Health Care Financing Administration (HCFA)

OVERVIEW

Introduction

The Clinton Administration has made reforming the Federal government's regulatory process a top priority. Consistent with this commitment, President Clinton and Vice President Gore asked Health and Human Services Secretary Donna Shalala to assist in meeting this priority by carefully examining the regulatory requirements of the Health Care Financing Administration (HCFA).

HCFA has taken the President s and Vice President s commitment to reinventing government and government regulations seriously and is meeting the challenge. HCFA has a new customer service focus: we are working in partnership with the rest of the health care community to institute better, more common sense ways of operating. HCFA has reviewed its regulations to determine which requirements could be reduced or eliminated while assuring that we continually improve the quality of services to some of America s most vulnerable populations -- Medicare and Medicaid beneficiaries. This report contains the initiatives that have resulted to date from the review of HCFA s regulations.

Agency Overview

The Health Care Financing Administration s primary mission is to assure health care security for nearly 37 million Medicare beneficiaries and, in partnership with State governments, another 36 million Medicaid beneficiaries. HCFA ensures that program beneficiaries are aware of the services for which they are eligible and that those services are accessible, meet quality standards, and are delivered in an efficient manner. HCFA also ensures that health care providers of services meet approved standards and that program funds are used efficiently.

Regulatory Reform Principles

Regulatory reform means regulating only when necessary and no more than needed. When regulations are issued, they must be the most cost effective, least intrusive, and most flexible types of regulations that achieve the stated objectives. This common sense way of regulating is accomplished by working with our partners, including industry groups and States, and by keeping in touch with the needs of our customers. For HCFA, this means knowing what our beneficiaries want and need, and then working with our partners to fulfill and even exceed these expectations.

To guide the regulatory review process, HCFA relied on three basic principles that help define the Agency s new and improved approach to regulations and customer service.

Communicate not dictate -- The number one tenet of this principle is to communicate through listening and consulting, thereby increasing our understanding of what our customers need, what they like and dislike about our programs, and how we can serve them better overall. This principle says that HCFA will consult with our partners and beneficiaries about how our programs and policies should improve, instead of dictating such changes to them as has been done too often in the past. When changes are a result of legislative initiatives, HCFA will consult with partners and stakeholders on the full range of implementation issues that needs to be addressed.
Educate rather than inundate -- Top-rate customer service also means making sure that customers understand our programs and policies. Providing reams and reams of information is not enough and probably not effective. The "new" HCFA is committed to educating instead of inundating. This principle ensures that HCFA will educate our customers by developing effective educational techniques and disseminating information about how our programs operate rather than inundating them with information that is difficult to understand and doesn't speak to their needs.
Innovate more than regulate -- HCFA's regulatory reform and improved customer service initiatives are driven more by innovation than regulation. This means that HCFA is relying upon innovation in program operations and administration more than regulation to foster improved customer service capabilities. For example, by streamlining Medicare claims processing and information exchange, the Medicare Transaction System will make electronic interaction with Medicare easier for providers and beneficiaries and will enable Medicare contractors to devote more time to customer service activities.

Accomplishments

During the Clinton Administration, HCFA has improved its regulatory process to focus on results, not red tape.

In March 1994, HCFA published a regulation that replaced the requirement for physicians to provide hospitals annually with a signed acknowledgment concerning penalties for misrepresenting certain information with a one-time signing requirement at the time a physician is initially granted hospital admitting privileges. Almost 24,000 hours of physician time will be saved. One major medical association characterized this change as one that will alleviate the hassle factor for physicians and an important step toward restoring mutual trust between the Federal Government and the medical profession.

HCFA is totally redesigning its system to pay claims for Medicare services. Currently, providers must cope with 9 different claims processing systems operated by 72 insurance companies at 57 sites. The development of the Medicare Transaction System (MTS) will increase control of program expenditures, simplify administrative operations, and improve services to beneficiaries and providers. This integrated, national system will replace the diverse existing systems and significantly simplify administrative operations for beneficiaries, providers, and the Medicare program. Final contracts for the analysis, design, development, testing, and implementation of the MTS were awarded in January and March 1994.

