the bifurcated fee schedule of the site-of- service rule.
Included among these procedures are colonoscopies - - the major diagnostic and
treatment tool in the fight against colorectal cancer. The GAO recently reported
to the Senate Aging Committee that despite the new Medicare colorectal cancer
screening benefit, only 1% of Medicare beneficiaries are availing themselves of
screening. When the phase-in is complete in 2002, Medicare will pay physicians
39 percent more if he/she performs the diagnostic colonoscopy in the completely
unregulated office environment, than provided for the same service performed in
a hospital or ASC which is Medicare-certified and meets criteria for quality and
minimal equipment, as well as the training/credentialling requirements that
these facilities impose. The anomaly whereby HCFA maintains a mechanism and
standards which must be met to qualify as a Medicare-certified ASC, and then
implements a reimbursement system which pays physicians more if they perform
cases in the office environment where none of the training, mandatory capacities
to handle complications or other ASC-required standards apply is inexplicable.
As much as HCFA articulates that the rationale for the higher physician payment
for office-based services lies in the higher practice expenses, it would be
naive not to consider that a substantial motivation is elimination of the Part A
facility fee paid to those facilities that meet the requirements for Medicare
certification. There are two key problems with HCFA's site-of-service policy.
The first and larger problem is that the new policy creates incentives which can
result in patients receiving treatment in the office instead of the
Medicare-certified hospital or ASC. While some procedures can safely be
performed in the right office setting -- one with some of the same criteria that
are mandated for Medicare certified facilities -- the ultimate decision should
not be based upon reasons other than what is best for the patient. We are very
concerned about how minimal quality of patient care can be assured in the
largely unregulated environment of the typical private physician's office. We
are not here today to propose a solution to larger issues relating to site of
service or practice expenses. Keeping in mind that HCFA has set up this
bifurcated fee structure for some, but not all diagnostic and surgical
procedures, there is a more immediate narrower, problem relating to the standard
HCFA uses to identify those services appropriate for dual fees. There must be a
standard, but HCFA has not articulated it. We assume that such a standard would
be tied to the percentage of cases already being performed in the office, and
also would take into account the safety of the office setting. For example,
coronary artery bypass graft surgery retains a single fee, presumably because
HCFA believes it is not and ought not be done in the office. At one point HCFA
directed its clinical practice panels to use the 10% threshold as a benchmark,
meaning that if a procedure is done less than 10% of the time in office, then it
would not be considered for the bifurcated fee. However, in response to ACG's
comments and in meetings with ACG, HCFA has denied that this is their standard
(See Secretary Shalala's Letter). This narrower problem -- the absence of any
articulated standard for the bifurcated fee structure, as well as the unfair
results from HCFA's having reduced payments by 39 percent over the four-year
phase in to the 90-95% of GI physicians who, despite the HCFA disincentives,
still have declined to do these procedures in the unregulated office setting,
but choose to take their patients to Medicare-certified facilities -- is the
issue which we today propose is appropriate for a modest legislative fix. Last
year, the Commerce Committee's Mark in the Balanced Budget Relief Act (BBRA)
package included a provision, then-labeled as section 204(v), which would have
established a 10% threshold before HCFA could establish a bifurcated fee, and
would have remedied current and past economic inequities by instructing HCFA to
revert to a single fee structure (i.e., number of relative value units, or RVUs,
then proposed as the 1997 level that pre- dated HCFA's change). At that point,
the ACP-ASIM criticized the specific language, expressing concern that it might
inadvertently apply to a much larger universe of services than the ACG intended.
