oversight

Problems in Paying for Services of Supervisory and Teaching Physicians in Hospitals Under Medicare

Published by the Government Accountability Office on 1971-11-17.

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

                                            llllllllllllllllllllllllllllllllllllllll
                                                    LM095477




         Problems In Paying For Services
         Supervisory And Teaching hysicians
         In Hospitals Under edicare                   B-164031   (41




         Social Security Administration
         Department of Health, Education,
           and Welfare




    ./




I




         BY THE COMPTROLLER   GENERAL
         OF THE UNITED STATES
                                           .           *
                           COMPTROLLER     GENERAL         OF     THE      UNITED   STATES
                                         WASHINGTON.        DC.         20548




      B -164031(4)




      To the      President   of the Senate     and the
/.*
      Speaker       of the House   of Representatives

               This is our report     on problems       in paying      for                     services
      of supervisory     and teaching     physicians      in hospitals                         under
      Medicare.      The Medicare      program       is administered                           by the
 !    Department      of Health,  Education,      and Welfare.

                 Our     review  was made pursuant                          to the Budget      and Ac-
      counting         Act, l9Zl (31 U.S.C.   53), and                     the Accounting       and
      Auditing         Act of 1950 (31 U.S.C.     67).

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




                                                           Comptroller               General
                                                           of the United             States




                                    50 TH ANNIVERSARY 1921- 1971
COMPTROLLERGENERAL'S                                   PROBLEMS IN PAYING FOR SERVICES OF SUPERVISORY
REPORTTO THE CONGRESS                                  AND TEACHING PHYSICIANS IN HOSPITALS UNDER
                                                       MEDICARE
                                                       Social    Security   Administration
                                                       Department      of Health,    Education, and Welfare
                                                       B-164031(4)


DIGEST
------


WHYTHE REVIEW WASMADE

          Because of expressed             congressional            interest       in the administration            of Medi-
          care-payments       to supervisory             and teaching           physicians        in hospitals      having
          programs     in graduate         medical       education,          the General        Accounting     Office     (GAO)
          reviewed     payments       for the services              of such physicians              at six hospitals.
          Tts reports      on-these        hospitals        $reviouslkwere              submitted       to congressional
          committees,       Xhis      report     summar?-zes problems                discussed        in the individual
          reports?       -    5 6. .,f.      i     ‘_.,* ;.T ::      ,, ~ _ -. h--B,‘- +J7" y L. dcd 4dc.Y .!f ,‘PI I ,~-(,~J
                           c-
                           L . ,+-,'..b.G;*"      .CF.        -'-<-4-i: / :-
          Background

          The Medicare      health      insurance    program      for Americans       aged 65 and over pro-
          vides    two kinds of coverage.            Part A covers        hospital     services     and certain
          posthospital      care.       Part B covers       physicians'      services     to individual      patients.
          When a Medicare        patient      is hospitalized        under the care of a physician,              the
          patient      may be entitled        to both kinds       of benefits.

          Part B payments     reviewed     by GAO were made for the Social                         Security   Administra-
          tion  (SSA) by paying      agents--or    carriers--under    contract.                      The payments      were
          made on a fee-for-service          basis for services    by specific                     physicians   to spe-
          cific  patients.

          Under this   method         of payment,      a physician   charges       a fee for each service--
          a hospital    visit,        a consultation,       or an operation--furnished           to a patient.
 /ic      The Senate Finance            Committee     has estimated   that     total    Medicare    payments   for:   ,,L!~;
          teaching   physicians'          services     could be more than $100 million             annually.        '

          Most of the other Medicare                payments   (for   services     at the hospitals)                were
          made under part A by other                SSA paying    agents    called   intermediaries.


FINDINGS AND CONCLUSIONS

          ProbZems in achinistration

          As shown below problems   existed     in               the   administration           of the fee-for-service
          method of making Medicare    payments                  for   the services        of     supervisory    and teach-
          ing physicians.




u Sheet
The problems       do not concern        the    quality    of medical   care provided--&scribed
authoritatively        as excellent--but           they   raise  the question     as to whether
the traditional        fee-for-service          method    of payment  is suitable      in many 'ceach
ing hospitals       under the program.

QuestionabZe propriety           of many physicians'            charges
The hospitals'      records    showed that   teaching     physicians'     services   to individ
ual patients     (part    B) had, in many instances,         been provided      only by residen-
and interns    whose salaries       were reimbursable      as hospital     services    (part   A).
If reimbursement       for the same services       was made under parts         A and B, Medi-
care would be paying        for such services      twice.

The Medical       records    reviewed      by GAO at      the   six      hospitals        showed     that

   --physicians       named on the bills           had provided          about       13 percent      of     the
      number of      services billed   in        their  names,

   --supervisory       physicians,  other          than the physicians     named              on the        bills,
      had provided      about 15 percent           of the services,    and

   --only     residents     and interns        had provided        the    remaining        67 percent             of   the
      services.         (See p. 17.)

Methods of providing          and supervi_sing medical care at certain                            teaching
hospitals

The methods     followed      made it inherently           difficujt          to establish          an "attend-
ing" physician-patient          relationship.

In about 45 percent         of the cases where a supervisory                physician      was identifie
with a specific       service    billed       to Medicare,        the name of the supervisory
physician     shown on the medical            records    was different      from the supervisory
physician     in whose name the service               was billed.       It was difficult      therefore
to establish      the bona fide        relationship       of the attending        physician     to the
patient    necessary     to qualify        for fee-for-service         payments     under Depart-
ment of Health,       Education,       and Welfare       (HEW) regulations.           (See p. 33.)

Problems in administering               the dual (part A and part                BI Medicare reimburse-
ment system
Services       of a teaching       physician    may be paid for as hospital       services
 (part    A) on the basis        of costs     and also under part B on the basis           of fee-
for-service.          Because of difficulties         encountered    in the administration         of
this     arrangement,       payments     at two of the hospitals       exceeded the reimburs-
able Medicare         costs    by about $434,000.       (See p. 38.)

Other problems

Often there  was no indication               that the     patients        had     authorized payments                  to
be made on their  behalf     for          physicians'      services.             (See pp. 39 and 40.)
     Certain   Medicare  payments,   on the basis     of customary     or prevailing    charges
     for physicians'    services,   were questionable     because    the carriers    did not
     pay for similar    services   at those same hospitals       for their    own subscribers.
      (See pp. 42 and 43.)

     In commenting   on GAO's            review          of    the medical       records,            the        hospitals       and
     medical schools   usually             took        the     position    that:

         --The absence    of teaching   physicians'                        notations    in         the medical              records
            did not mean that    the services      were                    not provided            or personally               super-
            vised  by these physicians.

         --Before    April     1969 SSA did not                 require   that bills                for services             of super-
            visory   and teaching     physicians                  be documented    in             the patients'              medical
            records.       (See p. 25.)

     GAO noted that,         when private        doctors    treated      their     own patients,        their     in-
     volvement      was frequently       shown in the hospitals'                medical   records.         Also,
     at two of the hospitals           where GAO reviewed            payments        made before     and after
     implementation        of the April         1969 guidelines,         there     was only slight         improve-
     ment in the extent          to which the medical            records       supported    physicians'         bills.
     At another      hospital      the affiliated        medical     school       pointed   out that       the SSA
     recordkeeping       requirements         took too much of its physicians'                 time.        (See
     pp. 26 to 32.)

     Action     taken by SSA and carriers
r,    From April      1969    to April         1971,      SSAissued instruction                      to    its       carriers      to:
Cl                                                                                                                                       2,;'

         --Clarify        the conditions          under which part 6 payments                            could be made on a
            fee-for-service         basis       for the services   of supervisory                             and teaching
            physicians        in hospitals.

         --Suspend      payments       where      such        conditions         were    not      met.

         --Determine,        through     audits          by the      carriers,          whether          over      payments       had
            been made.

      SSA reported      that,     at one time or another,         payments   had been suspended            at
      about 250 hospitals.           (See pp. 45 and 46.)          GAO believes     that     this    is indi-
      cative    of the difficulties        inherent      in administering      a fee-for-service           reim-
      bursement    system that       is neither     easily   understood     nor readily        susceptible
      to effective      controls.

      In addition     to the six hospitals        included     in GAO's review,       SSA has identified
      six others     where overpayments       may have occurred.         As of June 1, 1971, SSA
      had determined       that  overpayments     totaling     about $2.5 million        had been made
      at four of the 12 hospitals           and it was trying       to collect    the overpayments.
      SSA-directed      audits   were in process        at six hospitals      to determine    the
      amounts     of overpayments.       (See p. 47.)




 Tear Sheet
    LegisZative        changes being considered-

     Legislation        being considered      by the Congress     would change the basis                                 of reim-
     bursement       for supervisory     and teaching    physicians     from a fee-for-service
     basis     (part    B) to a cost-reimbursement       basis    (part   A) except  where

       --the     Medicare    patients        are   bona     fide      private        patients     of   the     billing
           physicians     or

       --during     the Z-year  period  ended December 31, 1967, and each year there-
          after,    all the hospital's    patients     were regularly billed on a fee-for-
          service     basis and most patients      paid the charges.

    GAO believes   that   the           proposed      legislation,             if   enacted,    will    help      resolve        th,
    major problems    noted        during its           reviews.            (See    p. 53.)

    Remaining potential          problem area

     Under the proposed            Jegislation it would still be possible               to pay for teaching
     physicians'       services       to their    private   patients    at an institution         on a fee-for
     service     basis    (part     B) and also to pay for the same physicians'                  services   to
     their    nonprivate       patients      on the basis of costs        (part A).'      Under these circum
     stances     the difficulties          in administering        the dual Medicare       reimbursement
     system would continue.              (See p. 55.)


RECOMMENDATIONS
              OR SUGGESTIONS

     If the proposed      legislative changes are enacted, HEW should establish                 and
    maintain    effective    procedures      for determining        the proper  amounts   to be paid
    for supervisory       and teaching      physicians'     services    which are reimbursed     on the
    basis    of both costs     and fee-for-service        at the same institution.          (See p. 55.1


AGENCYACTIONS AND UNRESOLVEDISSUES
    HEW advised        GAO that    it was aware of the potential  continuing   problem   of ad-
    ministering        the dual part A and part B reimbursement      system for physicians'
    services     and     that  it would deal with the problem by developing      guidelines and
    instructions         for implementing   the new amendments,  when they are enacted.


MATTERS FOR TEE COWXiWATION OF THE CONGRESS

    As previously        stated this report              deals       with      legislation      that    currently           is
    being considered         by the       Congress.
                           Contents


DIGEST

CHAPTER

  1       PERTINENT FEATURESOF THE MEDICARE PROGRAM                   5
              Use of intermediaries      and carriers   to
                help administer     Medicare                           5
              Payments for physicians'       services in a
                hospital  setting                                      6
              Pertinent  HEW regulations                               7
             What is a teaching hospital?                              9

  2       PRIOR REPORTSTO COMMITTEESOF THE CONGRESS                   13
              Pertinent  data on the six teaching hos-
                pitals  reviewed                                      14

  3       PROBLEMSIDENTIFIED BY GENERALACCOUNTING
          OFFICE REVIEWS                                              16
              Difficulties     in supporting      the propriety
                 of physicians'       fees                            17
              Difficulties     in establishing       an attend-
                 ing physician-patient        relationship      in
                 some teaching settings                               33
              Difficulties     in administering        dual reim-
                 bursement system                                     38
              Difficulties     in clearly     establishing      any
                 beneficiary     liability                            39
              Difficulties     in establishing        customary
                 and prevailing       charges                         42

  4       MAGNITUDE OF OVERALL PROBLEMAND ACTIONS
          TAKEN BY SSA AND THE CARRIERS                               4.4
              Estimated magnitude of problem under
                Medicare                                              44,
              SSA direction   to carriers                             45
              Other federally    sponsored programs pay-
                 ing for the services     of supervisory
                and teaching physicians                               48
  5       LEGISLATIVE CHANGESBEING CONSIDERED BY THE
          CONGRESS                                                    50
              Congressional   deliberations                           50
CHAPTER                                                                  Page

          6   CONCLUSIONS                                                 53
                 Remaining potential              problem area            55
                 Agency comments                                          55

          7   SCOPE OF REVIEW                                             56

APPENDIX

          I   Listing  of instructions     concerning payments
                 to supervisory    and teaching physicians  is-
                 sued by SSA after the April 1969 guidelines              61

     II       Letter     dated September 22, 1971, from the As-
                 sistant     Secretary, Comptroller,   Department
                 of Health, Education,     and Welfare,   to the
                 General Accounting Office                                63

 III          Principal   officials of the Department of
                 Health, Education,  and Welfare responsible
                 for administration  of the activities  dis-
                 cussed in this report                                    65

                                    ABBREVIATIONS

              American     Medical     Association

GAO           General     Accounting     Office

HEW           Department      of Health,     Education,    and Welfare

SSA           Social     Security    Administration

VA            Veterans     Administration
[FpROiLER GENERAL'S                         PROBLE6 IN PAYING FOR SERVICES OF SUPERVISORY
'ORT TO THE COIVGRESS                       AND TEACHING PHYSICIANS IN HOSPITALS UNDER
                                            MEDICARE
                                            Social    Security   Administration
                                            Department      of Health,    Education, and Welfare
                                            B-164031(4)


   GEST
-----


 THE REVIEW WASMADE

   Because of expressed        congressional       interest       in the administration          of Medi-
   care payments     to supervisory       and teaching         physicians      in hospitals      having
   programs    in graduate     medical    education,        the General       Accounting    Office     (GAO)
   reviewed    payments    for the services        of such physicians            at six hospitals.
   Its reports     on these hospitals        previously        were submitted        to congressional
   committees.      This report      summarizes      problems       discussed      in the individual
   reports.

