[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
                PROMOTING DISEASE MANAGEMENT IN MEDICARE
=======================================================================


                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 16, 2002

                               __________

                           Serial No. 107-80

                               __________

         Printed for the use of the Committee on Ways and Means









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82-324                          WASHINGTON : 2002
___________________________________________________________________________
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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota               GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa                     JOHN LEWIS, Georgia
SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington            MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia                 WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania           XAVIER BECERRA, California
WES WATKINS, Oklahoma                KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona               LLOYD DOGGETT, Texas
JERRY WELLER, Illinois               EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin

                     Allison Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                         Subcommittee on Health

                NANCY L. JOHNSON, Connecticut, Chairman

JIM McCRERY, Louisiana               FORTNEY PETE STARK, California
PHILIP M. CRANE, Illinois            GERALD D. KLECZKA, Wisconsin
SAM JOHNSON, Texas                   JOHN LEWIS, Georgia
DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota               KAREN L. THURMAN, Florida
PHIL ENGLISH, Pennsylvania
JENNIFER DUNN, Washington


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
Advisories announcing the hearing................................  2, 4

                               WITNESSES

Centers for Medicare and Medicaid Services, Ruben King-Shaw, Jr., 
  Deputy Administrator and Chief Operating Officer...............     8

                                 ______

Anderson, Gerard, Johns Hopkins University.......................    48
Henschke, Claudia I., M.D., Weill Medical College of Cornell 
  University.....................................................    58
Humana Inc., and Disease Management Association of America, 
  Jonathan T. Lord, M.D..........................................    33
Marshfield Clinic, Michael Hillman, M.D..........................    38
Wennberg, John E., M.D., Dartmouth College.......................    28

                       SUBMISSIONS FOR THE RECORD

3M Health Information Systems, Wallingford, CT, Richard Burford, 
  statement and attachment.......................................    75
Advanced Medical Technology Association, statement...............    77
American Heart Association, Robert Bonow, M.D., statement........    80
Burr, Hon. Richard, a Representative in Congress from the State 
  of North Carolina, statement...................................    82
Disease Management Association of America, Christobel Selecky, 
  statement......................................................    84
McKesson Corporation, San Francisco, CA, Sandeep Wadhwa, M.D., 
  statement......................................................    88
RMS Disease Management Inc., McGaw Park, IL, statement...........    91











                PROMOTING DISEASE MANAGEMENT IN MEDICARE

                              ----------                              


                        TUESDAY, APRIL 16, 2002

                  House of Representatives,
                       Committee on Ways and Means,
                                    Subcommittee on Health,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 3:16 p.m., in 
room 1100 Longworth House Office Building, Hon. Nancy L. 
Johnson (Chairman of the Subcommittee) presiding.

    [The advisory and revised advisory follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
March 28, 2002
No. HL-15

 Johnson Announces Hearing on Promoting Disease Management in Medicare

    Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on 
Health of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on promoting disease management in the 
Medicare program. The hearing will take place on Tuesday, April 9, 
2002, B-318 Rayburn House Office Building, beginning at 3:00 p.m.

    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 
Witnesses will include academics, practitioners, and health plans with 
expertise in disease management. However, any individual or 
organization not scheduled for an oral appearance may submit a written 
statement for consideration by the Committee and for inclusion in the 
printed record of the hearing.

BACKGROUND:

    Approximately 12 percent of all Medicare enrollees accounted for 
three-quarters of all Medicare fee-for-service program costs. Many of 
these beneficiaries have chronic health conditions, such as diabetes, 
hypertension, asthma and congestive heart failure that require repeated 
and costly hospitalizations. Medicare's costs could be curtailed if the 
program is designed to better manage health care for these 
beneficiaries.

    Disease management programs assist both the physician and patient 
with a plan of care that helps evaluate and prevent complications and 
improve outcomes through evidence-based practice guidelines and patient 
empowerment strategies. Typically this is used to improve health 
outcomes and reduce the costs of chronic diseases.

    Some fee-for-service providers have incorporated disease management 
programs, but only to a limited extent. But in general, health care for 
those in Medicare fee-for-service with chronic illnesses has been 
poorly coordinated across sites of care and is often fragmented, 
although many providers have expressed greater interest in using 
management techniques to improve care.

    Conversely, Medicare+Choice plans widely use disease management 
programs and have found preventative care and case management may 
ultimately save money by avoiding costly hospital stays. According to 
the 2000 Survey of Disease Management Practices, ``virtually all'' 
plans have at least one disease management program. The average plan 
has four disease management programs in place, and 95 percent of plans 
have a diabetes disease management program. Finally, at least 75 
percent of plans have asthma and congestive heart failure disease 
management programs and almost 50 percent of plans have a disease 
management plan for coronary artery disease.

    On February 22, 2002, the Centers for Medicare and Medicaid 
Services issued a request for proposals to conduct demonstration 
disease management programs in the fee-for-service program as required 
by the Benefits Improvement and Protection Act. The demonstration 
programs are for congestive heart failure, diabetes, or coronary heart 
disease. The proposal recognizes the value of expanding disease 
management to additional beneficiaries.

    In announcing the hearing, Chairman Johnson stated, ``As Congress 
modernizes and strengthens Medicare, we must recognize the significant 
role disease management can play in improving seniors' lives. 
Unfortunately, this is yet another area in which Medicare significantly 
lags behind the private market. By encouraging widespread incorporation 
of disease management programs in Medicare, we will help improve 
patient outcomes while reducing health costs.''

FOCUS OF THE HEARING:

    Tuesday's hearing will focus on promoting disease management 
programs in traditional and managed Medicare.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

    Please note: Due to the change in House mail policy, any person or 
organization wishing to submit a written statement for the printed 
record of the hearing should send it electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, by the close of business, Tuesday, April 23, 2002. 
Those filing written statements who wish to have their statements 
distributed to the press and interested public at the hearing should 
deliver their 200 copies to the Subcommittee on Health in room 1136 
Longworth House Office Building, in an open and searchable package 48 
hours before the hearing. The U.S. Capitol Police will refuse sealed-
packaged deliveries to all House Office Buildings. Failure to do so may 
result in the witness being denied the opportunity to testify in 
person.

FORMATTING REQUIREMENTS:

    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.

    1. Due to the change in House mail policy, all statements and any 
accompanying exhibits for printing must be submitted electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, in Word Perfect or MS Word format and MUST NOT exceed a 
total of 10 pages including attachments. Witnesses are advised that the 
Committee will rely on electronic submissions for printing the official 
hearing record.

    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.

    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.

    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov/.

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call (202) 225-1721 or (202) 226-3411 TTD/TTY in advance of the event 
(four business days notice is requested). Questions with regard to 
special accommodation needs in general (including availability of 
Committee materials in alternative formats) may be directed to the 
Committee as noted above.

                                 

                * * * NOTICE--HEARING RESCHEDULED * * *

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                         SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
April 2, 2002
No. HL-15-Revised

                         Rescheduled Hearing on

                Promoting Disease Management in Medicare

                        Tuesday, April 16, 2002

    Congresswoman Nancy L. Johnson, (R-CT), Chairman, Subcommittee on 
Health of the Committee on Ways and Means, today announced that the 
Subcommittee hearing on Promoting Disease Management in Medicare, 
previously scheduled for Tuesday, April 9, 2002, will now be held on 
Tuesday, April 16, 2002, at 3:00 p.m., in the main Committee hearing 
room, 1100 Longworth House Office Building.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

    Please note: Due to the change in House mail policy, any person or 
organization wishing to submit a written statement for the printed 
record of the hearing should send it electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, by the close of business, Tuesday, April 30, 2002. 
Those filing written statements who wish to have their statements 
distributed to the press and interested public at the hearing should 
deliver their 200 copies to the Subcommittee on Health in room 1136 
Longworth House Office Building, in an open and searchable package 48 
hours before the hearing. The U.S. Capitol Police will refuse sealed-
packaged deliveries to all House Office Buildings.

    All other details for the hearing remain the same. (See 
Subcommittee Advisory No. HL-15, dated March 28, 2002.)

FORMATTING REQUIREMENTS:

    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.

    1. Due to the change in House mail policy, all statements and any 
accompanying exhibits for printing must be submitted electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, in Word Perfect or MS Word format and MUST NOT exceed a 
total of 10 pages including attachments. Witnesses are advised that the 
Committee will rely on electronic submissions for printing the official 
hearing record.

    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.

    3. Any statements must include a list of all clients, persons, or 
organizations on whose behalf the witness appears. A supplemental sheet 
must accompany each statement listing the name, company, address, 
telephone and fax numbers of each witness.

    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov/.

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call (202) 225-1721 or (202) 226-3411 TTD/TTY in advance of the event 
(four business days notice is requested). Questions with regard to 
special accommodation needs in general (including availability of 
Committee materials in alternative formats) may be directed to the 
Committee as noted above.

                                 

    Chairman JOHNSON. Good afternoon. The hearing will come to 
order. Mr. Stark is near at hand, we hope, and so I would like 
to start. I consider this one of the most important hearings 
the Subcommittee has had.
    Seniors in traditional Medicare are literally held hostage 
to an outdated benefit package that denies them the state-of-
the-art care that is possible under programs like disease 
management (DM). Programs designed to assist both the physician 
and patient to develop a plan of care can help defray rising 
costs while at the same time improving the quality of health 
outcomes and tremendously improving the quality of life of our 
seniors. Unless we transform Medicare from a sick and acute 
care program, the costs we face as the baby boomers age will be 
staggering, but the health needs of the rising number of 
seniors suffering from multiple chronic illnesses will not be 
met.
    So, as we start this hearing, I believe it lies at the 
heart of improving both the quality of Medicare and managing 
its costs. I would have to say that as I have gone through 
doctors' offices where these protocols are being used, medical 
organizations, all kinds of providers, honestly, I have never 
seen such enthusiasm, such excitement by both patients and 
providers for the quality of life disease management is making 
possible for seniors with very serious and chronic illnesses, 
as well as the respect for the costs that can be avoided and 
the long-term cost control that is possible through this 
approach that dramatically improves quality.
    A small portion of Medicare beneficiaries, 12 percent, 
account for 75 percent of all Medicare fee-for-service 
payments. Typically, it is these beneficiaries who suffer from 
chronic illnesses such as diabetes, asthma, or coronary heart 
disease. In many cases these high costs come from repeated 
hospitalizations due to poor medication compliance, lack of 
adherence to a prescribed treatment plan, and lack of patient 
self-management skills.
    In addition, there are also provider-related problems that 
undermine efforts to coordinate and better manage patient care: 
poor communication, and narrowly focused payment systems that 
result in inadequate and fragmented monitoring of patients. 
Yet, as the baby-boom generation retires, the number of 
chronically ill beneficiaries is expected to increase, causing 
Medicare costs to escalate.
    Disease management programs, designed to assist both 
physician and patient to develop a plan of care using evidence-
based practice guidelines, more consistently manage illness, 
and will better involve the patient in their own health care. 
This will defray some of the costs while improving the health 
care of our senior citizens.
    While some providers have attempted to implement disease 
management programs in Medicare fee-for-service, health care 
for beneficiaries with chronic illness remains typically 
fragmented and poorly coordinated. Conversely, many managed 
care entities have developed a wide array of cost control 
programs that combine adherence to evidence-based medical 
practices with better coordination of care across providers.
    Medicare+Choice (M+C) plans have found preventive care and 
case management saves money and avoids costly hospital stays. 
According to the 2000 Survey of Disease Management Practices, 
the average M+C plan has four disease management programs, with 
95 percent of plans having diabetes disease management.
    Netcare, a diabetes management program covering 7,000 
diabetics in 7 managed care organizations, actually decreased 
hospital admissions by 18 percent, resulting in a 12 percent 
savings. Think of the impact on people's lives.
    There has been some movement toward implementing disease 
management programs in fee-for-service. A coordinated care 
demonstration authorized by the Balanced Budget Act (BBA) 
resulted in approval of 15 programs. In addition, on February 
22, Centers for Medicare and Medicaid Services (CMS) issued a 
Request for Proposal to conduct demonstration disease 
management programs targeted specifically toward congestive 
heart failure (CHF), diabetes, and coronary heart disease. The 
demonstration projects will operate for up to 3 years, after 
which a formal evaluation will be conducted by CMS.
    These proposals hold the hope that we can achieve the twin 
goals of improving care and saving money, long recognized as 
central tenets of managed care. I am pleased to welcome Ruben 
King-Shaw from the Centers for Medicare and Medicaid Services, 
who will comment on these exciting new opportunities.
    I will also welcome other experts: Dr. Wennberg from 
Dartmouth University will discuss regional variations in 
quality-of-care. Dr. Hillman from the Marshfield Clinic will 
explore their exciting work in incorporating disease management 
into fee-for-service Medicare. Dr. Henschke from Cornell 
University will present her firsthand efforts in managing lung 
cancer patients. Dr. Lord from Humana, and the President of the 
Disease Management Association of America, will discuss 
Humana's work in M+C. Finally, Dr. Anderson of Johns Hopkins 
University will discuss his work in this field.
    I look forward to your testimony, and I specifically 
welcome Ruben King-Shaw for your first appearance before this 
Committee, but I hope not your last. As the testimony you will 
offer us today is testimony that speaks more to the future 
needs of our seniors and to the future evolution of Medicare 
than frankly any testimony we have had to date. So welcome to 
you, Mr. King-Shaw, and when Mr. Stark joins us, if he would 
like to make an opening statement, I will make room for that, 
and meanwhile I would like to recognize my colleague from 
Florida, Congresswoman Thurman.
    [The opening statements of Chairman Johnson and Mr. Foley 
follow:]
  Opening Statement of the Hon. Nancy L. Johnson, a Representative in 
 Congress from the State of Connecticut, and Chairman, Subcommittee on 
                                 Health
    Good morning. Today's hearing will focus on the important subject 
of disease management and its application to the Medicare program. 
Disease management has significant potential to improve health outcomes 
and the quality of patients' lives, and may reduce health costs.
    A small number of Medicare beneficiaries--12 percent--accounted for 
75 percent of all Medicare fee-for-service payments. Typically, these 
beneficiaries suffer from chronic illnesses, such as diabetes, asthma 
or coronary heart disease. In many cases, these high costs are from 
repeated hospitalizations as a result of poor medication compliance, 
lack of adherence to a prescribed treatment plan, and lack of patient 
self-management skills.
    In addition, there are also provider related problems, such as poor 
communication and coordination between providers, and inadequate and 
fragmented monitoring of patients that undermines patient care.
    As the baby boom generation retires, the number of chronically ill 
beneficiaries is expected to increase, causing Medicare costs to 
escalate. Disease management programs--programs designed to assist both 
the physician and patient to develop a plan of care, using evidence-
based practice guidelines--should help defray some of these costs and 
improve health care outcomes.
    While there have been some attempts by providers to implement 
disease management programs in fee-for-service, health care for 
beneficiaries with chronic illness is typically fragmented and poorly 
coordinated. These shortcomings are due to multiple health care 
providers and multiple sites of care.
    Conversely, many managed care entities have developed a wide array 
of cost-control programs that combine adherence to evidence-based 
medical practices with better coordination of care across providers. 
Medicare+Choice plans have found preventative care and case management 
saves money and avoids costly hospital stays. According to the 2000 
Survey of Disease Management Practices, the average Medicare+Choice 
plan has four disease management programs, with 95 percent of plans 
having a diabetes disease management program.
    Netcare, a diabetes management program comprised of 7,000 diabetics 
in 7 managed care organizations actually decreased hospital admissions 
by 18 percent--resulting in 12 percent savings.
    There has been some movement towards implementing disease 
management program in fee-for-service. A Coordinated Care Demonstration 
authorized by the Balanced Budget Act resulted in approval of 15 
programs. In addition, on February 22, of this year, CMS issued a 
request for proposal to conduct demonstration disease management 
programs in targeted specifically towards congestive heart failure, 
diabetes and coronary heart disease. The demonstration projects will 
operate for up to three years, after which a formal evaluation will be 
conducted by CMS.
    These proposals hold the hope that we can achieve the twin goals of 
improving care and saving money--long recognized as a central tenet of 
managed care.
    We are pleased to welcome Ruben King-Shaw from the Centers for 
Medicare and Medicaid Services who will comment on these exciting new 
opportunities.
    I would like to welcome our other experts. Dr. Wennberg from 
Dartmouth College will discuss regional variation in quality of care. 
Dr. Hillman from Marshfield Clinic will explore their exciting work in 
incorporating disease management in fee-for-service. Dr. Henschke from 
Cornell University will present her first hand efforts in managing lung 
cancer. Dr. Lord, from Humana and the President of the Disease 
Management Association of America will discuss Humana's work in 
Medicare+Choice. Finally, Dr. Anderson of Johns Hopkins University will 
discuss his work in this field. I look forward to your testimony.

