[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]




 
                     ASSESSING HEALTH CARE QUALITY

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 26, 1998

                               __________

                           Serial No. 105-94

                               __________

         Printed for the use of the Committee on Ways and Means



                     U.S. GOVERNMENT PRINTING OFFICE
60-999                       WASHINGTON : 1999



                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        BARBARA B. KENNELLY, Connecticut
JIM BUNNING, Kentucky                WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
                     A.L. Singleton, Chief of Staff
                  Janice Mays, Minority Chief Counsel
                                 ------                                

                         Subcommittee on Health

                   BILL THOMAS, California, Chairman
NANCY L. JOHNSON, Connecticut        FORTNEY PETE STARK, California
JIM McCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
JOHN ENSIGN, Nevada                  GERALD D. KLECZKA, Wisconsin
JON CHRISTENSEN, Nebraska            JOHN LEWIS, Georgia
PHILIP M. CRANE, Illinois            XAVIER BECERRA, California
AMO HOUGHTON, New York
SAM JOHNSON, Texas

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.




                            C O N T E N T S

                              ----------                              
                                                                   Page
Advisory of February 19, 1998, announcing the hearing............     2

                               WITNESSES

Health Care Financing Administration, Jeffrey Kang, M.D., Chief 
  Medical Officer, Center for Health Plans and Providers.........    29
Agency for Health Care Policy and Research, John M. Eisenberg, 
  M.D............................................................    13
American Association of Health Plans, and Blue Cross of 
  California, Jeffrey A. Rideout, M.D............................   127
American Medical Association, Randolph D. Smoak, Jr., M.D........   174
Families USA, Ronald F. Pollack..................................   153
IBM Corporation, and Corporate Health Care Coalition, Jill Kanin-
  Lovers.........................................................   106
Institute of Medicine, National Roundtable on Healthcare Quality, 
  and Mount Sinai School of Medicine, Mark R. Chassin, M.D.......    63
Mulley, Albert, Massachusetts General Hospital, and Harvard 
  Medical School.................................................    79
Stratco, Inc., S. Diane Graham...................................   101

                       SUBMISSIONS FOR THE RECORD

American Academy of Family Physicians, statement.................   205
American College of Occupational and Environmental Medicine, 
  Arlington Heights, IL, Robert S. Rhodes, statement.............   211
American Society for Quality, Milwaukee, WI, statement...........   220
American Society of Plastic and Reconstructive Surgeons, 
  Arlington Heights, IL, Dennis J. Lynch, statement..............   223


                     ASSESSING HEALTH CARE QUALITY

                              ----------                              


                      THURSDAY, FEBRUARY 26, 1998

                  House of Representatives,
                       Committee on Ways and Means,
                                    Subcommittee on Health,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:10 a.m., in 
room 1100, Longworth House Office Building, Hon. William Thomas 
[Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]
    [GRAPHIC] [TIFF OMITTED]60999A.001
    
    [GRAPHIC] [TIFF OMITTED]60999A.002
    
    Chairman Thomas. The Subcommittee, such as it is, will come 
to order.
    I want to welcome everyone to today's hearing, assessing 
health care quality. Today, the subcommittee will hear from 
witnesses who will help us better understand how health care 
quality is defined--or not defined, measured--or not measured, 
and, hopefully, assured across a wide array of delivery systems 
and practice settings.
    We'll also hear about what is being done to promote quality 
in both the private sector and in Federal government health 
care programs.
    Last week, President Clinton issued an executive order 
requiring all Federal health care programs to initiate a 
timetable for complying with the recommendations of the 
President's Advisory Commission on Quality and Consumer 
Protection in the Health Care Industry. We all agree that 
Americans should have access to the highest quality health 
care. The challenge, of course, is to assure quality without 
stifling innovation, increasing the number of uninsured 
Americans, making health coverage more costly and more 
unattainable, and expanding government bureaucracy. Those are 
not desirable side effects from the changes.
    That's why I sent a letter to Secretary Shalala last week 
requesting information, including cost analysis, that I assumed 
the administration would have assessed very thoroughly before 
launching such a major initiative. I received an answer to my 
letter, I believe this morning, and without objection, I'd like 
to put in the record at this point both my letter and Secretary 
Shalala's response.
    [The information was not available at the time of 
printing.]
    Chairman Thomas. The concern that I have is that the 
administration's response fails to provide us with any 
estimates of the cost impact of the executive order on seniors 
and those enrolled in other public programs, or on the 
providers, practitioners, and health plans providing those 
services to patients. In fact, the Secretary's letter--page 1 
and at the top of page 2--indicates that these estimates simply 
don't exist. In the words of the Secretary that ``although the 
Office of the Actuary has not completed the analysis of these 
estimates,'' they believe they will not have any significant 
impact.
    My concern is that by using the executive order process, 
the President has avoided these new requirements of submitting 
to the Office of Management and Budget for assessment their 
impact on the American public. It's doubly disturbing because 
the President challenged Congress to extend the requirements in 
the executive order to the private sector so that, as he said, 
they will become the law of the land for all Americans. 
Obviously, when Congress considers the President's challenge in 
actual legislative language, it will have to be fully analyzed 
by the Congressional Budget Office. In the past, CBO and 
private economists have estimated that premium increases of one 
percent resulting from government mandates cause between 
200,000 and 400,000 Americans to lose their health care 
coverage. I don't know whether the Secretary assumes one 
percent is not significant or not, but clearly the costs are a 
concern.
    While I recognize there's an opportunity for partisan 
advantage in the debate over health care quality and consumer 
protection legislation, I had hoped we could begin to address 
this issue by building on the bipartisan health care reforms 
enacted during the past two years to, for example: one, save 
the Medicare program from bankruptcy for over a decade; two, 
provide Medicare beneficiaries with greater choice of private 
health plans; and three, expand preventive care for seniors; 
four, fight health care waste, fraud, and abuse; and five, 
limit preexisting conditions and guarantee affordability of 
private health insurance.
    Specifically, there is a recent history of bipartisan 
quality protections on which to bill. We strengthened Medicare 
consumer protections in the 1997 Balanced Budget Act by one, 
guaranteeing access to emergency coverage under a ``prudent, 
layperson standard''--Ben Cardin has been very helpful 
specifically in moving that issue forward; and two, allowing 
physicians to discuss all available treatment options with 
patients regardless of the cost; three, requiring health plans 
to consider appeals from denials of care in emergency and 
urgent care situations within specified timeframes; and four, 
more importantly and more fundamentally, strengthening the 
authority of the health care financing administration to 
collect, monitor, measure and disseminate information about the 
quality of care provided to beneficiaries in Medicare Plus 
Choice plan and fee-for-service.
    Instead of entering into a substantive discussion about how 
best to ensure quality of care based on sound clinical data in 
the private sector, however, it appears the administration is 
more interested in playing partisan politics without fully 
analyzing the issue. It is unfortunate.
    Before rushing to enact legislation that may do more harm 
than good, stifle innovation, and increase the number of 
uninsured Americans, we need to set aside politics and look for 
ways to empower consumers with clinical data and outcomes to 
allow them to make better health care choices. We've assembled 
a group of witnesses today that will help us do just that.
    I'm very concerned about movements that are occurring in 
States, I'm concerned about what the Federal Government is or 
is not doing, and I look forward to today's testimony to assist 
us in making, what I consider to be, some extremely important 
decisions for all Americans over the next several months and 
years.
    [The opening statement follows:]
    [GRAPHIC] [TIFF OMITTED]60999A.003
    
    [GRAPHIC] [TIFF OMITTED]60999A.004
    
    And with that, I'd recognize my colleague from California, 
Mr. Stark, for any comment he may wish to make.
    Mr. Stark. Mr. Chairman, thank you. Thank you for holding 
this hearing on health care quality and what I'd like to think 
of as the search into medical outcomes. But, I notice an 
undertone in your opening remarks that I think was perhaps 
present in your press release. I just want to come back to 
that. It deals with an event which Mrs. Morella and I attended 
in Wheaton, Maryland last Friday to join with the President in 
announcing his executive actions to implement laws which we 
passed last year under your direction and with your support.
    Now, you had referred to that as a political stunt and I'll 
stipulate to that. There were lots of press and people out 
there. I like to take credit for the sun coming up every 
morning, but I can't get any press to observe it with me. But, 
I want to say that those were commission recommendations that 
applied to Medicare and Medicaid beneficiaries. Recommendations 
requiring that beneficiaries have more complete information; 
they have a choice of providers within plans, access to 
emergency services; full participation in medical treatment 
decisions; no discrimination based on race, sex, and age; 
privacy of medical records; a system for handling complaints 
and appeals as you suggested; and a call for consumers and 
patients to become more involved in the health--to guide their 
own destinies by quitting smoking, exercising, those sorts of 
things.
    Now, these recommendations were basically the Medicare 
section of the Balanced Budget Act. And, I guess what I'd like 
to ask my Republican colleagues is, and it's a challenge, which 
one of those would you repeal? Which one of those rights for 
our senior citizens or the Medicaid beneficiaries would you 
like us to deny?
    Now, I'm prepared this morning to ask unanimous consent to 
give you all the right to vote on any one of them or all of 
them. But, I don't think that that's going to get us where we 
want to get. We've got a couple of hundred cosponsors on the 
Norwood Bill. I presume we'll get the same number on a bill 
that Mr. Dingell will be introducing. We're prepared to move.
    I hear that our Speaker does not want to move ahead this 
year to give patient protection in the form that either Norwood 
or Dingell are proposing. There may be an alternative to that, 
but I think that we're missing a bet. We may not get the 
expansion of Medicare into the younger people; that's a tough 
one to pass and I don't know if the public is pushing us that 
much. But, the public is pushing us on. They are pushing us 
from both sides of the aisle, in movies, on television, in the 
press, in States--in California they have a ballot initiative--
and I think we could move ahead.
    And I'd like to challenge my Republican colleagues not to 
move backward on what the President has done, but to move 
ahead. Once more, while Mr. Houghton and Ms. Johnson are in the 
room, I'm perfectly willing to ask unanimous consent to have a 
vote today to remove any one of the privileges or rights that 
the President bestowed by executive action for Medicare and 
Medicaid beneficiaries last Friday. I think those were all 
things that we all voted on--I know the Chairman did. Everybody 
supported those in the Balanced Budget Amendment of last year. 
We ought to say, Mr. President, you did it expeditiously and 
let's us go on and do whatever else we have to do. Change it if 
you want, but I think we ought to move ahead.
    I'm sorry to be so negative because I do really want to get 
into what Dr. Eisenberg wants to talk about in terms of 
outcomes research and things that will help make these 
decisions more empirical and less subjective as I am making 
comments this morning. But, I want to give some credit, where 
it is due. As you know, Mr. Chairman, I tend to think you do a 
better job in health care, generally, than the President does. 
So, I am no fan of the President or his former advisor in that 
area, as you well know. But, I do want to give credit in this 
case where credit is due and it has bipartisan support. Thank 
you, Mr. Chairman.
    [The opening statement follows:]
    [GRAPHIC] [TIFF OMITTED]60999A.005
    
    [GRAPHIC] [TIFF OMITTED]60999A.006
    
    Chairman Thomas. I don't want to prolong the discussion but 
I do believe a brief response would be appropriate.
    Pretty obviously, where we came together in a bipartisan 
agreement and implemented quality aspects under the Balanced 
Budget Agreement, I have no quarrel, obviously, with going 
forward in that area. But, the gentleman's statement as to what 
occurred, I believe, needs a slight correction. What the 
President was referring to was the commission that he created 
several months before the election, before we passed the 
Balanced Budget Agreement, and which include a number of items 
that are not in the Balanced Budget Agreement and which apply 
to something more than Medicare and Medicaid in terms of all 
Federal Government health programs.
    The gentleman himself mentioned that there should be no 
discrimination on the basis of age, sex, or race. I have a 
difficult time figuring out how that gets implemented, for 
example, in the Medicaid program based upon who current 
recipients are in the Medicaid program. Does that mean that 
able-bodied males can now sue to get the same kind of benefit 
that pregnant women or women with children get in a Medicaid 
program? That's my point about the politics of it. It looks 
good and it sounds good, but as far as trying to advance a 
comprehensive quality program, it didn't help a whole lot.
    And, as far as the gentleman's statement about the Speaker 
not wanting to move quality legislation in this Congress, then 
why in the world was I up at a 7:30 quality care task force 
meeting of all of the key chairmen of the Commerce Committee, 
the Ways and Means Committee, the Education and Workforce 
Committee, and all of the pertinent committees that would deal 
with this legislation to try to take a look at putting together 
a decent package of legislation and not one based upon 
anecdote? The last thing we ought to do is legislate by myth, 
rumor or anecdote.
    One of the reasons we're holding this hearing, and I'm glad 
we got it early in the session and that we have the kind of 
quality people that we have here today, is to get an 
understanding of what real-world problems there are; what we 
need to do to be able to get the tools to measure quality--if, 
indeed, we can measure quality, which I believe we can and I 
hope out of this hearing I'll get some support for that 
argument; and what are the practical and appropriate steps to 
take both legislatively and administratively to ensure real 
quality, lasting quality, in a structure that will evolve over 
time and not be one designed to last between now and November 
of 1998. And that's the context in which I made my statements.
    Any other member of the panel wishing to make statements 
can certainly submit a written report. It is now my pleasure to 
turn to the first panel, and it's good to see with us someone 
who's been with us a number of times before, Dr. John 
Eisenberg, who is currently the Administrator of the Agency for 
Health Care Policy and Research, an important agency which will 
assist us in this task, and I believe, for the first time, Dr. 
Jeff Kang who is the Chief Medical Officer, Center for Health 
Plans and Providers, the Health Care Financing Administration.
    I want to thank you both for being here. Any written 
statement you have will be made a part of the record and you 
may address us in any way you see fit on this important 
subject. Should we start with Dr. Eisenberg.

 STATEMENT OF JOHN EISENBERG, ADMINISTRATOR, AGENCY FOR HEALTH 
                    CARE POLICY AND RESEARCH

    Dr. Eisenberg. Thank you very much. I'm pleased to be back 
and to join you to address these issues that you've raised. In 
your invitation to us to testify today, you asked that we talk 
about how health care quality is defined and how it's measured, 
what the role of Government and the private sector are in 
promoting health care quality, and how legislation might affect 
quality costs and access.
    As you mentioned, I address these questions not only from 
my role as Administrator of the Agency for Health Care Policy 
and Research but from my experiences working with you as Chair 
of the Physician Payment Review Commission and having recently 
left the position of chief of the medical services at 
Georgetown, where these issues were really quite real.
    Most importantly, I think we need to emphasize that health 
care is a personal decision. It's a decision that's made by 
individuals and, although many of these decisions are made with 
some help from doctors and from nurses and from our loved ones, 
they remain personal and they remain very individual decisions. 
But, they are decisions that get made in the context of a very 
complicated health care system----
    Chairman Thomas. John, I'm going to ask you to move that 
microphone just a little bit closer. Something happened----
    Dr. Eisenberg. Okay.
    Chairman Thomas [continuing]. To it during the break, I 
don't know----
    Dr. Eisenberg. I apologize.
    Chairman Thomas [continuing]. What it is but it's very hard 
to hear and so you're going to have to get very close to it. I 
apologize.
    Dr. Eisenberg [continuing]. I will do that.
    I was alluding to the fact that our decisions about health 
care are very personal ones, they're made with some help from 
our family, from our friends, from our clinicians, but they're 
made in the context of a very complicated health care system 
where patients and clinicians deal with decisions for which 
they often have inadequate information. I think the bottom line 
for us is that our job, whether we're emphasizing the powerful 
role of the market to reward quality or whether we're 
emphasizing public policy that more directly promotes quality 
care, is that we need to determine how we can assure that 
quality care is delivered in this country.
    Government can assure that consumers have their rights 
protected, as you've mentioned in your opening comments, and 
that's important. But, I think what is also very important is 
what you both mentioned in your opening comments and that is 
that once those rights are protected, what is the health care 
to which people have access? I want to discuss how we as public 
servants can be sure that the health care to which we do have 
access is high quality health care.
    Let me mention six ways in which I think we can address 
your question of how Government can play a role here. The first 
is that we can protect consumers' rights. Secondly, we can be 
sure, as Dr. Kang will address, that we purchase high quality 
health care for our beneficiaries, through Medicaid, through 
Medicare, through the Office of Personnel Management. Another 
way in which we can assure quality care is the care that we 
provide through the uniformed health services--the VA, the 
Defense Department--care that is directly provided by 
Government. So, those are three ways; we can protect consumers, 
we can purchase care of quality, and we can provide care of 
quality.
    But, as the head of a research agency, I want to emphasize 
three other roles that I think are very important for 
Government in assuring high quality care. First, we need to be 
sure that we're sponsoring and that we're conducting research 
that's going to give us knowledge about what works, that's 
going to give us knowledge about what new tools we can use to 
improve the quality of care, and provide us with tested and 
proven ways of improving quality. That takes more research. 
Secondly, we should be tracking the quality of care in this 
country. We should be doing a better job of monitoring where 
there's a need for improvement and where there's an opportunity 
for us to do better, to identify where there are gaps between 
what we know how to do and what we are doing. And third, we 
need to be providing very clear and very unbiased information 
to the public so that when they choose a plan or they choose a 
provider, hospital, or clinician, or with their clinician they 
choose a diagnostic test or as treatment, they can make an 
informed decision.
    You established this agency, AHCPR, in 1989 to do just 
that; to be sure that that knowledge is available. We sponsor, 
we conduct, we translate research in the science of health 
care. We apply the same kind of rigorous evaluation that is 
applied at the NIH.
    What we mean by quality, when we sponsor this research, is 
usually thought of in three ways: structure, process, and 
outcome. And it's probably familiar to you; by structure, we 
mean, what's the basic construct of the health care system--for 
example, with breast cancer, do we have the right mammography 
equipment out there? With coronary disease, are clinicians or 
cardiologists board-certified? Are they well-trained?
    But, even if the structure is right, it doesn't mean we're 
practicing right. We need to be looking at the process of care. 
The process of care asks questions about how we deliver it. In 
breast cancer, it asks questions such as are we getting 
mammography to the women who need it when they need it, to 
women at high risk? For coronary disease, it asks questions 
such as are we giving people clot-dissolving drugs when they 
come in with myocardial infarctions?
    Even if we have the right structure and we have the right 
process, though, you don't do much for people unless they get 
good outcomes, unless the end results of their care are good. 
Just having the right structure, just having the right process 
isn't going to be sufficient. We need to be asking questions 
like, was the breast cancer treated at an early stage when we 
could treat it effectively? And, did the patient survive the 
heart attack with a high level of functioning?
    You know well because of your concerns about the AAPCC how 
much variation there is in practice in this country. We need to 
understand that practice better. We need to understand why, in 
Miami, the AAPCC is $8,000 and why, in Allegheny County in New 
York, it's $4,400 and why those variations exist. One big 
reason is because of the uncertainty that clinicians have and 
patients have about what works and when it works. We know from 
Wennberg's work and others that when the uncertainty is the 
greatest, the variation is the greatest and the opportunity for 
improvement is the greatest.
    One other area which I'd like to emphasize where 
information may help both public policymakers and consumers is 
by giving them information about what consumers think about the 
quality of care that they're getting.
    We have a big poster here about the consumer assessment of 
health plans survey (CAHPS) which we, at AHCPR, have sponsored 
with collaboration from HCFA, NCQA, and others. HCFA announced 
recently that it will be adopting CAHPS as has the Office of 
Personnel Management. This means that we as Government 
employees and Medicare beneficiaries will know what other 
consumers think about the plans. CAHPS gives them information 
that they previously didn't have.
    So, Mr. Chairman, I think we're making progress. We're 
making progress towards an effective system of quality 
measurement. We know that consumers, physicians, managers, and 
other leaders--public policymakers--need information about what 
works and what doesn't. Neither the public nor public leaders 
are going to be able to make decisions about the quality of 
care without the knowledge about what works, how to measure it, 
and how to improve it. Unless we develop better measures of 
quality and better ways of improving the information that 
guides both choices about care and programs to improve it, 
we're not going to be able to do what the public wants us to 
do: to be assured that the care they have is high quality care. 
Thank you.
    [The prepared statement follows:]
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    Chairman Thomas. Thank you very much, Dr. Eisenberg.
    Dr. Kang, welcome to the Subcommittee.

