Statement of the American Medical Association, Chicago, Illinois

The American Medical Association (AMA) would like to thank the Ways and Means Health Subcommittee, Chairwoman Johnson, and Ranking Member Stark for holding this hearing on H.R. 2768, the "Medicare Regulatory and Contracting Reform Act of 2001." 

We also appreciate Chairwoman Johnson and Ranking Member Stark’s substantial efforts to work with the Centers for Medicare and Medicaid Services (CMS) in its efforts to accomplish additional reforms on an administrative level.

The AMA believes that H.R. 2768 is a solid, first step in addressing many of physicians’ concerns regarding CMS contractors’ activities for the following reasons: 

We laud the legislation’s commitment to and funding of education programs for physicians, providers of services, and suppliers.  Although we have some technical suggestions in these sections, we believe that the education provisions in the bill would vastly improve the resources available to physicians, providers of services, and suppliers.  In particular, the section requiring contractors to work with organizations representing physicians, providers of services, and suppliers when a widespread billing problem exists would be extremely helpful in ensuring that the problem is explained to the larger community sooner rather than later.  This broad dissemination of information would lead to a quicker and better resolution of the issues involved. 

The AMA is generally pleased with H.R. 2768’s provisions related to repayment plans. This provision, if clarified to ensure that repayment plans would be for a minimum of three years, would permit physicians, providers of services, and suppliers to enter into reasonable repayment plans with their CMS contractors if the alleged overpayments exceed a certain proportion of their Medicare revenues.  Currently, CMS contractors require repayment of alleged overpayments within 30-60 days.  When alleged overpayments represent a high proportion of practice revenues, this requirement can present a major economic hardship to the practice.  Carrier overpayment demands for almost immediate repayment can also restrict the financial ability of physicians to provide an adequate level of service to their patients and can make physicians less eager to care for Medicare patients in the future.

The AMA greatly appreciates that the legislation would establish pilot projects to test the viability of proposed evaluation and management documentation guidelines.  Although CMS has recently withdrawn proposed documentation requirements, as this process progresses, it is clear that any new proposed guidelines must be tested to ensure their accuracy prior to national implementation.  H.R. 2768 would also ensure that a sufficient number of physicians participate in the pilot projects by prohibiting audits for documentation that occurred as part of the pilot project. 

The legislation’s proposed standardization of random prepayment audits is a very positive development that would ensure that the Secretary would establish standards for random prepayment audits.  Contractors would no longer have unlimited discretion as to the circumstances that would trigger random prepayment audits.  Another serious problem with prepayment audits is that they often have no defined endpoints.  This places an enormous strain on practices’ cash flow as claims are held up for payment while audit continue.  H.R. 2768 would ensure that procedures are put in place to remove physicians from prepayment review once their billing practices are sufficiently compliant with Medicare policies. 

The AMA also appreciates the additional resources that this bill would direct towards administrative law judges.  This funding would increase the number of administrative law judges and improve education and training opportunities for the judges and their staffs.

The AMA is also gratified that the Committee has recognized that contractors’ use of “extrapolation” is a serious problem, and that it has acknowledged the inequity of demanding that overpayments be repaid before appeals are heard.  These and several other provisions of the bill must be strengthened, however, if they are to remedy the problems they are intended to address.  In particular:

Contractors use “extrapolation” to magnify the alleged overpayments found in a very small probe sample of claims to all of these type of claims submitted by a physician or provider of services over a one-to-two year period.  This technique lacks any semblance of statistical validity, but it can lead to overpayment demands in the hundreds of thousands of dollars.  Even more egregious, the letter demanding repayment of these huge sums is often the first indication a physician has that there is a problem with his/her billing practices.  For this reason, the provision of H.R. 2768 that would allow CMS contractors to use extrapolation to project an overpayment in instances where there is a high error rate OR where documented education efforts have failed should be strengthened.  For example, this extrapolation provision would have a very limited impact on physician practices such as the critical care practice that testified before the House Budget Committee.  This particular practice had a high error rate, but there was no documented educational effort.  Thus, the provisions in H.R. 2768 would still subject this and other physician practices to enormous overpayment allegations, even if it were the first time the practice had heard that it had a billing problem.  The AMA strongly believes that contractors should be prohibited from using extrapolation to calculate overpayment amounts unless documented educational efforts have been employed first and have failed to correct the billing problem.