                                 

Opening Statement of the Hon. Mark Foley, a Representative in Congress 
                       from the State of Florida
    Madam Chairman, I want to thank you for holding this very important 
hearing today on disease management programs in Medicare. As you know, 
Congress created Medicare in 1965 for the purpose of providing a basic 
health insurance package for our elderly--who, in many cases, cannot 
make ends meet. In its current form, Medicare is a reactive program 
that generally pays only when the beneficiary gets ill.
    However, with health care costs rising between eight and ten 
percent each year we need to reexamine the entire health system in 
order to save it. Medicare must move from a reactive pay-as-you go 
system to a pro-active ``wellness care'' model. This shift will save 
the American people billions of dollars while increasing the quality of 
life of our elderly. The notion is simple--if we can get a patient to 
the doctor soon enough, then the overall cost of taking care of that 
person dramatically decreases. That is why Congressman Sander Levin and 
I introduced H.R. 2058, the Medicare Wellness Act. Our bill would be a 
major step in providing necessary preventive care benefits to our 
elderly. Specifically, the bill would establish a Healthy Seniors 
Promotion Program; expands coverage of preventive services; establishes 
a national fall prevention campaign; sets up a clinical depression 
screening demonstration project; and, requires a study of elderly 
disease prevention.
    Again, Madam Chairman, I commend your actions today in bringing 
this very important issue to our committee. I hope that as you and your 
committee begin work on a larger Medicare bill this year that you will 
give strong consideration to incorporating some of the provisions in 
our bill.
    Thank you.

                                 

    Mrs. THURMAN. Thank you, Madam Chairman, and I just also 
want to thank Mr. Shaw for being here today, and for the 
benefit of the Members of this Committee, to let them know that 
Mr. Shaw came from Florida, was a very able Administrator, and 
was one who strengthened, I think, in many ways the health 
programs in the State of Florida through his time, and then 
certainly coming into the Federal Government, in which he 
helped us attain some very valuable waivers that he had been 
pushing before he left Florida. So, we certainly are pleased to 
have him before us today and for the work that he has done on 
behalf of the United States, but also on behalf of our citizens 
in Florida. Welcome.
    Chairman JOHNSON. Thank you, Congresswoman Thurman. I was 
aware of his service in Florida. I am glad you were here to 
make some comment. I would like to recognize now my colleague 
and Ranking Member, Congressman Stark, for his comments.
    Mr. STARK. Well, thank you. I apologize for being late, 
Madam Chair, and I want to thank you for this hearing. We are 
going to hear about Medicare beneficiaries, who are more likely 
to have chronic illnesses and perhaps even more than one of 
them. I hope that we can be careful not to focus on the short-
term costs of covering and caring for these individuals. 
Without budget rules and scoring rules, it is tempting to do 
that. In the short term, it might be in Medicare's interests to 
curtail the costs by curtailing care, and that is not I think 
what the Chair has in mind, certainly not what this Ranking 
Member has in mind.
    There isn't an incentive that I can determine, in the 
managed care industry as we know it, for plans to invest in the 
long-term health of their enrollees. If they keep getting 
adjusted each year, it is hard to see how they will recover 
major costs.
    So, I think this is a topic that is long past due, and I 
think that you are brave to venture into a complex area where I 
am sure you are going to get a lot of opinions of what is wrong 
with every way that people suggest how to do it. I hope we can 
get at it, and maybe in a couple of years we will be able to 
see this become a standard part of Medicare, and I thank you 
for your interest in it.
    Chairman JOHNSON. Thank you, Mr. Stark. Mr. King-Shaw?

  STATEMENT OF RUBEN KING-SHAW, JR., DEPUTY ADMINISTRATOR AND 
  CHIEF OPERATING OFFICER, CENTERS FOR MEDICARE AND MEDICAID 
                            SERVICES

    Mr. KING-SHAW. Well, Madam Chairwoman, thank you very much 
for the opportunity to talk about something so important and so 
meaningful and so much a part of what I have been focused on 
for a number of years. To Congressman Stark, again, thank you, 
and Congresswoman Thurman, always good to see you again.
    It is very, very appropriate that I take time to thank all 
the Subcommittee Members for being here and for the great 
leadership you have shown in this area. Clearly, disease 
management has enormous potential for Medicare, and has proven 
its ability to provide great results outside of Medicare for a 
number of years. In fact, there are really millions of 
individual seniors included who benefit from the power of 
disease management programs in the Medicaid and commercial 
sectors.
    We in Medicare have been demonstrating various 
technologies--I will share them with you in a moment--but truly 
have some ways to go in harnessing the power of these disease 
management methodologies for the benefit of the people we serve 
and the mission that we have chosen, which is to care for poor 
people and old people and those who need public assistance for 
their daily health care needs. I think it is important, though 
you have my written statement that goes into great detail of 
the specifics of what we are doing at CMS, I think it is 
important to take a moment in just this first opening 
discussion about what do we mean when we say ``disease 
management'' in Medicare.
    I think disease management is best described as a 
continuum, if you will, that can be both very robust on one end 
and particularly light on another. So, as I walk through some 
of the common elements of a robust disease management program, 
I think we get a sense of what a full, comprehensive disease 
management program would look like.
    It would have elements of a clinically driven best practice 
or evidence-based clinical strategy. That is where it begins, 
with strong clinical leadership based on proven, effective 
clinical strategies. It would then include the integration of 
administrative, particularly data, and financial resources to 
support the patient-physician relationship.
    This truly is a patient-centered strategy for improving 
health care outcome, treatment, and wellness. There is an 
important element of patient education in disease management, 
and as patients understand the pathology of their condition, 
they become full participants in the help and healing process. 
As you can see, they actually become a partner and take 
ownership of the health care itself.
    A significant part of provider education is attributed to 
disease management, and there is the important discipline of 
risk assessment, truly knowing the population. You will hear a 
term, ``population management,'' and an important part of 
population management is stratifying the population according 
to levels of risk or understanding of disease or degree of 
severity in these types of things.
    There is an important part of disease management that 
focuses on outcomes and outcome measures. All successful 
disease management programs truly do have ways of identifying 
the objective, the clinical, the social, the cultural even, 
outcomes that are the target of performance. So, here are some 
quite rigorous, very effective ways of measuring those 
outcomes. Then clearly there are cost savings, and then the 
provision of comprehensive, integrated, but coordinated care 
across the delivery system.
    So, these are the elements of what I would describe as a 
very robust disease management program, and I will share with 
you some examples that we are focusing on at CMS in a moment. 
There are elements of disease management, as I have just 
outlined, that can appear in isolation. You can have two or 
three of these deployed very effectively, and those would end 
up on the lighter scale of disease management. It is within 
that continuum of sources, of resources, of approaches, that 
you will find most disease management programs.
    It is also a good question to ask, well, where is disease 
management most effective? I think Chairwoman Johnson has 
addressed those, and they are in the chronic conditions. They 
are most commonly found in asthma, congestive heart failure, 
coronary heart disease, Alzheimer's, cardiovascular, and so 
forth, diabetes, depression, hypertension, and increasingly 
substance abuse and chemical dependency, as well as lung 
disease and mental health such as depression conditions.
    So, where you have in the Medicare program an increasing 
number of beneficiaries who are suffering from chronic 
diseases, it would be a natural progression, a natural 
advancement of the Medicare program, to begin to harness more 
effectively disease management methodologies. Where have these 
methodologies been proven to be most successful? It truly has 
been in the managed care or coordinated care or integrated care 
world.
    Whether that has been in Medicaid or the commercial 
environment, or managed indemnity before that, it has truly 
been in the managed care arena where we have developed the most 
promising models for disease management. Why would that be the 
case? Why would managed care be the place where the expertise 
has grown up in such abundance around disease management?
    Well, for one thing, these private plans have the 
flexibility to reconfigure resources around the patient-
physician relationship. These private plans also have the 
ability to achieve greater returns on the continuity of care. 
They are more free to respond to the needs of the population. 
They can be more agile in financial models or contracting or 
partnerships. They can build coalitions with clinical and 
academic and pharmacological and community-based resources 
around the needs of a population or a patient, and they have 
the ability to maintain a platform that is conducive to further 
disease management operations.
    So, it is within the context of a delivery system which is 
flexible and agile and patient-centered that we have seen the 
most effective deployment of disease management programs. So, 
if we are looking at one of the ways that Medicare can preserve 
the benefits of disease management, it would clearly be to 
shore up the M+C program itself, in that the provision of an 
actuarially sound methodology of financing M+C programs will 
preserve for seniors in those programs the benefits of disease 
management that they currently enjoy.
    Clearly there is an application of disease management 
programs outside of M+C, and so the next few comments that I 
will share with you will give you some sense of what we are 
doing outside of the M+C environment. In addition to what you 
may have already read about is our preferred provider 
organization (PPO) demonstration solicitation that we have just 
announced.
    We are looking at doing some things around congestive heart 
failure that will identify clinical outcomes among congestive 
heart failure patients, either in M+C organizations or outside 
in the fee-for-service world, that would give us the ability to 
direct resources, data, information, coordinated care for a 
better outcome in revised incentive payments, if you will, as a 
result of good clinical outcomes.
    Similar efforts are underway with the ESRD, end-stage renal 
disease patients, and here is an important part of disease 
management which is often missed. These are often extremely 
effective methodologies for addressing disparities in health 
care, disparities among men and women and among ethnic and 
racial groups.
    So ESRD, which is disproportionately a condition where 
African Americans suffer, effective disease management programs 
are among the ways to address that disparity by truly 
integrating care and all of the other things that I listed up 
front. Similar types of interventions can address disparities 
in other ways, between rural and urban areas, between male and 
female.
    There are a number of things that we are doing in 
coordinated care, like demonstrations. You heard Madam 
Chairwoman refer to those. There are some very interesting 
implications for direct contracting with provider sponsored 
organizations.
    I mentioned early on that part of disease management is 
building teams, communities of care, if you will, and so where 
you have community-based organizations, be they medical or 
cultural or social or community support, that you can build a 
delivery system around, then you can be quite effective with 
those. So provider sponsored organizations, case rate 
methodologies, where you truly are able to build a financial 
model around a continuum of care based on a diagnosis, these 
are areas that we are beginning to do some work now.
    None of this will substitute for a financially sound 
delivery system as whole, be it M+C or the Medicare program 
itself, but there are ways that we can begin to do a better 
job.
    Just a couple of other examples that kind of will lay out 
the landscape of some of the power of disease management, and I 
will go around the country a little bit. Up in Boston there is 
a very effective diabetes program that truly focuses on the 
provision of annual retinal eye exams, an important part of 
diabetes management, as well as monitoring hemoglobin and 
cholesterol levels.
    Down in Florida, that great Sunshine State, there is quite 
an effective program that is looking at cancer through disease 
management, and the measurement there has been acute care 
hospital days which have gone down 15 percent over a 2-year 
period through effective use of disease management, and also 
looking for admissions as a result of complications from 
cancers, which is already down 10 percent.
    Then I'll stop in New York, because there is an application 
of a more interesting, perhaps, disease management program 
around the issues of mental health.
    I am very pleased to be able to share with you this 
opening. I would love to be a part of whatever question and 
answer or further discussions you would like to have. I have 
had the privilege of being a part of disease management both at 
private and State and now Federal level. I am happy to be a 
part of this great hearing, and I can spend whatever time you 
would like, just respond to your questions, continue the 
dialog.
    Thank you again, Madam Chairwoman.
    [The prepared statement of Mr. King-Shaw follows:]
   Statement of Ruben King-Shaw, Jr., Deputy Administrator and Chief 
     Operating Officer, Centers for Medicare and Medicaid Services
    Chairman Johnson, Congressman Stark, distinguished Subcommittee 
members--first, thank you for inviting me to discuss the significant 
role that disease management can play in improving people's lives. 
Also, I want to express my appreciation to you, Chairman Johnson and 
other Subcommittee members for your leadership on this issue. Analysis 
of disease management is an integral part of the Centers for Medicare & 
Medicaid Services' (CMS) efforts to improve and strengthen Medicare and 
improve the health care services provided to all Medicare 
beneficiaries. As the delivery of health care has matured, we all know 
that individual health care providers routinely plan and coordinate 
services within the realm of their own specialties or types of 
services. However, rarely does one particular provider have the 
resources or the ability to meet all of the needs of a chronically ill 
patient. Ideally, as part of a disease management program, a provider 
or disease management organization is dedicated to coordinating all 
health care services to meet a patient's needs fully and in the most 
cost-effective manner. I want to discuss with you in greater detail the 
challenges and opportunities in integrating disease management into 
Medicare. The demonstration projects we are developing can help achieve 
the President's principles to improve and strengthen Medicare while 
ensuring that America's seniors and disabled beneficiaries receive high 
quality care efficiently.
    As you may know, last July, the President proposed a framework for 
strengthening and improving the Medicare program that builds on many 
ideas developed in this Committee and by other Members of Congress. 
That framework contains eight principles to guide our efforts:

         All seniors should have the option of a subsidized 
        prescription drug benefit as part of modernized Medicare.

         Modernized Medicare should provide better coverage 
        for preventive care and serious illness.

         Today's beneficiaries and those approaching 
        retirement should have the option of keeping the traditional 
        plan with no changes.

         Medicare should make available better health 
        insurance options, like those available to all Federal 
        employees.

         Medicare legislation should strengthen the program's 
        long-term financial security.

         The management of the government Medicare plan should 
        be strengthened to improve care for seniors.

         Medicare's regulations and administrative procedures 
        should be updated and streamlined, while instances of fraud and 
        abuse should be reduced.

         Medicare should encourage high-quality health care 
        for all seniors.

         The President, the Secretary, the Administrator and I 
        are determined to work constructively with Congress to achieve 
        these principles. We believe disease management is a critical 
        element for meeting these goals. We are currently undertaking a 
        series of disease management demonstration projects to explore 
        a variety of ways to improve beneficiary care in the 
        traditional Medicare plan. These demonstrations provide 
        beneficiaries with greater choices, enhance the quality of 
        their care, and offer better value for the dollars spent on 
        health care. The almost complete absence of disease management 
        services in the traditional Medicare plan is another striking 
        indication of how outdated Medicare's benefit package has 
        become. We appreciate this committee's efforts to improve and 
        strengthen the traditional Medicare plan, and we are pleased to 
        be working with you on legislation that will make disease 
        management services more widely available.

