San Francisco, CA - February 2, 2006

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

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TOWN HALL MEETING
“ECONOMIC IMPACT OF HEALTH CARE REGULATIONS”

(click here for a pdf version of this transcript)

The Public Meeting was held in the Sonoma Ballroom, Lobby Level of the Hilton San Francisco Fisherman’s Wharf Hotel, 2620 Jones Street, San Francisco, California at 10:04 a.m.

MODERATOR:

CAROL SIMON, Ph.D.,

EXPERT PANELISTS:

CHRISTOPHER J. CONOVER, Ph.D.
H.E. FRECH, III, Ph.D.
MICHAEL A. MORRISEY, Ph.D.
DAN MULHOLLAND, M.A., J.D.
WILLIAM D. ROGERS, M.D., FACEP

SPEAKERS PRESENTING COMMENTS:

ANDREW ROBERTSON, M.D.
BARBARA PAUL, M.D.
MELINDA STAVELEY
CHARLENE HARRINGTON, Ph.D.
SERGE TEPLITSKY
DAVID WOODS, Ph.D.
JOSEPH HAFKENSCHIEL
KEITH PUGLIESE
RON DODGEN
PEGGY GOLDSTEIN
STEPHEN CORNELL

P R O C E E D I N G S

10:04 a.m.
          DR. SIMON:  Good morning.  Welcome to the Fourth Town Hall on the Economic Impact of Health Care Regulations.  My name is Carol Simon and I am going to be your moderator today, and all around traffic cop.
          We have a full agenda, and the subject of the agenda is basically to listen to you folks, to listen to testimony on the impact of health care regulations:  their costs, their benefits.
          This project, which others will speak to a little more broadly, is part of a larger endeavor that has been in fact requested by Congress.
          The Town Hall Meetings, the public comments are part of a process in which we are examining evidence geared toward a report that is aimed to streamlining health care regulations, streamlining in order to reduce the burden on providers, and to free up resources to improve the quality of care and to continue to protect patients and health care outcomes.
          The agenda today is pretty simple, and so I'm going to go over a few of the sort of ground rules here.  For those of you who intend to prepare comments, I hope that you signed up outside.  There was a sign-up list as you registered.  I am going to be taking the public comments in the order in which you signed up.  If you have any time constraints or other issues, please see me at the break, and we'll try to accommodate them the best we can.
          We have a reasonably full house today, and so we are going to try to allow time so that everybody has a chance to present their comments.  No voice is more important than the other.
          So the ground rules are something like this.  I'll call your name, I'm going to ask you to introduce yourself, tell us who you're from, who you're representing.  I'm going to give you about five minutes, and those five minutes are to review your statement.  Many of you, I know, have more to say than that.  So if you don't talk as fast as I do, or we don't quite get through your time, I encourage you to leave a copy of your comments, or to send them to us via electronic mail, and I'll make sure that you know exactly where to send those.
          In your packet is an e-mail address that is associated with this project.  So the comments that you present today, or comments that you think about when you leave the room, or evidence that you and your colleagues have back at your office, we need to hear from you.  So please submit the testimony, your commentary to the public web site as well.
          So I'm going to give you like five minutes, and there is a spiffy little light system up there, and I called myself a traffic cop for a good reason.  The light goes on at green, at three minutes it goes to yellow, at four minutes I start waving madly at you, and at five minutes we ask you to sum up.
          The gentlemen up here are part of our panel of experts, and their role is to help us in many ways clarify some of your comments in the context of the larger project.  So at the close of your comments, I'm going to turn the podium over to our experts for a little bit of Q&A.  They are going to have collectively five minutes, and that's frequently harder for this group than it is, indeed, for me.
          So what I'd like to do at this point in time, though, is to introduce a couple of folks from the Department of Health and Human Services, and from the Regional Office of HHS who are going to tell you a little bit more about the project.
          We'll then go to our panel of experts and let them introduce themselves to you, and then we're going to start off with your comments.
          So I'd like to call on Ruth Katz who is from the Assistant Secretary for Planning and Evaluation's Office in the Department of Health and Human Services and Ruth will tell us a little bit more about the project, and give you her welcome.  Ruth?
          MS. KATZ:  Use that mic?
          DR. SIMON:  This mic will be on in a second.
          MS. KATZ:  Okay.  Great.
          DR. SIMON:  Thank you, Ruth.
          MS. KATZ:  Thank you, Carol.
          I want to start this one the way the Oklahoma City one started because it was such a great way to start the day.
          Carol got up, and she started the wonderful shpiel that she just started to kind of get everybody going, and this woman in the audience -- there were about 100 people there, 120 people there -- this woman in the audience yelled out, "You have a beautiful smile."  And it was such a great way to start the day, you know.  So we'll start like that.
     (Laughter)
          MS. KATZ:  Carol?
          DR. SIMON:  It really was great.  So if anybody wants to offer a little ‑‑ 
     (Laughter)
          MS. KATZ:  She just -- it was so shocking and surprising.  Carol said, "Thank you.  Thank you very much."  But it just set us off on a nice tone.
          Good morning.  Thank you all for coming.  It's amazing.  I noticed this at the last one.  As Carol said, this is the fourth and final of our Town Hall Meetings.  It's very generous of people to share their very valuable time to come and talk to us.  We realize that you're doing this to help us help you, and it's very good for us; very generous of you.
          The purpose of this meeting, as the other three, is to quantify -- seek your help in quantifying the economic impact of federal regulations on the health care industry.
          As Carol said, my name is Ruth Katz, and I'm from the Office of the Assistant Secretary for Planning and Evaluation.  This project is about bureaucracy, how much bureaucracy, good bureaucracy, bad bureaucracy, so I'll share with you my title.
          My title is Deputy to the Deputy Assistant Secretary for Disability, Aging and Long-Term Care Policy in the Office of the Assistant Secretary for Planning and Evaluation.  So it's kind of long.
          DR. SIMON:  Your five minutes are up.
          MS. KATZ:  Okay.  Yeah.
     (Laughter)
          MS. KATZ:  Yeah.  There's bureaucracy for you.
          ASPE is -- has been asked by the Congress to run this project.  We're kind of a good place to do it.  We're a policy advisor.  We are the Secretary's policy advisor, and we have the wonderful good fortune of having a little bit of money to do some research too.
          So what we can do is figure out policy issues, policy questions, and if there -- if it is possible to try to address them with data with information, ASPE's the place to look for that data, to collect it, to analyze it, and then to try and bring that back to the policy process.  It's an incredible opportunity for us, and for people who talk to us too.
          As we began work on this project, we realized that many things have changed over the past decade in health care, and one of the things that just doesn't seem to change is regulation.  It's always there.  We get complaints about it, we get complaints that there's too much, complaints that there's not enough.  We hear about it all the time.
          Why does the government regulate?  We get questions about it, whether regulation distorts practice, or contributes to good practice, and we like to touch base with people, and hear back from people about this.
          Our previous excursion into health care regs was the Secretary's Advisory Committee on Regulatory Reform, SACRR, which produced this report in late 2003.  I don't
-- is it still available?  Can people get hard copies?  You can get the on-line version but not hard copy?  Yeah.  Okay.  The hard copies are out, but you're welcome to come and take a look at this too, and you can read it on-line.
          There were 255 recommendations that came from a very broad swath of people providing input, and 84 percent of those recommendations have been implemented, we're very pleased to say, to streamline federal programs.
          The majority of the recommendations of course, because it's health care, related to the Centers for Medicaid and -- Medicare and Medicaid services.  And as a result, CMS's outreach -- I think as a result of that process, and our other work CMS is doing -- CMS's outreach and information sharing processes that they used prior to the development of rules and regulations has probably even altered and gotten broader.
          We're very glad that Bill Rogers is here today with us, and our friend from CMS, and actually all the panelists are here, and we're pleased that they're all with us today.
          So anyway, with SACRR behind us, and with this book, and implementing these recommendations behind us, we are looking now, because we have been asked to do so by the Congress and because it seems to make sense, at the economic impact of regulation.  This is a real tough question.
          After we accepted the assignment to examine the economic impact of regulations on health care we started to plan how to do it.  So we had to -- we had a very short time frame to do it, and a lot of decisions to make, and a lot of work to do.
          So the first thing we thought we would do is that well, you know, we could just do a literature review on this, although there's not a whole lot of literature, but we could just go do that and check we've done it.
          But it seemed better to come back to people, the people in the industry, the consumers, people that are on the other end of that regulation that they see all the time.  Talk to them and hear from them.
          One of the problems of working in Washington is that you deal in two dimensions and they are 8-and-a-half by 11, and it's really nice to get out and talk to three-dimensional people who are out there in the world.  I wish we could do it everyday, because every time I do it I hear things, I learn things from people and it helps me do my job better.  It helps all of us do our job better.
          Thinking that we wanted to do more than just ask people to talk to us in person, talk to us on the web site we went ahead and published a notice in the "Federal Register" seeking comment and quantification.  So that's the big kind of hook here, is that:  Can you quantify the economic impact?  And you'll hear all of us, and members of the panel, and Carol, “But can you give us numbers?  Can you talk to us about the economic impact?”  And that's really what we're looking for.
