Medicare Payments for Care Provided in Hospitals and in Extended-Care Facilities

Published by the Government Accountability Office on 1971-03-24.

Below is a raw (and likely hideous) rendition of the original report. (PDF)


Dear Mr       Burke.

       This 1s in response to your letter         of January 15, 1971, enclosing
a copy of a letter     to you from Mr Charles J Kelley, president                 of
Massachusetts Council of Health Care Facllltles,             and requesting       our
comments on his statements        Attached to Mr Kelley's            letter   were
copies of (1) a questlonnalre       which our Boston Regional Offlce recently
sent to selected Medlcare providers         (hospitals    and extended-care         facll-
Ities)    that had voluntarily   terminated      their partlclpatlon        in the
Medicare program and (2) Mr Kelley's           letter   in response to that

        Because we were concerned about the large number of providers
which had terminated         partlclpatlon      in the program--Social      Security
Admlnlstratlon      statlstlcs        showed that, as of June 30, 1969, about
1,000 extended-care         facrlltles      and 500 hospitals    had terminated     their
partlclpatlon     from lnceptlon         of the Medicare program In fiscal        year
1967--we furnished        these questlonnalres         to former providers      The pur-
pose of the questlonnalres             was to obtain their views and comments on
the reasons for tennlnatlng             their partlclpatlon     nn the program and on
the effects    that their termlnatlons            had on the avallabrlrty     of serv-
ices to Medicare beneficiaries              in their locality.
      We are pleased that Mr Kelley reacted favorably     to our approach
of directly  querying providers as to the reasons for therr termlnatlons
from the program and that he provided  us wxth meaningful    comments.

       In his letter    to you, Mr Kelley stated that Medicare payments for
services rendered to patients      in extended-care     facllltles      had decreased
by 75 percent,     whereas payments to hospitals    had continued        to increase
at a rapid rate       He suggested that, in view of these statlstlcs,               It
appeared that Medlcare beneficiaries       were recelvlng        care In hospitals
when they could be cared for in less expensive extended-care               facllltles

      Under the Hospital      Insurance Benefits    for the Aged portlon   of the
Medicare program, an eligible         person aged 65 or over 1s provided     with
basic protection   agaxnst the costs of care provided         by 11) a hospital
during the acute stage of his condltlon          and (2) an extended-care    facnl-
lty when he receives     skilled     nursing care on a continuous    basis for a

                           50TH   ANNlVERSARY       1921-   1971

condltlon      which had been treated more intensively     during a previous        hos-
pital    stay      Benefit payments to hospitals   and extended-care     facllltles
on behalf of eligzble       Medlcare beneflcaarles   are usually made by organr-
zations,     such as Blue Cross plans, operating     under contracts     with the
Social Security Admlnlstratlon         These organrzatlons     are referred       to as
fiscal    lntermedlarres.

         The leglslatlve       history   of the Medlcare program indicates       that the
Congress was concerned that the program be carried out In such a manner
that the patient          would be provided       cJlth necessary hospital  care but
would remain rn the hospital              for only as long as necessary        The legls-
latlve     history     indicates     also that the Congress intended that every
effort     be made to move a patient           from the hospital   to an extended-care
faclllty      which could provide         less expensive care to meet the patlent's
medical needs, such as skilled               nursing care, durzng the period of his

         Mr. Kelley's   belief      that Medicare payments for care provided              to
Medicare beneflclarles            in hospitals    have increased     at the same time that
payments for care in extended-care               facllltles    have decreased IS correct;
however, his estimate           regarding     the extent of the decrease in payments
to extended-care       facllltles,        at least on a national      basis, appears to be
overstated         Data developed by the Social Security Admsnlstratlon                   show
that Medicare payments to hospitals                in fiscal   year 1970 were approxi-
mately $4 4 brlllon         compared mth approximately            $4 2 bllllon     in fiscal
year 1969--an increase of about 5 percent                    Payments  to    extended-care
facllltles     were about $295 mllllon           in fiscal    year 1970 compared mth
about $390 mllllon        in fiscal       year 1969--a decrease of about 24 percent

      One of the most difficult      problems of the fiscal      lntermedlary    In
admlnlsterlng   the Medicare program has been the determlnatlon             of whether
the care provided      to a patient  in an extended-care    facility     1s the type
of care covered by Medicare         Skilled   nursing care provided      In an
extended-care   faclllty    1s covered under the Medlcare program, custodial
care of the type traditionally       provided   in nurszng homes is specifically
excluded by law from Medlcare coverage

       In June 1968 and April 1969, the Social Security Admlnlstratlon                   pro-
vided additional       guldellnes     to fiscal   lntermedlarles       that were intended to
more clearly     define the type of care which IS covered by the Medicare pro-
gram and to dlstingulsh          this type of care from the custodial           type of care
An official    of the Social Security Admlnlstratlon               advised us that the
guidelines    and the efforts        of the rntermedlarles       to implement these guide-
lines were the basic underlying            reasons for the decline in the extent of


utlllzation       of, and payments for services    provided      to Medicare     benefi-
ciarles     in,   extended-care  facllltles  during fiscal       year 1970

       During our reviews of the Medlcare program, we have examrned Into
the controls    exercised by the Social Security Admlnlstratron,                the fiscal
~ntermedlarles,      and the providers       to ensure that patients       remain In hos-
petals and extended-care          facllltles    for only as long as medically         neces-
sary and that patients         receive the appropriate        types of care,      In an
executive    sessxon of the House Ways and Means Committee in March 1970,
which you attended,         we discussed the status of our review of the Social
Security Admlnlstratlon's          controls    over the utlllzatlon      of hospitals     and
extended-care     facilities      by Medicare patients.         We are nearing completion
of that review and expect to submit a report to the Congress in the near
future      A copy of that report knll be furnished              to you.

     As you requested,  we are returning    the correspondence    enclosed with
your letter   We trust that the information     furnished   herein will serve
the purpose of your request

                                             Comptroller  General
                                             of the United States

Enclosures        - 2

The Honorable James A Burke
House of Representatives