  Background

   The Medicare      health      insurance    program      for Americans       aged 65 and over pro-
   vides    two kinds of coverage.            Part A covers        hospital     services     and certain
   posthospital      care.       Part B covers       physicians'      services     to individual      patients.
   When a Medicare        patient      is hospitalized        under the care of a physician,             the
   patient      may be entitled        to both kinds       of benefits.

   Part B payments     reviewed     by GAO were made for the Social                   Security   Administra-
   tion  (SSA) by paying      agents--or    carriers--under    contract.                The payments      were
   made on a fee-for-service          basis for services    by specific               physicians   to spe-
   cific  patients.

   Under this   method       of payment,      a physician   charges       a fee for each service--
   a hospital    visit,      a consultation,       or an operation--furnished           to a patient.
   The Senate    Finance       Committee     has estimated    that    total    Medicare    payments   for
   teaching   physicians'        services     could be more than $100 million             annually.

   Most of the other Medicare             payments   (for   services     at the hospitals)            were
   made under part A by other             SSA paying    agents    called   intermediaries.


'DINGS AND CONCLUSIONS

   Problems in administration

   As shown below problems   existed    in            the   administration         of the fee-for-service
   method of making Medicare    payments              for   the services      of    supervisory     and teach-
   ing physicians.
The problems       do not concern        the     quality      of medical   care provided--described
authoritatively        as excellent--but            they    raise  the question      as to whether
the traditional        fee-for-service           method     of payment   is suitable      in many teach
ing hospitals       under the program.

Questionable       propriety       of many physicians'              charges
The hospitals'      records    showed that    teaching     physicians'     services   to individ
ual patients     (part    6) had, in many instances,          been provided      only by residen-
and interns    whose salaries       were reimbursable       as hospital     services    (part   A).
If reimbursement       for the same services        was made under parts         A and B, Medi-
care would be paying        for such services       twice.

The Medical       records      reviewed      by GAO at      the     six     hospitals        showed     that

   --physicians       named on the bills               had provided         about       18 percent      of     the
      number of      services billed   in            their  names,

   --supervisory       physicians,  other             than the physicians     named              on the        bills,
      had provided      about 15 percent              of the services,    and

   --only     residents     and interns         had provided          the    remaining        67 percent             of   the
      services.         (See p. 17.)

Methods of providing            and supervising           medical         care at certain            teaching
hospitals

The methods     followed        made it inherently            difficult         to establish           an "attend-
ing" physician-patient            relationship.

In about 45 percent          of the cases where a supervisory                physician      was identific
with    a specific     service    billed       to Medicare,        the name of the supervisory
physician     shown on the medical             records    was different      from the supervisory
physician     in whose name the service                was billed.      It was difficult       therefore
to establish       the bona fide        relationship       of the attending        physician     to the
patient    necessary      to qualify       for fee-for-service          payments     under Depart-
ment of Health,        Education,       and Welfare       (HEW) regulations.           (See p. 33.)

ProbZms in administering                  the dual     (part A and part B) Medicare reimburse-
ment system
Services      of a teaching       physician   may be paid for as hospital       services
 (part    A) on the basis       of costs and also under part B on the basis              of fee-
for-service.         Because of difficulties        encountered    in the administration         of
this    arrangement,       payments     at two of the hospitals      exceeded the reimburs-
able Medicare        costs    by about $434,000.      (See pm 38.)

Other probhns

Often  there was no indication                 that the     patients         had authorized payments                      to
be made on their  behalf     for            physicians'      services.          (See pp. 39 and 40.)
-Certain   Medicare  payments,   on the basis     of customary     or prevailing    charges
 for physicians'    services,   were questionable     because    the carriers    did not
 pay for similar    services   at those same hospitals       for their    own subscribers.
  (See pp. 42 and 43.)

In commenting   on GAO's             review          of     the medical       records,         the     hospitals        and
medical schools   usually              took        the      position    that:

   --The absence of teaching     physicians'                            notations    in       the medical          records
      did not mean that  the services      were                         not provided          or personally           super-
      vised by these physicians.

   --Before       April     1969 SSA did not                 require   that bills              for services         of super-
      visory      and teaching     physicians                  be documented    in           the patients'          medical
      records.          (See p. 25.)

GAO noted that,         when private        doctors    treated      their     own patients,        their     in-
volvement      was frequently       shown in the hospitals'                medical   records.         Also,
at two of the hospitals           where GAO reviewed            payments        made before     and after
implementation        of the April         1969 guidelines,         there     was only slight         improve-
ment in the extent          to which the medical            records       supported    physicians'         bills.
At another      hospital      the affiliated        medical     school       pointed   out that       the SSA
recordkeeping       requirements         took too much of its physicians'                 time.        (See
pp. 26 to 32.)

Action    taken     by SSA and carriers

 From April       1969    to April         1971,          SSA issued      instruction           to    its    carriers     to:

   --Clarify        the conditions            under which part B payments     could be made on a
      fee-for-service          basis        for the services   of supervisory      and-teaching
      physicians        in hospitals.

   --Suspend       payments        where      such         conditions       were    not      met.

   --Determine,          through     audits by the carriers,                       whether          over    payments     had
      been made.

 SSA reported      that,     at one time or another,        payments  had been suspended            at
 about 250 hospitals.           (See pp. 45 and 46.) GAObelieves that this is indi-
 cative    of the difficulties        inherent      in administering    a fee-for-service           reim-
 bursement    system that       is neither     easily   understood   nor readily        susceptible
 to effective      controls.

 In addition    to the six hospitals       included in GAO’s review, SSAhas identified
 six others    where overpayments      may have occurred.          As of June 1, 1971, SSA
 had determined      that overpayments     totaling     about   $2.5 million       had been made
 at four of the 12 hospitals         and it was trying        to collect     the overpayments.
 SSA-directed     audits  were in process        at six hospitals       to determine     the
 amounts of overpayments.         (See p. 47.)
    LegisZative chanqes being considered
    Legislation        being considered     by the Congress    would change the basis                              of    re
    bursement       for supervisory     and teaching  physicians     from a fee-for-service
    basis     (part    B) to a cost-reimbursement     basis    (part   A) except  where

       --the     Medicare    patients     are   bona   fide     private      patients       of   the     billing
           physicians     or

       --during     the Z-year  period  ended December 31, 1967,                        and each year there-
          after,    all the hospital's    patients     were regularly                   billed  on a fee-for-
          service     basis and most patients      paid the charges.

    GAO believes   that   the proposed     legislation,                if enacted,        will    help      resolve
    major problems    noted during     its reviews.                  (See p. 53.)

    Remaining potential          probZemarea
    Under the proposed            legislation        it would still      be possible      to pay for teach
    physicians'       services       to their       private   patients    at an institution         on a fee-
    service     basis    (part      B) and also to pay for the same physicians'                    services   t
    their    nonprivate       patients         on the basis    of costs     (part   A).     Under these cir
    stances     the difficulties             in administering        the dual Medicare       reimbursement
    system would continue.                 (See p. 55.)


RECOMMEllrDTIONS
              ORSUGGESTIONS
    If the proposed       legislative       changes       are enacted,      HEW should    establish                     and
    maintain    effective      procedures      for determining          the proper    amounts     to be                  paic
    for supervisory       and teaching        physicians'       services     which are reimbursed                        on t
    basis    of both costs       and fee-for-service          at the same institution.              (See                 p. f


AGENCY
     ACTIONSAND UNRESOLVED
                        ISSUES
    HEW advised        GAO that    it was aware of the potential   continuing   problem      of                               ad
    ministering        the dual part A and part B reimbursement       system for physicians'
    services     and     that  it would deal with the problem    by developing    guidelines                                   a
    instructions         for implementing   the new amendments,   when they are enacted.


               cWX4TION OF THE CONGRESS
MTTERSFORTHE&'N&,
    As previously    stated    this report         deals      with    legislation         that   currently              is
    being considered      by the Congress.




                                                       4
                               CHAPTER1

          PERTINENT FEATURESOF THE MEDICARE PROGRAM

       Title XVIII of the Social Security           Act (42 U.S.C.
1395-139511))       effective   July 1, 1966, established         two basic
forms of health protection          for eligible    beneficiaries      aged
65 and over.        One form, designated       as Hospital    Insurance Ben-
efits    for the Aged (part A), covers inpatient            hospital    ser-
vices,     as well as posthospital       care in an extended-care        fa-
cility     or in the patient's      home. Part A is financed by a
special social security         tax paid by employers and their em-
ployees and by self-employed           persons.    For fiscal     years 1967
through 1970, benefit         payments under part A amounted to about
$15.7 billion,       of which about $14.4 billion        was for inpatient
hospital     services.

       The second form of protection,     designated as Supplemen-
tary Medical Insurance Benefits       for the Aged (part B), is a
voluntary   program and covers physicians'       services and a num-
ber of other medical and health benefits.           Part B is fi-
nanced, in part, from premiums collected         from each partici-
pating beneficiary.    The premiums are matched by equal
amounts appropriated   by the Congress.       Effective   July 1,
1971, the monthly premium was $5.60.

      Under part B the beneficiary      is responsible   for paying
for the first      $50 for covered medical services    in each year
 (the deductible),      Medicare usually pays 80 percent of the
reasonable charges for covered services        in excess of $50 in
each year; the remaining 20 percent of the reasonable charges
is usually the responsibility      of the beneficiary    (coinsur-
ance>,

     For fiscal   years 1967 through 1970, benefit payments un-
der part B amounted to about $5.7 billion;   about 90 percent
was for physicians'    services.

USE OF INTERMEDIARIES AND CARRIERS
TO HELP ADMINISTER MEDICARE

     To administer   Medicare benefits,     the Congress authorized
the Secretary   of Health,  Education,   and Welfare to contract
with public agencies or private     organizations   to pay (1) for

                                    5
    services provided by hospitals           and other   institutions   and
    (2) for physicians' services,

            The organizations   making payments to hospitals    and other
    institutional     providers  are called fiscal intermediaries    and
    are nominated by the providers.

I           The principal   intermediary  is the Blue Cross Association
    which was nominated by the American Hospital        Association.     At
    December 31, 1970, the Blue Cross Association         was the fiscal
    intermediary      for about 90 percent of the 6,800 hospitals      par-
    ticipating     in the Medicare program.     The remaining partici-
    pating hospitals      deal directly  either with SSA or with nine
    other intermediaries.

           SSA reimburses    intermediaries   for their administrative
    costs in making Medicare payments and for performing           certain
    other functions     under their contracts    with the Secretary.
    For fiscal    years 1967 through 1970, the intermediaries'         ad-
    ministrative    costs amounted to about $263 million,

           The organizations     making benefit     payments for physi-
    cians'   services are called carriers.          Carriers      were selected
    by SSA; at December 31,       1970,   SSA  had  contracted       with 48 car-
    riers to pay part B benefits        in specific      specific     geographi-
    cal areas of the c0untry.l         Of  these   carriers,      33  were  Blue
    Shield organizations,      14 were private      insurance companies and
    one was a State agency.        For fiscal    years 1967 through 1970,
    SSA reimbursements      to the carriers     for their Medicare-related
    administrative    costs amounted to about $416 million.

    PAYMENTSFOR PHYSICIANS'
    SERVICES IN A HOSPITAL SETTING

          Depending on the classification          of the physician   and
    and the type of services   provided,         payments for physicians'

    1The Travelers    Insurance Company, operating          under a contract
     with the Railroad      Retirement     Board, acts as the nationwide
     part B carrier     for railroad-related       beneficiaries   and, ac-
     cordingly,    administers    a small part of the part B Medicare
     program in the same geographical          areas covered by the SSA
     carriers.

                                         6
           . .



services provided       in a hospital setting  can be made either
by intermediaries       under part A or by carriers  under part B.

       Under part A hospitals        are reimbursed by intermediaries
for the reasonable costs of the services furnished                    to Medi-
care patients--    including     salaries    paid to physicians         who are
residents    and interns     participating       in training     programs ap-
proved by the American Medical Associati0n.l                   For those phy-
sicians not in training        who are on a hospital's           staff and who
are salaried     or otherwise      compensated by the hospital,           that
part of their compensation for services                other than direct       pa-
tient   care--  such  as  teaching,      administration,       and  supervision
of technical     personnel-- is also reimbursable            to the hospital
under part A.

      Under part B payments for physicians'      services for di-
rect patient   care usually are made by carriers      on the basis
of reasonable charges (fee-for-service     basis)--a     fee is paid
for a specific    service to a specific patient.

        Where physicians--    other than residents      and interns    under
an approved training       program--are     paid salaries   by the hos-
pital,    part B payments may be made by the carrier           to the hos-
pital    for the physicians'       services  to individual   Medicare    pa-
tients;     in this case, the part of the physicians'          salaries
applicable     to direct   patient     care should not be reimbursed
to the hospital      under part A.