          And our final decision in this project to get more information was to make what we're calling some "house calls," a series of case studies which Carol and folks from Abt are helping us with to see if we could get past, get deeper even, beyond what we hear here, and then take that with us and talk to people in case studies.
          I do want to credit some people here.  Abt deserves enormous credit for the work that they're doing, Carol Simon.  Jessica Kasten has also been a big player here.  David Newman.
          The folks that greeted you at the door, Vanessa Timmons and Bridgette Saunders have really stuck with this project and done a great deal of work.
          I want to acknowledge Adele Simmons from our office, from ASPE, for all the great work that she has done.
          And mostly I want to acknowledge you and thank you ahead of time.
          I was thinking about Carol's smile, and she is like Snow White.  She's just so great.  She's so sweet, and she's so wonderful at the beginning of your five minutes, and as the clock starts to go, she turns into Cruella deVille, okay?  The federal government is not Cruella deVille, but ‑‑ so that's why we hire a contractor to do this evil job.  She will stop you at the end of five minutes, please keep that in mind.
          Anyway, thank you so much for helping us with this data gathering, and I look forward to hearing from all of you today.
          DR. SIMON:  Thank you, Ruth.  I certainly have a lot to live up to at this point now.  No magic apples during the break please.
          Okay.  I would also like to welcome Mr. Emory Lee who is ‑‑ 
          MR. NEWMAN:  Carol.
          DR. SIMON:  Well, I thought I turned it on, and I didn't.
          I'd like to welcome Emory Lee.  Emory is the Executive Officer from the San Francisco Regional Office of Health and Human Services.  Did I get that right?
          MR. LEE:  Right.
          DR. SIMON:  Excellent.  Mr. Lee?
          MR. LEE:  I'd like to welcome all of you to Region -- on behalf of Region IX to this very important Town Hall Meeting.  I bring greetings from our Regional Director, Calise Munoz who is in Arizona today and couldn't be here, but she serves as the Secretary's personal representative in Region IX, and as a -- part of her responsibility is working with the state, local, territorial, and tribal governments in our region on the oversight and coordination of our department's program.
          I'd like welcome all the speakers and the attendees today, certainly the distinguished panelists here from -- coming to California, and to our host, the Assistant Secretary for Planning and Evaluation.
          This is a part of ASPE that I haven't dealt with.  They're -- ASPE is really important for us, because we look to them for issues and guidance on things running from homeless policy -- homelessness policy to self-governance for tribal governments on departmental programs that they could very possibly administer themselves, and so we'd like to acknowledge them.
          And building upon your two-dimensional analogy, we encourage and tell people in central office to contact and work more closely with the regional offices because we are the three-dimensional part of the department, and we have the on-the-ground experience in working with people.
          We have a few of the representatives from our Regional Office here today. I'd like to just acknowledge them:  Diane Caradeuc from CMS.  She's the Acting Associate Regional Administrator for Medicare Financial Management.
          We have Nicole Lockey, who's the Special Assistant to the CMS Regional Administrator.  Janet McDonald who is our Food and Drug Administration Public Affairs Director for Northern California.  And a young intern who's working in my office currently, Cami Lee who is an emerging leader on assignment out here from Washington, D.C. from HRSA, from our Health Resources Services Administration.
          It's really fitting that the final Town Hall Meeting is held here in California.  California has such a huge health care industry and it has certainly a lot of innovations underway, including all the health insurance demonstrations that our counties have been providing health care to children in particular.
          We also have the cutting edge on the part of the health care, everything from biotech to stem cell research to health information technology.  And so the meeting here today obviously is going to be very important because we need to design programs, we need to draft regulations that are sensitive to the economic impact of those regulations.
          Too often times you read in the newspaper, everything is -- everything that you see and read are budget oriented, the budget deficits, the cost control steps that are being taken.
          You know, Congress -- the House yesterday passed a $39 billion budget cut that's going to affect everything from student loans to crop subsidies, to in particular, of interest to work, obviously is Medicaid.
          We -- as a matter of fact, our Regional Director was in Sacramento yesterday appearing before a state joint legislative hearing having to do with the Medicare prescription drug costs related to that.
          And so town hall meetings like this are important because we need to have it at the front end.  We want to avoid the litigation.  We want to avoid all the burden that is eventually going to come to all of us if, in fact, there are cost overruns.
          And so I look forward to -- I looked at the list of the attendees who had signed up, or registered for this program.  It's a very, very impressive list.  It represents a cross-section of health care administrators, providers, physicians, practitioners, and so I really look forward to hearing today from -- your comments, because as we need to work together to be able to keep costs under control, and most importantly to bring health care in a very -- deliver health care in a very economic and safe way.  Thank you.
          DR. SIMON:  Mr. Lee, thank you.  Thank you for giving us our charge.  So as my son would say, let's rock and roll.
          I'd like to introduce to you our very distinguished panel of experts who, as I said have -- could speak on these topics in their own right, and we're not going to give them more than five minutes at a shot to do so.
          Their role here is to help clarify, to ask some questions, and in many ways to be an assistant to those of us who are now then going to try to use your information to craft a larger picture of the problem in health care.
          So may I introduce -- let's start with -- we'll do this alphabetically, as much as I'm fond of the end of the alphabet.  Our first panelist is Dr. Christopher Conover, a professor of economics at Duke University.  Chris, do you want to -- and those are all on guys, or they should be.
          DR. CONOVER:  Good morning.  I'll leave it to you to deduce whether I'm up here representing Dopey or Sleepy.
          I've done work on all sorts of health services regulation, but what I've done most recently is this compilation of literature, and in your packets is a little summary of what we found.
          I too like hearing from three-dimensional people, and these town hall meetings are very interesting to me.  I look forward to hearing your comments today.
          DR. SIMON:  Great.  Thank you, Chris.  Our second panelist is Professor Ted Frech from U.C. Santa Barbara.
          DR. FRECH:  Thanks.  Yeah, I'm from U.C. Santa Barbara, so I came the shortest distance of the people on the panel, although in the fog it didn't seem that short.
          I do a lot of economic research and consulting in health care, in health care regulation, hospital competition, physician competition, Medicare reform, nursing home reimbursement, a whole bunch of areas.  I've been doing it for a shockingly long time.
          DR. SIMON:  Thank you, Ted.  Our third panelist is Professor Michael Morrisey from the University of Alabama at Birmingham.
          DR. MORRISEY:  Thank you.  And with a Ph.D. from the University of Washington, it's always nice to be back on the West Coast.
          Unlike Ted, I've only been working on the issues of hospital and health insurance markets for 25 years, and my interests in regulation have revolved around certificate of need, state insurance mandates, mandates with respect to managed care plans, and most recently, medical malpractice.
          DR. SIMON:  Great.  Our fourth panelist, for a bit of a change of pace is Mr. Dan Mulholland.  Dan is an attorney with Horty Springer.
          MR. MULHOLLAND:  Thank you, Carol.  Hello everybody.  Our firm represents hospitals and their medical staff leaders in boards around the country, and we have an opportunity, if you can call it that, to see the effects of the regulatory system on a day-in, day-out basis.  So I very much look forward to your comments today.
          DR. SIMON:  Thank you, Dan.  And last, but not least, we have Dr. William Rogers from CMS.
          DR. ROGERS:  Thanks.  It's not often that alphabetical order puts me at the end, but this is a -- I guess this is a sort of biased group here, huh?  At least alphabetically.
          I'm a practicing emergency physician.  I worked full-time practicing clinically and running emergency departments until 2002 when I accepted an offer from Tom Scully to dramatically reduce my income tax exposure by coming to work full-time for the federal government.
          I continue to work clinically, though.  In fact, I worked four shifts last week in addition to my regular federal job.
          But my main job is representing providers at CMS, making sure that the regulators at CMS understand the reality of the business that providers are in, and the reality of their clinical challenges, and I do a lot of traveling in that role.  This is just one more opportunity for me to find out what the community we serve sees as problems with the program.
          DR. SIMON:  Great.  Thank you very much, Bill.
          All right.  I'd like to begin the public testimony portion of our program.  When I call you, you can take your choice of the microphones that are here.
          Please repeat your name for -- in many ways for the folks who are recording this on public record in the back.  Tell us who you're from, and watch the little lights in front of you.  Again, I'll be giving you approximately five minutes, with five minutes for Q&A.
          So, if I could call Dr. Andrew Robertson to the microphone?  Dr. Robertson.
          DR. ROBERTSON:  Thank you very much.  I'm a neurologist by training, and currently a health care consultant.  I work Joint with Commission Resources, and in addition, the California Hospital Association co-sponsor representative in the California Technology Assessment Forum.  And that latter point is what brings me here.
          I have developed a keen interest in evidence-based medicine, and the use of good information in the both management and regulation of health care delivery.
          As we all know, health care is extremely complicated, and we have an expensive but very varied system here in the States.  I would like to appeal that we can reduce that complexity and promote better services for beneficiaries through the use of good information.
          Whether it's new drugs, which are expensive, or new technology, which consumes a lot of capital, the benefit of using evidence-based medicine that will provide data to improve decision-making from regulators through providers to patients will improve our ability to spend wisely, and provide better services for more people in the future.