HCFA has re-invented its evaluation of Medicare contractors. The newly restructured Medicare contractor performance evaluation establishes Medicare beneficiaries and medical care providers as integral partners in the evaluation process. This new evaluation process, which began October 1, 1994, allows for greater flexibility in evaluating Medicare contractor operations and performance.

The process for obtaining Medicaid home and community-based services waivers was simplified and now enables States to offer a wide variety of home and community-based services as cost-effective alternatives to more expensive institutional care. Without this regulatory change, published July 25, 1994, joint State and Federal efforts to expand opportunities to provide cost-effective alternatives to institutional care would have been frustrated. The regulatory provisions were worked out in collaboration with the States (through the National Governor s Association).

Regulatory Reform Initiatives

The following proposals are the next major HCFA initiatives to evolve from our commitment to the regulatory reform process.

Physician Attestation: Eliminate the physician form required to certify the accuracy of all diagnosis and procedures before submission for payment by Medicare.
Clinical Laboratory Improvement Amendments: Reduce burden and improve the CLIA system by rewarding good performance by laboratories, creating incentives for manufacturers to develop more reliable testing equipment, allowing private organizations that meet certain standards to accredit laboratories, and using proficiency testing as an outcome measure to monitor laboratory performance.
Outcome Performance Measures: Change current regulations that focus solely on requirements for measuring processes, rather than outcomes of care. Changes affect:
- Home Health Agency Conditions of Participation
- Medicare Hospital Conditions of Participation
- ESRD Facility Conditions of Coverage
- Rules for ESRD Facilities - A Pilot for Good Performers
- Elimination of Personnel Requirements for Excellent ESRD Facilities
The HCFA-1500 Form: Require participating Federal Employee Health Benefit Plan (FEHBP) carriers to use the HCFA-1500 form for physicians and other practitioners claims. The HCFA-1500 is currently used by physicians and others to submit claims for reimbursement of health care services under Medicare. This change will mean that physicians and other practitioners will be able to use a single form to submit claims for many patients -- both Medicare beneficiaries and patients enrolled in the FEHBP.
Annual Preadmission Screening and Annual Resident Review (PASARR): Currently, two Federal requirements call for the assessment of nursing home patients. This change eliminates the requirement under PASARR that mentally ill and mentally retarded nursing home residents are assessed annually. Resident assessments and reassessments required under the general nursing home requirements ensure that residents continuing needs are properly evaluated and met. The preadmission screening for these residents under PASARR is retained.
Nurse Aide Training and Competency Evaluations: Permit States to approve nurse aide training and competency evaluation programs offered in nursing homes.