Although the education provisions in H.R. 2768 are a vast improvement over existing education efforts by CMS contractors, the AMA is concerned that the legislation gives contractors discretion as to whether they wish to supply physicians, providers of services, and suppliers with written advice upon which they could rely.  Under H.R. 2768, the aforementioned groups would not be entitled to any additional information or guidance regarding complex and confusing carrier policies and regulations to use if they are later audited by their contractor.

The ability to rely on written guidance is especially important in light of the recent report by the General Accounting Office (GAO), which found that when GAO called contractors (callers identified themselves as calling from the GAO), contractor employees gave incorrect answers to questions 85% of the time.  GAO further reported that these questions had been identified by the contractors as “frequently asked questions.”  The carriers will not give physicians written answers to their billing and coding questions, and as the GAO study shows, answers given via the telephone are often incorrect.  Physicians should be able to submit their written questions to contractors, and in turn, receive correct and consistent written responses from contractors upon which they can rely.

The consent settlement process, as detailed in H.R. 2768, would still not permit physicians, providers of services, and suppliers to contest the validity of a probe sample without being forced to submit to a statistically valid random sample (SVRS) of 200-400 claims, which is very disruptive to a physician practice.  The AMA believes that a physician should not be forced to agree to an SVRS in order to maintain his or her appeal rights.  Physicians should be permitted a 60-day time period to decide whether to appeal the probe sample finding.  If the physician decides not to appeal the probe sample, then he or she would either have to pay the alleged projected overpayment or agree to an SVRS.  This ability to appeal the probe sample is an essential due process right that should be afforded to physicians, providers of services, and suppliers – especially in light of the probe sample’s use in determining projected overpayments.

H.R. 2768 would permit physicians, providers of services, and suppliers to repay an alleged overpayment after the first level of internal appeal has occurred.  This internal appeal usually occurs within 45 days.  Under H.R. 2768, repayment would be required at this point.  Physicians, providers of services, and suppliers who opt for further administrative appeals would still be forced to repay alleged overpayments while their appeals are pending.  In contrast to the 45 days for internal appeals, administrative law judge (ALJ) decisions took an average of 389 days in the first quarter of 2001 and departmental appeals board decisions (DAB) took an average of 661 days to complete.  If the physician, provider of services, or supplier is successful at the DAB level, it is likely that three years have elapsed since the physician’s payment of an alleged overpayment to the CMS contractor.  This is especially egregious since the most recent figures from 2000 show that 60% of contractor decisions were reversed by an ALJ.  The provisions of H.R. 2768 would not assist physician practices such as the West Coast practice that received its overpayment demand letter in 1996, paid the alleged overpayment amount six weeks later and received a favorable ALJ ruling in 1999.  The carrier had held the practice’s funds (approaching $100,000) for nearly three years. 

While the AMA greatly appreciates H.R. 2768’s provision that would require contractors to repay the funds held with interest, we agree with Administrator Scully that physicians, providers of services, and suppliers should have the same rights that taxpayers have when they are audited by the IRS; that is, as long as interest accrues, taxpayers do not have to repay alleged overpayments while administrative appeals are pending.

We strongly urge the Subcommittee to amend the repayment provision to mirror the “Access to Judicial Review – Interest on Amounts in Controversy” provisions in Section 8 of H.R. 2768.  This would ensure that interest would begin to accrue 60 days after the date of the contractor’s determination.  The overpayment amount plus any interest would be payable when all administrative appeals are exhausted.  (Section 8 states that such amounts become payable when they are awarded to the prevailing party).