          Gathering evidence-based medicine will need a number of particular points to be considered by those involved in regulating, and writing policy: 
          That is, adequate data protection for those medical records that are included in the gathering of evidence-based medicine.  This will mean continually reviewing and making user-friendly regulations such as HIPAA;
          Continuing to support provider ownership hospitals and physicians of the primary data;
          And continuing to push harder for evidence-based medicine to be gathered from an electronic medical record.
          Furthermore, I believe that the excellent program with reimbursement with evidence development that CMS has currently embarked on is a program that deserves more attention and more support.  This will benefit beneficiaries and taxpayers.  It will reduce the misuse of capital, improve the efficiency and efficacy of care, and ease access and care decisions for beneficiaries.  Thank you.
          DR. SIMON:  Thank you.  Well, this is actually a record.  I don't think we've had a speaker who has left time on the floor.  So we applaud you in the spirit of economic efficiency for your -- the efficiency of your remarks.
          May I turn to the panel first.  Chris?
          DR. CONOVER:  Thank you for those remarks.  I'm curious.  Is there something about -- and most of what you said was sort of complimentary, and sort of future oriented.  I'm curious about whether -- are there specific ways in which regulation now, you know, isn't doing the right job, or you know, are there specific examples of how we can improve regulation right now?
          DR. ROBERTSON:  The cost and complexity, for example, in implementing HIPAA, if we get to consider how that plays in the future, we might look for simpler ways of codifying and regulating that.
          You've already commented as a panel that the issues of medical malpractice present some economic challenges.  I believe that if we were to improve access to medical records, the electronic medical record, that there needs to be appropriate separation from any litigation-focused, as opposed to research-focused access to the record.
          We don't want to open Pandora's Box and find that the opportunity to gather good information that will improve health care is closed by self-serving, or misperceived risks by any of the stakeholders, be it a patient, be it a physician, be it a hospital, or be it a researcher involved in looking at new technology.
          I'm reminded that the electronic age has made life more difficult.  I discovered that my bank now requires if I'm to access cash when I travel overseas, pre-notification so that their fraud alert systems don't block my ability to get cash.
          As we proceed with data that's digital, and quick, and easy, appropriate controls, and appropriate thoughtfulness of the regulations needs to be considered early in the process to make sure that it is rolled out smoothly and easily.
          Did I answer your question adequately?
          DR. SIMON:  Mike, and then Dan.
          DR. MORRISEY:  Could you speak a little more about provider ownership of the primary data as opposed to say, insurers or a state agency?
          DR. ROBERTSON:  Well --
          DR. MORRISEY:  Or consumers for that matter?
          DR. ROBERTSON:  Or consumers.  Well, I think the consumers have some good access in the current regulation.  Insurers can request copies of records, but the access belies the ease and the ability to process the data, and in order for, for example, the generation of evidence-based medicine, which relies on good randomized controlled trials, or longitudinal case studies on the exact data for each patient subject to a new drug, or a new technology, requires a lot of trust and a lot of good access.
          Two-thirds of the time new technologies brought before a California Technology Assessment Forum has no adequate data.  They can pass the FDA, which requires safety equal to existing technologies, but it doesn't prove benefit from the additional expenditure, or adequate safety.
          And the only way we're going to get to this is when good research is done on the primary data as soon as possible, which means that two-thirds of the new drugs and new technologies need to embrace this early on, and they're not.  And part of the reason is there's a little bit of concern by many providers that they don't want to release this information in such detailed a form.
          We need adequate protection for that.  We need positive encouragements.  We need thoughtful processes.
          DR. SIMON:  All right.  Dan?
          MR. MULHOLLAND:  Doctor, I'd be interested in any comments that you have about the extent to which federal regulation, in particular the fraud and abuse laws, the anti-kickback statute, and to so-called Stark law might impede connectivity between doctors and hospitals.
          And a specific example, a lot of doctors are looking to hospitals for assistance to wire their offices into the hospital, upgrade their information systems, their EMR systems.  But if a hospital is doing that to a doctor who refers to them who's not an employee, that raises some fraud questions.
          I know that the government came out with some very limited proposals to lighten that up in November, but I'd be interested in your comments from seeing this on a regular basis as to whether you think that that's a ‑‑ any kind of impediment to the kind of electronic medical records system that you're advocating, which I think makes a lot of sense.
          DR. ROBERTSON:  Here in California, the corporate prohibition against employing physicians, hospitals cannot employ them directly, has created a slightly different environment.
          I was a shareholder member of Hill Physicians, an IPA, and I have recently been associated with Sante IPA, and they are an exclusive IPA to the hospital system I used to work for.
          Both those entities, which I know in more detail than others, are choosing to diminish physician reimbursement for a short period of time, one, two, three years, to capitalize the placement of a single electronic medical records system for their providing physicians.
          I think by chance, rather than good management, that clearly is a superior way of doing things than what may be happening elsewhere in the country.  And as you are alluding to, many hospitals have a closer working relationship in other states with their physicians on the medical staff, and their primary care physicians, and this raises the whole issue of, as you point out, Stark II infringements, which could cause them to take complicated legal steps to sidestep it, but the basic tenant is that there could be concerns on all sides that this is not a healthy working relationship.
          I would encourage regulators to consider how they support physicians better capitalizing this, or continue to push forward with the Veterans Administration software program that is inexpensive, and if there was adequate support, might be a reasonable alternative for some groups, or rural areas.
          DR. SIMON:  Great.  Thank you very much.  Other questions from the panel?
          Dr. Robertson, thank you very much for your time.
          DR. ROBERTSON:  Thank you for your time.
          DR. SIMON:  Okay.  And I will ask Dr. Robertson, but also remind all the panelists, that if you have brought with you written comments, written copies of your comments, please make sure you leave them with one of the ladies outside before you leave.  If you wish to submit them to our web site, that the address is in your packet, and please see me, or any of the other representatives out there if you would like any additional information.
          Our second speaker is Ms. Barbara Paul.  Barbara?
          DR. PAUL:  Thank you very much.  It's a pleasure to be here this morning.  I'm Dr. Barbara Paul, and I am an internal medicine physician, currently the chief medical officer for a company called BEI, which is the parent company for Beverly Health Care Nursing Homes, AseraCare Hospice and Home Health, and Aegis Therapies.  I have provided hard copies of my comments, and I think maybe the panel has them.
          Before I took this position, I was at CMS, and in fact, led the Physicians Regulatory Issues Team before Bill took it over.  I also launched the Nursing Home Quality Initiative, and Home Health Quality Initiatives for Tommy Thompson and headed up the Quality Measurement Group there, working a lot with hospital measurement.
          Before that, I was an internist in full-time practice in Napa, California, actually.  So I bring that perspective to my comments here today, both as a physician, as a senior policy person at CMS, and as well now as someone who's in the trenches with a provider.
          My comments are really in three parts.  Just three points.
          First, I would like to offer an alternative framework to the sort of less/more debate about regulation.
          Secondly, I would like to give you an example of conflicting regulations.
          And then third, talk about an example of gaps in regulation.
          So -- and I am speaking primarily here for the long-term care sector, and I'm -- my understanding from these hearings is that you're hearing a lot from the nursing home sector, and I'm sure you're hearing both testimony regarding less regulation and testimony regarding more regulation.
          And we do, in the nursing home area, need to improve the care in our facilities, and regulations do help us to improve that care.  But the best thinking about quality improvement is much more inclusive than thinking that additional regulation upon regulation is actually going to truly improve care.
          And I would like to give you the strategies that are listed on my -- the handout that I have for you, there's seven of them that are actually employed by CMS to improve care.  It includes regulation.  It also includes appropriate payment and payment policies.
          But it also includes technical assistance, which for CMS is the Quality Improvement Organization Program, rewarding superior results.  Increasingly CMS is implementing pay for performance and other rewards for superior results.
          The whole push towards standardization, which I think is incredibly important for enabling good-hearted care givers to be able to do what they need to do, to have that underlying standardization.  And the federal government is in the unique position to really push that underlying standardization.
          Collaborations and partnerships, and then informed consumers.
          And that list is not my list.  That is a list that was created by the quality team before me at CMS, and is a list, however, that I relied on when I was there, and I continue to rely on it in my work in my current position, and it really makes the point that regulations are only one part of improving quality.
          And this -- and nowhere is this more apparent to me than in the nursing home sector where for years the response to an issue or a problem is another regulation.  And it has led to a paradoxical problem, which is that people, both surveyors, regulators, as well as people working in nursing homes therefore believe that the lack of a deficiency on a survey means good care.
          And I think this is a misperception.  We know -- particularly I think clinical people know that that's not necessarily the case.  In fact, there can be a better way to do something than the way that's going on right now that does satisfy a regulator or a surveyor.
          And it's only by applying these other strategies that we will get where we need to get to in nursing home care in terms of the quality that everyone wants.  So that's my first point, which is to look at that framework.
          Secondly, conflicting requirements.  There's a situation right now under Medicare Part D with nursing homes in which we are required to provide the medications prescribed for a patient.
          On the other hand, prescription drug plans, we have moved from one Medicaid formulary to maybe a dozen in our facilities.  They are allowed to have closed formularies.  They are allowed to have a variety of hoops for the physicians, or others have to jump over to prescribe him that.