HCFA INITIATIVES

Physician Attestation
Background: Since the Medicare hospital inpatient prospective payment system (PPS) was implemented by HCFA in 1984, HCFA regulations have required physicians to sign an attestation form for each Medicare patient discharged from a hospital. The form certifies the accuracy of the diagnoses and procedures for each patient. This information is used to ensure that the correct coding is on the claim, the correct diagnosis-related group (DRG) can be assigned, and the proper Medicare payment can be made.
Feedback from physicians, hospitals, and intermediaries has told us that obtaining the physician s signature is burdensome and results in billing delays that hurt hospital cash flow and hinder service to the beneficiary. Peer Review Organization (PRO) review of attestations has resulted in less than a 0.01 percent denial rate of sampled claims. In addition, the improvement in hospital record keeping and coding sophistication make the hospitals the appropriate focus for combating fraud and abuse.
Proposal: Eliminate the form requirement and instead hold hospitals responsible for the accuracy of their diagnoses and procedures. With improved technology and software coding capabilities, hospitals are more equipped than ever to combat billing fraud and abuse, the form s original purpose.
Impact:
Reduces paperwork burden and "hassle" on physicians and hospitals. Decreases administrative costs for hospitals. 11 million forms will be eliminated.Almost 200,000 hours of physician time will be saved. Hospitals will have improved cash flow and reduced labor costs by approximately $22,500 per hospital per year.
Implementation and Timeline: HCFA will publish this final regulation by September 1, 1995.
Clinical Laboratory Improvement Amendments
Background: The Clinical Laboratories Improvement Amendments (CLIA) of 1988 established baseline quality standards that ensure the accuracy, reliability, and timeliness of laboratory testing. These requirements are based on the complexity of the test performed, rather than where the test is performed. Compliance with the standards is determined through on-site inspection.
HCFA and the Centers for Disease Control and Prevention, which share responsibility for the CLIA program, continually review ways to reduce the burden and improve the entire CLIA system. A flexible survey system that employs data analysis to target good performers and allow for self-attestation and off-site review has already been initiated for certain laboratories. HCFA has reduced information requirements and eliminated unnecessary paperwork and has taken steps to reduce personnel requirements. HCFA also revised and streamlined the inspection process. Additional burden reductions are being undertaken that will virtually eliminate oversight for certain laboratories, establish performance standards in place of process requirements, and use information and education as a substitute for sanctions.
Proposal:
1. Waive the routine 2-year survey of users of "black box" technology, conducting surveys only if there are indications of problems or complaints. ( Black box technology refers to simple and easy to use test systems that have demonstrated accuracy and precision through scientific studies.) We will develop and implement criteria for accurate and precise "black box" technology that will be followed to determine if the technology qualifies for waiver of the routine 2-year survey. A small number of surveys will be conducted to validate the criteria for determining black box technology and to assure quality.
  Impact:
  Creates incentives for manufacturers to develop more reliable testing equipment by stimulating demand for accurate and precise technological testing systems.
  Reduces paperwork and costs for providers, especially for physician office laboratories, as well as reducing costs of program management.
  Implementation and Timeline: Proposed rules will be published in September 1995.
2. Clarify and expand the waiver criteria and streamline the waiver process so that CLIA regulations can be waived for more tests. CLIA requirements will be waived for tests approved for home use by the Food and Drug Administration - - that is, tests that do not require trained personnel.
  Impact:
  Decreases burden, especially for physician office laboratories because of less regulatory oversight.
  Increases access to greater variety of tests. Physician office laboratories may expand the range of tests they perform without an increase in costs/burden.
  Creates incentives for manufacturers to develop more test systems that meet the clarified waiver criteria and criteria for approval for home use.
  Eliminates inspection fees for many of the 60,000 physician offices and other small laboratories not now waived that decide to perform only tests from the expanded waiver category.
  Many additional laboratories will face lower inspection fees because, while they will continue to perform non-waived tests, many more tests will fall into the expanded waiver category.
  Implementation and Timeline: Proposed regulations will be published in September 1995.
3. Use performance standards and require less frequent on-site inspections (surveys) of excellent performers. Private accrediting organizations may be approved for Federal accrediting status ( deemed status ) when their accreditation standards are as stringent as CLIA. Exempt laboratories from CLIA requirements when the State in which they are located has requirements equal to or more stringent than CLIA's.
  Impact:
  Reduces inspection burdens.
  Rewards good performers with fewer inspections. This is a positive incentive to improve performance. Offers laboratories oversight by peers by approving private accrediting organizations for Federal accrediting status.