PERTINENT HEW REGUIATIONS

      Because the Medicare law is silent        regarding    the precise
methods for paying for the services       of supervisory       and teach-
ing physicians   who work in a hospital      setting,    HE%Jand SSA
have issued various regulations       and instructions      on the sub-
ject.   Two categories   of regulations     and instructions      most
germane to the subject are discussed below.


1If  training programs have not been approved, 80 percent of
 the salaries  of interns and residents are reimbursed under
 part B on a reasonable cost basis.
Payments to sunervisory
and teachina physicians

        Payments to supervisory       and teaching physicians      at
teaching hospitals       are authorized     by HEW regulations     under
part B. HEW regulations,1          issued on August 31, 1967, stated
that, to qualify      for payment on a fee-for-service         basis, the
physician     must be the Medicare patient's       attending    physician
and must either     render services personally         or provide ttper-
sonal and identifiable       direction    to residents    and intern9
participating     in the care of his patient,

         In April   1969 SSA issued new and more comprehensive
guidelines      which were intended to clarify     and supplement the
criteria     for making payment for the services of supervisory
and teaching physicians,          From June 1969 through April   1971,
SSA issued numerous instructions         which were intended to clar-
ify the April       1969 guidelines,    (See app. I.>

Payments to hospital-based         physicians

       HEN issued regulations         in October 1966 providing        for
part B payments to hospitals            for services to individual        pa-
tients    by physicians     who are employed by, or receive compen-
sation from or through,         hospitals.       To the extent that these
hospital-based      physicians     are compensated for services          other
than direct    patient     care--such      as teaching,  administration,
and supervision      of professional        or technical   personnel--the
cost is reimbursable        to hospitals      under part A,

      HEW regulations    provide,     however, that the sum of the
payments to hospitals     under parts A and B be about equal to
the amount of the physicians'         compensation allocable        to the
Medicare program-- except in certain          circumstances     where hos-
pital  charges for physicians+        professional     services   to indi-
vidual patients     had been identified       separately    from the
charges for other hospital        services.


1Tne HEW regulations    were published in February             1967 in the
 Federal Register    as a proposed rule.




                                     8
WHAT IS A TEACHING HOSPITAL?

        The term "teaching    hospital" has been defined by the
Association     of American Medical Colleges as any hospital
where there is a program of graduate medical education          (res-
idents and interns)      whether or not the hospital   is related
directly    to a medical school.

       The director of a prominent teaching hospital in New
England has described the role of teaching hospitals   in the
following   terms.

             "The primary function             of the hospital         re-
     gardless of the adjective               used to designate           its
     character,        is the care of the sick and injured                    of
     the community.           An additional         responsibility         of
     the teaching hospital             is the conservation           and ex-
     pansion of knowledge through educational                       endeavor
     and scientific         research.        The teaching of medical
     students;       the postgraduate          training     of interns
     and residents;         the support of schools for nurses,
     dietitians,        medical record librarians,               physiother-
     apists,      x-ray and laboratory            technicians;       the con-
     duct of postgraduate            'refresher'         courses for prac-
     ticing     physicians       and teaching conferences              open to
     all physicians         on a regular         basis; the publication
     of clinical         experience and research findings                  and
     the further         sharing of knowledge as visiting                  lec-
     turer;      all round out the activities               of the teach-
     ing hospital         and its staff.          In such an environ-
     ment of constant          inquiry,      high intellectual          ac-
     tivity,      repeated questioning            of the conventional
     wisdom, constant scrutiny               of established         proce-
     dure, and with the rigorous                 application       of the
     scientific       method, the quality             of patient     care
     is likely       to be optimal.          Our country depends on
     such teaching hospitals              for the setting          of stan-
     dards in the best care of the sick and for the
     provision       of the all-too-scarce              supply of well-
     trained      doctors,     nurses, dietitians,            technicians,
     and so on. The urban, university-affiliated,
     teaching hospitals           are our islands of excellence
     in medicine."


                                          9
                                                            .   ’




According to the American Medical Association (AMA), there
are about 1,400 hospitals that have AMA-approved residency
and/or intern programs, including about 135 which are oper-
ated by Federal agencies, such as the Department of Defense
and the Veterans Administration.
     During 1968 and 1969 about 1,000 teaching hospitals
were participating  in the Medicare program where part B bill-
ings could have been made for the services of supervisory
and teaching physicians.
      According to information furnished by AMA, the 1,000
hospitals and their affiliation   with medical schools can be
classified   under the following categories.
                                           Approximate number
            Classification                    of hospitals
Hospitals owned by a medical school
  or both the hospital and medical
  school are owned by the same or-
  ganization.                                         55
Hospitals used by a medical school
  as a major unit in the schoo'i's
  teaching program.                                   145
Hospitals used by a medical school
  to a limited degree in the school's
  teaching program.                                   135
Hospitals used by a medical school
  for graduate training programs
  only (i,e.,  residents and in-
  terns but not medical students).                    90
Hospitals not formally affiliated
  with a medical school but have an
  AMA-approved resident or intern
  program.
    Total                                         1,000
     The AMA, in commenting on an approved internship           pro-
gram, stated:
           "A well-organized, effective educational
     program inevitably results in the improvement

                             10
   . .



         of the quality        of patient   care in a hospital.
         In no way does it conflict           with the hospital's
         primary function        of providing     adequate facili-
         ties for the scientific          care of the sick and in-
         jured by a competent medical staff.              For such an
         educational      program, it is fundamental        that the
         staff recognize its obligations            to permit full
         utilization      for teaching purposes of all pa-
         tients,     whether private      or non-private,     to
         whoa interns       are assigned,"

What is the difference   between a
nonprivate and a private    patient?

      The director   of a large university-owned                 hospital     ex-
plained the distinction      between a nonprivate               (service)     pa-
tient  and a private    patient   as follows:

                 "Patients     in the Hospital     are designated        as
         either     service or private.        Service patients         en-
         ter the Hospital        without a private       physician,
         generally      through our outpatient        clinics,      emer-
         gency room, or from a State mental or penal in-
         stitution.        These patients   are provided care
         primarily      by the house staff      [residents       and in-
         terns]     under the supervision       of one of the staff
         [supervisory       and teaching]   physicians.          Private
         patients     are admitted to one of these [staff]
         physicians      who assumes primary responsibility
         for directing       the care of the patient          with the
         assistance       of the house staff."

       Officials     of other teaching hospitals      stated that they
had only one class of patients        or that they had made no
distinction      between service and private     patients.

       In June 1970, in testimony     before the Senate Finance
Committee, an official      of the Association    of American Medi-
cal Colleges described the delivery        of medical care in
teaching hospitals     in the following    terms.

               "-k-k* On any well-organized  teaching service,
         the professional    care provided to a single pa-
         tient   invo7:ves more than one physician.   In the

                                         11
                                                                   . .



     teaching hospital,      it is a team of physicians
     that cares for the patient,      not a single prac-
     titioner,    as envisioned   by the [Medicare]   law
     and regulations.

             "The team usually     consists of an attending
     faculty    member, residents,      and interns,   and I
     would again add parenthetically          that all these
     individuals     on the team are licensed to practice
     medicine,    the intern     being an exception     since
     his licensure      is somewhat limited      to his practice
     within    the institution."

       In summary the problems disclosed       in our reviews in-
volving     supervisory   and teaching physicians    do not relate
to the quality       of medical care provided in teaching hospi-
tals--which      has authoritatively   been described as excellent--
but they raise the question as to whether the traditional
fee-for-service       method of paying for physicians'     services  is
suitable     in many teaching hospitals    under the Medicare pro-
gram.




                                    12
                                CHAPTER    2


          PRIOR REPORTSTO COMMITTEESOF THE CONGRESS

      In April   1969 the Committee on Finance of the U.S.
Senate requested us to make a review of Medicare payments
to an association      of supervisory      and teaching physicians
at a large midwestern hospital.            In July and September 1969,
we reported    to the Committee that,         according     to the hospital's
medical records,     the   professional      services   billed    to Medi-
care on a fee-for-service        basis in the names of supervisory
and teaching physicians        had been furnished,        in almost all
cases, by residents       and interns     in training    at the hospital
with only limited      involvement      of the supervisory       physicians
in whose names the services         had been billed.

       In May 1970 the Committee requested reports           on our re-
views of Medicare payments at five other teaching hospitals.
The Committee was considering       proposed legislation       to change
the basis of payment under Medicare for supervisory              and
teaching physicians      from a fee-for-service       basis to a cost-
reimbursement     basis under certain     conditions.      The Committee
on Ways and Means of the House of Representatives             also re-
quested reports     on these reviews.       In line with the Commit-
tees'    interest  in this subject,    our examinations      were di-
rected toward determining:

      --The extent to which the services          paid for by Medicare
         had been performed by (1) supervisory           and teaching
         physicians     and (2) residents    or interns--as     shown by
         the hospitals'     medical records,

      --The extent to which payments had been made               for ser-
         vices provided by salaried     and nonsalaried          (volunteer)
         physicians   and whether the hospitals    or the          physicians
         had been otherwise    compensated by Medicare           for such
         services.

      --Whether Medicare patients   had been billed  for deduct-
         ibles and coinsurance  and whether the patients  had
         requested that Medicare payments be made on their be-
         half.



                                      13
                                                                     . .


      --Whether    other medical insurance programs or other
         patients   had paid for physicians'  services in amounts
         comparable to those paid by Medicare under comparable
         circumstances.

      This report   to the Congress summarizes the more signif-
icant problems discussed     in the six separate reports to the
cognizant  congressional   legislative  committees.

PERTINENT DATA ON THE
SIX TEACHING HOSPITALS REVIEWED

        The six hospitals    were all affiliated       in some manner
with medical schools and ranged in size from about 450 to
2,500 beds.      Five of the hospitals        were used by the medical
schools as major units        of the schools9 teaching programs,
which involved residents,         interns,    and medical students;
one hospital     had only a relatively        small residency  program
related    to thoracic    (chest)    surgery.

       Five of the hospitals     are owned and operated by county
governments or by a city government.        The sixth hospital  is
privately   incorporated     and serves both paying and nonpaying
(service)   patients    of the community.

       We reviewed samples of Medicare part B payments totaling
about $85,500 made for services        provided to 315 patients        by
supervisory     and teaching physicians     at six hospitals.        These
samples were selected       from payments totaling     $4.2 million
which were identified       as having been made for services        ren-
dered at the six hospitals.         The period of time and the
services    for which the $4.2 million      was applicable     varied
at the individual     hospitals,    depending on when the billing
started,    the types of service billed,      the availability      of
financial    records,   and the periods covered by our reviews.
On an annual basis,      however, the part B payments averaged
about $500,000 at each hospital        and ranged from about
$120,000 to $1.6 million.

          At none of the six hospitals        did the supervisory    and
teaching      physicians    usually    retain   the Medicare part B pay-
ments for the services         billed     by them or in their    names.
Generally       the physicians     were salaried    employees of the
hospitals       or medical schools or were nonpaid volunteers           who


                                    14
had donated their      time to supervise    and teach residents
and interns   at the hospitals.       Usually the physicians    gave
the money received       from Medicare to the hospitals    or the
affiliated   medical schools.       In other words, although Medi-
care was billed     for teaching physicians'      services on a fee-
for-service   basis,     this was not the method by which the
physicians   were compensated for services        provided to the
Medicare patients.




                                 15
                                CHAPTER 3

                       PROBLEMSIDENTIFIED BY

                GENERAL ACCOUNTING OFFICE REVIEWS

       Our reviews indicated       the existence    of serious problems
in the administration        of the fee-for-service      method of mak-
ing Medicare payments for the services of supervisory                and
teaching physicians.         Although the six hospitals       included
in our reviews may not be representative            of all teaching
hospitals,    these problems raised the question as to whether
this traditional      method of paying for physicians'          services
is suitable     in many teaching hospitals        under the Medicare
program.     The problems involved SSA, the intermediaries              and
carriers,    as well as the hospitals,        medical schools,      or
other organizations       that were billing      Medicare and stemmed
from the difficulties        in

      --supporting    and verifying   the propriety   of physicians'
         fees charged under part B of Medicare because the
         hospitals'   medical records showed that physicians'
         services   paid for under part B had, in many instances,
         been provided only by residents      and interns whose
         salaries   were reimbursable    as hospital  costs under
         part A of Medicare,

      --establishing      the attending   physician-patient      rela-
         tionship    necessary to qualify    for payment on a fee-
         for-service    basis under pertinent      HEW regulations,

      --reimbursing   for services of the same physician under
         both part A on the basis of costs and under part B
         on the basis of fee-for-service,

      --clearly   establishing  the required beneficiary     liabil-
         ity to pay for the services because of the lack of
         the Medicare patients*    involvement in the billing
         arrangements,    and

      --establishing        that the physicians'  charges for the
         services were customary and prevailing          because major
         health insurers --other      than Medicare--did    not pay for
         similar     services.

                                     16
     . .