          We are caught in a bind, and CMS is working through a lot of these issues, but this is a bind that simply Part D does not work in the nursing home setting right now.  And I'd encourage you -- I know you're getting a lot of testimony about Part D -- encourage you to send the message back from you that CMS really needs to look at the nursing home setting differently.  It is a different entity than the ambulatory-based care that most of Part D is responsive to.
          My third point has to do with silos.  As you know, Medicare operates the program through silos, and I see my red light, so -- I have my comment here.  There are opportunities by using this other framework to break down those silos, and again, I think it gets you out of the less/more debate, and into a more holistic conversation about improving quality.

Thank you.
          DR. SIMON:  Thank you, Dr. Paul.  Panel?  Chris?
          DR. CONOVER:  Again, you've provided some excellent suggestions in terms of sort of re-imagining how we go about this.
          But in terms of concrete things, going to the survey process as an example, and you allude at the end of your paper to, you know, trying to ferret out bad apples.
          And it seems like in the other town hall meetings that the basic picture I'd gotten was that we're requiring a lot of good apples to jump through a whole bunch of hoops in terms of survey, et cetera, et cetera, in order to detect a few bad apples.
          And I'm curious whether you sort of share that view, and if that's true, then what are the implications with respect to the survey process?  I mean are there specific things that can be taken out of the existing layers of regulation right now?
          DR. PAUL:  I think that you'll have others, and probably have had others who are much more sort of intimate with the survey process and hopefully they can provide you some real detail.
          I do think that the survey process does need to be continually looked at and not asked to do so much, and separate the effort to find the bad apples from the effort to help assure highest quality care.  And it's perhaps the latter is done by using these other strategies, and not thinking that you're going to do all of that with the survey process.
          It really does -- the current survey process -- and I know CMS has launched a pilot program to reconfigure the survey process a little bit, and I don't know how that's going.  It was launched in just one, or two, or three states just in the last couple of months.  So that certainly deserves looking at.
          I think that part of the message here for me is that in the void of a lack of additional quality-related information about nursing homes, there's much too much reliance on what's going on in the survey.  And so even before I were to get to lessening the survey -- and I'm sure there are people who could talk about how to sort of right-size that -- I would encourage an expansion of the picture that's being created.
          Right now we have survey data, and we have a dozen or 16 measures on the web site which talk about the lack of bad things happening.
          What we need is more measures of quality that are much more inclusive of the true clinical picture in that facility, how well are they doing on diabetes care, heart failure care, what is the patient and family experience of care?  Things like that.  And I think only by getting to there will we be able to then sort of relax a little bit, and sort of let down a little bit of the emotion here and right-size the survey process.
          DR. SIMON:  Thank you.  Bill?
          DR. ROGERS:  Thanks.  Barb, you're absolutely right about the problems with the survey process, and it's also a snapshot, and as a snapshot, it's hardly reflective of what goes on during the other 364 days in a year.
          I think we have a huge opportunity here with the dissemination of electronic health records to automate our sort of quality -- our quality measurements in nursing homes, as well as in doctors' offices.
          And this may be a great opportunity to reduce regulation and to reduce intrusive surveys in favor of actually looking at outcomes, looking at interventions, looking at who's getting colonoscopies, who's getting pap smears, and all that stuff will be easy to extract painlessly and automatically once the electronic health records are disseminated.
          DR. PAUL:  And on that point, again bringing it back to nursing homes, I think a couple of messages.  One is that the underlying data has to be common in cross-settings, and for so long, nursing homes have been over there, and in fact, in the RHIOs, the regional health information organizations that are springing up around the country, there's one in Indianapolis that I'm somewhat familiar with because we have -- our company has four nursing homes in the Indianapolis area.
          I learned about it.  I was very excited.  I found out that they -- nursing homes where nowhere on their radar screens.  Doctors offices, x-ray, lab, hospital, pharmacy.  So we are as a company working to get ourselves into that RHIO.
          I think one thing that can be done is to make sure that that happens around the country so that those underlying data elements and standardization, and then that data sharing that could exist today starts to happen across into nursing homes, and stop this perpetuation of seeing nursing homes as something, sort of an afterthought, and you know, 40 percent or so of admissions and discharges in nursing homes are to and from hospitals.  They're the same people.  We have to look at it through the person's eyes.
          DR. SIMON:  Other questions from the panel?  Dr. Paul, thank you very much.
          DR. PAUL:  Thank you.
          DR. SIMON:  Melinda Staveley.
          MS. STAVELEY:  Staveley.
          DR. SIMON:  Staveley.  Well, thank you.
          MS. STAVELEY:  Thank you.  I also respond to Stumply, Stovely, it matters not.
     (Laughter)
          MS. STAVELEY:  Thank you for the opportunity today.  My name is Melinda Staveley.  I am the President and CEO of Rehabilitation Institute at Santa Barbara, a small free-standing rehabilitation -- physical medicine and rehabilitation provider, 50 years old in our community.  My clinical background is nursing, and I have 24 years experience in physical medicine and rehabilitation.
          Today I am here representing the California Rehabilitation Association with 42 inpatient rehabilitation facility providers in California and the Western Alliance with over 60 inpatient rehabilitation facility members.
          Collectively, the CRA and Western Alliance members serve over 21,000 acute inpatient rehabilitation admissions each year.  This is a small number compared to acute care, but we believe a very important number in the health care continuum in our country.
          The patients served in the CRA and Western Alliance member facilities require the high-touch rehabilitation therapies and sophisticated, specialized physician and nursing services at a pace, intensity, and sophistication that cannot be duplicated in other health care settings.
          Patients receive high quality coordinated programs provided by an interdisciplinary team of rehabilitation professionals with the goal of achieving functional independence, and a rapid return to the community.
          The Medicare criteria for admission to inpatient rehabilitation facilities are very specific.  All patients are evaluated against these criteria for admission and must meet them.  The criteria, and I'm sure you know them, are that they -- that a patient needs the intensity of medical care that requires frequent, sometimes daily physician review, and 24-hour specialized rehabilitation nursing care.
          Patients must require and be able to participate in a minimum of three hours of therapy.  And treatment must focus on community discharge and be achieved in a relatively short period of time.
          When I first started, 24 years ago, the average length of stay in rehabilitation was indeed eight months.  The average length of stay nationally now is 11 days.  That's all patients, highest level spinal cord injury to most benign, if you will, stroke patient who is going to go back to work even.
          The adverse impacts of Medicare regulations to inpatient rehabilitation facilities both economically and to access of care are dramatically demonstrated in many ways.  I'm going to quickly cite a few and then focus on one.
          The automatic 50 percent reduction in payment.  If a patient is discharged to a skilled nursing facility, or back to an acute care hospital, obviously negatively impacts inpatient rehabilitation facilities who in good faith provided quality care only to experience the deficit in the cost-to-reimbursement ratio because of circumstances requiring the patient to be discharged to an other than community setting, which are outside of either the physician's, or the facility's control.
          The restriction to only 13 CMS approved diagnoses prevents access, despite physician beliefs that the acute rehabilitation care team and process will assure a beneficial, functional and economic outcome not only for the facility, but the patient and their family, and thus, the community.
          Care providers are required to pay interest on dollars paid to them by CMS when the stay is denied if the dollars are not repaid to CMS within 30 days.  However, conversely, CMS is under no obligation to pay interest to providers when it takes sometimes up to four years in reviewing and reversing denials.
          There is onerous duplication of medical necessity review by the fiscal intermediaries prospectively, and now the new recovery audit contractors retrospectively.
          The specific governmental regulation, however, that we would like to address today is the 75% Rule.  This rule requires that 75 percent of all admissions, not just Medicare patients, must fall into one of the 13 CMS approved diagnoses.
          This rule has impacted rehabilitation providers economically in limiting the patients who may be admitted as well as patient/family access to the appropriate level of care to meet their needs.
          According to the Moran Company publications, new estimates of the impact of the 75% Rule on inpatient rehabilitation services volume -- you will get all this in my written notes -- there has been a decrease of 7.7 percent, or a reduction of 30,000 patients served across the nation.
          The total number of patients of all insurance categories, that's just Medicare, probably is closer to 40 or 50,000 patients.  This reduction in number of patients served is representative of a far greater number that was actually articulated as hopefully to be achieved by the changes in the application of the 75% Rule in CMS's documents, in discussing with us why the rule was being applied differently.
          The dollar savings therefore exceeds the dollars expected.  This savings, however, we would let you know is achieved at a significant and sad cost to those many individual lives throughout the country who have been denied access to acute medical rehabilitation, and we would submit and will quantify for you that the rehabilitation, medical rehabilitation at this level of care that was not achieved did not create savings, but rather cost the community in the long-run with rehospitalizations.
          Thank you very much.  I'll be happy to take questions.
          DR. SIMON:  Thank you very much.  I'm going to start with Chris and then go to Dan.
          DR. CONOVER:  Just to clarify, is the 75% Rule relatively new, or it's been on the books for a long time?
          MS. STAVELEY:  No.  The 75% Rule has been on the books now, I want to say about eight years.  I don't have the date, the year, in my frontal lobes at the moment.
          DR. CONOVER:  All right.
