Chairman Barton, Congressman Klink, distinguished Subcommittee
members, thank you for inviting me here today to discuss problems
with community mental health centers and our efforts to ensure that
Medicare beneficiaries with acute mental illness get quality
The HHS Inspector General, working with our staff at the Health
Care Financing Administration, has in two separate reports
documented widespread abuse of Medicare's partial hospitalization
benefit at many community mental health centers (CMHCs). We
greatly appreciate the work the Inspector General's Office has done
in producing these reports. We are already acting to address these
problems. We are terminating providers who have egregiously
abused this benefit. The President has also proposed legislation that
we need to help prevent abuses of this benefit in the future.
Medicare's partial hospitalization services are reserved for
beneficiaries with acute mental illness who otherwise would need to
be hospitalized. These intensive psychiatric services can be provided
by both CMHCs and outpatient psychiatric programs in hospitals.
The number of CMHCs has grown rapidly since Congress first
allowed the centers to serve Medicare beneficiaries in a 1990 law.
There are about 1,150 CMHCs participating in the Medicare
program today. Nearly half are concentrated in four states Florida,
Texas, Pennsylvania and Alabama. About 1,000 hospitals also
provide the partial hospitalization benefit. Medicare payments to
CMHCs rose by 342 percent between 1993 and 1996, from $60
million to $265 million. The average payment per beneficiary
during this period rose by 319 percent, from $1,642 to $6,874.
Preliminary figures for 1997 show an even greater increase, with
total payments to CMHCs climbing to $349 million and average
payment per beneficiary topping $10,000.
Problems with CMHCs were first documented through Operation
Restore Trust, our cooperative effort with the Inspector General and
other law enforcement agencies to ferret out fraud and abuse. As you
know, the Clinton Administration has made stopping waste, fraud
and abuse in the Medicare program one of its top priorities. In fiscal
1997, Medicare saved more than $7.5 billion through its anti-fraud
and abuse efforts, and, with its law enforcement partners, returned
another $1 billion to the Medicare Trust Fund.
Operation Restore Trust last year examined 18 Florida CMHCs. The
investigation found that 89 percent of sampled beneficiaries were
not eligible for partial hospitalization services, and that 100 percent
of the services provided in these facilities were not Medicare
covered services. In addition, 17 of the 18 CMHCs did not provide
all of the core services they are required by law to provide in order
to participate in Medicare.
The law requires CMHCs to provide four core services: 1) outpatient
services to the elderly, children and the severely mentally ill; 2) 24-hour-a-day
emergency care; 3) day treatment or other partial
hospitalization services; and 4) screenings to determine whether to
admit patients to state psychiatric hospitals.
We suspended payments to all 18 providers involved in that review,
and made referrals to appropriate law enforcement agencies to
investigate those providers for fraud and abuse.
Also, based on other findings in Operation Restore Trust, we are
reviewing every claim submitted by several other CMHCs in Florida
where we have identified widespread problems. And, this year, we
increased our budget for medical reviews and audits for all services
and all providers, including CMHCs.
This year we conducted site visits to about 700 Medicare-participating CMHCs
and applicants. Our Administrator, Nancy-Ann DeParle, inspected some of these
programs herself and saw first hand that some centers are using this
program and billing Medicare in ways that are completely inappropriate.
Many CMHCs meet few, if any, of the statutory requirements for
Medicare participation, raising doubts about their ability to properly
care for beneficiaries. There also is extensive evidence of CMHCs
billing Medicare for patients who are ineligible for partial
hospitalization services, and for services that are not appropriate.
Some CMHCs offer bingo and other entertainment, which Medicare
does not cover, but do not offer the full range of psychiatric services
that they legally must provide in order to receive Medicare
payments. In some cases, beneficiaries were receiving services they
did not need and did not even know that they were in a program
intended for people with mental illness.
We must correct these problems now before they grow worse, and
we must ensure that beneficiaries who do need partial hospitalization
services get the appropriate, quality care they need. Centers must be
equipped to provide the services that are needed, and they must stop
enrolling beneficiaries who do not need these benefits.