    Disease management is also one of the principal reasons why the 
President and Secretary Thompson have advocated immediate action to 
give seniors reliable private plan options in Medicare, and to prevent 
further pullouts of private plans from the Medicare program. Disease 
management services have been available to millions of seniors through 
private plans, yet inadequate and unfair payments are threatening those 
benefits. The most important step that Congress could take right now to 
allow seniors who depend on disease management to keep these valuable 
services, and to provide rapid access to such services to many more 
seniors who need them, is to fix the problems with the payment system 
for private plans.
BACKGROUND

    A relatively small number of beneficiaries with certain chronic 
diseases account for a disproportionate share of Medicare expenditures. 
These chronic conditions include but are not limited to: asthma, 
diabetes, congestive heart failure and related cardiac conditions, 
hypertension, coronary artery disease, cardiovascular and 
cerebrovascular conditions, and chronic lung disease. Moreover, 
patients with these conditions typically receive fragmented health care 
from providers and multiple sites of care. We need to find better ways 
to improve and coordinate care for these patients and to do so more 
efficiently. Such disjointed care is confusing and can present 
difficulties for patients, including an increased risk of medical 
errors. Additionally, the repeated hospitalizations that frequently 
accompany such care are extremely costly, and are often an inefficient 
way to provide quality care. As the nation's population ages, the 
number of chronically ill Medicare beneficiaries is expected to grow 
dramatically, with serious implications for Medicare program costs. In 
the private sector, managed care entities such as health maintenance 
organizations, as well as private insurers, commercial firms, and 
academic medical centers, have developed a wide array of cost-control 
programs that combine adherence to evidence-based medical practices 
with better coordination of care across providers.
    Several studies have suggested that case management and disease 
management programs can improve medical treatment plans, reduce 
avoidable hospital admissions, and promote other desirable outcomes. 
Coordination of care has the potential to improve the health status and 
quality of life for beneficiaries with chronic illnesses. Although 
there is a distinction between the two models, the case management 
approach is generally used to coordinate care to a patient with 
multiple chronic conditions, while the disease management approach 
tends to focuses primarily on the patient and one chronic condition, 
such as congestive heart failure. In the largest sense, both disease 
management and case management organizations provide services aimed at 
reaching one or more of the following goals:

         Improving access to services, including prevention 
        services and necessary prescription drugs.

         Improving communication and coordination of services 
        between patient, physician, disease management organization, 
        and other providers.

         Improving physician performance through feedback and/
        or reports on the patient's progress in compliance with 
        protocols.

         Improving patient self-care through such means as 
        patient education, monitoring, and communication.

    These goals echo the President's principles of improving the 
Medicare program through better care for serious illness, delivering 
higher quality health care, and protecting Medicare's financial 
security.

  PROVIDING RELIABLE COVERAGE OPTIONS THAT INCLUDE DISEASE MANAGEMENT

    We are already taking advantage of private sector expertise in 
disease management to give Medicare beneficiaries more services for 
their premiums, often with lower cost sharing and more benefits than 
are available under traditional Medicare. For example, Medicare+Choice 
plans provide many benefits that are valuable to seniors with serious 
and chronic health conditions, such as:

         A Medicare+Choice plan in Boston that has a 
        comprehensive disease management program for its enrollees with 
        diabetes. This has resulted in significant increases in the 
        share of enrollees who received annual retinal eye exams and 
        are monitored for diabetic nephropathy and substantial 
        improvements in the management of their Hemoglobin and 
        cholesterol levels.

         A Medicare+Choice plan in Florida that has a 
        comprehensive disease management program to monitor, 
        facilitate, and coordinate care for enrollees with cancer. As a 
        result, the number of acute hospital days per cancer case 
        dropped by about 15% over two years and the share of inpatient 
        admissions for complications with cancer has declined by 10 
        percent.

         A Medicare+Choice plan in New York that has a case 
        management program for those hospitalized for mental health 
        disorders and nearly doubled the share of its enrollees who 
        received follow-up care within 7 days of their hospital 
        discharge. This is consistent with research that has shown that 
        individuals who receive after-care following hospital stays for 
        mental illness are more likely to be compliant with their 
        treatment regimens and less likely to be readmitted to the 
        hospital.

    We are also undertaking several demonstration programs improve the 
disease management options available to seniors in private plans. The 
projects represent a wide range of programs and approaches, and they 
address a number of chronic conditions. First, we just announced 
yesterday a demonstration project to expand health plan options in 
Medicare+Choice. Preferred Provider Organizations (PPOs) have been 
successful in non-Medicare markets in providing disease management 
services and other valuable benefits for patients with chronic 
illnesses, yet they are almost nonexistent in Medicare. CMS is 
conducting the demonstration to test ways to provide more health plan 
options to people with Medicare. We hope to award demonstrations later 
this year in up to 12 geographic areas that will be available to enroll 
beneficiaries during the Fall open enrollment period and begin to serve 
enrollees next January. This demonstration program will test changes in 
methods of payment for Medicare services that may be more efficient and 
cost effective while improving the quality of services available to 
beneficiaries. The demonstration plans will be considered 
Medicare+Choice plans and must offer all of Medicare's required 
benefits, but will also have the flexibility to offer greater access to 
drug benefits. Second, we are giving Medicare+Choice organizations that 
meet specific quality indicators extra payments recognizing the costs 
of successful outpatient management of congestive heart failure (CHF).
DEMONSTRATION PROGRAMS IN FEE-FOR-SERVICE MEDICARE

    The outdated benefit package in fee-for-service Medicare does not 
include disease management, and so beneficiaries in fee-for-service 
have not had access to these valuable services. To identify innovative 
ways to include coordinated disease management services in an 
inherently uncoordinated fee-for-service system, we have a number of 
demonstrations both underway and in development. This includes 
demonstrations that are being implemented under legislation developed 
with bipartisan support in this committee. In one fee-for-service 
project at Lovelace Health Systems in New Mexico, we are testing 
whether intensive case management services for CHF and diabetes 
mellitus can be a cost-effective means of improving the clinical 
outcomes, quality of life, and satisfaction with services for high-risk 
patients with these conditions. As part of the evaluation, we will be 
looking at mortality, hospitalization rates, emergency room use, 
satisfaction with care, and changes in health status and functioning.
    We also have implemented an End Stage Renal Disease (ESRD) Managed 
Care Demonstration project that began in September 1996. Among other 
things, the demonstration was designed to test whether: integrated 
acute and chronic care services, and case management for ESRD patients 
improve health outcomes; and whether additional benefits are cost-
effective. Services were provided for 3 years at each site--Kaiser 
Permanente in Southern California and Advanced Renal Options in 
Southern Florida. We measured outcomes such as: survival, 
hospitalizations, patient satisfaction, transplantation, vascular 
access, hematocrit and adequacy of dialysis. In general, enrollees in 
the demonstration exhibited comparable or better outcomes when compared 
to those in fee-for-service. This demonstration provided us with 
valuable information as we consider new ways to better serve ESRD 
beneficiaries, including the possibility of developing a new ESRD 
demonstration.
    In another demonstration, we have selected 15 sites to provide case 
management and disease management services to certain Medicare fee-for-
service beneficiaries with complex chronic conditions. These conditions 
include congestive heart failure, heart, liver and lung diseases, 
diabetes, psychiatric disorders, major depressive disorders, drug or 
alcohol dependence, Alzheimer's disease or other dementia, cancer, and 
HIV/AIDS. This demonstration was authorized by the Balanced Budget Act 
of 1997 to examine whether private sector case management tools adopted 
by health maintenance organizations, insurers, and academic medical 
centers to promote the use of evidence-based medical practices could be 
applied to fee-for-service beneficiaries. This program was designed to 
address important implications for the future of the Medicare program 
as the beneficiary population ages, and the number of beneficiaries 
with chronic illnesses increases. We are testing whether coordinated 
care programs can improve medical treatment plans, reduce avoidable 
hospital admissions, and promote other desirable outcomes among 
Medicare beneficiaries with chronic diseases. The projects have just 
begun enrolling patients. The statute that authorizes these projects 
allows for the effective projects to be continued and the number of 
projects to be expanded based on positive evaluation results--if the 
projects are found to be cost-effective and that quality of care and 
satisfaction are improved. In addition, the components of the effective 
projects that are beneficial to the Medicare program may be made a 
permanent part of the Medicare program. These initial projects are 
varied in their scope and include both provider organizations as well 
as commercial companies, utilize both case and disease management 
approaches, are located in urban and rural areas, and provide a range 
of services from conventional case management to high-tech patient 
monitoring. For example:

         CorSolutions Medical, Inc. of Buffalo Grove, Illinois 
        will implement an urban disease management program targeting 
        beneficiaries in Texas and Indiana with high-risk CHF. The 
        program will offer an extensive array of interventions 
        including an in-home assessment, patient education, and 
        physician reports.

         Carle Foundation Hospital of Urbana, Illinois will 
        implement a rural case management program targeting 
        beneficiaries in eastern Illinois with various chronic 
        conditions. Interventions include health assessments, patient 
        and physician education, medication review, and supportive 
        services.

         Health Quality Partners of Allentown, Pennsylvania 
        will implement an urban and rural disease management program 
        targeting beneficiaries in eastern Pennsylvania with various 
        chronic conditions. This integrated delivery system will 
        provide disease-specific education, and coordination and 
        arrangement of medical care and social services.

         Quality Oncology, Inc. of McLean, Virginia will 
        implement an urban disease management program targeting 
        beneficiaries in Broward County, Florida with cancer. This 
        commercial vendor will match the plan of care written by the 
        patient's own oncologist with its guidelines based on the type, 
        location and stage of the patient's cancer. The program's 
        medical director will contact the patient's oncologist to 
        discuss any differences between the care plan and the 
        guidelines. A care manager will provide patient education and 
        counseling, care coordination, and service arrangement.

         Washington University of St. Louis, Missouri and 
        StatusOne Health of Hopkinton, Massachusetts will implement an 
        urban case management program targeting beneficiaries in St. 
        Louis with various chronic conditions. In this joint venture, 
        patients will receive health and self-care education, personal 
        goal setting and health and social services.

         QMED, Inc. of Laurence Harbor, New Jersey will 
        implement an urban disease management program targeting 
        beneficiaries in Northern California with coronary artery 
        disease. This commercial vendor will combine data from a 
        cardiac monitoring device with its system knowledge database to 
        assist physicians in assessing the patient's condition and 
        formulating treatment recommendations. In addition, cardiac 
        medications will be provided to participants in financial need.

BUILDING FOR THE FUTURE

    We are also developing future demonstration projects that will 
expand options for Medicare beneficiaries in the Medicare+Choice 
program and the traditional Medicare program. Recently, we announced a 
new and innovative demonstration, as required by the Benefits 
Improvement and Protection Act of 2000 (BIPA), that will test the 
combination of providing disease management services and offering 
outpatient prescription drugs to Medicare beneficiaries with advanced-
stage congestive heart failure, diabetes, or coronary heart disease. 
The goal is to coordinate care and assist beneficiaries in managing 
their doctors' orders and monitoring their medication, which in turn 
will lead to better, healthier and fuller lives. Under this 
demonstration, disease management organizations may be paid a monthly 
premium for coordinating the care of patients in the studies and for 
the cost of prescription drugs. We will require each organization 
participating in the program to measure improvements in health outcomes 
and reduce Medicare program expenditures. In fact, participating 
organizations must post a bond guaranteeing savings for the program. 
Also, as mandated by BIPA, we are developing a physician group practice 
demonstration encouraging coordination of Part A and Part B services, 
rewarding physicians for improving beneficiary health outcomes, and 
promoting efficiency.
    In addition to stabilizing the existing Medicare+Choice program, 
and providing more health plan options, like our PPO initiative, we 
want to develop specific health plan options for those beneficiaries 
with chronic illness. We are investigating disease management projects 
that would work with a diverse group of organizations, including 
Provider Sponsored Organizations (PSOs), integrated healthcare systems, 
disease management organizations, and Medicare+Choice plans. We want to 
enhance the clinical management of care to better serve the patients, 
provide for more effective coordination of services, and improve 
beneficiaries' health clinical outcomes and reduce costs to the 
Medicare program.
    For example, we are considering demonstrations to test capitated 
payment arrangements with qualified organizations that will use the 
case management techniques to treat chronic diseases such as congestive 
heart failure, diabetes, and chronic obstructive pulmonary disease. 
This would allow a plan to specifically target treatment and 
coordination for chronic diseases. The payment models are intended to 
improve the coordination and quality of care for Medicare beneficiaries 
and to reduce costs to the Medicare program. The targeted populations 
could include beneficiaries eligible for both Medicare and Medicaid, as 
well as the frail elderly.
    Similar to the current BIPA demonstration project, we also are 
interested in applying the private sector contracting techniques that 
health plans use in the Medicare+Choice program with disease management 
for fee-for-service populations. In addition, as I mentioned, we are 
considering building on the positive aspects of our current ESRD 
demonstration to further explore using integrated care management 
systems for beneficiaries with ESRD. We want to test the effectiveness 
of disease management models in increasing quality of care for ESRD 
patients while ensuring that this care is provided both more 
effectively and efficiently.
    Our evaluations of all of these projects will inform our future 
efforts. We are evaluating health outcomes and beneficiary 
satisfaction, the cost-effectiveness of the projects for the Medicare 
program, provider satisfaction, and other quality and outcomes 
measures. We anticipate that better outpatient care and monitoring 
through the case management model will reduce avoidable 
hospitalizations, avoid unnecessary services, and improve outcomes. The 
Agency also is exploring various payment options, including case-rated 
methodologies for treating particular conditions, such as stroke, that 
may lend themselves to this type of payment system. We recognize, 
however, that costs for some individual cases, particularly those in 
which appropriate medical services were previously underutilized, could 
increase with coordination of services. Nevertheless, we expect that in 
the aggregate, the costs to Medicare will be the same or lower through 
the efficiencies that will result in providing appropriate care and 
this will more than offset the added expenses.
    While these new demonstration programs hold promise, they are not 
yet fully tested and they are no substitute for the comprehensive 
coverage that many beneficiaries prefer through private plans. The most 
important step for helping Medicare build for the future, in terms of 
providing integrated benefits that keep patients healthy, is to create 
a stable and fair payment system for Medicare+Choice plans.
CONCLUSION
    Disease management is a critical element for improving the nation's 
health care delivery system. Yet seniors are far less likely than other 
Americans with reliable access to modern, integrated health care plans 
to have access to disease management services. Through changes in 
Medicare's unfair payment system for private plans, we are working to 
give seniors the same access to modern disease management services that 
other Americans enjoy. We also are working to address the difficulties 
of providing effective disease management services in the fee-for-
service plan. Our goal is to make disease management services widely 
available, enabling beneficiaries to enhance their quality of care and 
get better value for the dollars they spend on health care. We look 
forward to continuing to work cooperatively with you Chairman Johnson, 
this Subcommittee, and the Congress to find innovative and flexible 
ways to improve and strengthen the Medicare program while making sure 
that beneficiaries, particularly those with chronic conditions, have 
access to the care they deserve. I thank you for the opportunity to 
discuss this important topic today, and I am happy to answer your 
questions.

