oversight

Improved Controls Needed Over Extent of Care Provided by Hospitals and Other Facilities to Medicare Patients

Published by the Government Accountability Office on 1971-07-30.

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

REPORT TO THE CONGRESS




Improved Controlsl Needed
Over Extent Of Care Provided
By Hospitals
And Other Facilities
To Medicare Patients .-            16403(,,,,,,,




Social Security Administration
Department of Health, Education,
  and Welfare

                                                     0

BY THE COMPTROLLER GENERAL
OF THE UNITED STATES
                                                         6
   FILE COPY - COMP GEN
                                    JULY 30, 197 1
               COMPTROLLER GENERAL OF THE UNITED STATES
                          WASHINGTON. D.C. 20548




B- 164031(4)




To the President of the Senate and the
Speaker of the House of Representatives

      This is our report on improved controls needed over
the extent of care provided by hospitals and other facilities
to Medicare patients. This program is authorized by title
XVIII of the Social Security Act (42 U.S.C. 1395) and is ad-
ministered by the Social Security Administration, Department
of Health, Education, and elfare.

       Our review was made pursuant to the Budget and Ac-
counting Act, 1921 (31 U.S.C. 53), and the Accounting and Au-
diting Act of 1950 (31 U.S.C. 67).

      Copies of this report are being sent to the Director,
Office of Management and Budget, and to the Secretary of
Health, Education, and Welfare.




                                      Comptroller General
                                      of the United States




                    50TH ANNIVERSARY 1921-1971
COMPTROLLER GENERAL'S              IMPROVED CONTROLS NEEDED OVER EXTENT OF
REPORT TO THE CONGRESS             CARE PROVIDED BY HOSPITALS AND OTHER
                                   FACILITIES TO MEDICARE PATIENTS
                                   Social Security Administration, Department
                                   of Health, Education, and Welfare
                                   B-164031(4)


DIGEST

WHY THE REVIEW WAS MADE

      Because of congressional concern about rising Medicare costs, the Gen-
      eral Accounting Office (GAO) reviewed the effectiveness of procedures
      established to control the extent of care provided to Medicare patients
      in hospitals and extended-care facilities. This review was made at 41
      hospitals and 49 extended-care facilities in five States.
      Medicare payments for care provided by hospitals and extended-care facil-
      ities increased from $2.5 billion in fiscal year 1967 to $4.7 billion in
       fiscal year 1970.

       The potential significance of controls over the utilization of medical
       services is illustrated by a statement of a former Secretary of the De-
       partment of Health, Education, and Welfare (HEW), in which he estimated
       that Medicare costs could be reduced by as much as $400 million annually
       if each Medicare patient's hospital stay could be reduced by a single
       day.

       GAO was assisted in its evaluation by consulting physicians, some of
       whom were employed by the Social Security Administration (SSA) or its
       fiscal intermediaries and others who represented State medical societies.
       Program description
       Eligible persons aged 65 or over are provided with protection against
       most of the costs of care provided (1)by hospitals during acute stages
       of illness and (2)by extended-care facilities when skilled nursing care
       is required on a continuous basis for a condition previously treated
       more intensively in a hospital.
       SSA has primary responsibility for administering the Medicare program
       for HEW. In turn, HEW has contracted with (1)private organizations,
       called fiscal intermediaries, to assist SSA in reviewing and paying
       benefit claims and (2)the States, to determine the eligibility of
       facilities to participate in the program.




 Tear Sheet                            I              JULY 30, 1 9 7 1
     Legislative history shows that the Congress was concerned that Medicare
     provide necessary care to the patients but that patients remain in the
     hospitals or extended-care facilities only as long as necessary.
     To control the extent and cost of care provided, the Medicare legislation
     stipulated that hospitals and extended-care facilities institute certain
     procedures designed to discourage unnecessary utilization of medical
     services and facilities.
     The Medicare law requires that each hospital and extended-care facility
     participating in the program establish a utilization review committee,
     consisting of at least two physicians, to review the medical necessity
     of admissions, duration of stays, and professional services rendered.
     The Medicare law provides also that, for a patient's stay in a hospital
     or an extended-care facility to qualify for Medicare coverage, his at-
     tending physician must certify, and periodically recertify, that the
     stay is medically necessary.

FINDINGS AND CONCLUSIONS

     GAO found that the review committees helped, to some extent, to reduce
     unnecessary costs which would otherwise have been borne by the Medicare
     program. (See p. 17.)
    GAO also found, however, that efforts of SSA   and the intermediaries had
    not resulted in a full understanding, on the   part of review committees,
    of the limitations on the type of care which   could be provided and paid
    for under the Medicare program. (See pp. 17    to 21.)
    GAO's consulting physicians reviewed the same records--for 1,735 Medicare
    patients--which had been available for examination by the review commit-
    tees. In 465 cases the consulting physicians questioned whether the care
    provided should have been paid for under the Medicare program.
    The questions raised by GAO consulting physicians generally centered
    around the following issues:
       --Whether a hospital patient's condition required hospital care or
         skilled nursing care in an extended-care facility.

      --Whether an extended-care-facility patient's condition required con-
        tinuous skilled nursing care or merely custodial care.
      --Whether the care needed by a patient in an extended-care facility
        or a hospital could be provided on an outpatient basis.
    These issues are ones on which professional judgments may differ.
    Therefore GAO is not in a position to say how many patients should or
    should not have received certain levels of care. These differences in


                                   2
     professional judgment, however, point up a number of significant problem
     areas which require the further attention of SSA in its efforts to
     achieve an effective utilization review function as part of the controls
     exercised over the Medicare program.
     GAO believes that an understanding by the review committees of the levels
     of care which can be covered by Medicare is important so-that the commit-
     tees' consideration of cases can be of maximum assistance to the interme-
     diaries in their determinations of whether the cost of the care should
     be paid for under the Medicare program.
      GAO found other important problems in the manner in which hospitals and
      extended-care facilities had implemented the requirements for utilization
      review and physicians' certifications and in the controls being exercised
      over these functions by SSA, fiscal intermediaries, and State agencies.
      (See pp. 22 to 35.)

     A need exists for SSA to develop clearer and more definite guidelines
     pertaining to the responsibilities of State agencies and intermediaries,
     to ensure compliance with the legislative requirements for utilization
     reviews and physicians' certifications. SSA also should expand its re-
     views of State agency activities, to obtain greater assurance that these
     agencies are enforcing compliance by hospitals and extended-care facili-
     ties with their approved utilization review plans.
      By SSA's taking actions to improve the carrying out of the utilization
      review function and to enforce more effectively the legislative require-
      ments of the Medicare program, fiscal intermediaries would be in a better
      position to identify, on a timely basis, cases involving noncovered care
      to patients under the Medicare program. Such actions may also signifi-
      cantly reduce the Medicare costs. These actions will also reduce the
      incidence of retroactive denials of benefit payments which occur when
      intermediaries discover that noncovered care has been provided.

RECOMMENDATIONS AND SUGGESTIONS

      The Secretary of HEW should arrange for SSA to take the following
      actions.
         --Define more clearly the role of the utilization review committees,
           to make clear that their decisions are essential to the intermediaries
           in determining whether the care provided to patients in hospitals
           and extended-care facilities is covered under the Medicare program.
         --Define the responsibilities of State agencies and intermediaries
           more clearly with respect to (1)monitoring follow-through actions
           taken on the questions raised by review committees and (2)ensuring
           compliance with the legislative requirements regarding review



 Tear Sheet                           3
         committees' activities and physicians' certifications and recertifib
         cations of the necessity for continued care.
       --Establish more appropriate criteria for determining when cases in-
         volving stays in hospitals and extended-care facilities should be
         reviewed by review committees.
       --Provide for increased attention, in SSA's reviews, to whether State
         agencies are doing an adequate job of determining the degree of
         compliance by hospitals and extended-care facilities with their ap-
         proved review plans. (See pp. 37 and 38.)

AGENCY ACTIONS AND UNRESOLVED ISSUES

     HEW agreed that there was a need for SSA, State agencies, and interme-
     diaries to take additional practical measures to foster the role of re-
     view committees as set out in the law. HEW outlined several actions
     which it had taken or proposed to take to improve the utilization re-
     view function. (See pp. 37 and 38 and App. I.)
     HEW officials estimated that, as a result of such actions, Medicare
     costs in fiscal year 1972 would be reduced by about $60 million.

MATTERS FOR CONSIDERATION BY THE CONGRESS

     This report is furnished because of interest expressed by committees
     and members of the Congress in the Government's efforts to provide
     quality medical care to the aged and, at the same time, to curb unnec-
     essary use of institutional care and services under the Medicare program.




