Medicare Providers Voluntarily Terminating Their Participation in the Medicare Program

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

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

                                            e                  *

                          (EOMPTROLLER          GENERAL   OF       THE      UNITED     STATES   *

                                            WASHINGTON.    D.C.          20548


Dear    Mr.    Burke:

       This is in response          to your letter          of January       15, 1971, enclosing
a copy of a letter            to you from Mr. Charles           J. Kelley,      president      of
Massachusetts         Council    of Health      Care Facilities,         an% &quest.our
comments on his statements.                Attached     to Mr. Kelley'sletter             we're
copies     of (1) a questionnaire           which our Boston Regional              Office    recently
sent to selected         Medicare     providers      (hospitals      and extended-care           facil-
ities)     that had v                    terminated       their   participation         in the
Medicare       program    and (2) Mr. Kelley's          letter     in response       to that

         Because we were concerned                     about     the large         number of providers
which had terminated                 participation           in the program--Social                 Security
Administration            statistics          showed that,          as of June 30, 1969, about
 1,000 extended-care               facilities          and 500 hospitals               had terminated        their
participation           from inception             of the Medicare              program      in fiscal     year
 1967--we      furnished         these questionnaires                 to former         providers.       The pur-
pose of the questionnaires                      was to obtain           their      views and comments           on
the reasons         for terminating              their     participation             in the program         and on
the effects         that     their       terminations          had on the availability                 of serv-
ices to Medicare             beneficiaries             in their       locality.

      We are pleased     that    Mr. Kelley  reacted   favorably     to our approach
of directly   querying     providers    as to the reasons      for their    terminations
from the program      and that he provided      us with meaningful       comments.

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

       Under the Hospital         Insurance       Benefits    for the Aged portion    of the
Medicare      program,  an eligible        person     aged.65    or over is provided     with
basic    protection    against      the costs of care provided           by (1) a hospital
during    the acute    stage of his condition              and (2) an extended-care      facil-
ity when he receives         skilled      nursing     care on a continuous      basis  for a

                              ‘   50TH     A/NNlVERSARY                   1921-      1971
(I   .   ’

             B-164031(4,                                                                .

             condition which had been treated more intensively         during a previous hos-
             pital    stay.   Benefit payments to hospitals   and extended-care facilities
             on behalf of eligible     Medicare beneficiaries   are usually made by organi-
             zations,     such as Blue Cross plans, operating under contracts with the
             Social Security Administration.       These organizations     are referred to as
             fi seal intermediaries.

                     The legislative history of the Medicare program indicates      that the
             Congress was concerned that the program be carried out in such a manner
             that the patient would be provided with necessary hospital         care but
             would remain in the hospital      for only as long as necessary.     The legis-
             lative history indicates      also that the Congress intended that every
             effort be made to move a patient from the hospital        to an extended-care
             facility    which could provide less expensive care to meet the patient's
             medical needs, such as skilled       nursing care, during the-period of his

                     Mr. Kelley's  belief that Medicare payments for care provided to
             Medicare beneficiaries      in hospitals  have increased at the same time that
             payments for care in extended-care facilities          have decreased is correct;
             however, his estimate regarding the extent of the decrease in payments
             to extended-care facilities,      at least on a national basis, appears to be
             overstated.      Data developed by the Social Security Admtnistration        show
             that Medicare payments to hospitals        in fiscal. year 1970 were approxi-
             mately $4.4 billion      compared with approximately     $4.2 billion  in fiscal
             year 1969--an increase of about 5 percent.           Payments to extended-care
             facilities    were about $295 million    in fiscal year 1970 compared with        '
             about $390 million     in fiscal year 1969--a decrease of about 24 percent.

                   One of the most difficult    problems of the fiscal intermediary   in
             administering   the Medicare program has been the determination     of whether
             the care provided to a patient in an extended-care facility      is the type
             of care covered by Medicare.      Skilled nursing care provided in an        .
             extended-care facility    is covered under the Medicare program; custodial
             care of the type traditionally     provided in nursing homes is specifically
             excluded by law from Medicare coverage.

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


utilization       of, and payments for services provided    to Medicare benefi-
ciaries     in,   extended-care facilities  during fiscal   year 1970.

       During our reviews of the Medicare program, we have examined into
the controls exercised by the Social Security Administration,         the fiscal
intermediaries,    and the providers to ensure that patients remain in hos-
pitals   and extended-care facilities   for only as long as medically neces-
sary and that patients receive the appropriate        types of care.   In an
executive session of the House Ways and Means Committee in March 1970,
which you attended, we discussed the status of our review of the Social
Security Administration's     controls over the utilization    of hospitals   and
extended-care facilities    by Medicare patients.      We are nearing completion
of that review and expect to submit a report to the Congress in the near
future.     A copy of that report will be furnished to you.

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

                                          Comptroller General
                                          of the United States

Enclosures        - 2

The Honorable James A. Burke
House of Representatives