Secretary's Advisory Committee on Regulatory Reform; Request for Public Input (67 Federal Register 599), January 4, 2002

Liberty Place, Suite 700
325 Seventh Street, NW
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(202) 638-1100 Phone

Tuesday, March 5th 2002

The Honorable Tommy G. Thompson
Health and Human Services
200 Independence Avenue, SW- Room 615
Washington, DC 20201

Dear Secretary Thompson:

On behalf of our nearly 5,000 member hospitals, health care systems, networks and other providers of care, the American Hospital Association (AHA) welcomes the opportunity to provide suggestions for reducing the regulatory burden imposed on caregivers by the Medicare Program that may inhibit the delivery of high quality, timely, and efficient health care.

We commend you for your outstanding leadership in this area and applaud your creation of an advisory committee on regulatory reform. In your confirmation hearings, you expressed strong views about Medicare's regulatory overload: "Patients and providers alike are fed up with excessive and complex paperwork… Complexity is overloading the system, criminalizing honest mistakes and driving doctors, nurses and other health professionals out of the program." Your commitment to work with hospitals and other health care providers to identify and streamline burdensome regulations will benefit both beneficiaries and caregivers by enabling health care professionals to spend more time with patients and less time on bureaucratic paperwork.

Caregivers are frustrated when these administrative burdens, driven by complex rules and regulations, shift the focus from patient care to paperwork. Last year, the AHA commissioned PricewaterhouseCoopers to survey hospitals about their paperwork experience. The study, which examined a typical episode of care for a Medicare patient suffering from a broken hip, found that physicians, nurses and other hospital staff spend, on average, at least 30 minutes on paperwork for every hour of patient care provided to a typical Medicare patient. Results also showed that in the emergency department, every hour of patient care generates an hour of paperwork. At a time when hospitals face serious workforce shortages, many caregivers cite regulatory burden as a significant negative aspect of their jobs and a major cause of overtime.

The AHA has identified areas where current regulations should be refined and where process reforms are needed to reduce regulatory burden:

I. Streamline the Medicare cost report. As you know, Medicare provider payment methodologies have changed significantly since the advent of the program. Prospective payment methods have replaced cost-based reimbursement for hospital inpatient and outpatient care, skilled nursing facilities, and home health agencies. Unfortunately, little, if any, information has ever been deleted from the cost report since it was introduced to support cost-based payment. Instead, new requirements have simply been added to support newer payment methods. The present Medicare cost report has outlived its usefulness and should be radically redesigned and simplified.

While it is true that the cost report provides some information currently used to make different Medicare payment determinations, it is considerably more complicated and burdensome than required to collect the needed data to calculate those payments. Furthermore, hospitals maintain accounting records using generally accepted accounting principles (GAAP) for financial reporting, operational decision-making, and external reporting to lenders and the business community. Continued reliance on Medicare-specific cost accounting and allocation principles requires hospitals to adjust their GAAP financial data to the arcane rules required for Medicare reporting. There may not be sufficient value to continue this alternate cost accounting method and, clearly, there is no value in continuing the voluminous cost report that it supports. We strongly support the Secretary's steps to reform the cost report by eliminating the separation of capital into old and new capital, as well as eliminating the separate Provider Questionnaire Form 339. We urge the Advisory Committee to continue in the path the Secretary has taken and significantly scale back the cost report and related requirements that are no longer relevant to reimbursement. Also, the potential movement to a less frequent filing requirement (e.g., every two years) for at least some parts of the reporting requirements could reduce administrative burden without any significant limitations on program operations. We refer the Advisory Committee to the Cost Report Reform Proposal that the AHA sent to Secretary Thompson on October 5, 2001. (see Addendum A.)

II. Revise the HIPAA privacy regulation. The AHA supports meaningful medical privacy standards. But the new Health Insurance Portability and Accountability Act (HIPAA) privacy rule is so complex and prescriptive that it's unworkable - or worse - for patients and for hospitals. For instance, the privacy rule as currently written requires hospitals to obtain written consent from patients before care can be scheduled or provided. In order to simply schedule hospital care, patients must wait to obtain a 10-or-more page privacy notice and a separate consent form, read both documents, and sign and return the consent form to the hospital. Obtaining and returning forms is frustrating and burdensome, delaying timely care. To avoid liability for potential or perceived violations, hospitals will feel compelled to require that patients receive a notice and sign a consent form each time they receive care at the hospital.

The AHA recommends that written consent requirements be discretionary, rather than mandatory, to ensure that neither patient care nor essential hospital operations are compromised. As the Department noted in the original Notice of Proposed Rulemaking, requiring individual consent for use of information prior to treatment gives patients little control
over their health information. Most cases will require the patient sign a consent form as a condition of treatment, becoming little more than written verification of notice of privacy practices.

In addition, many of the business associate provisions within the final rule are duplicative, unnecessary and costly to hospitals. Health and Human Services (HHS) should eliminate the requirement that covered entities, such as hospitals, enter into business associate agreements with one another when they need to exchange protected health information (PHI). Hospitals often share PHI with state associations and agencies for important public health and planning purposes. The importance to the community of giving hospitals access to these data cannot be underestimated. Requiring a business associate agreement between the hospital and various entities increases the administrative cost and burden to hospitals without providing additional privacy protections for consumers.