  States with strong licensure programs are being approved for exemption from CLIA.
  Implementation and Timeline: To date, notices to approve four accrediting organizations (College of American Pathologists, Joint Commission on Accreditation of Healthcare Organizations, Commission on Office Laboratory Accreditation, and the American Society of Histocompatibility and Immunogenetics) and the State of Washington have been published. Notices for two additional accrediting organizations and one additional State are pending. Final rules to eliminate redundancies or unnecessary requirements for Federal review and approval will be published in March 1996.
4. Use proficiency testing (PT) "failures" for education and as an outcome indicator in laboratory quality. (PT is testing samples of known values to assess the accuracy of a laboratory's results.) Sanctions (for example, loss of Medicare payment or loss of approval to do testing) are imposed only in cases of immediate jeopardy or when the laboratory has refused to correct the problem or has had repeated failures on proficiency testing.
  Impact:
  Less intrusive than traditional regulation and oversight.
  Allows use of proficiency testing as an outcome measure to monitor laboratory performance, provides laboratories with feedback on test quality, and as an incentive to improve performance.
  Minimizes the fear of sanctions in 60,000 non-waived laboratories.
  Implementation and Timeline: A proposed rule will be published in March 1996.
Outcome Performance Measures
Background: Medicare, as a purchaser of health care, requires hospitals, home health agencies (HHAs), and End-Stage Renal Disease (ESRD) facilities to meet health and safety requirements to participate in the Medicare program. Historically, these requirements measure "process" (procedural and administrative systems as proxies for quality health care) rather than "outcomes" (evaluations of actual patient care) and the adequacy of quality management programs.
HCFA is committed to changing current regulations that focus solely on requirements for measuring processes. The Agency realizes that not focusing on outcome measures results in several inherent problems. First, regulatory requirements vary by type of facility and provider even when the services provided in each facility are the same, creating inequities and inappropriate incentives. Second, without outcome measures, there is very little information available for consumers on the quality of care at a given facility. Third, by law, HHAs must be surveyed yearly--even though historical data show that this frequency is excessive for many HHAs and does not improve care.
HCFA is revising regulations for hospitals, home health agencies, and End- Stage Renal Disease facilities to address these issues, eliminate unnecessary process requirements, and focus on the outcomes of care.
Proposal: Eliminate unnecessary process requirements and instead develop outcomes-based performance standards; collect and analyze patient care data needed for continuous quality improvement and performance evaluation; increase consistency of requirements across providers; and ask the customer to provide input on what the outcome measures should be, and to evaluate the services they received. We are seeking legislation to give us flexible survey cycles.
Impact:
Eliminating unnecessary process requirements for compliance will reduce compliance and survey burdens and make it possible to focus on actual patient care.
Educating the consumer will produce a strong, non-regulatory force to improve quality of care.
Powerful data will be available to regulators and providers.
Produces savings because providers are free to achieve high quality outcomes in the most cost-effective manner.
Outcomes Performance Measures Initiatives
HCFA is currently involved in the following new initiatives that focus on the concept of Outcomes Performance Measures and the consensual approach to developing regulations.
Home Health Agency Conditions of Participation: HCFA is developing revisions to the Medicare Home Health Agency (HHA) conditions of participation. The purpose of the revision is to place greater emphasis on patient outcomes while reducing the current emphasis on process requirements (e.g., elaborate professional qualifications and other "paperwork" requirements) and enhancing an HHA's flexibility in meeting patient needs. The Agency has actively involved home health beneficiaries, providers, physicians, professional organizations (American Association of Retired Persons, National Association for Home Care, American Federation of Home Health Agencies, American Medical Association, Visiting Nurses Association of America, American Academy of Home Care Physicians), States (State Survey and Medicaid Agencies), and intermediaries in order to receive input on developing revisions to the conditions of participation. A work group of HCFA staff and representatives of Medicare beneficiaries, home health providers, physicians, and State Survey Agencies will develop a Standard Core Assessment Instrument for use in home health care. The use of this tool is central to HCFA s efforts to place the emphasis of survey and enforcement on patient outcomes.
Implementation and Timeline: HCFA will publish a proposed rule in September 1996.
Hospital Conditions of Participation: HCFA is revising the current hospital conditions of participation to center on the patient, support a cross-functional approach to patient care, and focus on quality. In developing these revisions, HCFA has worked closely with organizations representing hospitals, practitioners, patients, and States and has already distributed informal pre- regulatory drafts to approximately 70 outside groups for comment.
