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Document 8 of 9.

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APRIL 22, 1999, THURSDAY

SECTION: IN THE NEWS

LENGTH: 3712 words

HEADLINE: PREPARED TESTIMONY BY
WALTER M ROSEBROUGH JR
PRESIDENT AND CEO
HILL-ROM COMPANY
HEALTH INDUSTRY MANUFACTURERS ASSOCIATION
BEFORE THE HOUSE WAYS AND MEANS COMMITTEE
HEALTH SUBCOMMITTEE
SUBJECT - MEDCARE COVERAGE DECISIONS AND BENEFICIARY APPEALS

BODY:

My name is Walt Rosebrough. I am the President of Hill-Rom, Inc., a manufacturer of patient care systems, including hospital beds, located in Batesville, Indiana. I am testifying today on behalf of the Health Industry Manufacturers Association - known as HIMA---on whose Board of Directors I serve. Accompanying me is Brad Thompson, a partner in the law firm of Baker & Daniels and counsel to HIMA.
In my remarks today, I want to leave you with the following five points:
- While the Health Care Financing Administration, or HCFA, is working hard to reform the process by which it makes coverage decisions and deserves much praise, there remain important issues such as the need for early collaborative meetings between the agency and manufacturers that continue to be unresolved.
- One of those unresolved issues--the need for an effective appeals process--is critically important to ensuring that the agency is accountable for the coverage decisions it makes.
- Our experience at Hill-Rom with the CLINITRON bed shows that the current appeals process is ineffective at resolving policy disputes at the local level, and moves far too slowly to meet the needs of beneficiaries.
- There are several statutory improvements that Congress can make to the appeals process, including creating an appeals mechanism for policy issues at the local level and adding the opportunity for administrative review of national coverage decisions. These steps will more efficiently and effectively resolve coverage disputes.
- HCFA, as a government agency that regulates the access to care by seniors, should not be exempt from the need to offer an effective appeal mechanism.
Before I begin, Mr. Chairman, I want to say a special thanks to you personally and to the Subcommittee for the instrumental role you have played in bringing about needed improvements in the Medicare coverage process. There is no question that HCFA's efforts to modernize coverage--to make it more open, timely, and predictable--are due, to no small degree, to your continuing efforts.
Device Industry Proposed Reforms of Medicare's Technology Policies
To assist HCFA in its task of reforming Medicare coverage, HIMA in mid-1998 developed a range of recommendations for specific improvements to the system. They are described in HIMA's paper entitled "Modernizing the Medicare Coverage Process: A Prescription for Fundamental Reform of Medicare's Technology Policies." Copies have been submitted to the Subcommittee.
Earlier this year, HIMA also participated in the work of a broad group of medical device industry representatives that developed consensus policy positions on the procedural elements of Medicare coverage decision-making. That consensus paper was delivered to HCFA in January. The same group is now set to tackle the substantive criteria that HCFA should use to evaluate technology for possible coverage.
Recommended Coverage Process Reforms
One of the most significant improvements to the coverage process that HIMA and the industry recommend is the need for HCFA to use a notice- and-comment type approach to collecting data and other useful information on proposed coverage policies. While we are certainly not advocating that HCFA follow rule-making in reaching individual coverage decisions, we do think it is critical that HCFA use the Internet and other economical avenues to reach out to a broad public audience to collect information on coverage issues.
In addition, the device industry recommends that HCFA ensure openness in the process for initiating coverage decision-making and in the process for requesting a technology assessment. We also think HFCA should offer manufacturers and others the opportunity to request an early meeting with the agency to reach agreement on the type of information necessary for HCFA to make a coverage determination.
These collaborative meetings might take place well before the start of the coverage process. Not only would such meetings improve the quality of the data presented to the agency, the meetings would add greater certainty to the process from the company's standpoint.
Procedural Reforms Should Be Codified in a Rule
As you know, Mr. Chairman, the controversy over the coverage process has been alive for well over ten years. To achieve the necessary accountability, obtain broad public input on the design of the coverage process, and resolve these issues in an enduring fashion, we believe the agency needs to put these concepts in a binding rule. Unfortunately, the agency so far has opted instead for an informal notice of the kind it published in 1987. We hope it will reconsider that decision.
Agency Progress To Date
The good news is that the agency --with your strong support and oversight, Mr. Chairman--is already making significant efforts to reform the coverage process. After talking with many of the stakeholders and holding a town hall meeting last September, HCFA has re-chartered its technology advisory committee to make it compliant with the Federal Advisory Committee Act. HCFA has also shed some light on the basis for its recent coverage decisions, and I believe it is working on some guidance in a couple of areas. In addition, HCFA appears willing to discuss some issues--such as timeframes-that are so important to ensuring timely access to care. Dr. Kang has made a tremendouseffort to have a dialogue with stakeholders, and we hope the current spirit of cooperation continues on all sides.
Effective Appeals Process Essential in Making Coverage Process Work
HCFA has not embraced all of the stakeholders' suggestions. One area of contention is the need to reform the appeals process. A significant part of the industry consensus paper was devoted to describing improvements that are needed in the system of Medicare appeals. Having an effective appeals process for a government agency such as HCFA is absolutely essential to ensure the proper level of accountability.
Appeals are necessary when an agency, for whatever reason, departs from a legal standard--whether that standard is the process the agency needs to follow or the criteria the agency is supposed to apply. Judicial and administrative appeals are not intended to allow stakeholders to overturn an agency decision when reasonable minds simply differ. The agency's decisions are entitled to deference. Even so, the mere existence of an effective appeals mechanism creates an environment in which the agency listens more closely to the public's concerns.

