tion that one carrier has found a particularly effective way to screen that should be shared with others.

Chairman WYDEN. Now, about half of the medically unnecessary services seem to be submitted by a pretty small percentage of doctors, something like 5 to 6 percent in your inquiry. Why has the Government been so slow to go after this problem when it seems clear that the focus can be on a relatively small number of doctors? I mean, the message here is that a vast majority of physicians in this country are trying to comply in a responsible sort of fashion, but you have got 5 to 6 percent who clearly are taking this program and the taxpayers for a ride. Yet the Government still doesn't seem to be doing much about that.

Ms. HEDRICK. I think one of the things that you have to do is to have the data at your fingertips to identify those providers when it occurs. That argues again for doing things like monitoring denial rates across providers. When you see a small percentage of providers flagged, it may be an indication that there are problems with fraud and abuse with a limited number of providers. It, again, may also indicate that you need to look at the billing practices and they may be using incorrect codes. So, you have to get behind it to find what's there.

Chairman WYDEN. What's being done to get behind it? I mean, this strikes me as especially troubling. I mean, it would be one thing if we had to deal with 50 percent of the Nation's doctors; but you'd think if you have got a situation where 5 to 6 percent are submitting half the medically unnecessary services, there ought to be a way to get on top of this.

Is this a matter of writing new computer programs to excavate the names of these individuals? What's needed to turn this around? Ms. HEDRICK. I wanted to make clear that there are some efforts that are ongoing to identify small numbers of providers who are abusing the system. Let me ask Mr. Dowdal to talk to that briefly. Mr. DOWDAL. HCFA has started some efforts in that area, focused medical review. One of the aspects of that is looking at services that appear to be out of the norm with other areas of the country. Again, as part of that program-that program you could end up looking at a group of people who are responsible for most of the problems.

There have been efforts over the years to do stuff about this topostpayment review and other things that haven't been extremely successful. Hopefully, the focused medical review will be better at handling the problems.

Chairman WYDEN. Well, do you think what's under way is going to allow for these 5 or 6 percent who seem to be exploiting the program to be rooted out?

Mr. DOWDAL. We believe that it is a better chance than there was in the past. It's too early for us to tell whether it's actually going to work or not.

Chairman WYDEN. My understanding is, to really go after abusers, you have got to have some prepayment review. I mean, aren't we basically trying through a pretty half-hearted kind of a program, without-based on what Dr. Hedrick said, without these computer screens, to play some catch-up ball?

Mr. DOWDAL. One of the aspects, I believe, of the focused medical review is to develop prepayment screens. Obviously, it's better to have a prepayment screen and not pay a claim than to do something after the fact and try and get the money back.

Chairman WYDEN. But these prepayment screens don't exist today?

Mr. DOWDAL. Well, they do, but there aren't a whole lot of them. What we're talking about here in this report are the differences across carriers that are resulting primarily because of the presence or absence of a screen. If one carrier has a screen, and another doesn't, the one that's going to have the higher denial rate is always the one that has the screen.

Chairman WYDEN. What is the Health Care Financing Administration doing, based on your inquiry, as far as the carriers who identify these doctors? I mean, does the Health Care Financing Administration insist that these carriers go after the doctor?

Mr. DOWDAL. They would be in a better position to answer that directly, but I know what they do is they look for services that are out of bounds with the other carriers. They send a list of those services to each carrier, where they are the ones that are out, and then they ask the carriers to develop programs to address any problems that are identified in that list.

Ms. HEDRICK. If I can also add to it, I think it's important to note that the funds available for doing reviews for medical necessity have decreased dramatically from 20 percent to 5 percent of the services being reviewed. So, in 1994, carriers are funded to review only 5 percent of the service claims.

Chairman WYDEN. I think you're going to touch on a point that we're going to examine with the Health Care Financing Administration. Funds have gone down for these reviews. My concern is that at a time when it sure looks like both taxpayers' and seniors' interests are not being met now, I'm reluctant to hand over more dollars to these unaccountable private insurance contractors to do more reviews.