The AMA is very concerned about the provisions in H.R. 2768 related to a physician, provider of services, or supplier’s right to appeal a contractor’s decision to deny or revoke a Medicare provider number.  For most health care practitioners, the denial or revocation of a provider number is an extremely serious occurrence that prohibits them from submitting any claims for reimbursement to the Medicare program.  Currently, physicians have very limited recourse if their provider enrollment application has been denied.  They can request that the carrier reconsider their application, and then can request a hearing by an entity or person appointed by the Secretary of the Department of Health and Human Services.  The provision in H.R. 2768 would not establish any additional rights for physicians, providers of services, and suppliers whose applications have been denied.  In fact, the legislative language appears to codify existing and proposed CMS practices.  We strongly urge the Subcommittee to consider a denial or revocation as an initial determination and accord physicians full administrative appeal rights under Section 1869 of the Social Security Act.

The provision of H.R. 2768 addressing voluntary repayments also should be strengthened.  The legislation proposes that an ombudsman would make recommendations to the Secretary about how to respond to physicians and providers of services who identify overpayments themselves that they have mistakenly received and voluntarily repay Medicare.  We note that CMS has previously issued instructions to its contractors on handling these voluntary repayments and that the contractors are instructed to investigate and consider auditing those who make the repayments.  These kinds of policies are more likely to intimidate than encourage honest professionals to develop compliance plans.  H.R. 2768 should offer real protections, not leave the matter for the Administration to resolve in the future.

Finally, the AMA is uncertain as to why H.R. 2768 seeks to limit the ability to present additional information during the appeal process.  We are not aware of any indication that physicians, providers of services, and suppliers are inundating the system with new evidence, and creating a sizeable backlog.  Many physicians may not hire attorneys or experts immediately to contest a contractor’s audit finding.  When these attorneys or experts are hired, they may suggest additional evidence or information that the physician had not thought to disclose.  We believe that this section is not needed and urge its deletion.

In closing, the AMA has also been very interested in the issue of contractor reform.  A coalition letter signed by the AMA and other leading national medical organizations and specialty societies, as well as every state medical society, was sent to Chairman Johnson and Ranking Member Stark on August 30, 2001, and is attached to this statement.  On the whole, the reforms to the contractor reform language appear to be reasonably geared towards improving the efficiency of the program and towards sharpening the responsiveness of contractors to beneficiaries and physicians.  As an overarching comment, the AMA does believe that contractors should be required to maintain local carrier advisory committees and local carrier medical directors.  In addition, a transparent contracting and budgeting process should be set forth in the Federal Register for public notice and comment.  We also have some technical suggestions regarding these sections which we will be happy to share with the Subcommittee at the earliest possible date. 

We appreciate the Subcommittee’s consideration of the AMA’s concerns.  We value all of the Subcommittee’s work on H.R. 2768, and we believe that we can work together to ensure that physicians obtain more complete due process rights and extremely effective education tools that can be relied upon by the physician.  We thank you for the time that your Subcommittee, and particularly, the Subcommittee staff has devoted to this issue, and are pleased that it is a high priority for the Subcommittee.

August 30, 2001

The Honorable Nancy Johnson                                                    Letter Sent to all members of the House Ways and
Committee on Ways and Means                                                                  Means Subcommittee
Subcommittee on Health
U.S. House of Representatives
1136 Longworth House Office Building
Washington, DC 20515

Dear Chairwoman Johnson:

As your Committee continues its work on the “Medicare Regulatory and Contracting Reform Act of 2001,” H.R. 2768, please know that the medical organizations listed below endorse the need for regulatory relief in the administration of the Medicare program.  For that reason we strongly support the provisions of the “Medicare Education and Regulatory Fairness Act of 2001” (MERFA), H.R. 868.  One aspect of that relief that is not addressed in MERFA is the need for contractor reform.  The Medicare program is a continual source of frustration, complexity, and paperwork for virtually all physicians treating Medicare patients.  The contractor community plays a key role in administering the program.  We believe that Congress should incorporate the following principles in any Medicare contractor reform efforts:

• Physicians and other providers must have a single point of contact who will be responsible and accountable for program administration.  Even if contractor services are themselves fragmented (e.g., claims processing performed by one contractor, medical review by another contractor, and correspondence/appeals to another), physicians and providers should not have to deal with a whole new contractor bureaucracy where each contractor tries to shift responsibility to others.  There should be a single point of contact in each state that can, if necessary, serve as a liaison between physicians/providers and the various contractors.
• Local carrier advisory committees (CACs) should be continued in each state to assure that local medical review policy reflects the consensus of the local physician community.  All changes in local coverage decisions (whether through a change in contractor or through the consolidation of existing contractors) should be subjected to the normal review and comment process with the local CAC.  It would be unacceptable for a new contractor to simply transport a new policy from one geographic region to another without subjecting that policy to CAC review in the new geographic area.
• Given the significant transition problems experienced with establishing regional durable medical equipment carriers, the medical community believes it is imperative that the Center for Medicare and Medicaid Services (CMS) establish contingency plans to assure that there are no delays in claims processing/payment capabilities.  Such contingencies should include provisions for advanced payments for covered services based on the previous year’s submissions.
• CMS should establish and enforce the highest possible standards in determining which organizations are most qualified to serve as contractors in the program.  Formal physician/provider feedback should be solicited regarding the establishment of performance criteria for contractors and whether the contractors’ actions have actually met those standards.
• Physician/provider outreach, education, and service should be considered a priority for each contractor in the program.

We believe these basic principles should be incorporated into any Medicare contractor reform legislation agreed to by the Congress.

Sincerely,

Alaska State Medical Association
Arizona Medical Association
Arkansas Medical Society
California Medical Association
Colorado Medical Society
Connecticut State Medical Society
Florida Medical Association
Hawaii Medical Association
Idaho Medical Association
Illinois State Medical Society
Indiana State Medical Association
Iowa Medical Society
Kansas Medical Society
Kentucky Medical Association
Louisiana State Medical Society
Maine Medical Association
Massachusetts Medical Society
MedChi, The Maryland State Medical Society
Medical Association of Georgia
Medical Association of the State of Alabama
Medical Society of Delaware
Medical Society of the District of Columbia
Medical Society of New Jersey
Medical Society of the State of New York
Medical Society of Virginia
Michigan State Medical Society
Minnesota Medical Association
Mississippi State Medical Association
Missouri State Medical Association
Montana Medical Association
Nebraska Medical Association
Nevada State Medical Association
New Hampshire Medical Society
New Mexico Medical Society
North Carolina Medical Society
North Dakota Medical Association
Ohio State Medical Association
Oklahoma State Medical Association
Oregon Medical Association
Pennsylvania Medical Society
Rhode Island Medical Society
South Carolina Medical Association
South Dakota State Medical Association
State Medical Society of Wisconsin
Tennessee Medical Association
Texas Medical Association
Utah Medical Association
Vermont Medical Society
Virgin Islands Medical Society
Washington State Medical Association
West Virginia State Medical Association
Wyoming Medical Society
American Academy of Allergy, Asthma and Immunology
American Academy of Dermatology Association
American Academy of Facial Plastic and Reconstructive Surgery
American Academy of Family Physicians
American Academy of Neurology
American Academy of Ophthalmology
American Academy of Otolaryngic Allergy
American Academy of Otolaryngology-Head and Neck Surgery
American Academy of Physical Medicine and Rehabilitation
American Association of Clinical Endocrinologists
American Association of Neurological Surgeons
American Association of Orthopaedic Surgeons
American College of Allergy, Asthma and Immunology
American College of Cardiology
American College of Chest Physicians
American College of Emergency Physicians
American College of Obstetricians and Gynecologists
American College of Osteopathic Family Physicians
American College of Osteopathic Surgeons
American College of Physicians-American Society of Internal Medicine
American College of Radiology
American College of Surgeons
American Gastroenterological Association
American Geriatrics Society
American Medical Association
American Osteopathic Association
American Psychiatric Association
American Society for Gastrointestinal Endoscopy
American Society for Therapeutic Radiology and Oncology
American Society of Anesthesiologists
American Society of Cataract and Refractive Surgery
American Society of Clinical Pathologists
American Society of General Surgeons
American Society of Hematology
American Society of Plastic Surgeons
American Thoracic Society
American Urological Association
Association of American Medical Colleges
College of American Pathologists
Congress of Neurological Surgeons
Joint Council of Allergy, Asthma and Immunology
Medical Group Management Association
National Medical Association
North American Society of Pacing and Electrophysiology
Renal Physicians Association
Society of Critical Care Medicine