Current Appeals System does not Resolve Coverage Disputes Effectively or Promptly
While an effective appeals system is essential to ensuring appropriate coverage decisions, the current system unfortunately has several deficiencies. I would like to describe for you what we at Hill-Rom see with respect to how the current appeals system handles issues surrounding coverage of one of our products--the CLINITRON AT HOME Air Fluidized Therapy Unit or more commonly known as the CLINITRON Bed.
Background on the CLINITRON Bed
The CLINITRON bed uses a technology called "air fluidized therapy," or AFT, to treat a variety of very sick patients. These patients include, for example, severe burn victims and those with severe pressure ulcers that don't respond to other therapies. Very basically, AFT involves tiny silicon beads that are placed in motion beneath the patient by gentle air flow. The light air flow through the beads "floats" the patient resulting in reduced pressure on the patient's body. The reduction of pressure and accompanying elimination of shear and friction to the skin enhance healing and help prevent further tissue damage.
We developed the product in the 1970s. Numerous studies were conducted which reinforced the clinical efficacy of AFT. In 1987, the Public Health Service developed consensus guidelines for the proper use of AFT at home, with input from health professional societies and patient groups. By 1990, enough data existed that, after extensive study, HCFA issued an affirmative national coverage decision delineating thepatients who could benefit from this therapy at home. That policy can be found in section 60-19 of the Medicare Coverage Issues Manual. As you well know, HCFA deliberates carefully before issuing national coverage determinations, and not many technologies have met that standard.
One would have thought that our story would end there. It did not.
To be quite blunt, the Durable Medical Equipment Regional Carriers, or DMERCs, did not embrace HCFA's decision. As best we can determine, they simply did not agree with the HCFA physicians and scientists on the usefulness of the technology and have sought to add their own definition of medical necessity that is inconsistent with the national policy. As a result, we estimate that the DMERCs have denied close to 80 percent of all claims for reimbursement of the CLINITRON bed presented to them since the national policy was published in 1990.
Appeals of AFT Claim Denials
While those denials have dissuaded some doctors and patients from seeking this treatment, many others, indeed thousands of beneficiaries with the severe injuries identified in the national policy, have sought to obtain access to AFT--despite the opposition from the DMERCs.
The appeals process for these denials involves five steps. In sequence, they are (1) a paper review by the carrier, (2) a "fair hearing" by a carrier hearing officer, (3) a hearing before an administrative law judge, (4) an appeal to the departmental appeals board, and (5) if necessary, an appeal to a U.S. court. Because of the tremendous time, inconvenience, and cost of such appeals, we have helped our elderly patients by accepting assignment of their claims, and have kept track of the results.
In the literally thousands of AFT appeals to administrative law judges since 1990, the beneficiaries have been successful in overturning the carrier decisions in more than 95 percent of the cases.
What the AFT Experience Tells Us About the Appeals System
On the one hand, that success rate is the good news about the system. With an obviously strong case seeking the enforcement of a national coverage decision, the beneficiaries are successful in over 95 percent of the AFT cases.
