INTRODUCTION
Good Morning, Mr. Chairman. I am George Grob, Deputy Inspector General for
Evaluation and Inspections of the Department of Health and Human Services. I am
here today to discuss fraud, waste, and abuse in nursing homes. My testimony
focuses on the "gaming" of billings by some nursing home owners and by suppliers
of medical services and supplies. This gaming ultimately takes the form of
unnecessary services, excessive prices, and fraudulent billings; and it results
in a loss of quality of care for the nursing home residents. It will take
aggressive administrative action and legislation to eliminate these problems.
The abuses that I will discuss involve the so called "dually eligible"--low
income elderly or disabled individuals who are entitled to receive benefits
under both the Medicare and Medicaid programs. In the context of nursing homes,
these are residents whose nursing home stay is financed by Medicaid but who are
also receiving medical services and supplies paid for by Medicare Part B.
However, these same problems occur when the nursing home stay is financed
under Medicare Part A or even under private insurance. The interplay of all
these various payment sources is complex. In fact, it is this complexity which
is the source of most of the vulnerabilities which I will describe.
The material included in this testimony is derived from intensive work under
an initiative called Operation Restore Trust. This was a two year
demonstration of innovative ways to fight fraud, waste, and abuse in the
Medicare program. It focused on problems with home health, nursing homes,
hospices, and durable medical equipment in five States--New York, Florida,
Illinois, Texas, and California. It involved concerted and coordinated action by
the Office of Inspector General, the Health Care Financing Administration, the
Administration on Aging, the Department of Justice, and other law enforcement
agencies. The initiative is now being expanded beyond the initial five States
and to cover additional programmatic areas within the Medicare and Medicaid
programs.
MEDICARE AND MEDICAID FUNDING OF NURSING HOME SERVICES
In 1996, almost 3 million persons were in nursing homes whose stay was paid
for by either the Medicare or Medicaid program. Nursing home care includes a
wide variety of services that range from skilled nursing and therapy services to
assistance with such personal care functions as bathing, dressing, and eating.
It also includes room and board.
The Medicare and Medicaid programs together paid $46 billion for nursing
care of all kinds in 1995. This included $42 billion in payments to nursing
homes ($9 billion under Medicare Part A and $33 billion under Medicaid), and $4
billion (under Medicare Part B) in payments to various providers of medical
supplies and services for Medicare beneficiaries residing in nursing homes.
Medicare Part A. Medicare Part A provides up to 100 days of coverage after
hospitalization for stays in a skilled nursing home. After 20 days, a daily
co-payment of $95 must be paid by the nursing home resident. The amount it pays
has three separate components--the per diem, ancillary costs, and capital costs.
Per Diem: The per diem, or routine service costs such as nursing, room and
board, and administrative and other overhead costs of the facility. These costs
are subject to a limit.
Ancillary Services: Ancillary costs include laboratory, radiology, drugs,
therapy, and other items and services. These are paid on the basis of reasonable
costs, but are not subject to a limit as such.
Capital: Capital is also reimbursed on the basis of cost and is not subject
to a limit as such.
A deeper look at the Part A payment methods will reveal additional details
about how the per them limit is established and how payments vary depending on
whether a nursing home is free standing or hospital based. Certain nursing
homes, under certain conditions, are also allowed to elect to be paid on the
basis of a prospective payment rate.
Medicare Part A payments to nursing homes have more than doubled, from $3.7
billion in FY 1992 to $9 billion in FY 1995. The number of beneficiaries in
covered nursing home stays increased from 779,000 in 1992 to an estimated 1.2
million in 1996. Along with home health services, this is one of the fastest
growing parts of the Medicare program.
Medicaid. Medicaid covers nursing home care for low income families and
individuals. Eligibility requirements vary by State. Medicaid will on y pay for
nursing home care provided in Medicaid-certified facilities. Most of these are
skilled nursing facilities which also satisfy Medicare certification
requirements. But while Medicare pays only for post- hospitalization skilled
care, Medicaid pays for both skilled and long term care. It also covers care in
intermediate care facilities. An estimated 1.7 million individuals received
Medicaid paid nursing home stays in 1996.