                                   4
                          Conte    nt s
                                                           Page

DIGEST                                                       1

CHAPTER

   1       INTRODUCTION                                     5

   2       CONTROLS OVER UTILIZATION OF MEDICAL SERVICES
           UNDER MEDICARE PROGRAM                           9
               Utilization reviews                          9
               Physicians' certifications of need for
                 services                                  13

   3       NEED TO IMPROVE CONTROLS OVER EXTENT OF CARE
           PROVIDED BY HOSPITALS AND ECFs TO MEDICARE
           PATIENTS                                        14
               Benefits derived from utilization review    17
               Problem areas affecting utilization re-
                 view function                             17
               Need for timely follow-through on ques-
                 tions raised by utilization review
                 committees                                 22'
               Differences in extended-duration periods
                 established by providers                   24
               Noncompliance with legislative require-
                 ments of Medicare law                      25

   4       CONCLUSIONS AND RECOMMENDATIONS                  36
               Conclusions                                  36
               Recommendations to the Secretary-of
                 Health, Education, and Welfare             37

   5       SCOPE OF REVIEW                                  39

APPENDIX

   I       Letter dated February 16, 1971, from the
             Assistant Secretary, Comptroller, Depart-
             ment of Health, Education, and Welfare, to
             the General Accounting Office                  43
APPENDIX                                                  Page
      II    Principal officials of the Department of
              Health, Education, and Welfare respon-
              sible for administration of activities
              discussed in this report                    51

                          ABBREVIATIONS

ECF        extended-care facility

GAO        General Accounting Office

HEW        Department of Health, Education, and Welfare

SSA        Social Security Administration
COMPTROLLER GENERAL'S             IMPROVED CONTROLS NEEDED OVER EXTENT OF
REPORT TO THE CONGRESS            CARE PROVIDED BY HOSPITALS AND OTHER
                                  FACILITIES TO MEDICARE PATIENTS
                                  Social Security Administration, Department
                                  of Health, Education, and Welfare
                                  B-164031(4)

DIGEST

WHY THE REVIEW WAS MADE

     Because of congressional concern about rising Medicare costs, the Gen-
     eral Accounting Office (GAO) reviewed the effectiveness of procedures
     established to control the extent of care provided to Medicare patients
     in hospitals and extended-care facilities. This review was made at 41
     hospitals and 49 extended-care facilities in five States.
    Medicare payments for care provided by hospitals and extended-care facil-
    ities increased from $2.5 billion in fiscal year 1967 to $4.7 billion in
    fiscal year 1970.
    The potential significance of controls over the utilization of medical
    services is illustrated by a statement of a former Secretary of the De-
    partment of Health, Education, and Welfare (HEW),.in which he estimated
    that Medicare costs could be reduced by as much as $400 million annually
    if each Medicare patient's hospital stay could be reduced by a single
    day.
    GAO was assisted in its evaluation by consulting physicians, some of
    whom were employed by the Social Security Administration (SSA) or its
    fiscal intermediaries and others who represented State medical societies.
     Program description
    Eligible persons aged 65 or over are provided with protection against
    most of the costs of care provided (1)by hospitals during acute stages
    of illness and (2)by extended-care facilities when skilled nursing care
    is required on a continuous basis for a condition previously treated
    more intensively in a hospital.
    SSA has primary responsibility for administering the Medicare program
    for HEW. In turn, HEW has contracted with (1)private organizations,
    called fiscal intermediaries, to assist SSA in reviewing and paying
    benefit claims and (2)the States, to determine the eligibility of
    facilities to participate in the program.
     Legislative history shows that the Congress was concerned that Medicare
     provide necessary care to the patients but that patients remain in the
     hospitals or extended-care facilities only as long as necessary.
     To control the extent and cost of care provided, the Medicare legislation
     stipulated that hospitals and extended-care facilities institute certain
     procedures designed to discourage unnecessary utilization of medical
     services and facilities.
    The Medicare law requires that each hospital and extended-care facility
    participating in the program establish a utilization review committee,
    consisting of at least two physicians, to review the medical necessity
    of admissions, duration of stays, and professional services rendered.
    The Medicare law provides also that, for a patient's stay in a hospital
    or an extended-care facility to qualify for Medicare coverage, his at-
    tending physician must certify, and periodically recertify, that the
    stay is medically necessary.

FINDINGS AND CONCLUSIONS

     GAO found that the review committees helped, to some extent, to reduce
     unnecessary costs which would otherwise have been borne by the Medicare
     program. (See p. 17.)
     GAO also found, however, that efforts of SSA   and the intermediaries had
     not resulted in a full understanding, on the   part of review committees,
     of the limitations on the type of care which   could be provided and paid
     for under the Medicare program. (See pp. 17    to 21.)
     GAO's consulting physicians reviewed the same records--for 1,735 Medicare
     patients--which had been available for examination by the review commit-
     tees. In 465 cases the consulting physicians questioned whether the care
     provided should have been paid for under the Medicare program.
     The questions raised by GAO consulting physicians generally centered
     around the following issues:
       --Whether a hospital patient's condition required hospital care or
         skilled nursing care in an extended-care facility.

       --Whether an extended-care-facility patient's condition required con-
         tinuous skilled nursing care or merely custodial care.
       --Whether the care needed by a patient in an extended-care facility
         or a hospital could be provided on an outpatient basis.
     These issues are ones on which professional judgments may differ.
     Therefore GAO is not in a position to say how many patients should or
     should not have received certain levels of care. These differences in


                                    2
    professional judgment, however, point up a number of significant problem
    areas which require the further attention of SSA in its efforts to
    achieve an effective utilization review function as part of the controls
    exercised over the Medicare program.
    GAO believes that an understanding by the review committees of the levels
    of care which can be covered by Medicare is important so that the commit-
    tees' consideration of cases can be of maximum assistance to the interme-
    diaries in their determinations of whether the cost of the care should
    be paid for under the Medicare program.
    GAO found other important problems in the manner in which hospitals and
    extended-care facilities had implemented the requirements for utilization
    review and physicians' certifications and in the controls being exercised
    over these functions by SSA, fiscal intermediaries, and State agencies.
    (See pp. 22 to 35.)
    A need exists for SSA to develop clearer and more definite guidelines
    pertaining to the responsibilities of State agencies and intermediaries,
    to ensure compliance with the legislative requirements for utilization
    reviews and physicians' certifications. SSA also should expand its re-
    views of State agency activities, to obtain greater assurance that these
    agencies are enforcing compliance by hospitals and extended-care facili-
    ties with their approved utilization review plans.
    By SSA's taking actions to improve the carrying out of the utilization
    review function and to enforce more effectively the legislative require-
    ments of the Medicare program, fiscal intermediaries would be in a better
    position to identify, on a timely basis, cases involving noncovered care
    to patients under the Medicare program. Such actions may also signifi-
    cantly reduce the Medicare costs. These actions will also reduce the
    incidence of retroactive denials of benefit payments which occur when
    intermediaries discover that noncovered care has been provided.

RECOMMENDATIONS AND SUGGESTIONS

     The Secretary of HEW should arrange for SSA to take the following
     actions.
       --Define more clearly the role of the utilization review committees,
         to make clear that their decisions are essential to the intermediaries
         in determining whether the care provided to patients in hospitals
         and extended-care facilities is covered under the Medicare program.
       --Define the responsibilities of State agencies and intermediaries
         more clearly with respect to (1)monitoring follow-through actions
         taken on the questions raised by review committees and (2)ensuring
         compliance with the legislative requirements regarding review



                                    3
         committees' activities and physicians' certifications and recertifi-
         cations of the necessity for continued care.
       --Establish more appropriate criteria for determining when cases in-
         volving stays in hospitals and extended-care facilities should be
         reviewed by review committees.
       --Provide for increased attention, in SSA's reviews, to whether State
         agencies are doing an adequate job of determining the degree of
         compliance by hospitals and extended-care facilities with their ap-
         proved review plans. (See pp. 37 and 38.)

AGENCY ACTIONS AND UNRESOLVED ISSUES

     HEW agreed that there was a need for SSA, State agencies, and interme-
     diaries to take additional practical measures to foster the role of re-
     view committees as set out in the law. HEW outlined several actions
     which it had taken or proposed to take to improve the utilization re-
     view function. (See pp. 37 and 38 and App. I.)
     HEW officials estimated that, as a result of such actions, Medicare
     costs in fiscal year 1972 would be reduced by about $60 million.

MATTERS FOR CONSIDERATION BY THE CONGRESS

     This report is furnished because of interest expressed by committees
     and members of the Congress in the Government's efforts to provide
     quality medical care to the aged and, at the same time, to curb unnec-
     essary use of institutional care and services under the Medicare program.




                                   4
                         CHAPTER 1

                       INTRODUCTION

     Title XVIII of the Social Security Act (42 U.S.C. 1395),
enacted on July 30, 1965, established the Medicare program
which is administered by the Social Security Administration,
Department of Health, Education, and Welfare. The program
provides eligible persons (beneficiaries) aged 65 or over
with two basic forms of protection against the costs of
health care services.

     One form, designated as Hospital Insurance Benefits for
the Aged (part A), covers inpatient hospital services and
post-hospital care in extended-care facilities (ECFs) and in
patients' homes. Coverage under this act became effective
on July 1, 1966, for care provided by hospitals and on Janu-
ary 1, 1967, for care provided by ECFs. Benefits paid un-
der part A of the program are financed by special social
security taxes collected from employees, employers, and self-
employed persons.

     Over 20 million people are covered under part A of the
program. During fiscal year 1970 about 7,000 hospitals par-
ticipated in the Medicare program and were reimbursed for
costs amounting to about $4.4 billion; about 5,800 ECFs par-
ticipated in the program and received payments totaling
$295 million.

     The second form of protection, designated as the Supple-
mentary Medical Insurance Benefits for the Aged (part B), is
a voluntary program and covers physicians' services and a
number of other medical and health benefits, including hos-
pital outpatient services and certain home care. Benefits
paid under part B of the program are financed from (1) pre-
miums collected from eligible beneficiaries and (2) matching
amounts appropriated from the general revenues of the Federal
Government.

     This report is concerned with-the controls over the ex-
tent of care provided to Medicare patients by hospitals and
ECFs under part A of the program. Pursuant to the Social
Security Act, the Secretary of HEW entered into agreements
(1) with public and private organizations and agencies to

                             5
act as fiscal intermediaries in the administration of bene-
fits under part A of the program and (2) with States, to
determine the eligibility of hospitals and ECFs to partici-
pate in the program.

     Part A of the program provides for eligible beneficiar-
ies to receive hospital care when such care is medically
necessary. Extended-care benefits are provided for when
the patient requires skilled nursing care on a continuous
basis for a condition related to a previous hospital stay.
A patient is eligible to receive extended-care benefits if
he enters an ECF within 14 days following his discharge from
a hospital in which he was confined for at least 3 consecu-
tive days.

     The Congress intended that hospital care would be pro-
vided and paid for under Medicare during the acute stages of
the patient's condition and that less expensive extended
care would be provided during the period of recovery in
which the patient's condition was less acute and did not re-
quire care as intensive as that available in hospitals.

     The concept of extended care, as defined in the Medi-
care law, differs from custodial care of the type tradi-
tionally provided by nursing homes, which is expressly ex-
cluded by law from coverage under the Medicare program. The
Congress intended that the program would cover only high-
quality convalescent and rehabilitative care in an ECF, where
medically appropriate, as an alternative to inpatient hos-
pital care. An ECF is defined in the law as an institution
which, in addition to meeting certain other requirements, is
engaged primarily in providing skilled nursing care and re-
lated services to patients who require medical or nursing
care or rehabilitation services for the rehabilition of in-
jured, disabled, or sick persons.