Implementation and Timeline: HCFA will publish a proposed rule in January 1996.
End Stage Renal Disease (ESRD) Conditions of Coverage: HCFA s ESRD Conditions of Coverage (COC) have not been comprehensively revised since their original implementation in the late 1970's. The current COC are primarily focused on process-oriented requirements, and do not provide adequate support for a modern survey system based on an outcome-oriented approach. Under the current regulation, facilities have a substantial paperwork burden. As a result, revised regulations must be issued to increase facility flexibility and to bring the ESRD COC up to current standards of practice in the ESRD community. The revised COC will address the outcome-oriented, patient- centered standards process where appropriate, reflect innovations in the dialysis and transplant community, and address new issues such as adequacy of dialysis to ensure that the Medicare beneficiary is receiving the most progressive quality of care possible. Thus, HCFA s emphasis will be on the total patient experience with dialysis, including patient functional well-being and continuous quality improvement. The revised regulations will include development of performance expectations for the facility that result in quality, comprehensive care for the dialysis patient.
Implementation and Timeline: HCFA will publish a proposed rule in March 1996.
Rules for ESRD Facilities - A Pilot for Good Performers: HCFA is conducting a pilot project to apply a different, less prescriptive set of rules to excellent ESRD facilities. Under the pilot project, an ESRD facility's performance will be measured using only three key patient care outcome indicators. The pilot differs from the current system in three important ways. First, these indicators will be used in place of the current certification standards and surveys will be waived. Second, the pilot project will focus on helping facility staff use outcome measures in an ongoing way to improve the care provided to dialysis patients. Third, facilities that document sustained achievement in the outcome indicators over six consecutive months will be awarded a HCFA certificate of excellence.
The indicators measure the quality of hemodialysis in three areas critical to the health of the patient: adequate dialysis, control of anemia, and adequate water supply. They will be used by the facilities to monitor the condition of each dialysis patient and to achieve improvement in the patient's health status. For the pilot project, excellence will be identified through a process focused on the quality indicators. The process will look at whether facilities have an internal quality monitoring system, whether the results of such monitoring are documented, and whether results are sustained. The facilities that qualify in this pilot will have established certain internal quality control mechanisms in order to participate. Routine surveys of these facilities will be waived and HCFA will examine other appropriate means of providing regulatory relief for good performers. Surveys will be conducted in response to complaints about the quality of care or if the data indicate a potential serious problem.
Information about project results will be packaged in brochures and newsletters so that ESRD patients and non-participating ESRD facilities will be aware of the results. In this competitive industry, a successful project will stimulate many other providers to seek recognition as "EXCELLENT" facilities.
ESRD facilities will be notified of their eligibility to participate and participation will be voluntary. The pilot will be limited to facilities in the States of Colorado, Idaho, Montana, and Washington.
Implementation and Timeline: Planning for this pilot is underway. Regulations to permit this pilot will be published in November 1995.
Elimination of Personnel Requirements: HCFA is conducting a pilot project that will evaluate the impact of the elimination of Medicare personnel requirements for ESRD facilities. Currently, the Medicare conditions for coverage for ESRD facilities include fairly detailed specifications for several types of personnel employed in furnishing ESRD services to Medicare beneficiaries. For example, the medical director of the facility must be a physician, board eligible in internal medicine; the nurse in charge must have 12 months of clinical experience, with 6 months experience with ESRD patients; the social worker must be master level educated, etc. Over the years, HCFA has received comments from the industry both in favor of elimination of the personnel requirements and in favor of strengthening them. Those in favor of relaxing the requirements commonly cite the difficulty rural facilities can face in recruitment of personnel with the requisite experience. They believe that the job does not require the level of experience and education prescribed in order to perform adequately. Those in favor of maintaining personnel requirements cite the medical condition of ESRD patients as justification for the skills level requirements. They express concern that if the personnel requirements are weakened or eliminated, ESRD facilities, most of which are proprietary entities, would hire less experienced and more inexpensive personnel to provide care that is of inferior quality.
The pilot project would be conducted in concert with another proposed project establishing new rules for historically good ESRD performers (see above). HCFA will collect information regarding the skills level of all personnel employed by those facilities participating in the project. Facilities would be informed that as part of the project, Medicare would not apply any of the personnel requirements contained in the conditions for coverage. At the end of the two-year project period, HCFA will re-collect information regarding the education and experience level of all the facility's staff and evaluate the impact of the changes on predetermined measures of quality of care.