In the interim, we have held frequent discussions among the ACP-ASIM and three
major GI organizations, namely, the American Gastroenterological Association
(AGA), American Society For Gastrointestinal Endoscopy (ASGE) and ACG. The
current proposed legislative language has the endorsement of all three GI
organizations; these changes also have prompted ACP-ASIM to withdraw its
objections to this proposal. Attached to my written testimony is an addendum
that refers to comments, meetings and discussions with HCFA officials about this
problem. Several members of Congress from both parties have communicated their
concerns about this policy to the Secretary of HHS as well as to the HCFA
Administrator. In a recent response to one of these inquiries, Secretary Shalala
addressed this issue in terms which demonstrate: (1) the current absence of any
agency standard; (2) the prospects for creation of unintended financial
incentives potentially steering where care is delivered; and (3) HCFA's economic
objective of avoiding payment of the facility fee to those hospitals and ASCs
that meet Medicare certification requirements. Her response, and ACG's comments
on her response, are summarized in the addendum. A recent GAO report to the
Senate Special Committee on Aging underscored that the colorectal cancer
screening benefit has not been utilized very widely by Medicare beneficiaries --
numbers were in the range of 1% uptake in 1998. While there are many reasons for
this, the reimbursement inequities of the inappropriate site-of-service
treatment, despite less than 10% office volume level must be considered as a
contributing factor. Certainly, there is little logic in creating a national
priority for colorectal cancer screening and then whittling the payment rates to
such low levels as to make them a losing proposition for physicians. So, in the
narrow fix to this site of service problem, Congress also would be making an
important investment in favor of colorectal cancer screening. It is essential to
recognize the proposed section 204(v) provision is not directed to resolving
concerns about the larger site-of-service differential issue. It addresses
solely an antecedent problem, the much smaller subset of services where the
volume of services performed in the office setting have never reached the 10%
threshold. This issue needs to be resolved distinctly from, and in advance of,
any effort that may evolve to address broader concerns about the site of service
differential. While we do not seek to address or solve the broader site-of-
service differential issue, we strongly oppose the solution to that issue which
has been proposed by the Medicare Payment Advisory Commission (MEDPAC), which
will only compound the problem, and further strip reimbursement rates. We ask
that the Committee favorably consider incorporating this proposed legislative
fix for this narrow problem by articulating the 10% threshold, and requiring
HCFA to revert to a single fee structure--the fee currently being paid only for
services provided in the office to be set at either the 2000 office fee, or the
2001 office fee, whichever is higher, as to a limited number of specific
services where office volume falls well below the 10%. Reversing Overall Cuts in
Payments to Physicians The BBA made a number of significant changes in the way
physicians were paid under Medicare fee-for-service. This included replacing the
volume performance standard with the sustainable growth rate system (SGR) and
phasing-in a new method of calculating practice expenses for physicians. The SGR
establishes a target growth rate for Medicare spending on physician services,
then annually adjusts payments up or down, depending upon whether actual
spending is below or above the target. However, HCFA's original method of
estimating the SGR was flawed and resulted in a $3 billion shortfall in payments
to physicians during 1998 and 1999. This financial burden has strained
physicians' ability to adequately serve Medicare beneficiaries, and led to a
joint lawsuit against HCFA by ACPASIM and 16 other medical organizations, which
is still pending. Fortunately, the Balanced Budget Relief Act of 1998 (BBRA) has
corrected this technical flaw for the years 2000 and beyond. The BBA's new
methods for establishing Medicare payment rates for physicians still present
significant technical concerns for physician organizations, especially their
potential for producing wide fluctuations in reimbursement rates from one year
to the next. To ensure physicians are fairly compensated for their services, and
in a manner that does not allow for precipitous fluctuations in income, MEDPAC,
in its March 1999 Report to Congress, recommended the following SGR
improvements: - Revise the sustainable growth rate to include measures of
changes in the composition of Medicare fee-for-service enrollment. - Revise the
sustainable growth rate to include a factor of growth in real gross domestic
product per capita plus an allowance for cost increases due to improvements in
medical capabilities and advancements in scientific technology. - Amend a
provision of the Balanced Budget Act of 1997 to require the Secretary to publish
an estimate of conversion factor updates by March 31 of the year before their
implementation. - Reduce time lags between sustainable growth rate measurement
periods by allowing calculation of the sustainable growth rate and update
adjustment factors on a calendar year basis. - Require the Secretary to correct
estimates used in sustainable growth rate system calculations every year. The
BBRA did produce some significant refinements to the SGR, primarily limiting