     In its instructions to Medicare intermediaries, SSA
has described "continuous skilled nursing care" in the fol-
lowing manner:

    "Skilled nursing care includes components which
    distinguish it from supportive care which does not
    require professional health training. One compo-
    nent is the observation and assessment of the

                             6
     total needs of the patient. Another component is
     the planning, organization and management of a
     treatment plan involving multiple services where
     specialized health care knowledge must be applied
     in order to attain the desired result. An addi-
     tional component is the rendering of direct ser-
     vices to a patient where the ability to provide
     the services requires specialized training.

     "In evaluating whether the services required by
     the patient are the continuous skilled services
     which constitute'extended care,' several basic
     principles must be kept in mind:

     "1. Since extended care represents skilled nursing
         care on a continuous basis, the need for a
         single skilled service--for example, intra-
         muscular injections twice a week--would rarely
         justify a finding that the care constitutes
         extended care services.

     "2. The classification of a particular service as
         skilled is based on the technical or profes-
         sional health training required to effectively
         perform or supervise the services. ***

     "3. The importance of a particular service to an
         individual patient does not necessarily make
         it a skilled service. ***

     "4. The possibility of adverse effects from im-
         proper performance of an otherwise unskilled
         service--for example, improper transfer of
         patients from bed to wheelchair--does not
         change it to a skilled service."

     To participate in the Medicare program, a provider of
services (a hospital or an ECF) must meet certain conditions
established by law and regulations of the'Secretary of HEW.
Conditions of participation were included in the law to en-
sure that providers '(1) maintained safe conditions, (2) -had
the facilities and organization to provide adequate and high-
quality care, and (3) discouraged unnecessary utilization of
their services and facilities under the Medicare program.

                             7
     Under agreements with SSA, State agencies make surveys
to determine whether hospitals and ECFs seeking to partici-
pate in the Medicare program meet SSA requirements. State
agencies:also are required to periodically make follow-up
surveys to determine whether facilities continue to meet
these requirements.

     Fiscal intermediaries are responsible for making pay-
ments to providers for covered services furnished to Medi-
care beneficiaries and for serving as a channel of communica-
tion from providers to the Secretary of HEW.




                             8
                        CHAPTER 2

      CONTROLS OVER UTILIZATION OF MEDICAL SERVICES

                 UNDER MEDICARE PROGRAM

     The legislative history of the Medicare program shows
that the Congress was concerned that the program be carried
out in a manner which would provide necessary hospital care
to the patients but, at the same time, that the patients
would remain in hospitals only as long as necessary. To
control the extent and cost of care provided to Medicare
patients, the Medicare legislation provided that hospitals
and ECFs institute certain procedures, to be carried out by
physicians, designed to discourage unnecessary utilization
of medical services and facilities.

     In formulating its regulations for implementing the
procedures, SSA's intention was to provide as much freedom
as possible for hospitals and the medical profession to de-
velop those procedures which were found most suitable and
effective within the context of the structure, organization,
and needs of individual hospitals.

     The primary controls provided for in the Medicare leg-
islation--utilization reviews and physician certification--
are discussed more fully below.

UTILIZATION REVIEWS

     The law provides that, to be eligible to participate
in the Medicare program, hospitals and ECFs have in effect
a plan for utilization review which applies to the services
furnished to Medicare patients. The concept of utilization
review provided for in the law is one in which physicians,
working together and accountable to one another, are required
to evaluate the medical necessity of medical services pro-
vided to Medicare patients in hospitals and ECFs. The rec-
ommendations of private study groups, State and national
medical societies, and State agencies were considered by the
Congress in developing the requirement for such reviews un-
der the Medicare program.



                              9
     To discourage unnecssary utilization of medical ser-
vices, the Medicare law requires that each hospital and ECF
establish a committee consisting of at least two physicians,
referred to as the "utilization review committee," to review
the medical necessity of admissions, duration of stays, and
professional services rendered.

     SSA regulations provide that the physicians serving on
the committee not have a financial interest in the hospital
or ECF and not be involved professionally in the cases to
be reviewed, unless the Secretary of HEW determines that:

     -- Such financial interest is not significant and pre-
        sents no conflict of interest.

     -- Utilization reviews could not be made otherwise be-
        cause of the nonavailability of other physicians.

The Medicare law allows these utilization review committees
to be staffed with physicians from the hospitals' or ECFs'
medical staffs or from external groups of physicians, such
as local medical societies. The law also allows providers
to include on the committees other professional personnel,
such as nurses, social workers, and therapists.

     The committees are responsible for reviewing the neces-
sity of continued care for all Medicare patients who have
been in the institution for an extended period of time (which
may differ for different classes of cases), to determine
whether the patients need to receive further care in the hos-
pital or ECF. Reports of the cognizant Senate and House
legislative committees state that regulations would give the
provider some leeway in determining when the review would
have to be carried out and that the point at which a review
would be most appropriate might vary with the diagnoses and
treatments involved.

     The legislative history of the Medicare program also
indicated that the Congress intended that every effort would
be made to move patients from hospitals to other institu-
tions which could provide less expensive care to meet the
patients' medical needs, such as skilled nursing care during
the period of recovery. In view of the difference iln cost
of care provided in hospitals and ECFs, the Congress intended

                             10
that the possibility of providing needed medical care at
less expensive facilities would be a prime concern of the
utilization review committee.

     SSA estimated the average cost of hospital care during
fiscal year 1970 to be about $62 a day, compared with about
$24 a day for care in an ECF.

     The law authorizes the Secretary of HEW to specify the
number of days of continuous care that should be considered
as an extended period for purposes of utilization review.
The Secretary, however, elected to allow each participating
institution to specify in its utilization review plan the
number of continuous days of hospital or ECF care which
would be considered as an extended-duration period.

     The law and SSA regulations require that the committees
review cases as promptly as possible after the extended-
duration period and no later than 1 week following such pe-
riod. For example, if the extended-duration period estab-
lished by a provider is 30 days, a case must be reviewed
after the 30th day, and no later than the 37th day, from the
date that the patient was admitted.

     The Medicare law further provides that utilization re-
view committees review Medicare cases, other than those
which have received care for extended periods, to evaluate
the medical necessity for (1) admissions of patients to the
institutions for care, (2) the services being provided to
the patients, and (3) lengths of patients' stays in the in-
stitutions.

     As stated in the Medicare law, the objective of this
review of cases, on a sample or other basis, is to promote
the efficient use of services and facilities. Statistical
and other data obtained from the cases selected for this
review, referred to by SSA and elsewhere in this report as
a'sample review," are to serve as a basis for formulating
appropriate criteria for use in evaluating the medical neces-
sity of services provided by the institution.

     Medicare regulations indicate that sample reviews are
expected to give particular attention to the identification
and analysis of patterns of care which may indicate the
possibility of inappropriate utilization of medical services.
     Medicare regulations provide that, if the utilization
review committee determines--after an opportunity for con-
sultation is given to the patient's attending physician--
that further stay in the institution is not medically nec-
essary or that the needed care can be provided in other fa-
cilities at less cost, it must provide prompt written noti-
fication to the institution, the patient, and his attending
physician. Prompt notification is defined as being within
48 hours of the committee's determination.

      Payment under Medicare may not be made for more than
3 days of hospital orECF care provided after the date that
the notice is received by the institution. In billing the
fiscal intermediary for patient care, the hospital or ECF
is required to show, where applicable, the date that it re-
ceived notification from the utilization review committee
that further inpatient stay was no longer medically neces-
sary.

     An important benefit of effective utilization review
would be to help limit Medicare coverage during the patient's
stay in the hospital or ECF to the care authorized under
the program and thus to minimize retroactive denials of pay-
ments to these institutions, which occur when it is subse-
quently discovered by fiscal intermediaries that unnecessary
care or an inappropriate level of care has been provided.
Retroactive denials can work hardships on hospitals and ECFs
in cases in which they cannot collect from the patients and
on the patients if they have to pay substantial amounts for
care that they believed was covered under the Medicare pro-
gram.

     Various organizations participating in the administra-
tion of the Medicare program have a role in implementing
the concept of utilization review. State agencies have the
basic responsibilities for (1) determining whether providers
have developed an acceptable plan for utilization review and
(2) verifying, through on-site visits, that the utilization
review committees are operating in accordance with the plan.

     The fiscal intermediaries are responsible for determin-
ing whether services provided to patients are covered under,
the Medicare program and for making payments to providers
for such services. The intermediaries are responsible also


                             12
for assisting hospitals and ECFs in the identification and
evaluation of factors which impair effective utilization
review. SSA instructions point out the necessity for fiscal
intermediaries, in carrying out their responsibilities, to
work closely with an institution's medical staff and admin-
istrative personnel and with State agencies.

PHYSICIANS' CERTIFICATIONS
OF NEED FOR SERVICES

     The Medicare law provides that, for a patient's stay
in a hospital or an ECF to be covered under Medicare, his
attending physician must certify that the stay is medically
necessary.

     Prior to January 1, 1970, SSA regulations required a
physician's statement regarding the necessity of inpatient
hospital care on or before the 14th and 21st days after ad-
mission and at least every 30 days thereafter. (Effective
January 1, 1970, SSA regulations changed the requirements
for the first two certifications to the 12th and 18th days.)

     For a patient's stay in an ECF to be covered under
Medicare, the law provides that the attending physician cer-
tify on, or soon after, admission that skilled nursing care
on a continuous basis is necessary for a condition related
to a previous hospital stay.

     Medicare regulations require physicians to recertify
the necessity of the patient's remaining in the ECF by the
14th day and at least every 30 days thereafter. At the
time of each certification, the physician is required to
document (1) the reasons why the patient must continue to
stay in the ECF, (2) the estimated period of time that the
patient will need to remain in the ECF, and (3) any plans,
where appropriate, for medical care after discharge from the
ECF. Claims submitted to intermediaries are required to
disclose whether the physicians' certification and recertifi-
cation statements are on file at the hospital or ECF for
verification by the fiscal intermediary.