   STATEMENT OF JEFF KANG, CHIEF MEDICAL OFFICER, CENTER FOR 
       HEALTH PLANS AND PROVIDERS, HEALTH CARE FINANCING 
                         ADMINISTRATION

    Dr. Kang. Thank you, Mr. Chairman and members of the 
committee. I'm very pleased to be here to describe HCFA's 
efforts working to ensure that Medicare and Medicaid 
beneficiaries receive high quality health care services.
    By way of introduction, since this is the first time I'm 
here, I am an internist and a geriatrician who practiced 
clinical medicine for 10 years and ran a private-group 
practice. I also am very familiar with managed care as a 
provider who took capitated payments, but also worked for plan 
management for utilization management and quality assurance. As 
a practicing physician, I am pleased to be here to talk to you 
about quality.
    But, before I begin, I would like to recognize you and 
Representative Stark and thank you for your strong leadership 
in passing consumer protection and quality protections in last 
year's Balanced Budget Act.
    Because this Subcommittee has jurisdiction over Medicare, I 
will focus my comments on that program. With regard to 
Medicare, I would like to focus on managed care first because 
this is where HCFA's thinking and its programs, with regard to 
quality assurance, are most matured.
    Our strategy in managed care has two components, as Dr. 
Eisenberg suggested, and I'm going to spring off of his 
comments: the first really is performance measurement, and then 
the second is consumer protection. With regard to performance 
measurement--and by performance measurement, I'm referring to 
the processes and outcomes, as Dr. Eisenberg discussed--
performance measurement has two purposes in it also; the first 
is for plan-to-plan comparisons, the second is for internal 
quality improvement.
    With regard to plan-to-plan comparisons, this requires 
standardized measurement systems. Here we have three efforts in 
process: the first, as you know, is HEDIS 3.0 measures. In 
1997, we required Medicare managed care plans to report this 
information to us and we soon hope to be able to publish this 
data for consumer information. The second, as Dr. Eisenberg 
referred to, was the consumer satisfaction survey, or CAHPS. We 
are currently in the process of surveying over 130,000 Medicare 
managed care beneficiaries and we'll be able to get this 
information back to them with regard to their plan performance 
sometime in the fall. The last effort is the Foundation for 
Accountability. FAcct endorses and promotes a common set of 
patient-oriented measurement systems and we anticipate that 
some of these measures will be incorporated in future versions 
of HEDIS.
    But, with plan-specific comparative data from these 
standardized measurement systems, what can we do with them? 
Well, as purchasers, we can do four things: we can set minimum 
performance level, we can set contractual targets, we can 
reward good performance, and we can assist beneficiaries in 
making health plan choice to create market competition based on 
quality, not cost.
    The second use of performance measures I'd like to briefly 
touch on is for the purposes of internal plan quality and 
improvement; not for the purposes of comparison, but for the 
purposes of internal improvement. Here, through a contractor, 
HCFA developed what we are calling QISMC, Quality Improvement 
Standards for Managed Care. Plans will be required to show 
measurable improvement in specified broad, clinical and non-
clinical areas of measures of their own choosing. So, they have 
the flexibility of choosing their own measures and the 
requirement is that they just show demonstrable and measurable 
improvement over time.
    Now, let me just briefly mention the second component of 
our quality strategy, which is consumer protection. As the 
members--as Representative Stark and yourself have discussed, 
as a result of the Balanced Budget Amendment, I'm happy to 
report that much of what's in the President's Consumer Bill of 
Rights is or will be available to the Medicare beneficiaries 
and Medicaid beneficiaries. As you've already mentioned, 
there's appeals of grievances, the physician incentive 
regulation, and the prudent layperson standard.
    In conclusion--oh, I should mention the--I did promise to 
talk a little bit about fee-for-service. Just as we're 
interested in getting performance measurement and improvement 
and accountability in managed care, we can do the same in fee-
for-service. We are looking at doing HEDIS measures in fee-for-
service, we're developing an OASIS measurement system for home 
health providers, the MDS system for nursing home providers, 
and the joint commission has the ORIC system for hospitals. We 
are also looking at developing a member satisfaction survey 
instrument to be used in fee-for-service. Finally, we are 
revising our conditions to participation for providers to 
reflect the same emphasis as in QISMC for managed care on 
minimum performance level and demonstrable and measurable 
improvement.
    In conclusion, there is much work to be done but I think 
we've gotten a good start. The difficulty really is in 
developing good performance measurements and outcomes. But, as 
quality measurements improve, HCFA will be well-positioned in 
its strategy of emphasizing performance, accountability, and 
quality improvement. I'd like to thank the Chairman and Mr. 
Stark and other members of the committee for working to enact 
the quality-related provisions in the Balanced Budget Act and I 
agree very much with the Chairman's notion of empowering 
consumers to make better health care choices based on clinical 
data and outcome measures and we look forward to continuing to 
work with you on this vital issue.
    [The prepared statement follows:]
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    Chairman Thomas. Thank you very much, Doctor.
    Probably to both of you, but more directly to Dr. 
Eisenberg, you know, given the direction and tone of his 
testimony because pretty obviously--and Dr. Kang, you're 
correct, we're focussing primarily on Medicare--but I've 
discovered that since this committee is one of the few that 
actually puts together the product that's moved through the 
system, we've had to drive a lot of the system through the 
Medicare structure. But, when we talk about quality health 
care, as Dr. Eisenberg indicated clearly, it ought to be open 
to all.
    And I was heartened to a certain extent by the President's 
Commission concern about patient protections in the use of the 
term ``confidentiality,'' rather than privacy because I believe 
if you use the terms ``right to privacy,'' it tips over into an 
area that oftentimes is not viewed in a way commensurate with 
our job of collecting data. And so, the confidentiality term is 
one that I am appreciative of having been used.
    My concern about our ability to collect data which is 
critical to outcomes, research, and quality comparisons is that 
there apparently is a move-on in the States and I happen to be 
over the break in Minnesota at the Mayo Clinic and got 
firsthand evidence and information of the difficulty in 
complying with the Minnesota State law in restricting the 
collection and dissemination of data.
    My question directly is over what I understand to be the 
administration's position that they would not be interested in 
restricting States who passed laws which are more stringent 
than the Commission's proposal for confidentiality. If indeed 
that is the case, how could we possibly move forward in a 
broad-based, multistate data collection structure if we allow 
the States to devise privacy laws similar to Minnesota's which 
requires an affirmative sign-off with a 60-day window for the 
use of material?
    Dr. Eisenberg. Well, we share your concern. In fact, I 
often think about this problem and think about the metaphor of 
a key and a lock. I think that we do need to lock up the data 
that we have--confidential information for our health care--but 
we can't throw away the key. And the question, of course, that 
you ask is, who's going to control that key and who's going to 
control access to that data.
    The Secretary, on September 11, sent the Congress a 
proposal from the Department on privacy and emphasized in that 
letter that there were several elements that must be maintained 
and available because they're public goods; they include 
research and quality of care evaluation. And, I think your 
point, especially in the context of this hearing, is very, very 
important. We need to be sure that we have not only consistent 
data but good data that's available so that we can evaluate the 
quality of care and so that we have access to information for 
research. Now, given that----
    Chairman Thomas. But, Doctor, is my understanding correct, 
that the administration has indicated notwithstanding that 
floor, that States could go below it if they so chose and that 
there was no interest in dealing with that issue? Is that 
understanding correct or not?
    Dr. Eisenberg. The Department's and the administration's 
comments to the Congress were just that; that this would be a 
floor of stringency and if the States decided to be more 
stringent, they could do so. I think what we need to do as we 
work through this process is for the Congress and the 
administration to work together to be sure that those public 
goods are preserved, especially in the context of this hearing, 
research and quality. We could do that in a variety of 
different mechanisms, including model legislation for the 
States, but we do share your concern that those public goods 
continue to be available and would look forward to working with 
you as this legislation goes through to be sure that they are 
available----
    Chairman Thomas. Well, I'm sorry to press you on this but I 
think it's a fundamental point and I want it to be very clear. 
If States have the ability to create more stringent 
restrictions on the use of patient records than as advocated by 
the administration, is that going to be a concern to those 
people who are trying to establish computer-based information 
networks for quality control?
    Dr. Eisenberg. Yes, it will, and like every element in this 
confidentiality debate, there are two edges to the sword. As we 
try to prevent inappropriate use of these data, we have to be 
sure that we preserve the appropriate use with the right 
safeguards. And, what we need to do is to work together to be 
sure that your concerns are taken into account.
    Chairman Thomas. I appreciate your response. It is a 
difficult one. I know both of you are in a difficult position 
on this, but I think at this point we have got to be as honest 
as we can about what the job is with full protections of 
individual confidentiality of records but the absolute 
necessity to collect statistically quantitative data.
    Dr. Kang. Mr. Chairman, if I may, give a real live example 
on this--and I'm not a legislator so I don't know how to get 
out of this problem, but it is a problem. Medicare is a Federal 
program. We're requiring HEDIS measures for the purposes of 
ensuring quality. We did have some problems--in HEDIS, there is 
a measure with regard to follow-up care for mental health after 
an affective disorder and there are some places, States, where 
we've run into problems where we could not collect that 
information because of confidentiality laws with regard to 
mental health records. And, this is an issue and, again, I 
don't know exactly how to solve this but I think you've 
identified a very important issue.
    Chairman Thomas. Dr. Kang, recently I was somewhat 
disturbed to find out that your agency's trying to, for want of 
a better term, ``water down'' some of the beneficiary-centered 
BBP provisions like the national toll-free number for seniors 
to report fraudulent activities, toll-free number for seniors 
to ask questions about their private plan choices. There was an 
attempt to phase it in or to create something other than what 
we had requested in the BBA. Do you perceive any difficulties 
in implementing the additional, beyond the BBA requirements in 
the President's proposal since, apparently, the agency's having 
some difficulty swallowing all of the stuff that we asked them 
to do?
    Dr. Kang. With regard to that, I assume you're referring to 
the Consumer Bill of Rights. As I suggested, much of the 
protection proposed in the Consumer Bill of Rights are already 
present in Medicare so the incremental changes that are being 
proposed really will not present a major administrative 
problem.
    Chairman Thomas. If, in fact, that's the case, I don't 
expect any additional slippage of any of the items that are 
critical for consumer information. If you are willing to make 
that statement about being able to accept the President's 
additional workload, then I don't expect any additional 
concerns about phasing in or not implementing in full the 
provisions that we agreed to on a bipartisan basis and I 
appreciate your statement on that.
    I have some concern, and I don't normally do this but, 
there's a witness that's coming and this is the last question 
that I'll ask, there are additional witnesses and, frankly, 
some of the testimony is very good and I think this is 
important to get out, especially in the context of the debate 
that we're going to be engaging in in the House and, I guess, 
in the Senate, on the question of quality and where should it 
be applied.
    A member of a panel to come makes this statement in a 
summary way, if I can find it. I'm looking for it and I can't 
find it. I apologize.
    This is a phrase used both as a summary in one of the 
future panel participants and from a February 1998 National 
Healthy Policy forum briefing paper ``Health Care Quality: From 
Data to Accountability'' by Mary Darby and I was struck with 
the similarity of the phraseology and one, which I think is 
absolutely critical as we move forward in this debate. And his 
statement, Dr. Chassin's statement is this: ``Very large 
numbers of Americans are harmed by exposure to the risks of 
health services from which they cannot benefit. Equally large 
numbers of Americans fail to receive health services that save 
lives and prevent disability. More are injured when avoidable 
complications of heath care are not prevented. Quality of care 
is the problem, not managed care. These problems occur in small 
and large communities in all parts of the country with about 
equal frequency in managed and fee-for-service systems of 
care.'' That was from his summary.
    And, from the Health Care Policy forum statement, ``The 
quality of care, it appears, has always been inconsistent. It 
is only recently that awareness of inconsistency has become 
widespread. This observation runs counter to a popular tendency 
to associate poor quality with the spread of managed care and 
its perceived limited on consumer choice. In fact, evidence can 
suggest that managed care is as good as, worse than, or better 
than fee-for-service care, depending upon which research one 
turns to.''
    And, in that context, my question would be, Dr. Kang, I 
have available information that you are now going to send out a 
questionnaire and it, interestingly enough, is going to about 
130,000 Medicare beneficiaries is, as the release indicates, 
Medicare will use the consumer assessment of health plans, the 
CAHPS proposal, this month to conduct a first-ever survey of 
beneficiaries in every Medicare managed care plan to assess 
their experiences with managed care. Have we done this with the 
fee-for-service program?
    Dr. Kang. We haven't but we are actively working with AHCPR 
to develop a similar instrument to be used in a fee-for-service 
program.
    Chairman Thomas. What percentage of Medicare beneficiaries 
are fee-for-service versus managed care?
    Dr. Kang. Right now, in the Medicare program, it's 16 
percent in the managed care program.
    Chairman Thomas. So, we have 85, roughly 85, percent of the 
beneficiaries in the fee-for-service program. Unless you with 
to disagree with Dr. Chassin or the report survey that quality 
of care is unequal in both areas, and why haven't we been 
trying to do assessments on quality in fee-for-service and why 
are we launching the first ever in only the 15 percent portion 
of the beneficiaries of Medicare? And this is the concern I 
have about, in part, politics driving rather than policy 
driving a discussion of this issue. Quality care is quality 
care. But, what's occurring is a political wave to focus only 
on managed care on a quality concern, rather than across the 
board, including 85 percent of the beneficiaries in the fee-
for-service. When are we going to have the fee-for-service 
questionnaire out and in the field?
    Dr. Kang. I agree with Dr. Chassin's position completely. 
This notion of tremendous variability in quality of care, 
whether its managed care or fee-for-service or whether whatever 
State we're in, it has been known for years. It's unfortunate, 
though, that the movement to managed care has actually brought 
it to the public's attention so this is actually where we've 
started. But, in reality, HCFA's viewpoint on this is that we 
need similar measurements and accountability in the fee-for-
service program----
    Chairman Thomas. Then why aren't we doing fee-for-service? 
Why are we doing managed care first?
    Dr. Eisenberg. Let me--since we're the guys who developed 
this instrument, I should help out here.
    Chairman Thomas. Yes, but you're not the ones who decided 
to apply it to managed care before you applied to fee-for-
service. That was HCFA.
    Dr. Eisenberg. But we----
    Chairman Thomas. Now, I need to know why HCFA decided that 
it was more appropriate to move on 15 percent of the 
beneficiaries rather than assist quality care for 85 percent of 
the beneficiaries. What was the decision structure that led to 
the movement to push this out as a survey to managed care 
rather than fee-for-service?
    Dr. Eisenberg. If I may, the main reason we developed this 
instrument is because people making choices among plans wanted 
help in choosing among those plans. And, in fact, much of the 
debate that has gone on in this committee in previous years has 
been to give people that choice. They didn't have choice of 
plans within Medicare part A and part B and so therefore----
    Chairman Thomas. Yes, but they have choice of doctors----
    Dr. Eisenberg. They do, and----
    Chairman Thomas [continuing]. And, frankly, when you talk 
about quality in fee-for-service, it is a comparison of folks 
who were doing the same thing in different ways.
    Dr. Eisenberg. And you're right on target because the next 
phase of the development of this CAHPS instrument is to develop 
measures among providers. But, the first step was to address 
what people were complaining about, which was now that we have 
choice among plans, how to choose----
    Chairman Thomas. The only point I want to make is we have 
to be careful in terms of what we're doing because we may drive 
through politics the belief that quality of care is, in fact, a 
``problem'' only with managed care when, in fact, quality of 
care is a concern for all in all of medicine. And that's my 
primary concern. And, from a policy point of view, we should be 
sensitive to that.
    Dr. Eisenberg. Can I just make one other comment on that? 
And that is to say that we--AHCPR sponsored a conference this 
year during which the theme was the question of what the 
quality of care is in managed care, and the conclusion was very 
much what you stated, which is managed care is so diverse and 
so, there's a term we use in medicine which is pleomorphic, 
multi-forms. It's a great word for managed care because it 
comes in so many different forms. You can't compare managed 
care versus fee-for-service anymore.
    And, we, as an agency, believe that the right research 
question to ask is the one that you're asking; not whether 
managed care is better than fee-for-service, but what aspects 
of managed care are good in health and which ones might not be. 
And that's the reason why the CAHPS program is designed to try 
to tease apart those element.
    Chairman Thomas. Thank you.
    Mr. Stark. Mr. Chairman, I thank you for letting me 
inquire. I'd like to follow up on that to suggest that the 
complaints that I'm getting, and I think my colleagues are also 
getting are all about managed care. I'm not getting any 
complaints that people in the fee-for-service system are being 
denied access to specialists, or are not having their emergency 
room bills paid, or can't appeal. They can just walk out of one 
doctor's office and into the next doctor's office and Medicare 
will pay. The major part of all of our constituents' 
unhappiness is coming from managed care. And, I tend to grease 
the squeaky wheel.
    Second, we're paying $500 a month for everybody in managed 
care, healthy and sick. If you're in fee-for-service and you're 
not going to the doctor, it doesn't cost us anything. So, that 
100 percent of the people in managed care are clipping the 
system for, let's say, an average of $4,000, $5,000, $6,000 a 
year, depending upon where they live. That is an area in which 
we have a responsibility because the individual has no choice 
in managed care.
    In a fee-for-service plan, Medicare is the broadest choice 
plan in the country. There is no facility or no physician, 
almost, that is denied to a person in the Medicare fee-for-
service system. There is a caveat in that they ought to have 
Medigap insurance, which could be a little bit expensive. 
Nonetheless, some 70 percent of Medicare beneficiaries have 
that.
    So, I think from this member's standpoint, going first to 
managed care makes sense. It is new, it is confusing, it is 
unusual and it's generating a lot of complaints. We might as 
well start there and hopefully we would build those efforts.
    I wanted to ask Dr. Kang a question regarding this issue of 
the HEDIS--is that how you pronounce the acronym?
    Dr. Kang. [Witness nods affirmatively.]
    Mr. Stark. In your report, you're suggesting, if I can read 
into your report, that many of these plans are not responding 
accurately. I'm going to be generous. They're not lying, I 
don't think you would say, but they aren't responding very 
accurately. And, I'm guessing that the reason they're not 
responding very accurately is that, rather than fibbing to you, 
they're just not keeping good records. Or, they're not able to 
keep good records. For example Oxford health plan. Their 
computers are down and they're not able to pay the doctors, 
much less respond to your inquiries. But, is there a 
legislative action that must be taken to achieve accurate HEDIS 
reporting? Should we kick plans out of medicare if they can't 
respond? If somebody was honing up their HEDIS figures, would 
you suggest kicking them out of the system? Or, do you think 
given time, these systems will start providing you with more 
accurate information?
    Dr. Kang. I'd like to take an opportunity to briefly just 
talk a little bit about this managed care fee-for-service issue 
and then I'll just----
    Mr. Stark. Okay.
    Dr. Kang [continuing]. Speak to the HEDIS issue. I think 
that there is some confusion with regard to quality care----
    Chairman Thomas. Dr. Kang, as a first time visitor, you 
need to know that in terms of the lights and the members' 
times, they get antsy. But, obviously, you want to respond to a 
question that I asked and so, it won't come out of the 
gentleman from California's time.
    Dr. Kang. Okay.
    Mr. Stark. Take your time.
    Dr. Kang. There is some confusion between the access to 
care and consumer choice in the fee-for-service system as being 
a proxy for quality of care. What we really need to do is 
actually have good performance measures. And, it turns out that 
the peer review program has done a managed care to fee-for-
service diabetes quality improvement project where the initial 
measurement shows that there are no differences between managed 
care and fee-for-service with regard to those diabetes 
outcomes.
    So, we have to be a little bit careful in terms of how we 
define quality of care but it really explains why we need good 
performance measures and outcomes measurements.
    Chairman Thomas. Could I ask you just a followup? Did you 
read the magazine U.S. News rating of America's top HMOs? That 
their rating--they used HEDIS figures, did they not, in putting 
that together? Did they do a pretty good job of rating? Not in 
terms of--systematic, I mean, as their procedure. Is that a 
good way to build a--it may not be accurate--go ahead. You can 
criticize U.S. News and World Report or you can praise them.
    Dr. Kang. Let me--shall I answer this question or your 
first question?
    Chairman Thomas. Well, either one. I just--[Laughter.]
    Dr. Kang. With regard to the HEDIS measures, I do want to 
say that HEDIS measures are self-recorded and, given the fact 
that the Balanced Budget Amendment calls for us to publicly 
report these measures, we felt that our responsibility to make 
sure that these measures were accurate and with what confidence 
that we could publish these. So, therefore, we did this audit 
of measures. The purpose of the audit was not to actually catch 
fraud or lying. It turns out we did not see any. But we did 
find measurement problems and they really speak to the 
immaturity of this science.
    There are information system problems, and there are 
measurement specification problems. There's ambiguity in those 
specifications. I believe, though, over time that they will 
improve.
    Now, the problem with some of these U.S. News and Reports 
is that there is an issue of what is the underlying accuracy 
and validity of the measures. And I think that we need to be a 
little careful with what we publish as we move forward.
    At the same time, though, these kinds of things begin to 
dialog and begin to push the importance of quality in the 
public's mind, rather than just comparing plans based on costs 
and benefits.
    Mr. Stark. Let me now jump to the last holiday season----
    Chairman Thomas. Would the gentleman yield on that point?
    Mr. Stark. Yes.
    Chairman Thomas. My assumption is, since you're now into 
HEDIS 3.0, as you move to HEDIS 4.0 or 5.0 or 6.0, your shift 
will be away from the process analysis aspect and more into 
outcomes so, although this kind of a comparison in U.S. News 
and World Report might be premature and you wouldn't be able to 
get a full reading, clearly you anticipate that as you go 
forward on this it will be a much more useful tool in comparing 
the quality aspects between HMOs. So, they're a little 
premature, would that be fair to say?
    Dr. Kang. That is true----
    Chairman Thomas. That your later models will be better in 
helping us?
    Dr. Kang. That is true. In fact, there is a true outcomes 
measure in HEDIS for the Medicare population called the Health 
of Seniors measure. The problem is this is a longitudinal 
measure for which we won't have data----
    Chairman Thomas. Okay.
    Dr. Kang [continuing]. For the next 3 or 4 years.
    Chairman Thomas. Thank you. Thank you.
    Mr. Stark. Let me add--Mr. Chairman----
    Dr. Eisenberg. May I add just a quick comment to that?
    Mr. Stark. Well, I want to ask you a question first. Not 
knowing that all the television would be over at the Kyoto 
hearing this morning, I have prepared this chart which I'll 
share with my colleagues.
    [Chart.]
    Mr. Stark. But, really, it's Uwe Rheinhardt's Christmas 
card. [Laughter.]
    That's true. And what it shows, and John Eisenberg has 
already seen this, is that between Minneapolis (which is in the 
neighborhood of the Mayo Clinic), and New York or Miami and 
probably San Francisco, there's an almost 50 percent difference 
in the AAPCC. In other words, we're paying four grand a year 
for the average health care cost in Minneapolis and we're 
paying $8,500 in Miami. What we need to encourage Dr. Eisenberg 
to do is to change this. It isn't right. There's no reason why 
Medicare we couldn't fly somebody from Florida to Minneapolis, 
give them a pass on Northwest Airlines to do so, and spend half 
as much. We'd save money for the Government and make a little 
money for the airlines in the bargain.
    I want to ask Dr. Eisenberg to comment on how the research 
that we hope you're going to do is going to help us to 
straighten this out, to make this differential less extreme. 
And maybe you could comment on where these numbers came from, 
Doctor, and how you would see AHCPR's ability to address this. 
I can't make that part of the record but it's a new Christmas 
card. Thank you, Mr. Chairman.
    Dr. Eisenberg. Many of these numbers about variations among 
small areas come from the work of Jack Wennberg who looks at 
Medicare data and looks at how we can compare the utilization 
of services across areas. It's not always the case that one 
region is high in everything or is low in every area. What is 
almost always the case, as I mentioned in my prepared 
testimony, is that when there's variation, there's uncertainty. 
And when the uncertainty is reduced, we can often improve the 
quality of care, sometimes reduce it's costs.
    AHCPR is sponsoring projects now to try to test that but 
it's only a hypothesis at this point. We believe, given the 
evidence that's available, that if we can get more information 
to doctors and patients about what works and what doesn't work, 
we can both get rid of the unnecessary services and, have some 
resources so that we can provide some services that aren't 
being used now that should be.
    Experts in this area say that about 30 percent of services 
that are provided to Americans don't help them, and these 
services don't enhance the quality of their care. There are 
other services we know would enhance the quality of their care 
if they received them. So, our job is to figure out which is 
which and then to get that information to the decisionmakers.
    Mr. Stark. Thank you, Mr. Chairman.
    Chairman Thomas. Certainly. The gentlewoman from 
Connecticut is not available. Does the gentleman from New York 
wish to inquire?
    Mr. Houghton. Thank you, Mr. Chairman. Gentlemen, good to 
have you here. Thanks very much for your testimony.
    Just picking up a little bit on what Mr. Stark was saying, 
I think dollars do make a great deal of difference. You 
mentioned, Dr. Eisenberg--I forget whether you mentioned Miami 
or Houston or Dallas, but also you did mention Allegheny 
county, New York, which is something which I represent--a big, 
big difference in the AAPCC. And if I understand correctly, 
that the higher the amount, the more frequent the use.
    But, I guess the basic question that I was searching for is 
this: with all of your testimony and, you know, you're talking 
about standards and you're talking about peer review and 
information and followup and reports and things like that, 
where is the incentive for quality, for better quality? I know 
what it is in business, it's in terms of higher price.
    Dr. Eisenberg. Right.
    Mr. Houghton. Or, it's in terms of greater profit margin. 
But where is the incentive for somebody in Allegheny county, 
New York, who in many cases has to pay the same costs because 
they are in the greater Buffalo, New York area. And, I'm sure 
that the Buffalo Children's Hospital, or something like that, 
gets a far different payment. Where is the incentive for this? 
As a matter of fact, where is the incentive--I don't quite put 
my fingers on it--with all the standards and the reviews and 
things like that, what is the incentive really to do what you 
want?
    Dr. Eisenberg. Well, let me just comment first on the 
statistics. You're absolutely right about the difference 
between Allegheny county and Miami and that would suggest that 
there's either underservice in your area or overservice in 
Miami, or both. But, we wouldn't imagine that all services 
should be the same across the country. In fact, we would hope 
it would be the case that there would be more skin cancer being 
treated in Miami than in Allegheny county, New York.
    But, that notwithstanding, your question about where we're 
going to provide incentives is really a quite fundamental one 
because, by and large, right now we have incentives on what we 
can measure and we can measure cost easily. And so, the 
incentives today say all of the studies that are being done 
are, by and large, on cost. But, we find that when we survey 
Americans, 90 percent of them say that quality is a key issue. 
Over 40 percent of Americans say that quality is the most 
important issue, but over 60 percent say they've never seen any 
information on quality.
    Mr. Houghton. Yes.
    Dr. Eisenberg. Now, consider the U.S. News and World Report 
example, as a sort of consumer's report approach. If I'm buying 
a car, I'm going to go to Consumer Reports so I can see what 
the quality of that car is going to be based on unbiased 
observers measures. The U.S. News and World Report measure in 
some ways was unfortunate because it amalgamated all the 
different measures that NCQA looks at. If I'm looking at a car, 
I want to know how fast it goes from zero to 60. I also want to 
know how comfortable it is, as well as its cost. If I'm 
choosing a plan or a doctor or a hospital, I want that 
information as well.
    We don't have that information yet but Americans want it 
and the answer to your question, unfortunately, right now is 
the incentive is on cost and next it's on image and after that 
it's on something which we can't give them, which is quality.
    Mr. Houghton. Yes, well, maybe Dr. Kang, you'd like to 
answer. But, I really think in the final analysis if we talk 
quality, at least from any experience I've had through my life, 
that there has to be some sort of a push, an internal 
incentive, and I don't see it there. I mean, for example, just 
little things like a quality emphasis in business and having a 
Malcolm Baldrige award. I don't even see that here.
    Maybe you'd like to comment.
    Dr. Kang. I think the problem is there is no market for it. 
(a) we're not able to measure quality, but (b), there is no 
market for quality. So, I think that--but we're in somewhat of 
a chicken and egg situation. If consumers don't have 
information, then they make their choices based on costs. If we 
start giving them information on quality, the demand for that 
information will increase which will then put pressure on 
creating this information.
    Mr. Houghton. But, if I could just interrupt a minute, but 
whenever I've seen quality work, it just doesn't come from one 
source. Let's say that all the information is available early 
on to a patient so that they are able to make intelligent 
decisions about their own health. And let's say all those 
things that you've talked about here in terms of the standards 
and the peer review, things like that, are available to the 
doctors. It still doesn't----
    Chairman Thomas. Right.
    Mr. Houghton. It doesn't really quite match.
    Dr. Kang. There is another thing that HCFA's interested in. 
We do not have the statutory authority for it, but other 
purchasers do this, which is the notion of beginning to pay for 
better quality care. Just like your car manufacturer or 
something, you may choose to pay for better quality parts or 
whatever. So, I think that as we begin to develop quality 
measures and create a market for quality, the notion of 
economic incentive for good quality of care gets put on the 
table. I think we need to begin to move in those directions.
    Chairman Thomas. Right. Thank you.
    Mr. Houghton. Thank you, Mr. Chairman.
    Chairman Thomas. Thank you. I believe this is the last vote 
of the day and I would ask the panel if you would indulge us, 
the subcommittee will adjourn until 25 after. Then we can come 
back and continue with the questioning. Is that okay with you?
    Thank you very much. Subcommittee stands adjourned until 
11:25.
    [Recess.]
    Chairman Thomas [presiding]. Does the gentleman from 
Maryland wish to inquire?
    Mr. Cardin. Thank you, Mr. Chairman. First, let me thank 
you for this hearing on quality issues. I think it's an 
extremely important subject and one that will become even more 
dominant in the health care debate in the very, very near 
future. I very much appreciate the testimony of our witnesses 
and the response to the questions so far.
    I'm just curious as to the appropriate role between the 
Federal Government and the States here. I know that in my State 
of Maryland, we have had some State efforts in regard to trying 
to give consumers more information on selection of HMOs. The 
State of New Jersey has also had a performance report in 
regards to helping their consumers on selection of HMOs. The 
Federal Government, obviously, has a responsibility as it 
relates to the Medicare population in trying to give better 
guidance to consumers on selection of HMOs based upon quality. 
And the Chairman raises a very good point, that quality goes 
well beyond just a managed care program, such as the fee-for-
service is also Medicare.
    So, how do we handle the relationships between what the 
States are doing--they're closer to their people and to the 
beneficiaries, they have a better network of getting 
information out--and to the work that you all are doing? I 
appreciate any guidance you might be able to give us on that 
issue.
    Dr. Eisenberg. Let me start by saying that there is a 
critical role for the States in this area and, as an agency, 
our feeling is that our methods, our tools ought to be used by 
whoever is going to take the lead. In this area, the States in 
many instances have taken the lead.
    One example is the one you mentioned which is that the 
consumer assessment of health plan survey, which this poster 
depicts, is used in the Maryland report on managed care plans 
and there's a booklet that the State puts out, as you know, 
that's a side-by-side comparison of managed care plans along 
these lines.
    I applaud the States for doing this. I think given that we 
are experimenting and that we're trying to find the best way to 
get information to patients, we need to have as much innovation 
at the State level as we can. There are certainly some 
economies of scale in the area of research and measurement that 
we ought to be taking advantage of at the Federal level and, to 
the extent that many of the plans cross State boundaries, we 
need to be considerate of that factor as well. But I'd like to 
see the States do as much as they can and would like to 
continue to work with them in that area.
    Mr. Cardin. Are you working with the States?
    Dr. Eisenberg. We do. We, as an agency, have not only 
supported the development of tools like this, but we have a 
program called the User Liaison Program, which is one of our 
most popular, in which we meet with State governments, both 
administrative and legislative sides, to help them understand 
what health services research is bringing forth that they might 
apply in addressing questions related to the cost, use, access, 
quality, and outcomes of health services. We get very good 
reviews for that program and look forward to continuing it.
    Mr. Cardin. Dr. Kang.
    Dr. Kang. I'd like to just add one other thing: in addition 
to the issue of the efficiency with regard to the 
standardization of measurements and the science of outcomes and 
performance, I think there is a role for the Federal Government 
working with States on data infrastructure issues and data 
collection issues and this will be critical because we want 