States employ different payment methodologies. These include prospective,
flat rate, and cost based systems, some of which may involve ceilings, case-mix
adjustments, and efficiency incentives.
Medicare Part B. Medicare beneficiaries who are residents of nursing homes,
including but not limited to Medicaid and Medicare Part A covered stays, may be
eligible for Medicare Part B covered medical supplies and services for which
they would be eligible whether or not they are in a nursing home. A good example
would be physician services. Other examples include psychotherapy, lab services,
wound care, etc.
Medicare Part B generally pays 80 percent of the approved amount based on a
fee schedule, reasonable charge, or reasonable cost, for covered services in
excess of a $100 annual deductible.
The remaining 20 percent is paid by the beneficiary, or by Medicaid if the
beneficiary does not have the ability to pay.
Medicare payments for Part B services for both Medicare and Medicaid nursing
home residents in 1995 were $4 billion.
VULNERABILITIES
Nursing home residents are accessible and can be vulnerable, providing a
unique opportunity for fraud, waste, and abuse. Unless protected by concerned
family or friends, the attending physician, or enlightened policies and
practices of the nursing home, nursing home residents may be subjected to health
care practices in which decisions on care are governed as much by financial
incentives as medical necessity.
Some services can be reimbursed under more than one payment category. This
weakens the oversight of expenditures and services, providing opportunities for
outright fraud and abuse, reducing incentives to economize, and diluting the
responsibility for the overall care of nursing home residents.
Fraud and Abuse Under Medicare Part B. We have particular concern regarding
Part B supplies and services when they are furnished in a nursing facility
setting because they are frequently furnished and billed by an outside entity,
not the nursing home. The nursing home may have very little to do with
authorizing or overseeing the quantity or quality of such services. Without
appropriate oversight, the opportunity and incentive exist for aggressive
marketing as well as excessive and unnecessary utilization. Following are
examples of the problems we have found.
Wound Care: We found that questionable payments of wound care supplies may
have accounted for as much as two-thirds of the $98 million in Medicare
allowances from June 1994 through February 1995. In the more egregious cases:
- One beneficiary was charged $5,290 for tape over a 6-month period, almost
$5,000 of which appears excessive. Medicare paid for, but the beneficiary
probably did not receive, 66,000 feet or 12.5 miles of one-inch tape.
Another beneficiary was charged with $11,880 in hydrogel wound filler,
$11,533 of which may be unnecessary. This beneficiary's record showed payments
for 120 units of one-ounce hydrogel wound filler each month for 6 consecutive
months, or over 5 gallons.
We also assessed the marketing of wound care supplies. We found that nursing
homes and physicians generally determine which patients need supplies, but some
suppliers determine the amount provided. We also found that 13 percent of
nursing homes have been offered inducements in exchange for allowing suppliers
to provide wound care products to patients in their facility.
Incontinence Supplies: We found that questionable billing practices may have
accounted for almost half of incontinence allowances in 1993. In addition,
information obtained from nursing facilities and beneficiaries indicates that
some suppliers engage in questionable marketing practices.
Orthotic Body Jackets: We reported that 95 percent of claims paid by
Medicare ($14 million in 1992) for custom fitted orthotic body jackets were for
non-legitimate devices. These non- legitimate devices are more properly
categorized as seat cushions rather than body jackets. In addition, we found
that suppliers, rather than physicians, initiated orders for the non-legitimate
body jackets, and that physicians provided only limited controls for preventing
the sale of non-legitimate devices.
Mental Health Services: We conducted a review of the medical necessity of
mental health services furnished in nursing homes and found that in 32 percent
of the records we reviewed Medicare paid for unnecessary services. This amounted
to $17 million or 24 percent of all 1993 Medicare payments. In an additional 16
percent of the records, representing $10 million, the services were highly
questionable.
Excessive Cost of Medicare Part A Ancillary Services. As noted earlier,
ancillary services are not subject to the limit imposed on per diem. Also, since
they are reimbursed under Part A, they are not subject to the limits imposed on
services reimbursed under Part B. This can lead to excessive costs which are
difficult to control.