The problems we are acting to correct were not anticipated when the
law was changed in 1990 to allow CMHCs to provide partial
hospitalization services. CMHCs at that time were primarily either
government agencies or federal grantees. It seemed reasonable to
simply have them sign attestations that they did in fact meet the
requirements. Since then, however, private entities have come into
the program, particularly in states with no CMHC licensure
requirements. Also since then, we have learned a great deal about
what we must do to fight waste, fraud and abuse. This
Administration has put unprecedented emphasis on finding and
stopping these kinds of problems. Working with Congress, we have
recently obtained resources to conduct necessary oversight. Clearly,
if this benefit were enacted today, we would we take a much more
restrictive approach to enrolling and reviewing providers from the
We are taking action. We have so far this year denied more than 100
new applicants that failed to provide all the core services. And, just
last week, we unveiled our comprehensive, 10-point plan to ensure
that Medicare beneficiaries with acute mental illness get quality
treatment in CMHCs and that Medicare pays appropriately for those
services. We are terminating many centers that are not providing
legally required core services, and will require others to come
quickly into compliance. In some cases, we also will demand
repayment of money paid inappropriately for non-covered services
or ineligible beneficiaries.
We need to move in a deliberate, targeted manner to assure that
beneficiaries' needs are met, and at the same time that fraud and
abuse in this program is eliminated. Termination actions will be
phased in over a period of months in order to address the most
egregious providers first and to assure that beneficiaries needing
psychiatric services will continue to receive them in an appropriate
setting. Last week we sent non-compliance notices, which begin the
termination process, to 20 CMHCs. We expect to terminate an
estimated 80 CMHCs in all by early 1999.
We will work with the Administration on Aging, the Substance
Abuse and Mental Health Services Administration, and patient
advocacy groups as we terminate facilities to ensure that
beneficiaries receive any appropriate services they may need.
As mentioned above, we have developed a 10-point action plan to
protect the partial hospitalization benefit and prevent fraud and
abuse by CMHCs. It will ensure that beneficiaries who need
intensive psychiatric services get them from qualified providers. At
the same time, it will protect beneficiaries and taxpayers from waste,
fraud and abuse of the benefit. Our 10-point plan includes:
- Protecting beneficiary access to covered services. We will
consider the needs of beneficiaries before terminating any
centers. We will work with the Administration on Aging and
other federal agencies, mental health advocates, state
officials and others to ensure that beneficiaries receive
appropriate services from Medicare, and when appropriate,
other social service agencies.
- Terminating the worst offenders. Medicare will end its
relationship with those CMHCs that are most out of
compliance with legal requirements. Other CMHCs that are
not as far out of compliance will need to quickly correct
- Increasing scrutiny of new applicants. We will require site
visits nationwide to ensure new applicants meet all of
Medicare's core requirements. As mentioned above, we
have already this year denied Medicare participation to more
than 100 applicants because they failed to provide all the
- Pursuing the President's proposed legislative reforms.
We will seek passage of legislation President Clinton sent to
Congress in January to strengthen CMHC enforcement
activities by: authorizing fines for falsely certifying a
beneficiary's eligibility for partial hospitalization services;
prohibiting partial hospitalization services from being
provided in a beneficiary's home or other residential setting;
and authorizing the Secretary to set additional requirements
for CMHCs to participate in the Medicare program. In
addition, we will work with other agencies to consider
- Intensifying medical review of claims. We will increase
review of partial hospitalization claims to ensure Medicare
pays only for appropriate services to qualified beneficiaries.
This will involve claims from CMHCs as well as hospital
- Implementing a prospective payment system. We are
working to develop a new prospective payment system for
hospital outpatient services, as required by the Balanced
Budget Act of 1997. The new system will apply to partial
hospitalization benefits in CMHCs and will eliminate the
financial incentives to provide inappropriate, unnecessary or
- Conducting a broad evaluation of the benefit. With the
Inspector General, we will conduct an overall review of the
partial hospitalization benefits in both CMHCs and hospital
outpatient departments. We will take appropriate steps to
address problem areas identified during that review.
- Reinforcing Medicare's CMHC standards. Through our
regional offices and state survey agencies, we will reinforce
the need for prospective CMHCs to meet all existing
statutory and regulatory requirements for participation in the
- Evaluating the need for re-enrollment requirements. We
will consider new regulations that would require CMHCs to
re-enroll periodically in the Medicare program and to serve a
minimum number of non-Medicare patients.
Community mental health centers may account for a small fraction
of Medicare's overall budget, but the abuses the Inspector General
and our staff have uncovered are egregious. We must ensure that
every Medicare dollar goes to legitimate services. We must secure
passage of the legislation President Clinton has proposed to provide
tools we need to stop these abuses. We must stop these abuses, both
to protect taxpayers, and to ensure that beneficiaries are getting the
appropriate, quality care to which they are entitled.
Again, I thank you for holding this hearing to highlight this issue,
and I am happy to answer any questions you might have.