oscillations in the annual update to the conversion factor, and requiring that
the SGR be calculated on a calendar year basis. The BBRA did fail, however, to
reinstate the $3 billion shortfall in 1998 and 1999 physician payments, and to
"increase the SGR to account for rising physician costs due to technological
advances and an aging population," as noted in the November 22/29, 1999 issue of
American Medical News. Though the SGR will be 5.8% for 2000, according to the
April 24, 2000 issue of American Medical News, the preliminary SGR estimate for
2001 of 2.8% is considered "too low" according to the MedPAC, in its June 2000
Report to Congress. The MedPAC report explains that HCFA has underestimated the
SGR by underestimating one of its key components, growth in traditional Medicare
enrollment, by overestimating the number of beneficiaries who will join
Medicare+Choice plans. This distortion of the SGR results in only a 1.8% net
update to the Medicare physicians' conversion factor, meaning the pool of
Medicare funds available to pay physicians in 2001 will be substantially less
than in 2000. This has led the MedPAC to recommend that, "When preparing the
final 2001 update to the physician fee schedule's conversion factor, the
Secretary (of the Department of Health and Human Services) should review the
data and methods used to project growth in enrollment in traditional Medicare
and explain the methods used to project that growth." In its March 2000 "Report
to the Congress: Medicare Payment Policy," the MedPAC shows that physicians
display a serious erosion of their confidence in the ability of Medicare and
managed care plans to pay them fairly for their services, as shown in survey
findings: - About 45% said that reimbursement levels for Medicare FFS patients
are a very serious problem, compared with 25% for private FFS patients. - A
higher percentage of physicians--59%--reported that reimbursement levels for FFS
Medicaid patients are a very serious problem. - Physicians expressed the highest
level of concern with the reimbursement levels of health maintenance
organizations and other capitated plans--about 66% of the total surveyed. The
underfunding of physician services is contributing to concerns that the medical
community has about other Medicare payment issues. Although there are different
views within the medical profession on specific Medicare reimbursement/payment
policies, there is widespread agreement that Congress should address the
underfunding of Medicare physician payments that was caused by the SGR and other
budget cuts. Cuts in Payments to Teaching Institutions The heart of the safety
net are the nation's academic medical centers and large inner city hospitals.
ACPASIM, in a October 1, 1999 letter to the House of Representatives' Ways and
Means Subcommittee on Health, was very vocal in expressing its concern about the
BBA's impact on these vital institutions, seeking restoration and/or relief from
BBA cuts--especially those related to indirect medical education and DSH
payments. The letter noted that the cuts would be particularly harmful to
teaching hospitals, which "often serve as providers of health care for inner
city populations that otherwise are underserved. They provide substantial
amounts of uncompensated care for poor and indigent patients. Graduate
medical education is the linchpin for these inner city safety net
hospitals, and they cannot survive if their educational programs are not
adequately funded." In the same letter, ACPASIM also warned Congress that "The
BBA cuts also jeopardize our nation's medial research enterprise...medical
schools and teaching hospitals serve as the crucible for much of the nation's
medical research...the Medicare BBA cuts undermine the ability of teaching
hospitals to perform this vital mission." The March 2000 MedPAC Report to
Congress displayed great concern for the BBA's impact on access to hospital
care, especially that obtained in public hospitals and academic medical centers:
"With the passage of the BBA, the Congress made several changes in hospital
payments that have the potential to affect beneficiary access or reduce the
quality of hospital care. These provisions included: no updates to inpatient
operating payments for hospitals under the Medicare Prospective Payment System
(PPS) in fiscal year 1998 and limited updates from 1999 to 2002; phased
reductions in the per-case adjustments for the indirect costs of medical
education (IME); temporary reductions for hospitals serving a disproportionate
share (DSH) of low income patients; and a new transfer policy for 10 high volume
diagnosis related groups (DRGs) that reduces payment rates when hospitals
discharge patients in these DRGs to post-acute care facilities following
unusually short stays." A November 1999 study by the Commonwealth Fund showed
just how vital Medicare and Medicaid DSH payments are to the survival of safety
net hospitals: In 1996, the year before the BBA was passed, "costs for
uncompensated care at a sample of urban, safety net hospitals totaled $4 billion
and represented 26 percent of total costs. These costs were financed through
state and local government subsidies (59 percent), Medicaid DSH payments (29
percent), Medicare DSH payments (9 percent), and cost-shifting from privately
insured patients (3 percent)...In 1996, without DSH payments, these hospitals
would have experienced an alarming negative 7 percent margin...BBA cuts in DSH
payments will reduce by half the surpluses derived from Medicare and Medicaid
payments (without accounting for the impact of any other BBA reductions).