that standardized to the extent that plans or providers cross 
States lines.
    Mr. Cardin. It seems like that almost all the work is being 
done in trying to give consumers information on a health care 
plan, more so than individual providers. Can you just give us 
any hope that the technology will ultimately give guidance not 
just on the plan itself but to the individuals that participate 
so that the consumer can not only make a choice on plans but 
can also know about the individual components of the plan?
    Dr. Eisenberg. We are working on that. In fact, and there 
is a plan to move this consumer assessment to the provider 
level as well as to deal with the importance of gaining data 
from large data sets about providers, both within plans and 
across plans, to see how well they do.
    One of the challenges, though, is the problem of the sample 
size and severity adjustment, which are technical problems but 
very tough problems. We don't want to penalize physicians or 
hospitals who take on the toughest cases who then might have 
poorer outcomes and we don't want to infer that that's poor 
quality care. You wouldn't want that to happen to Hopkins in 
Maryland and we don't want it to happen to any hospital in the 
country that takes care of the sickest patients.
    And so, we don't yet have the technology, the methodology, 
to be sure that we can correct for severity and risk in that 
area. We do, though, have good enough data to give back to 
providers so that they can look at it and they can say, here's 
an area where we might be able to improve. And, I'm 
distinguishing here between the use of data for choice by 
consumers or employee benefit managers, and the use of data for 
quality improvement. The data for quality improvement should be 
corrected as much as possible for severity but that kind of 
judgement can be made internally by the organization as well.
    Mr. Cardin. I understand it's very difficult and I think 
you need to go slowly on it. You don't want to put out material 
that could disadvantage those that are willing to really take 
on the more difficult assignments in our health care delivery 
system. So, I encourage you to take your time, but it is 
important that we do make progress and provide greater 
guidance.
    Dr. Eisenberg. Well, it's critically important to us, as a 
department, as an agency, as well.
    Mr. Cardin. Thank you, Mr. Chairman.
    Chairman Thomas. I thank the gentleman. The terms comes up 
over and over again, risk assessment, the ability to judge risk 
in a number of different areas and I'm just hopeful if we can 
push forward in some kind of some crude measuring device in a 
number of areas dealing with risk assessment; here, in terms of 
responsibility taken on heavy cases, others, in terms of a fair 
and equitable load among similar patients and that sort of 
thing. It's very frustrating. Several times in the past if we'd 
had it, we could have moved forward in a little bolder way. 
Good luck to you.
    Does the gentlewoman from Connecticut wish to inquire?
    Mrs. Johnson of Connecticut. Thank you very much, Mr. 
Chairman. I want to just raise two issues. First of all, I'm 
interested in your comments about the need for standard and 
objective measures and I respect that need. I also was very 
reassured by your comments a few minutes ago about the need to 
correct for severity and type of illness in a lot of this 
public information that we're going to distribute.
    I would also like to raise the issue, because I hope you're 
thinking about it but it's never been thought about very well, 
and that is legitimate variation. You do point out in your 
testimony, Dr. Eisenberg, variation is not inherently bad. Now, 
it's more than that. Often, the best ideas are not popular at 
first.
    I know we all move from anecdotal evidence but my husband 
was trained as an Obstetrician in California and, when he moved 
to the East Coast, no one in the hospital had done any delivery 
by natural childbirth and he had never done one under general 
anesthesia. I mean, this is polar variation. You know, he stuck 
to his way of practicing and, over time, there has been change, 
but, if you look at what's happened in the public conversation 
about caesarian sections, it's not healthy. It wasn't good. A 
lot of the advice that's been given to women on that issue has 
not been good for them, nor good for the child that they were 
about to give birth to.
    So, there's a certain fadism in our public conversation 
about what treatments are best and the standardization could 
easily sock-in current practice as best practice. So, that's a 
problem. Now, I don't want to spend all of my time having you 
talk about that because it's really just a problem that we all 
understand but you've really got to make sure that somehow we 
build in a space for new approaches that aren't popular at 
first, and that may even be picked up by a group and dramatized 
as dramatically bad when, in fact, in the long run, they may be 
dramatically good.
    The more important issue that I wanted to bring up and Dr. 
Kang, you referenced capitation--you know, you need to think 
about, because we need your guidance, on how do we merge our 
research on best practice with our commitment to reimbursement 
rates.
    Now, a perfect example is the problem we're having now in 
oncology--the RBR'S does not reward the physician for the 
delivery of the drug and the wholesale price, the Inspector 
General says, is the price we're paying is way too high because 
he doesn't take into account the cost of delivery. And, when 
you're talking infusion therapy and OSHA regulations and 
insurance to cover things that have to be refrigerated for a 
wide range of kinds of cancer patients, it's really wrong for 
Government not to be able to see this. So, we have to think 
honestly about reimbursement rates. Reimbursement rates 
destroyed Medicaid. When Medicaid did usual and customary, it 
was a one-kind of system. When it stopped doing usual and 
customary, it was a different kind of system and a lower 
quality system. And, I personally believe that we're moving 
this direction in Medicare.
    So, I think it's unrealistic for you guys to be ``quality'' 
in Government and in the administration and not be willing to 
talk about cost of quality. Both cost and reimbursement rates, 
cost and capitation--I mean, some of the capitation rates I see 
HMOs proposing are scandalous and, at some point, the 
Government has to be able to say quality care--we don't see at 
this point that quality care can be delivered for that.
    Then, lastly, I'd just like to mention to you that our own 
approach to fraud and abuse is now reducing the very kinds of 
care that we want to hold physicians and HMOs accountable for. 
In my area, it has eliminated annual physicals because the OIG 
only lets you get reimbursed for what it specifically you are 
supposed to look at, at that moment, with that patient. And 
doctors used to say, fine, you're in for this, but we'll also 
just do all this checkout to be sure you're okay. Can't do that 
anymore. Fraud and abuse investigations won't let you.
    So, are we going to hold them, then, to the quality 
standard of you didn't get it early enough? Well, you didn't 
get it early enough because you already had your mammogram a 
month ago or four months ago or eight months ago or nine 
months, ten months ago and it wasn't quite time for your next 
one. So, yes, you didn't get it early enough. So, I think we 
have to deal honestly with the conflict between quality as you 
academicians, in a sense, professionals, look at it and what we 
are actually reimbursing for and allowing. So, are you running 
into those kinds of problems in your work?
    Dr. Eisenberg. Let me respond to one of your first comments 
about the variation issue. I couldn't agree with you more. 
There needs to be healthy and legitimate variation to reflect 
cultural differences, geographical, epidemiologic differences. 
My response to you in brief is that variation is not the 
answer; variation is the question. We have to follow up to find 
out why those differences exist and whether they are legitimate 
differences.
    Let me let Dr. Kang address the issues that are specific to 
HCFA except that I would say this: that one way in which we 
reward providers for providing high quality care is through the 
attraction of patients. It's the market share issue so that--
and I recall my days when I was on that side--the fact that 
there were fees that were constrained or limited didn't stop us 
from trying to provide high quality care or in other ways 
attract patients because we needed more patients, more market 
share. So, that I think your question does raise some very 
important issues but it doesn't preclude the attraction of 
patients through a market mechanism.
    Mrs. Johnson of Connecticut. Well, all I'm saying is 
there's a point at which it does. If the market--if the 
reimbursement rate is so low that your volume has to get so 
high that you literally don't have time to listen for that 
hour, then it does. And that's what you also having to be 
willing to speak up about and think about.
    Dr. Kang.
    Dr. Kang. I'll answer briefly. I think what you're really 
raising is what we're after, which and what society's after is 
value from the health care system. And it's really quality 
divided by cost. So, you're absolutely right; we cannot talk 
about quality in the absence of cost and the dilemma that we 
have--I think the Balanced Budget Amendment has given us a lot 
of tools to look at the cost side of the equation. What we're 
really wrestling with is the quality side of that equation such 
that we can have an open discourse on the tradeoffs between 
quality and costs, i.e., value of what we're trying to get.
    Mrs. Johnson of Connecticut. Just in conclusion, Dr. 
Eisenberg, you mentioned geographic, culture, and those kinds 
of differences. That's the least of our problems. When you get 
down to outcomes for a surgeon, you say, given all of that, 
this works better and that means you're not going to reimburse 
for this other thing that right now doesn't look as good 
because the majority of physicians don't do it and don't like 
it and for one reason or another, you know, don't think it's 
the right thing. If you don't allow that, you don't find out in 
5 years that, in fact, it was the right thing. That's the kind 
of narrowness that I fear losing. So, these are just warning 
thoughts and particularly on the reimbursement issue, we have 
to be far more honest or we'll destroy the system. Thank you.
    Chairman Thomas. I thank the gentlewoman. Does the 
gentleman from Louisiana wish to inquire?
    Mr. McCrery. Now, Dr. Kang, when your agency is considering 
a payment or a coverage policy change that has clinical 
implications, what types of experts do you consult with?
    Dr. Kang. Actually, I'll let Dr. Eisenberg answer that 
question because we do very much rely on much of the evidence-
based practices that AHCPR works on.
    Dr. Eisenberg. There is in the organization of AHCPR, the 
Agency for Health Care Policy and Research, a mechanism whereby 
when HCFA asks a question like you just asked, it will say: is 
this the kind of question where we can ask the medical 
directors of the carriers' intermediaries to deal with this 
issue or is this something where we do need to go to the 
evidence and get an approach that looks at what the real 
evidence is?
    And when that's the case, HCFA has several options, one of 
which is to come to us and ask us to do an evaluation. 
Sometimes we do those internally within the agency but 
increasingly, we ask one of our evidence-based practice centers 
to take on that project, 12 centers around the country that 
have expertise in this area. They write a report that then 
would go back to us and we'd then go to HCFA after we're 
confident that the report is of the highest quality. That helps 
HCFA to make that decision.
    The coverage decision is HCFA's but what we are able to do 
is to provide an arms-length analysis of the science that 
underlies the question of whether a service should be covered 
or not; that is to say, whether its effectiveness is 
demonstrated or not.
    Mr. McCrery. Well, the reason I asked the question, in 
September, this last September, there was a payment policy 
change regarding EPOGEN that was issued by the agency and we're 
told by a specialist in that area that this decision could have 
a dramatic impact on some of their patients.
    When the staff--I'm told when our staff asked HCFA if the 
agency had consulted with leading nephrologists about this, 
they were told that HCFA did not and the rationale for not 
consulting with leading nephrologists was that, well, they're 
likely to give us a biased answer because of financial 
interests.
    Couldn't you have found some retired nephrologists? 
[Laughter.]
    Or an academic, someone that didn't have a financial 
interest that could give you a specialist's view of this 
change?
    Dr. Kang. Well, I think that we actually consulted the 
available literature. The dilemma here with regard to EPO is 
there is scarce literature on this issue and then we have to 
make a decision. We need to make a decision, whether we 
actually refer this for some sort of practice or evidence-based 
practice center evaluation. The dilemma here is there really is 
little literature. Then, we have to make some sort of coverage 
decision based really on whatever efficacy information that we 
might have and also, though, there are cost implications. So, 
it's a balancing act here. The dilemma with EPO is there's very 
little information really available on either side.
    Mr. McCrery. Well, but, I mean, that just underscores the 
need to consult, at least to me it should underscore the need 
to consult, some leading nephrologists and we're told that you 
did not do that, that the agency didn't do that. So, what's the 
rationale?
    Dr. Kang. I understand that we're in the process of 
reevaluating our EPO policy so I'll have to get back to you----
    Mr. McCrery. We hope so.
    Dr. Kang [continuing]. On this issue for the record.
    Mr. McCrery. We keep asking this question and we don't get 
a good answer really. We're hopeful that HCFA will undertake an 
expeditious review of this policy and get back to us soon with 
some specifics rather than a general answer that you're looking 
into it because that's all we've gotten so far. Thank you.
    Chairman Thomas. Does the gentleman from Nevada wish to 
inquire?
    Mr. Ensign. Thank you, Mr. Chairman. I'd like to just 
briefly follow up on the EPOGEN situation and just give you an 
anecdote, and being a veterinarian, we're not supposed to just 
give anecdotes when we're in the medical field.
    But, my Aunt is in end-stage renal failure, has been for 
some time, and as a personal story there, the EPOGEN policy for 
her was almost disastrous recently and it does not take into 
account--and we know in medicine, medicine is an art every bit 
as much as it is a science. And just like body temperature 
varies, hematocrit varies between people. What's normal and 
healthy for one person is not necessarily what another person 
needs. Your policy does not take that into account and I would 
urge you, as a personal request for people like my Aunt and the 
many people out there, that your policy may work for 80 percent 
of the people but for the 20 percent that it doesn't work it 
can have disastrous consequences.
    And it has to cost a lot more money to get somebody back to 
bring regulated and get them up to feeling well because they 
can end up in the hospital and all kinds of things if they end 
up, you know, becoming sick because their hematocrit levels are 
not high enough. So, I would definitely add my voice to the 
other people on the committee who I would like to see HCFA do 
this as expeditiously as possible.
    Do you have a date when you think that you will--at all, 
that HCFA will be finalizing their change in policy?
    Dr. Kang. I'm sorry. I'm not close to this particular issue 
so I would have to get back to you for the record.
    Mr. Ensign. Okay. I would appreciate that.
    Dr. Kang. I do have a general comment, though, which is 
that having worked for other plans, the way other plans will 
deal with this issue is that they'll have a general policy that 
works for 80 or 90 percent of the population. But, to actually 
waive that policy for the 1 or 10 percent individuals who are 
special cases causes a dilemma for us as an agency. To 
administer an exceptions policy has tremendous administrative 
costs and, quite frankly, we're not funded to do that.
    Mr. Ensign. And yet----
    Dr. Kang. That's a major dilemma for us.
    Mr. Ensign. The other exception--I visited one of these 
clinics in Las Vegas and Las Vegas has a lot of people that 
travel and they're not quite there to authorize their next 
EPOGEN shot but they need it and that's another thing I'd like 
you to look into, is that you don't want to restrict people 
that would like to enjoy that quality of life, to be able to 
travel like other people. So, that is another consideration I'd 
like you to look into.
    Dr. Eisenberg, I'd like to ask you a question on measuring 
quality. Once again, kind of anecdotally, this seems to be one 
of the most difficult things to measure because some of the 
things along the line that Nancy Johnson was talking about--
once again, this gets back somewhat to the art of science, the 
art and science of medicine and what a doctor's particular 
experience may be in a particular area may be different than 
somebody else's.
    A very good example is my son has gastric reflux. We're 
working with a gastroenterologist, we're working with a 
surgeon. This surgeon has done, probably as much work as 
anybody in the world on this particular disease process in kids 
and his recommendation right now is to do surgery. Her 
recommendation--and they have different standards by which they 
measure these recommendation--her recommendation is to go the 
conservative approach.
    And, to measure which one of those is the quality is very, 
very difficult and, it's real judgement call. There are pluses 
and minuses whichever way you go and whichever route you turn 
out, if it turns out wrong, then that's going to be negative 
against that judgement.
    But also, along similar lines to that, if you have--for 
instance, caesarian rates. You measure caesarian rates across 
the country and they vary somewhat, depending upon the plan, 
and things like that. My wife and I just went through the 
Bradley method of natural childbirth.
    Now, under the Bradley method, they have about a 4 percent 
caesarian rate, okay, even with past caesarian operations. But, 
that's a minor technique used across the country; very few 
people use that on a comparison number, although there are 
significant enough numbers nationwide. But, that's not going to 
be a particular procedure that you all are mostly going to be 
measuring. You see what I'm saying?
    Dr. Eisenberg. Yes.
    Mr. Ensign. In other words, depending on who's giving you 
the measurements will depend on, are going to depend on whether 
or not something affects their measure of quality.
    Dr. Eisenberg. You hit one of the toughest nails on the 
head which is that when we make choices about our health care, 
they're individual choices. In making a decision about how to 
treat reflux, making a decision between medical and surgical 
therapy, you don't have a simple yes/no question. It's a 
question that weighs the advantages and disadvantages, the 
risks and potential outcomes of each.
    Our belief, and I haven't seen Dr. Mulley's testimony but I 
bet he'll talk about this, is that if we can get information to 
patients about what the expected outcomes are of the 
alternatives facing them, they can make a choice which best 
meets their individual needs. Some people will say, I'll take 
the chance of surgery, and some will say, I just don't want to 
take that chance. We can let them make those individual 
decisions. But without the data about what the expected 
outcomes will be, we can't give them that choice. That's the 
first level.
    Now the second is the level of trying to improve quality. 
We talk a lot about quality, like it's a scorecard, and we're 
trying to develop scorecards of quality. But it's not just a 
scorecard for others to look at and grade us. It's a way of our 
grading ourselves. You know, when I and you used to get report 
cards in school, it was okay because your parents knew how you 
were doing, but it was most important because you knew how you 
were doing, and you knew the areas in which you had to work the 
hardest to improve.
    So what I hope we can do is to recognize this individualism 
in health care and give the community, the medical community, 
the hospitals, the information so that they can improve 
themselves. And as this data gets better and more solid, we can 
also use it for people to make choice. But your point is well 
taken--it's at all of those levels of decisionmaking that we 
need to have the data for people, and we can't lock ourselves 
into one single way of getting to the outcome.
    Mr. Ensign. The only caution I would make is when we're 
providing these various statistics, and you get the oncologist 
that will take on the absolute worst cases, and so his 
mortality rate is going to be much higher than somebody else's 
that won't take----
    Dr. Eisenberg. Right.
    Mr. Ensign [continuing]. On those real bad cases. It may be 
a disincentive for that oncologist then to take on the bad 
cases or any oncologist to want to take on the bad cases in the 
future. We have to be careful when we're reporting these things 
because the press, you can't expect them to be physicians or 
scientists; they aren't. So when they can take something and 
make a particular group or a hospital or a particular part of 
the country look very, very bad, and what they're not doing, 
not based on good evidence, but based on the way that they read 
it in an unscientific way.
    Dr. Eisenberg. Absolutely. In fact, the old HCFA mortality 
data is a good example of that, I think. I think HCFA, quite 
rightly, stopped presenting that data because it was so 
misunderstood by people who were making the comparisons in the 
way that you are describing them--mistakenly.
    But as a chief of a service at a hospital, it was immensely 
useful to me to see how we compared to our peers, and I could 
then look at that information and say, is there an opportunity 
for improvement here? There was somewhere it was easily 
explained because we had the toughest cases; there were others 
where there were really some things we could have done that 
were better. So I think what we're saying together is that this 
data is important, but it's got to be used appropriately, when 
it is used.
    Mr. Ensign. Thank you.
    Chairman Thomas. I thank the gentleman.
    Before I call on Members of Congress who aren't on the 
subcommittee, Dr. Kang, in your response to the EPOGEN 
question, you indicated that you were somewhat removed from it. 
So I want to ask you a question I assume that you are not 
removed from, although I'm interested to hear.
    When Nancy Anne-Min DeParle talked to us on her first 
occasion as the Administrator, I had referenced a GAO discovery 
that the Technology Advisory Committee had violated five major 
provisions of the Federal Advisory Committee Act, and she had 
indicated that she understood that, and was canceling the next 
scheduled meeting, which I believe was supposed to be sometime 
this month.
    IPOGEN is one particular of the high-tech aspect. A lot of 
it are devices that are coming in. This committee, Technology 
Advisory Committee, obviously, makes assessments to provide 
opportunities for the latest technology to be part of 
Medicare's basket of services. What are you doing to make sure 
that you can continue to make evaluations, notwithstanding the 
fact that you were in violation of the Federal law previous? 
You're a member of that committee, aren't you?
    Dr. Kang. Yes. No, I am.
    Chairman Thomas. Has it met?
    Dr. Kang. It has not met since that----
    Chairman Thomas. Does it have a scheduled meeting?
    Dr. Kang. It does not. What we're trying to do is figure 
out a different process for obtaining the expert opinion that 
we actually need to make our coverage decisions.
    Chairman Thomas. Well, aren't we concerned about any 
extensive time of not meeting that we can't advance new medical 
technologies which, in fact, would be part of the quality 
issue?
    Dr. Kang. I am concerned about this, and we're trying to 
figure out another vehicle for us to get expert----
    Chairman Thomas. Do you have any timetable for figuring out 
the other vehicle?
    Dr. Kang. I will have to get back to you on that.
    Chairman Thomas. Yes. I am concerned about it. I just want 
to know that you're resolving it. It doesn't have to be in 
any--I'd be concerned if it was six months from now, but I am 
concerned about getting up and running on this important 
aspect. I'm sorry they were in violation of the law. I 
appreciate Ms. DeParle's voluntary cancellation of the 
continued process, which was in violation of the law, but we've 
got to figure out how to get within the law, so we can continue 
to do what you and I both think is an important part of 
evaluation.
    The gentleman from Washington I believe wishes to inquire. 
Mr. McDermott?
    Mr. McDermott. Thank you, Mr. Chairman. The chairman and I 
had a discussion walking across the street about the whole 
question of privacy versus data. I know you're both aware of 
the Stanford-Harvard study of the misuses of medical data that 
have been accumulated. There are now in the Congress probably 
six or eight different approaches to this whole question of 
privacy--I think driven at least in part by the Human Genome 
Project, which is just about to come to completion. It's going 
to give us enormous data beyond what we already have. The 
proposal that makes the most sense to me--obviously, one that I 
dropped in--is one in which it would require a patient to sign 
off that the data was going to ``X'' place, and if any other 
use of that was going to be made, they would have to come to 
the patient, explain, and make a second signoff for shifting 
the data, except for research in which, if it was going to be a 
part of a statistical basis, not personally identified, it 
could be sent on without a personal signature.
    Now I would imagine that a patient in Medicare would send 
in their documents to Dr. Kang for payment. You would have the 
data, and that you could send it to Dr. Eisenberg for 
statistical analysis with no problem under that procedure. I 
can't see why that procedure isn't the best one for us to adopt 
in the Federal Government in terms of protecting the privacy of 
that information. If HCFA were to release it to the HIAA, then 
that would be a violation of the law unless the patient were 
notified of that. And I can't see--I would like to hear a 
dialog from you about why that is not an effective and simple 
mechanism to deal with it now, because we all come from the 
same basis, believing that we need data. I believe we need 
data. We can't run this thing without data. So we're on that. 
Now let's figure out how to protect the patient.
    Dr. Eisenberg. Let me add one item before I start, which is 
to say, no matter which solution we conclude is the right 
approach for making information available for research, I'd 
like to add quality improvement and quality assurance 
activities to that list, because if we're going to have 
oversight groups that look at doctors' quality, hospitals' 
quality, plans' quality, we need the data, and that may be 
individualized data, in order to do that. Because it's not 
literally research, it might get lost. It might fall through 
the cracks.
    So, first, I hope that we can include quality improvement/
quality assurance activities. Secondly, one of the difficulties 
that we face in the research community is the need to link data 
across different databases. To do that, we need to have some 
identifier. It doesn't have to be the patient's name. It could 
be an encoded and encrypted identifier, but we do need to have 
an identifier to link data across different datasets, maybe an 
interview that----
    Mr. McDermott. Something other than the social security 
number, for instance?
    Dr. Eisenberg. Well, the social security number is one 
simple proposal. There are problems with that. We are, as is 
the Congress, working on what the right identifier ought to be, 
but it would be an identifier. We need to be sure that it's 
adequately encrypted or somehow adequately protected and that 
there are firewalls available, so that those people who get 
these data can't identify the individual.
    Some have pointed out to us, though, that even with a few 
pieces of information about an individual, especially for 
unusual people, you could figure out who that person is, even 
if it's encrypted. So there are technical challenges to this, 
and I hope that, no matter what we do in solving the 
confidentiality problem, that we maintain the ability to link 
different databases, so that we don't throw out some identifier 
of people in order to make that linkage.
    And then the final comment I would make is that I think 
that we need to do a better job of helping institutional review 
boards who have the responsibility for overseeing the ethics of 
research, understand better how they can assure that the 
investigators in these research projects to which you refer 
have adequate controls for confidentiality. I think if we can 
develop standards for them and we can help them, then we 
probably could allow more data to be available to 
investigators, but still to have appropriate safeguards for 
that kind of data.
    Mr. McDermott. Do you foresee a problem with saying to a 
patient who's submitting their data to Dr. Kang for payment, in 
your submitting information, you signed that this will be 
available for encryption for research in the agency that you 
head?
    Dr. Eisenberg. I see two problems with it. One is that we 
may want to undertake studies that are retrospective, whereby 
the waiver that the patient signed would not cover the kind of 
research that we might want to do 5 or 10 years later on old 
data. We ought to at least leave room for new kinds of 
questions and new kinds of research to be done.
    My biggest concern is the second, though. I don't think 
that most patients, especially in the heat of arriving in a 
hospital emergency room, pay much attention to those waivers, 
frankly, and I'm not sure that's the right time to ask a person 
whether they want to waive their privacy rights.
    We had a staff person in our agency who told me the story 
about going to an emergency room in a hospital out of town, and 
after she signed the form, she went back to see what she had 
signed, because she just didn't even know what she had signed.
    If we are going to have these waivers signed, we have to be 
absolutely sure they're being signed with full knowledge of 
what people are signing, and I'm concerned that in most 
instances it's not the right time in a person's life to be 
asking them to waive that information, especially when they 
fear that they might not have access to care if they don't sign 
the waiver.
    Dr. Kang. Actually, with regard to our claims data, that's 
basically what's happening right now. We get the claims data 
in. If someone like John Eisenberg wants to use it, we strip it 
of all the patient identifier information, and then he can use 
it. The dilemma is he can't link data with other sets. That's 
one issue.
    There is one other issue, that is the medical record 
itself--we do not have this in claims data. The medical record 
itself is a rich source of clinical data for outcomes and 
performance measure, quality assurance, quality improvement, 
all this stuff. Your proposal speaks to the issues that we have 
the data in-house to do claims, but what about the 
confidentiality or privacy issues around the medical records, 
which prevents people from access to that needed data? So there 
is that issue also.
    Mr. McDermott. It seems to me that in the bills we passed a 
year or so ago, we required every physician to report what's in 
the chart, including what was called ``encounter'' data, which 
to me is a major source of information, but also a major source 
of potential abuse. If you were to tell your physician that you 
thought you were having a problem with X, Y, or Z, if somebody 
can retrieve that data and use it, as the Stanford-Harvard 
study suggests, to deny loans or employment or all the other 
reasons or the other ways it's been used, it seems to me that 
there has to be a way to gather that chart data, but still 
protect it.
    Dr. Eisenberg. Well, one mechanism is to be sure that those 
who have access to the chart understand the restrictions, that 
there are penalties for those who misuse the information, and 
that the protocol that's used has been approved by an oversight 
group. I recall having sent medical students to the record room 
to do research for me, to go through charts, and in retrospect, 
I wonder if I had instructed them adequately on their 
responsibilities about the privacy of that information. And I'm 
sure as a psychiatrist that there were times when you didn't 
write things on the chart that you might have otherwise 
written, and you had to write some kind of code, so that you 
knew what it was, but nobody else might. I think the problem 
that you're describing is a critical one.
    But we do need a mechanism in place where we have adequate 
oversight and protections, but where we don't throw away the 
key to the data that's going to be so helpful for understanding 
health care.
    Mr. McDermott. Do you think the mechanisms that were in 
place in Maryland, where the employees of their Medicaid system 
were selling cases to HMOs, so that they could do selection of 
which patients they wanted to approach--do you think those 
mechanisms are sufficient?
    Dr. Eisenberg. Not knowing the specific details, let me 
respond in a general way. I think we need to have restrictions 
and firewalls, protections, in place, but there will always be 
people who undertake criminal activity. My feeling about this 
is that we ought to be sure that if people violate the 
standards that the Congress establishes, that there are 
penalties in place for those people.
    Mr. McDermott. Thank you, Mr. Chairman.
    Chairman Thomas. I thank the gentleman.
    Any additional inquiries?
    [No response.]
    Then I'll just ask one, Doctor, to try to sum up the 
concerns that we have in the directions that we're going, 
because we all want a measure of quality. But just as the 
gentleman from Nevada indicated, you can get into a definition, 
but there are other levels that you have to deal with.
    HCFA has worked with the National Academy of State Health 
Policy to develop what you call your QUISMC System, and you've 
got seven clinical focus areas that you're dealing with in 
beginning to examine managed. And I guess they're as good as 
any other seven you might be able to evaluate, but what I've 
looked at, and my immediate reaction to it was, that this could 
easily be applicable to the fee-for-service area, and that what 
my concern would be, if you created a kind of a cookie-cutter 
seven focus, have you taken into consideration severity of a 
problem area in terms of numbers that have occurred, degree?
    Clearly, you've got down, for example, mental health or 
substance abuse. That may or may not be an important area, and 
you may want to focus more on an area--you know, lousy jobs of 
fixing hips or something else that would be far more critical 
to the senior population. How are you dealing with weighting 
these kinds of inquiries on quality? So that we're getting 
answers that are useful for more people and not just we've now 
done a quality check and we can put seven checks in seven 
boxes. By the way, how many boxes could you currently check off 
in managed care if this system were in effect?
    Dr. Kang. There are actually plans that could satisfy this 
requirement for the prevention measures, the acute ambulatory, 
and the chronic measures here. Let me----
    Chairman Thomas. There are seven. Could any of them comply 
with all seven?
    Dr. Kang. At this point, no, that's the reason for the 
phase-in. There is a phase-in such that the requirement for 
seven doesn't go into effect until six years out. So there is a 
very gradual phase-in to this.
    I do want to speak to this. Actually what I think is that 
there is a very important issue. What we had to do is balance 
what I would call the distribution requirements for performance 
improvement projects versus trying not to be specific. Health 
care is local in nature, and these performance or quality 
improvement projects need to be local, based on the local 
conditions, who are the stakeholders, who are the interested 
parties, et cetera. So we came up with this notion of here's a 
general distribution, but then within these categories you have 
great latitude to pick the project that you're interested in. 
So in the chronic condition one, giving you an example, you 
could pick hip fractures for the Medicare population. I do 
think that in the Medicare population that the prevalence of 
mental health and substance abuse is quite high. So from a 
distribution requirement standpoint, you'd probably want to 
have something in that area. That's how we came to this.
    I do think, though, that this is part of--this has been the 
source of great public comment, and with regard to distribution 
requirements, we are open to getting into dialog to see----
    Chairman Thomas. And what are you doing in the fee-for-
service area, since I guess six years out, when this thing is 
supposed to be implemented, the fee-for-service will have 
shrunk from 85 percent down to about 80 percent of the 
beneficiaries? Are we doing anything in the fee-for-service 
area such as this?
    Dr. Kang. Yes. Again, actually, these QUISMC requirements--
we're calling them QUAPI--this particular domain, quality 
assurance performance improvement, is being built into our 
conditions of participation for hospitals, nursing homes, home 
health agencies, et cetera.
    Chairman Thomas. Okay. I guess you're getting my drift, and 
that is I'm concerned about quality across the board, not just 
in those areas that are politically-hot right now, because 
those winds blow warm and blow cold, and quality ought to be of 
concern in any aspect of medical delivery services.
    I thank both of you very much.
    Dr. Eisenberg. Thank you.
    Chairman Thomas. You've been a great help.
    I would ask the next panelists to come forward, and thank 
you for your patience. The next panel consists of Dr. Mark 
Chassin, who's chairman of the Department of Health Policy, Mt. 
Sinai School of Medicine, New York, New York, and probably more 
important, he's co-chair, Institutes of Medicine's National 
Roundtable on Health Care Quality; and Dr. Albert Mulley, who's 
an associate professor of medicine and health policy at the 
Harvard Medical School.
    Thank you both for accepting our invitation. Any written 
material you may have will be made a part of the record, and 
you can address us in any way you see fit in the time provided 
to you.
    Dr. Chassin?
    You've done this before. Thank you for the summary. I read 
all this stuff, but it's nice to have it right out in front. I 
appreciate it.