But in two very real ways, this example shows the system also fails. First, incredibly the initial denial of claims continues after nine years of the DMERCs losing thousands of appeals and after numerous meetings between the DMERCs and Hill-Rom. For the most recent 6-month period, the average denial rate for AFT by the four DMERCs is still over 80 percent. The appeals process has done nothing to resolve the fundamental dispute over the local DMERC policies that are inconsistent with HCFA's national policy.
Second, the system simply takes too long to effectively resolve even the claim-specific disputes. Data obtained from HCFA show that, in fiscal 1997, on average for a part B carrier claim, it took 119 days for a beneficiary to get through the carrier review and fair hearing. HCFA has previously testified before Congress that it takes 664 days, on average, to receive a decision from an administrative law judge, measured from the date the hearing is requested. Thus, combined, it takes an elderly patient on average 783 days, or well over two years, to obtain a decision from an ALJ after initiating the appeals process. That is simply too long to be an effective option for most beneficiaries. Moreover, most small medical device companies could not afford to take assignment of claims in these circumstances, and survive long enough to get paid.
Congress Should Make Improvements in the Medicare Appeals Process
In our experience, as well as the experience of others who have worked with the Medicare appeals process, there are several improvements that Congress can make.
- Permit Appeals From Local Policy Decisions
While the current law allows judicial appeals from national coverage decisions (albeit through a seriously flawed process), unfortunately there is no appeals process at all for local coverage policy decisions. Rather, we must rely on a system that forces each beneficiary to appeal individual claim denials on a claim-by-claim basis. When broad principles are in dispute at the local level, Congress should allow aggrieved parties to challenge the broad principle at issue, rather than force an inefficient claimby-claim adjudication that, as in our case, may never resolve the real dispute.
Medical device innovation is unique in the medical field, and is characterized by continuous, incremental improvements, based on the feedback of professionals who use these technologies in actual clinical settings. The local coverage process is especially well suited to evaluating innovative medical technology, and should remain essentially intact. Thus, while we recommend reforming the appeals process at the local and national levels, we start from the important premise that the present ratio of local to national decisions serves the system well. The current emphasis on local decision-making offers important flexibility that needs to be preserved, is more economical to administer, and helps to ensure that new technology does not diffuse until it is well-accepted.
- Create Reasonable Timeframes for Appeals
As I explained above, the appeals process simply takes too long to complete. While this is obviously a function of resources, the decision-makers in the appeals process also need to understand the importance of timely decisions. Statutory timeframes would communicate the Congressional expectation regarding the promptness with which these appeals should be resolved.
Require Finality of Policy Decisions
In many instances, HCFA and the DMERCs deliberate on coverage issues for years. Because there are no final decisions during the time of that deliberation, any appeal is effectively foreclosed, even at the national level.
For an appeals mechanism to create the proper level of accountability, there must be some way to require HCFA and its local contractors to reach decisions that would then be subject to appeal. To be sure, these decisions do not need to be a "yes" or "no." They could include a decision that, as of the date of the decision, there does not yet exist enough data to make a coverage decision. Permitting appeals of this type of decision would create accountability in those instances where the agency is simply dragging its feet and adequate data do already exist.