     Although the hospital or ECF is required to obtain
timely physician certifications and recertifications, SSA
regulations provide that delayed statements may be honored in
certain instances, if the delays are justified in writing.

                             13
                        CHAPTER 3

       NEED TO IMPROVE CONTROLS OVER EXTENT OF CARE

   PROVIDED BY HOSPITALS AND ECFs TO MEDICARE PATIENTS

     The purpose of our review was to evaluate the effec-
tiveness of the procedures established under the Medicare
program for controlling the extent of care provided to
Medicare patients by hospitals and ECFs. The potential
significance of effective controls over the utilization of
medical services is illustrated by a statement of a former
Secretary of HEW, in which he estimated that Medicare costs
could be reduced by as much as $400 million annually if
each Medicare patient's hospital stay could be reduced by a
single day.

     In our evaluation we were assisted by consulting phy-
sicians, some of whom were employed by SSA or intermedi-
aries and others who represented State medical societies.

     Our review at 41 hospitals and 49 ECFs in five States
showed that the utilization review function served a useful
purpose and helped, to some extent, to reduce unnecessary
costs which otherwise would have been borne by the Medicare
program. Actions taken by the utilization review commit-
tees at the hospitals and ECFs that we visited contributed
to timely discharges of many patients who no longer re-
quired the care provided by those institutions.

     We found, however, that significant problems existed
in the manner in which providers implemented the require-
ments for utilization reviews and physicians' certifica-
tions and in the controls being exercised over these func-
tions by SSA, intermediaries, and State agencies. Specifi-
cally we found that:

     -- Efforts of SSA and the intermediaries had not re-
        sulted in a full understanding, on the part of the
        committees, of the limitations on the type of care
        which properly could be covered by the Medicare
        program and of the importance of the committees'
        reviews in the intermediaries' determinations of


                            14
      whether the cost of care provided should be paid for
      by the Medicare program.

    -- In many instances the committees did not act timely
       in consulting with the patients' attending physi-
       cians and in preparing written notices to parties
       affected by the committees' decisions.

    -- In some cases where written notices were given to
       the affected parties that the care provided was un-
       necessary, the providers' administrative staffs
       either did not report the information on the bil-
       lings to the intermediary, contrary to SSA regula-
       tions, or reported it incorrectly.

    --The criteria established by the hospitals and ECFs
      governing the time when individual cases were to be
      reviewed by committees varied widely and seemed to
      bear little relationship to the diagnosis or condi-
      tions for which the patients were receiving hospital
      or extended-care services.

    -- The reviews often were not made at the times speci-
       fied in the providers' utilization review plans and
       within the time limitations established by the Medi-
       care law.

    -- The committees did not review many of the extended-
       duration cases which, according to the providers'
       utilization review plans and the Medicare law,
       should have been reviewed.

    -- Several providers were not making sample reviews as
       required by law and SSA regulations.

    -- In several instances payments were made for care
       provided, although physicians' certifications and
       recertifications of the need for care in hospitals
       and ECFs were not on file or properly completed,
       contrary to law and SSA regulations.
     We believe that there is a need for SSA to prepare
more definite guidelines (1) concerning what utilization
review committees are expected to do and the nature of

                           15
determinations needed from the committees to allow fiscal
intermediaries to determine whether the services are cov-
ered under Medicare and (2) to more clearly explain to
State agencies and intermediaries their intended roles in
monitoring the activities of the committees.

     HEW agreed that there was a need for SSA, State agen-
cies, and intermediaries to take additional practical mea-
sures to foster the role of utilization review committees
set out in the law, and HEW outlined several actions which
it had taken or proposed to take to improve the utilization
review function. (See app. I.) HEW officials estimated
that, as a result of such actions, Medicare costs in fis-
cal year 1972 would be reduced by about $60 million.




                           16
BENEFITS DERIVED FROM UTILIZATION REVIEW

     At 31 of the hospitals and at the 49 ECFs included in
our review, we obtained statistics that showed the results
of actions taken by the utilization review committees during
fiscal year 1969. The committees at these 31 hospitals ex-
amined about 14,200 cases and raised questions concerning the
need for the continuation of hospital care in about 550 cases.
The actions of these committees contributed to the prompt
discharge of about 250 patients from the hospitals. Utiliza-
tion review committees at the 49 ECFs examined about 6,000
cases and questioned the need for continued care in about
500 of the cases, which contributed to about 400 patients
being discharged promptly.

     We also noted that one intermediary which serviced ECFs
throughout the nation had compiled statistics showing that,
for about 1,000 ECFs which it served, the number of stays
terminated as a result of utilization review committee de-
cisions increased from 6.3 percent in 1968 to 8.2 percent
in 1969, while the average length of stay in these ECFs de-
clined from about 50 days to about 43 days during the same
period.

     In our opinion, by helping to eliminate unnecessary
care provided by hospitals and ECFs, committees have contri-
buted to reductions in costs which otherwise would have been
borne by the Medicare program and by the patients.

PROBLEM AREAS AFFECTING
UTILIZATION REVIEW FUNCTION

     To assist us in evaluating the effectiveness of the
utilization reviews, our consulting physicians reviewed the
medical records for 1,735 extended-duration Medicare cases
which we selected at random and gave us their professional
opinions as to whether the care provided was medically nec-
essary. The 1,735 cases included 1,003 ECF patients and
732 hospital patients at 49 ECFs and 41 hospitals in five
States. From their reviews of the same medical records which
had been available for examination by the providers' utiliza-
tion review committees, our consulting physicians questioned
in 465 cases whether the care provided should have been paid
for under the Medicare program. Of the 465 cases, 351 had


                              17
also been reviewed, but not questioned, by the providers'
utilization review committees.

     The questions raised by our consulting physicians, which
were referred to the intermediaries for their consideration
and disposition as they determined appropriate, generally
centered around the following issues:

     -- Whether a hospital patient's condition required hos-
        pital care or skilled nursing care in an ECF.

    -- Whether an ECF patient's condition required continuous
       skilled nursing care or merely custodial care.

     -- Whether the care needed by a patient in an ECF or a
        hospital could be provided on an outpatient basis.

     We recognize that these issues are ones on which pro-
fessional judgments may differ. Therefore we are not in a
position to say how many patients should or should not have
received certain levels of care. We believe, however, that
these differences in professional judgment point up a number
of significant problem areas which require the further at-
tention of SSA in its efforts to achieve an effective uti-
lization review function as part of the controls exercised
over the Medicare program. These and other problem areas
are discussed in the following subsections of this chapter.




                            18
Determination that patient needs
continuous skilled nursing care

     One of the most difficult problems of the fiscal inter-
mediary, in administering the Medicare program, has been to
determine whether the care provided to a patient in an ECF
is the type of care covered by Medicare.

     The Medicare law provides that post-hospital, extended-
care services be covered by the Medicare program when the
individual needs or needed "skilled nursing care on a con-
tinuing basis" for treatment of a condition or conditions
(1) for which the beneficiary was receiving inpatient ser-
vices prior to transfer to the facility or (2) which arose
while receiving extended care for treatment of a condition
or conditions for which he was receiving inpatient hospital
services.

     The Congress intended that the program would cover high-
quality convalescent and rehabilitative care in an ECF,
where medically appropriate, as an alternative to inpatient
hospital care. Custodial care of the type traditionally
provided in nursing homes, however, is excluded specifically
by law from Medicare coverage.

     In their review of the medical records of 1,003 ECF
patients, our consulting physicians were of the opinion
that, in 354 cases, the patients did not require continuous
skilled nursing care during a part of the patients' stays
(or for their entire stays) in the ECFs. The consulting
physicians questioned whether about 26,000 days of care pro-
vided to these 354 patients should have been paid for under
the Medicare program.

     In determining whether care provided in an ECF should
be paid for under the Medicare program, the fiscal interme-
diary has to determine whether the care provided was contin-
uous skilled nursing care, rather than a lower level of
care--such as custodial care. The findings of a utilization
review committee that the patient does not require continu-
ous skilled nursing care is useful to the intermediary in
determining whether the program should pay for the care pro-
vided.


                             19
     Intermediary officials advised us that committees often
did not understand that their role included making determi-
nations which would serve as a basis for the intermediary
in deciding whether the care provided was covered by the
program and that the committees often did not understand
that certain levels of care--although medically necessary--
were not covered under the program. SSA regional officials
and intermediary officials stated that committee members
often did not have a clear understanding of the definition
of continuous skilled nursing care.

Use of hospitals v. ECFs

     Another problem confronting the intermediaries and the
providers in their participation in the program is the con-
sideration of whether the patient's condition requires con-
tinued inpatient hospital care or whether the needed care
could be provided in ECFs at a lower cost.

     The legislative history of the Medicare program shows
that, although the Congress was concerned that necessary
hospital care should be provided to patients, the Congress
also intended that every effort would be made, at the appro-
priate time, to move patients from hospitals to other insti-
tutions which could provide less expensive care to meet the
patients' medical needs, such as skilled nursing care dur-
ing the period of recovery.

     In their review of the medical records for 732 hospital
patients, our consulting physicians were of the opinion that
in 98 cases the condition of the patients did not require
acute care during a portion of the patients' stays (or for
their entire stays) in the hospital and that the needed care
could have been provided in ECFs at less cost. In those 98
cases the consulting physicians questioned whether the Medi-
care program should have paid for 3,000 days of hospital
care provided to those patients.

     When a patient's medical needs can be adequately met in
an ECF, rather than in a hospital, the use of an ECF genera
ally offers significant cost advantages to the Medicare pro-
gram.



                            20
Inpatient v. outpatient care

     On the basis of their review of the medical records for
our entire sample of 1,735 hospital and ECF cases, our con-
sulting physicians were of the opinion that in 13 cases the
condition of the patients did not require inpatient care in
either an ECF or a hospital. These patients received about
1,000 days of inpatient care which our physicians questioned.
With respect to these cases, the physicians were of the
opinion that the needed care could have been provided on an
outpatient basis.