  STATEMENT OF MARK R. CHASSIN, M.D., CHAIRMAN, DEPARTMENT OF 
HEALTH POLICY, MT. SINAI SCHOOL OF MEDICINE, NEW YORK, NY, AND 
CO-CHAIR, INSTITUTE OF MEDICINE'S NATIONAL ROUNDTABLE ON HEALTH 
                          CARE QUALITY

    Dr. Chassin. You're very welcome.
    Mr. Chairman, Members of the Subcommittee, thank you very 
much for inviting me to talk with you this morning about health 
care quality. I'd like to make four points. The first is that 
quality of care can be precisely defined and accurately 
measured.
    The second is that research using well-defined and 
documented measures has shown serious and extensive quality 
problems in American medicine.
    Third, though some quality improvement programs have 
succeeded in substantially improving health outcomes for 
patients, these efforts generally are sporadic and limited in 
scope. Much broader efforts are needed if we are to realize the 
full potential value in improved health of the trillion dollars 
we spend every year on health care.
    And, fourth, the recent flurry of legislation and 
regulation aimed at managed care is important to establish due 
process and other procedural rights for managed care enrollees, 
but it will not materially improve health care quality. Quality 
is the problem, not managed care.
    As the chairman mentioned, I co-chair with Bob Galvin of 
Motorola the Institute of Medicine's National Roundtable on 
Health Care Quality, which has deliberated for about two years. 
The Roundtable and the IOM are presently considering statements 
about health care quality. Those are in process. So my remarks 
this morning are not to be construed as conclusions of the 
Roundtable or the Institute of Medicine; rather, they come from 
my experience of about 20 years working in the field of health 
care quality in various forms.
    Start with the definition of quality, and I think it's 
useful to articulate a specific definition. The best one I know 
of was created by the Institute of Medicine in 1990, and it 
defines quality as, ``the degree to which health care services 
for individuals and populations increase the likelihood of 
desired health outcomes and are consistent with current 
professional knowledge.'' It's a definition I believe 
consumers, providers, and health plans can agree on and use 
productively.
    The research on quality the last 20 years is clear and 
compelling. We have, as I said, serious and extensive problems 
in quality in American medicine. These problems come in three 
varieties: overuse, underuse, and misuse. Many studies have 
documented substantial amounts of overuse of health services. I 
believe a conservative reading of that literature supports the 
conclusion that 20 percent of what we do constitutes overuse; 
that is, it could be eliminated safely because patients would 
be spared the unnecessary risk of those procedures and those 
services; quality would improve.
    One recent study, for example, showed that in 1992 12.6 
million Americans received antibiotic prescriptions for colds 
and other upper respiratory infections caused by viruses in 
which antibiotics are entirely useless. This represented 21 
percent of all adult ambulatory antibiotic use in that year. 
Overuse of antibiotics is the major preventable cause of the 
very serious problem we face now with bacteria growing 
increasingly resistant to current treatment and causing life-
threatening illness.
    Underuse, too, is very common. Research has documented 
underuse of virtually every effective health care service 
that's been studied. These include immunizations, inhaled 
steroids for patients with asthma, treatment for early-stage 
breast cancer, the identification and treatment of patients 
with depression or high blood pressure, on and on.
    Large numbers of patients in many of these studies, as many 
as 50 percent--5-0 percent--failed to receive these effective 
interventions. Research has documented that underuse about 
equally prevalent in managed care and fee-for-service systems.
    Let me just give you one example of the magnitude of these 
failures. A variety of treatments for heart attacks, when used 
appropriately, saves about 80 lives for every 1,000 patients 
treated. While as many as 60 percent of heart attack victims 
may be eligible for these treatments, the research shows that 
we currently reach only about half. Since more than 750,000 
Americans suffer heart attacks every year, when you do the 
math, it works out to about 18,000 preventable deaths every 
year, just because we don't do what we know already works. Put 
another way, that death toll is the equivalent of one TWA 
Flight 800 plane crash every five days, and that's the quality 
failure for just one disease.
    Misuse problems, unfortunately, are also very common. They 
occur most commonly in the form of preventable injuries from 
the use of medications or from the use of medical and surgical 
procedures. Patient injuries from medications, for example, 
alone occur at a rate of about 2,000 per year at the average 
large hospital. Over 500 of those are entirely preventable with 
current knowledge, and each one adds about $5,000 to the cost 
of hospital care.
    These problems clearly need to be addressed by a wide 
variety of methods directed at their root causes, including 
improving patient and physician knowledge, creating support 
systems that remind physicians and other caregivers about when 
and exactly how to administer effective treatments, and 
engaging clinicians in ongoing efforts to measure and improve 
the quality of care that they render.
    Improvement efforts are being made today, and I don't want 
to minimize them, and some are, indeed, producing impressive 
results, but, over all, particularly when stacked up against 
the magnitude of the problems, their impact is small.
    Current legislation and regulation aimed at managed care 
will not fix these quality problems. Now let me be clear. I do 
believe it's important to establish these procedural rights and 
other benefits for managed care enrollees, but there is no 
evidence that those kinds of rules will affect the kinds of 
quality problems that I've just described. Improving quality 
requires a far more concerted and widespread effort than we're 
currently making. Government can play a vital role, for 
example, by investing in the development of specific quality 
measurement approaches and by disseminating, evaluation and 
dissemination, effective improvement methods, as the Agency for 
Health Care Policy and Research has been doing. Government can, 
and I think should, promote the collection of standardized data 
on quality to stimulate improvement by showing providers where 
they stand compared with their peers, a comparison that is 
extremely difficult for individual providers to obtain on their 
own.
    Creative regulation could improve health outcomes by 
facilitating regionalization, particularly of services where we 
know that high volume is associated with much better outcomes. 
We've known that for quite some time, but we still permit very 
low-volume facilities to do these procedures.
    However, Government should be one part of a much more 
multifaceted approach that includes components of competition, 
voluntary and professionally-led quality improvement, and 
payment incentives. At its best, health care in the United 
States is the finest in the world. Unfortunately, it is very 
often not at its best, and Americans bear a great burden 
because of these failures, a burden that's measured in lives 
lost, reduced functioning, and wasted resources. Addressing 
these problems vigorously should be among our very highest 
priorities.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]
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    Chairman Thomas. Thank you very much, Doctor.
    Mr. Mulley.