                                 

    Chairman JOHNSON. Thank you very much, Mr. King-Shaw, for 
your testimony. I did have a chance to read through it, and it 
offers us a lot of very good information.
    I want to focus for just a minute--and I have several 
questions, so I want to just hit on these things lightly--but 
you stress in your testimony that the M+C programs and 
eventually the PPO programs are the only access Medicare has 
right now for patient-centered systems of care, and I think 
that is true. You talk about in the fee-for-service area 
building teams of care, but that team approach is only sort of 
automatically available to us through the more integrated care 
plans.
    It has struck me, as I have worked in this area, that as 
important as any one factor in the ability of those plans to 
offer disease management is their information management 
technology. They actually can follow their patients more 
easily. They can communicate among their providers more easily. 
They can track and incentivize their patients to participate in 
their own care in a way that fee-for-service Medicare from 
Washington can't do.
    Do you want to comment a little further on the information 
technology aspect of an integrated care system and, how that 
means that we really have to look at alternatives to fee-for-
service medicine if we are going to accomplish these goals in 
the near term?
    Mr. KING-SHAW. Well, that is clearly, clearly a powerful 
point, and one of the advantages that private plans and M+C 
organizations bring is that they typically have front end 
pieces that they can attach to their claims system to integrate 
all types of claims, and increasingly the types of interactions 
or encounters that happen outside of the regular claims 
operation.
    So, as we do a better job at collecting lab results and lab 
values, not just the financial but the actual values, as these 
organizations have access to other types of qualitative data, 
they can array it and display that to identify progress, to 
measure the effectiveness of the interventions, to actually 
look at the risk. I mean, in every disease management program 
you have got those that have a condition and know it, those who 
have it and don't know it, those who don't have it but are 
about to get it or are at risk for getting it.
    This kind of data that M+C organizations can integrate 
throughout the continuum of care makes them particularly 
qualified to maintain that kind of risk and outcome and 
performance data. It also enables them to do something with 
reimbursement and contracting and pricing of those 
relationships.
    On the fee-for-service side, we have a long way to go. 
There are ways to do it. We have several people who pay claims 
in the Medicare program, A and B and DMERC, Durable Medical 
Equipment Regional Carrier, and all of that. So, integrating 
the data will be a challenge on the fee-for-service side, but 
there are organizations, disease management organizations, that 
bring that expertise. There are system integrators that would 
like to be able to bring that value to us on the fee-for-
service side. There are some contractors that do have large 
pieces of the care continuum that can bring us that value, or 
team up with other organizations to integrate that data.
    So, it does present challenges on the fee-for-service side, 
but it is without question where 84 percent of the population 
is, where we can do the most work.
    Chairman JOHNSON. All right, thank you. In my opening 
statement I mentioned that 12 percent of our Medicare 
beneficiaries account for 75 percent of the spending, and in 
his testimony later on Dr. Wennberg will suggest a disease 
management approach to some of the end-of-life use issues. He 
notes the enormous variation across the country in the number 
of seniors that pass away in intensive care units (ICUs) in 
some areas and very uncommonly in ICUs in other areas; the 
disparate use in physician visits. You know, is that going to 
be a focus of one of your demonstrations, to really look at the 
management of end-of-life illness and the efficacy of one 
approach versus another?
    Mr. KING-SHAW. It certainly could be, and I think it should 
be. When we issue solicitations or invitations, either in 
writing through the official means or through the conversations 
that Tom Scully, the Administrator, the Secretary, and I have 
around the country, we are always interested in ideas that 
people bring us, initiatives that we can support and work 
through.
    This is one area that makes a lot of sense. The closest we 
have come--I mean, actually it's not commonly thought of as a 
disease management program, but in many ways it is--is the 
Program of All-Inclusive Care for the Elderly (PACE program) 
itself. Our PACE program is, you know, an all-inclusive program 
for frail elders, and in there is a great deal of knowledge and 
value and opportunity to strengthen disease management 
technologies and methodologies around people late in life.
    So, the answer would be yes. How we do it, where we do it, 
would be a function of someone bringing to us that expertise 
that we can connect with and support and develop.
    Chairman JOHNSON. We have known for such a long time that 
so much of our money is spent in the waning months of one's 
life, I do hope that we will think about how much the private 
sector does know in this area. I think they know less than they 
know in the area of diabetes and some other areas, so I 
appreciate that, but I think this does need to be a focus of 
our thinking as we develop approaches to managing the costs of 
care and improving the quality of life.
    Lastly, let me just ask you if you--I noticed with your 
comments about the end-stage renal disease management care 
demonstration project that began in September 1999, you comment 
that it did improve outcomes. You don't comment on whether it 
cost money or saved money. You don't comment on why, with this 
project completed now and under our belts, we aren't thinking 
about rolling this out through Medicare across all of our ESRD 
providers, when clearly it did improve at least quality-of-
care. So, if you would, comment on the cost aspect and why we 
aren't ready to move that out.
    I would ask the same question in terms of diabetes. I have 
stood in doctors' offices. I have seen what fantastic, simple 
programs we have available that can help physicians monitor 
patients much more easily, can get patients involved in their 
care ever much more easily. When you look at what it would do 
to prevent blindness and all kinds of complications as people 
age, it does seem to me that there are areas in here where we 
might even use the national coverage process to change the way 
we--you know, what care it is we are willing to pay for.
    Mr. KING-SHAW. Thank you very much for that, Madam 
Chairman. Actually, we are working on at least two different 
ESRD disease management initiatives. There is one in the 
variety of looking at a true capitated model that would enable, 
at a fixed rate per enrollee, ESRD providers to provide the 
basket of services that patients need. We are also looking at 
some more of the disease management coordinated, noncapitated 
models. We are looking at different ways, as I mentioned, you 
know, case rate methodology.
    So, there are a number of different initiatives that we 
have underway, organized toward ESRD, so you will be hearing 
about them more. We are engaged with partners and interested 
parties to help us do that. So, as they cook a little bit more 
and become more structured, there will be ways for us to 
present those to you and anybody else who is interested.
    There is actually quite a lot of work we are doing in the 
area of diabetes, both in the 15 BBA-sponsored diabetes--I am 
sorry--disease management programs, there is work being done in 
diabetes, and of course the Beneficiary Improvement Protection 
Act (BIPA) provided an opportunity for types of disease 
management. In that second group, we are actually including the 
cost of prescription drug coverage----
    Should I wait?
    Chairman JOHNSON. Go ahead.
    Mr. KING-SHAW. The cost of prescription drug coverage.
    As far as the cost goes, in these past examples, they have 
proved to be at least cost-neutral. There is some spike in cost 
as you bring services to people who have under-utilized the 
system, and there is an investment cost, so you will very 
commonly see a spike early on in the treatment process. That 
levels out and actually reduces over time as you stabilize and 
provide all the basket of services, so it is our view that they 
actually are quite cost-effective, and over the life of the 
program actually at least a break-even, most likely even as a 
small benefit to the Medicare program.
    Chairman JOHNSON. Thank you very much. Mr. Stark?
    Mr. STARK. Thank you, Mr. King-Shaw, for your testimony. Is 
there any reason now that providers shouldn't be required to 
put in place practice guidelines and patient safety plans as a 
condition of participating in Medicare?
    Mr. KING-SHAW. Well, we actually have a new policy 
forthcoming, a new regulation forthcoming on conditions of 
participation. There are several guidelines that are sponsored 
by the various medical societies, and those best practices and 
guideline are freely available to physicians.
    The Medicare program has traditionally not prescribed a way 
of practicing, or at least tries not to do that, and so by 
identifying any particular protocol or guideline or best 
practice, we would be stepping way outside of where the 
traditional role of Medicare has been, though we can work in a 
consultive way with quality organizations to identify best 
practices and be a part of research in evidence-based 
methodologies and that kind of thing.
    Now, our carriers do have local medical guidelines that are 
developed in a very consultive way or consultative way with 
physician groups, and there is a Carrier Advisory Committee of 
medical professionals who help them do that. So there is 
considered effort going on at the carrier level, regional 
level, to embrace best practices and good medical decision 
making.
    Now, the actual issue of proscribing them and mandating 
them, that is a different issue than Medicare has dealt with 
before from a clinical, physician point of view.
    Mr. STARK. It is fair to say that--I believe at this point 
you basically completed one ESRD demonstration, and you have 17 
other demonstrations currently working. If that is all you have 
got, does CMS really have enough information to make a 
determination as to whether disease management and case 
management has value for Medicare beneficiaries, either in 
terms of quality or in cost savings to the taxpayers? Do you 
know enough now to make that decision?
    Mr. KING-SHAW. Yes, I believe that we have enough 
experience to know that there is great value in disease 
management methodologies when done well and when done in 
partnership with organizations who do it well. I believe like 
anything else a poorly designed, poorly supported effort, be it 
a study or a protocol or a project, is not going to derive the 
kind of results that a well thought out, well financed, well 
put together, clinically led program is.
    So, I think what we have learned is that there are some 
best practices in disease management that we have imported from 
other organizations, that we have learned in partnering with 
other organizations, and there are some not so best practices. 
So, I think that that is sound and that is credible.
    As we move forward, I think the objective would be to take 
from demonstration to operation, to mainstream, if you will, 
those models, those best practices that have worked well, while 
not shutting the door to the ever-evolving methodologies that 
are being generated in the private sector, that Medicare can be 
a part of. So, I think we have enough information to move 
forward appropriately, cautiously, with the right kind of 
responsible decision making, but we clearly, clearly can see 
greater benefit from disease management than what we are seeing 
today.
    Mr. STARK. Well, we don't have any today. Is that correct?
    Mr. KING-SHAW. We have some. What I have described in the 
testimony are some disease management initiatives that have 
been launched. There are 15 of them that are being launched now 
as a result of BBA. There were others that preceded it in ESRD 
and a few other areas that have given us meaningful results. 
Even if we want to do it differently going forward, the results 
were meaningful in helping us guide that decision.
    We have a number of others that are under development right 
now, and there actually are a number of disease management 
organizations that are operating within the M+C world that 
continue to bring good value to Medicare beneficiaries in M+C 
environments.
    Mr. STARK. When you say ``good value,'' do you suggest then 
that the M+C plans save money by using disease management?
    Mr. KING-SHAW. When effective, yes. I mean, having spent 
some time outside of the Federal government, I can tell you 
that yes, when effectively done, again with all the elements 
that I identified in my oral comments, they clearly produce 
cost savings to the program, both the insurer itself and the 
program that they operate under, either Medicaid or Medicare or 
commercial. They also can do a great deal in terms of reduced 
costs on the part of the beneficiary, of the patient, by better 
managing their condition or their disease.
    Just as an example, to the extent that there is any out-of-
pocket cost sharing on the commercial side--I come from 
hospital admissions--effectively reducing hospital admissions 
is a cost saver to the patient's out-of-pocket expense. To the 
extent that there is not a prescription drug benefit in the 
Medicare program outside of M+C, disease management that brings 
prescription drug coverage, as this new BIPA package would, or 
by helping people manage their diseases and manage their 
medications, so that they are not over utilizing or having 
contraindications or drug-to-drug interactions that would lead 
to other types of complications, there is cost saving on the 
part of the patient there, as well as the program overall.
    So, I would say yes, most definitely, when effectively 
done, disease management is a cost saver to the program, to the 
patient, with quite, quite substantial benefits in clinical 
outcome, satisfaction, and performance. It has to be done well. 
You can't do a bad job with it and expect those kinds of 
results.
    Mr. STARK. Thank you.
    Mr. KING-SHAW. Thank you, sir.
    Chairman JOHNSON. Mr. McDermott?
    Mr. McDERMOTT. No questions.
    Chairman JOHNSON. Mrs. Thurman? I am going to recognize him 
after you, but since you are on the Subcommittee.
    Mrs. THURMAN. Thank you, Madam Chairman.
    Mr. Shaw, I guess the problem--and I don't disagree with 
disease management at all. You and I know of a very good health 
plan that--AvMed, which is all over the State of Florida, but 
even in our Fifth District, we know what they have done with 
the congestive heart failure program, and what they have saved 
and what they have done.
    Quite frankly, we talk about the fact that the M+C programs 
have had an excellent way of handling this, but all indications 
are, M+C programs are leaving. It would seem to me that it 
would be nice to think in a real true world, and everything was 
great, that that would happen.
    My concern is that we are not seeing that happen, but it 
also seems to me that the M+C programs are no different than 
Medicare fee-for-service in many ways. They are both with 
doctors. They both have an insurer. From what I can gather with 
M+C, the insurer is the one somewhat that makes some of these 
decisions to and for the patient, and that drives what doctors 
might do.
    So, why is this so hard, or why do we think this is going 
to be so hard to implement under fee-for-service Medicare? What 
are the components that we are missing in Medicare that would 
make this transition happen?
    Mr. KING-SHAW. One of the elements of success in the fee-
for-service world, where it has been successful--I am not going 
to represent to you that all M+C programs or all managed care 
programs do a great job at disease management and save a lot of 
money. There is, as I say, there are robust, there are all 
right, there are best practices, and less than best practices, 
but where they have been successful, wherever they have been 
applied, they have had some common elements.
    One is an organized delivery system where you truly have a 
community of care, where there are a number of primary care 
physicians and specialists who truly have organized their 
efforts around the effective treatment of a disease, who know 
the population. They know the other Members of the community of 
care. There are conversations, there is information sharing, 
there are feedback reports that give the providers and the care 
givers and the patient and everybody else around that 
community, if you will, information about the patient's 
progress. The M+C organizations have that platform established, 
and many of them actually have networks that are especially 
carved out because they are effective at diabetes or 
hypertension or congestive heart failure.
    So, in the fee-for-service world our delivery system is not 
so well organized. It is quite a disparate system, and so you 
need to have an organizer, you need to have a partnership with 
a disease management entity, which doesn't have to be M+C--it 
could be somebody else--and the patient, to assemble that 
community of care around the needs of the individual. It is not 
a given. Then to integrate data which is actually captured in 
many different parts of the system, to bring them together. 
That can be identified by diagnosis or by patient or by 
substance or by the DM community.
    All are doable. I mean, there is technology. There are 
people who know how to do it. You know, there are resources to 
do those things. It is all doable. It is just not a ready-made 
platform, the way it is outside of the fee-for-service sector.
    Mrs. THURMAN. In Medicare, it sounds to me like there needs 
to be some kind of a benefit payment structure within our 
Medicare fee-for-service to provide for that. Is that what we 
are kind of saying? I know we talked about primary care, talked 
about the gatekeeper. Those were kind of some of the buzz words 
at the time.
    Is there anything in our Medicare payment services now that 
would allow us to do that? For example, we have struggled with 
the issue of whether or not we should pay for every year an 
exam. Right now I can't remember if Medicare--I don't think we 
ever offered that once-a-year exam, so that at the beginning, 
the person comes in at the beginning of the year, you have an 
opportunity--what are some benefit issues that we could be 
doing under Medicare fee-for-service, that would help in fact 
organize as you are suggesting?
    If we can find out and we can put them in the right 
direction, we are in better shape, and then you have somebody 
that also can organize this to some--are we doing anything in 
the benefit plan to help to do that?
    Mr. KING-SHAW. Excellent question. The principal piece on 
the benefit side is preventive care services, and that is by no 
coincidence a part of the President's principles for reforming 
and strengthening and modernizing Medicare. It is with that 
preventive piece, the screening piece, that you do a lot of 
your risk measurement up front and your monitoring that is such 
an important part of disease management.
    So, for example, we have very specific screening tests that 
are covered under Medicare but they are specific. General 
health care screening is not included. That would be one.
    Clearly, prescription drugs. When you have many of these 
conditions, the prescription drug cost for wellness and 
prevention and maintenance is an integral, important part. I 
think that the power, the potential power of the new round of 
BIPA demonstrations does include prescription drugs in the 
community of care, if you will. Without a prescription drug 
benefit on the fee-for-service side or any clinical trial as 
something to attach to, you have left a huge hole out there.
    Then the last piece, again, is you have to have an 
integrator, a care manager, somebody who is truly organizing 
all of this on behalf of the patient-physician relationship. 
There we are testing methodologies that would have physicians 
actually empowered through primary care case management type of 
things and financial resources brought to bear, to enable him 
or her to perform that integrating function.
    Mrs. THURMAN. In the M+C programs we actually provide them 
those incentives to do that through the payment structure and/
or whatever, so----
    Mr. KING-SHAW. Yes, yes.
    Mrs. THURMAN. Okay. Thank you very much.
    Mr. KING-SHAW. Thank you.
    Chairman JOHNSON. Mr. Houghton?
    Mr. HOUGHTON. Madam Chairman, first of all, thank you very 
much for letting an alumnus come back to this Subcommittee, an 
outsider, and I really applaud you for having this hearing. It 
is just under so many things that we need to talk about and 
discuss.
    Mr. King-Shaw, thank you so much. We are honored to have 
you here, and you are doing just a wonderful job. I would like 
to ask you a question. You mentioned in your testimony the 
disease management for lung cancer, and I know Dr. Henschke is 
going to be talking about this a little later, but in terms of 
just the human part here, cancer, lung cancer kills so many 
people and is often so expensive to treat, particularly in the 
final stages. How can your agency really take steps to help 
those patients get good care, but care that won't break the 
bank? That is really the only question I have.
    Mr. KING-SHAW. Well, again I would say it begins with the 
screening piece. I am familiar with some of the work being done 
up at my alma mater, Cornell University, around this area, and 
in fact the kind of screening, that computerized tomography 
(CT) scanner screening for lung cancer, is a proven, effective 
way of risk assessment which is a part of the overall package. 
So not having the ability to do that for lung cancer 
specifically is an issue, and so we would look to be able to do 
a better job at screening as a part of disease management, in 
order to be more successful at it. That is one.
    I would also say that as we partner with community-based 
organizations, again, one of my comments was, partnering with 
academic medical institutions, community-based care providers 
and those types of things, there are folks out there who know 
very well how to manage and treat this condition. It is 
expensive, and so when we talk about making things less so or 
moving the care earlier in the development of the condition, so 
that your interventions can be more effective and the 
downstream costs can be minimized, but there is a certain 
amount of financial commitment that, you are going to have to 
make to effectively manage or treat lung cancer patients.
    So, I think the short answer is, we would partner with 
those folks who know how to do this, again until we can build 
more infrastructure inside. We would have to look at our 
ability to provide some of the important screening up front, 
the capabilities, and you know there is the case that, as I 
said, Medicare law does not specifically allow us to do this.
    There is always the opportunity to look at our overall 
benefit structure it and modify it, in this case for lung 
cancer but I would suggest for many other conditions as well, 
through the national coverage decision process. Where we have a 
need to look at technology or methodologies and go through 
evidence-based review of its potential to contribute to life 
and wellness in the Medicare program, we have a mechanism to do 
that. We need to have a law that says it is covered, first, but 
once we have that, there is a process that we have already 
established that can help us bring to the Medicare program 
technologies and strategies such as this one, for lung cancer 
patients or for anybody else.
    Mr. HOUGHTON. Just to follow up on that just a bit, since 
it is not quite a third but almost a third of all the cancer 
deaths really are from lung cancer, this is such an important 
area, break down a little bit what you mean by partnering.
    Mr. KING-SHAW. Well, for example, if we were to do a 
provider sponsored, in this case demonstration for disease 
management around lung cancer, one of the places I would look 
to is Cornell, who is doing this. There are other types of 
academic or provider organizations that are doing this.
    So to partner, it would mean bringing them in as either a 
care manager, or we would develop a patient population we would 
place under their management. They would develop a proposal 
that would look at what resources they would have to bring, 
educators, care managers, and so forth; a system for providing 
some of the related care needs of lung cancer patients.
    We would work out a financial mechanism, whether that would 
be a case rate or a capitation, or that would be some type of 
bundled rate or fee-for-service or some administrative 
reimbursement that covers the cost of integrating these things. 
There is no risk involved. There are many different financial 
relationships you can build.
    Mr. HOUGHTON. These are things that could be done, not are 
being done now. Is that right?
    Mr. KING-SHAW. Yes, that is correct. These are things that 
could be done. We are doing them, applying those technologies, 
those methods, to things other than lung cancer. A lot of what 
I have talked about in diabetes or hypertension and congestive 
heart failure are those very same types of applications. We are 
not doing it currently for lung cancer. We could.
    Mr. HOUGHTON. Thank you. Thank you, Madam Chairman.
    Mr. KING-SHAW. Well, thank you.
    Chairman JOHNSON. Thank you, Mr. King-Shaw. I just did want 
to ask one final question. I know you have got a proposal out 
there for a number of disease management demonstration 
projects. I wondered if you could just give us a quick run-down 
of how many Medicare beneficiaries you are going to target for 
each demonstration, whether they will be distributed across the 
regions of the country, across minority populations, urban/
rural, and what incentive will there be for physicians to 
participate?
    Mr. KING-SHAW. I can maybe give you some sense by picking a 
few at a time. The PPO demonstrations, we anticipate there 
being 12 geographic markets spread throughout the country, 
because every market has a different nuance. Twelve geographic 
areas, twelve markets should give us, I think, a well-rounded 
comprehensive, and we would look at large and small towns and 
big cities. There are some rural methodologies out there that 
people would want to bring, so I would hope to have some rural 
participation as well in those 12.
    A number of the, it is the BBA, what is currently the 15 
demonstrations, have been everywhere from--we have some in 
Virginia, you have some in the Midwest and in New England, you 
have got those down--we understand that there is about, I 
think, 6,700 Medicare beneficiaries that we would anticipate 
being a part of those.
    Under the new BIPA ones, there is a cap of 30,000 
beneficiaries. I can get you all of this information in writing 
with a much more detailed spreadsheet that would give you the 
number of lives and markets and locations once the contracts 
are awarded, sometime after July.
    In the testimony, if you don't have it, I can provide it, 
too, there is a grid that gives you the geographic location and 
the disease class of the current 15 BBA demonstrations. I can 
also give you some more of the history of the lives that were 
involved in some of the past demonstrations.
    [The information follows:]