     The committees' surveillance over the determination
that inpatient care is necessary has significant implica-
tions from a program cost viewpoint and is also relevant to
the problem of shortage of hospital beds, which is being en-
countered in many areas of the country.



     HEW advised us that the decisions of utilization review
committees were essentially medical determinations made by
staff accountable to the providers for the purpose of ensur-
ing proper utilization of their respective inpatient facili-
ties and that the decisions having Medicare implications
were essentially the by-product of the medical determination.

     In our opinion, an understanding by the committees of
the levels of care which can be covered by Medicare is im-
portant so that the committees' consideration of cases can
be of maximum use to the intermediaries in their determina-
tions of whether the cost of the care should be paid for
under the Medicare program.




                               21
NEED FOR TIMELY FOLLOW-THROUGH ON QUESTIONS
RAISED BY UTILIZATION REVIEW COMMITTEES

     We found that, in many cases, neither utilization re-
view committees nor the administrative staff at hospitals
and ECFs had taken timely action to follow through on cases
questioned during utilization review committee meetings.
The questions raised by the committees involved (1) the
medical necessity of continued stays in the facility, (2)
the possibility of providing needed care at other facilities
at less cost, or (3) the further need for continuous skilled-
nursing services.

     At the 49 ECFs included in our review, utilization re-
view committees examined more than 6,000 Medicare cases
during fiscal year 1969 and raised questions on the neces-
sity for continued care for about 500 of them, which con-
tributed to about 400 of these patients being discharged on
a timely basis. The utilization review committees at 31 of
the 41 hospitals included in our review examined medical
records of more than 14,000 Medicare patients during fiscal
year 1969 and raised questions on the necessity for con-
tinued hospitalization for about 550 of them, of which about
250 were discharged on a timely basis.

     We found, however, that about 220 of these 400 hospital
and ECF patients who remained in the institution under Medi-
care coverage did so for periods ranging from 6 to 81 days
after the committees had questioned the medical necessity
for the care being provided or the appropriateness of the
level of care provided. Medicare costs for this continued
care totaled about $35,000.

     Our review showed that the patients remained in the in-
stitutions under Medicare coverage after committees had
questioned the medical necessity of the care provided be-
cause:

    -- The utilization review committees did not always con-
       sult promptly with the attending physicians after they
       questioned the need for the patients to stay in the
       institution. The time elapsed before consultation,
       in the cases we sampled, ranged from a few hours to
       about 2 weeks.

                             22
     -- When committees had reached a decision, they seldom
        issued written notices to the affected parties of
        their determination, contrary to SSA regulations.
        The regulations define prompt notification as written
        notices to the provider, patient, and attending phy-
        sician within 48 hours of the utilization review com-
        mittee's determination that further inpatient stay
        is no longer medically necessary.

     -- Even when written notices were prepared, the hospi-
        tals and ECFs often did not record the information
        on the billing form to the intermediary, contrary to
        SSA regulations, or often recorded it erroneously.
        As a result, the intermediary often did not have
        timely information about the committees' determina-
        tions that would enable it to limit payments.

     Intermediary, State, and SSA regional officials advised
us that the SSA guidelines pertaining to written notifica-
tions by utilization review committees did not specify the
period of time allowed for consultation with the attending
physician before preparing a written 48-hour notification.
We noted instances in which about 2 weeks elapsed between
the time that a committee questioned a case and the time
that it prepared a written notification of its finding.

     We found that, in their survey of providers' compliance
with conditions of participation, State agencies had not
put much emphasis on utilization review requirements. The
absence of guidance regarding the time period allowed for
consultation with attending physicians and the lack of em-
phasis on utilization review requirements have resulted in
State agencies not disclosing to SSA that hospitals and
ECFs are not complying with law and regulations pertaining
to timely decisions as to whether continued care is medi-
cally necessary.

     We believe that SSA should consider defining more
clearly the responsibilities of State agencies and interme-
diaries for monitoring actions taken by utilization review
committees and administrative staff at hospitals and ECFs in
following through on questions raised by utilization review
committees. By SSA's taking these actions, intermediaries
would be in a better position to identify, on a timely basis,
cases where institutional care is no longer medically neces-
sary and to terminate Medicare coverage.

                             23
DIFFERENCES IN EXTENDED-DURATION
PERIODS ESTABLISHED BY PROVIDERS

     We examined the utilization review plans of 682 hospi-
tals and 1,039 ECFs serviced by the eight intermediaries in-
cluded in our review. The hospitals' extended-duration pe-
riods ranged from 7 to 90 days, and those of the ECFs ranged
from 6 to 100 days. The periods most frequently used were
21 days for hospitals and 30 days for ECFs. The periods
used and the number of hospitals and ECFs using these pe-
riods are shown below.

     Extended-duration      Number of      Number of
       period (days)        hospitals        ECFs

           1 to 7                  8            3
           8 to 14               135           26
          15 to 21               279           48
          22 to 30               130          692
          Over 30                 26          211
          Variable               104           59

              Total              682        1,039

     Officials of 35 of the 41 hospitals and of 48 of the
49 ECFs included in our review told us that their extended-
duration periods had been established on one or more of the
following bases: (1) arbitrarily without regard to medical
factors, (2) consistent with local or prevailing institu-
tional practices, (3) at the suggestion of State agencies or
other external groups, and/or (4) for reasons unknown by
present officials due to management changes.

     We also were advised that four hospitals used extended-
duration periods which varied depending upon the diagnoses
of the patients' conditions and that two hospitals and one
ECF used periods which were based on the average length of
stay or on other medical factors. Officials--including phy-
sicians--of State agencies, intermediaries, and SSA re-
gional offices advised us that extended-duration periods
would be most meaningful if related to the diagnoses of the
patients' conditions and the normal length of stay required
to recover.


                            24
     We believe that consideration should be given to es-
tablishing extended-duration periods which vary depending
upon the diagnoses of the patients' illnesses and the treat-
ments involved. We believe that this would be consistent
with the law which recognizes that the extended periods can
vary for different classes of cases.

     Intermediary officials advised us that there was a
lack of adequate and meaningful data regarding utilization
of services. Although SSA instructions provided that SSA
furnish the intermediaries and providers with statistical
profiles on Medicare cases, such data had not been developed
at the time that our fieldwork was completed. Subsequently
SSA initiated a program for presenting comparative data on
lengths of stays for Medicare patients discharged from short-
stay hospitals and began releasing the data to the interme-
diaries and providers in a series of reports.

     HEW advised us in February 1971 that it was hopeful
that this program would accelerate progress toward the goal
of developing uniform criteria for determining when a pa-
tient's case should be reviewed by a utilization review com-
mittee on the basis of the individual diagnosis and other
pertinent medical factors. (See app. I.)

NONCOMPLIANCE WITH LEGISLATIVE REQUIREMENTS
OF MEDICARE LAW

     Our review showed a number of instances where providers
were not complying with the legislative requirements regard-
ing (1) reviews of extended-duration cases by utilization
review committees, (2) sample reviews by utilization review
committees, and (3) certification by physicians that care
provided by hospitals and ECFs to Medicare patients was
necessary.

Noncompliance with requirement
concerning frequency of reviews
of extended-duration cases

     Medicare legislation requires that each provider have
in effect a utilization review plan which provides that
each extended-duration case be reviewed no later than
1 week following the last day of the extended-duration

                             25
period. SSA instructions provide that the review of each
extended-duration case be made during a specific 7-day pe-
riod beginning with the day that the case reaches the de-
fined extended-duration period and ending 7 days there-
after.

     To determine whether such reviews were being made as
required, we selected a sample of about 1,860 hospital cases
and about 1,490 ECF cases, which should have been reviewed
by the committees. We found that 397 of these hospital
cases and 401 of the ECF cases had not been reviewed within
1 week following the extended-duration period. In addition,
372 of the hospital cases and 284 of the ECF cases had not
been reviewed at all.

     ECF cases were not being reviewed within 1 week follow-
ing the extended-duration period because the committees were
not meeting often enough. For providers that admitted pa-
tients daily, the utilization review committee would be re-
quired to meet every 7 days to ensure timely review of all
extended-duration cases. Our review showed that none of the
committees at the 49 ECFs included in our review met every
7 days and that committees at only 11 ECFs met more often
than once a month.

     We were told by intermediary and ECF officials that the
ECF committees did not meet more frequently because, in most
cases, the physicians serving on the committees found it dif-
ficult to arrange their schedules for more frequent meetings.

     Committees at most of the hospitals were meeting at
least monthly to review cases, although they generally were
not meeting frequently enough to ensure that all extended-
duration cases were reviewed within the 7-day period. Con-
sequently, in accordance with SSA instructions, most of the
hospitals had established subcommittees of staff physicians
to review extended-duration cases between full committee
meetings. Even when providers used subcommittees, we noted
instances where cases had not been reviewed on a timely
basis or had not been reviewed at all because of clerical
oversight.

     Effective June 1970 SSA allowed an optional method of
reviewing cases at hospitals having 75 beds or less, which

                             26
have extended-duration periods no longer than 21 days, and
at ECFs which have extended-duration periods no longer than
30 days. Under this method committees must meet at least
every 21 days at hospitals and every 30 days at ECFs and
must review the cases of every Medicare patient in the fa-
cility at the time of the meeting, including those who have
not yet reached the period of continuous extended duration
and those who have already been reviewed at previous meet-
ings. SSA instructions also provide that special studies
should be made of the medical records of patients who have
been discharged.

     Under the optional method the timing of the review of
current cases is dependent upon the relationship between the
admission date of the patient and the date of the next com-
mittee meeting. For example, in an ECF with an extended-
duration period of 30 days, the case of a patient admitted
the day before the scheduled committee meeting would be re-
viewed after 1 day of stay, whereas the case of a patient
admitted the day after the committee meeting would not be
reviewed until after 29 days of stay.

     SSA officials advised us that the optional method rec-
ognized the actual practice of convening committees on a
monthly basis and attempted to get maximum benefit from uti-
lization review, given the operating realities at these
small institutions.