DIFFICULTIES IN SUPPORTING
THE PROPRIETY OF PHYSIt%NS'          FEES

       According to the hospitals'     medical records,   in a ma-
jority   of cases reviewed by us, the services billed       in the
names of supervisory     and teaching physicians     had been pro-
vided only by residents     and interns.     Excluding those ser-
vices for which there was a lack of any notations         by medical
personnel,    the medical records at the six hospitals      showed
that, overall:

      --The physicians      named on the bills were involved in
         providing    about 18 percent of the number of services
         billed    in their names.

      --Supervisory  physicians,   other than the physicians
         named on the bills,   were involved in providing    about
         15 percent of the services.

      --Only residents  and interns  had been involved  in pro-
         viding the remaining 67 percent of the services.

       It is important     that the billings        to Medicare for su-
pervisory   physicians     be supported by documentation           evidenc-
ing their   involvement      in providing     the services    because
Medicare payments for residents'            and interns'    services    are
not authorized      on a fee-for-service        basis; their    salaries,
however, are reimbursable         as hospital     costs under part A of
the program.      If reimbursement       for these services were made
under both parts A and B, Medicare would be paying twice
for the same services.

      In testimony    before the Senate Finance Committee in
June 1970, the president     of the Association    for Hospital
Medical Education described the following       situation,   which
is typical    of those noted during our reviews.

      "The services     rendered to 'institution       patients'
      have usually    been rendered by residents        and in-
      terns in training      under the general supervision
      of the assigned full-time        and/or part-time      staff
      doctor,   'supervisory    physicians.'      They assume
      medical and legal responsibility         for the care
      rendered.     There have been instances       when the

                                     17
care rendered by house staff--residents           and
interns--to  these 'institutional       patients'     who
are Medicare beneficiaries       has been reimbursed
under part A which we believe is appropriate,
and where reimbursement      for the same services
has been sought by a supervisory        physician     under
part B, who is also paid under part A. Clearly
this is double reimbursement       and it is unequiv-
ocally wrong."    (Underlining     supplied.)




                             18
Comparison     of bills     with   medical    records

       The type and number of occasions of services,    the
amounts billed   and the amounts allowed by the carriers    for
services provided the 315 Medicare patients     covered by our
samples of payments of about $85,500 selected from total
payments of $4.2 million   at the six hospitals   are summarized
below:

                     Summary of Amounts Billed,
                Allowed and Paid by Type of Service

                                             Occasions
               Type of                          of       Amounts      Amounts
               service                        service    billed       allowed

Inpatient     services
    Initial     medical care                      251    $    8,105   $    7,145
    Daily visits                               5,553         46,208       45,072
    S,urgery                                      144        46,146       42,077
    Cons,ultations                                151         4,163        3,887
    Other medical and other
       surgical     services                     286          4,962        4,536
    Anesthesiology                                51          5,221        4,989
    Radiation     therapy                        115          2,300        2,300

   Total     inpatient     services            6,551a    $117,105a    $110,006

Outpatient     services                          107          1,173        1,065

   Total                                       6,658     $118,278     $111,071

   Less :     Amount of patients'
                responsibility
                 (coinsurance    and de-
                ductible     amounts)                                     25,529,

   Total     Medicare     payments                                    $ 85,542

aAt one of the six hospitals,      11 of the 65 Medicare patients
 included in our sample had private      physicians     who had par-
 ticipated    in the care of the 11 patients.       Included in the
 billings   reviewed were billings    by these private     physicians
 consisting     of 227 occasions of service and charges of about
 $7,500.
                                       19
The difficulty       in supporting  the billings for teaching phy-
sicians'     services   on the basis of evidence in the hospitals'
medical records are discussed below for the more typical
types of services       billed.

       Initial      medical   care

        At all six hospitals         the Medicare program usually was
billed    for initial     medical care (initial       visits)   provided
to nonsurgical       patients    on the first     day of hospitilization.
Initial     visits   generally    consisted     of developing a patient's
history     and making a physical         examination   and a diagnosis.
Charges for an initial         visit    ranged from $15 at one hospital
to $50 at another.

        According     to the hospitals'     medical   records    for   the 251
initial    visits

       --the physicians   named on the billings,   in addition to
          the residents  and interns, were involved in providing
          about 27 percent of the services billed;

       --supervisory    physicians,   other than the ones named on
          the billings,   were involved in providing   about 24 per-
          cent of the services;

       --only   residents      and interns were involved        in providing
          the remaining       49 percent of the services.

       The extent of the support for the charges, as shown in
the medical records,     varied widely among the hospitals.                  For
example, at one hospital,       the records indicated            that the phy-
sicians named on the billings          or other supervisory          physicians
had been involved     in providing        initial    medical care in about
80 percent of the cases sampled.               At two other hospitals        the
records indicated    that the physicians            named on the billings
were involved    in providing     initial        medical care in about
half of the cases for which charges were made. At the re-
maining three hospitals,      the supervisory           physicians    named on
the billings    were involved in providing             about 7 percent of
the services billed.




                                      20
      Daily   visits

       At all six hospitals        the Medicare program usually was
billed   for follow-up    visits      for each day of hospitilization,
unless such care was covered under the fees billed                for sur-
gery ' In some instances,         however, the s,urgical fees were
supposed to include the preoperative            and postoperative      care,
yet additional     fees for daily visits        also were s,ubmitted
and, in our opinion,      incorrectly      paid by the carriers.
Charges for daily visits         ranged from $4 at one hospital         to
$15 at another.

        The hospitals'   medical records showed that,        for about
2,000 of the 5,553 daily visits,         notations    had not been made
in the records by any of the physicians,           including    the resi-
dents and interns,      to indicate   that they had seen the pa-
tients;    therefore   we could not determine who provided the
services or whether the services had been provided at all.
Included in the 2,000 unsupported charges for daily visits
were charges for 16 visits        on days when the patients        were
not in the hospitals.

      About 1,300 of these 2,000 ,unsupported daily visit
charges related    to a long-term    tuberculosis  hospital   where
the average length of a patient's        stay was about 90 days
and where notations    by any of the physicians     s,upporting the
daily visit   charges usually    were not made.

        For the 3,553 visits     that were supported by physicians'
notations,     the medical records showed that (1) at three hos-
pitals    only residents     and interns   had provided about 95 per-
cent of the services billed,          (2) at one hospital  the named
physicians     were identified     with about 17 percent of the ser-
vices billed,      and (3) at another hospital      the named physi-
cians were involved in about 30 percent of the services
billed.

       At the last hospital,    however, there were wide variances
regarding    the involvement   of the named physicians    with Medi-
care patients.      The medical records showed that,     for some
Medicare patients,      the named physicians    had been involved
in virtually    all of the services billed      in their name
whereas, for other Medicare patients,        all of the daily


                                     21
visits  recorded had been made by residents  and interns   with
no involvement   of the physician in whose name the services
had been billed.

      S,urgery

       At all six hospitals   the Medicare program was billed
for surgical   procedures which usually    required the use of
the hospitals'    operating  rooms.   Our samples of payments
included 144 charges for operations.       We found that one op-
eration   had not been performed and that one operation     had
been charged and paid for twice.

      The August    1967 HEW regulations     provided    that:

              "In the case of major surgical     procedures
      and other complex and dangerous procedures or
      situations,     such personal and identifiable     di-
      rection     must include supervision   in person by
      the attending     physician."

        For the 142 operations    actually     performed,   the hospi-
tals’    records indicated   that the physicians        named on the
billings     had been present during about 58 percent of the op-
erations     and that,  in about 22 percent,       other supervisory
physicians     had been present during the operation.           For the
remaining 20 percent,      however, the hospitals'        records did
not show that any supervisory         physician    was present during
the surgery which was performed by residents.

       Wide variations      existed among the six hospitals       regard-
ing the extent that their medical records supported the pro-
fessional    fees for the surgical       procedures.     For the pay-
ments included in our samples, the medical records at one
hospital    showed that the physicians        named on the billings
had been present for all the surgical           procedures whereas
the medical records at another hospital            did not show that
any supervisory      physician    was present at 60 percent of the
procedures.

       The findings  of our reviews of the medical records at
the six hospitals    relative   to the presence of supervisory
physicians    during the operations   for which Medicare was
billed   are summarized in the following     table.

                                   22
                                       Medical records showed
                              Number of super-
                   Total       visory physi-       Supervisory     physi-
                operations     cians present        cian not present
                covered in    Same as                          Percent
                our samples   named on                         of total
Hospital        of payments   billing     Other    Number operations

    A                 13        13
    B                 14         4           5          5          36
    C                 49        32          15          2           4
    D                 20        10           7          3          15
    E                 28        20                      8          29
    F                 18        -3          -4         11          61

 Total                          82          31         29
                                                       -           20

       Surgical procedures for which Medicare was billed       but
for which the hospitals'    records did not show that a super-
visory physician  was present included prostate    operations,
leg amputations,   and cataract   extractions.

           Consultations

         Our samples of payments included 151 charges for con-
s,ultations   at five of the six hospitals.      A consultation   was
billed    when a department (e.g.,   medicine)   received medical
advice from another department (e.g.,       surgery)    or from a sub-
specialty    within  the same department.     Charges for consulta-
tions ranged from $7 to $50.

         Our samples of payments at three of the five hospitals
pertained    to 155 patients  and included charges for 25 consul-
tations.     The hospitals'  medical records showed that

           --the physicians  named on the billings    had been in-
              volved in 72 percent of the consultations    and

           --other   supervisory physicians    had been involved    in
              20 percent of the consultations.

In other words, at these        three hospitals,   more than 90 per-
cent of the cons,ultations        in our samples of billings  were
supported by supervisory        physicians'   notes in the medical
records.
                                     23
         In contrast,    our samples of payments at the other two
hospitals    which pertained     to 140 patients   included charges
for 126 consultations,         For about 65 percent of the charges,
the hospitals'      medical records (1) showed that consultations
had been provided only by residents         but did not indicate    the
involvement     of the named physician    or of any other supervi-
sory physician       or (2) did not show that consultations     had
been provided,




                                   24
    . .




Hospital   and medical       school    comments

        The hospitals,   the medical schools,   or other billing
entities    were afforded    the opportunity  to review and comment
on the drafts      of our reports  to the congressional  committees.

     In commenting on our findings    that the medical records
did not support the professional   fees charged to Medicare,
these organizations usually   took the position  that:

      --The absence of supervisory   physicians'     notations in
         the medical records did not mean that the services
         were not provided or personally    supervised by them.

      --SSA, before the issuance of its April 1969 guidelines,
         did not require    that billings   to Medicare for super-
         visory   and teaching physicians     be supported by docu-
         mentation   in the hospitals'    medical records of pa-
         tients.

       A medical school       affiliated           with   one of the governmental
hospitals   advised us,       in part,          that:

      "It    is our studied opinion that our faculty          have
      provided these patients        with the highest quality
      of patient    care.   It is well recognized       in the
      medical community that participation           of attending
      physicians    in the care of their private        patients
      is not always .fully     documented in the patients'
      medical records.      It is a common practice        to enter
      notes in the patient's        chart when a doctor feels,
      for medical reasons,       that a notation     should be in
      the chart.     This activity      of note writing    has no
      relationship     to whether a service was rendered to
      a patient    and it has no clear relationship          to the
      quality    of patient   care that is delivered."

           *             *                 *               3;         *


      "We would also like respectfully      to call to your
      attention     the fact that the method or methods of
      providing     documentation in the medical records in
      any of the intermediary     letters or any other mate-
      rial   published   by the Social Security  Administration


                                               25
      have not required   the degree of note writing       that
      the report describes ***.'I

      One county   hospital   commented as follows:

      "We now have reviewed the clinical    records     of the
      patients    identified to us as those audited     by
      your staff.    ***

      "Regrettably,      our review of the aforementioned
      clinical    records does not enable us to refute the
      findings    reported *** that our Medical Staff has
      not documented in the clinical       records that they
      provided all of the services for which bills        were
      rendered.      This does not mean that the services
      were not rendered.        It does mean, however, that
      our Medical Staff cannot confirm by means of the
      clinical    records that the services were rendered.

      "The conclusion     indicated   *** that the professional
      services    for which Medicare billings      were rendered
       'generally    had been furnished   by residents   and in-
      terns and not by an attending       physician'   is con-
      sidered erroneous by our Director        of Medicine and
      our Director     of Surgery."

       We acknowledge that the absence of a notation        in the
medical records does not conclusively     prove--in    allinstances--
that a service directly    involving a supervisory     physician
had not been rendered to a patient.      We believe,    however,
that the comments by the hospitals    and medical schools raised
two important    questions which were relevant     to the basic
issue of whether, under the Medicare program, the fee-for-
service method of payment is suitable     for many teaching
hospitals,   namely:

        1. Is the involvement    of private    doctors in the treat-
ment of their      own private patients     in a hospital  teaching
setting    usually   shown in the hospitals'     medical records of
the patients?

       2. Did SSA's April 1969 guidelines which specifically
require   that medical records contain documentation   in
support of billings     to Medicare for services   furnished    by
supervisory    and teaching physicians  provide satisfactory
solutions    to the problems of unsupported    and questionable
billings    at these hospitals?




                                  27
What did the hospitals'  medical             records   show
for private Medicare patients?

       At two hospitals   we obtained some data indicating      that
hospital   medical records did reflect     the services  provided
to private   patients   by their own private   doctor,

       At the privately     owned hospital,  there were two distinct
classes of patients --private       patients and service patients.
The private     patients   were admitted by physicians      on the
hospital's     medical staff    and normally were housed in private
and semiprivate       accomodations  at the hospital.     The service
patients     normally were housed in the hospital       wards and
generally     were unable to pay the hospital      charges and related
professional      fees.