                                     Medicare Coordinated Care Demonstration
----------------------------------------------------------------------------------------------------------------
                                                                         Projected
     Project Site         Rural/Urban      Beneficiary  Location   Beneficiaries  To Be     Targeted  Diseases
                                                                           Served
----------------------------------------------------------------------------------------------------------------
Avera McKennan         Rural              SD, IA, MN                 634                 Congestive heart
 Hospital Sioux                                                                           failure and related
 Falls, SD                                                                                cardiac diseases
----------------------------------------------------------------------------------------------------------------
Carle Foundation       Rural              Eastern IL               1,518                 Various chronic
 Hospital Urbana, IL                                                                      conditions
----------------------------------------------------------------------------------------------------------------
CenVaNet Richmond, VA  Urban              Richmond                   614                 Various chronic
                                                                                          conditions
----------------------------------------------------------------------------------------------------------------
CorSolutions,          Urban              Houston                  1,963                 High-risk congestive
 Medical, Inc.                                                                            heart failure
 Buffalo Grove, IL
----------------------------------------------------------------------------------------------------------------
Erickson Retirement    Urban              Baltimore                  396                 Various chronic
 Communities                              County, MD                                      conditions
  Baltimore, MD
----------------------------------------------------------------------------------------------------------------
Georgetown U. Medical  Urban              DC, MD suburbs           1,025                 Congestive heart
 Center Washington,                                                                       failure
 DC
----------------------------------------------------------------------------------------------------------------
Health Quality         Both               Eastern PA               1,070                 Various chronic
 Partners                                                                                 conditions
 Plumsteadville, PA
----------------------------------------------------------------------------------------------------------------
Hospice of the Valley  Urban              Maricopa                 1,092                 Various chronic
 Phoenix, AZ                              County, AZ                                      conditions [Note: Demo
                                                                                          not limited to end-of-
                                                                                          life care]
----------------------------------------------------------------------------------------------------------------
Jewish Home and        Urban              New York City              365                 Various chronic
 Hospital New York,                                                                       conditions
 NY
----------------------------------------------------------------------------------------------------------------
Mercy Medical Center   Rural              Northern IA                607                 Various chronic
 Mason City, IA                                                                           conditions
----------------------------------------------------------------------------------------------------------------
Medical Care           Rural              ME                       1,218                 Congestive heart
 Developments                                                                             failure or post-acute
 Augusta, ME                                                                              myocardial infarction
----------------------------------------------------------------------------------------------------------------
Quality Oncology,      Urban              Broward                  1,426                 Cancer
 Inc. McLean, VA                          County, FL
----------------------------------------------------------------------------------------------------------------
QMED, Inc. Laurence    Urban              Northern CA                571                 Coronary artery disease
 Harbor, NJ
----------------------------------------------------------------------------------------------------------------
University of          Urban              Baltimore, MD              339                 Congestive heart
 Maryland Baltimore,                                                                      failure
 MD
----------------------------------------------------------------------------------------------------------------
Washington University  Urban              St. Louis, MO            5,422                 Various chronic
 St. Louis, MO/                                                                           conditions
 StatusOne Health
 Hopkinton, MA
----------------------------------------------------------------------------------------------------------------


                                 

    Chairman JOHNSON. Well, thank you very much. You did 
mention in response to my colleague from Florida's comment, 
that under the fee-for-service system there would have to be 
some compensation for this management capability that the 
managed care systems are able to provide. I assume in your 
demonstration project, you will get a better handle on what it 
will require for physicians to add the extra time it takes to 
spend on patient education and to coordinate care, or a non-
physician assistant. So, I think those costs that are currently 
being absorbed by the Choice plans will be isolated in these 
demos and will get a better handle on that.
    Mr. KING-SHAW. Yes. In fact, in some of these demos there 
is an administrative fee which is a part of the demonstration 
to the best of our understanding right now to cover those 
costs. You are absolutely correct, as these demonstrations 
unfold, we will get a much better handle of what the financial 
resources that are required on the part of physicians and other 
clinicians to be effective disease managers. We can then build 
a model that would incorporate that.
    Mr. McDERMOTT. Madam Chairman, may I ask a question?
    Chairman JOHNSON. Yes.
    Mr. McDERMOTT. We had sporadic reports recently in Seattle 
of patients having difficulty finding physicians who would take 
payment for Medicare. What I am interested in understanding is, 
do you think that in the face of our attempt to cut 
reimbursement in this session of the Congress that we can 
expect that there will in fact be more patients who have access 
to the kind of health care you are trying to deliver? Do you 
think you are going to get more doctors involved in that kind 
of chronic management if we cut our rates by 5\1/4\ percent?
    Mr. KING-SHAW. Well, I mean, the sustainable growth rate 
that Congress gives us to work with resulted in those negative 
updates, the physician fee schedule that you are referring to. 
Absent a change in that formula or corrective action then 
that's what we have to live with. So, I think that we need to 
recognize that there is a threat to the integrity of a provider 
network in Medicare with the financing and the financial 
pressures under--on top of the system right now. So, should we 
be concerned about that threat? Yes. One of the things that we 
are doing at CMS through our 10 regional offices and out of the 
outreach, is we are seeking to obtain very quantifiable 
specific data about participation rates in Medicare, either as 
a result of the current numbers or as anticipation of more 
oblique numbers going forward. As we collect that very specific 
about those who are just saying they are going to leave, but 
actually leave, actually disenroll, we can provide that 
information to leadership for consideration.
    Beyond just looking at the number of physicians who leave 
Medicare or not is the important question of is there a 
restriction of panels? Do you see physicians reserving less and 
less time in their weekly schedules for Medicare patients? Are 
they closing their practices to any additional Medicare 
patients? The conversation seems to have remained at, are we 
going to lose doctors through Medicare? Perhaps we may not lose 
a doctor through Medicare--from Medicare. We may have that very 
same physician restrict the ability of Medicare patients to get 
their attention, and that is as much of a concern to us.
    Is that a threat? Absolutely. Are we going to try to 
articulate that in clearer objective ways? Absolutely.
    Mr. McDERMOTT. What is the administration's proposal to 
deal with the 5.4-percent reduction?
    Mr. KING-SHAW. Work with Congress to figure it out.
    Mr. McDERMOTT. Thank you for that clarifying answer.
    [Laughter.]
    Mr. McDERMOTT. Thank you, Madam Chairman.
    Chairman JOHNSON. Thank you very much for your testimony. I 
did discuss before the hearing started, the things that the 
Virginia hospitals are doing, and I will look forward to 
hearing from you as to how that fits in, and the other reports 
that are coming out now, the one from Ernst & Young and Cap 
Gemini on disease management and fee-for-service beneficiaries. 
So, we look forward to working with you on these issues in the 
months to come, and hopefully making some significant progress. 
Thank you very much for your testimony this morning.
    Mr. KING-SHAW. Thank you, Madam Chair.
    Chairman JOHNSON. I would invite the final panel up, Dr. 
John Wennberg, the Director of the Center for Evaluative 
Clinical Sciences, Dartmouth University; Mike Hillman, Dr. 
Hillman, the Medical Director of the Business and Community 
Health, Marshfield Clinic, Marshfield, Wisconsin; Dr. Claudia 
Henschke, Professor of Radiology, Director of the Division of 
Chest Imaging, and Director of the Division of Health Policy 
and Technology Assessment at Cornell University; Dr. Gerard 
Anderson, Professor of Health Policy and Management, 
International Health, Johns Hopkins University; and Dr. 
Jonathan Lord, Senior Vice President and Chief Clinical 
Strategy and Innovation Officer of Humana.
    We welcome you all to this important hearing and look 
forward to your comments. We will move right through. We have 
that roughly 5-minute rule, and then we will follow that by 
questions.
    Dr. Wennberg, welcome.

 STATEMENT OF JOHN E. WENNBERG, M.D., M.P.H., DIRECTOR, CENTER 
   FOR THE EVALUATIVE CLINICAL SCIENCES, DARTMOUTH COLLEGE, 
                     HANOVER, NEW HAMPSHIRE