STATEMENT OF ALBERT MULLEY, ASSOCIATE PROFESSOR OF MEDICINE AND 
           HEALTH POLICY, THE HARVARD MEDICAL SCHOOL

    Dr. Mulley. I, too, want to thank you, Mr. Chairman and 
committee members, for having me here today. Let me begin by 
introducing myself. I am a practicing physician and chief of 
the General Medicine Division at Massachusetts General 
Hospital, as well as associate professor at Harvard, as you 
mentioned. I'm also co-founder, with Dr. Jack Wennberg of 
Dartmouth Medical School, of the Foundation for Informed 
Medical Decisionmaking, which was established in 1989, 
expressly----
    Chairman Thomas. Doctor, excuse me. You're really going to 
have to talk directly in the microphone.
    Dr. Mulley. Okay, thank you.
    Chairman Thomas. It's very hard to pick it up. Thank you.
    Dr. Mulley. The Foundation was formed expressly to promote 
research and to develop educational interventions, with the 
goal of improving the quality of medical decisionmaking.
    I believe that there are some reasons to feel good about 
American health care quality, but, as we've heard, there are 
also compelling reasons to be concerned. I'd like to make a 
distinction between two forms of variation that raise many of 
the questions that we've been addressing so far today.
    First, there is variation when the same interventions are 
used by different providers and produce very different 
outcomes. For instance, four-to five-fold variation in rates of 
mortality after prostate surgery or as much as ten-fold 
variation in rates of mortality after cardiac surgery to treat 
coronary artery disease. These kinds of outcome variations 
raise serious questions about the processes of care and suggest 
that there's variation in these processes, often unrecognized, 
that leads to inadequate quality, or misuse, to use Dr. 
Chassin's term.
    But even more striking than these differences in outcomes 
when the same intervention is used by different providers, are 
differences in the rates at which interventions are used in 
seemingly similar populations. This form of variation raises 
questions about decision quality, and that's what I want to 
focus on this afternoon.
    Why is it that a man in Washington State is six times more 
likely to have radical surgery for prostate cancer than a man 
living in Connecticut? Why is it that a resident of New Haven 
is twice as likely to have coronary artery bypass surgery than 
a resident of Boston, and that a resident of Boston is twice as 
likely to have carotid endarterectomy? Why is it that a woman 
living in Pittsburgh is 15 times more likely to have breast-
conserving surgery if she has breast cancer than a woman living 
in Ogden, Utah?
    There are many explanations for practice variation. Dr. 
Eisenberg has focused on professional uncertainty, but there 
are also enormous geographic variations in capacity to deliver 
certain services. There are variations in the ways physicians 
interpret the same evidence. And different professionals bring 
different preferences and attitudes to patients' decisions. And 
sometimes the professionals' preferences and attitudes seem to 
overrule or override the preferences of a particular patient.
    The result from the perspective of policymakers and payers 
is concern about underutilization and overutilization of 
services, as we've just heard, but the result from the 
perspective of patients is that the care received may depend 
more on where you live and who you see than who you are and 
what you care about.
    The implication for the profession is that we need to pay 
far more attention not only to doing something right, but to 
doing the right thing, and I would term that ``decision 
quality.''
    Consider what that means for a man with benign prostatic 
hyperplasia, something that all of us men will experience if we 
live long enough. Whether or not he has surgery should depend 
on how bothered he is by his symptoms of urinary dysfunction, 
but it also should depend on how bothered he is by the prospect 
of compromised sexual function, which may follow surgery.
    Practice variation tells us that these personal 
preferences, more often than not, are overruled by professional 
conventional wisdom that may vary from place to place, but does 
not vary sufficiently from patient to patient. Now, we've tried 
to respond to this by developing guidelines, and improvement in 
decision quality does require reduction in the variation in 
professionals' access to, interpretation, and application of 
clinically-relevant scientific information. Guidelines have 
been developed that can accomplish this. But decision quality 
also requires that the variation among patients with regard to 
preferences and attitudes be recognized and honored in the 
decision process. Guidelines can rarely accomplish this.
    More often, they rely on assumptions about average 
preferences and average values. If these guidelines are 
followed, interventions will be given to people who, if 
informed, would not choose them, while they are withheld from 
patients who would choose them. This is bad medicine and it's 
bad economics.
    Approaches to decision support can make a difference. Some 
approaches have been developed and have been subjected to 
extensive evaluation, including randomized trials. The results 
are noteworthy. Patient satisfaction with care and 
decisionmaking is generally increased. Confidence in treatment 
choice is generally increased, and patients' participation in 
prospective outcome studies has been facilitated, thereby 
producing new knowledge to better support decision quality.
    Also importantly, utilization rates of some costly 
interventions have fallen. Most noteworthy is evidence that 
programs to support decisionmaking shared by doctors and 
patients together produce very strong associations between what 
patients care about and the treatments they get. For example, 
with shared decisionmaking, men who are very bothered by 
symptoms that can be relieved by surgery are seven times more 
likely to have surgery. Men who are very bothered by the 
prospect of having their sexual function compromised are one-
fifth as likely to have surgery.
    These kinds of measures applied broadly could assure that 
health plans and providers deliver care that is consistent with 
the wants and needs of the patients who live with consequences. 
Given that we live in a time of constrained resources, the 
potential impact of this approach on utilization and the cost 
of care deserves some emphasis.
    When shared decisionmaking was used among men in staff 
model HMOs who were being operated upon at a rate that was 40 
percent below the national average, the rate fell 40 percent. 
If this rate of surgery existed in the 306 hospital referral 
areas in the country, there would have been 160,000 fewer 
operative procedures done in the Medicare population. 
Similarly, if we look at coronary artery bypass surgery in New 
York, we see that it's done about twice as often per capita in 
New York as it's done in Ontario. If we look at clinical 
characteristics and look at people based on their coronary 
anatomy, those who are least likely to benefit because of the 
location and extent of their blockages, and are most likely to 
be harmed because of their age and the concomitant risk of 
stroke, are 17 times more likely to have surgery in New York 
than in Ontario. When this approach to decision support was 
used in a randomized trial in Toronto, despite the much lower 
baseline rates, the rate of surgery fell 22 percent.
    The relative inattention to decision quality and health 
care is a serious problem with enormous consequences in the 
trillion dollar health care economy. The dual challenge is to 
raise the level of awareness about the problem among all 
stakeholders, especially patients, while developing tools to 
measure and improve decision quality.
    The common thread that runs through the problems and 
challenges that I've talked about is the need for unbiased, 
objective, and balanced information. This information and its 
flow to patients and doctors, when they need it to improve the 
quality of decisions, are enormously important public goods.
    Thank you.
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    Chairman Thomas. We thank both of you very much.
    As you know, we're engaging in what some folks in Congress 
believe is a major debate over quality. I'm just looking at the 
press table and all of the empty seats over there, so perhaps 
it may not be as burning an issue as some folks thought. Or I 
guess the way in which we approach trying to deal with 
legislative remedies is not nearly as exciting as some other 
folk who aren't trying to get to the bottom of it and solve it 
in a way that I think is the only way to deal with these 
issues. I don't know which, but they're not here.
    Interestingly enough, both of your testimony is just about 
180 degrees off of what I hear on the floor or in the cloakroom 
or see as what the argument is when I read the legislation that 
we're supposed to be looking at, because you've clearly 
indicated--I mean, choice is a term that everybody is using 
now. Quality--if you have choice, you have quality, and what 
you've said is that more isn't necessarily better. In fact, it 
can clearly be harmful.
    But my problem is I've still got to deal with what some 
folks believe is an issue, and that perhaps we can get outfront 
in doing it right. Dr. Mulley, your decision quality statements 
could be fairly defeatist if what I took away from what you 
said was, gee, we need a clean sheet of paper; we need 
different folks going through medical school; we need different 
patients coming to those doctors. I mean, it's pretty 
fundamental that a lot of these problems apparently are 
political, cultural, or geographic, and that's darn tough to 
get to from a legislative point of view.
    So I want to try to see if you can give us some pointers 
here that we can take away and apply directly to what we're 
going to have to be doing over the next several months. You 
heard the earlier questions and testimony from people who are 
more in the public sector. If you gave us the three most 
important things that we needed to do to provide quality--I 
mean, I'm kind of focused on the collection and dissemination 
of data, so that we've got the outcomes, so that we can talk 
about guidelines and maybe we would also need to deal with 
enforcement, but that gets into some sensitive areas.
    You've seen also a great concern, and I think rightly so, 
about patient records in terms of how they're used and what 
they're used for, beyond the patient's approval, but if you 
have a patient approval, you'll never be able to get to the 
collection and dissemination of data.
    So if I'm a legislator who's got to put a bill together 
that would disregard all of the arguments that are being made 
by folks as to what quality is because most of them are Trojan 
horses protecting particular interests, and they are getting to 
the fundamental question of improving quality. What would you 
like to see us do within the realm of what we're able to do 
from a legislative point of view? And if you've got more than 
three, I'll take them, but I didn't want to create too long a 
list for you.
    I am very concerned about the movement in States' denying 
the access to data. I'm very concerned about creating a system 
which, in fact, allows businesses in Maryland to mail to you 
based upon what folks thought were confidential medical lists. 
Is the collection of data critical? How can we get to it? What 
other things can be doing, if that's not the most important 
thing? Give me one, two, three, four, or what do you think--
from a legislative point of view, not from your point of view, 
because we've got to legislate?
    Dr. Mulley. Well, let me begin by saying that I think that 
the kind of research necessary to collect data, both on quality 
and on outcomes and effectiveness, is critically important, and 
let me just say that I think supporting the kind of research 
that has led us to where we are in being able to measure 
quality research done by AHCPR, and research of the same kind 
done by NIH, is critically important.
    But for the hearing now----
    Chairman Thomas. Could you submit--you don't have to do it 
now--some example, a list of the kind of research that is most 
useful in moving forward in that kind of approach?
    Dr. Mulley. Yes. It's included in my written testimony.
    Chairman Thomas. It's in your presentation?
    Dr. Mulley. Yes.
    Chairman Thomas. Okay.
    Dr. Mulley. What I focused on in my written presentation is 
the kind of research that brings patients more into the quality 
equation, because I really do believe that there is an enormous 
patient choice dividend in the health care economy that 
addresses many of the cost issues that we're all concerned 
about.
    Second, I would also say that there are opportunities to 
test this model of patient involvement in treatment choice. 
Certainly trying to develop some demonstration projects in the 
Medicare population, and seeing the extent to which attention 
to quality decisionmaking would have the same kinds of results 
it's had in these experiments that I've described to you--that 
is, increases in the quality of outcomes, increases in patient 
satisfaction, decreases in utilization. To be able to intervene 
on a broader scale and further test the hypothesis will be very 
important. And it would certainly be consistent with the 
current focus on patients' involvement in treatment choice.
    I want to make the distinction between choice of plans, 
choice of doctors, and the fateful choices that people make 
about the treatment they get, because they live with the 
consequences. With ischemic heart disease, we don't, that's 
right. With ischemic heart disease, we're talking about an 
enormous knowledge gap among patients because there's enormous 
knowledge gap among professionals, about the risk of cerebral 
vascular events when people have bypass surgery, because we did 
the randomized trials in people who are younger than 65 and 
people who are over 65, who now often get the surgery, are the 
ones who are at greatest risk for this complication.
    So I think that if we could find ways to create some 
demonstration projects where people in the Medicare population, 
in particular, are given balanced, objective information about 
the potential harms and benefits of procedures that are used 
800,000 times a year in this country, that we would really 
learn something important.
    Third, I want to pick up on something that Mr. Houghton 
mentioned, and that is the need for incentives that encourage 
decision quality. And by that, I mean decision quality with the 
information that we currently have available, but also 
incentives that reward providers who capture collective 
experience, so that we can improve future decisions. I could 
cite many examples; Dr. Chassin could cite many examples of 
databases that have provided more information to professionals 
in this country and around the world than all of the collected 
randomized trials in the area.
    In finding ways to award fee-for-service physicians in 
academic centers or in large settings to participate in those 
kinds of objective, balanced, prospective cohort studies, so 
that we're learning from collective experience, rather than not 
learning from it, is something that I would like to see in 
legislation.
    Those are three responses.
    Dr. Chassin. I think I have four maybe. I think certainly 
the protection of the ability to collect clinical information 
and use it properly and appropriately, with appropriate 
confidentiality safeguards, is of the highest priority, and I 
have followed this issue as it's developed over the last many 
months, and some of the solutions that have been proposed are 
extremely worrisome. I would certainly agree with Dr. Eisenberg 
that exceptions for properly-overseen research and quality 
assurance and quality improvement activities that have also 
been duly constituted should be in any consideration of 
legislative action there.
    I would distinguish between the kind of research support, 
which I think clearly needs to increase, of the kind that the 
agency has done and sponsored in the past with respect to 
finding out better what works and what doesn't work. We need an 
awful lot more of that. But the kind of research that I think 
we also need is how to do what we already know works when we 
ought to be doing it, and that has lagged even further behind 
the effectiveness and efficacy research that tells us more 
about what does work and what doesn't work.
    We've known that antibiotics don't help colds ever since 
there were antibiotics and we understood colds were viral 
infections, and yet, 50 percent of adult office visits for 
colds result in an antibiotic prescription, leading to the 
problem that I mentioned.
    We don't know how to solve that problem. We haven't figured 
out how to measure it very well and how to intervene to improve 
it, and yet we know from a couple of small examples in other 
countries where massive programs have been put in place that 
not only is that problem solved, but this problem with growing 
bacterial resistance is also greatly helped. So there are 
tremendous gains to be had here, if we were to focus research 
efforts on specific measurement and improvement attempts, and 
then even more important, disseminate those, make them easy for 
others to do.
    One of my jobs, in addition to my academic job, is to lead 
our hospital and health systems' quality improvement efforts 
that are clinically directed and focused on improving outcomes. 
Now when we try to figure out how to improve treatment for 
women with breast cancer or for patients with heart attacks, we 
almost have to start from scratch. We ought to have an easily-
available library of tools, of instruments, of methods, of 
materials that others have used, that are proven to be 
effective, that we can pull off the shelf and just use. That 
does not exist, and I think it would facilitate improvement 
enormously.
    Chairman Thomas. I know you haven't finished your list, but 
on that point, let me ask you a quasi-loaded question, because 
I don't know the answer to it, and it may not be appropriately 
phrased. But it gets back to this question of quality, because 
what you have talked to me a little bit about is, okay, 
obviously, I agree we've got to get informed patients; the 
first-dollar, third-party payment system created a bunch of 
ignorant consumers, and we've got to get the material to them 
and let them--but it just seems to me it starts also with those 
professionals who went through professional training, who 
perpetuate myths and failures to collect data that's most 
recent and most appropriate.
    Which system has the better chance of propagating the 
better materials, a managed care structure or a fee-for-service 
structure?
    Dr. Chassin. Well, I think looking at----
    Chairman Thomas. Or is that an unfair question because, as 
I said----
    Dr. Chassin. I think both have opportunities in slightly 
different ways. A managed care setting has, if it's tightly 
controlled--I mean, as Dr. Eisenberg said, there is no such 
thing as managed care anymore. There's so many different 
varieties, it's hard to know what one means by that.
    Chairman Thomas. I guess I don't mean it that way. Let me 
put it slightly differently, and that is, if we have all these 
problems in a system in which doctors were totally in control, 
I think the political and cultural tends to dominate almost as 
much as the scientific. To what extent have we broken down the 
great man concept, and is that a help or a hinderance in terms 
of trying to move forward?
    Dr. Chassin. Well, I think that a number of things have 
been changing at the same time over the last, say, 10 or 15 
years, including the tremendous and dramatically-accelerating 
weight of new information about what works and what doesn't 
work. It is simply not possible anymore for an individual 
physician practicing on his own or her own to keep in his or 
her head everything that they need to know to practice good 
medicine, but that was not true 20 or 25 years ago. It was 
possible. We haven't kept pace with that enormous explosion of 
information, with the systems to provide information that is 
necessary at the right time, and we haven't yet trained up our 
physician and other care-giving workforce to understand that 
working together in teams is going to be a much more effective 
way of making use of this information.
    Chairman Thomas. And I apologize for getting you off the 
track.
    Dr. Chassin. No.
    Chairman Thomas. You gave us our second one. I'm looking 
forward to your third and fourth.
    Dr. Chassin. So the second one I think is to recognize that 
there is an enormous public education effort that needs to go 
along with the professional education effort. I think one of 
the problems that we have faced in trying to combat--I go back 
to the antibiotic example, antibiotics for colds and other 
overuse problems--is a pervasive belief on the part of a lot of 
the consuming public that more is, in fact, better, and that's 
not, certainly not always true in health care. It may not be 
true most of the time.
    And I, going back to Mr. Houghton's comment of earlier, I 
think we do need a Baldrige Award in health care, and I 
understand that that is in process. I think that highlighting 
in that very public, very visible way voluntary, professionally 
driven efforts to improve could make a big difference.
    Chairman Thomas. Does the gentleman from California wish to 
inquire?
    Mr. Stark. Gentlemen, thank you for your work in this area.
    The only thing I've thought about as I've gone through your 
testimony Dr. Mulley, is a story I often use anecdotally. It is 
a managed care plan in Florida that was hustling male patients 
into castration rather than giving them a costly drug that is 
the alternative therapy castration. And I always say, I don't 
know what castration costs because every time I ask doctors, 
they all volunteer to do it for free. So, I get a biased 
opinion of what it would cost. But I suspect its lot less then 
the drug therapy. It saves a lot of money, $7,000 to $8,000 for 
every patient they can castrate rather than put on a regimen of 
drug at $300 a month. But it doesn't seem proper to me. I 
gather both are effective in stopping testosterone. So I don't 
know what you do about that. However, if that patient knew 
their options I think that that health plan might not have had 
such a high degree of members of their plan electing surgery.
    My question to both of you is that I have not seen in your 
testimony--and maybe I didn't read it as thoroughly as I should 
have here--any reference to free markets or competition. Now I 
know Jerry Austin in your institution took the same economics 
course I did when we were both students a thousand years ago. 
So he knows all about competition and free markets. I don't 
know whether every other member at Mass General hospital does, 
Why is that? How does competition help you? You guys didn't 
mention it but the AMA is going to talk about it. They say that 
their members should have the benefits of competition. I think 
that just means more money, which is usually all the AMA is 
interested in. But what does the free market do for us? What 
does competition do?
    The poster child of competitive models would be Columbia 
Hospital. They are the best at doing what they learned to do at 
the Harvard Business School and applying free market and 
competitive business practices to the delivery of medical care. 
How does that factor into your studies?
    Dr. Mulley. Well, I think that free market competition has 
provided very strong incentives for providers and provider 
organizations to compete on costs, but on also perceived 
quality. And the problem is that we haven't been able to 
measure more than perceived quality. To a great extent, health 
care organizations have competed on the basis of amenities. 
We've measured satisfaction with food or with quality of the 
rooms or the ambience of the facilities that people see rather 
than measuring the core issues that really are unique to health 
care. That's one area where I think we need to do a good deal 
more work, and some of that work is research and some of it is 
demonstration projects using what we already know.
    I think that the ability to compete on perceived quality 
without adequate measures is potentially dangerous for lots of 
reasons. Some of it was referred to earlier today--when the 
wrong incentives are put in place for providers to compete on 
the basis of scorecards, when outcomes are measured only for 
people who get a surgical intervention as opposed to all people 
with the condition. Obviously, there's an incentive to not take 
on the riskier patients. If the denominator includes all of the 
people with the condition, then you're able to monitor that 
kind of change in behavior and really provide more accurate 
measures of quality.
    With regard to the focus that I brought to the committee, 
decision quality, I think there are some enormous opportunities 
to create competition in the marketplace with individual 
providers and provider organizations demonstrating their 
ability to provide care that is most consistent with what 
patients care about. As I've said, the story about the care 
you're getting depending more on where you live and who you see 
than who you are and what you are about is compelling to 
individuals. And if one plan was able to show strong 
associations between what people said they cared about and the 
treatment they received, and another plan wasn't, the 
marketplace would reward the plan that tailored care to what 
people really cared about and what they defined as quality of 
life. And the kinds of measures that I cited earlier could do 
that and could allow plans to compete on that kind of attention 
to patient wants and needs.
    If we were to talk to Jerry Austen about this, Jerry might 
say, ``Well, what about decreasing the rate of bypass surgery 
as a result of providing this information to patients? I think 
the answer to that, for some who are into competing in the 
marketplace, is that the absolute number of operations that are 
done depends not just on the rate at which you do them; it 
depends on your denominator; it depends on your market share. I 
think there are lots of leverage points in the health care 
economy now whereby one can increase their market share by 
virtue of decreasing their rate, because of the overutilization 
and supplier-induced demand that drives decisionmaking.
    Mr. Stark. We have an example in The Washington Post today. 
George Washington wants to build a new hospital, 400 new beds. 
We've got more hospital beds around here than we know what to 
do with. But the key is--and one of the things they mentioned--
is that every room is going to be private with its own shower 
or bathtub. They don't talk about better equipment or better 
lighting in the surgical amphitheater or any of that. I'm not 
sure what that does for outcomes as opposed to sharing a room. 
It's nicer, I suppose, particularly if somebody snores like I 
do. Nonetheless, for us to be building these huge new hospitals 
when the use of hospitals is decreasing is exactly what Dr. 
Mulley is talking about, I think.
    Dr. Mulley. Yes, exactly.
    Mr. Stark. They're building bells and whistles and extra 
chrome grills when they should be looking to put in seatbelts 
and anti-lock brakes.
    Dr. Mulley. That's what I was referring to when I was 
talking about competition and amenities.
    Mr. Stark. Yes. That's a perfect example. Well, I don't 
want to belabor this, and my colleagues would like to inquire. 
Thank you both for your work in this area, and godspeed. Do it 
faster, wouldn't you? We need it.
    Chairman Thomas. Does the gentleman from New York wish to 
inquire?
    Mr. Houghton. Mr. Stark, I'm sitting next to a very 
distinguished physician here, and he has told me that an 
alternate word to castration is orchiectomy, and you might want 
to consider using that at another time. [Laughter.]
    Well, anyway, gentlemen, I'm delighted to be here with you 
and to hear your words of wisdom. I really have sort of two 
basic questions.
    One--and this is something we've been talking up here 
about, about the basis information system which Dr. Chassin was 
talking about--that it seems to me that, my impression--and 
most of this comes from rural America--is that doctors are so 
involved in caring for patients, they do not have the 
information of what's going on in the rest of the world, and 
they don't have time to look it up. They're not next to a 
teaching or a research university, and therefore, they do the 
best they can.
    But that information is available, and the vehicle for it 
is there, as long as somebody does it. I mean, whether it's 
Microsoft or whether it's HCFA or what--I mean, I can't imagine 
a local doctor developing his own software for something like 
this. It's just impossible.
    But that information is available, and then it feeds right 
into what Dr. Mulley is saying, being able to share that with a 
patient. So the question is, it's there, but how do we get it 
here? And that's something I think that might lend itself to 
understanding and legislation. So maybe you'd want to comment 
on that.
    And then I've got another question for Dr. Mulley.
    Yes?
    Dr. Chassin. Sure. I think you're absolutely right, that we 
have the technology, the technical know-how to build support 
systems that really are quite effective, and in fact, we know 
from the isolated cases where they've been used and evaluated 
that, in fact, they can have dramatic effects. One LDS hospital 
in Salt Lake put in a series of programs to reduce antibiotic 
adverse drug events, injuries due to antibiotics, reduced the 
frequency by 30 percent, reduced mortality by 27 percent, and 
reduced antibiotic costs by 58 percent for every treated 
patient. So these systems can work; they require enormous 
investment, and they require organizations, not, as you've 
pointed out, individual physicians or small, one- or two-or 
three-person practices to be able to do that.
    Where we've now started moving away from hospitals, and in 
places like the Northwest, where big, multi-specialty physician 
groups don't exist by culture or tradition, those organizations 
are few and far between. Hospitals are harried because of 
competition and reduced reimbursement.
    So finding the capital to make those investments is one 
problem, and then adapting the culture of physicians and other 
caregivers to an understanding that they need that information 
is another part of the problem. The current generation of 
physicians I think, by and large, still believe they ought to 
be carrying everything in their heads and that requires an 
educational effort that will take some time.
    But, technically, you're absolutely right; we have the 
technical know-how to build systems that could make an enormous 
difference.
    Mr. Houghton. Yes, because I think we're searching for ways 
to increase quality; we're searching for ways to increase 
coverage; we're searching for ways to help those people who are 
the suppliers, and it's all there. The question is, how can we 
put it together?
    And I don't know whether you gentlemen would like to make 
some sort of proposal to us--it doesn't have to be long, just 
some general thoughts, but, I mean, of all the things we're 
talking about, this may be one of the most important things we 
can do, and it's possible; it's not technically impossible.
    Now the other thing is what Dr. Mulley was talking about, 
is--the chairman is now on the phone--but my sense is that what 
you're talking about doesn't have anything really to do with 
law. It doesn't have anything to do with data. I mean, it's 
really a matter of standard operating procedures. It's really a 
matter of attitude.
    But when you talk about a process which reduces cost and 
helps the customers, it saves assets, and doesn't cost very 
much, it's very attractive. And it is really just sharing 
information not on a post-operative basis, but on a pre-
operative basis, with people, and the willingness to take 
upfront time and knowledge and care, rather than having all the 
downstream complications which come. Some of the statistics you 
mentioned, the coronary issue with something like 17 times more 
whatever the procedure was in New York versus Toronto, those 
are very compelling figures.
    So I don't know whether it takes a tremendous investment, 
whether it takes law, or what it takes, but it just seems to me 
that there, again, that's all there to do, if the attitude is 
changed. Maybe you could help me on that?
    Dr. Mulley. Yes, I agree with everything you've said. It's 
a very simple idea with a lot of compelling implications. I'd 
come back to something that the chairman raised a couple of 
times, which is that social and political issues sometimes 
really get much more complicated than the actual idea that 
you're trying to implement. In order for this approach to 
decision quality to work, there really has to be a recognition 
of a change in roles on the part of both providers and 
patients. Patients are often very happy to defer decisions to 
doctors because they're feeling very vulnerable, and they 
anticipate that there might be a bad outcome, and they might 
not want the responsibility for the decision that led to the 
bad outcome.
    So there needs to be, I think, a major educational effort, 
as Dr. Chassin has also suggested, to help people understand 
their role in a health care economy, particularly since we've 
unleashed some market forces in that health care economy.
    I want to come back to the issue that you raised with Dr. 
Chassin because it's related to this. We certainly have the 
wherewithal with information technology today to deliver 
existing information and to inform decisions. We can give 
people probabilities of good and bad outcomes, and give them 
vicarious experience of what other patients have gone through, 
so they can recognize their role and make choices with regard 
to the quality-of-life implications of the different available 
treatments. But that same technology gives us the wherewithal 
to capture their experience, so that the next generation of 
decisions are even better informed.
    And the point I want to make is that, yes, we do have some 
information that we could do a better job of delivering, but we 
don't have nearly enough information about the most common 
conditions and the most common procedures that we do. We do 
400,000 coronary artery bypass operations a year in this 
country. We do about 400,000 angioplasties a year. I estimate 
that worldwide we've randomized about 1 in 5,000 patients 
who've had coronary artery bypass surgery, and as a result of 
that, the few, 1,400 or so, who have been randomized aren't 
nearly as representative of the population we treat as we would 
like. You've heard some examples of the problems this creates 
already.
    We should have ways of capturing experience that patients 
have as they make treatment decisions and after they make 
treatment decisions, regardless of which treatment they end up 
having. And, again, information technology makes it possible 
for us to do that and dramatically improve what we know about 
what works, at the same time we're improving decision quality 
at the outset.
    The reason I think that's important--and to some extent 
related to the issue of confidentiality and privacy that keeps 
coming up--is that the feasibility of this kind of research, 
when it's focused on a particular condition, and the 
alternative treatments for it, has been shown over and over 
again. Patients are happy to participate in focused outcomes 
research. It's very different than the vague, administrative 
database research. Over and over, patients have been asked to 
participate, and they do it. In fact, when they're given a 
choice between one therapy or another therapy, or perhaps 
randomization, which gives us the strongest evidence, they're 
happy to participate in that kind of study as well. That's been 
shown in the UK repeatedly, and more recently, it's been shown 
here.
    So I'm just agreeing with what you said and what Mark said. 
We have the technology to deliver the best available current 
information, but that technology also gives us the capacity to 
continuously improve it in ways that we haven't been organized 
to do in medicine in the past.
    Chairman Thomas. Does the gentlewoman from Connecticut wish 
to be recognized?
    Mrs. Johnson of Connecticut. Yes, briefly, thank you.
    I appreciated your testimony very much. I'm sorry I had to 
be so in and out during the question period.
    I just wanted to ask you if you are working in any areas 
like nutritional services. One of the problems that we're going 
to have is focusing on those things that hit you in the face, 
like the difference between New Haven and Boston in certain 
areas, and regionally, and things like that. But the ability of 
nutritional services to either improve the quality of recovery, 
reduce the cost of recovery, or prevent surgery, that kind of 
thing, is increasingly interesting to me. Are you doing 
anything looking at those new areas? Because, eventually, if 
we're going to turn the system around to a more preventive 
approach and a higher-quality approach, we have to start 
thinking about those kinds of ancillary services that may not 
be so clearly related to illness, treatment, the model of 
medicine.
    Dr. Chassin. Well, I think you're right, and I think you 
point to an area that has been understudied greatly. But 
particularly I think in recent years with the development of 
our capacity to better measure functional outcome, that 
nutrition will become an increasingly important ingredient in 
producing better functional outcomes. A study that we're doing, 
for example, now, funded by AHCPR, is looking at the effect of 
a variety of inpatient interventions on risk-adjusted 
functional outcome after hip fracture repair, and nutritional 
services, along with physical therapy and rehab and a lot of 
others, are in that mix. I think as we do more with measuring 
functional outcomes in the course of disease following 
treatment or in the course of chronic disease, we will need to 
pay more attention to nutritional services and other services 
that have to date been very underevaluated.
    Mrs. Johnson of Connecticut. There's, I think a new Lewin 
Study, or fairly recent Lewin Study, on just the Medicare 
population of access to nutritional services on a cost-free 
basis. It's had some very interesting implications. So there's 
somewhat more work being done in this area than there has been, 
but I think some of those things that are systemic we need to 
be looking at, as well as the particular things, because those 
we need to be building into the coverage network of Medicare, 
so that the system can evolve in a way that's comprehensive.
    Dr. Mulley. I'm certain that access to nutritional services 
varies enormously across the country in terms of the manpower 
available to provide those services, but that, too, I think is 
something that we can expect to change with the availability of 
new information technology and access to information. My guess 
is that the whole structure, and our very definition, of 
nutritional services and health care will look radically 
different five years from now because of available information 
technology.
    Mrs. Johnson of Connecticut. And then, just lastly, I'd 
just like to comment. In your work, does it come to your 
attention, the relationship between decisions and reimbursement 
rates? Aren't we driving----
    Dr. Chassin. All the time.
    Mrs. Johnson of Connecticut [continuing]. Patient care 
decisions yet by reimbursement rates?
    Dr. Chassin. Well, I think that reimbursement, in whatever 
form it occurs, is a very powerful motivator, and like 
competition, another very powerful motivator, we haven't yet 
figured out how to use financial incentives and line them up 
with quality incentives, so that excellence gets rewarded. We 
have fee-for-service, which encourages overuse--one kind of 
quality problem; capitation encourages underuse, another kind 
of quality problem. We don't have a payment system that 
consistently and effectively rewards excellence, like 
competition. Competition now occurs on price. It's a wonderful 
motivator. If we could only figure out how to harness it to 
quality improvement, potentially it could be very effective, 
but that doesn't exist in any market in health care that I'm 
aware of. So we've got a lot of challenges before we can make 
these motivators that work in other areas, particularly in 
business, very well work to improve quality.
    Mrs. Johnson of Connecticut. At a very crude level, I do 
see employee dissatisfaction resulting in employers looking not 
just at the price of a plan, but also quality issues and what 
the plan can tell them about response to consumers and appeal 
procedures, and things like that. I see some bottoming-out of 
price being the only consideration, and I think that brings the 
market back into quality issues. Do you see that?
    Dr. Chassin. Well, I hope you're right, although with the 
current trend up again in premiums, I don't think it takes much 
to get people thinking again about cost. I don't yet see a 
market where quality considerations are even a significant part 
of the purchasing decisions.
    Mrs. Johnson of Connecticut. Thank you.
    Chairman Thomas. My only concern in that conversion of 
ideals to reality is that some bureaucracy and some Congress 
will create a link between you get more money if you do this 
procedure, legislate it. I'm very concerned about the 
collection of data to be used as required behavior procedure to 
receive specific amounts of money. Incentives are good; 
collection of data and outcomes research is good, but it's a 
very tempting governmental role to link the two produce, quote-
unquote, ``quality medicine'' as defined by the last majority 
vote of Congress. That's what really worries me as a down side 
on all of this, and it's just now come up in a form that I 
could capsulate it.
    Dr. Chassin. Yes, I'm not at all sure that Federal 
legislation or legislation anywhere is the right way to use 
payment incentives. I think that provider organizations and 
other structures that are much closer to where patients 
actually receive care are probably better, although there may 
be some exceptions to that, where the data are really excellent 
and could support payment incentives.
    Chairman Thomas. I'm quite sure that it would be the 
exception to the rule rather than the rule where it should be 
done.
    Not a member of the committee or the subcommittee, but 
someone who, obviously, as the gentleman from New York 
indicated, has an interest in what we're doing--it's a pleasure 
to have with us once again the gentleman from Louisiana, Dr. 
Cooksey. Do you wish to inquire?
    Dr. Cooksey. Thank you, Mr. Chairman.
    Dr. Chassin and Dr. Mulley, I assume you're both 
internists, right?
    Dr. Chassin. Training, but specialty----
    Dr. Cooksey. What do you have in your own department in 
terms of computerized medical records, and what's available in 
the rest of your respective universities? And what departments 
utilize computerized medical records? Or do you still use pen 
and paper?
    Dr. Chassin. We, I think like most places, still use 
largely paper records. There are information systems that are 
helpful in a number of specific areas, in the laboratory and 
radiology, and some others, but we have not gotten even to a 
minimal implementation of a computerized medical record. It's 
in the planning, but it hasn't arrived yet.
    Dr. Mulley. A colleague of mine at MCH, Dr. Barnett, is a 
leader in medical computing and has been for decades. So that 
in our ambulatory practices we have something called COSTAR, 
which he invented some time ago. It needs major modification, 
major simplification, but we use that.
    Some of the modification and simplification that's 
necessary has been accomplished for one service now. The 
obstetrics and gynecology service has an entirely electronic 
record; it's paperless. And the plan is to move that throughout 
the hospital and throughout the partners' system.
    Dr. Cooksey. Good. The Mayo Clinic in Phoenix was the first 
clinic to put a system like this in place. I mean, it was 
really a software company from Wisconsin that developed the 
software, and it was all, you know, a Windows-based system.
    You might be interested to know that I've had my medical 
records on a computer since 1985, and the software company was 
Computers in Medicine from Boston. It was a Digital, a DEC 
outgrowth, and it works very well. I have a specialty that 
lends itself to it.
    I happen to think that the solution to the quality problem 
is exactly what my colleague from New York said: information 
systems. As physicians, we have been very provincial in taking 
advantage of the information age. There's some wonderful 
physicians out there who are very well-educated and very 
skilled technicians, and still limping along without taking 
advantage of the information age. And I think that's a 
travesty.
    I think that HCFA has got the same problems. They have 
archaic information systems. It contributes to their problems, 
our problems. But the ultimate solution to the quality issue is 
to have the information available out there, have it available 
to the patients, to the physicians in different geographic 
areas of the United States, and even around the world. It 
should be out there on the internet. You do have the problem of 
confidentiality, confidentiality is important, but I think it 
can be done, and I think it would really be worthwhile for 
those of you that are still making an honest living in the 
medical profession to go back to your respective medical 
schools and do whatever you can to jump-start that process. I 
think it will help us, as Members of Congress, to address the 
quality issue.
    You know----
    Dr. Mulley. I agree.
    Dr. Cooksey. [continuing]. I look at the health care 
profession now as comparable to what the airline industry was 
in the late seventies. It was a regulated industry with a lot 
of bureaucrats in Washington and a lot of politicians in 
Washington, not my two colleagues here, but the other 
politicians in Washington, and they were running an airline 
system. The airlines were not available to everybody; they were 
only available to the people that had the money to afford them. 
And there were some problems in the industry, and there was 
some problems when we went through deregulation. None of us has 
flown Braniff Airlines lately, or none of us has flown 
PanAmerican, and I'm not saying that Braniff is the HMO or 
PanAmerican is fee-for-service, but deregulation and devolving 
the power back to the patients with good, quality information 
is the ultimate solution. I don't have a lot of confidence in 
politicians and bureaucrats and insurance companies coming up 
with a solution. Do you?
    Dr. Mulley. I agree with you. I think that a friendly 
qualification would be that the information that's provided to 
doctor and patient needs to mesh, and that it needs to be 
balanced and objective, and its source and its auspices must 
not have clear interests behind it to decrease utilization or 
perhaps increase utilization, depending on where it's coming 
from. And that, too, is a difficult social and political 
accomplishment.
    Dr. Cooksey. Yes, Dr. Chassin? I am from Louisiana. We 
would pronounce your name ``Chessae'' in Louisiana. How do you 
pronounce it?
    Dr. Chassin. Chassin.
    Dr. Cooksey. Chassin.
    Dr. Chassin. Chassin, yes.
    Let me give you an example of a program that was initiated 
by government, but that facilitated quality improvement that 
would not have been possible otherwise. It's a program that, 
when I was Commissioner of the New York State Health 
Department, that we inaugurated as a quality improvement 
effort. It involved collecting clinical information in order to 
produce risk-adjusted data on mortality after coronary bypass 
surgery--by hospital and by physician. Since 1990, those data 
have been made public on an annual basis.
    But that wasn't really the innovation of the program, 
although it is the oldest, ongoing program of public release of 
that kind of information in the country. The innovation was to 
make that information usable for cardiac surgery programs and 
hospitals to find out how to improve problems that they didn't 
know existed until they were able to compare their results with 
that of their peers. One hospital, for example, in Albany, for 
two years running, had the highest, statistically the highest 
mortality rate in the State; looked at their data, used the 
standard peer review surgical mortality and morbidity 
conference; couldn't find a problem. And it was only when we 
helped them parse those data that they found that, for their 
emergency cases, their mortality was 26 percent compared with 
the statewide average of 7 percent. That clue allowed them to 
look in great detail at how they were managing those emergency 
cases, completely overhauled it, and the very next year their 
mortality rate dropped from 11 in 42 to 0 in 54.
    In case after case now, we've discovered using this 
dataset, where hospitals didn't even know there was a problem. 
Now these data, which are collected by each program, but are 
audited and really centralized in terms of accuracy and quality 
and viability of the data by a State government agency, have 
been enormously helpful in actually resulting in improvements. 
Now New York, in recent research, has the lowest mortality 
rates across the State for Medicare patients and the most rapid 
rates of decline. So that program has really been very 
effective.
    Dr. Cooksey. Well, that's the kind of result that we will 
get with open and comprehensive information systems. I think 
it's there; the technology is there. I don't really have 
confidence in government's ability to develop the system. I 
think that some entrepreneurial private sector company that can 
write software should develop it, and do it in concert with 
physicians, not necessarily politicians, maybe a few 
regulators.
    But thank you, Mr. Chairman.
    Chairman Thomas. I'd tell the gentleman I've been tempted 
to try to work a deal with Microsoft in exchange for whatever 
help we might be able to deal with their group, but we could 
get some software. [Laughter.]
    Dr. Cooksey. That would be a good start.
    Chairman Thomas. That might be useful.
    We thank both of you very much. It's clear that an informed 
consumer is going to be an important link, but when you tell me 
that health care professionals don't have the time to stay up 
with what's going on--I mean, we've got to look at realistic 
roles for informed consumers as well. But your information, I 
just want to assure you, is going to be very, very helpful to 
us, as we begin talking about, quote-unquote, ``quality health 
care'' legislation. Thank you very much.
    And I also want to thank our panelists on the last panel 
for being patient. My belief is we're not going to get too many 
opportunities to have a full and complete hearing on this 
subject, and so I appreciate your patience.
    I'd ask now that Dr. Graham--excuse me, Diane Graham, who's 
chairman/chief executive officer of STRATCO; Jill Kanin-Lovers, 
who's vice president of Global Operations, Human Resources, IBM 
Corporation; Dr. Jeffrey Rideout, who although he's the medical 
director and vice president of Quality Management of Blue Cross 
of California, he's here on behalf of the American Association 
of Health Plans; Ron Pollack, executive director of Families 
USA Foundation, and Dr. Randolph Smoak, vice chairman, Board of 
Trustees, American Medical Association.
    We thank all of you for coming. I would indicate that any 
written testimony that you may have will be made a part of the 
record, and that you can in the time that you have address us 
in any way you see fit. Could we just start, Ms. Graham, with 
you, and then we'll move across the panel.
    And as I indicated to other panelists, you have to talk 
directly into these microphones or other folk can't hear you.