                            27
Noncompliance with requirement
for sample reviews

     The Medicare law and SSA regulations require that each
hospital and ECF have in effect a utilization review plan
which provides for a review of cases--in addition to the
review of extended-duration cases--on a sample or some
other basis to evaluate the medical necessity for (1) ad-
missions of patients to the institution for care, (2) ser-
vices being provided to patients, and (3) lengths of pa-
tients' stays in the institution. As stated in the Medi-
care law, the objective of the sample review is to promote
the efficient use of services and facilities.

     SSA regulations and instructions provide that:

     -- Such sample reviews be specific studies, usually
        conducted from the medical charts of discharged pa-
        tients, which give particular attention to the iden-
        tification and analysis of patterns of care for
        groups of patients.

     -- At any given time some study by the utilization re-
        view committee be in process.

     -- The utilization review committee select a study ob-
        jective that simultaneously encompasses all three
        areas required by law to be reviewed (admissions,
        lengths of stays, and services provided) or covers
        only one facet at a time, such as whether patients
        in a particular diagnostic category are discharged
        at appropriate time intervals.

     -- Once a study objective has been selected, the com-
        mittee select the criteria that they believe repre-
        sents optimum care, analyze the data, and report to
        the institution's entire medical staff their con-
        clusions and recommendations for changes in the pat-
        terns of care, where indicated.

     We found that sample reviews were not being made at
four of 41 hospitals and at 13 of 49 ECFs included in our
review. Sample reviews at the remaining hospitals and ECFs
generally were limited to evaluations of care provided to

                            28
individual patients but were not directed to the analysis
of trends and patterns affecting the overall quality of
patient care in the institution.

     Officials of SSA regional offices, intermediaries,
and some hospitals and ECFs stated that they did not be-
lieve that the SSA requirements for sample review were
clear or that the value of such reviews had been demon-
strated, particularly for small ECFs where the cases of
all the patients were reviewed.

     For example, a physician member of a county medical
society performing utilization review for about 40 ECFs,
including one of the 13 included in our review that was not
performing sample reviews, told us that he believed that
there was no value in making sample reviews and developing
statistics for each ECF, because most facilities had very
few Medicare patients, the medical conditions of most ECF
patients were similar, and the clerical expense of develop-
ing statistical reports would not be justified by any ap-
preciable benefit to the patients or the facilities.

     Hospital officials and utilization review committee
personnel at eight hospitals in one State advised us that
they were not studying patterns of patient care for one or
more of the following reasons.

     -- Medicare patient loads were not high enough to war-
        rant sample studies.

     -- The committees did not have adequate time to make
        studies.

     -- Other hospital committees had made similar studies.

     -- Utilization review committees were unclear on how
        sample review regulations were to be interpreted or
        how patterns of care were to be defined.

     State agency officials told us that they were unable
to evaluate providers' compliance with sample-review re-
quirements because SSA had not provided specific require-
ments or criteria concerning matters, such as sample sizes,
sample objectives, or documentation. Consequently the

                            29
State agencies reported to SSA that these institutions were
complying with sample-review requirements if a hospital or
ECF merely had a written plan for conducting sample reviews
or was reviewing any cases other than extended-duration
cases.

     An SSA regional official informed us that the defini-
tion of an acceptable sample review had not been entirely
resolved and that he believed that professional scrutiny
of individual cases, which did not also use the cases as a
basis for developing criteria for use in evaluating the
medical necessity of services provided by the institution,
would be inadequate.




                           30
Noncompliance with legislative
requirement for physicians' certifications

     The Medicare legislation provides that payment for ser-
vices furnished to beneficiaries be made only if the pa-
tients' attending physicians certify (and recertify, in ac-
cordance with regulations, where services are provided over
a period of time) that the stays in hospitals or ECFs are
medically necessary.

     The regulations stipulate that the provider of services
(a hospital or an ECF) is responsible for obtaining the re-
quired physicians' certification and recertification state-
ments and is to certify on the billing form submitted to the
intermediary that the required certification and recertifi-
cation statements have been obtained and are on file for ver-
ification by the intermediary. This certification by the
provider and other information on the billing, such as the
diagnosis of the patients condition, period of stay, and
types of treatments provided, are used by the intermediary
to determine whether the care is covered by Medicare.

     The regulations provide that each certification and
recertification statement be signed by the physician respon-
sible for the case or by another physician having knowledge
of the case. These statements may be entered on, or included
in, forms, notes, or other records used by physicians or on,
separate forms.

     Physicians' certifications that care provided to Medi-
care patients is necessary are an important element in the
intermediaries' determination that the medical care is neces-
sary and can be paid for by Medicare. An SSA study completed
in January 1969 showed that hospital discharges were signif-
icantly greater on the days that certifications and recerti-
fications where required than on other days.

     We found a number of cases in which payments had been
made to providers for medical care for which the required
physicians' certification and recertification statements
were not on file or were not signed by the attending physi-
cians.




                             31
     Our review of the providers' records for 1,612 ECF pa-
tients and 2,006 hospital patients showed that:

     -- Of 5,579 certification and recertification state-
        ments which were required by the regulations for the
        ECF patients, 728 statements were not on file. An
        additional 12 statements were on file but had not
        been signed by the attending physicians.

     -- Of 4,574 certification and recertification statements
        which were required by regulations for the hospital
        patients, 273 were not on file. An additional 52
        statements were not signed by attending physicians.

     It should be noted that, under the requirements for
periodic recertifications, several certifications may be re-
quired for a given patient. For the 1,612 ECF patients and
2,006 hospital patients, certification and/or recertifica-
tion statements were on file for 94 percent and 96 percent,
respectively, for at least some part of the patients' stays
in the institutions.

     Although the hospital or ECF is expected to obtain
timely physician certifications or recertifications, the
law and regulations provide that intermediaries may accept
delayed statements, in certain instances, if the hospital
or ECF justifies the delay in writing.

     Our reviews of the providers' records were made from
6 to 18 months after the care had been provided to the pa-
tients at these hospitals and ECFs. We do not know the ex-
tent to which certification and recertification statements
were obtained subsequent to our review.

     Our review of the certification and recertification
statements on file showed that 642 of the statements at ECFs
had not been completed within the time required by the reg-
ulations and SSA guidelines; at the selected hospitals 341
of the statements had not been completed on a timely basis.
The statements which had been prepared late generally in-
cluded no explanation for the lateness.

     The regulations require that the physicians' certifica-
tion and recertification statements must evidence in writing

                            32
(1) the reasons for continued hospital or ECF care, (2) the
estimated period of time the patient will need to remain in
the facility, and (3) any plans, where appropriate, for care
after discharge from the hospital or ECF.

     At 31 of the 41 hospitals and at the 49 ECFs included
in our review, the reasons for continued stay were not dis-
closed on certifications or recertifications or otherwise
referenced to information in other records in 190 of 3,113
hospital statements and in 503 of 4,851 ECF statements that
were on file.

     Sometimes the certification and recertification state-
ments also did not give estimates of additional care or did
not indicate whether post-hospital or ECF care had been con-
sidered. For example, our review of 633 recertifications
required for selected cases at 16 ECFs in one state showed
that 136 recertifications did not include estimates of the
additional time the patient would need to remain in the fa-
cility and that 385 did not disclose plans for further care
following the ECF stay.

     Some intermediary officials told us that they did not
strictly enforce the requirements for estimated additional
stay and plans for home care, because (1) a physician's
reasons for continued care would seem to indicate that he
had given consideration to the additional stay needed by
the patient and (2) plans for home care was an optional re-
quirement, as evidenced by the statement in SSA regulations
that they should be included where appropriate.

     Although the law provides that payments be made to hos-
pitals and ECFs only if the required certifications and re-
certifications are prepared, intermediary officials advised
us that they had not withheld payments for one or more of
the following reasons.

     -- Withholding payments would penalize the hospital or
        ECF for noncompliance on the part of the attending
        physicians.

     -- The regulations did not provide clear criteria to de-
        termine when payments should be withheld, because
        certifications or recertifications may be obtained on

                            33
       a delayed basis, as well as on or before specified
       intervals. At one intermediary, we were told that
       attending physicians generally filed delayed certifi-
       cations and recertifications when they were not pre-
       pared on time.

     -- Lack of compliance was not considered sufficiently
        important to warrant measures as drastic as withhold-
        ing payments. (One intermediary stated, however,
        that it planned to take such action in the future.
        Withholding payments would be considered only if the
        hospital or ECF was uncooperative in attempting to
        improve compliance. The intermediary believed that
        compliance could be effected by notification to the
        hospital or ECF of the problem).

     Officials of one intermediary advised us that, if they
found during a visit to a hospital that physician certifi-
cations and recertifications were not being properly ob-
tained, follow-up visits were made within 3 months to deter-
mine whether improvements had been achieved. If the follow-
up visits disclosed little improvement, the hospital would
be required to furnish all certifications and recertifica-
tions with each claim for payment.

     Intermediary officials believed that more effort was
needed to make attending physicians aware of the require-
ments and to gain their cooperation. Regional SSA officials
generally agreed that such a need existed, but they felt
that firm action by intermediaries in withholding payment
was also necessary. One regional SSA official stated that,
after one intermediary (not included in our review) began
withholding payments because certifications and recertifi-
cations had not been properly obtained, immediate and signi-
ficant improvements were made by the providers in complying
with these requirements. Another SSA regional official
stated that delayed recertifications have been used too fre-
quently and that more definite limitations should be im-
posed on the acceptance of delayed certifications and recer-
tifications.




                            34
     We believe that a need exists for SSA to develop clearer
and more definite guidelines pertaining to the responsibili-
ties of State agencies and intermediaries, to ensure compli-
ance with the legislative requirements for utilization re-
views and physicians' certifications. We believe also that
SSA should expand the extent and scope of its reviews of
State agency activities, to obtain greater assurance that
these agencies are enforcing compliance by hospitals and
ECFs with their approved utilization review plans.




                            35
                         CHAPTER 4

              CONCLUSIONS AND RECOMMENDATIONS

CONCLUSIONS

     By SSA's taking actions to improve the carrying out
of the utilization review function and to enforce more ef-
fectively the legislative requirements of the Medicare pro-
gram, fiscal intermediaries would be in a better position
to identify, on a more timely basis, cases involving non-
covered care to patients under the Medicare program.