    Dr. WENNBERG. Thank you, Chairman Johnson, Congressman 
Stark. I am glad to be here today. I have been asked to comment 
on geographic variations in traditional Medicare and their 
implications for the design of chronic disease management 
programs.
    In my written testimony, I document extensive unwarranted 
regional variations in the patterns of practice. The amount of 
care patients receive depends as much on where they live as it 
does on the disease they have.
    First, there is extensive under use of effective care. That 
is, care that works and all patients should get. Second, there 
is extensive misuse of discretionary care such as elective 
surgery, care that should depend on what patients want, but 
seems to depend too much on what providers prescribe. Third, 
there is extensive over use of physician visits, testing, 
imaging, hospitalizations, and stays in intensive care. The 
frequency of use in a given region has to basis in medical 
science and is determined by the supply of resources rather 
than medical need.
    Finally, Medicare spending varies extensively. In 1996, per 
capita spending in Miami was nearly 2\1/2\ times that of 
Minneapolis, but greater spending does not buy higher quality-
of-care. These regions score equally poorly on such measures of 
quality as the percent of diabetics who get needed eye exams or 
heart patients who get needed drugs. Greater spending is not 
associated with greater rates of elective surgery. Rates are 
about the same in high-cost regions such as Orange County, 
California, as in low-cost regions such as Portland, Oregon.
    What then does greater spending buy? It buys more visits, 
more tests, more stays in hospitals, and more stays in 
intensive care. In some regions Medicare enrollees average more 
than 20 visits to medical specialists during the last 6 months 
of their lives. In other regions the average is less than 
three. In some regions nearly 30 percent of Medicare deaths 
occur in ICUs; in others, fewer than 7 percent do. This all 
adds up to a lot of money. If the pattern of conservative 
practice observed in regions with low spending were the norm 
for the Nation, we have estimated a savings of over $40 billion 
in 1996. The implications seem quite clear. If disease 
management programs in traditional Medicare are to have system-
wide impact on overall qualify and costs, they will need to 
provide remedy for each category of unwarranted variation.
    The causes and remedies for variation are different 
according to the category. Disease management programs 
organized by health maintenance organizations (HMOs) have been 
quite successful in reducing under service of such things as 
diabetic eye exams and beta blockers. They should well work in 
traditional Medicare, particularly if the claims data can be 
mobilized and patient registries can be mobilized to assist in 
that process. Variations in discretionary surgery and other 
preference sensitive treatments pose a greater problem. In some 
regions virtually no patients with breast cancer receive a 
lumpectomy, while another region's almost have to. Such 
variation occurs because patients aren't involved in a 
meaningful way in the choice of treatment. Patients need to 
understand their options.
    A basic problem is that Medicare fee structure rewards 
procedures, not counseling. Disease management demonstration 
projects should be given flexibility to deal with these flaws 
that perversely interfere with informed patient choice.
    The principal cause of geographic variation in visits, 
testing, and hospitalizations of the chronically ill is 
variations in the supply of resources relative to the size of 
the population saved. More physicians means more frequent 
visits. More hospital beds means more hospitalizations. Greater 
use of care means more Medicare spending. We interpret these 
patterns as evidence for inefficiency in the use of resources, 
not health care rationing. Medical science provides no 
guidelines regarding appropriate use and studies conducted at 
the population level show no gains in life expectancy 
associated with a twofold variation in spending across the 
United States for Medicare. For these reasons, we believe there 
is widespread overuse of such services.
    Dealing with the overuse of what we call supply sensitive 
services poses a great challenge. The problem is finding the 
appropriate level of resources. Only staff model HMOs have 
dealt effectively with this problem. Staff model HMOs practice 
what Alan Enthoven has called ``private sector health 
planning.'' That is, they regulate the capacity of their 
organizations. Since their benchmarks for resource inputs are 
consistently lower than the prevailing rates in their regions, 
the cost of their care has been correspondingly lower than fee-
for-service medicine. For the Nation to achieve such 
efficiency, health care organizations serving fee-for-service 
populations would need to become accountable for their own 
capacity.
    While the task of comprehensive reform of the management of 
chronic disease is formidable, we need to get on with it. I 
applaud the Subcommittee's willingness to address the 
complexity of this task. I applaud the efforts by CMS to invite 
chronic disease management companies to undertake demonstration 
projects in fee-for-service Medicare. We need to learn how well 
the network model can improve the quality-of-care in each 
category of service, but the complexity of the task warrants 
additional demonstration projects carried out by provider 
organizations serving traditional Medicare populations. In my 
written testimony, my colleagues and I have recommended that 
such a demonstration project be undertaken.
    I want to thank you for the opportunity to testify, and 
also to thank you personally for the kind comment that you made 
on our paper in health affairs.
    [The prepared statement of Dr. Wennberg follows:]
 Statement of John E. Wennberg, M.D., M.P.H., Director, Center for the 
Evaluative Clinical Sciences, Dartmouth College, Hanover, New Hampshire
    My name is John Wennberg. I am a member of the faculty of Dartmouth 
Medical School. I have been asked to comment on variations in Medicare 
spending and quality, and on the implications of these variations for 
the design of chronic disease management programs. It is now well known 
that spending for traditional, fee-for-service, Medicare varies 
extensively. For example, in 1996, age, sex and race adjusted spending 
for non-HMO Medicare services in the Miami hospital referral region was 
nearly two and a half times higher than in the Minneapolis hospital 
referral region. In a recent Health Affairs article (attached), my 
colleagues and I described some of the variations in quality of care 
among hospital referral regions, as well as the association between 
quality and spending. We looked at three categories of medical 
services: ``effective care,'' ``preference-sensitive care'' and 
``supply-sensitive care.''

        It is important to make distinctions among effective care, 
        preference-sensitive care and supply-sensitive care because the 
        causes of the variation and the remedies are different for each 
        category. Moreover, variation in per capita Medicare spending 
        is associated with only one of these categories--supply-
        sensitive care. If disease management programs are to have an 
        important impact on the overall quality and cost of care for 
        the chronically ill, the programs will have to address 
        variations in each category.

    I will summarize very briefly what we mean by the terms effective, 
preference-sensitive, and supply-sensitive care. Each of these 
categories of care raises a different challenge to the design and 
implementation of disease management programs.
    Effective care is evidence-based care--care that we know works and 
we know all eligible patients should get. Our studies show extensive 
underuse of effective care among fee-for-service Medicare enrollees in 
virtually every part of the country. For example, in some regions of 
the United States, less than 20% of post-heart attack patients who were 
classified as ``ideal'' candidates for a particular medication actually 
received the medication. There are similar patterns of underuse of 
effective treatments for Medicare enrollees with diabetes, and evidence 
that there is poor compliance with guidelines for cancer screening and 
immunizations. The principal cause of variation in the delivery of 
effective care is a lack of infrastructure--systems that make sure that 
appropriate care is provided in a timely way.
    Correcting the underuse of effective care will demand improvement 
in the infrastructure of the everyday practice of medicine. Staff model 
HMOs provide exemplary models of how this can be done and a number of 
network HMOs (and their disease management company subcontractors) have 
had success in promoting provider compliance. Health insurance claims 
provide the information databases that can identify patients who need 
services, so that both patients and providers can be reminded to seek 
and administer appropriate care in a timely way. The processes of care 
can be monitored with these claims databases, at the level of 
individual practitioners or physician groups. We have shown that this 
monitoring is possible using the Medicare claims data; and many health 
systems already have the information available, but have not put it to 
use.

        Underuse of effective care can be reduced by collecting and 
        monitoring the processes of care at the hospital and physician 
        group levels. Medicare claims data can serve as the basis for 
        establishing disease management registries to identify patients 
        in need and document health care quality. Medicare claims 
        should be made available in ``real time'' for use in disease 
        management demonstration projects in traditional Medicare.

    Preference-sensitive care pertains to conditions where at least two 
valid treatment strategies are available, each with its own risks and 
benefits. Since the choice of treatment involves tradeoffs that ought 
to depend on patients' preferences--such as the choice between surgical 
or pharmaceutical treatment--the patient's choice of treatment should 
determine what is done. There are wide variations in the use of 
discretionary surgery and other preference-sensitive treatments. For 
example, the rates of lumpectomy for breast cancer and prostatectomy 
for prostate cancer vary by a factor of five among hospital referral 
regions in the United States. In some cases, the principal cause of 
variation is that there is substantial uncertainty about the risks and 
benefits of the treatment options because there have been no clinical 
trials to determine the facts. The fundamental problem, however, is the 
failure to involve the patient in a meaningful way in the choice of 
treatment. Decisions should belong to the patient, but provider opinion 
tends to dominate. For this reason, we believe there is widespread 
misuse of preference_sensitive care.
    Dealing with the misuse of preference-sensitive care requires that 
patients become actively involved in the choice of treatment in those 
clinical situations where options exist. Shared decision making or 
``informed patient choice'' is gaining recognition as the remedy for 
unwarranted variations in this category, but implementation is just 
beginning. Staff model HMOs and a few IPA HMOs provide examples of 
implementation, but the results are spotty. A basic problem facing IPA 
and traditional Medicare is that the fee structure doesn't reward 
providers who implement shared decision making; in other words, 
reimbursements reward activity, rather than careful consideration of 
all the options. The most important goal of this effort should be to 
make sure that people with chronic illnesses know what the options are 
(including costs, risks, and benefits). The current system does not 
reward or encourage physicians to engage in this effort. It should, 
because it is the right thing to do. It could also save money. Several 
studies have shown that informed patients tend to want less surgery 
than surgeons are inclined to recommend under the current system of 
rewarding procedures rather than counseling.

        Misuse of discretionary surgery and other forms of preference-
        sensitive care can be reduced by actively involving patients in 
        the choice of care. We must make sure that chronically ill 
        patients understand their options and are aware of the benefits 
        and risks of treatment. Disease management demonstration 
        projects should be given flexibility to deal with the current 
        flaws in the traditional Medicare fee structure that perversely 
        interfere with informed patient choice.

    Supply-sensitive services are those in which the frequency of use 
is not determined by well-articulated medical theory, much less by 
scientific evidence. Supply-sensitive services include physician 
visits, diagnostic tests, hospitalizations, and admissions to intensive 
care among patients with chronic illnesses. The variations are 
particularly striking among the most seriously ill Medicare enrollees. 
In some regions, Medicare enrollees average more than 20 visits to 
medical specialists during the last six months of their lives; in other 
regions, the average number of such visits is fewer than three. In some 
regions, nearly 30% of Medicare deaths occur in ICUs; in other regions, 
fewer than 7% do.
    The principal cause of variation in utilization of services is the 
regional and local variation in resources. More hospital beds per 
capita mean more hospitalizations per capita among those who have 
chronic diseases such as congestive heart failure, diabetes and chronic 
pulmonary disease. More cardiologists per capita mean more visits with 
cardiologists per person with heart disease. Yet there is little 
medical theory--and no evidence--about the appropriate frequency of 
such services--that is, what rate of physician visits, for example, 
results in the best health outcomes. Moreover, studies conducted at the 
population level have demonstrated that there are no gains in life 
expectancy associated with higher frequency of intervention. For these 
reasons, we believe there is widespread overuse of supply-sensitive 
services.
    Dealing with the overuse of supply-sensitive services poses the 
greatest challenge to the implementation of a comprehensive program in 
disease management. Most of the care given to patients with chronic 
disease belongs in this category. Those who live in areas with more 
resources are likely to have more visits with doctors, more tests, and 
more admissions to hospitals and to intensive care, particularly at the 
end of life. This is the category of care that ``explains'' higher per 
capita spending, but it is not associated with better quality of care 
or extension of life expectancy. Medicare enrollees living in regions 
where per capita spending is higher than average don't receive more 
effective care--and the differences in spending are also not explained 
by higher rates of major (non-elective) surgery. (See Exhibit 2 in the 
attached article.)
    The role of supply-sensitive services in both spending and outcomes 
has received little attention from academic researchers. The topic 
barely makes it onto the research agenda, and there are few studies 
that could provide a basis for constructing guidelines that might tell 
us how many physicians are actually needed in a given region, what rate 
of visits to physicians results in the best outcomes for those with 
chronic diseases, or whether the use of expensive diagnostic technology 
actually improves accurate diagnosis, health, or survival. Recent 
research on the redesign of clinical practice to introduce group visits 
and open appointment schedules is encouraging because it breaks the 
cycle of supplier-induced demand and could serve as the basis for 
redesign of chronic disease management.
    Except for staff-model HMOs, insurers and providers have not 
responded to the challenge of determining what works and how much is 
enough. Much of the intellectual leadership in the research on redesign 
of clinical practice comes from these organizations, which are able to 
control their own per capita resources (eg. doctors hired, hospital 
beds constructed or contracted for, patterns of practice). But the 
efficiency of staff-model HMOs in the use of supply-sensitive care is 
probably more a byproduct of a corporate strategy of remaining 
competitive with fee-for-service medicine than a conscious attempt to 
manage chronic disease. As Alain Enthoven has pointed out, such HMOs 
practice ``private sector health planning.'' That is, they regulate the 
capacity of their organizations. Since the staff-model HMO standards 
for resources are consistently lower than the prevailing rates of 
resources in the regions where they compete, the cost of HMO care has 
been correspondingly lower than the cost of fee-for-service medicine. 
For the nation to achieve HMO-like reductions in spending, health care 
organizations would need to become accountable for capacity. This is a 
formidable task and one that in the absence of reform of payment 
systems is probably impossible.
    Addressing the overuse of supply-sensitive care is made even more 
challenging by the cultural assumption that more health care is better. 
There might be hope in the growing public awareness that for many 
patients with advanced chronic illness, high-technology interventions 
such as admissions to intensive care are both futile and unpleasant, 
degrading the quality of life in its closing months and years. The 
chronic disease management movement might find natural allies among the 
growing numbers of Americans who are trying to reform of end of life 
care.

        Reducing the overuse of hospitals, intensive care, physician 
        visits and testing among chronically ill Americans should be a 
        national priority. This must be done if we want to reduce 
        unwarranted Medicare spending and improve heath care quality. 
        Disease management programs must address this priority. 
        However, the scientific basis for defining optimal care is weak 
        and, with the exception of staff model HMOs, the tools 
        available for dealing with the causes of variation are also 
        weak. Demonstration projects are needed to establish benchmarks 
        for effective clinical practice for supply-sensitive care and 
        to identify ``best practice'' models for efficient care.

    While the task of comprehensive reform of the management of chronic 
disease is a formidable challenge, we have a moral obligation to take 
it on. I applaud the committee's willingness to address the complexity 
of the task and confront the difficulty of finding workable solutions. 
Progress often begins with debate, which I hope these hearings will 
spark. I also applaud the efforts by CMS to invite chronic disease 
management companies to implement experimental chronic disease 
management in fee-for-service Medicare. We need to learn how well the 
IPA model can improve the quality of care in each category of service. 
The complexity of the task, however, warrants additional demonstration 
projects, and some should be carried out by provider organizations 
serving traditional Medicare populations. In our Health Affairs 
article, my colleagues and I recommend a demonstration project that 
could prove that the federal government and responsible health care 
organizations can establish a partnership to fruitfully address each 
category of unwarranted variation. The results could, I believe, 
improve the quality and efficiency of services provided for all fee-
for-service Medicare beneficiaries. And it is only the first step in 
improving the quality of care for all chronically ill Americans while 
we demonstrate that doing medicine right does not mean doing it the 
most expensive way.

                                 

    Chairman JOHNSON. Thank you. Dr. Lord.

 STATEMENT OF JONATHAN T. LORD, M.D., CHIEF CLINICAL STRATEGY 
AND INNOVATION OFFICER, HUMANA INC., LOUISVILLE, KENTUCKY, AND 
      PRESIDENT, DISEASE MANAGEMENT ASSOCIATION OF AMERICA