       For comparative       purposes we reviewed the hospital's
medical records of 42 Medicare nonsurgical                   service patients
and of six Medicare nonsurgical             private    patients,         For the
nonsurgical      services    billed    on behalf of the private            Medicare
patients,     the hospital's       medical records showed that--in
addition    to the services        provided by residents          and interns--
the physicians       named on the billings          had been involved per-
sonally   in about 65 percent of the services                 charged for,       In
contrast,    for the nonsurgical          services    billed     on behalf of
the Medicare service patients,             the hospital's       medical records
showed that the physicians           named on the billings            were in-
volved in only about 4 percent of the services                    billed    in
their   names.

        As indicated      by the footnote      on page 19, at one county
hospital      11 of the 65 Medicare patients           in our sample had
private     physicians      who had participated       in their    care during
their    hospitalization.         Our comparison of the charges billed
by these private         physicians   with the hospital's        medical
records showed that --in addition            to the services      provided by
residents      and interns --the private        physicians     had been in-
volved personally         in about 75 percent of the services            billed.
We noted, however, that,          for the services      billed   in the names
of the medical school faculty            members assigned to the pa-
tients,     the medical records showed the faculty              physicians
had been involved         in only about 25 percent of the services
billed    in their names.



                                        28
-   .


        Did SSA's guidelines    specifically
        requiring documentation    solve the problem?

               SSA's April     1969 guidelines   focused the attention     of
        the Medicare carriers,       the hospitals,    and the affiliated
        medical schools on the existence         of the problems involved
        in the payments for the services         of supervisory    and teaching
        physicians;    in our opinion,      however, these instructions     did
        not result   in timely and permanent solutions          to the problems
        of unsupported     bills.

               At three'      hospitals     included in our review,    our samples
        of Medicare payments included payments made before and after
        the dates in June and July 1969, when, we believe,                the hos-
        pitals    and the affiliated         medical schools should have im-
        plemented SSA's April           1969 guidelines.     These guidelines
        specifically       required     that bills   for supervisory   and teaching
        physicians'       services    be supported by medical records contain-
        ing evidence of the physicians'             personal involvement     in the
        services     billed.

               At two of the hospitals,      the SSA carriers   had (1)            sus-
        pended Medicare payments for supervisory         and teaching             physi-
        cians'   services   in August 1969 pending implementation                 of
        SSA's guidelines     and (2) resumed or partially     resumed             pay-
        ments 2 or 3 months later       on the assumption that such               im-
        plementation     had been made effective.

               During our reviews at these two hospitals,                   however, we
        noted that only slight         differences         had resulted     from SSA's
        revised    instructions      in either       the billing     practices     or the
        documentation       supporting     the billing       physicians'      charges.
        For example, at one hospital,              for 97 percent of the nonsurgi-
        cal services      provided before and for 94 percent of the non-
        surgical    services    provided      after     the date that,      we believe,


        1
         At the other three hospitals  such a comparison could not
         be made because at the time of our field    reviews,   Medicare
         payments had been suspended.    At one of the hospitals,     pay-
         ments were resumed in November 1970, and, at the other two
         hospitals,  the suspensions were still   in effect   in Septem-
         ber 1971.


                                                29
SSA's April   1969 documentation     requirements    should have
been implemented,     the medical  records   did  not  show that the
supervisory   physician   in whose name the services       had been
billed   had been involved   in providing     such services.

       At the second hospital,       for 70 percent of the services
billed    before and for 57 percent of the services            billed
after   the date that we believe        that SSA's April 1969 documen-
tation    requirements     should have been implemented,        the medical
records did not show that the supervisory             physician     in whose
name the services       had been billed     had performed or directly
supervised      the services.

       On the basis of these findings,        we concluded        that SSA's
guidelines    for supporting   the bills    had not been        effectively
implemented at these two hospitals.           In May 1970       and April
1970, respectively,     the carriers     again suspended        Medicare
payments for supervisory     and teaching physicians'             services
at these hospitals;     such payments were not fully            resumed
until   February 1971 and January 1971.

      At the third    hospital,   the SSA carrier   had (1) suspended
Medicare payments for supervisory       and teaching physicians'
services   in August 1969 pending implementation       of SSA's
April   1969 guidelines    and (2) resumed payments about 2-l/2
months later.

        At this hospital     we noted that,     after    the effective
date of SSA's guidelines,        there (1) was increased documen-
tary evidence of the supervisory           physicians'      involvement     in
the services      billed to Medicare and (2) were some changes in
certain    physicians'   billing    practices    which had the effect
of reducing the Medicare charges for the nonsurgical                   ser-
vices by about 35 percent.          These changes involved          reduc-
tions in the number of charges for daily visits                  and in the
number of minor medical and surgical            services     billed    to
Medicare.

       Although the affiliated     medical school at the third
hospital    had taken steps to implement SSA's requirements,
the dean of the medical school pointed out that,         in an aca-
demic setting,      payments for teaching physicians'    services
on a fee-for-service      basis were almost impossible     to admin-
ister    and audit.    The dean stated,   in part, that:


                                      30
"When the Medicare health insurance program was
established        under Title     XVIII of the Social Secu-
rity    Act, it was done so with little             thought being
given to the mode of delivering              health care other
than a one to one relationship,              namely one physi-
cian dealing with a single patient.                 In an academic
medical center setting,            medical care is provided
through a team approach.              It matters not whether
the patient        is a private      patient   paying his own
bill,    a private       patient   whose bill     is paid in total
or in part by some third             party mechanism, be it a
private      insurance company or some government pro-
gram,    or    if the patient      is indigent,        This is
generally        conceded to be the most effective            means
of providing         care to insure optimum quality           of
care.      In such a system, the medical record is al-
most always more extensive              than in the case of a
private      physician's      record in a community hospital.
The record is intended to document the condition
of the patient          and his progress and not to document
 the role played by the responsible               physician.     It
 is this difference          that has caused so much of our
problem in auditing            the patient    record."
      *               *            *            *             *
"It   is unfortunate    that our faculty members spend
as much as two hours per day when they are on-
service just to provide the documentation         that is
required    if they are to be entitled    to bill    for
their   services.     This adds nothing to the care of
the patient     and indeed takes up a very appreciable
amount of a physician's      time that should be devoted
to patient     care.

"I recognize     that it is absolutely      essential     that
we abide by the rules and regulations            governing
the program and we are doing so.           None of us will
countenance any misrepresentation          of facts or
unappropriate      billing    for services  rendered.       I
do hope, however, that a program can be worked out
that will    better      accomodate the situation     in an
academic medical center."

     *            *             *            *            *



                                31
       "The present legislation   and guidelines   make it
       almost impossible   to administer  and audit the
       Medicare program in an academic medical center
       setting."

        In our opinion,     the dean's comments are germane to the
basic issue of whether there is a viable alternative               to the
traditional    fee-for-service      method for paying for physicians'
services    under Medicare--particularly        in an institution
where residents      and interns    are extensively     involved   in
providing    day-to-day     patient  care and where the personal
involvement    of a teaching physician       in the care of a partic-
ular patient     may range from extensive       to virtually     none.

Agency comments

        In commenting on the difficulties         encountered     in sup-
porting     the propriety    of physicians'     charges, HEW indicated
that our findings       at these three hospitals        may not have been
representative      of the ultimate     overall   effect    of SSA's April
1969 guidelines.         (See app. II.>     HEW pointed out that,      after
April     1969, there had been considerable         improvement in the
medical record documentation         supporting     the billings    in the
names of supervisory        and teaching physicians,        as evidenced
by the fact that,       as of September 1971, payments had been
resumed at all but 22 of the 250 hospitals              where Medicare
payments for such services        had been initially        suspended.
(See ch. 4.)

       We do not disagree with HEW that our findings                    at these
hospitals    may not have been typical              of the ultimate      overall
effect    of the April      1969 guidelines.           On the other hand we
question whether compliance with medical record documenta-
tion requirements         specifically       for the purpose of supporting
Medicare billings        necessarily       means that the fee-for-service
method of paying for physicians'                services    is suitable     in
many teaching hospitals           because of the need for maintaining
continuous     surveillance       and enforcement        of such requirements
to ensure the propriety           of the payments.          In other words,
if such medical record documentation                 is not usually      provided
by the physician        in the normal course of treating              his Medi-
care patients,      some other payment mechanism which is more
susceptible     to effective        controls     appears to be desirable
from the standpoint         of both the physicians            and the paying
organizations.
                                         32
DIFFICULTIES IN ESTABLISHING AN ATTENDING
PHYSICIAN-PATIENT RELATIONSHIP
IN SOMETEACHING SETTINGS

        Our comparisons of the part B billings    for physicians'
services with the medical records of the hospitals          revealed
difficulties    in establishing  the attending   physician-patient
relationship    necessary to qualify    for payment on a fee-
for-service    basis under HEN regulations.

       Available    background material       relating     to HEW's August
1967 regulations,       the language of the regulations,          as well
as later SSA guidelines        and instructions        placed particular
emphasis on the requirement         that,    in order to bill     part B
of Medicare,     the physician     who involves residents        and in-
terns in the care of his Medicare patients                be the patient's
attending    physician     and render personal and identifiable
medical services      to the patient      that are of the same
character    as his services      to his other paying patients.

      One of HEW's considerations       which led to the promulga-
tion of the August 1967 regulations         was the concern that,
unless provision     was made for paying supervisory       and teach-
ing physicians    on a reasonable charge or fee-for-service
basis under part B, physicians       who customarily    admitted
their private    patients  to teaching hospitals      would withdraw
their Medicare patients      from the hospitals'     educational    pro-
grams under which residents,      interns,    and medical students
learn by participating     in the care of the physician's        pri-
vate patients.

       The August 1967 regulations         emphasized the attending-
physician      concept and also stated that there would be situa-
tions when part B payments on the basis of reasonable charges
(fee-for-service)        would not be applicable     because the medi-
calneedsofapatient           and the development of the resident's
professional        competence would make it inappropriate       for a
teaching physician         to become involved personally      in treating
the patient       to the extent required     by the regulations.

       The April 1969 guidelines --which,   according    to SSA,
were intended to clarify     and supplement the criteria     for
making payments for the services      of supervisory   and teaching
physicians--   further emphasized the attending-physician

                                     33
concept    by providing     that   a fee under part       B would be au-
thorized    only when

       --the physician,        in fact,   functioned   as the Medicare
          patient's     attending    physician    and personally  rendered
           identifiable     services    to the patient    which were doc-
          umented in the hospital's          medical records;

       --the physician's    services were of the same character
           as those rendered to his private  patients;

       --the physician    was recognized by the patient     as his
          private physician    and was responsible   for the conti-
          nuity of the patient's     care at least throughout    the
          period of hospitalization;     and

       --the physician  had full personal control over that
          part of the care for which charges were submitted.

        Comparisons of Medicare part B billings        with the medi-
cal records at the six hospitals         showed that,    in about 45
percent of the cases where a supervisory          physician   was iden-
tified    with a specific    service billed   to Medicare,    the su-
pervisory     physician   shown on the medical record was different
from the supervisory       physician  in whose name the service was
billed.

        We believe that this situation           occurred because (1) the
supervisory      physicians     in a particular       department or ward
practiced    as a group and/or (2) the supervisory                physicians
served specific        or intermittent      tours of duty which were not
necessarily      related    to a particular      Medicare patient's        pe-
riod of hospitalization.            It was difficult,       therefore,      to
establish    the bona fide attending           physician-patient       relation-
ship contemplated        by HEW regulations,          Examples of such dif-
ficulties    follow.

        1. At one county hospital    which relied   on a large vol-
untary staff     to help supervise the medical care provided,
the hospital's     director described the delivery      of patient
care by the supervisory     physicians,   the residents,    and the
interns    in the following  terms.



                                      34
          "NOW, I'd be the first        to say that the vast ma-
          jority    of our voluntary      staff members, those who
          come in voluntarily      and contribute         their time,
          that there would be difficulty             in the patient
          identifying    just exactly which of those men were
          their personal physician;          it is unlikely       that a
          vast majority     of our patients         could do that.
           [note 11 Nevertheless,       by virtue       of the organized
          programs which we have, it is possible for three
          of four of these voluntary           staff physicians,
          backed up by full-time        staff physicians,         to come
          in and supervise the residents,              one being present
          at the time to check the initial              examination     of
          the patient    and the initial        plan of treatment,
          and, perhaps, another one being present at the
          time that the patient      undergoes a therapeutic
          procedure,    such as an operation           or the like,     and
           I believe this is at the present time an accept-
          able physician-patient        relationship        in the teach-
          ing setting    with interns      and residents,        but it is
          going to be increasingly         under scrutiny        and it
          may be more difficult       to document to the satisfac-
          tion of all parties      concerned."

       2. At the privately   owned hospital,      supervisory     physi-
 cians in the section of the hospital        for service patients
 had specified   monthly tours of duty during which they super-
 vised and taught residents     and interns,      Because the super-
 visory physician's    tour of duty did not necessarily          coincide
 with the period of the patients'      hospitalization,       the physi-
 cians could not be responsible     personally      for the continu-
 ity of care for all the patients      in the section during their
 entire periods of hospitalization.