For example, we recently completed 16 joint HCFA-directed surveys of Florida
nursing homes which were undertaken to evaluate the medical necessity of the
care and services provided and the reasonableness of the charges and
reimbursements made to these facilities. These 16 surveys of 1-year periods,
questioned charges of about $2.5 million for selected beneficiaries residing in
these facilities. Most of the questioned costs related to physical,
occupational, and speech therapy services. We recommended that these
overpayments be collected and that the fiscal intermediaries conduct a focused
review of all rehabilitation therapies at most of these facilities.
We are now studying the cost of portable x-rays provided to nursing home
patients. We are finding that Medicare pays considerably more for these services
under the Part A ancillary cost category than it would if reimbursed under Part B.
Lost Economies. We found that in 1992 Medicare Part B paid about $368
million in enteral nutrition equipment and supplies; $514 million in
rehabilitation therapy; and $84 million for surgical dressings, incontinence
supplies, catheters, and similar items for Medicare beneficiaries in nursing
homes. We believe that these services are more appropriately paid as part of the
per them under Part A of the program. One reason is that payment under Medicare
Part B reduces the incentive for nursing homes to economize. Some recent studies
provide evidence to this effect.
Enteral Nutrition: Some nursing homes include their enteral supplies in
their per them rate. We found that nursing homes and hospitals who purchase
enteral nutrition supplies in bulk are able to get them on average 30 percent
below what Medicare allows for them. We also found that other third party payers
are able to purchase enteral products at rates 17 to 48 percent less than
Medicare allows.
I-V Poles: We found that I-V poles can be purchased in bulk by nursing homes
for as little as $33. Generally, the cost of these poles is included in the
nursing home per them rate, and Medicare benefits from the incentives that
nursing homes have to keep their costs down, and from the limit placed on per
them payments. However, current payment rules allow these poles to be reimbursed
under Part B if they are used for enteral feeding services. The purchase costs
on the Medicare fee schedule exceed $110.
Hospice Services. Recently we have become concerned about Medicare payments
for hospice services provided to nursing home patients. As many as one in five
hospice patients who live in nursing homes may be erroneously enrolled. In
audits we have conducted of hospice patients, two thirds of those whom we found
to have been ineligible were nursing home patients. We are finding that they are
receiving fewer services from hospices than at-home patients and that most of
the services would have been available to them from the nursing home without the
assistance of the hospice.
We are very concerned about these patients. The Medicare hospice program
provides an extraordinarily important service to patients who are facing death.
They receive relief from their pain, counseling, and help in meeting their daily
needs during their final days. Their families also receive counseling to help
them through the dying of their loved one. However, as a condition of
eligibility for Medicare hospice care, the beneficiaries must forego their
rights to Medicare payment for curative care. This is appropriate for someone
who is near death and has decided to seek help in facing it in peace. But a
patient who is improperly enrolled may be receiving inappropriate services while
not receiving those he or she really needs.
Both Medicare and Medicaid pay for hospice care for these nursing home
patients. The States' Medicaid programs pay 95 percent of the daily nursing home
rate to the hospice, and Medicare pays the hospice the same daily rate it pays
for at-home patients. The hospice then is primarily responsible for patient care
but usually returns to the nursing home the amount it would have received from
the State under the Medicaid program to cover room and board costs. This is
another example of the complicated financial arrangements that arise in the
Medicare and Medicaid program for nursing home patients. Inappropriate
incentives can easily crop up under such circumstances.
We are continuing to study this situation and hope to provide new insights
and recommendations shortly.
REMEDIES
Administrative. I am pleased to report that in addition to discovering
problems we are also developing new and effective ways to deal with them. Some
of these techniques have come from Operatr abuses
I have discussed in my testimony. Under Operation Restore Trust, the Office of
Inspector General and the Health Care Financing Administration have been
developing improved tactics involving State Survey and Certification teams and
Medicaid Fraud Control Units, as well as Department of Justice and State
attorneys and law enforcement officials.