   STATEMENT OF DIANE GRAHAM, CHAIRMAN AND CEO, STRATCO, INC.

    Ms. Graham. My name is Diane Graham, and I am chairman and 
CEO of STRATCO, a chemical and mechanical engineering company 
serving mainly the refining industry. My small business has 
become the worldwide leader in alkylation technology, a 
chemical process essential to the creation of high octane and 
reformulated gasoline. Though we compete against three Fortune 
100 companies, we are now number one in market share.
    Mr. Chairman, I want to thank you for giving me the 
opportunity to testify today and to add my voice to the 
congressional debate about health care quality. I am here today 
wearing several hats. I sit before you as a small business 
owner; a mother of 4 children, and as an employer who provides 
health insurance for more than 50 people and more than 100 of 
their dependents. I also sit before you as someone who is 
honored to be asked by President Clinton to serve on his 
Commission on Health Care Quality and Consumer Protection. And, 
finally, I sit before you as the only member of that commission 
to dissent from its recommendation that Congress should pass a 
consumer bill of rights. With your permission, I would like 
that a copy of my dissent be included in the record.
    Chairman Thomas. Without objection.
    Ms. Graham. I would like to use my time here to explain 
why. I will do so by telling you why my company provides health 
insurance; what it's like to provide health insurance, and why 
my personal experience makes me deeply concerned with all 
proposals to pass Federal mandates on private health plans. 
STRATCO is celebrating our 70th year in business. My company 
has provided health insurance for our employees for decades 
because the previous owner including my father and I believe it 
is good business to treat employees as if they were our 
extended family, and I try to offer a health plan that best 
meets the needs of my employees. An employee with good benefits 
is a loyal, productive employee.
    But health benefits are not cheap. Next to direct payroll, 
they're the greatest business cost we incur. Over the last 
decade STRATCO's health care costs have grown far more quickly 
than any other cost of doing business. Do we keep providing 
health insurance despite cost increases? Yes. Is it a struggle? 
Definitely. Is there a limit to how much my company and our 
employees can afford to stay covered with the kind of plan we 
want? Of course. And here's my big question: Do I want Congress 
to do anything at all that would make this struggle of health 
insurance affordability worse? Absolutely not. In fact, two 
years ago, we had to reduce the company paid coverage from 100 
percent to 75 percent.
    I believe that many in Congress and the administration are 
giving the affordability issue minimal attention. I am 
concerned that in the rush to protect consumers we may protect 
them right out of their coverage, and there is plenty of 
evidence that Government mandates on private health plans raise 
costs and reduce coverage.
    The Chamber of Commerce says three out of four insured 
working Americans receive their health care coverage through 
their employers. Ninety-six percent of businesses have 50 or 
fewer employees. At a time when 42 million Americans do not 
have any health insurance and when small businesses are still 
identifying the cost of health insurance as their number one 
business problem, I do not want Congress passing mandates on 
private health plans.
    Some of you may say you just want to pass a few small 
mandates to keep the costs down. You may seek out harmless 
mandates that you will say nobody can or should disagree with. 
I ask you not to go down that road either. It will only take 
you to where the States are; over 1,000 coverage mandates from 
coast to coast. This does not take in account future mandates 
that may be imposed on the States by Congress.
    Do I want quality health care protected? Of course. After 
all, I am not just a business owner, employer, and 
commissioner, I am a mother and occasionally a patient. We all 
support quality; it's just a question of who gets to preserve 
it and improve it. I, myself, vote for the private sector: for 
small business owners, providers, health plans, and benefit 
managers to work hard to meet the needs of consumers; different 
consumers with different needs in different parts of the 
country. Please stick with this formula and avoid costly one-
size-fits-all Government solutions. And please, whatever you 
do, make the affordability issue a key component in all your 
deliberations. Thank you.
    [The prepared statement follows:]
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    Chairman Thomas. Thank you very much.
    Ms. Kanin-Lovers.