In addition, HHS should streamline the business associate process, whereby hospitals develop agreements with their business associates, by designating private entities to certify business associates as HIPAA compliant. HHS also should create a safe harbor for hospitals and other covered entities to ensure that they are not liable for any violation of the privacy requirements by a certified business associate. Hospitals currently have hundreds or thousands of business associates. Negotiating and entering into new agreements with each one by the compliance deadline will be very costly and an enormous administrative burden for hospitals. Hospital resources should be devoted to patient care and essential operations, not burdensome regulatory requirements.

III. Enable providers to challenge questionable policy actions in court. Expedited access to
court is essential to provide fundamental fairness for hospitals participating in the Medicare program. In Shalala v. Illinois Council on Long Term Care, the Supreme Court held that under section 205(h) of the Social Security Act, incorporated into the Medicare Act by section 1872, claims related to the Medicare statute must go through an administrative process before being brought to court. As a result of that decision and the government's expansive application of the holding, providers are being denied the ability to challenge the legality of actions by HHS that, under other agency statutes, would be subject immediately to review.

The problem with the Court's interpretation is that it continues to permit the HHS to rebuff any and all lawsuits against the Secretary for failing to "channel a claim," even when there is no administrative process available. Except for disputes about reimbursement for individual claims (that are clearly appropriate for the channeling requirement), the only time an administrative process is available to hospitals is if they are terminated from the program. The court's decision does not allow health care providers to challenge the Secretary on policy or other grounds. As currently interpreted, the only means for hospitals to challenge an unlawful action by the Secretary is to fail to follow or "violate" the dictates of the Secretary so severely that they are terminated from the program. For example, when HHS issues a regulation that fails to follow the Administrative Procedures Act or is beyond the scope of the Secretary's authority, Illinois Long Term Care precludes a challenge in court, even though there is no administrative means to challenge the Secretary's policy decision. If the Secretary threatens or attempts to hold providers responsible for not meeting a "policy" that should have been and was not issued as a rule, Illinois Long Term Care precludes the provider from seeking relief in court - again, even though there is no administrative means to challenge the Secretary.

We believe this is fundamentally unfair. We urge the Advisory Committee to recommend to Congress that the Medicare statute be clarified so that when a dispute, unrelated to the specific situation of a provider or beneficiary, challenges the legality of HHS' actions, or of any of the other grounds for court review that currently exist under the Administrative Procedures Act, a hospital or other provider is entitled to bring an action in court.

IV. Prohibit the denial of payment by Fiscal Intermediaries (FI) for emergency services provided to Medicare beneficiaries that are required by the Emergency Medical Treatment and Active Labor Act (EMTALA.) As a participating provider in the Medicare program, a hospital is required to screen any individual who comes to the emergency department, determine whether that person has an emergency medical condition or is a woman in active labor and, if so, to stabilize him or her, as mandated by EMTALA. To adequately screen and stabilize the patient, we are required to employ ancillary services routinely available to the emergency department.

Medicare sometimes denies payment for the services furnished in emergency departments because they exceed the local medical review policies (LMRPs) or utilization guidelines for coverage and frequency established by the local Medicare fiscal intermediaries (FIs). However, hospitals are prohibited from billing beneficiaries for such services unless we notify patients in advance that the service may not be covered, using an advanced beneficiary notice. Conversely, we cannot notify patients in advance because the Inspector General interprets this advance notification of possible non-coverage as a delay in screening and stabilization. Hospitals, caught in a "Catch-22," are often left with an unpaid bill for emergency care. The solution is simple: If hospitals must provide the services, Medicare should pay. We refer the Advisory Committee to an AHA letter sent on September 21, 2001 to CMS Administrator Tom Scully (see Addendum B.) In the letter, we detailed additional EMTALA reform issues, including establishing an EMTALA Advisory Committee; allowing for Administrator-level review of a Regional Office's determination prior to issuing public notice of a hospital's termination from the Medicare Program; and ensuring that EMTALA does not apply beyond the emergency room.

V. Further Streamline the Medicare Secondary Payer Provision. We are pleased that CMS has taken a first step in reducing the burdensome requirement that patients fill out the 25-question Medicare Secondary Payer (MSP) questionnaire every time they come to the hospital for recurring services, such as chemotherapy or blood work. The MSP is intended to identify other insurance coverage a beneficiary might have. CMS has proposed that the questionnaire be completed every 30 days for a recurring therapy and every 60 days in the case of a non-patient (where the hospital has no contact with the patient and only receives a specimen from the patient's doctor.) Altering this to require completion of the MSP every 90 days for recurring services instead of every 30 days would be more than sufficient to capture changes in a Medicare beneficiary's insurance status and would be consistent with the comments Secretary Thompson made at the AHA's annual meeting in April 2001.