     The timely identification of such cases, coupled with
the timely termination of Medicare coverage, may result in
significant reductions in the costs of noncovered care
presently being charged to the Medicare program.

     Furthermore such actions will also reduce the incidence
of retroactive denials of benefits which occur when inter-
mediaries discover that noncovered care has been provided.
Such retroactive denials of benefits can work hardships on
hospitals and ECFs in cases where they cannot collect from
the patients and on the patients who may have to pay sub-
stantial amounts for care that they believe was covered un-
der the Medicare program.

     We believe that there is a need for SSA to develop more
definite guidelines as to what utilization review committees
are to do and the nature of determinations and documentation
needed from the committees to allow fiscal intermediaries
to determine whether services provided are covered under
Medicare. In our opinion, an understanding by committees
of the level of care which can be covered by Medicare is
important so that committees' consideration of cases can be
of maximum use to the intermediary in its determination of
whether the care should be paid for by Medicare.

     We believe that SSA should consider establishing
extended-duration periods at hospitals and ECFs, which would
vary depending on the diagnoses of the patients' illnesses
and the treatments involved.



                             36
     To improve the timeliness of terminating Medicare cov-
erage in cases where institutional care is no longer medi-
cally necessary, we believe that SSA should consider more
clearly defining the responsibilities of State agencies and
intermediaries for monitoring actions taken to follow
through on questions raised by utilization review committees
and ensuring compliance with the legislative requirements
for utilization reviews and physicians' certifications.

     We believe also that SSA should expand the extent and
scope of its reviews of State agency activities to. obtain
greater assurance that these agencies are enforcing compli-
ance by hospitals and ECFs with their approved utilization
review plans.

RECOMMENDATIONS TO THE SECRETARY
OF HEALTH, EDUCATION, AND WELFARE

     We recommend that the Secretary arrange for' SSA:

     --To more clearly define the role of the utilization
       review committees in terms of the nature and objec-
       tives of the reviews that they are expected to per-
       form, to make it clear that their decisions are es-
       sential to the intermediaries in determining whether
       the care provided to Medicare patients in hospitals
       and ECFs is covered under the Medicare program, and
       to more clearly define the types of care which are
       not covered under the program.   -


       In commenting on this recommendation in February 1971,
       HEW recognized the need for improvement in the quality
       of the utilization review process and stated that it
       was in the process of taking corrective actions.
       HEW (1) has begun work on a teaching-training project
       for representatives of provider committees and offi-
       cials assessing their performances and' (2) is pro-
       ductng informational material showing useful examples
       of utilization review at hospitals and ECFs to supple-
       ment SSA's current instructions.

     -- To more clearly define the responsibilities of State
        agencies and intermediaries with respect to monitor-
        ing the actions taken to follow through on the

                              37
 questions raised by utilization review committees and
 ensuring compliance with the legislative requirements
 regarding utilization review committees' activities
 and physicians' certifications and recertifications
 of the necessity for continued care.

 HEW advised us that it would scrutinize its instruc-
 tions with a view to determining whether they properly
 reflected SSA's intentions as to the degree of re-
 sponsibilities intermediaries and State agencies were
 expected to assume regarding the activities of pro-
 vider utilization review committees and certifications
 by physicians of the need for care.

-- To establish more appropriate criteria for determin-
   ing when cases involving stays in hospitals and ECFs
   should be reviewed by utilization review committees.

  HEW stated that it recently had initiated a program
  which would enable the provider to use data regarding
  the normal length of hospital stay by specific diag-
  nosis, to establish when cases should be reviewed by
  utilization review committees. HEW stated that it
  was hopeful that this and other developments would
, accelerate progress toward the goal of our recommen-
  'ation.

-- To provide for increased attention, in SSA's reviews,
   to whether State agencies are doing an adequate job
   of determining the degree of compliance by hospitals
   and ECFs with their approved utilization review plans.

 HEW advised us that several programs had been insti-
 tuted to evaluate the operational effectiveness of
 the State agencies and to ensure the full coopera-
 tion of participating facilities in improving their
 operations. HEW stated that its efforts would be
 reevaluated intensively in light of our findings.




                        38
                         CHAPTER 5

                     SCOPE OF REVIEW

     'Our examination included a review of Medicare legisla-
tion and the related regulations and was directed toward an
evaluation of the effectiveness of the utilization review
function at hospitals and ECFs participating in the Medicare
program. The review included (1) an examination of the reg-
ulations and instructions promulgated by SSA, (2) an exami-
nation of the role of State agencies and fiscal intermedi-
aries in controlling the utilization of medical services by
Medicare patients, and (3) a test of the manner in which the
legislative and administrative controls were applied at hos-
pitals and ECFs.

     Our review was made at 41 hospitals in California,
Colorado, Michigan, and Ohio; at 49 ECFs in California and
New York; and at five State agencies and eight intermediaries
located in the aforementioned States.

     During fiscal year 1969 the eight intermediaries in-
cluded in our review made Medicare part A benefit payments
totaling about $1.3 billion, or approximately 27 percent of
the total Medicare part A payments made during the year; the
hospitals and ECFs included in our review were reimbursed
for costs of $42.4 million and $8.4 million, respectively.

     Variations in the sizes of the hospitals and ECFs in-
cluded in our review are shown below.

            Number of beds    Hospitals    ECFs

              50 or less           5         8
              51 to   100          9        25
             101 to   200         13        12
             201 to   500         12         3
             501 to 1,000          1         1
             Over   1,000          1         0

                 Total            41        49




                             39
      At the hospitals and ECFs, we randomly selected a sam-
ple of cases for use in evaluating the timeliness and ef-
fectiveness of the utilization reviews. We also reviewed a
sample of cases at these facilities to ascertain whether the
required certifications and recertifications of the neces-
sity for continuation of care had been made by the Medicare
patients' attending physicians in the manner prescribed by
SSA. At the State agencies and intermediaries, we examined
the procedures and practices followed by these organizations
in monitoring the activities of utilization review commit-
tees.




                            40
APPENDIXES




41
I
                                                                         APPENDIX I




                          DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE
                                       WASHINGTON, D.C.   20201



OFFICE OF THE SECRETARY                   FEB 1 6 1971




                  Mr. Philip Charam
                  Associate Director, Civil Division
                  United States General Accounting Office
                  Washington, D. C. 20548

                  Dear Mr. Charamn:

                  Enclosed is a revision of the response I submitted on
                  December 28, 1970 to your draft audit report entitled,
                  "Need to Strengthen Controls Over Utilization of Medical
                  Facilities Under the Medicare Program." Our comments
                  have been modified to reflect the changes in the revised
                  draft of this audit report which was given to represent-
                  atives of the Social Security Administration by Mr. Fred D.
                  Layton.

                                                      Sincerely yours,




                                                      James B. Car   4
                                                      Assistant Secretary, Comptroller

                   Enclosure




                                           43
 APPENDIX I


                          NEED TO STRENGTHEN CONTROLS
                          OVER UTILIZATION OF MEDICAL
                     FACILITIES UNDER THE MEDICARE PROGRAM
                (GAO Draft Report Transmitted September 23, 1970)

 The audit report indicates that much remains to be done to improve
 the effectiveness of utilization review at hospitals and extended
 care facilities. We will continue to direct our attention to this
 objective. .To put this matter in perspective, it must be recalled
 that, when Medicare began operations, utilization review was virtually
 unknown in many areas and, where it did exist, it frequently did not
 encompass all of the activities envisioned by the Medicare legislation.
 In this context, the accomplishments of utilization reviews, such as
 those set out in the section of Chapter 3 captioned "Benefits Derived
 From Utilizatior Review", are a tangible measure of the very sub-
 stantial progress that has been achieved to date through the concerted
.efforts of the Social Security Administration, the Public Health Service,
 State agencies, and health insurance intermediaries. This evidence in-
 dicates the viability of provider utilization review as a mechan4.sm to
 promote more effective use of limited inpatient facilities, and thus
 to help contain Medicare costs.

We agree that there is a need for SSA, State agencies, and health
insurance intermediaries to take additional practical measures to
increase the effectiveness of utilization review. These measures
must be designed to foster the role of utilization review committees
set out in the law. Except insofar as the result flows indirectly
and by implication from their activities, it is not the function of
the committees to make determinations of Medicare coverage. Utilization
review was originally conceived as a function of the professional medical
community to promote more effective use of medical resources. Although
the decisions made by utilization review committees do have Medicare
coverage implications, this is essentially the by-product of a decision
clearly indicating that services are medically inappropriate or no longer
necessary. A converse decision does not necessarily have to address it-
self to the question of Medicare coverage.

The decisions of utilization review committees are essentially medical
determinations made by staff accountable to the providers for the pur-
pose of assuring proper utilization of their respective inpatient
facilities. It is true that Congress sought to give impetus to the
growth of the utilization review concept and to make use of it in
controlling Medicare costs by requiring providers to carry out utiliza-
tion review as a condition fcr participation, etc. However, as correctly
stated on [page 9 of this]      report, the concept of utilization review
provided for in the law is one in which.physicians, working together and
accountable to one another, are required to evaluate the medical necessity
of medical services provided to patients.




                                   44
                                                          APPENDIX I


This is not to imply that improvement in utilization review will
have inconsequential effects on program coverage decisions.




                            [See GAO note]




                            Steps that have been taken or will be taken
to deal with these problems are discussed below in relation to GAO's
four specific recommendations.

1.   Recommendation: That SSA more clearly define the role of the
     utilization review committees in terms of the nature and objectives
     of the reviews they are expected to perform, to make it clear that
     their decisions are an essential tool to the intermediary in deter-
     mining whether the care provided to Medicare patients in hospitals
     and ECF's is covered under the Medicare program, and to more clearly
     define the types of care which are not covered under the program.

We have for some time recognized the need for improvement in the quality
of the utilization review process and we are in the process of taking



GAO note:   Deleted comments relate to matters which were presented in
            draft report but revised in this final report.