Now, if these additional dollars were given in line with some guidance by the Health Care Financing Administration, then I think the Congress could say this is additional money that could be well spent. But, if you start with a situation where they're not paying claims that they ought to pay and they're paying claims that ought to be denied-and the General Accounting Office has confirmed that for us this morning-and somebody now says, let's give some additional money to these private insurance contractors, it's kind of hard to justify doing that until we have some strong guidelines in place so that the contractors turn it around.

Now, some have said that the differences in these denial rates are due to local variations in medical practice, that there may be differences between something that's done in Oregon and something that's done in another part of the country. Has the Health Care Financing Administration done any studies with respect to the appropriateness of medical care in each carrier jurisdiction to determine whether medical practice variations account for these discrepancies?

Mr. SHARMA. Not that we know. But I think HCFA will be in a better position to answer this question.

Ms. HEDRICK. I think it would be unlikely that they could account for all of the variation that we have found in denial rates. Chairman WYDEN. If you look at page 13 in your report-and I want to do this for a moment, because I think it illustrates part of the situation. Table 3 shows that the southern California Medicare carrier is finding between 17 and 25 percent of these cardiac imaging procedures as medically unnecessary. Northern California's carrier, on the other hand, has found only about 10 of 1 percent of these procedures to be medically unneeded. Is that correct a reading of that?

Mr. SHARMA. Yes.

Chairman WYDEN. Does the Health Care Financing Administration have any data to explain why southern California physicians might prefer to prescribe and conduct a great deal more medically unnecessary heart imaging procedures?

Mr. DOWDAL. Mr. Wyden, I would note in that table that the southern California carrier was the only carrier that had a screen for that service, and that would be the main reason-that should be the biggest reason explaining the difference among the carriers. If the other carriers had put in a screen, they would probably have denial rates too, instead of all showing zero.

Chairman WYDEN. Well, let's continue that for a second.

A possible explanation is that southern California's Medicare carrier is looking for medically unnecessary cardiac imaging and northern California's carrier is not. You would agree that that is a possible explanation, would you not?

Mr. DOWDAL. Yes, because of the absence of a screen.

Chairman WYDEN. While you're on the subject of Table 3, why don't you explain what a diagnostic screen and utilization screen are, if somebody doesn't speak this arcane kind of language of "carrier-speak" or whatever you might call it.

Mr. SHARMA. Utilization screens look for the frequency of service; that is to say that if a particular service-let's say, chest X-ray we will pay for it two times a year, and if a third time a bill appears, the computer screen will flag it and it will be denied because it can't be performed more frequently than has been approved.

The diagnostic screen, on the other hand, looks for specific diagnostic codes for which the procedure will be allowed. A particular procedure code may be allowed for four or five diagnostic codes, or it may be allowed for 10 or 15 codes; and that's essentially a function of the stringency of the criteria, and that's the primary difference between the utilization and the diagnostic criteria.

Chairman WYDEN. I think that Dr. Dowdal is saying that this may come down to the difference between somebody having a screen and somebody not having the screen. I gather that's something you think that is at issue here?

Mr. DOWDAL. That would be one of the main explanations, as we say in the report, for differences in denial rates across carriers. If you don't have a screen, you're not going to be denying very many claims, because without a screen, no one looks at a claim unless it happens to come up for some other reason.

Chairman WYDEN. Well, how do you explain, then, something like the difference between Illinois and Wisconsin? I mean, both of

them have screens-the situation for chest X-rays, a huge difference.

Mr. DOWDAL. Those kinds of cases are normally explained by the ones that we looked at in here because of the differences in the criteria used to screen. If one carrier has a criteria that says we'll allow five per year before we question it, and another one has a criteria that says we'll allow two per year, there is going to be a difference in the denial rates between those two carriers based on the criteria.

Chairman WYDEN. Which certainly raises the fairness issue, and I understand that. Has the Health Care Financing Administration, Dr. Hedrick, verified the scientific and medical validity of either the Federal California diagnostic screen or the absence of the screen in northern California?