          MS. STAVELEY:  About eight years.
          DR. CONOVER:  But then the related question is are the private payers that you have, are they different than Medicare in terms of they -- how they handle all of these various issues that --
          MS. STAVELEY:  Our experience is that private payers follow Medicare's lead, always.  And that's been true for 24 years.  As each one of the changes that Medicare determines happens, the private payers jump on board.
          Now, do we have the opportunity to discuss the patient, and the need, and have a receptive voice depends on our relationships with the private payers, those medical directors, and frequently they appear to us to have far more understanding of the benefit of the rehabilitation process over the long haul for their subscriber.
          A major problem there, of course, however, is that the long-term actuarial, you know, look that insurance carriers take is not long-term.  That subscriber may be out of their program, so what do they care if it's going to save somebody else money ten years from now, or five years from now.
          DR. SIMON:  Thank you.  Dan?
          MR. MULHOLLAND:  I'd like your comments on the extent to which, if at all, the complexity of the reimbursement system imposes additional cost on rehabilitation facilities.  I think you've articulated well the substantive issues that come up.  But are there additional compliance costs that are associated with, say, tracking your admissions to comply with the 75% Rule?
          MS. STAVELEY:  Absolutely.  Someone was talking about accreditation and licensure, and I can quantify that.  I can go back and quantify your question as well, although I can't do it today.
          We dropped the Joint Commission -- we being Rehabilitation Institute at Santa Barbara -- we dropped it.  We're a 38-bed free-standing small little outfit.  It was costing us with staff time, et cetera, close to $50,000 to participate in the Joint Commission.
          So compliance, we have a compliance officer.  HIPAA, we have a privacy officer.  Those are salaries.  We have the tracking that you talk about, absolutely.
          MR. MULHOLLAND:  You know, we don't want you to go home and do a homework assignment because that would be imposing additional costs on you, as we all are aware.
          MS. STAVELEY:  Well, that too.  But if it will help in the long-run, we have it all.
          MR. MULHOLLAND:  If you have it readily available --
          MS. STAVELEY:  No, no, we have it all, and we'll provide it.
          MR. MULHOLLAND:  It would be helpful.  Thank you.
          DR. SIMON:  It would be.
          MS. STAVELEY:  Is it helpful for an individual hospital to provide it?  Or is it more helpful for CRA to composite it?
          DR. SIMON:  I think both actually would be very helpful.
          MS. STAVELEY:  All right.
          DR. SIMON:  Great.  Ted.
          DR. FRECH:  It's nice to see someone else from Santa Barbara.
          MS. STAVELEY:  Yes.  Hello.  Nice to see you.
          DR. FRECH:  You have outpatient facilities, too, right?
          MS. STAVELEY:  Yes.  We do both inpatient and outpatient, and community outreach service in contracted ways, yes.
          DR. FRECH:  Right.  Right.
          MS. STAVELEY:  Yeah.
          DR. FRECH:  I want to talk to you later about that, but --
          MS. STAVELEY:  Good.  All right.
          DR. FRECH:  One question that came up in my mind is some HMOs at least claim that they have case management people who kind of more or less will do what's in the interest of the HMO and the patient and not follow real specific rules.  Have you had better luck with them than with other private payers?
          MS. STAVELEY:  Interestingly enough, the private HMOs, no, we have not.  And in our opinion, their weight of what benefit they're looking for is definitely the cost to the HMO, not the benefit to the quality outcome for the patient.
          The one agency that really understands us and works very well with us is Health Authority in Santa Barbara County, which is the waivered Medicaid program, one of the most -- one of the earliest ones approved by the feds and one of the most successful my understanding is, and they get it.
          They also know that they're going to have that patient and family for the long haul, because we know that most people don't ever get out of Medicaid.  Also an unfortunate comment, but true.
          DR. SIMON:  Bill?
          DR. ROGERS:  I have to explain a little bit the thought behind imposing the 75% Rule.
          As the grandchild of one grandparent that rehabbed from a hip fracture in a skilled nursing facility rather than an inpatient rehab facility, and another grandparent who rehabbed from a stroke in a skilled nursing facility, it costs about $18,000 to rehab somebody from a hip fracture in an inpatient rehab facility, and about $10,000 in a skilled nursing facility.
          Many, many less serious problems can be rehabbed at less expense to the taxpayer in a skilled nursing facility.  What the 75% Rule intends to do is to make sure that the inpatient rehab facilities are concentrating their special expertise, equipment, staff on those patients who really could not be adequately rehabbed in a less expensive environment.
          And I think, although it's not perfect, I think it was necessary, because there was a huge growth in the use of inpatient rehab facilities more expensive than it is to rehab patients who would have rehabbed just fine in good skilled nursing facilities, and it became a growth industry.
          Obviously you guys haven't grown, and you probably weren't involved in that feeding frenzy that was going on, but there was, and I'm sure you would agree, a feeding frenzy that was going on nationally, bellying up to the trough of taxpayer money, and something had to be done to stop it.
          MS. STAVELEY:  Yes.  If I may just comment back to you.  Absolutely.  But this is an example of regulation being applied to weed out the few who were feeding frenzy and destroying in the process those who were not.
          So in Santa Barbara, at Rehabilitation Institute, over six percent of our admissions come from nursing home failures that have gone home, and the family has no clue what to do with them, and they've been rehospitalized again because we have to have them from an acute rehab -- acute hospital setting.
          So it isn't working everywhere.
          Now, I agree with you, and we're very careful.  We do not admit, as our medical director calls them, straight vanilla strokes, or straight vanilla hip fractures.  We admit people with complications, and whose families need the education and training.  That's as big a part of the care as is the actual medical nursing intervention, is helping people learn and know how to take care of their person coming home with a stroke, or a spinal cord injury.
          That's what the recidivism is based on for the most part, is care giving incapacity, because no one has taken the time to work with them and train them.
          DR. SIMON:  Thank you.  Panel?  Thank you very much, Ms. Staveley.
          MS. STAVELEY:  Thank you very much for the opportunity.
          DR. SIMON:  And we look forward to getting your comments.  If you would like any help in terms of where to submit them or how, or any questions, please feel free to see me, one of the -- the gentleman in the back who's shaking his head and waving at you, or any of the representatives from Social & Scientific Systems.
          MS. STAVELEY:  I will do that.
          DR. SIMON:  Great.  Thank you.  Okay.  Charlene Harrington.
          DR. HARRINGTON:  Thank you very much.  I'm a Professor of Nursing and Sociology at the University of California, San Francisco, and I'm here to represent myself as a researcher for over 25 years looking at regulation and enforcement issues, particularly in the nursing home industry, and as a former regulator who was in charge of regulation in California under the days of Jerry Brown, whom some of us would like to forget but --
     (Laughter)
          DR. HARRINGTON:  But anyway, I'm here to talk about -- my view is that we -- the regulations are not really a problem in our nursing homes as much as the enforcement is a real problem.
          Because nursing home quality of care has been a problem for -- since the 1970s that it's been identified, Congress finally passed the Nursing Home Reform Act in 1987 following up on a -- recommendations of an Institute of Medicine Committee that I was on that recommended to reform the survey enforcement and the regulations, and the enforcement system.
          As part of that new law Congress established in the intermediate sanction procedures, which is the civil money penalties, and other sanctions like denial of payment so that you wouldn't have to try to force a nursing home to close entirely, but you could issue sanctions to try to bring about compliance.
          And as you know, regulation for nursing homes is very decentralized.  It's a joint federal/state responsibility where CMS establishes the regulations, the oversight and the budget, and the state licensing and certification agencies carry out the actual survey process, and the enforcement process.
          In 2001, as a member of the Institute of Medicine, I was on another committee on -- of long-term care quality, and we reviewed the regulation and the enforcement system for the country, and we confirmed that we thought the regulations for nursing homes were adequate, but the enforcement system is extremely problematic.
          I thought about bringing a stack of papers that I have written, and the GAO, and the IG, and all the people have written over the last 15 years just to show you it would be that high, saying that we do not have a good enforcement system out there.
          The survey and certification process is not working because there's been a decline in the number of actions taken against facilities, it's gone steadily downhill.  The scope and severity of the regulations have been rated down by state agencies.
          And there was just a new survey, a new report by GAO last week showing that the downgrading of regulations and the enforcement actions, many severe problems are not referred to the federal government for any kind of penalty.
          The OIG found that in the CMPs, civil money penalties imposed in 2000 and 2001, only 42 percent were paid, and 70 percent were reduced before payment for systematic reductions, appeals, settlements, bankruptcies and other things.
          And I should mention that the fines are so low in most cases that they have no deterrent effect whatsoever.
          We have just come out with a new study, and I have provided it to you and in my written testimony, showing that in 2004 there were 140,000 deficiencies, and I should say that 90 percent of facilities in the nation are out of compliance with the regulations.
          They were -- of all those deficiencies given, only two percent were given civil money penalties.  Ten states didn't collect any civil money penalties at all.  There's a huge variation.
          Wisconsin issues civil money penalties for 19 percent of its deficiencies, while 10 states don't even issue them.  So there's inequity across states.
          And another problem is that the procedures are so cumbersome and bureaucratic that the states don't even want to use them.  They report that other sanctions are more useful.