Implementation and Timeline: Planning for this pilot is underway. Regulations to permit this pilot will be published in November 1995.
The HCFA-1500 Form
Background: The HCFA-1500 form is currently used by physicians, other practitioners, and durable medical equipment suppliers to submit claims for Medicare reimbursement of health care services. The HCFA-1500 is also used by many other insurers for claims submission. Although many Federal programs require the use of the HCFA-1500, use of the form is not required by the Federal Health Benefit Plan (FEHBP). Currently, more than a dozen different forms are used by fee-for-service carriers participating in FEHBP. In addition, instructions for the forms vary across programs.
Proposal: After a phase-in period, the Office of Personnel Management (OPM) will require participating FEHBP carriers to use the HCFA-1500 form for physicians and other practitioners claims.
Impact: Physicians will be able to use one form to submit claims for services provided to many patients. The number of claims forms that are used will drop from more than a dozen to one and instructions will be standardized.
Implementation and Timeline: OPM phase-in of the HCFA-1500 will begin in January 1996 and will be completed in September 1996. By the year 2000, the majority of provider claims will be submitted electronically.
Preadmission Screening and Annual Resident Review (PASARR) of Mentally Ill and Mentally Retarded Residents
Background: Nursing homes under Medicare and Medicaid are currently required by law to conduct an initial assessment of each resident within 14 days of admission, with a reassessment whenever a significant change in condition occurs but in any event at least once a year. In addition, there is a statutory requirement that for persons with serious mental illness or mental retardation entering a nursing home, the State is required to conduct: (1) a preadmission screening to assure that the individual is being appropriately placed in a nursing home, and (2) an annual reassessment to assure that the patient continues to be appropriately diagnosed and treated. Proposed Solution: Legislation would be proposed to eliminate the duplicate annual assessment. Resident assessments and reassessments required under the general nursing home requirements are entirely adequate to assure that residents continuing needs are properly assessed and met. Preadmission screening, which deters inappropriate admissions, would continue. Impact: By eliminating the redundant annual PASARR reassessment, costly duplication of effort by States would be reduced and nursing facilities would be relieved of intrusive annual inspections. Implementation and Timeline: Legislation will be proposed.
Nurse Aide Training and Competency Evaluations
Background: To assure quality of care in nursing homes, current law prohibits nursing homes from using nurse aides that have not successfully completed a training or competency evaluation program. The statute requires the Secretary to establish requirements for the approval of nurse aide training and competency programs. The law further forces States to prohibit, for a period of two years, nurse aide training and competency evaluation programs operated by or in nursing homes that were subject to an extended survey or partial extended survey or certain other sanctions. (Extended or partial extended surveys are conducted as more intensive follow-up investigations after a routine survey has demonstrated that a facility is furnishing substandard care.)
When a facility's program has been disapproved, the facility may not even be the site of an aide program conducted by others during the time that the two-year penalty is imposed. The prohibition on approval of nurse aide training and competency evaluation programs causes a special problem for rural nursing homes where a community college or other training facility may be inaccessible to nurse aides. Rural facilities can face a serious shortage of trained and competent staff due to the expense and inconvenience of sending prospective aides to remote locations. Alternative training programs may not be available.
Proposed Solution: Specify that a State could choose to approve a nurse aide training and competency evaluation program offered in (but not by) a nursing home subject to an extended or partial extended survey or certain other sanctions if the State determines that there is no other nurse aide training and competency evaluation program offered within a viable distance. States would be required to provide ongoing oversight of these programs in the interest of patient health and safety.
Impact: This proposal would safeguard the availability of nursing homes which might otherwise stop participation in the Medicare and Medicaid programs as a result of losing a training programs' approval. It would also make it easier for nurse aides to obtain the training they need to provide quality services to our beneficiaries.
Implementation and Timeline: Legislation will be proposed.

Conclusion

Under President Clinton's leadership, HCFA has made communication, cooperation, and partnership the guiding principles of the regulatory process, replacing the adversarial environment that often existed in the past. At a time when the American health care system is undergoing dramatic changes, HCFA is committed to putting the Federal government s customers -- the American people -- first. We are pleased to report that the initiatives described in this report represent just the beginning phases of HCFA s ongoing work on regulatory relief.