       For example, our samples included payments for one Medi-
 care patient   who was hospitalized from October 29 to Novem-
 ber 16, 1968. Medicare was billed     in the name of the super-
 visory physician   on duty during October for daily visits
--
1
     The director  indicated   in a separate statement to us that,
     in the case of the full-time     salaried   staff,    more patients
     were aware of the role of the supervisory          physician  intheir
     care, although they still    identified   the intern or resident
     as their doctor.
at $10 each up to and including           November 16, even though
his tour of duty ended October           31.

      ATter we brought this situation      to SSA's attention,
SSA issued instructions      in August 1970 pointing   out that,
in the foregoing     circumstances,   the supervisory    physician
could not properly    be considered   the patient's   attending
physician   for Medicare billing    purposes.

       3. At another county      hospital   the medical care was
largely    supervised by the     faculty   of the affiliated  medical
school,     A number of the     physicians    on the faculty were
also full-time      employees   of a nearby Veterans Administration
(VA) hospital.

        VA has encouraged its hospitals       and their medical staffs
to become affiliated       with medical schools.       VA regulations
permit full-time       VA physicians  to teach in educational         in-
stitutions     and to accept remuneration,      provided that (1) the
teaching activity       does not impinge on the physicians'         re-
sponsibilities      for the care and treatment      of VA patients        and
(2) the physicians       do not assume responsibility       for the
continuing     care of non-VA patients.       Therefore full-time         VA
physicians     could not function    properly   as attending    physi-
cians although the HEW regulations         for billing    Medicare re-
quire them to do so.

       During fiscal     year 1969 Medicare paid about $100,000
for the services      of 17 full-time    VA physicians     who were on
the faculty    of the affiliated      medical school supervising        the
medical care at the non-VA governmental          hospital.     Our sam-
ple of Medicare payments at this hospital           included bills
for about $4,800 for services provided to Medicare patients
by 10 VA physicians.        About 95 percent of the payments rep-
resented billings      for services provided as an attending
physician,    contrasted     to charges for a single limited       ser-
vice, such as a consultation.

        The hospital's   medical records showed that,  in many
cases, a full-time      VA physician  was not involved in any of
the services     billed  in his name as a Medicare patient's
attending    physician   although some of the patients  were hos-
pitalized    for periods of more than a month.


                                    36
        Because these payments appeared to be in conflict                with
either    the VA regulations        or the HEW regulations,        we brought
the matter to the attention           of these agencies,         Subsequently
VA, in February 1970, clarified             its regulations      to specifi-
cally prohibit      its full-time      physicians      to act as attending
physicians     to Medicare or Medicaid patients            or to bill    for
such services.        Further,    in March 1970, SSA ordered the
suspension of Medicare part B payments for the services of
full-time    VA physicians      in teaching hospitals,and,in           July
1970, SSA directed        its carriers     not to pay any Medicare bills
applicable     to the services       of full-time      VA physicians    ex-
cept for clinical       consultation      and for services       provided by
the relatively      few VA physicians         authorized   to engage in
special community service activities.




                                     37
DIFFICULTIES    IN ADMINISTERING
  AL R-T              SYSTEM

        The costs of certain   physicians'     services     in a hospital
setting    which are of benefit   to patients       in general are re-
imbursable     to the hospital  under the hospital        insurance
(part A) portion     of Medicare, whereas physicians'          services
relating    to the care of individual      patients    are reimburs-
able under part B.

      We noted that, at five of the six hospitals,       the car-
riers  and intermediaries    experienced problems in administer-
ing the dual part A and part B Medicare reimbursement         sys-
tem, which resulted     in excessive reimbursements   of about
$434,000 to two of the hospitals       included in our review.

       As pointed out on page 8, HEW regulations               issued in
October 1966 provide for part B Medicare payments to hos-
pitals   for services      to individual     patients   by physicians
who are employed by, or receive compensation from or
through,    a hospital.      To the extent that the hospitals          pay
these hospital-based        physicians    for services other than
direct   patient    care--such     as teaching,     administration,    and
supervision      of professional     or technical     personnel--such
compensation is reimbursable           to the hospital     as a cost un-
der part A.

       The regulations    further     provide,   however, that the sum
of the payments to the hospital            under parts A and B about
equal the physicians'       compensation allowable        by the Medicare
program except in certain         circumstances     where historically
the hospital     charges for physicians'        professional    services
had been identified      separately      from the charges for other
hospital   services.

       These regulations     were not complied with at two govern-
mental hospitals      where the physicians        were salaried   employ-
ees and were paid by the hospitals           for both part A and B
services.
       1. At the city-owned      hospital,     the staff physicians
          were employed by the city and were paid annual sal-
          aries.     As a condition     of their employment, the
          physicians    were precluded from billing         for the
          treatment    of patients     in the hospital.

                                    3s
         Although the Medicare part B carrier         paid about
         $354,000 to the hospital      during the 3-year period
         ended June 30, 1969, for the services of the hos-
         pital  physicians   to individual     Medicare patients,
         the hospital's    costs of providing      such services
         were only about $49,000.       These costs had been eli-
         minated from the hospital's       claims for reimburse-
         ment under the part A portion        of the Medicare pro-
         gram.

               After subtracting   the deductible   and coinsur-
         ance amounts totaling    about $14,000--which     were
         payable by the Medicare patients--from       the.hospi-
         tal's   cost of $49,000, we estimated    that part B
         payments received by the hospital      exceeded its reim-
         bursable Medicare costs by about $319,000.

      2. At a county-owned    hospital,   the staff physicians
         were salaried   employees who were precluded        from
         billing  for their services    to patients    in the hos-
         pital.   We estimated   that,  for the 3-year period
         ended June 30, 1969, the amounts paid to the hos-
         pital under part B and the amounts claimed by the
         hospital  under part A for physicians'       services    to
         Medicare patients    exceeded the hospital's      reimburs-
         able Medicare costs by as much as $115,000.

DIFFICULTIES IN CLEARLY ESTABLISHING
ANY BENEFICIARY LIABILITY

       Because the Medicare program primarily        is an insurance
program to privide      protection    against the cost of health
care for most Americans aged 65 and over, the Medicare law
provides that payments not be made for health services--
including   physicians'     services-- if the individual   receiving
such services has no legal obligation         to pay for them.

       The willingness   of a Medicare patient   to pay the part B
deductible    and coinsurance  amounts and to sign a claim re-
questing Medicare payments to be made on his behalf provides
some evidence that the patient      acknowledges his obligation
to pay for the services of the supervisory       and teaching
physicians.


                                 39
                                                                 . .



        There was, however, a general lack of beneficiary          in-
volvement in the billing        arrangements   for services of teach-
ing and supervisory      physicians.     This condition    caused dif-
ficulties     in clearly  establishing    that the patients    had
acknowledged any obligation         to pay for the services billed
to Medicare on their behalf.

Patients   generally  not billed    for
deductible   and coinsurance     amozs

       With few exceptions      the Medicare patients    generally
were not billed       for the deductible   and coinsurance   amounts
applicable     to the services provided by supervisory       and
teaching physicians.         In some instances where a Medicare
patient    was also covered under the State Medicaid program or
a private    insurance policy supplementing       Medicare,  the State
or the private      insurers   were billed   and paid the deductible
and coinsurance       amounts.

       According to the responsible       billing    officials, the
Medicare deductible      and coinsurance      amounts generally  were
not billed     to the individual   patients     because they were not
financially      able to pay.




                                   40
Patients    did not   usually   authorize    billings

        Under Medicare there were generally             two forms used in
billing    for physicians'       services.     One form (form SSA-1554)
was for use by hospitals          only when they had a billing          ar-
rangement with physicians          to collect     their charges for the
care of individual      patients.        One hospital      used this form,
and--according      to SSA instructions--the           patients   were not
required     to sign each bil1.l         Instead,    the hospital    required
the Medicare patients,         at the time of admission,          to sign a
statement authorizing        the hospital      to bill     Medicare for any
benefits     due the patients.        Under this arrangement patients
did not authorize      any specific        payments for services of any
specific    physician.

       The other form (form SSA-1490) was for use by individual
physicians    or by the beneficiaries        to bill    Medicare for phy-
sicians'   services.      SSA instructions     require,      generally,
that a patient     sign the form requesting         payment of benefits
to him or to others on his behalf.            When a physician        accepts
an assignment of a Medicare claim from a patient,                which au-
thorizes   the payment to be made directly           to the physician
or his billing     organization,      the patient's     signature     pro-
vides evidence that the patient          has made the assignment and
that he recognizes      the right of the physician           to request
payment on the patient's         behalf for services       rendered.

        At five hospitals,l     forms SSA-1490 usually were used to
bill    for the services of supervisory     and teaching physicians
and the billings     were handled as assignments      (i.e.   the bene-
ficiary     did not submit a claim for reimbursement        to himself
to pay the physician's      bill).

     At two governmental hospitals  none of the claims for
the payments included in our samples were signed by the


1One of the departments of an affiliated     medical school at
 another hospital  had improperly   used this hospital     form to
 bill  Medicare for the services of its faculty     physicians.




                                     41
                                                                   . ,


Medicare beneficiaries.       Also, at the three remaining hos-
pitals,  about 65 percent     of the claims were not signed by
the Medicare beneficiaries.

       In commenting on the lack of patients'        authorizations
on the billings    for the physicians'     services,    officials    of
the hospitals   or other billing    organizations      generally    ad-
vised us that (1) the patients      were physically      unable to
sign or (2) the officials     had misunderstood      the SSA billing
requirements.

DIFFICULTIES IN ESTABLISHING
CUSTOMARYAND PREVAILING CHARGES

       The Congress, in establishing       the Medicare program,
provided that payments for physicians'         services be made on
the basis of reasonable charges and that, in determining           the
reasonableness    of charges, consideration      be given to (1) the
customary charges for similar       services generally   made by
physicians   and (2) the prevailing      charges of physicians   in
the locality   for similar   services.

      At two hospitals   the Medicare carriers     had a question-
able basis for determining     that the charges billed     to Hedi-
care for the services of supervisory      and teaching physicians
were customary and prevailing      because these carriers    did
not pay for similar    services at these hospitals     for their
own subscribers.     Under these circumstances     it could be
argued that the customary or prevailing       charge would be
zero.

        For example, at a privately    owned hospital,    the SSA
carrier    (l31ue Shield) paid for surgical    and inpatient     medi-
cal and outpatient      services provided to Medicare patients
in the service section of the hospital.         For its own sub-
scribers,     however, Blue Shield did not pay for inpatient
medical or outpatient       services to service patients     al-
though it did pay for surgically       related  services.

      Blue Shield informed us that one of the conditions          of
its medical insurance policies     was that professional      fees
be paid only for services    rendered to private    patients.
The term "private   patient"  was defined as a patient       with
whom a physician  or dentist   has an expressed or implied

                                   42
      . .


contract    to render services for a fee.        Because service
patients    at this hospital     were not expected to pay for
supervisory     physicians'    services  if they had no insurance,
Blue Shield considered       that no contract,    expressed or im-
plied,   existed between its subscribers        who were service
patients    and the supervisory      and teaching physicians.

       Also we noted that insurance companies other than Blue
Shield did not pay for inpatient     medical services or out-
patient    services rendered by teaching physicians   to service
patients    at this hospital.

       At a county hospital, the SSA carrier    (Blue Shield)
would not pay for any supervisory    or teaching physicians'
services   rendered toitsown  policy holders although--in
1 year-- it paid part B funds of $1.6 million     for such ser-
vices to Medicare patients.     Some insurance companies, how-
ever, other than Blue Shield did pay fees for physicians'
services   at this hospital.




                                 43
                                CHAPTER4

                   MAGNITUDE OF OVERALL PROBLEM

                        AND ACTIONS TAKEN BY

                        SSA AND THE CARRIERS

       In April 1969 SSA recognized the seriousness               of the
problems that existed        in Medicare because of the payment on
a fee-for-service      basis for the services of supervisory             and
teaching physicians      in a hospital     setting.       During the .
2-year period between April 1969 and April 1971, SSA issued
various instructions       to its carriers      to clarify     the regula-
tions,    to determine where possible overpayments existed,               and
to obtain data on the subject;         however, as of April 1971 SSA
was still    unable to definitely      establish     the magnitude of
the overall     problem.

       In addition to the problems associated   with the Medi-
care program, the Federal Government also has participated
in payments to supervisory    and teaching physicians   under
various State Medicaid programs providing     medical care to
the indigent.

ESTIMATED MAGNITTJDEOF PROBLEMUNDER MEDICARE-

      Although SSA has never clearly  established  the overall
magnitude of the problem in terms of the total    Medicare pay-
ments that have been made for the services of supervisory
and teaching physicians,   the Senate Finance Committee has
estimated   that total payments could be more than $100 mil-
lion annually.

      On the basis of our reviews at the six           hospitals where
Medicare payments averaged about $500,000 a            year and re-
sponses that we received to a questionnaire            from other teach-
ing hospitals  selected randomly, it appears           that the problem
is widespread and significant.