                                   45
APPENDIX I


corrective actions. We have already begun work on a teaching-training
project, which we feel is basic to producing well-functioning utiliza-
tion review. At present, there is no private institution that offers
training in utilization review. However, a training institute is being
developed under a Public Health Service grant contract. The first session
is to be held next spring for representatives from provider committees and
officials assessing their performance.

In addition, we have produced informational material on utilization review
at hospitals to supplement instructions contained in SSA's State Operations
Manual (HIM-7). This material, which we recently published as Appendix E
to the manual, pulls together information from a wide variety of published
and unpublished sources relating to the performance of reviews at hospitals.
The aim is to supply useful examples and discussions of a practical nature
on proven practices and procedures, and to furnish copies of utilization
review forms and formats in present use. We are working on supplemental
materials relating to extended care facilities but anticipate greater
difficulty because of the dearth of pre-Medicare experience with any
type of utilization review involving these providers and the correspond-
ing lack of published materials.

An additional printing of Appendix E is being distributed to State
surveyors to use as a teaching tool during their visits to each
hospital and ECF utilization review committee and to State and local
medical societies. There are also plans to release the Appendix to
intermediaries.

We hope that these steps will aid in the improvement of utilization
review activity in the spirit of GAO's recommendation.

The law places responsibility for making coverage determinations on
the intermediary. This was further clarified in the intermediary
agreements of July 1, 1970. Article II, A states that the inter-
mediary shall, "Make determinations as to whether the services pro-
yided an individual are covered services...." The role of the utiliza-
tion review committee is set forth in section 1861(k) of the Social
Security Act which requires that these committees review admission
and duration of stays with respect to the medical necessity of the
services provided and for the purpose of promoting the most efficient
use of available health facilities and services.

We think that this distinction between the intermediary and the
utilization review committee role is important; it seems reasonable
that a physician or a committee may make a judgment of medical necessity
without regard to Medicare coverage. It is our view that the intermediary
should take the physician determination (on certification or recertification)
and the utilization review committee determination regarding medical neces-
sity and translate them into a determination of coverage. As such, the
utilization review committee decision is only a part of the medical evidence
used by the internmediary in its determination of coverage.


                                   46
                                                         APPENDIX I



2. Recommendation: That SSA more clearly define the responsibilities
   of State agencies and intermediaries with respect to policing the:
   (1) activities of utilization review committees, (2) actions taken
   by the facilities to follow-up on the decisions of the committees,
   and, (3) compliance by physicians with the requirements for certi-
   fication and recertification to the necessity for continued care.

The responsibilities of State agencies and intermediaries in the areas
mentioned are defined in considerable detail in the State Operations
Manual and the Part A Intermediary Manual. SSA's basic policy on the
respective roles of the States and intermediaries in utilization review
is set out in State Agency Letter No. 73 and in Intermediary Letter
No. 248, which were issued in 1967. Despite these issuances, however,
there continues to be some overlap so that we are taking a close look
at whether they can be clarified to eliminate overlap that may be un-
necessary. At the same time, we will scrutinize our instructions with
a view to whether they properly reflect SSA's intentions as to the
degree of responsibility intermediaries and State agencies are expected
to assume regarding the activities of provider utilization review committees
and certifications by physicians of the need for care.

In any program as complex as Medicare, a degree of overlapping of re-
sponsibility inevitably results. The law gives State agencies the
responsibility of determining the compliance of providers of services
with the conditions for participation, one of which is utilization
review. The law also charges the intermediaries with assisting the
providers in the application of safeguards against unnecessary utilization
of services. However, steps are being taken to identify -and eliminate
unnecessary duplication wherever possible.

3. Recommendation: Establish more appropriate and uniform criteria
   for determining when cases involving stays in hospitals and ECF's
   should be reviewed by utilization review committees

On page   [25 of this] report, GAO concludes that "extended duration
periods should be related to normal lengths of stay by specific diagnosis".
Further, on page [36],it is suggested that SSA consider "the desirability
of developing uniform criteria for determining when a patient's case
should be reviewed by a utilization review committee on the basis of
individual diagnoses and other pertinent medical factors instead of
arbitrary criteria presently being used by hospitals and ECF's". It
appears the audit recommendation stems-from these conclusions.

We agree that more use of the type of criteria envisioned by GAO would
be very desirable. We have actively encouraged this and our efforts
have resulted in more hospitals adopting such criteria. Up to now,
however, progress has been inhibited by the absence of reliable statistics




                                   47
 APPENDIX I


and data on length of stay, etc. Recently, SSA initiated the Medical
Analysis of Days of Care (MADOC) program, which is discussed under our
general comments below. In addition, more data is becoming available
from private sources such as the Professional Activities Study (PAS)
of the Commission on Professional and Hospital Activities, Ann Arbor,
Michigan. We are hopeful that these developments will accelerate
progress toward the goal of this audit recommendation.

4. Recommendation: Provide for increased attention, in SSA's own
   reviews, to whether State agencies are doing an adequate job of
   determining the degree of compliance by hospitals and ECF's with
   their approved utilization review plans

SSA has been constantly working toward upgrading the quality of medical
care and services under the Medicare program. Toward this end, several
programs have been instituted to evaluate the operational effectiveness
of the State agencies and to ensure the full cooperation of participating
facilities in improving their operations.

In conjunction with the Public Health Service, SSA conducts programreviews
of each Medicare State agency. Also, each of the Bureau of Health Insurance
(BHI) regional offices conducts comprehensive reviews of State operations.
These reviews include, among other quality controls, direct surveys of a
sample of providers to determine the effectiveness and adherence to Federal
guidelines of the State surveyors.

In addition, measures have been instituted to improve the quality of State
agency professional employees. The third in a series of training programs
for State agency survey personnel is being held at Tulane University and
similar institutes are being started in three other universities. Approx-
imately 300 surveyors will receive this training in 1971 and, ultimately,
all surveyors will receive such training at various BHI-sponsored institutes
throughout the country. We have also been working closely with State and
Federal merit system officials in an effort to upgrade and augment State
Medicare agency staffing.

This is all a part of our total effort to upgrade the capabilities of
the State agencies. Review of utilization review has always been an
important part of the State agencies' function and has been receiving
our increased attention. Our efforts will be intensively reevaluated
in the light of the GAO findings.



In addition to our comments on the recommendations, we have the following
general comments:

On page[25],~t is stated that some intermediary officials cited a lack of
adequate anid meaningful data relating to the utilization of services as
one reason why utilization review committees do not make good decisions.



                                  48
                                                           APPENDIX I


As part of a continuing effort to promote the most efficient use of
available hospital facilities and services, SSA has developed a program
for presenting comparative data on lengths of stays of Medicare patients
discharged from short-stay hospitals. The data are being released in a
series of reports entitled, "Medicare Analysis of Days of Care" (MADOC)
which will be issued semi-annually to short-stay hospitals, their inter-
mediaries, and State agencies.

The purpose of the MADOC reports is to provide data to help hospitals
assess and improve their utilization practices. The data has been
designed to identify those hospitals whose average actual length of
stay differs significantly from the estimated length of stay based
on the experience of all hospitals in the same area. The technique
used in MADOC takes into account differences in hospital characteristics,
in the medical and demographic characteristics of each hospital's patients,
in the treatment given patients, and in specific geographic location.

Actual data for the last six months of 1969 was sent to providers, inter-
mediaries, and State agencies during November 1970. Succeeding reports
will include data based on discharges during successive six-month periods,
i,e., January-June 1970, July-December 1970, and will be distributed
semi-annually. More detailed information on MADOC may be found in State
Agency Letter No. 150 or Part A Intermediary Letter No.. 70-34, both of
which were released in November.

MADOC was developed with the active participation of a joint intermediary-
SSA work group. Work has begun to develop similar data for extended care
facilities. An advisory group of both intermediary and SSA personnel has
also been established to assist in this work.

On page[251GAO is critical of the utilization review committees not meeting
every seven days to review all extended duration cases coming due. From
the outset we recognized that this might be a problem and suggested that
this could be a subcommittee activity using physician-delegates to do the
initial review and screening of cases. This method was discussed in State
Agency Letter No. 125 dated November 20, 1968.
                                 [sic]
The problem and expense of coveningAphysician committees on more than a
monthly basis preceded Medicare. Voluntary accrediting organizations
have accepted the monthly interval as satisfactory for usual committee
purposes. Becauseof payment considerations, we try to promote more
frequent meetings wherever feasible. However, our compromise, the
so-called optional method for small hospitals and ECF's, recognizes the
actual practice of convening committees on a monthly basis and attempts
to get the maximum benefit from utilization review given the operating
realities at these small institutions.




                                   49
APPENDIX I


We would like to point out that under the optional method the initial
review then constitutes the miscellaneous sample for medical necessity
of admission, professional services rendered, and duration of stay to
date. When the physician certification was set at 14 days, it was
noted there was a peaking of discharges on that date, with the result
that the ddte for certification was revised to 12 days in an attempt
to reduce the length of hospital stay further. We hope to see a
similar fall out of discharges prior to the committee review date in
facilities using the optional method.




                                 50
                                                         APPENDIX II


                       PRINCIPAL OFFICIALS OF

       THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE

           RESPONSIBLE FOR ADMINISTRATION OF ACTIVITIES

                       DISCUSSED IN THIS REPORT


                                             Tenure of office
                                             From          To

SECRETARY OF HEALTH, EDUCATION,
  AND WELFARE:
    Elliot L. Richardson                  June    1970   Present
    Robert H. Finch                       Jan.    1969   June 1970
    Wilbur J. Cohen                       Mar.    1968   Jan. 1969
    John W. Gardner                       Aug.    1965   Mar. 1968

COMMISSIONER OF SOCIAL SECURITY:
    Robert M. Ball                        Apr.    1962   Present

DIRECTOR, BUREAU OF HEALTH INSUR-
  ANCE (note a):
    Thomas M. Tierney                     Apr.    1967   Present
    Arthur E. Hess                        July    1965   Apr. 1967

aThe Bureau of Health Insurance was a part of the Bureau of
 Disability and Health Insurance until September 1965. At
 that time separate bureaus were established to handle the
 functions of the disability program and the health insur-
 ance program.




U.S GAO, Wash., D.C.




                                   51