          The states tell us that they are short by 20 percent of their budget, so that is one of the serious problems that we've found, is that the budget for the regulatory activities is completely inadequate.
          So I see I'm out of time, but I think in summary it's the lack of enforcement that is the serious problem and the poor quality in general.
          DR. SIMON:  Thank you very much, Dr. Harrington.  Mike?
          DR. MORRISEY:  Yes.  You talked about some 10 states, I guess, who have not levied fines, but also suggested that they've used other approaches to dealing with nursing home quality problems.  What have they done, and is that likely to be a more effective approach?
          DR. HARRINGTON:  Well, some of these 10 states just don't do anything, but there are 11 states that issue their own fines and use their own fines.  California is one, Washington is one.  And Maryland, I'd like -- is a very good example.
          They have a new state law that requires that when a fine is issued that the nursing home has to put the money in an interest bearing escrow account, and then they go through the appeal process, and then the -- whatever the decision is made, then the money is distributed if it -- so that's one way to solve the problem.
          Because with the federal government, it can take two or three years to issue the penalty in the appeal process, and then they'll end up reducing the whole thing in the first place.  So some states are doing a much better job themselves than the federal procedures.  They really need to be overhauled.
          DR. SIMON:  Dan?
          MR. MULHOLLAND:  Just playing devil's advocate.  One person's sufficient regulatory system is another person's denial of due process, and I'd just like to hear you comment on that.  That if, you know, a nursing home thought that it had a legitimate objection to a citation, making it pay money into an interest bearing escrow account is basically like sentence first, trial later.
          DR. HARRINGTON:  Well, I guess, you know, it all -- if it takes two and a half years to get justice on either side, that's not very -- it's not a speedy justice for anybody.  I mean, you don't do that with a traffic ticket.
          So I just think the whole -- there's something wrong with the process that it takes that long, and the whole thing needs to be fixed.
          MR. MULHOLLAND:  Well, one -- I'd like your comment on this.  If you were going to increase the use of civil money penalties, what about earmarking part of that for a more efficient appeals process, say by getting more administrative law judges, or being able to speed the process along?
          DR. HARRINGTON:  Sure.  That would be great.
          DR. SIMON:  Chris?
          DR. CONOVER:  You said that 90 percent of nursing homes were out of compliance in some fashion?
          DR. HARRINGTON:  Yes.
          DR. CONOVER:  Okay. 
          DR. HARRINGTON:  Ninety percent are in serious noncompliance, and of that, about 12 percent of them are very bad, very serious.
          DR. CONOVER:  Okay.  Is the impression you're trying to convey that 90 percent of the nursing home facilities in this country are bad apples?
          DR. HARRINGTON:  Yes.  Well, I'm not saying they're -- no.  I'll say that 12 percent are bad apples, and they've been in the business for all this time, and it's because we have such an ineffective regulatory system that they're allowed to stay in year after year.
          And then we know that 95 percent of all nursing homes in the country do not meet adequate staffing standards.  You cannot have good quality of care if you don't have nurses and adequate staff.
          So it's not surprising when you have such poor staffing, and it's actually gone downhill, that you're going to have poor quality.
          DR. CONOVER:  We've heard in other town meetings that because staff are, you know, filling out all these forms to do the survey process, that it's basically diverting their time, and so they can't give quality care.  I'm curious what your reaction is to that?
          DR. HARRINGTON:  I – no.  I would say that's nonsense.  I mean, you know, they only survey a home, you know, between 12 and 15 months, one time every 12 to 15 months.  I mean, there are other forms that they fill out, but bottom line is there's an incredibly high turnover rate of staff, and that's because there's inadequate staffing.  There's no staff to do the job.  I mean, it's just -- that's the problem.
          DR. SIMON:  Other questions from the panel?  Professor Harrington, I thank you very much.
          DR. HARRINGTON:  Thank you.
          DR. SIMON:  You said you left a copy of a new report?
          DR. HARRINGTON:  Yes.
          DR. SIMON:  Is it with the panel, or is it also with the individuals outside?
          DR. HARRINGTON:  Yes.
          DR. SIMON:  Excellent.  Very good.  Everybody held up their 8-and-a-half by 11's, so I can verify that they're here.  Thank you very much.
          Our next speaker is Serge Teplitsky.  And how bad did I do that, I can't read your handwriting.
          MR. TEPLITSKY:  Oh, you're just great.  Thank you.
          DR. SIMON:  Okay.  Cool.
          MR. TEPLITSKY:  Good morning.  My name is Serge Teplitsky and I work at Laguna Honda Hospital, which is a 1200 bed acute care hospital, and a distinct part nursing facility here in San Francisco, and it's part of the Department of Public Health.
          Also I'm representing California Hospital Association, and it represents acute care hospitals and dependents, or hospital-based nursing facilities in the State of California.
          And I'll be very brief in my comments.  And I know you've heard probably a lot about Medicare Part D, and how it affects skilled nursing facilities, free-standings, and hospital based, but I'm trying to bring a few points here, and based on my experience, and the experience of other providers, there are a few issues that we wanted to bring up.
          And number one is the number of PDPs, or prescription drug plans.  In California we have about 40 PDPs, in other states it's a bit more.  And distinct for our skilled nursing facilities get stuck in-between the rock and the hard place in terms of finding appropriate PDPs and working with the numbers of formularies and other things.
          For example, if you have only a few PDPs to contract, you actually gain better control over your formulary, but at the same time, you may lose reimbursement because you have only a few contracts.
          When you have more contracts than you need, sometimes it creates problems with prescriptions, also drug storage, and some other issues that can lead to patient safety, and medication errs.
          And the second issue is that the education of patients around Medicare Part D, and choosing the appropriate plans for them is becoming a big problem, because we are somewhat limited by regulations in this process.  We can do only that much.
          And especially for the hospitals that are operated by cities and counties.  We serve a lot of indigent patients who have no families, a lot of homeless patients as well who come to us for skilled nursing care.
          It is very hard to educate them, and especially here when you have such a melting pot of everybody, and you have different languages, a variety of languages, how do you work with those individuals to choose the right plan for them?
          And they ask for our assistance because the regulations and the program is quite complex.  I know you are working on it, and you have probably a lot of good efforts towards fixing all this, but at this point, it's not working the way it's supposed to be, and it's a new program, and it's completely understood.
          So the suggestion here would be also pay a lot of attention to the multi-language need of this program.  And I know on the Medicare.com web site you have instructions only in English, for example, and I'm not sure if there are any other languages that patients can go and look at and get some education around the program.
          So that would be my comments.  Thank you.  And I will be submitting those comments via e-mail.
          DR. SIMON:  Thank you very much.
          MR. TEPLITSKY:  Thank you.
          DR. SIMON:  Questions from the panel?  Bill?
          DR. ROGERS:  Thanks.  I've been very involved with dealing with physicians and other prescriber's issues having to do with Part D, and I share your frustration.
          You know, unfortunately for us, the way the program is created, the -- at least unfortunately for us with this respect, the PDPs actually do the paying of the claims, and for obvious reasons, not doing something anti-competitive, Congress said --
     (Audio malfunction - 10 minute recess.)
          DR. SIMON:  Thank you for your indulgences.
          If I could ask, Serge, once again, and I've been asked by the audio folks in the back for the speakers to come up close to the microphone and make sure that when -- we do this so we have shorter people followed by taller people.  So it's going to require a little bit of, you know, sort of manual adjustment there.
          Anyway, I think we had just -- we caught just before the punch line of Bill's joke.  No.  Bill, if you could start with your questioning again, we'll just sort of rewind this whole thing and see if we can pick up where we left off.
          DR. ROGERS:  So anyways, this woman walks into the pharmacy --
     (Laughter)
          DR. ROGERS:  Well, you know -- and this is a great opportunity for me to modify the way I was saying that a little bit.  But there's no question that there are an enormous number of PDPs that are offering services right now, and I think the number's going to diminish over the next couple years.
          But for the moment, it does confront you with a large number of formularies to deal with and we have been advising providers to use the Epocrates software, which is available free.  You can load it into a PDA or you can use the web serve version and it does a phenomenal good -- a phenomenal job.  I was showing Ruth the software on my PDA this morning -- making it easy to figure which drug in a particular class is first tier and second tier.
          And so to the extent that physicians adapt their prescribing patterns, we're going to see I think a healthy downward pressure on drug prices which is obviously something that we'd all benefit from.
          The -- you know, with respect to the issue about advising patients on which PDPs to choose, you know, the concern of the attorneys is that there are opportunities for people with financial interests in a patient's choice to steer them, and that obviously is something that can't be permitted legally. 
          So admittedly it seems like an intrusion into the clinical relationship of the patient, but, you know, this is something that has been imposed on us by attorneys who worry about these sorts of things.
          And then the foreign languages idea is a great idea.  I think we're in English and Spanish exclusively, and to the extent that we can find money -- I means it's remarkable that a program that's spending a billion dollars a day has trouble finding money to translate web sites, but I had to beg and borrow and steal to travel here to San Francisco for 12 hours.
          So to the extent that we can find money to have those web sites translated into other languages, we should do that.  You're right. 
          MR. TEPLITSKY:  Thank you very much. 