    Dr. LORD. Good afternoon. My name is Jack Lord, and I am 
the Chief Innovation Officer for Humana. I am also the 
President of Disease Management Association of America.
    Health benefits companies like Humana have turned toward 
disease management programs to help Members get appropriate and 
effective care. Humana, like many other health plans, has 
changed its approach to medical management after years of 
understanding that the real needs that people have is to have 
supported self management. That approach emphasizes Members' 
control of their own care and help to make better decisions.
    Dr. Wennberg and I have collaborated for the last decade at 
the American Hospital Association and an organization called 
Health Dialog to produce tools that help people make better 
decisions.
    Disease management programs also provide for personalized 
support for the people who are sick so they can get more 
effective care, and certainly self-care opportunities for the 
well. The availability of technology, e-health and the Web make 
those systems far more effective.
    Disease management was evolved to help deal with some of 
the symptoms of a systemless world. Fragmentation, variation, 
lack of adherence to clinically proven practices, lack of 
patient involvement and the absence of predictive tools, where 
we had to rely on data from our rear view mirror as opposed to 
looking forward, characterized the way health care has been 
practiced in this country in many regions.
    Disease management does support self management of 
individuals, focuses on what Dr. Wennberg calls effective care, 
uses evidence-based treatment protocols to provide information 
to both patients and practitioners, emphasizes the coordination 
of care, and uses advanced sciences to help track patients and 
look at outcomes. That science could be used to help predict 
future needs of people.
    The impacts of disease management programs include better 
care planning, both at the individual level as well as at a 
population level, healthier behaviors on the parts of 
individuals and their families, better clinical outcomes, 
physical function and quality of life, better access in care 
coordination, and ultimately lower cost, reduced 
hospitalizations, surgery and invasive procedures.
    Research shows that disease management is effective. Humana 
has been an industry leader in this effort, and we have put our 
effort and resource behind that. Whether it is in specialized 
diabetic care for Hispanics in San Antonio or in the under 
served areas of this country in terms of rural health care, we 
have seen results. Diabetes programs show that patients who are 
managed through disease management programs have increased 
frequency of hemoglobin A1c testing, foot exams, eye exams, and 
cholesterol exams, and demonstrate reduced hospitalization. 
Congestive heart failure programs show significant reductions 
in inpatient stays, admissions, emergency room visits, as well 
as the reduction of disease-specific claims and co-morbidities. 
These are outlined in our written testimony.
    Humana's own experience reflects the research. Congestive 
heart failure, 90 percent of patients show improvements or 
stabilization of their disease, and a 60-percent reduction in 
hospitalization. Coronary artery disease patients show 
significant reductions in cholesterol levels, and patients who 
have chronic renal disease show greater percentages achieving 
dialysis targets when people are in disease management programs 
than outside of those programs.
    The bottom line is, what is right for patients and what is 
right for you and me? People are more engaged in their own 
care. They get effective care. That is, care that has been 
proven to be right. They avoid unnecessary or harmful care, and 
they have an opportunity to have improved compliance both in 
their drug regimens as well as the medical regimens that are 
prescribed by their physicians. The net result is improvement 
in self-reported health and real functional status for 
individuals.
    We have outlined some stories in the written testimony, 
stories that reflect our sensitivity around the privacy of our 
Members, but also give you a glimpse of the kinds of care and 
the kinds of outcomes that are achievable.
    One quick example. Mrs. V. We have an example here of a 
patient who had successful behavior modification when enrolled 
in a disease management program for congestive heart failure.
    The key to success is targeting the right patients and 
being sure they are connected to the right care. The M+C 
programs have had advantages because of the data and the 
integration of services. We can use claims to target that 
information, and we can use outreach programs like our Personal 
Nurse program, where we provide essentially a concierge for 
those people who have complex significant chronic disease.
    The bottom line to all of this is disease management has 
demonstrated advantages for the chronically ill Medicare 
beneficiary. Most M+C programs have offered some form of 
disease management programs, and those efforts should be 
continued. There is a tremendous opportunity to extent disease 
management programs beyond the M+C program to a fee-for-service 
program, and have an impact on getting the right care to people 
and lowering the cost of the care that is provided to Medicare 
beneficiaries across the country.
    Thank you, Madam Chair.
    [The prepared statement of Dr. Lord follows:]
   Statement of Jonathan T. Lord, M.D., Chief Clinical Strategy and 
 Innovation Officer, Humana Inc., Louisville, Kentucky, and President, 
               Disease Management Association of America
    Good Afternoon. My name is Jack Lord, and I am Chief Clinical 
Strategy and Innovation Officer for Humana Inc., one of the nation's 
largest health benefits companies. Humana provides health benefits to 
nearly 6 million commercial, military, and Medicare beneficiaries. I 
have also spent time as Director of Quality for the Naval Medical 
Command, Executive Vice-President for a large health system in 
Maryland, as Chief Operating Officer of the American Hospital 
Association, and as President of Health Dialog, a company providing 
tools and services to enhance consumer medical decision making. 
Additionally, I am president of the Disease Management Association of 
America. I am pleased to be here to tell you about how health benefits 
companies like Humana have turned to disease management programs to 
help our members--especially those members most in need of care--to 
obtain appropriate and effective care.
    Over the past six or seven years, the offering of health benefits 
has significantly changed to address what consumers want. Many of those 
changes are already bearing fruit. So not only do we have a great 
chance to exceed the expectations of our customers--they couldn't be 
lower--but by the time everybody becomes aware of the great changes 
that have taken place in our business practices, we will already have 
results to prove that the new approaches work--not just for us and for 
employers but for patients, too. I'm happy to be here to share some of 
these results and, more importantly, some of these success stories, 
with you today.
    First, I'd like to tell you a little bit about how health plans 
have begun to focus on disease management as a core strategy for 
addressing medical management. Then, I'll share with you some 
information about disease management programs--what they are, how 
effective they are, and what we do at Humana, as a health plan, to 
better target, recruit, and triage our members, and to provide better 
continuity and integration of care. Finally, I'd like to talk a little 
bit about how disease management can be extended to all Medicare 
beneficiaries, and note some practical obstacles that may stand in the 
way.
New Approaches to Medical Management

    Consumers in the market place have made health plans to look in the 
mirror and rethink how they approach medical management. Humana, like 
many other plans, has made extensive changes in its approach. We are 
trying to focus our effort on providing personalized support to the 
sick so they can get appropriate care and provide opportunity for the 
healthy to manage their own health with the help of advanced 
information technology. We take seriously our relationship with our 
members and our responsibility to help them get more control and make 
better decisions about their health and their care.
    Our data show that a relatively small percentage of members consume 
the health care services that account for 90 percent of health care 
costs each year. Medicare knows this phenomenon well. In the Medicare 
population these tend to be very sick people with chronic conditions 
that require ongoing attention if they are not going to enter a cycle 
of costly acute episodes, or beneficiaries at the end of their lives.
    Think, for a moment, about the people you know with serious chronic 
diseases--people with diabetes, heart disease, or kidney disease. These 
people need to receive routine care for their conditions, adhere to 
treatment protocols, comply with medication regimens. And if they do, 
their conditions can be maintained and their health functioning 
significantly improved. For many of the most common and costly 
conditions, programs have been developed to operationalize the clinical 
knowledge that will keep these chronically ill people feeling 
relatively healthy, keep them out of the hospital and reduce their 
health care needs and costs.
    These sorts of programs are increasingly prevalent in health plans. 
A survey last year by the American Association of Health Plans found 
that the average plan had at least five disease management programs, 
usually focusing on diabetes, coronary artery disease, congestive heart 
failure, asthma, high risk pregnancy, and depression.
What is disease management?

    Disease management provides disciplined, evidence-based, expert-
approved support for individuals with chronic conditions to help them 
become more aware of their condition and of their treatment choices, to 
change their behavior to reduce their health risk, and to bridge their 
relationships with their physicians. They do this by educating the 
patient and encouraging adherence to a personalized treatment plan 
based on the body of clinical expertise we call ``evidence-based 
medicine.''
    Disease management evolved over the last twenty years out of the 
recognition that our health care system does not behave like a system 
at all. DM is an approach to patient care that is designed to 
compensate for the fragmentation in service delivery, the unwanted 
variation in care, the lack of adherence to clinically proven 
practices, the lack of adequate patient education and decision support, 
and the inadequate involvement of patients in making decisions about 
their care.
    Disease management is a multi-disciplinary set of services that 
generally involves identifying the population at risk and eligible for 
disease management services, and matching interventions with need; 
educating patients for self-management, including primary prevention, 
behavior modification, and support for compliance with the treatment 
plan; ongoing, structured assessment and the use of evidence-based 
practice guidelines to establish personalized treatment goals and to 
standardize treatment plans; ongoing communication with the patient and 
her family, with routine reporting and feedback to her physicians and 
support-service providers; measuring, evaluating, and managing 
outcomes; and periodic reassessment and feedback to capture problems as 
early as possible and to make adjustments to treatment goals and care 
plans before the problems become more severe.
    For many patients the need for health care is ongoing and the 
required patient effort is significant. Intensifying the support 
provided to those patients and their practitioners can improve the 
process and outcomes of care. Disease management supports the patient's 
self-management and uses evidence-based treatment information as a 
basis for coaching the patient and providing timely information to the 
practitioner. Since most physicians practice alone or in small, single-
specialty groups without an infrastructure or team to support the 
systematic management of patients with chronic disease, DM programs 
emphasize the coordination of services between the treating physician 
and nurse case managers, educators, pharmacists and other health care 
professionals. Because of the need for daily monitoring of measures of 
health or adequacy of medication, such as blood sugar in diabetes or 
body weight in congestive heart failure, patients with chronic illness 
need to take an active role in the management of their disease. 
Advanced information technology is frequently used to monitor patients, 
such as Interactive Voice Response (IVR) systems that allow patients to 
make daily reports of their vital signs and symptoms using a touch-tone 
telephone, facilitating regular reporting of process and outcome 
indicators.
    By maximizing patient adherence to prescribed treatments and to 
health-promoting behaviors, patients with chronic diseases should 
experience better clinical outcomes, better functional capacity and 
quality of life, better access to care, better coordinated care, and 
lower health care costs through a reduction in hospitalization, surgery 
or other invasive care.
Effectiveness of Disease Management

    So what does the research say? How effective are these programs?
    A study of a diabetes program implemented in several plans 
concluded that the program generated substantial cost savings and 
resulted in substantial improvement in all clinical measures. According 
to the study, ``members were more likely to receive HbA1c tests, foot 
exams, eye exams, and cholesterol screenings while enrolled in the 
program . . . [and h]ospital utilization decreased dramatically for 
each plan's diabetic population.'' \1\ Another study that followed a 
group of patients with congestive heart failure showed significant 
improvements a year after enrollment, including a 48 percent reduction 
in inpatient (acute) days, a 36 percent reduction in inpatient 
admissions, a 31 percent decrease in ER visits, and a 20 percent 
decline of average length of stay, yielding an average reduction in 
disease-specific claims of 54 percent and total claims of 42 
percent.\2\ Health status improved, too--surveys revealed a 16 percent 
improvement in functional status and quality of life, as reported by 
patients themselves.
---------------------------------------------------------------------------
    \1\ Robert J. Rubin et al., Clinical and Economic Impact of 
Implementing a Comprehensive Diabetes Management Program in Managed 
Care, 83 J. Clin. Endocrinol. and Metab. 2635, 2640 (1998) (Attachment 
B).
    \2\ Am Heart J 1999;138: 633-40.
---------------------------------------------------------------------------
    Our own experience mirrors these results. We have found significant 
savings related to the investment in time and support to help the 
sickest of our members. But more importantly, we have seen 
significantly improved health results for the members. Ninety percent 
of participants in our CHF program show stabilized or improved disease 
status, with a 60 percent reduction in hospitalization. Participants in 
our coronary artery disease program show improved cholesterol control. 
And a recently published study of our End Stage Renal Disease program, 
comparing its results against the U.S. Renal Data System, a national 
registry of 300,000 ESRD patients coordinated by CMS, found 
significantly higher percentages of Humana members met their dialysis 
adequacy targets than the national average. Hospital bed days were 45 
percent lower than the USRDS average and ER visits dropped 75 percent 
over the two year study period. Mortality for the Humana population was 
80 percent of the expected mortality compared to the USRDS standard.
    Of course, financial results tell only a small part of the tale. 
The financial results improve because patients become more engaged in 
managing their own health care, take better care of themselves, get 
care that experts say they should be getting, avoid care that does them 
little good, improve their compliance with drug regimens, and generally 
experience improved health and functional status. Let me tell you a few 
of these stories.
    Mrs. V. is an obese diabetic female enrolled in the CHF program. At 
the time of admission, she exhibited moderate fatigue and shortness of 
breath with exertion. Her treatment plan focused on weight control, 
exercise, and maintenance of a low-sodium diet. Mrs. V. eventually came 
to exercise four times a day at 45 minutes per day, moderated her salt 
intake, and lost 60 lbs. She is very satisfied with the program and 
looks forward to the regularly scheduled calls. Mrs. B is a woman with 
coronary artery disease enrolled after an angioplasty. She required 
consistent reinforcement with routine exercise and stress management. 
At enrollment, she couldn't walk a one block without complaining of 
fatigue, but after one month she is able to walk a mile without 
fatigue, feels less stress and is more motivated to manage her health.
    One of the keys to a successful program is targeting the 
interventions to the right patients so that services are matched to 
needs. At Humana, we use our extensive claims information, including 
daily feeds of pharmacy data, to identify and link members with 
relevant information and services. To improve enrollment in our DM 
programs, we used pharmacy and claims data to identify those members 
who were likely to have a diagnosis of a chronic disease for which we 
had an established disease management program. We were then able to 
compare program enrollment with disease incidence so we could improve 
the targeting of our efforts to recruit people into the programs. We 
subsequently broadened our eligibility criteria and initiated new 
procedures for the identification and recruitment of individuals who 
would most benefit from DM services.
    In addition, Humana has implemented a ``Personal Nurse'' program 
that reaches out to members during acute episodes of illness. The 
personal nurse provides pre--and post-hospital care coordination, 
coaching and navigational support to help members make their treatment 
choices, referral into appropriate disease management programs, 
consultations with a pharmacist for drug-related issues, and access to 
interactive, on-line personal health tools.
    In this regard, the Medicare+Choice plans have capabilities that 
Medicare simply does not have. We have procedures that enable us to 
identify members as soon as they enter a hospital, which, in Humana's 
case, triggers an outbound contact from a Personal Nurse who can assess 
the member's suitability for a disease management program and recruit 
the member directly into an appropriate program. In addition, the 
freshness of our pharmacy reports provide a rich source of information 
about the member's condition, compliance, complications, and 
comorbidities, which we can use to identify members for intervention, 
track guideline compliance, and enable our pharmacy consultants to 
evaluate possible drug treatment problems.
Extending Disease Management to the FFS Population

    At the moment, these great advantages for the care planning and 
support for chronically ill beneficiaries are available only to 
Medicare+Choice members. However, these represent a relatively small 
percentage of Medicare beneficiaries. Most beneficiaries continue to 
receive their care in the fragmented, uncoordinated fee-for service 
world. We continue to believe that the ``system-ness'' offered through 
Medicare+Choice plans creates distinct advantages for the prompt 
identification and recruitment of beneficiaries into appropriate 
disease management programs.
    However, we commend the efforts of the Medicare program to 
experiment with the use of disease management and care management 
programs in the FFS environment and encourage further demonstrations of 
its effectiveness. With appropriate targeting and recruitment, free-
standing disease management programs can produce savings for the 
Medicare program and, through the systematization, care coordination, 
and access to best-practice medicine that is at the core of DM 
programs, improve the care experience of Medicare beneficiaries. CMS 
Administrator Sculley has signaled his intention to conduct more 
demonstration projects to use private disease management services to 
bring some of the benefits of managed care to the fee-for-service 
beneficiaries still struggling to navigate the fragmented, 
uncoordinated health care ``system.'' We think these demonstrations are 
worth expanding. In the coming years, with the advancing age of the 
baby boomers and the increased ability of our health system to keep 
them alive with chronic illnesses, the number of Medicare beneficiaries 
having to manage chronic health conditions is likely to rise. There are 
clearly some obstacles to the implementation of DM in the Medicare FFS 
population that will require some creative solutions. The most 
important of these is the identification and recruitment of the most 
suitable beneficiaries during their moments of acute need--mechanisms 
that exist within M+C plans to identify people when they are first 
entering an episode of acute illness do not currently exist. In 
addition, Medicare cannot rely on claims information for the 
identification of eligible beneficiaries unless it is very timely. 
These problems are not insurmountable, but they do need to be 
addressed.
Conclusion

    Disease Management offers significant advantages for the 
chronically ill Medicare beneficiary. Most Medicare+Choice plans will 
offer DM services and should be supported for doing so. But for the 
many beneficiaries who are not able to obtain coverage in a M+C plan, 
further extending the demonstrations to make private sector DM services 
available would be very desirable.

                                 

    Chairman JOHNSON. Thank you very much, Dr. Lord. Dr. 
Hillman.