 STATEMENT OF JILL KANIN-LOVERS, VICE-PRESIDENT, GLOBAL HUMAN 
             RESOURCES OPERATIONS, IBM CORPORATION

    Ms. Kanin-Lovers. Mr. Chairman and members of the 
committee, my name is Jill Kanin-Lovers, and I am vice 
president for global human resources operations for the IBM 
Corporation.
    Before I get into the specifics about my testimony, I would 
like to reach back to something from the other panel and let 
you know IBM would love the opportunity to come back and share 
with you the tools that are available to manage data and assess 
quality programs. Those things do already exist, and we would 
certainly be willing to share that with you.
    Chairman Thomas. I'm more than willing to take you up on 
your offer, and I've also been very pleased that a number of 
managed care companies, although that information may be 
somewhat proprietary, are willing to share as well, I'm 
concerned about the inability to have a clearing house 
available for maximum collection of this data. I appreciate 
your offer.
    Ms. Kanin-Lovers. Great, thank you. I don't have to explain 
what IBM is all about; I think most people know that, but we 
operate in a very intensely competitive and rapidly changing 
technology environment. We are totally committed to attracting 
and retaining the highest caliber work force and by offering 
high quality cost effective health care benefits that cover our 
employees and their families is one important way that we do 
that. This is part of our work force strategy.
    We are a major purchaser of health care. We currently 
provide health care benefits for over 500,000 people in the 
United States. That includes our employees, our dependents, and 
retirees. Last year, we paid over a billion dollars in premiums 
for health care, so we are very much an aggressive purchaser.
    I am here today on behalf of the Corporate Health Care 
Coalition. This is a group of 26 large self-insured, multi-
State corporate purchasers of health benefits who joined 
together in 1993 to address health care reform issues. Our 
coalition members have really been in the forefront of efforts 
to provide high quality, cost effective benefits for employees. 
What I want to do today is to talk about four different things. 
First, I want to talk about the purchaser's role. I want to use 
that----
    Chairman Thomas. Ms. Lovers, if you'll talk directly into 
that microphone, it's going to be easier for people to hear 
you.
    Ms. Kanin-Lovers. I'm sorry. Okay, I apologize. Thank you.
    Chairman Thomas. No, it's a lousy microphone. [Laughter.]
    Ms. Kanin-Lovers. I want to talk about the corporate 
purchaser's role in general, and then I want to talk about IBM 
and what we do. I want to talk about the importance of ERISA 
and ERISA preemption and then the harm that we believe could be 
done by some of the pending legislation.
    As long as our health care system remains voluntary, 
employers will play a critical role, we believe, in pooling 
risks; making coverage affordable; demanding quality, and 
informing and advocating for our employees. That is a very 
important role that we play. It would be impossible to 
replicate this in an individual purchasing system without 
extensive Government intervention. We view managed care as an 
important tool for quality. It helps us in organizing health 
care providers to gain accountability at the plan level. We 
think it helps to learn what treatments have worked. It helps 
in modifying them and continually improving patient outcomes. 
Our goal is to move toward evidence-based medicine.
    We demonstrate our commitment to quality at IBM everyday. 
We offer a very wide range of plan choices including a fee-for-
service plan, and this year we offered 183 HMOs to our employee 
population. What's interesting about that is 50 percent of our 
employees have chosen to be in managed care options. They can 
choose either one, and they go into managed care. On our own 
and through a national purchasing coalition of 11 major 
companies, we have set extensive purchasing requirements; we 
monitor plan performance, and we encourage improvements in 
quality. We think we play a very important role in moving the 
ball on quality.
    We offer employees access to a substantial amount of 
information. I can't emphasize how much employee education is 
critical to making sure that they get the right type of care 
that supports their specific needs and that supports the needs 
of their families. We've provided you with samples of what we 
call our HMO fact sheets, that is materials that go out to 
employees every single year so they can make reasoned decisions 
about what plan they should be in. We also provide our 
employees with access to a 24 hours a day, 7 days a week nurse 
hotline. In addition our employees have access to a telephone 
service if they've got questions about health care if they have 
any problems. We also have a lot of information available on 
IBM's internal internet side which employees can access. 
Recently, we launched a disease management program--it's a 
pilot project for us--to help employees in managing diabetes 
when they're chronically ill. That's the framework of what 
we're doing in the context of quality and how we go about 
offering health care to our employees.
    ERISA is extremely important to us as corporate purchasers 
of health care. We think it was a brilliant stroke. When there 
was no requirement to have a plan in the first place, it did 
not make sense to regulate the contents of plans. Congress, 
instead, provided participants through ERISA with something 
that we call a tool kit. Its rights and responsibilities are 
laid out for us. It includes information disclosure, fiduciary 
obligations for the employer, internal review, and external 
Federal remedies. ERISA preemption of State law is a critical 
part of the overall structure. We think we are then able to 
operate with a single plan. IBM wants to be one employer in the 
United States. We have employees in all 50 States of the Union. 
We want to be able to have the same plan regardless of where 
our employees and their families live and work. ERISA has done 
more to protect the voluntary system of benefits and quality 
assurance than any other law.
    This brings me to my last point. We are concerned about 
legislation like PARCA. We believe it would harm employer 
efforts to improve quality. This is for two reasons. First, 
Federal health plan standards would mandate benefits for 
voluntary plans. We think that's going to result in a huge 
enforcement bureaucracy. We think it will duplicate efforts 
that are already underway in private sector accreditation and 
would freeze current treatment preferences that are in place.
    Second, we believe any proposal that creates liability 
under State tort law for benefit coverage decisions of health 
plans is troubling. People in Federal and private sector plans 
now have access to internal reviews and Federal remedies, not 
to State torts or jury trials, and punitive damages. We 
administer millions of claims each year, and very few of those 
need to be resolved in court. We have an internal review 
process that works quite effectively. Cases are rarely 
appealed. When they are, more than likely, it is the result of 
lack of medical consensus. In some cases employees are looking 
for an answer that isn't even out there in the medical 
profession. We believe State tort liability would put juries in 
a position of deciding treatment and interfering with the move 
to evidenced-based medicine. Patients deserve to have evidence-
based reviews in real time, not in a protracted legal battle.
    Let me just conclude with some comments. It appears that 
there may be some action on health care this year. If this 
process moves forward, I would caution you to keep in mind the 
basic framework for any activity in this area. First of all, we 
would like to see you build on accreditation, quality 
measurement, and employee education efforts that are now 
underway. We think the Federal Government could really help 
here as the significant purchaser of health care.
    We also would like to see ERISA's federal framework 
preserved. We think that any issues that are raised should be 
in this framework of the tool kit which is already provided in 
Federal law, and we should reaffirm preemption of State 
regulations and remedies.
    We'd like to see you focus on the real issue which is 
solving the problems for the patient. The patient wants a quick 
decision to get appropriate treatment when needed. Neither 
litigation nor Federal health care standards meet this need.
    We'd like to retain and reinforce the reliance on evidence-
based decisions, systems of care, and accountability.
    And, lastly, we would like to entitle participants to a 
fair process, not a perfect result. Hold plans accountable for 
a fair process to resolve disputes; don't punish them for 
adverse outcomes that modern medicine cannot prevent. Thank you 
for the opportunity to address you.
    [The prepared statement follows:]
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    Chairman Thomas. Thank you very much.
    Dr. Rideout.

 STATEMENT OF JEFFREY A. RIDEOUT, M.D., MA., MEDICAL DIRECTOR 
     AND VICE PRESIDENT, QUALITY MANAGEMENT, BLUE CROSS OF 
  CALIFORNIA, ON BEHALF OF THE AMERICAN ASSOCIATION OF HEALTH 
                             PLANS

    Dr. Rideout. Mr. Chairman, members of the Subcommittee, my 
name is Dr. Rideout. I am the medical director for quality 
management for Blue Cross of California, a diversified managed 
care organization which serves over 5 million members in 
California through a range of medical and specialty products 
including HMOs, PPOs, medicare supplement pharmacy plans, and 
medicaid plans. Today, I am testifying on behalf of the 
American Association of Health Plans which represents over 
1,000 HMOs, PPOs, and similar network plans, providing care to 
over 150 million Americans.
    Blue Cross is also a member of the Blue Cross and Blue 
Shield Association and the Health Insurance Association of 
America. HIAA and BCBSA strongly support consumer protections 
in the marketplace, and their members have agreed to consumer 
protection principles that preserve the private health care 
system while improving quality.
    In addition to my position at Blue Cross, I serve on 
several committees and organizations devoted to health care 
quality such as the Technical Advisory Committee for the State 
of California's Office of Statewide Health Planning and 
Development. I am a board certified internist and maintained a 
part-time medical practice at the University of California at 
San Francisco until December of last year.
    As a physician that was largely educated, trained, and 
practiced exclusively in a managed care environment and as a 
consumer who has also been treated almost exclusively in 
managed care delivery systems, I've always considered the most 
important question not, should care be managed but how should 
care be managed to improve quality? While quality means 
different things to different audiences important attributes 
must include timely access to appropriate care; prevention of 
illness; continuity and coordination of high quality care; a 
respect for patient's rights; a mechanism to respond to patient 
concerns; the availability of health care information for 
patients, and a commitment to research and technology 
assessment.
    My goal, today, is to highlight several examples of 
voluntary, innovative, and collaborative approaches for quality 
improvement that already are occurring in the current health 
care delivery system. Each example has had a significant, 
positive impact on the quality of care received by consumers 
and has taken place without legislative mandates.
    The first is the California Cooperative Health Care 
Reporting initiative which seeks to disseminate preventive 
health care information using HEDIS measures. For the last five 
years, the California industry represented by purchasers such 
as GTE; physician organizations such as the California Medical 
Association, and health plans operating in California have 
cooperatively collected, audited, and publicly reported 
comparative preventive health information for things such as 
mammography screening and childhood immunizations. The primary 
goal of this effort is to provide consumers credible 
information to assist them in their selection of a health plan. 
The rigor of comparability used in CCHRI has been a model for 
many other areas of the country as well as organizations such 
as NCQA and also HCFA, and it's also significantly reduced the 
cost and burden on physicians compared to individual plan 
efforts to collect similar information. Given the success and 
the cooperation of the original process, 15 health plans and 
over 50 medical groups have voluntarily agreed to participate 
in an additional quality improvement initiative for California 
members with diabetes.
    The second is Blue Cross' own outreach to diabetic members. 
In 1997, we directly contacted nearly 4,000 members with 
diabetes to assess their individual status regarding critical 
screening exams. The members contacted report high rates of 
screening ranging from 65 percent for foot exams and 88 percent 
for glycemic blood sugar testing. This says a lot about the 
quality of care delivered everyday by the physicians and other 
practitioners in California. Through this effort, we have also 
been able to identify select groups at higher risk, which 
include those where English was not the primary language and 
those that have not had any previous health education about 
their disease. Altogether, Blue Cross had to use interpretive 
services for over 30 different languages in order to reach our 
members with diabetes and discuss clinical education.
    The third example is a collaborative research project with 
the University of California-Berkeley and Blue Cross. Initiated 
in 1997 through a Robert Wood Johnson grant, this public, 
private collaboration between a health plan and a major 
university is increasingly common, and it's an excellent 
example of innovation at work in the current environment. The 
research project is attempting to find out if first dollar 
coverage of nicotine replacement and smoking cessation 
counseling generates better quit rates in current smokers. Of 
note, we are using smoking cessation guidelines developed by 
AHCPR in this study. The physicians and other clinicians 
affiliated with Blue Cross already have an excellent track 
record regarding smoking cessation counseling. This study seeks 
to modify quality improvements already in place.
    With these three examples, I hope the committee can 
appreciate at least some of the innovation and collaboration 
effort that exists in the current environment. I believe all 
participants in health care delivery share a common goal: that 
the quality of care and service delivered to consumers must be 
exceptional. As a clinician, I believe that, and as a health 
plan medical director, I promote that.
    As you consider the testimony given, I would ask that you 
also consider that the more efficient coordination of existing 
oversight already in place through Federal, State, and private 
sector organizations may, in fact, be a more rapid and 
significant and long lasting step in improving the quality of 
care delivered to individuals.
    Thank you for your consideration of my comments. I look 
forward to answering any questions you may have.
    [The prepared statement follows:]
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    Chairman Thomas. Thank you very much.
    Mr. Pollack.

 STATEMENT OF RONALD F. POLLACK, EXECUTIVE DIRECTOR, FAMILIES 
                         USA FOUNDATION

    Mr. Pollack. Mr. Chairman, thank you for inviting me to 
this hearing, and thank you for your perseverance at this late 
hour. I wanted to focus on the need for consumer protections as 
part of the arsenal of achieving quality of care, not as the 
exclusive vehicle for achieving that. And in doing so, since 
people characterize regulations in so many different ways, I 
really would like to make sure that we don't exaggerate what we 
are talking about in terms of consumer regulations in this 
context.
    I'm referring, specifically, to two types of documents that 
the committee undoubtedly has in front of it. First, the 
recommendations of the President's commission of which I was a 
member, and I was a member of the subcommittee that drafted the 
bill of rights and, secondly, the agreement that Families USA 
together with AARP reached with three very distinguished HMOs: 
Kaiser Permanente, HIP, and Group Health Cooperative of Puget 
Sound. I've provided a copy of that agreement to you. I want to 
stress these because with respect to the President's 
commission, the reasonableness of what was presented was really 
the product of a virtually unanimous panel that was 
extraordinarily diverse. It involved four to five health plans, 
insurance companies, provider organizations, business, labor, 
academic people, and consumer organizations, and the product of 
this was the result of all those organizations working 
together.
    Having said that, what I'd like to do is present five 
reasons why we need these kinds of modest regulations. First of 
all, I believe that we need these kinds of modest regulations 
because the public very much needs it as part of the process of 
rebuilding public confidence in our evolving health care 
system. With respect to that, I would refer your attention to a 
survey that was released last November by the Henry J. Kaiser 
Family Foundation and the Harvard School of Public Health which 
surveyed the public's attitudes about our health care system 
and, in particular, managed care, and, clearly, the findings 
are not something any of us in this room are particularly happy 
about. The majority of Americans say that managed care plans 
make it harder for sick people to see medical specialists. Over 
half say managed care has decreased the quality of care for 
people who are sick. Over three out of five say managed care 
has reduced the amount of time doctors spend with patients, and 
over half say they are at least somewhat worried that if they 
are sick their health plan would be more concerned about saving 
money than about what is the best medical treatment. That is 
not to say that any of us, including myself, want to go back to 
fee-for-service health care, but it does show that we really do 
have a lack of confidence, and this lack of confidence is 
growing on the part of the public. I think the modest public 
regulations embodied in the President's advisory commission and 
the Kaiser Permanente agreement, are needed. Certainly, we're 
seeing more and more States find that this is true, and I think 
that's very reflective of the views of grassroots constituency.
    Second, is the real alternative to this is a market-driven 
approach, and I would suggest to you that, from a theoretical 
standpoint, a market-driven approach might make a great deal of 
sense. Unfortunately, it flies in the face of reality in terms 
of what exists in today's health care system. The way a market-
driven system would work is that consumers, in effect, would 
vote with their feet, and they would drive quality by going 
into good plans and leaving bad plans. Unfortunately, today, 
half of the people who get their health coverage through an 
employer do not have a choice of plans, so that the market 
system simply does not exist to hold plans accountable. If we 
had such a system, that would be a meaningful alternative to 
regulations, but the reality is we don't have that today.
    Thirdly, to the extent that we have some kind of a market 
system in some areas--and let me illustrate through the 
Medicare program where there are some choices, particularly, in 
some of the States where there has been greater penetration of 
health plans, I would tell you that I don't think the 
marketplace has actually driven quality and weeded out the bad 
plans from the good plans. Let me illustrate. We released a 
study--I don't know whether the committee has it--that looked 
at the disenrollment rates, literally, of every HMO in the 
country serving Medicare beneficiaries. This was the first time 
such numbers were released. They are provided by the HMOs 
themselves, and we took a look at the disenrollment rates. 
Particularly, we looked at every one of them in every one of 
the States, but we examined very carefully the HMOs in Texas 
and in Florida. The reason for that is that there were a 
significant number of HMOs serving Medicare beneficiaries in 
those States, and those two States had the highest 
disenrollment rates. And, so, what we did was we took a look at 
those plans that had extraordinarily high disenrollments 
rates--and my definition, it's an arbitrary one, of an 
extraordinarily high disenrollment were those plans that had a 
disenrollment rate in excess of 20 percent, meaning more than 1 
out of 5 of the enrollees disenrolled during the course of the 
year.
    In Texas, there were five such plans. Every one of those 
five plans in Texas, notwithstanding the extraordinarily high 
disenrollment rate, had a higher enrollment at the end of the 
year than they had at the beginning of the year. Every one of 
those plans had a higher market share at the end of the year 
than they had at the beginning of the year. In Florida, we saw 
something very similar. There were 14 plans in the State of 
Florida that had disenrollment rates in excess of 20 percent. 
Nine of those 14 had a higher enrollment at the end of the year 
than they had at the beginning of the year, and, clearly, what 
this is indicating is that these plans did a very good job of 
marketing and luring people into plans, but they were not doing 
the same kind of job of servicing those people and retaining 
them. I suggest to you that this is reflective that the market, 
even where there is some market, has really not held plans 
adequately accountable in driving quality.
    The fourth reason is that we do have a regulatory system 
today, but it's a patchwork quilt that is absolutely 
indecipherable by the American public. We have one set of rules 
for people in Medicare. We have a different set of rules for 
people in Medicaid. We have another set of rules for people in 
fully insured plans; another set of rules for people who are in 
self-insured plans. You cross State lines and you don't know 
what kind of protection you receive. Even within the same State 
if you get your coverage through an employer who's fully 
insured versus an employer who's self-insured, there's a vast 
disparity in the protection that you receive. I suggest to you 
that it is only this Congress that can establish some kind of 
rationality among these very diverse plans, and it is this 
Congress that I believe that can provide greater predictability 
by establishing a floor under which nobody can fall through, 
and I think that would be a very valuable service.
    The last point I want to make goes to the question of cost 
and cost effectiveness. I believe that the kinds of provisions 
that are embodied in the President's commission and that are 
embodied in the Kaiser Permanente agreement are extraordinarily 
cost effective. Now, I've heard some wild numbers about 
different bills. I'm not here to talk about PARCA or any other 
bill. I'm here to discuss what's recommended in the President's 
commission as well as in the Kaiser Permanente agreement, and I 
would suggest to you that any reasonable cost analysis would 
show that consumer proteciton legislation makes a great deal of 
sense.
    Now, let me just illustrate that. With respect to one of 
the key agreements in the President's commission, we 
recommended the procedural right of an external appeal. That 
is, if you're denied a service, if you're denied a referral if 
you're terminated for a specific service, there should be some 
opportunity to have that heard by an external body that's 
independent of the original decision-making body and that is 
dispassionate and has a competence to render a decision in a 
reasonably prompt manner. We did receive estimates on the cost 
of this, and the health plans that were part of the President's 
commission played a very important role in helping the Lewin 
Group develop the numbers for this. What the Lewin Group gave 
to the President's commission is that the cost of this very 
important recommendation ranges from three-tenths of one cent 
per person per month to seven cents per person per month. If 
you take the upper end of that range, we are talking about 84 
cents per person per year. I suggest to you that this modest 
but very important procedural protection would do a great deal 
for consumers to give them greater confidence that when they 
are denied care, they have some recourse and that they're not 
totally disempowered. Let me suggest a couple of the other 
issues that----
    Chairman Thomas. Mr. Pollack, I understand that you have a 
written testimony which has been made a part of the record, and 
I've let you go over twice the time, so if you can begin to 
move toward a wrap-up.
    Mr. Pollack. I'd be happy to, Mr. Chairman.
    Chairman Thomas. Thank you.
    Mr. Pollack. Let me just take two last issues about costs, 
and then I'll conclude. With respect to emergency care, the 
prudent layperson rule, that's not an issue resulting in new 
costs. The cost is incurred when somebody goes to an emergency 
room. The regulation that's at issue is who pays that cost, not 
whether there is a new cost. The question is should the 
hospital which provided that service eat that cost or should 
the patient eat that cost or should the plan that has received 
a premium for the care of that enrollee pay for that cost? I 
believe that the allocation of that cost is more properly 
located with the plan that has received a premium to provide 
health services.
    With respect to one last issue, the question of direct 
access to specialists, say to an Obgyn is very important for 
women. I suggest to you that this proposal saves money. It 
doesn't cost money, it saves money, because for a woman who 
wants to see an obstetrician or a gynecologist, now she only 
needs to make one visit rather than two visits for the exact 
same service. So, I suggest to you that what we're talking 
about here is extraordinarily cost effective. We are not 
talking about mandates here. We are not talking about the kinds 
of services that States require with respect to a whole bunch 
of services. We're talking about procedural protections. Thank 
you, Mr. Chairman.
    [The prepared statement follows:]
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    Chairman Thomas. Thank you very much.
    Dr. Smoak.

STATEMENT OF RANDOLPH D. SMOAK, JR., M.D., VICE CHAIR, BOARD OF 
      TRUSTEES AMERICAN MEDICAL ASSOCIATION, CHICAGO, ILL