          DR. SIMON:  Thank you.  I think we're good.  Mr. David Woods.
          DR. WOODS:  Hi, I'm Dr. David Woods.  I work at Laguna Honda Hospital with Serge, so we're here to team-tag you regarding Medicare D.
          I'm the Pharmacy Director at Laguna Honda Hospital, and come January 1st, we had 700 residents in the hospital --over 700 residents who were Medicare, Medi‑Medis, almost all of them who were then auto-enrolled into one of the various drug plans.
          What we attempted to do at Laguna Honda was to take a look at the formulary offerings of the ten PDPs in California that are eligible, that are allowed for the auto-enrolled people, and to really take a look at those formularies and see which matched the needs of our patients.
          And when we did that, we saw that three plans clearly were superior to the others.  And so what we attempted to do was to educate the residents, their families, their care givers about what was the best options for that, and almost all of them chose the plan which was most suitable for them.
          What we found, however, is that with all the computer glitches that have occurred here is that there are a number --hundreds of people in our facility which didn't get in the right plan at the right time.
          For example, this February 1st, yesterday, what happened was in January when again people -- we had 70 people who enrolled in various plans and 7 of them actually ended up in the plan that they wanted to be in February 1st.  So that's 10 percent.
          And so the cost for us is significant because then the hospital is stuck footing the bill for the medications for these patients until this gets straightened out. 
          What we're trying to do is provide the best quality of care that we can for these residents, but what then is happening is that it's costing us a lot more money to do that, and so what a lot of skilled nursing facilities are then forced to do is enroll with all the plans.  And -- which is not in the best interest of patient care.
          The whole bit about discussing and steering patients and residents into the best plan really is prickly for skilled nursing facilities and our staff, because our staff really don't have a financial interest in a plan.  I mean we really don't have a financial interest.
          What we're trying to do is work on the residents' behalf and help them assign or decide what is the best plan for them to be in and we really feel like our hands are tied when it comes to helping them decide and -- to the extent that we're allowed to help them decide and enroll.

probably over a quarter of our people have, you know, dementia issues.  And so how do we educate them and how do we help them make the best decisions for them when our hands are basically tied as far as assisting goes. 
          And then the resources that it takes us to do all of this assistance, to really help them get the best care that they can, is significant, from our social workers, from our eligibility staff, from our pharmacy staff.  We try to match the drugs that they're on with the plans. 
          It's a substantial undertaking and the costs associated with that are labor and then drug costs if we're not reimbursed from the plans. 
          So what I would really -- I would really suggest that a different model needs to be made for skilled nursing facilities and distinct part SNFs, and I think that there needs to be some allowance, for example, a system that would require all MAPDs and PDPs to accept electronic, out-of-network claims from pharmacies in SNFs, so that no matter what plan the person is enrolled in, at least the pharmacy can be reimbursed for the drug cost.
          So at least for that first 30 days or 60 days until they get into the right plan for them, we can be paid for their drugs, and if there was sort of one -- one sort of system where we could do that, I think it would be enormously helpful and it would be great for the skilled nursing community.
          Other issues that we found as far as plans not being able to manage -- they're not equipped to manage skilled nursing facility sorts of distribution systems and fill cycles and those sorts of things.  They're very -- they're much more equipped and have been dealing with community pharmacy issues for many years, and the plans are adept at that.
          The issues that we have is the operational needs in skilled nursing facilities are different.  And so to get reimbursed, it's very difficult because our fill cycles are different.  Maybe we dispense a seven-day supply.  Some hospitals will dispense a 24-hour supply.  Sometimes it's a 34‑day supply in a different skilled nursing facility.
          And plans reimburse 30 days or 31 days.  You have to submit the claim within five or seven days of the prescription being written, and so trying to backfill for the previous month worth of drugs is not possible with some of these plans.
          And then there's a lot of -- the other area where we're having a lot of confusion is regarding Medicare B versus D versus durable medical equipment and those sorts of things and getting denials from some plans for drugs which are fairly immediate because there's confusion or authorization required.
          DR. SIMON:  Thank you very much.
          DR. WOODS:  Sure.
          DR. SIMON:  Panel.  Dan. 
          MR. MULHOLLAND:  Mr. Woods, I was wondering if you could estimate a little bit more specifically the additional costs that you incur as a result of all these Part D issues; in particular, have you had to add staff?  Have you had to take staff off of other duties and then backfill for their normal duties?  Can you quantify it in any way?
          DR. WOODS:  At this point -- our pharmacy staff, for example, is a staff of 15 FTEs.  At this point, it's required at least two additional full-time equivalents to deal with this initial hump. 
          Eligibility.  Our eligibility workers and social workers, it's been I would say about a half-time person each in discussing options with residents.  We're a large facility so -- but still I mean we're all small departments, and it's pretty significant.
          DR. SIMON:  Chris.
          DR. CONOVER:  I still don't have a clear sense about how much of all the things you've described are sort of one‑time transition costs versus if you came back in a year or two years, what on your list would you -- might you still be talking about or worried about?
          DR. WOODS:  So the things that I think that we'll be talking about in a year or so, say we -- our goal is to stick with three plans.  Okay?  That means whenever a person is admitted to our skilled nursing facility, we eat the cost of the drug until the following month because they have to enroll in that new plan.
          So say today's February 2nd.  They're admitted today.  They're in a different plan.  We haven't -- our pharmacy hasn't contracted with that plan, which means we have -- the patient has two options.  They can get it from the hospital pharmacy and we don't get reimbursed; or they can get it from another pharmacy that may or may not meet the hospital's quality standards and requirements or may not be able to find it anyways.  So there's that drug cost in that window until they enroll in the plan.
          The other problem that we have is just the whole education about, okay, well, this is the best plan that meets your needs.  The staff and manpower required to do that for every person who's admitted is substantial, and then following up to make sure that they get in the right plan.  Like I said, this month out of 70, 7 were actually in the plan that they enrolled in.
          And then going through all of the hoops to make sure that they get where they're supposed to be in.  Last month, it took us, you know, three out of the four weeks in the month to get it all straightened out for 700 people.
          DR. SIMON:  Bill.
          DR. ROGERS:  Well, just a good piece of news, the Secretary's announcing today that the transitional fills now are going to be 90-day fills for emergency circumstances.  So that'll simplify life a little bit for you.
          And there's no question that it has been a challenge from a computer standpoint because every enrollment requires not only that the pharmacy, the PDP’s computer and Medicare's computer, but also the Social Security computer and also the computer that the pharmacies use to figure out what the co‑pay is, all of those have to talk to each other and they all have to have identical data.
          And if one person leaves a zero off or puts a capital "M" instead of a lower case "m" -- and you know, on December 30th, we had 100,000 people enroll on December 30th and we had 100,000 people enroll on December 29th.
          But the system is working remarkably well for the vast majority of people.  I mean they're filling about 40,000 prescriptions an hour.  But I know that it has really -- where it hasn't been working, it's been really very disruptive.
          DR. SIMON:  Okay.  Other questions, panelists?  Dr. Woods, thank you very much.
          DR. WOODS:  Thanks.
          DR. SIMON:  Okay.  Let's call Joseph Hafkenschiel.
          MR. HAFKENSCHIEL:  Good morning.  I'm Joe Hafkenschiel, President of the California Association for Health Services at Home and we represent California's home care providers. 
          Today I'd like to highlight three areas of Medicare regulations applying to home health care which present unnecessary burdens and costs.  The first area is the Outcome and Assessment Information Set known as the OASIS, collection and reporting requirements.
          Simply put, home health providers are required to collect and report far too many data elements and collect these elements for payors which do not use the data.  This not only forces resources to be devoted to filling out paperwork rather than providing patient care, but is also driving nurses and other staff which are in critically short supply out of home health care and into other health care sectors. 
          We conservatively estimate the cost of collecting OASIS data in excess of $300 million annually.  The methodology for that cost estimate is contained in Appendix A.  I have copies of our written statement. 
          We have three recommendations to reduce the OASIS burden.  Number one, discontinue OASIS for Medicaid patients.  Number two, limit OASIS to those data elements necessary for the Medicare payment system and outcome base quality assurance; and three, eliminate OASIS data elements which are unnecessary and improve other data elements which could be improved.  And there's additional details on those recommendations in our written statement.
          The second area I would like to focus on is the unnecessary burden of the bewildering set of notices home health and hospice providers must furnish beneficiaries when they need to reduce or terminate care.  For more detail on the notices, see Appendix B.
          The latest in the set of notices is the expedited determination notice which became effective July 1, 2005.  This process requires the face-to-face delivery of a generic and detailed notice to beneficiaries within two days of when services end, even when this end of services was predicated in the care plan.
          Beneficiaries have 60 days in which to provide certification from a physician of significant harm after patients request expedited reviews from quality improvement organizations.  Providers must furnish medical records to the QIO within 24 hours which are often never used because the beneficiary failed to obtain the required physician certification of harm.
          While data on the burden of the expedited determination are sparse, a crude estimate of the burden of just the expedited determination process is nearly $100 million dollars annually.  See Appendix C for methodology.
          We recommend that CMS immediately suspend all beneficiary notice requirements and design a single form which can be given to beneficiaries at the start of care which clearly and concisely informs them of their appeal rights.