Legislative. Unfortunately, administrative action is not sufficient to
address all the vulnerabilities associated with nursing homes and related
services. It is important to get at the underlying systems which leave Medicare
and Medicaid so vulnerable to abuse. Therefore, we believe it is necessary to
restructure the way these programs pay for services to nursing home patients.
A consensus seems to be emerging for a prospective payment system. This is
now being advocated for payments to skilled nursing homes covered by Medicare
Part A. Some States already use this approach in making Medicaid payments to
nursing homes. We support the idea of prospective payments for Medicare Part A
and would advocate that this approach be more widely used by States under their
Medicaid programs as well.
As the above examples show, however, it is important to simplify the
categories of payment. Otherwise we will continue to experience excessive prices
and utilization from unbundling services and skirting the various payment
limits. We therefore recommend that any proposal for a prospective payment
system capture as many services as possible intr abuses
I have discussed in my testimony. Under Operation Restore Trust, the Office of
Inspector General and the Health Care Financing Administration have been
developing improved tactics involving State Survey and Certification teams and
Medicaid Fraud Control Units, as well as Department of Justice and State
attorneys and law enforcement officials.
Legislative. Unfortunately, administrative action is not sufficient to
address all the vulnerabilities associated with nursing homes and related
services. It is important to get at the underlying systems which leave Medicare
and Medicaid so vulnerable to abuse. Therefore, we believe it is necessary to
restructure the way these programs pay for services to nursing home patients.
A consensus seems to be emerging for a prospective payment system. This is
now being advocated for payments to skilled nursing homes covered by Medicare
Part A. Some States already use this approach in making Medicaid payments to
nursing homes. We support the idea of prospective payments for Medicare Part A
and would advocate that this approach be more widely used by States under their
Medicaid programs as well.
As the above examples show, however, it is important to simplify the
categories of payment. Otherwise we will continue to experience excessive prices
and utilization from unbundling services and skirting the various payment
limits. We therefore recommend that any proposal for a prospective payment
system capture as many services as possible into the prospective payment rate.
This should probably include most payments for enteral nutrition, incontinence
supplies, and wound care.
Services which are not included in the prospective payment rate should be
consolidated into a single bill to be submitted by the nursing home. The
President's budget includes a proposal to do this for services provided to
patients in nursing home stays covered under Medicare Part A. We believe
consideration should be given to extending this idea to Medicaid paid stays as
well.
Other approaches that could be considered would be to limit Medicare
payments under both Parts A and B to no more than a prudent nursing home would
pay through competitive bidding or bulk purchasing arrangements; or to make
capitation payments to nursing homes for services provided to residents.
In any case, Medicare Part A payments for ancillary services should be
limited to the amount that would be paid under Part B.
Each of these strategies attempts to take advantage of the ability of
nursing facilities to more economically provide services and supplies to their
patients with the cost savings passed on to Medicare.
It is just as important to ensure quality of care as it is to control costs.
Most of the proposals described above-- prospective payments, rebundling of
routine services into the per them rate, and consolidated billing--recognize the
importance of the nursing facility in overseeing the quality of their residents'
care. Since nursing facilities are significantly involved in the planning and
provision of patient care, they arguably are the most appropriate entity to
scrutinize providers and determine the most cost effective methods of obtaining
and utilizing the services and supplies needed to meet the medical needs of
their patients.
Prospective payment systems will bring their own incentives, some of which
may provide a risk to quality of care through premature discharge or refusal to
accept patients with complicated conditions. Therefore, it may be necessary to
include higher payments for outlier cases with excessively long stays and
anti-dumping provisions similar to those under Medicare's hospital prospective
payment system. Stepped up vigilance by long term care ombudsmen, State survey
and certification teams, and Medicaid Fraud Control Units will also help protect
the quality of care for nursing home patients.
CONCLUSION
I appreciate the opportunity to appear before you today and share with you
the results of our work, especially the insights we have gained under Operation
Restore Trust. We have made all of our reports available to the Subcommittee. I
hope this information will be useful to you in formulating legislation to deal
with pervasive problems afflicting the elderly residing in nursing homes. I
would be happy to respond to any questions you may have.