    Dr. Smoak. Thank you, Mr. Chairman and members of the 
committee. I appreciate your perseverance in hearing all this 
testimony, and I'll wrap mine up in five minutes.
    My name is Randolph D. Smoak, Jr., and I am a practicing 
surgeon from Orangeburg, South Carolina and vice-chair of the 
American Medical Associations' AMA Board of Trustees. I'm also 
Chair of the governing body of the AMA's program that 
establishes qualifications and performance standards for 
individual physicians, known as the American Medical 
Accreditation Program, or AMAP. On behalf of our 300,000 
physicians and medical students, I want to thank you for the 
opportunity to testify on this issue of health care quality and 
patient protection and the AMAP program.
    For many years, the cost was a major concern with America's 
health care system. Efforts to control cost through utilization 
management, managed care, and a variety of regulatory and 
market-based incentives have dominated the public policy agenda 
for quite some time. Today, however, the focus has shifted to 
quality, but we want to preserve quality and also to 
continuously improve it. For that reason, we welcome the 
attention of Congress and the President to this issue.
    The AMA's committed to setting standards for all physicians 
and measuring and evaluating physician qualifications. To 
achieve these goals, the AMA established AMAP. It is designed 
to set national standards of physician performance through 
accreditation of individual physicians. AMAP is also a private 
sector initiative undertaken in conjunction with other private 
sector organizations and Government agencies. It seeks to find 
solutions to problems in the delivery of health--quality health 
care by eliminating redundancy; focusing on quality, and 
improving patient care.
    AMAP works by measuring and evaluating individual 
physicians against national standards criteria and peer 
performance in five areas: credentials, personal 
qualifications, environment of care, clinical performance, and 
patient care results or outcomes. AMAP provides the first 
credible, consistent, comprehensive national standard and 
physician quality; a standard that is meaningful not only to 
physicians but also for patients and purchasers.
    The AMA is engaged in a number of other quality initiatives 
such as the Clinical Practice Guidelines Recognition program. 
This program identifies guidelines that meet criteria developed 
by the AMA, national medical specialty societies, AHCPR, AHA, 
and the Joint Commission. In particular, the program identifies 
those practice guidelines that are evidence based. The AMA is 
especially pleased to be adding to the work of the AHCPR along 
with the American Association of Health Plans. Together, we are 
working to develop the national guideline clearing house, a 
comprehensive, internet-based source of clinical practice 
guidelines. Further, the AMA has developed a bulletin we 
believe will improve physician clinical performance. This 
quality care alert will be a periodic mailing to alert 
physicians to major quality issues. Finally, the AMA has issued 
a document entitled, Essential Characteristics of a Quality 
Health Plan that describes the elements all quality health 
managed care plans should actually meet. We urge Congress to 
carefully consider these workable private sector initiatives as 
it evaluates existing legislation.
    Mr. Chairman, while discussing quality I would be remiss if 
I did not mention the importance of patient protections. The 
AMA believes that certain basic rights are essential if all 
patients are to receive quality care from health plans, and 
these include comparative information; access to emergency 
services; external appeals; prohibition against gag practices, 
and the elimination of incentives to limit necessary care. 
After all, what good is quality care if you cannot access it.
    The Federal Government expanded patient protections and 
Medicare Plus Choice plans when it passed the BBA in 1997. 
States, too, have passed patient protection laws to protect 
their citizens. ERISA, however, has literally preempted States 
from protecting their citizens with the same patient protection 
laws enjoyed by all other privately insured individuals in the 
State. The AMA supports legislation that removes ERISA 
preemption so patients could recover damages for personal or 
financial injury or wrongful death. Specifically, the AMA 
supports Representative Norwood's bill, H.R. 2960, the 
Responsibility in Managed Care Act of 1997 and urges Congress 
to expedite its consideration of this bill.
    I appreciate the opportunity to appear before you today and 
would be happy to answer any questions. Thank you, sir.
    [The prepared statement follows:]
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    Chairman Thomas. Thank you very much, doctor.
    Mr. Pollack, if the President's proposals were limited to 
prudent layperson in the emergency room, anyone has to look at 
the BBA and realize that we worked that problem out for 
Medicare and it's pretty obviously going to be part of that 
package. Had we had a working cooperative relationship, it 
would have been done sooner. You also need to know that I don't 
normally do personal stuff in making points, but I'm a member 
of an HMO, and one of the reasons I selected it is because in 
that HMO my wife would be able to have her OB/GYN who she had 
collected prior to that as her doctor to be her primary care 
provider, and, obviously, there are enormous benefits to doing 
that, and that, again, is certainly an item that makes all 
kinds of sense; it's overdue. After all, this President's been 
President for six years, and he could have issued an executive 
order at any time during those six years. The commission you 
served on was appointed just prior to the last election, and as 
we heard in earlier testimony, Medicare has no problem at all 
conforming to it, because, after all, in conforming to the 
``President's proposal,'' quote, unquote, they will be 
implementing what we passed in a bipartisan way in legislation. 
So, my early comment about the degree of politics that have 
been involved in trying to move forward in this area, I think, 
is only underscored by some of the comments that have been 
made.
    A couple of other specific questions, and then I want to 
ask you some general ones so all of you can respond, because 
you come from a number of very interesting directions on some 
of my broader questions. Ms. Kanin-Lovers, in IBM's portfolio, 
do you currently offer MSAs? Are you thinking about offering 
them? Is that a product that you haven't looked at? That you've 
looked at and rejected? Medical Savings Account.
    Ms. Kanin-Lovers. Medical Savings Account, thank you very 
much. I thought, ``Oh, my goodness.''
    Chairman Thomas. Sorry. I don't like jargon, and I 
apologize.
    Ms. Kanin-Lovers. That is not something that we currently 
have available although we do have something called life 
planning accounts, which is an amount of money that we have put 
aside for employees to use in certain areas, if they want to 
join a health facility or something like that. But, we evaluate 
our plans every single year and we will be looking at design 
again and again to see what's appropriate for the workforce. 
The workforce has been changing a lot and so their issues are 
very different.
    Chairman Thomas. Well, as the workers have been changing, 
the whole concept of employment--who's an employer and how 
people work jobs--is also changed since the ERISA was written 
into law. One of the problems we've dealt with over the last 
several Congresses are what are sometimes called the MEWAs, the 
Multiple Employer----
    Ms. Kanin-Lovers. Right.
    Chairman Thomas [continuing]. Associations which don't fit 
well under the current ERISA structure and some of the members 
who are interested in making changes in this area see the basic 
ERISA concept as a kind of a model to try to bring more in and 
what that does, of course, is remove a State particulars and 
allow interstate corporations to function in a more reasonable 
way.
    My problem is when I listen to the President in terms of 
the changes that he believes need to be made by Government with 
Government-initiated programs because people, for example, in 
the near-senior group don't have jobs or people who are 55 and 
retired don't have jobs--over and over again the problem with 
health care.
    And, Ms. Graham, you pointed it out in terms of the number 
of people who get their health care through their employer. One 
of the discussions that's beginning to come to the fore is to 
what extent is this concept written into the Tax Code that the 
employer is the one who gets the exclusion and carries out the 
various procedures and, Mr. Pollack, I think you alluded to it.
    Why can't we change the Tax Code and have the provision 
available to an individual who then may use the employer as a 
collection site, and, obviously, Ms. Lovers, with the 
attraction that you have and the program, that you're willing 
to offer and if you wish to continue it, would certainly be a 
magnet for folks to use that as the collective group. But, it 
could be other groups that could be utilized as well.
    And that--I can't go through all the particulars in the 
time that we have--but that concept of taking it away from 
something that really was a World War II development and 
currently is significantly mal-distributed as a benefit in the 
society, to some people who work for a corporation and don't 
have it and others do, and create a more equitable 
redistribution of benefit availability through the Tax Code.
    What is the interest, approach, concern about Congress 
doing that kind of a radical change instead of waiting for 
folks to come up with here's a group who have a problem and 
let's have a Government program go into solve that problem. Any 
reaction from any of you?
    Ms. Kanin-Lovers. I----
    Chairman Thomas. Let's just start with Ms. Graham and go 
across----
    Ms. Kanin-Lovers. I'm sorry.
    Chairman Thomas [continuing]. So everybody gets it in kind 
of a--in turn.
    Ms. Graham. Well, I would really like to explore, learn 
more about that idea. I just know what the different State 
involvement, Federal involvement has done to our company and, 
again, I think that the private sector--when I look at--we have 
to go out and buy steel for our reactors that go into 
refineries and we do that by going to the marketplace and 
finding the best suppliers. We've done the same thing in the 
health care; however, every year for the smaller companies, it 
just gets harder and harder to find affordable and quality 
plans. And when we and several of the States have pooling 
available, I think that if there was more pooling available, 
that could be one solution. And certainly a lot less liability 
and malpractice---malpractice reform would be wonderful, also.
    Chairman Thomas. Well, obviously, malpractice reform, I 
think, is part of that package. But, my concern is that you 
will be loaded with so many requirements that eventually you 
simply say Uncle and then there's a problem because here are 
people who have joined the group of the uninsured and, to a 
certain extent, the group of uninsured are an artificial 
creation because of the Tax Code structure of how benefits are 
distributed. And, if we address the underlying problem, I think 
we can solve some of the others and I'm pleased to hear there 
is someone who takes it on as a personal responsibility, not 
just a corporate one, and I think that's the best way to look 
at it.
    These individuals could, then, deal with an approach which 
might allow for a more responsive marketplace, if they were the 
ones making the choices, including employers being more 
responsive because you'd have to offer what the employees 
wanted or they would go someplace else.
    Ms. Graham. Right.
    Chairman Thomas. Ms. Lovers?
    Ms. Kanin-Lovers. I'd like to answer that question in two 
parts.
    Chairman Thomas. Sure.
    Ms. Kanin-Lovers. First of all, I do want to confess that I 
can't give you any comment on the Tax Code.
    What I would like to talk about is kind of the employer 
view and the----
    Chairman Thomas. I won't ask why. [Laughter.]
    Ms. Kanin-Lovers. I don't think I'm quite the expert there.
    But, I think that what we need to recognize is the role 
that the employers play in defining quality and I do think that 
we are very actively involved in improving quality of health 
care in the United States. When IBM goes out to bid to the 183 
HMOs that we currently offer, we are very aggressive in setting 
standards, in telling them the records we want to see, we're 
looking at outcome, we're really pushing hard to make sure that 
that bar is raised every year. I believe that's not something 
that an individual employee, if they were operating as a sole 
person buying health care, could do. And so, we are able to do 
that and I think it benefits the entire United States. That's 
kind of one part.
    The other part that's important to recognize is, as a major 
employer, I do not view my benefit strategy as a snap-on; it's 
not an add-on thing. What I do for health care is very much 
focussed on the needs of my employees; it's part of my 
strategy. When I go out to recruit--last year, IBM hired 15,000 
people--we're out there fighting for the top-quality people and 
we're actually doing that through the design of our benefits 
plan. That's one component of it.
    And, I've also mentioned that the workforce is changing a 
great deal. One observation that I wanted to make is, you know, 
we're hiring what's been called the ``Generation Xers'' now. 
You know that group? That's actually a group that has a 
stronger affinity for managed care than our longer-term 
employees and so we've had to change our plan to be responsive 
to those kinds of shifts. And, I think that's something we can 
do more effectively as a major negotiator for health care 
coverage; that we could allow our employees to do. We also can 
improve quality more effectively than they can.
    Chairman Thomas. I agree with that in the current 
environment, but if you then gave the power to each individual, 
you would have to compete for their attentions because they're 
still your employees and you want to do what you're doing. But, 
why can't you be an icebreaker then so that other groups can 
say, we want what IBM has and if someone doesn't provide it 
either through the insurance agent writing it, they would go to 
some other group and you can then get collections of groups. 
And, of course, in California we have the group purchasing 
structures, which could utilize what these large corporations 
have been very successful in doing, in terms of packaging 
health care, and say, I want what they have or we'll go to 
someone who will give it to us.
    I don't see why that doesn't create a more competitive 
market for a better quality product for more people than just 
those who work at IBM because there's someone else in the 
computer software field who has no insurance whatsoever through 
no fault of their own but because of the mal-distribution of 
benefits in the Tax Code. That's the way I'm trying to get 
folks to look at it. I never said you guys have not done a 
great job of pushing quality; I just want to try to figure out 
a way that more people can share in it.
    Dr. Rideout, a comment?
    Dr. Rideout. My main comment on that would be that, at 
least in California, in my experience the purchaser 
cooperatives have been the primary driving partner of the 
quality initiatives that we undertake, although it's very much 
a two-way street. And, just as an example, they were very 
instrumental in pushing, say, HEDIS in preventive health rates 
as a standardization activity but it was the plans and the 
medical groups that said, hold on, the way we're organized 
here, we need to do this cooperatively and we would be willing 
to audit that data five years before it was ever done by HCFA 
or anybody else in this country to do that.
    I think the other thing that I would add to that is the 
enormity of the data problem is real. And in the State last 
year, we had to audit 80,000 medical records in a three-month 
period in order to meet the combined requirements of 23 HMOs 
trying to supply information to their commercial purchaser 
partners, as well as HCFA. And, also, in our State, we need to 
do Medicaid reporting and sometimes it may be on a contractor 
county specific basis. So, the problem is enormous and I think 
the purchaser community has been, at least in California, 
instrumental in bringing this together and they are willing to 
take on the real issues and make solutions out of them for us.
    Chairman Thomas. Well, I would be remiss if I didn't 
compliment the California Blues for the very aggressive way 
you've gone into the purchasing cooperatives and, in fact, were 
a leader to make sure that it worked.
    Mr. Pollack.
    Mr. Pollack. Mr. Chairman, what you raise is a question of 
an individual-based system and let me first start where 
theoretically I think that I have some common views with you. 
Then let me express my concerns about what you propose.
    Theoretically, I do believe that ultimately we have an 
individual-financed system. When employers purchase care, it 
ultimately is individual-purchased care because it results in 
wages that actually subsidize care provided by an employer.
    My concern about the proposal that you're suggesting is 
really two-fold. The first concern is from a political 
standpoint and the second from a substantive standpoint. From a 
political standpoint, I believe one of the things that has made 
health reform an intractable difficulty is that, when you deal 
with such significant change, you wind up having a massive 
redistribution of resources. Moving from an employer-based 
system essentially to an individual-based system would involve 
an enormous redistribution of resources. I suggest to you, from 
just a political standpoint, that kind of massive 
redistribution has confounded all attempts at significant 
change.
    The more significant problem that I'd like to raise is 
substantive. That is, if you move towards an individual based 
systems, there's a concomitant step that must occur. We need to 
have a regulatory framework to enable that to work. An 
essential component of that framework is we need to have 
serious insurance reform so that those people who are sicker, 
those people who are older, those people who are less desirable 
from an insurance company's standpoint are protected so that 
they can purchase health coverage. I suggest to you that, to 
the extent that such a proposal is viable, what must go with it 
is significant insurance reform.
    I was slightly bemused at the first question relating to 
MSAs and I don't want to talk about MSAs. But, there was an 
interchange that I thought was very instructive that relates to 
an important issue here. Ms. Kanin-Lovers, who is obviously a 
very distinguished, knowledgeable, and thoughtful person 
working for a very distinguished company, was for a moment a 
little lost by the MSA alphabet soup. She is probably in the 
99th percentile of knowledge in the country. I suggest to you 
that one of the things that those people who wish to promote a 
market-driven system to ensure quality vis-a-vis those who lean 
more toward a somewhat greater regulatory approach have in 
common is that we need to have a better system of information 
for consumers and ways to help consumers. If we don't have 
that, the marketplace cannot work.
    I would like to suggest what I hope is a bridge between 
these two approaches, an ombudsprogram run by a non-
governmental organization. It's being tested in a variety of 
ways in California, so you're probably as familiar about this 
as anyone. Such a program is often called a consumer assistance 
program. Others call them an ombudsprogram. I think this is an 
extraordinarily important non-governmental organization 
approach to providing assistance that would help the market-
based approach as well as the regulatory approach.
    People simply are bewildered today about the choices that 
they have. They are bewildered about their choices, their 
rights, and their responsibilities and they need help. I think 
this role should be done through non-governmental 
organizations.
    Chairman Thomas. I'm familiar with the argument that you 
make, Mr. Pollack.
    Dr. Smoak, did you want to comment on that?
    Dr. Smoak. Yes, Mr. Chair. MSAs certainly are a tag line to 
the AMA in terms of our Medicare transition plans and I won't 
go into the specifics as to why but we certainly wholeheartedly 
endorse that concept and believe that it's a way to afford some 
alternate in terms of the financing mechanism of some of our 
health insurance needs.
    I would suggest that the individually-owned as well as the 
individually-selected plan would be an excellent choice because 
it gives a patient the opportunity to have additional choices 
that he or she might not have otherwise, which leads me, then, 
to the idea of a defined contribution which would merit a lot 
of value in terms of government, employers, et cetera, knowing 
what their outlay is and would have a particular benefit, I 
think, overall in our planning for financing of care.
    I, myself, am a small businessman. I offer options to my 
employees and I think that the trust that we develop in our 
patient-physician relationship--this is the cornerstone, right 
here, of quality health care and given them a choice and 
opportunity to properly balance the quality, the cost, and the 
access to appropriate care.
    Chairman Thomas. I appreciate your comments and to pick up 
some points that you made, Mr. Pollack. I didn't want to 
continue to intervene. There's no question that you're going to 
have to deal with insurance reform; the question of risk 
adjustment is a critical one.
    As was mentioned by Ms. Graham, malpractice reform needs to 
be involved. Clearly, with the current Tax Code mal-
distribution where there are individuals who have, in essence, 
open-ended opportunities for fringe benefits based upon 
negotiating with an employer and others who don't, one of the 
key restrainers would be that beyond some amount that's 
determined, additional health care would be after-tax dollars 
and, until we get a fringe benefit dollar equated to a wage 
dollar, you're never going to get reasonable control of health 
care cost in this country, in my opinion.
    The defined contribution is clearly one way to approach 
that dollar amount, especially when it's other people's money. 
My colleague from Louisiana on the subcommittee is fond of 
saying that people will consume as much health care as other 
people are willing to pay for and what is long overdue, 
frankly, in this society is a debate in a budgetary way of how 
much money we're willing to spend in that area and make it a 
policy debate.
    Currently, in Medicare on part B, 75 cents out of every 
dollar is a subsidized dollar but you don't really see it; it 
should be a public policy debate as to how much that should be. 
I think in the long run that's the only way we're going to 
operate and, of course, the easiest device to do that is a 
defined contribution above which taxpayers dollars would be 
purchasing health care.
    If you say that, then, you have to look at the other end of 
the spectrum of those who are not able either through a tax 
credit structure by not having an income tax, or a low enough 
income not to be able to deal with that issue, that there's got 
to be a way to make sure that they're participants in the 
system as well at whatever the defined contribution level is.
    So, yes, it's a fairly radical discussion but I don't know 
any other way to get to the fundamental problem of dealing with 
it and maximizing the private sector's involvement in that 
ultimate health care structure because the current approach is 
wait for some group that either has a real or apparent problem 
and, for political purposes, create a plan which almost 
inevitably stretches a Government proposal to cover them, or, 
perhaps even worse under the current system, figure out a way 
to pony it up on the back of the employers either to cover 
those that are directly employed or, through increased tax 
schemes, get money to cover them as well.
    So, what I'm looking at is a way to try to maximize the 
private health care market while answering, I think, legitimate 
critics about the maldistribution of benefits currently today. 
And, while we're doing all that, of course, we will be looking 
at questions of quality and providing consumers with tools that 
allow them to make those decisions. But, it is a massive, 
massive undertaking and to talk about it is not to do it and 
the two are worlds apart right now.
    The gentlewoman from Connecticut?
    Mrs. Johnson of Connecticut. Thank you and thank you very 
much for your testimony today. I am going to have to leave 
fairly soon so I just wanted to ask a couple of questions.
    First of all, Ms. Lovers, you provide a lot of choice to 
your employees. You talked about a single plan but you also 
provide--talked about all the choices?
    Ms. Kanin-Lovers. Yes.
    Mrs. Johnson of Connecticut. How does that work? Very 
briefly.
    Ms. Kanin-Lovers. We go through an open enrollment period 
every year and, before enrollment starts, we send out to all 
employees information about the way the indemnity plan works 
and----
    Mrs. Johnson of Connecticut. Kind of like the Federal 
Government does.
    Ms. Kanin-Lovers. Sorry?
    Mrs. Johnson of Connecticut. Kind of like the Federal 
Government does.
    Ms. Kanin-Lovers. I'm not sure what the Federal Government 
does but I assume that they would send out information on how 
the plan works, and then there would be information on the HMOs 
that are in your specific neighborhood, what those look like. 
We've provided copies of what we call our fact sheets----
    Mrs. Johnson of Connecticut. Yes, that was very helpful----
    Ms. Kanin-Lovers [continuing]. And it kind of----
    Mrs. Johnson of Connecticut. Because I don't have much 
time, do most Fortune 500 companies provide choice, to your 
knowledge?
    Ms. Kanin-Lovers. Yes. To my knowledge, yes.
    Mrs. Johnson of Connecticut. Do you know anything about the 
group just below you? Do they generally provide--the bigger 
companies in America generally provide more than one plan?
    Ms. Kanin-Lovers. That would be my suspicion, yes.
    Mrs. Johnson of Connecticut. Ms. Graham, do you provide 
more than one plan?
    Ms. Graham. We used to about five years ago. In the last 
few years, we've changed and now we--everyone has a PPO. But, 
we have--we employ 57 people in 7 different States so each 
plan--and that's not a lot of people to spread over 7 States, 
and so we've come up with the best plan that our managers spend 
a lot of time on evaluating and they're saying it's the fairest 
for all 7 States----
    Mrs. Johnson of Connecticut. And why did you go from a 
number of plans to one plan?
    Ms. Graham. It was really cost and it was also taking so 
much time to evaluate different plans that--I mean, we're a 
small company and we just don't hire anybody to just review the 
plans so it's whatever----
    Mrs. Johnson of Connecticut. I just think it is very 
important in looking at the Norwood, some of the bills before 
us to recognize that Government provides multiple choices; 
that's all Federal, State and local governments, to my 
knowledge. All the big companies do, and a lot of the little 
companies that no longer do don't because they can't afford it. 
So, I think you have to be very careful about this issue of 
mandating because a lot--some of the most destructive changes 
that are going on are coming as the result of mandating.
    I just want to ask you one other question about your 
analysis of disenrollment rates. Now, my friend, Lynn Martin, 
went to work for one of the big accounting firms and one of her 
first tasks was to figure out why, when they were making such 
an aggressive effort to hire very, very talented women, that 
had so few women moving up the ladder. And, when they--when she 
first got the data together and she went to the CEO, he 
basically said, well, I guess they're retiring to have 
children. And that was it. The firm simply assumed that these 
women were leaving the firm because they had worked a number of 
years and now they were starting families and blah, blah, blah.
    In fact, they weren't doing that. When Lynn went back and 
looked and did all the exit work, they found out they were 
going to other firms because they were not getting good choice 
of assignments. There was a glass ceiling and their private--
all I'm saying is it really doesn't tell me anything for you to 
say there's a 20 percent turnover disenrollment rate because I 
see too much of that out there.
    Seniors don't know to be sure their own physician is in the 
plan first. It is confusing. It's happening very fast in my 
part of the country. I need to know far more about that and I 
can't conclude from the numbers you give me that service was 
the problem, that they were better at marketing than they were 
at serving. Unless you have some better information than you've 
given in your testimony, we shouldn't be drawing those kinds of 
conclusions from that kind of data.
    Mr. Pollack. Congresswoman Johnson, let me say a couple of 
things about this. First, in our report, we were very clear in 
saying that disenrollment rates are not determinative of 
quality; we were very clear about that.
    Mrs. Johnson of Connecticut. But, you're putting an awful 
lot of weight on it----
    Mr. Pollack. But, let me finish the point. However, there 
really is a conundrum, I think, for those who believe in a 
market-driven system who feel that a market-driven system is a 
better way to achieve quality. I think it is ironic that when 
people disenroll, say that this tells us nothing about quality.
    The whole notion of a market-driven system is that people 
can vote with their feet and, by people voting with their feet, 
the market drives quality. And then, when one makes an 
observation about that, the very person who----
    Mrs. Johnson of Connecticut. I'm absolutely not suggesting 
that we not be concerned about that data. But, to draw the 
conclusions you do from it, I think, is unwarranted. And, the 
other thing I would point out is that the market-driven health 
care system we have is doing more about quality than the fee-
for-service market-driven system ever did. For the first time, 
we are looking at patterns of practice. For the first time, we 
were looking at outcomes. The fee-for-service system never 
stimulated that.
    That isn't to say that there aren't problems but I think, 
you know, one of the reasons we see these statistics about 
people feeling, say, 55 percent can't get access to care is 
because we talk about the fears. We don't talk about the 
reality. And this body has got to look at the reality. It's 
helpful to us that almost all the States have passed the very 
same consumer protection provisions that we passed last year. I 
think that's true; we're going to try to document that. But, 
we've got to be careful that we don't legislate on the basis of 
rather slippery information.
    Let me just say one thing to Dr. Smoak. It does concern me 
that you have so little concern about the liability provisions 
in the Norwood bill. In my estimation, and I think this is 
universally accepted, it was, in a sense, malpractice, our 
malpractice laws driving very defensive medicine; driving the 
kind of medicine that didn't look at whether you needed the 
care, just whether this could possibly be something you might a 
few years later look back and say, we should have done. That 
really, in a sense, bankrupted the fee-for-service system.
    So, unfortunately, in some of the legislative proposals 
before us, some of my colleagues are trying to solve the 
problems of managed care by bringing all that liability stuff 
back into this system which will have exactly the same effect. 
So, I don't see that as the answer, as important as I think 
rectifying the balance between the physicians and restoring to 
the physician the control over the care decisions. But, I don't 
think exposing systems to malpractice in the way we expose 
individual physicians to malpractice is going to be a 
constructive part of the answer.
    So, I'm much more interested in other things that will 
restore power to physicians and the physician-patient 
relationship but maintain and oblige the physician to be 
accountable for the kind of discipline that we know can produce 
better quality care, as we heard from the earlier panel. So, I 
would hope that you would help us rethink what's constructive 
about the proposals before and what is really either terribly 
premature and terribly, possibly destructive because we are in 
a period of change and we don't want to truncate evolution; at 
the same time, we want to protect American health care 
consumers from possible significant disadvantages.
    I'm sorry. I have to leave and thank you, Mr. Chairman.
    Chairman Thomas. The gentlewoman's time has expired.
    For a brief final intervention, the gentleman from 
Louisiana.
    Mr. Cooksey. You know, I think that we all have the same 
motivation and that's to come up with an economic system of 
delivery of health care and we need straight answers, we need 
people to look at it objectively, people need to leave off 
their own biases. As a physician, I need to leave off some of 
mine. As managers of insurance companies, you need to leave off 
some of yours. And we need to look at it with a whole new 
perspective.
    You know, in this century, we've gone from health care 
being a cottage industry--one solo practitioner--through a 
corporate entity through a Government-regulated entity--
corporate in World War II with people getting health benefits 
instead of--in lieu of salary increases. And, it became 
corporate-oriented and in Government-oriented, in 1965 with the 
passage of Medicare, and then you interspersed labor unions, 
labor unions' leaders, you interspersed regulators with 
Government care.
    And it just--the chain gets longer and we need to get back 
to that patient-physician relationship. We need to get away--
clear out all the regulators and we need to use information 
systems much better than what the health care profession and 
the insurance companies are doing. And then we need to get all 
the people out that are out there, just, in the health care 
system just to make money. They're too many of them making too 
much money and not contributing anything to the quality of 
health care.
    Thank you, Mr. Chairman, and good day.
    Chairman Thomas. Thank you very much and I thank all of you 
for your patience and, more importantly, for your testimony. 
This is a critical area that we may very well be legislating 
and we need all the help we can get.
    So, the hearing stands adjourned.
    [Whereupon, at 2:30 p.m., the Subcommittee was adjourned 
subject to the call of the Chair.]
    [Submissions for the record follow:]


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