Regarding the 60 day requirement for completing the MSP form when hospitals have no direct contact with the patient and are simply being used as a reference lab, hospitals should not be responsible for collecting the MSP information for these patients, just as independent labs performing the same services are not responsible for securing this information.

In addition to these issues, we request that the Advisory Committee consider the following regulatory changes:

VI. Limit data collection to what is necessary for payment and quality. Prospective payment systems should be simple, predictable and fair. Unfortunately, the patient assessment tools for skilled nursing, rehabilitation and home health have been far from ideal. In fact, CMS devised three separate instruments, OASIS, MDS, and MDS-PAC, which have collected much extraneous information, have lacked statistical reliability, and are extremely burdensome. Recognizing the immediate need for reforms in this area, Secretary Thompson and Administrator Scully shelved the MDS-PAC for inpatient rehabilitation facilities, eliminated the MDS requirement for critical access hospital swing beds and significantly streamlined the MDS for non-critical access hospital swing beds. We commend them for these important changes. In the meantime, hospital-based skilled nursing facilities still need relief from the MDS and home health agencies need relief from the excessive burdens and often-irrelevant information requirements imposed by the OASIS assessment tool, which has close to 100 questions and takes roughly 90 minutes to complete on each new patient. We urge the Advisory Committee to review the specific recommendations we made to Secretary Thompson on streamlining the OASIS form as noted in our July 10, 2001 letter followed up by the AHA's September 24, 2001 letter to Administrator Scully focusing on MDS reforms. (see Addendum C).

VII. Coordinate the orderly release of federal regulations to allow for more seamless compliance. Government agencies with jurisdiction over hospitals need to release regulations in a coordinated manner so that implementation does not overwhelm hospital personnel and systems. That means establishing a point of accountability to coordinate regulatory activity across major federal agencies, as well as within HHS. As the predominant federal regulator of hospitals, HHS should periodically evaluate the total effect of regulations applied to health care providers for clarity and consistency regarding expected provider behaviors. As part of this evaluation, we are pleased that Secretary Thompson has ordered a top-down review of all HHS regulations to determine whether they are confusing, conflicting, impose unnecessary costs or penalties, or are simply burdensome.

VIII. Provide interpretive and advisory guidance on Medicare payment requirements. Medicare requirements for provider participation and payment are increasingly voluminous and complex, making compliance difficult, while penalties for compliance failures are increasingly severe. We recommend to the Advisory Committee that CMS establish query mechanisms for individual providers and their associations on the appropriate interpretation or application of Medicare rules in specific situations. CMS' responses should be timely and readily available to others in an easily accessible format, such as an indexed file on the Internet.

IX. Seek greater provider input on new rules and regulations; assess patient impact. We are pleased that the Secretary has taken an active role in seeking greater input from provider groups on rules and regulations. Federal regulators need to become more acquainted with real-world hospital operating environments so that practical implementation issues can be minimized before a regulation goes into place. We support Secretary Thompson's recommendation that CMS pilot test new regulations before requiring implementation nationwide. CMS and the Food and Drug Administration (FDA) should solicit early input from the health care field, and should publish notices of intent; make relevant databases, cost estimates, assumptions, and methodologies publicly available early on; hold field hearings; and conduct site visits. There are significant differences among America's hospitals in their size, complexity and available financial and human resources. Despite their obvious differences in size and roles, a 25-bed rural critical access hospital, a 200-bed community hospital, and a 500-bed teaching hospital all must meet the same requirements in the same way. We urge the Advisory Committee and CMS to test constantly for flexibility in compliance approaches. A "one size fits all" approach is inherently unfair and hits hardest on those least able to hire the additional specialized personnel or expensive consultants needed to respond to the latest regulatory initiatives.

X. Restrict use of interim final rules. CMS has increasingly issued new rules as interim final rules; that is, issued and implemented before the agency takes public comment. To reduce the disadvantages of this approach - which negates the public comment process - CMS should limit its use of interim rules and, when used, issue final rules within a year to ensure that public comments are taken into account on a timely basis.

XI. Republish the 1997 Medicare Hospital Conditions of Participation for comment. The 1985 Hospital Medicare Conditions of Participation (COP) were revised and published as a proposed rule in the December 1997 Federal Register. Since that time, sections of the COPs have been published as final or interim final rules, such as the patient rights standards and organ procurement standards. However, the bulk of the standards have yet to be finalized. While we have a keen interest in updating the remaining proposed standards, the last five years have been marked by considerable advancement in health services research and the science of quality assurance and improvement. As a result, it is vital that CMS revisit the Medicare COPs and publish the remaining standards as a proposed rule with a 60-day comment period. To simply finalize the 1997 proposal, or to continue to apply the 1985 standards (the last time that the COP was published) is not an acceptable position. In addition, any disparities between Medicare COP standards and JCAHO standards should be addressed by CMS, as these incongruencies render accredited hospitals in the untenable position of "serving two masters."

Thank you for the opportunity to share with you some of the regulatory difficulties hospitals face and our suggested solutions. We look forward to working with the Advisory Committee to make the Medicare Program more workable for patients and providers.


Rick Pollack
Executive Vice President



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