- Allow Administrative Appeals of National Coverage Decisions
Under the current law, people who disagree with a national coverage decision are required to go directly to court, with no opportunity for administrative review. Given the tremendous medical and scientific complexity of national coverage decisions, we believe it would be productive to interpose a level of administrative review before proceeding to court.
While the creation of a Medicare court would reduce the problem, federal district court judges today usually do not have the training to comfortably consider the types of issues that need to be considered as a part of a national coverage decision. An administrative body with the proper expertise, in all likelihood, would make more informed judgments to the benefit of everyone involved, before any judicial review.
- Confirm That Manufacturers have Standing as Aggrieved Parties in Coverage Decisions
The Administrative Procedure Act gives aggrieved parties standing to challenge broad rules imposed by an agency. To allow the challenges to broad policies at the local level that I referred to earlier, it is important for the Congress to clarify that manufacturers that sell products used by Medicare beneficiaries are aggrieved parties and have the ability to directly challenge policies that affect the access of beneficiaries to their products. This would reduce the appeals cost for the government because manufacturers would be able to address the broad issues in a single appeal, rather than require individual beneficiaries to bring perhaps thousand of individual appeals, with no guarantee that the process will actually resolve the real dispute.
- Permit Courts To Order Corrective Action, Rather than Merely Remanding Back to the Agency
The current statute sets forth certain limitations on appeals from national coverage decisions, such as requiring that a court merely remand a dispute for further development of the record, rather than, in appropriate instances, fashioning a corrective order. That limit is out of step with what the Administrative Procedures Act authorizes in the review of any other administrative action. We see no reason to treat national coverage decisions differently from other agency actions and recommend deleting that limitation.
HCFA Unfounded in Claiming its Decisions Should not be Subject to Appeal Because it is a "Market Actor"
Medicare Holds Monopoly Position
We have heard HCFA say, in many different forums, that the agency is more akin to a private insurance company or market actor than a regulator. HCFA's reasoning seems to suggest that, because HCFA reimburses for items and services in addition to regulating, it ought to enjoy the same freedom from the need to publicly justify its purchases that it perceives private insurers enjoy. We do not agree with the comparison, or with the premise that private insurance companies do not have rigorous appeal processes.
Unlike a private insurance company, whose shareholders voluntarily choose to invest in that insurer, Americans have no choice but to pay the social security taxes that fund the Medicare trust fund. And thus when Americans become seniors who qualify to receive benefits under Medicare, at that point we still have no real choice but to participate in Medicare. Medicare quite simply has a monopoly position in the marketplace for health insurance for the more than 38 million beneficiaries who depend upon the program for health care coverage.
Market Forces Keep Private Insurers Accountable
In practical terms, this means that the fee-for-service side of Medicare does not have the same market place forces keeping it accountable that private insurers have. On a daily basis, private insurance companies must strive to make sure that their policyholders are happy with the level of services the insurance company provides. Otherwise, their policyholders will vote with their feet.
If a private insurer, for example, does not make appropriate coverage determinations, not only can individual beneficiaries complain to the insurance company, they and/or their employers can vote with their feet. They can switch to a different insurer. Indeed, because most private insurance is handled on a group basis, that gives the employers andother group representatives significant market power to ensure appropriate coverage decisions. That same sort of leverage does not exist in the individualized Medicare arena.
Not only do private insurers have to worry about their top line, they have to worry about their bottom line. If insurers make poor coverage determinations, such as failing to cover new technology that would save them money, their bottom line suffers, and the owners of the company and the capital markets hold the company accountable. With all that Congress must monitor, Congressional oversight of HCFA cannot create the same level of accountability, nor is it efficient to ask aggrieved parties to seek Congressional involvement whenever a dispute arises. While there is choice within the Medicare system between fee-for- service and managed care plans, that choice does not create accountability in the coverage process for devices. The decisions that the HCFA Office of Clinical Standards and Quality makes set the standard in determining which devices beneficiaries can have access to, regardless of what part of Medicare is involved. Moreover, the significant differences between what the Medicare managed care plans and the fee-for-service part of Medicare offer in terms of access make it unlikely that competition between the two would ever hold HCFA accountable for the device coverage decisions HCFA makes.
For all of those reasons, the HCFA Office of Clinical Standards and Quality is not subjected to the same sort of marketplace pressures and accountability to which private insurers are subjected. The Congress must, therefore, look for an alternative means, such as appeals, to ensure that accountability.
The Medicare Fee-For-Service Appeals Process Should Be Updated
In 1997, when Congress created the Medicare+Choice program in the Balanced Budget Act, it took the opportunity to enhance the appeals process on the managed care side of Medicare. That Act--together with HCFA's implementing regulations outlines an appeals process with explicit time limits for the various stages of review and incorporates review by outside parties. These key features should be carried over to the fee-forservice side of Medicare.
In fact, HCFA's reluctance to improve the Medicare appeals system seems out of step with the modem trend. Many private insurers (the same group to which HCFA likes to compare itself) appear to be enhancing their appeals processes in response to President Clinton's Consumer Bill of Rights and Responsibilities in Health Care. That Bill of Rights, which applies to Medicare, proclaims that "All consumers should have the right to a fair and efficient process for resolving differences with their health plans, including a rigorous system of internal review and an independent system of external review." Yet HCFA seems to be resisting, for example, any effective system of independent external review for Medicare.
Conclusion
As you can tell from my remarks, many of these issues require statutory amendments to resolve. We support legislation to rationalize and improve the Medicare appeals process for coverage, coding, and payment decisions. We hope this Committee will give serious consideration to developing such legislation.
Thank you for this opportunity to present our views. We look forward to working constructively with you and the agency to develop appropriate solutions to these problems. I would happy to answer any questions you might have.
END

LOAD-DATE: April 24, 1999

Document 8 of 9.


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