July 09,2003

Grassley Urges Dedication of Proposed Nursing Home Dollars to Resident Care

Senator to Hold Oversight Hearing on Nursing Home Quality

WASHINGTON -- Sen. Chuck Grassley, chairman of the Committee on Finance, is urgingthe Health and Human Services Department to direct nursing homes to use a proposed $6.9 billionfederal windfall over 10 years to improve direct patient care. Grassley also will convene and chaira hearing next week to assess the state of nursing home quality of care.

“If nursing homes are getting more money, I expect them to use that money to improvepatient care,” Grassley said. “That means not using the money to increase profits, or double theadministrator’s salary. Nursing homes already get billions of tax dollars. They also get a lot of theresidents’ own dollars. Unfortunately, quality of care is too often poor. More money should resultin better care. It’s as simple as that.”

This week, Grassley sent a letter to Health and Human Services Secretary Tommy Thompsonurging the Administration not to implement a payment increase for nursing homes of $6.9 billionover the next 10 years without directing the nursing homes to use the additional payments for directcare services to nursing home residents. The Administration has proposed an administrative rulethat would adjust nursing home payments to allow the increase. Grassley’s letter came after hetalked with Thompson last month and expressed his interest in making sure any additional moneygoes to patient care.

Next week, Grassley will convene a Finance Committee hearing on the quality of care innursing homes nationwide. The hearing -- on Thursday, July 17, 2003, at 10 a.m., in 215 DirksenSenate Office Building -- will feature the release of a new General Accounting Office (GAO) reportthat Grassley requested. The report will analyze the level of improvement in nursing home qualityof care since Grassley began an aggressive campaign to improve care in 1998, leading to the Healthand Human Services Department mounting a quality initiative. Grassley has invited Tom Scully,director of the Center for Medicare and Medicaid Services, to testify on the state of improvingquality of care, especially related to the enforcement system, which Grassley and the GAO repeatedlyhave targeted for improvement.

The text of Grassley’s letter to Thompson follows.

July 7, 2003

The Honorable Tommy Thompson
U.S. Department of Health and Human Services
200 Independence Avenue, SW
Washington, D.C. 20201

Re: Comments on the June 10, 2003 Proposed Rule for the Medicare Prospective Payment Systemand Consolidated Billing for Skilled Nursing Facilities-Update

Dear Secretary Thompson:

I write to comment on your proposed rule, which considers an adjustment to the annualupdate for skilled nursing facilities (SNFs) that would account for forecast errors. My understandingis that this would result in increased payments to these facilities of $450 million in FY 2004, $2.9billion over five years, and almost $6.9 billion over the next ten years. While there may beagreement among actuaries and some analysts that such an adjustment is warranted to account forpast forecast errors in the payment rates, and that the Centers for Medicare and Medicaid Services(CMS) currently makes this type of adjustment in other existing payment systems, I have severalconcerns about adopting such a mechanism.

I strongly agree with the statement on page 34769 that "it is absolutely essential that theadjustment be applied uniformly--not only in those instances where the forecasted percent changeis lower than the actual percent change..., but also in those instances where the forecasted percentchange is higher than the actual percent change." I am concerned, however, that SNF providers donot fully recognize the possible downward effect this policy could have on future payments, whichcould result in a net decrease in payment rates. As you state, this policy of uniformity, which Isupport, would introduce significant uncertainty into the prospective payment system, making it verydifficult to plan for future activities.

Secondly, the correction for forecast error should be applied uniformly to all prospectivepayment systems throughout Medicare where the agency has the authority to do so. I understand thatthis authority exists for some prospective systems, but not for others. Consequently, if thisadjustment is made to skilled nursing facilities' prospective rates, it should be applied to otherpayment systems in a uniform manner. I look forward to your assessment of the agency's authorityin this area with respect to other prospective payment systems.

Finally, I object to such an adjustment, which would substantially increase SNF payments,without a strong commitment from CMS to direct skilled nursing facilities to use the additionalpayments for direct care services provided to nursing home residents. Specifically, I expect CMSto devise and implement a plan to improve quality, beyond the agency's current initiatives, throughmore aggressive direction and evaluation relying on guidance and instructions to monitor how theadditional payments are being used by SNFs to improve direct patient care.

Thank you for the opportunity to comment on this proposed rule.


Charles E. Grassley