Coupled with declining local government appropriations and market forces that
include managed care and an eroding Medicaid patient base, these cuts will
severely undermine the ability of these hospitals to remain financially viable."
The most thorough analysis of the combined impact of the BBA and BBRA on
academic medical centers is offered by the American Association of Medical
Colleges, which concluded in its April 21, 2000 Issue Brief: "America's Teaching
Hospitals Still Hurt from the BBA." The brief is quite critical of the BBA cuts,
indicating that "the BBA's significant Medicare and Medicaid payment
reductions--along with a highly competitive marketplace that is reducing private
payer reimbursements to teaching hospitals--will undermine the ability of
teaching hospitals to support their education, patient care and research
missions." The specific BBA cuts include $17 billion in reduced inflation
updates for Medicare patient service payments and $10 billion in Medicaid DSH
payment reductions from 1998 to 2002. Also, teaching hospitals' additional
payment from Medicare for indirect medical education costs was being reduced
from 7.7 percent in 1997 down to 5.5 percent in 2001, a $5.6 billion reduction.
The AAMC Issue Brief also notes that the BBRA restored only about 6 percent of
the BBA cuts to teaching hospitals, giving back about $7 billion of the BBA's
reductions. This includes a one year delay in the schedule of reducing the IME
to 5.5 percent, with the IME reduction "still representing the second largest
inpatient payment cut for teaching hospitals after the reduction in inflation
updates to patient service updates." Even with enactment of the BBRA, "total
hospital profit margins will continue to decline by over half from 4 percent in
1998 to 1.6 percent in 2002." AAMC President Jordan J. Cohen, M.D. called IME
payments "absolutely critical for teaching hospitals to be able to appropriately
care for the sickest patients, provide an environment in which clinical research
can flourish, and train new physicians." These points are underscored by the
following AAMC statistics: Though U.S. teaching hospitals represent 6% of all
hospitals, that is where 44% of all indigent care in the country is provided
(10), and where 75% of all residents are trained and a vast majority of the
clinical research is performed." The central, indispensable role academic
medical centers play in medical research and serving the indigent is also the
theme of a May 10, 2000 article in the Journal of the American Medical
Association entitled "The Perilous State of Academic Medicine." The article
warns..."academic medicine is in serious danger...Without prompt action, the
results could be devastating...The vitality of teaching hospitals and medical
schools should be a primary concern of the president and congressional
leadership...Reversals should be made of the BBA cuts for hospitals." CONCLUSION
The ACG and ACP-ASIM recognize that at the time Congress enacted the BBA 97, it
was doing so in an effort to control large federal budget deficits and restore
solvency to the Medicare program. It has become apparent, however, that some of
the cuts--particularly those relating to physician services and teaching
institutions-- went too far, and that access and quality are being placed at
risk as a result. Now that the federal government is enjoying a large federal
budget surplus, it is time for Congress to re- examine the BBA 97 cuts and
related HCFA policies, including the site of service differential for endoscopic
procedures performed less than 10 percent of the time in the hospital. Our
organizations are committed to working with the Congress to restore adequate
financing for all parts of the Medicare program and to correct HCFA policies
that may endanger quality and access to care for millions of beneficiaries.
LOAD-DATE: July 27, 2000, Thursday