MS. HEDRICK. I think that would be a good question for them. Chairman WYDEN. My understanding is that HCFA doesn't, because carriers develop their own screens. That's what you all have told us before.

Ms. HEDRICK. Right. They are at many times in consultation with local health care providers with an advisory body in doing that.

Chairman WYDEN. Now, even if HCFA doesn't write the diagnostic or utilization screens, has the Health Care Financing Administration officials been able to offer any data that would confirm the wisdom or appropriateness, to use this example, of the southern California carrier's diagnostic screen?

Mr. SHARMA. We have not asked.

Chairman WYDEN. Tell me what we know about the scientific basis of these diagnostic screens. Are the carriers required to reference their diagnostic screens in the medical literature?

Mr. SHARMA. We have only looked at this issue in reference to the California advisory committee, and so my remarks have sort of limited validity. But in California the carrier would-the medical director of that particular carrier would develop a policy, and the rationale for that policy may come either from their own experience or from literature. Then after they have the policy, they will send it to the members of the carrier's medical advisory board, who would be then given about 60 days to comment; and subsequently, the carrier would then incorporate those changes that come out from the physician medical advisory committee and incorporate it into the policy.

Now, the criteria for selection of the members is not based on whether or not they have a scientific reputation in that area, but that they represent the specialties, each of these specialties.

Chairman WYDEN. I guess what people really want to know-I guess what taxpayers and senior citizens want to know is how we can determine whether northern California's denial rate is too low or southern California's denial rate is too high. My sense is, we don't have any scientific basis for knowing that and both of them could be wrong; is that correct, Dr. Hedrick?

MS. HEDRICK. We believe that you would need to develop additional information to be sure which one has the correct policy. But we believe that it's much more likely that people who should not be paid are being paid for services.

Chairman WYDEN. So the answer to that is you don't know now and we need to develop some additional information?

Ms. HEDRICK. Right.

Chairman WYDEN. Let me ask about one other example. On page 24, Table 6 of your report, for the southern California carrier, when we look at the first and third procedures, again in cardiac imaging, what does that table tell us about the percentage of providers who have had at least one medical necessity denial for these procedures?

Ms. HEDRICK. It indicates that there are, over 50 percent of the providers are affected by disagreements in place for those services. Chairman WYDEN. How is this data consistent with the theory that local medical practice explains denial rates?

Ms. HEDRICK. It is beginning to look a little bit high. You would really have to look at the whole distribution to see whether you have a problem here.

Chairman WYDEN. Aren't the local medical necessity screens supposed to reflect local medical practice?

Ms. HEDRICK. Yes. This is the percentage, however, of providers that have at least one medical necessity denial, and we really would need to give you more information about how many of them had more than one to know whether they were really inconvenienced, and we can provide you with that information.

Chairman WYDEN. I think that would be helpful, but I think for purposes of my thinking, the only way you can really say that local physician advisory panels and these high denial rates really go hand-in-hand is to, in effect, say physician advisers signed off on the idea that there are too many medically unnecessary cardiac imaging procedures done in the area.

MS. HEDRICK. That is correct.

Chairman WYDEN. Is that where we are left in terms of the current system?

Ms. HEDRICK. Yes.

Chairman WYDEN. Go through your recommendations, if you would, for how we are going to turn this situation around.

Ms. HEDRICK. We have three recommendations. We would like the Health Care Financing Administration to issue instructions to carriers on how to classify the reason for denial when reporting this information to avoid the confusion that has occurred between noncovered care and lack of medical necessity.

We would like them to analyze the usage of screens across carriers, including the stringency of the criteria used, and to make an effort to identify effective screens and to share that information across providers.

Finally, this issue you mentioned about the subpopulation of providers responsible for a large number of the denials, we believe warrants attention and that providers should profile the population-the carriers should profile the population of providers accounting for a large number of the denials.

Chairman WYDEN. So generally, the areas that I have used to really supplement your recommendations that we ought to zero in on the 5 to 6 percent that seem to be causing most of the problem, that is something that you are supportive of and you would also