Information    requested    of 20 hospitals

      In an attempt to develop information on the overall
magnitude of the Medicare payments for the services  of

                                    44
     .   .I




supervisory       and teaching physicians,      we randomly selected
20 teaching hospitals         from the 200 non-Federal     medical
school-affiliated        hospitals   that were members of the Council
of Teaching Hospitals         of the Association     of American Medi-
cal Colleges and SSA queried them as to the extent of their
Medicare reimbursements          for the services    of supervisory  and
teaching physicians.          Eighteen responses were received,
which indicated       that for 1968 and 1969

         --11     hospitals     received   a total    of $3.2 million,

         --five     hospitals     made no billings,

         --one hospital         could   not determine    the amount received,
            and

         --one hospital   reported that Medicare             payments had been
            suspended during much of the period.

       For those hospitals   from which a positive    response was
received   (including   those that reported no billings),     the
Medicare payments averaged about $100,000 annually.

SSA DIRECTION TO CARRIERS

        Since April 1969 SSA has issued various instructions
and guidelines      concerning   the conditions    under which Medi-
care payments could be made for the services of supervisory
and teaching physicians        and also as a means for determining
where possible      overpayments existed.       A summary of SSA's
instructions      is shown in appendix I.       Some of the more sig-
nificant     steps taken are discussed below.

Suspension         of payments

       In June 1969 SSA instructed    its carriers    to suspend
Medicare payments for supervisory       and teaching physicians'
services at university-affiliated       teaching hospitals      in
those cases where the carriers     were not satisfied       that the
hospitals    were complying with the April 1969 guidelines.
In August 1969 SSA issued instructions         to the effect    that
payments at teaching hospitals     that were not affiliated          with
universities    were also to be suspended, if appropriate.


                                           45
                                                                I.   .




      In December 1970 SSA reported that at one time or an-
other Medicare part B payments had been suspended at about
250 hospitals,  and in September 1971 SSA reported that pay-
ments remained suspended at 22 of the hospitals.

Number and scope of carrier      audits

      SSA's April 1969 guidelines   require carriers    to make
appropriate    checks of hospitals' medical  records  of  patients
to verify   that services  for which charges are billed    meet
SSA's coverage criteria.

      In September 1969 SSA directed     that, before resuming
payment at those hospitals     where payments were suspended,
the carriers    should examine about 100 paid or unpaid bill-
ings to determine     if the physicians  named on the billings
had rendered the personal and identifiable        services  expected
of an attending    physician  in his private   practice.

       In December 1970 SSA reported to its carriers        that it
was unable to issue a definitive    national    policy for recov-
ery of overpayments and queried the carriers         throughout  the
country to identify   those that had made audits of hospitals'
medical records to determine the propriety       of payments for
services   rendered before June 1969--the    effective     date of
SSA's April 1969 guidelines.

        As of February 1971 SSA had received responses from
43 of the 48 carriers;      only 11 carriers   reported    that they
had made audits.      Excluding four hospitals     where SSA had
initiated    action to recover overpayments,      the carriers'    au-
dits were made at 58 hospitals      throughout    the country,    of
which one carrier     accounted for 36 hospitals      or more than
one half of the audits reported.

       This carrier    informed us that, on receiving    SSA's au-
dit instructions     in September 1969, it proceeded to review
current Medicare claims for reimbursement        but that it had
retained   no working papers showing the claims reviewed.        In
April 1971 this carrier       informed us also that it was making
a second audit at the 36 hospitals       and that it would docu-
ment the nature and scope of the work which would include
services   rendered prior     to June 1969.


                                  46
       In April 1971 SSA issued instructions       to its carriers
regarding   the determination     and recovery of overpayments
for teaching physicians'      services provided before June 1969.
According to SSA officials      these instructions     should involve
about 300 teaching hospitals.         The carriers   were instructed
to make their audits in the following         two stages.

      --An audit was to be made of a sample of about 75
         claims to determine whether the potential   overpay-
         ments justified   the cost of an in-depth audit.

      --If       a substantial overpayment was indicated, an in-
             depth audit of Medicare claims should be made to de-
             termine the amount of the overpayment.

       The April 1971 instructions     further  provided that, when-
ever the carrier     decided not to make an in-depth     audit, the
rationale   supporting    the decision   should be fully  documented.

Actions initiated to recover
overpayments at 12 hospitals

       In addition  to the six hospitals   included in our re-
views, SSA had identified     six other teaching hospitals    where
potential   Medicare overpayments for the services      of super-
visory and teaching physicians     might have occurred.

       As of June 1,. 1971, SSA had determined that overpay-
ments totaling         about $2.5 million    were made at four of the
12 hospitals        and it had initiated     collection     actions.      The
carriers'        SSA-directed  audits were in process and negotia-
tions for refunds had been initiated             at six hospitals.         At
one hospital        the intermediary     and carrier    were making a
joint     audit;    at the remaining hospital        no specific     recovery
actions had been taken by SSA at that time.




                                      47
OTHERm--e-
      FEDERALLY SPONSOREDPROGRAMSPAYING FOR THE
SERVICES OF SUPERVISORYAND TEACHING
                                 W-MPHYSICIANS
       Congressional     concern regarding payments for the ser-
vices of supervisory       and teaching physicians   has been pri-
marily directed      toward payments made under the Medicare
program because of HEW's August 1967 regulations           specifi-
cally authorizing       such payments (see p. 8) and because of the
substantial    amounts involved.       Similar payments have been
made under the Medicaid program-- authorized        by title    XIX of
the Social Security       Act, as amended (42 U.S.C. 1396)--which
is also an HEW program.         The Medicaid program is a grant-in-
aid program under which the Federal Government participates
in costs incurred       by the States in providing   medical assis-
tance to individuals       who are unable to pay for such ser-
vices.

       As of December 1970, 48 States and the District        of Co-
lumbia, Guam, Puerto Rico, and the Virgin         Islands had adopted
Medicaid programs.      The Federal Government pays from 50 to
83 percent (depending on the per capita income of the States)
of the costs incurred      by States in providing     medical ser-
vices under their Medicaid programs.         For fiscal   year 1970
the States and jurisdictions       then having Medicaid programs
reported expenditures      of about $4.7 billion     of which about
$2.4 billion   represented    the Federal share,      About $572 mil-
lion of the total    Medicaid expenditures     was for physicians'
services.

     Although this report concerns the problems involving
payments made under Medicare, we believe that similar   prob-
lems exist with regard to payments made under Medicaid.

Medicaid    payments    at     the six
hospitals    reviewed        by GAO

      At the time of our review at the six hospitals,      five of
the hospitals   were located in States that had Medicare pro-
grams.    Payments were made under the Medicaid program for
supervisory   and teaching physicians'    services rendered at
four of the five hospitals.      At one of the five hospitals,
the State had refused to pay for such services under the
Medicaid program.     The Medicaid payments for the services
at the four hospitals    varied from $500 to $371,000.     On an

                                         48
annual basis, the payments averaged about $112,000 and in-
cluded payments which represented  the Medicare deductible
and coinsurance  amounts.  (See p, 40.)

Information    requested     of 20 'hospitals

       The responses received from the 18 hospitals            referred  to
on pages 44 and 45 indicated       that 10 hospitals     billed      the
Medicaid program for supervisory        and teaching physicians'
services,    six made no billings,     and two hospitals       did not re-
spond to the question concerning the amounts received from
Medicaid.     The average annual amount received during the
years 1968 and 1969 for each of the 16 hospitals             that re-
sponded to our questionnaires       was about $125,000.



       Although the overall        magnitude of the problem involved
in payments for supervisory           and teaching physicians'          ser-
vices under the Medicare and Medicaid programs has not been
definitely     established,     the available      evidence indicates
that it is widespread and significant.                 In our opinion,
SSA's experience       over a 2-year period in attempting             to clar-
ify the pertinent       regulations      and to obtain overall        data on
the subject is indicative          'of the difficulties       inherent     in
administering      a fee-for-service       reimbursement      system that is
neither    easily understood nor readily           susceptible     to effec-
tive controls.




                                     49
                                 CHARTER5

                       LEGISLATIVE CHANGESBEING

                      CONSIDERED BY THE CONGRESS

CONGRESSIONALDELIBERATIONS

        In April 1969 the Committee on Finance, U.S. Senate,
requested us to review the Medicare payments made to an as-
sociation    of supervisory     and teaching physicians at a large
midwestern hospital.         On July 1 and 2, 1969, the Committee
held public hearings at which our representatives        and of-
ficials    of HEW testified.

Report     of staff   of Senate Finance      Committee

        On February 9, 1970, the staff of the Senate Finance
Committee issued a report1 to the Chairman which recommended
that payments on a fee-for-service           basis for supervisory   or
teaching physicians'        services rendered to nonprivate      or ser-
vice patients     be terminated     until  such time as the Congress
clearly    and specifically      expresses an intention   to pay for
these services     and specifies      the criteria  under which they
will be paid.

        The staff   report questioned whether the Medicare bene-
ficiary    who is an institutional       or service patient           in a
hospital    is under any legal obligation            to pay for such phy-
sicians'    services and noted that, although medical schools
and teaching hospitals         are in need of additional           sources of
funds, millions      of older people should not be required                to
subsidize medical education through their Medicare part B
premium payments.         The staff  reported      that the Congress had
recognized     that the proper approach to additional               financing
of medical education was through the appropriation                    process,
where needs could be established,           justified,      and met on the
basis of specific       requirements    of specific      institutions.


1
    Medicare   and Medicaid--Problems,       Issues,   and Alternatives.



                                      50
Social     Security   Amendments of 1970

      In May 1970 the House of Representatives     passed House
bill  17550, entitled  "Social Security   Amendments of 1970,"
which included a provision    to change the basis of reimburse-
ment under part B for the services of teaching physicians
from a fee-for-service   basis to a cost-reimbursement    basis
when the services are furnished    under either of the follow-
ing circumstances.

         1. The non-Medicare patients,      even when able to pay,
            are not obligated     to pay the billed  charges for
            physicians'   services.

         2. Some or all of the Medicare patients    do not pay the
            deductible   and coinsurance amounts related  to phy-
            sicians’   charges.

        The House bill  provided for the reimbursement       of 100
percent of the reasonable cost of such services           to a hospi-
tal    or other medical service organization,      including   medical
schools, and thus would have made it unnecessary for these
institutions    to obtain the deductible    and coinsurance
amounts from the individual      Medicare patients.

      The U.S. Senate passed an amended version of House bill
17550, on December 29, 1970, but the bill       was not enacted
into law because the ninety-first       Congress adjourned before
the differences  in the bills     could be resolved by a House
and Senate Conference Committee.

       The Senate version of the bill     provided that,  except
in certain    circumstances,   payment for the services   of teach-
ing physicians     to kdicare   patients  be made under part A1
on the basis of actual or "equivalent"        cost.  Under the bill
payment under part B would continue to be authorized        where
 (1) the Medicare patients     were bona fide "private"   patients
of the billing     physician  or (2) during the 2-year period


bhen  a patient  only had part B coverage, payment would be
 made on the basis of reasonable costs under part B.



                                   51
                                                                    . .


ended December 31, 1967, and each year thereafter,     all the
institutionis  patients were regularly   billed on a fee-for-
service basis for professional   services and most patients
paid such charges.

      The bill  provided that payments on a cost basis under
part A could include the salaries           paid by an affiliated
medical school to faculty         physicians    for patient    care fur-
nished to Medicare patients          in the hospital.       It provided
also for payments to a hospital's           organized medical staff
for the services      provided by the unpaid voluntary          medical
staff   of a hospital     on the basis of the average salary for
all full-time   physicians      (i.e.,    on an equivalent     cost basis).

       Thus, under the Senate version,    payment under Medicare
would be made for a proportionate      share of these costs in
much the same manner as payments are presently       made for the
services of residents   and interns.

      As for the Medicaid program, the Senate version of
House bill   17550 provided that, where States elect to pay
for the services   of supervisory  or teaching physicians,
Federal matching would be limited    to reimbursements   not in
excess of that allowable    under Medicare.

Social   Security   Amendments of 1971

       On January 22, 1971, House bill    1 entitled     "Social
Security    Amendments of 1971" was introduced      in the House of
Representatives.      On May 26, 1971, the House Ways and Means
Committee reported out its version of House bill          1 which
contained the same provisions      for the reimbursement      of
supervisory    and teaching physicians'   services under Medi-
care as the Senate's version of House bill        17550.    These
provisions    were included in the bill   passed by the House
on June 22, 1971.




                                    52
                               CHAPTER 6

                              CONCLUSIONS

        In our opinion,      the legislative    changes proposed by
the cognizant      legislative     committees are designed to pro-
vide reasonable solutions          to certain   of the problems we
identified    in administering       the fee-for-service      method for
making Medicare payments for supervisory              and teaching phy-
sicians'    services in a teaching setting.

       We believe that the proposed legislation--which        pro-
vides that, except in certain      circumstances,  payments under
Medicare would be made for teaching physicians'        services
under part A (hospital     costs) on the basis of a proportion-
ate share of the reasonable costs of such services to all
patients--  if effectively   implemented,    would

      --minimize     the problem of unsupported bills        because
         Medicare payments would be related          to that part of a
         supervisory    physician's     time applied to the care of
         patients    at the hospital      and would no longer require
         the extensive     documentation     now required   to support
         charges for specific       services on a patient-by-
         patient   basis,

      --eliminate   the need to demonstrate   that a supervisory
         or teaching physician  is the patient's    attending
         physician  in order to qualify   for reimbursement,   and

      --minimize     the difficulties        in administering  the dual
         Medicare reimbursement          system for the physicians'
         services    such as have occurred when a part of a phy-
         sician's    services may be reimbursed on the basis of
         reasonable costs under part A and a part of the same
         physician's     services     involving   individual  patients
         may be reimbursed on the basis of reasonable             charges
         under part B.