          The third area of over-regulation I would like to discuss is the Medicare conditions of participation.  In March 1997, CMS published proposed revisions to the COPs and stated their intent to move from a structure and process base requirements because they were moving to an outcome basis system of OBQI.  We are still waiting for these requirements to be eliminated nine years later.
          Among the Medicare COP requirements which present an unnecessary burden are requirements for clinical notes, progress notes, notice of patient rights, institutional planning, tracking and obtaining physicians' signatures, home health aide training, and home health aide supervision every two weeks.
          To provide an example of regulatory creep, the growth of the regulatory burden without analysis of the cost of the regulation, CMS published revisions to the State Operations Manual for Home Health on August 12th, 2005.  One of the new provisions is entitled, "Application of Home Health Agency Conditions of Participation to Patients Receiving Chore Services Exclusively."
          Buried within these provisions is this paragraph:
          "CMS considers as a medical service any hands-on service, personal care service, cuing or activity that is in any way involved in monitoring the patient's health condition.  As soon as the home health agency provides any Medicare service to an individual or any standard service permitted by federal law under the Medicaid state plan, such as personal care, we will consider the individual to be receiving medical care.  The COPs will apply for all services rendered to such an individual."
          These provisions would appear to mean that a Medicare certified home health agency providing a bath to an individual who is not receiving any other medical service would be required to meet all the Medicare conditions including the OASIS requirements previously described and the requirement to make a supervisory visit to the patient's home every 60 days.
          In conclusion, the growing body of federal regulations which apply to Medicare certified home health agencies and hospices are jeopardizing the continued viability of these services.  The costs of complying with regulations are not factored into the payment system, and as you probably know, Congress yesterday eliminated the 2.8 percent annual cost of living increase for home health agencies. 
          The paperwork requirements are a major factor in driving nurses out of home health care because the nurses feel the time spent on paperwork detracts from patient care.  We urge ASPE to recommend a systematic evaluation of the current regulatory burden in the home health sector and a crash effort to reduce it.  Thank you.
          DR. SIMON:  Thank you.  Panel.  Chris.
          DR. CONOVER:  That was really excellent and I look forward to reading all your appendices, so I won't ask for details.  But on your last point about paperwork driving nurses out, is that based on anecdotal evidence or is there some study of that?
          MR. HAFKENSCHIEL:  Our national association did a survey and I would consider it anecdotal evidence, but 40 percent of the people leaving home health care at the clinical level were citing the paperwork burden, and I have that referenced in a footnote in one of the appendices.
          DR. SIMON:  Bill, did I see you stretching there or do you have --
          DR. ROGERS:  No.  I'm sympathetic to the OASIS.  We had researchers that developed OASIS come to CMS when Tom Scully was administrator and make an impassioned plea for maintaining every data point on the form.  We removed some and I think we got it down to about, what, 187 pages or something now.  But, you know, clearly there may be an opportunity there for reduction.
          Some of the other things, it would be interesting if we have any patient advocates here, to talk about how they feel about deregulating the home health industry.  They might have a different perspective.
          MR. HAFKENSCHIEL:  Well, I'm not calling, let me be clear, for deregulation of the industry.  I'm not naive enough to think that that's ever going to happen.
          I'm saying eliminate the regulations that have absolutely no cost benefit and just get in the way of delivering patient care. 
          DR. SIMON:  Further questions.  Ted.
          DR. FRECH:  The regulations here remind me a little bit of the nursing home regulations and they seem kind of driven by a tremendous fear that there are some bad apples out there that are going to do just terrible things. 
          And for the nursing homes, there's at least sort of anecdotal evidence that that does happen sometimes unfortunately.  This is the third one of these I've been to.  I missed the one in Chicago with the blizzard.  It was too bad.  But we haven't heard any examples like that for home health care.
          So I'm sort of asking you if there are even like urban legends that there's major bad apples and major health problems being caused by bad home health care.
          MR. HAFKENSCHIEL:  Well, let me respond to that in a different way and say that the current system of regulation in home health care is totally ineffective in keeping the bad apples out of the industry and is extraordinarily burdensome to the good providers.  So it's just not working. 
          DR. SIMON:  Other questions from the panel?  Mr.  Hafkenschiel, I appreciate this.  You left -- the copies of your reports have been left with --
          MR. HAFKENSCHIEL:  I have four copies and I'll leave them with the people outside.
          DR. SIMON:  Excellent and one with the gentleman in the back who is nodding his head --
          MR. HAFKENSCHIEL:  Okay.
          DR. SIMON:  -- would be excellent.  I also want to echo the appreciation for your detailed comments, your calculations, your attempt to quantify.  Qualitative evidence is important.  Quantitative evidence appears to move more regulatory bodies, and I, you know, I state that as a plea to folks who are in the audience who can provide to us some quantifiable burden.
          Saying things are costly is important because then it helps us in our other phases of this study to identify where we need to drill down.  Telling us how costly puts some, not only additional clarity, but some real emphasis on what the burden indeed may be as well as telling us your methods for getting to that point because this is a scientific study and we need to be able to not only measure but to validate and compare.
          So I appreciate efforts to reduce things to numbers that can be reduced to numbers and not to push the techniques beyond where they are indeed applicable.
          And so with that sort of thought, we've reached the noon hour, or for those of us from the East Coast, the middle of the afternoon and we're truly confused.  We're going to take approximately an hour break for lunch in one of any one of the numerous places around here that you probably know better than I do. 
          We're going to reconvene at 1:00 o'clock.  I currently have on my list another five or six individuals who are slated to give comments.  I suspect there are others who have signed up in the meantime.
          If you want to know where you stand on the list, please come see me.  I'd be happy to give you that information.  Otherwise, have a pleasant lunch and I'll see you back here at 1:00 o'clock.  Thanks.
          (Lunch recess)
          DR. SIMON:  Everybody had a pleasant lunch.  I think I'm going to call the afternoon session into order.
          I currently have four more individuals signed up to give testimony this afternoon.  Then what we're going to do is provide about, oh, 15 minutes plus for our panel to comment back on some of the main themes and take-aways that they've distilled from the day's discussion and open it up briefly to any questions that may still exist from before.
          So if that works for you guys, we'll get going.   Okay. 
          I always found it a daunting thing to be the first speaker after lunch, so with that in mind, I'd offer my welcome and my apologies to Keith Pugliese -- is it --
          MR. PUGLIESE:  Pugliese.
          DR. SIMON:  Pugliese, oh, gosh.  I did a terrible job of that.  Keith, if you would introduce yourself.
          MR. PUGLIESE:  Okay.  For this daunting task.  So I am Keith Pugliese.  Good afternoon.  I'm Manager of Compliance and the Privacy Officer of Brown & Toland Medical Group. 
          Brown & Toland is a multi-specialty, independent physician network clinically integrated.  We have approximately 1,500 physicians in our network here in San Francisco.
          I have three main messages that I would like to offer, the first being the HIPAA Privacy Rule currently does not address interoperable electronic health records with particular respect to the use and disclosure of information in an individual's EHR.
          There are potentially multiple different type of models that incorporate interoperable EHRs.  For example, one model of an EHR is used by a provider or used between providers who are rendering care to a patient.  Another model, for example, is sometimes called a personal health record or PHR which would be owned by an individual.  A consumer.
          Additionally, there is discussion about having EHRs integrated with PHRs, trying to have a holistic electronic record from both a provider and patient or consumer viewpoint, all that information in there.
          But generally the idea is for EHRs, PHRs to be portable, that is available to a provider and/or patient wherever the patient is located, whenever the information is needed to be accessed, across a community and across multiple communities, from provider to provider, whether within an organized health care arrangement, quote/unquote, to use a term from the HIPAA Privacy Rule, or outside such an arrangement as determined by the health care needs of an individual.
          Brown & Toland has done due diligence in putting safeguards in place for its own community EHR and PHR as part of its developing San Francisco RHIO, but HHS should please issue guidance to clarify how an interoperable EHR model could be considered sufficiently safeguarded and secure as far as HIPAA's allowances for uses and disclosures of PHI is concerned.  So that was one message.
          Second, many physician organizations are heeding Dr. David Brailer's call to implement health care IT initiatives.  For example, Brown & Toland is spearheading a rollout of its EHR tools and other health care IT tools as part of the developing RHIO I just mentioned to its contracted physicians as well as to other providers in San Francisco Bay area community or what can be considered, to use the HIPAA phrase again, as an organized health care arrangement.
          Brown & Toland's view is that it wants to do what is best for its community providing EHR tools for providers and patients throughout the service area.  There have been those who have called for relaxing Stark provisions, to allow hospitals to implement EHR to physicians.  While this may be necessary in some specific market areas, HHS should note that in many market areas -- I would add particularly in California -- HHS that -- I'm sorry.  I lost my place for a second -- that in many market areas -- sorry.
          HHS should note that in many market areas physician organizations have on their own volition funded and led or are leading the implementation of EHRs and other health care IT tools to their provider community.
          And so there would be no market need to exempt a hospital entity from Stark requirements in those type of areas -- market or service areas.  So if HHS should consider relaxing Stark provisions for the purpose of implementing or supporting or fundi