        The proposed legislation      also gives consideration       to
our findings      on the difficulties     in (1) clearly   establish-
ing any beneficiary      liability    because of the lack of bene-
ficiary    involvement   in the billing     arrangements   and (2) es-
tablishing     customary and prevailing      charges.    For example:

                                    53
 ,-Medicare payments on a fee-for-service              basis would
   continue to be authorized         under part B for those
   Medicare patients      who are bona fide private          patients
   of the billing     physician.       According to the Commit-
   tees' reports     on the proposed legislation,           one of
   the criteria    for establishing        that a bona fide pri-
   vate patient-physician        relationship     exists would be
   that (1) the Medicare patient           is legally    obligated
   to pay the charges billed,          including    the deductible
   and coinsurance     amounts, and (2) the physician
   routinely    and regularly      seeks to collect      such
   charges.

  When the services of teaching physicians                are to be
  reimbursed on the basis of reasonable costs under
  part A, however, the part B deductible               and coinsur-
  ance provisions      would not be applicable.            This
  would make it unnecessary for the hospitals                or other
  billing   organizations       to obtain such amounts from .
  the individual     Medicare patients.          Further,    under
  the Committees'      proposed cost-based         reimbursement
  system, it would not be necessary to clearly                 estab-
  lish a specific      patient's    liability      to pay a spe-
  cific   physician    for specific      services.

--Hadicare     payments on a fee-for-service       basis also
   would be authorized      under part B of Medicare when,
   during the 2-year period ended December 31, 1967,
   and during each year thereafter        for which charges
   for physicians'     services are being claimed:          (1) all
   the institutions'     patients  were billed     regularly
   for professional     services,  (2) reasonable efforts
   were made to collect      these billed    charges, and (3)
   at least 50 percent of the patients         paid such
   charges.

  Because, under this proposal,       physicians'     fees were
  required  to have been charged and regularly           col-
  lected during a 6-month period (January 1 through
  June 30, 1966) before the effective         date of Medicare,
  the proposed legislation    would require       consideration
  of the customary billing     practices    at the time Medi-
  care came into effect,    as well as the customary
  practices   on a more current basis.

                             54
REMAINING POTENTIAL PROBLEMAREA

       We believe that, under the proposed legislation,                it
would still    be possible      to pay for teaching physicians'
services to their bona fide private            patients    at institu-
tions on the fee-for-service         basis under part B, and also
to pay for the same physicians'          services     to their nonpri-
vate patients     at institutions     on the basis of costs under
part A. Under these circumstances            the difficulties        in ad-
ministering    the dual part A and part B Medicare reimburse-
ment system could be a continuing          problem.

        Therefore,   if the proposed legislative       changes are
enacted, HEW should develop detailed          guidelines    (including
provisions     for audit)   to help establish     and maintain ef-
fective    procedures for determining      the proper amounts to be
paid for-supervisory       and teaching physicians'      services
which are reimbursed on both the cost basis and the fee-for-
service basis at the same institution.

AGENCY COMMENTS

       In commenting on the foregoing      observations    (see app.
II),   HEW advised us that it was aware of the possible prob-
lems of administering      the dual part A and part B reimburse-
ment system for physicians'      services and that it was sensi-
tive to their implications,        HEW stated that,     in developing
guidelines   and instructions    to implement the new amendments,
when they are enacted, HEW would deal with the problem of
reimbursement under both part A and part B for teaching
physicians'    services.




                                     55
                                 CHAPTER 7

                             SCOPEOF REVIEW

       We examined into Medicare payments for the services                  of
supervisory     and teaching physicians            at six teaching hospi-
tals.    Our examination        included comparisons of the billings
for 315 Medicare patients           with the hospitals'        medical rec-
ords applicable       to the patients        to ascertain     the extent to
which the medical records showed (1) whether the services
were provided and (2) who was involved in providing                   them.
Because of the technical           nature of the data being reviewed,
we received professional           assistance      at each of the six hos-
pitals   either   from Public Health Service physicians               or from
consulting     physicians      employed by the SSA carriers,          who in-
dependently     checked our findings          with the medical records.
The physicians'       findings     were incorporated       into our individ-
ual reports     to the cognizant         legislative     committees of the
Congress and into this overall              summary report.

        Cur examination    also included reviews of (1) the hos-
pitals'    claims for reimbursement       for physicians'    services
under the hospital      insurance    (part A) portion     of Medicare,
(2) the extent of the billings         for the Medicare deductible
and coinsurance      amounts which were the responsibility          of the
patients,     and (3) the billing     practices  for physicians'      ser-
vices as they pertained        to the State Medicaid programs and
to health insurers      other than Medicare.

         For each of the six hospitals,      we obtained written   com-
ments on drafts       of our individual    reports  from SSA; from the
applicable       Blue Shield carriers;    and from the hospitals,     af-
filiated      medical school, or other billing      organization  di-
rectly     involved.    We considered these comments in the prep-
aration      of our individual    reports and in the preparation      of
this report.

      Our selection     of the hospitals     was principally      based on
 (1) direction   from congressional      committees (two hospitals),
 (2) our reviews in process dealing with overall             Medicare
reimbursement    matters   (three hospitals),     and (3) information
obtained from nongovernmental        sources indicated       the exis-
tence of problems (one hospital).           Because of the nonrandom
basis for our selection,       our findings    at the six hospitals

                                       56
 . ..



may not be representative      of conditions    at all   teaching   hos-
pitals.

       At our request SSA sent questionnaires  to 20 teaching
hospitals,   selected by us at random, to develop additional
information   as to the extent of the payments for the ser-
vices of supervisory   and teaching physicians  under the Medi-
care and Medicaid programs.

       Our reviews were made at SSA headquarters         in Baltimore,
Maryland,    and at the offices   of the applicable      SSA carriers
and intermediaries     and the six hospitals     located in the
States of Florida,     Illinois,  Massachusetts,     Michigan,   and
Texas.

        As part of our reviews, we examined into the basic leg-
islation    authorizing     the Medicare program and the pertinent
HEW regulations       and SSA instructions    and guidelines    imple-
menting the program.          We examined also pertinent     documents
at the offices      of the SSA carriers    and intermediaries     and
at the hospitals       and/or affiliated   medical schools.




                                   57
. :




      APPENDIXES
        ,    .’
                                                                     APPENDIX I
.   .




                       LISTING OF INSTRUCTIONS CONCERNING

                  PAYMENTSTO SUPERVISORYAND TEACHING PHYSICIANS

                  ISSUED BY SSA AFTER THE APRIL 1969 GUIDELINES

            June 1969--directing        carriers  to suspend payments to
            university-affiliated        teaching hospitals  if they were
            not complying with       the April 1969 guidelines.

            July 1969--requesting   information    as to what steps have
            been taken by the carriers    concerning    their responsi-
            bilities  for claim review and verification       as outlined
            in the April 1969 guidelines.

            August 1969--cautioning carriers   to resume payments
            that have been suspended only after discussion   with
            SSA because of the many questions   concerning the pro-
            priety of payments.

            August 1969--directing        carriers     to suspend payments to
            non-university-affiliated          teaching hospitals   if they
            were not in compliance        with the April 1969 guidelines.

            August 1969--directing           carriers    to give review priority
            to university-affiliated            teaching hospitals      over the
            non-university        affiliated      types, starting    with those
            having extensive          intern and residency      programs.

            September 1969--specifically    directing carriers to exam-
            ine patient  records (about 100) at teaching hospitals
            where payments were suspended and to discuss recovery
            of overpayments where identified.

            September 1969--identification        of major issues        emanating
            from SSA questionnaires       completed by university-
            affiliated teaching hospitals.

            November 1969--directing       local SSA offices  to review
            carrier activities     regarding    the April 1969 guidelines,

            December 1969--recognition      that the problem of over-
            payment needs further     study and advising carriers    that
            the existence  of a possible      overpayment should not
APPENDIX I                                                           '. .


     preclude resumption    of payment if     the institution        meets
     the April  1969 guidelines.

     January 1970--31 questions   and answers relating          to
     implementation  of the April 1969 guidelines.

     March 1970--directing      carriers    to suspend payments for
     services   rendered full-time       VA physicians in teaching
     hospitals.

     June 1970--exclusion     of teaching hospitals       from detailed
     implementation    of the April 1969 guidelines         if (1) the
     Medicare patients     had a physician-patient      relationship
     with the supervisory     and teaching physician        before
     hospitalization,     (2) all patients    pay on a fee-for-
     service basis for the services,       including    amounts not
     paid by insurance     or other third parties,      and (3) the
     fees paid by the patients      are retained     by the physi-
     cians,

     August 1970--clarification   of April 1969 guidelines
     relating  to payments where the physician's  service             to
     a patient   is interrupted by rotation.

     December 1970--SSA recognition   that it was still   unable
     to issue a definitive  national  policy  on the approach
     to be taken regarding  the recovery of overpayments.

    April    1971--instructing       carriers to determine and re-
    cover overpayments         on claims for teaching physicians'
    services    for the period before June 1969.




                                  62
                                                                                         APPENDIX II


                       DEPARTMENT   OF     HEALTH,     EDUCATION,        AND   WELFARE
                                         WASHINGTON.     D.C.   2020 1




E OF THE   SECRETARY                      SEP 22 1971



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

   Dear Mr. Charam:

   The Secretary has asked that I reply to your letter   of July 29, 1971, which
   transmitted  copies of your draft report, "Problems in Administering  Medicare
   Payments for the Services of Supervisory and Teaching Physicians in a
   Hospital Setting"   (B-164031-4, July 29, 1971).

   This report was primarily     prepared for the guidance of members of the
   Congress in considering legislative      proposals designed to resolve problems
   that have arisen in connection with Medicare reimbursement for the services
   of supervisory and teaching physicians in a hospital           setting.    The draft
   report summarizes the more significant        problems GAO found in reviews of six
   teaching hospitals    and describes some of the actions taken by SSA to deal
   with these problems.      In Chapter 4 and Appendix I of the draft report, GAO
   gives specific   recognition   to SSA efforts     to (a) clarify     the conditions
   under which payment can be made on a fee-for-service           basis for the services
   of supervisory and teaching physicians,         (b) identify   particular   teaching
   hospitals where overpayments may have occurred, and (c) recover overpayments.

   GAO concludes that the proposed legislation          currently     under consideration
   would, if enacted, help to resolve the major problems identified               during the
   reviews.     It notes, however, that even under the proposed legislation,              the
   difficulties     in administering    the dual Part A-Part B Medicare reimbursement
   system could be a continuing problem where a teaching physician has both
   private and nonprivate patients in the same institution.               GAO suggests that
   detailed guidelines       be developed to help establish        and maintain effective
   procedures for determining the proper reimbursement for services based on
   both costs and fee-for-service         at the same institution.       We are aware of
   this possible problem and are sensitive         to its implications.        In developing
   guidelines     and instructions    implementing the new amendments when they are
   enacted, we will provide for the problem of reimbursement under both Part A
   and Part B.

   In the draft report, GAO considers whether the guidelines    issued by SSA
   in April 1969 to clarify   and supplement the criteria  for making payment for
   the services of supervisory and teaching physicians provided satisfactory
   solutions  to the problems of unsupported or questionable billings   for
   services furnished by these physicians.    Based on a review of Medicare
                                                          63
  APTENDIX II                                                                    'P .


payments at three teaching hospitals        for periods before and after the effec-
tive date of the instructions,       GAO concludes that, in their opinion, these
problems were not effectively      resolved.    We believe,  however, that GAO's
sample of claims for periods subsequent to April 1969 may not have been
representative    since it was for the period immediately following         the effec-
tive date of the instructions,       and full implementation   of these guidelines
was not in-mediately achieved.       Consequently, we think GAOmay have drawn
certain conclusions which are not properly reflective         of the ultimate    effect
of the instructions.      Overall, we think the evidence shows there has been
considerable    improvement since April 1969 in the medical record documentation
supporting billing     by supervisory and teaching physicians.       Chiefly because
of this improvement, payments have been resumed to all but 22 of the 250
hospitals   where payments for these services had been initally        suspended.

We appreciate the continuing     interest        of GAO in improving   the operation    of
the Medicare program.

                                             Sincerely    yours,




                                             Assistant    Secretary,   Comptroller




                                            64
                                                              APPENDIX III


                              PRINCIPAL OFFICIALS

                                    OF THE

                DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE

              RESPONSIBLE FOR ADMINISTRATION OF THE ACTIVITIES

                            DISCUSSED IN THIS REPORT


                                                    Tenure of office
                                                    From            -To
SECRETARYOF 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

COMMISSIONEROF SOCIAL SECURITY:
   Robert M. Ball                             Apr.     1962     Present

DIRECTOR, BUREAUOF HEALTH'IN-
  SURANCE (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.              65
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