  STATEMENT OF MICHAEL HILLMAN, M.D., MBA, MEDICAL DIRECTOR, 
  BUSINESS AND COMMUNITY HEALTH SERVICES, MARSHFIELD CLINIC, 
                     MARSHFIELD, WISCONSIN

    Dr. HILLMAN. Representative Johnson, Mr. Stark, on behalf 
of Marshfield Clinic, thank you for conducting this hearing. My 
name is Mike Hillman. I am the Medical Director for Business 
and Community Health Services at Marshfield Clinic.
    The hallmark of the Medicare population is age. In our 
society, an almost constant companion to age is chronic 
disease. Our current health care system, largely shaped by the 
health care reimbursement market, is not designed to prevent or 
meet the needs of those who are chronically ill. It is a 
fundamentally reactive system. It emphasizes response to acute 
problems instead of prevention, diagnosis of disease instead of 
early screening, symptom relief instead of health behavior 
change.
    The behavior of our health care system as a whole is 
exactly the behavior that the CMS reimbursement system rewards, 
and not just for the Medicare population. Make no mistake about 
it, CMS reimbursement policy is mirrored by most commercial 
insurance carriers.
    In addition, leveraging Medicare resources by selectively 
denying medical services or reducing reimbursement along faulty 
geographical assumptions is unfair and does not work. Dr. 
Wennberg has elegantly debunked the faulty logic behind these 
assumptions.
    However, an even greater problem is the Resource Based 
Relative Value Scale, RBRVS fee schedule, which is based on a 
model of medical practice centered on traditional patient/
physician encounters, instead of the value of care that is 
actually provided. This model is terribly outdated.
    When you think about it, physicians are the second most 
expensive resource in a patient's health care team. The patient 
is the most expensive. Therefore, the use of patient/physician 
encounters as the primary vehicle for delivering health care is 
shamefully wasteful.
    The Anticoagulation Service described in my testimony, 
illustrates a population health intervention that is 100-
percent telephonic, yet delivers superior quality with dramatic 
savings to CMS. Patients with chronic conditions are best 
served by a systematic multi-disciplinary approach in which the 
patient plays an active role. This approach requires a large 
front-end investment in information systems and process change: 
process change that defines roles and expectations of patients, 
physicians, nurses, and others in accordance with what each is 
most qualified to do in the most value-added way.
    I have submitted testimony to you that describes some of 
the information and population health tools and strategies used 
at Marshfield Clinic, including a detailed account of our 
Anticoagulation Program, a program that has dramatic and 
positive effects on both health care quality and cost. I 
detailed this program for three reasons.
    First, if we look at disease management separate from 
population health management, we would never have chosen to 
engage in this effort. Anticoagulation is not a disease. The 
process of managing anticoagulation has a profound quality-of-
care and cost-benefit effect that extends across the boundaries 
of many diseases. Isolated disease management interventions are 
not optimal. However, disease- or condition-specific population 
health interventions, when provided in a coordinated manner, 
make a lot of sense.
    Second, the effectiveness of any population health 
intervention is synergistically enhanced if it is part of an 
integrated and coordinated system of care, the record of which 
should be immediately available electronically and can be 
accessed 24-7-365 by an ``actionably'' qualified health care 
provider; that is, someone who can understand the information 
and act on it, such as a registered nurse.
    Third, it is essential to measure the value, the quality, 
and quantity per unit cost of a population health intervention. 
Cost should be a part of any quality or process improvement 
platform. It certainly is in other industries, but in other 
industries there is a market that rewards companies for 
providing services or products of superior value. That is not 
the case with the current CMS reimbursement policies.
    One final thought. I believe that a reimbursement system 
that stakes its financial solvency on the currency of patient 
provider encounters is at risk. At the same time, a care system 
that devalues the currency of patient provider relationships is 
at perilous risk.
    Thank you. It is truly an honor and privilege to be here.
    [The prepared statement of Dr. Hillman follows:]
Statement of Michael Hillman, M.D., MBA, Medical Director, Business and 
  Community Health Services, Marshfield Clinic, Marshfield, Wisconsin
    On behalf of the physicians and staff of Marshfield Clinic, I want 
to thank you for conducting this hearing and for the opportunity to 
comment on Disease State Management in the Medicare program.
    This document will summarize the following: (1) why it is important 
to view `disease management' as a carve-out of `population health 
management'; (2) Marshfield Clinic's approach to disease management, 
particularly as it relates to the Medicare population; (3) how the 
current reimbursement system influences (or may influence) population 
health strategies to reduce the cost of health care, while improving 
the health, of the Medicare population.
    Marshfield Clinic is the largest private group medical practice in 
Wisconsin and one of the largest in the United States, with 678 
physicians, 5158 additional staff, and 1.6 million annual patient 
encounters. The Marshfield Clinic system includes a major diagnostic 
treatment center, a research facility, a reference laboratory and 39 
regional centers located in northern, central and western Wisconsin. 
The largest concentration of physicians is in the city of Marshfield 
(population 19,000). The facility houses almost half of the 
physicians at the Clinic. The facility is attached to a 534-bed 
hospital, St. Josephs, which is owned by a separate company, Ministry 
Health Care. Marshfield Clinic serves a disproportionately large socio-
economically challenged population. As a 501(c)(3) non-profit 
organization, Marshfield Clinic is a public trust, and thus obligated 
to serve all who seek care, regardless of their ability to pay. The 
Clinic serves several federally designated Health Provider Shortage 
Areas (HPSAs). These communities are typically geographically remote, 
older, and educationally-challenged. Logging, mining, and agriculture 
are the economic mainstays. The Clinic also provides services in 
partnership with a federally funded Community Health Center at 13 
locations in Wisconsin providing comprehensive integrated care to un- 
and under-insured residents of the community with incomes at or below 
200% of the federal poverty level. Security Health Plan of Wisconsin, a 
tax-exempt health maintenance organization, is a wholly owned 
subsidiary of Marshfield Clinic and provides financing for health care 
services for almost 120,000 members throughout northern, central and 
western Wisconsin.
    Marshfield Clinic has developed and acquired sophisticated tools, 
technology, and other resources that complement and support the 
population health management strategy of the Clinic. These include an 
electronic medical record, a data warehouse, an immunization registry, 
and an epidemiological database that enable enhanced definitions of 
disease states, diagnoses or conditions, and activity-based cost 
analysis of CPT level interventions. These tools have enormous 
scientific, clinical and social policy potential that has only been 
partially tapped.
    During the last three decades, Marshfield Clinic funded and 
installed, and fully implemented a sophisticated electronic medical 
record (EMR) which now contains years of historical data, including 
diagnoses, procedures, test results, medications, immunizations, alert 
events, outcome measurements, and demographics. Marshfield Clinic's 39 
regional centers are linked by common information systems. The EMR 
provides instant portability across our system facilitating 
communication between providers in different departments and at 
different centers. For instance, easy access to previous diagnostic 
test results avoids duplicate ordering of lab and radiology tests. We 
presently put 2.5% of revenue into the operation and maintenance of the 
Clinic's information system, a cost for FY 2001 that amounted to 
$22,073 per physician.
    Marshfield Enhanced Charting & Code Acquisition (MECCA) is an 
integral part of the EMR. It allows us to collect high quality data for 
health care, research and education. It is a point-of-care application, 
acting as an electronic medical assistant that requires providers to 
document and/or review data from lists of items, such as visit types, 
providers, vital signs, diagnoses, procedures, medications, and alerts. 
MECCA plays an important role in patient safety because it tracks drug 
allergies and other diagnoses including past medical history, family 
history, food alerts, latex allergies, and allergic reactions. Because 
MECCA is required for all scheduled patient encounters in Marshfield 
Clinic (including ambulatory surgery, unscheduled encounters, and 
hospital procedures), it helps us track the resources needed for 
medical care and is the foundation of an order-entry system for 
providers. MECCA will also be used to capture data from Hospital 
Discharge Summaries. Patient identifying information is only available 
to providers who have previously taken care of the patient.
    Marshfield Clinic has developed innovative preventative health care 
measures such as an immunization registry (Regional Early Childhood 
Immunization Network or ``RECIN''). RECIN is a computer program that 
allows the sharing of immunization information between and among 
providers and public health departments. RECIN allows providers to have 
electronic access to a child's immunization history, including any 
alerts or reactions to immunizations. Such access minimizes the 
possibility of over-immunization and potentially severe allergic 
reactions. Equally important, access to this information allows public 
health personnel to target children who have not been immunized. As a 
consequence of this program, Marshfield Clinic and concerned public 
agencies have been able to increase childhood immunization rates from 
67% to 92% in Wood County alone. The RECIN platform can be applied to 
many other population health care problems affecting Medicare. Examples 
include anticoagulation, lipid, and diabetes management, as well as 
preventive services including flu and pneumovax vaccinations for 
vulnerable populations.
    Marshfield Clinic has also developed a very unique resource known 
as MESA (Marshfield Epidemiologic Study Area) for clinical research in 
population health management.

[GRAPHIC] [TIFF OMITTED] 82324A.001


    MESA.--In the 24 zip code areas shown in map of Wisconsin, 
virtually all of the 88,000 residents get almost all of their medical 
care from a Marshfield Clinic facility.This population is very stable. 
The Clinic has medical records of this population dating back to the 
early 1900s.

    MESA captures nearly all the health care information of those 
residing in the 24 zip codes above. Consequently, population-based 
health research can be done that includes all of the populations that 
comprise these geographic communities. Unlike most other research 
facilities, MESA researchers can monitor the residency of individuals 
on a daily basis by using updates of births, deaths, new patients, and 
name and address changes to Clinic databases. This allows researchers 
to monitor the health of a community over time by linking this 
residency information with the extensive health care information 
available in Clinic databases and medical records.\i\
---------------------------------------------------------------------------
    \i\ DeStefano F, Eaker ED, Broste SK, Nordstrom DL, Peissig PL, 
Vierkant RA, Konitzer KA, Gruber RL, Layde PM. (1996). Epidemiologic 
Research in an Integrated Regional Medical Care System: The Marshfield 
Epidemiologic Study Area. J Clin Epidemiol; 49: 643-652.
---------------------------------------------------------------------------
    The research opportunities afforded by MESA contrast starkly to the 
studies performed by payers (HMOs and other insurers). Payer research 
is largely based on claims data and is restricted to narrow populations 
circumscribed by a common disease from multiple communities, receiving 
their healthcare from multiple provider organizations. Likewise, MESA 
affords a very important perspective not provided by the research of 
traditional academic medical centers. Typical academic medical research 
is accomplished through randomized clinical trials. In these studies 
populations are studied across multiple sites in very disparate 
geographic communities. Typically, the populations are medically 
homogenous except for the single hypothetical factor that is being 
tested. This type of research has limited value because it is so 
severely restricted. It is widely accepted that multiple, often un-
anticipated variables, are important determinants to individual's and 
populations' health. Yet, there are very few tools to study multiple 
variables simultaneously. MESA is a platform that enables analysis of 
multiple variables simultaneously.
L`DISEASE  MANAGEMENT'  AS  A  PART  OF  `POPULATION  HEALTH 
        MANAGEMENT'
    Medicare is defined by a predominantly aged population, many 
members of which have chronic diseases or conditions. Hence, the need 
for `disease management'. Patients with chronic conditions typically 
enter a health care delivery system seeking acute care services 
traditionally covered under insurance, but they also may need services 
related to counseling and behavior change, support groups, 
communication between visits, continuous coordination with other health 
professionals, and medical supplies. Unfortunately, traditional fee-
for-service payment approaches offer a chronically ill patient face-to-
face office visits as the primary mechanism for receiving care and 
rarely encompass the range of services needed across the continuum of 
care. There is a misalignment among what the patient needs, how the 
services are provided, and how needed services are reimbursed.
    The explosive growth in the size of the Medicare population is one 
of three drivers that will completely transform health care in the next 
10-15 years. The other two drivers are human genomics and a revolution 
in healthcare consumerism. It is essential to consider these drivers, 
as well as the health factors that drive chronic disease, so that we 
minimize the possibility that changes in the Medicare health system 
cause unintended, more expensive, consequences.
    People use physicians primarily when they are, or perceive they 
are, ill. Their use of physicians is defined primarily by encounters. 
Most traditional fee-for-service reimbursement occurs on a `per 
encounter' basis. Therefore, physicians compete with each other for 
per-encounter business. They compete more vigorously for those 
encounters that reimburse at higher rates. The corollary is also true. 
It is not in the best business interest of physicians to compete for 
those patient encounters that are reimbursed at lower rates (i.e. 
Medicare). This situation poses a significant access problem for the 
Medicare population. Especially, when because of their age and chronic 
diseases, they require so much non-reimbursed care (care that does not 
have to be physician-encounter-driven). Therefore, it becomes in our 
enlightened self-interest to manage patients in the most cost-effective 
manner possible. Hence, our strategy to use population health 
management principles.
    Population health management. The sine qua non of population 
healthcare management is the improvement of the health status of a 
selected population by focusing on the needs of that population. There 
are multiple determinants of the healthcare needs of any population.
Multiple determinants of health model.\ii\
---------------------------------------------------------------------------
    \ii\ Evans, R., M. Barer, and T. Marmor. (1994) Why are Some People 
Healthy and Others Not? The Determinants of Health of Populations. 
Aldine de Gruyter. New York.
[GRAPHIC] [TIFF OMITTED] 82324B.002


    In the context of the multiple determinants of health model, 
population health management can be defined as ``the technical field of 
endeavor which utilizes a variety of individual, organizational and 
cultural interventions to help improve the morbidity patterns (i.e., 
the illness and injury burden) and the health care use behavior of 
defined populations.'' \iii\
---------------------------------------------------------------------------
    \iii\ Chapman, LS. (1997). HEALTH MANAGEMENT: Optimal Approaches 
for Managing the Health of Defined Populations. Summex Corporation. 
Seattle, WA.
---------------------------------------------------------------------------
    The generally accepted objectives for population health management 
include: (1) reduction in volume of services utilized, (2) shift of 
utilization to lower cost settings, (3) achievement of clinical 
improvement by focusing on the health status of the population, (4) 
integration of health care services, (5) organization of providers into 
networks, and (6) evaluation and documentation of quality.\iv\ Within 
each of these objectives, there is great number of considerations from 
both philosophical and operational perspectives, especially as they 
relate to the performance of the access system for a horizontally 
integrated health system like Marshfield Clinic.
---------------------------------------------------------------------------
    \iv\ Fos, PJ, DJ Fine, and PJ Foss. (2000). Designing Health Care 
for Population: Applied Epidemiology in Health Care Administration. 
Jossey-Bass. San Francisco
---------------------------------------------------------------------------
    To simultaneously accomplish the first 3 goals of population 
health, mechanisms must be in place to assist patients in becoming 
active, empowered participants in their own health care decisions, 
while reducing the need and use of unnecessary or ineffective medical 
services--enhancing the overall health status of a defined 
population.\v\
---------------------------------------------------------------------------
    \v\ Montrose, G. (1995). The Art & Science of Demand Management. 
Group Health Association of America
---------------------------------------------------------------------------
    The increase in patient responsibility inevitably results in a 
fundamental change in the patient-physician relationship. Patients, and 
the information with which they make decisions, are no longer solely 
dependent on their physicians. Patients, in the above model, are 
partners. They are customers. They are consumers. The consumerism that 
has already reshaped other large parts of the American economy (retail, 
information, automotive, and manufacturing) is carrying over to 
healthcare.\vi\ Much of this consumerism is driven by the increased 
information available on the Internet.
---------------------------------------------------------------------------
    \vi\ Herzlinger, R. (1997). Market-Driven Health Care. Perseus 
Books, New York.
---------------------------------------------------------------------------
    Physicians at Marshfield Clinic are not unique in their resistance 
to the demands of a changing healthcare delivery system. The value of 
specialty practice culturally persists at the Clinic today. The desire 
to develop this core competency of specialty care drove the formation 
of the Clinic. Implicit in subspecialty training is the emphasis on 
``sickness-care''. Specialists are not needed to prevent illness. They 
are needed to perform extraordinarily technical deeds to stave off 
mortality and reduce morbidity. However, even the most ardent advocates 
of specialty practice will now admit that it is not efficient use, for 
example, of a heart surgeon's time to manage a post-operative valve 
replacement patient's anticoagulation medicine. It is also not good 
patient care, because it not something that heart surgeons are expert 
at doing.
    Likewise, it is not the best use of a cardiologist's time to manage 
Type II diabetes in patients that have a stable myocardial status. 
Again, it is also not good patient care. It is not something that 
cardiologists are expert at doing. Then, whose job is it to manage 
these patients with these problems? At Marshfield Clinic, like many 
physician-oriented multi-specialty clinics, it falls to the primary 
care physicians--internists and family practitioners, and their 
physician extenders (Nurse Practitioners and Physician Assistants). For 
the last 6 years, the Marshfield Clinic has purposefully re-directed 
patients under the care of procedural specialists to the primary care 
departments.
    We believe that the business case to be made for this approach is 
sound, even considering the internal conflict attendant Medicare fee-
for-service reimbursement. Primary care is the entry point from which 
subspecialty care demand is generated. Dysfunctional access to primary 
care limits the growth of subspecialty care. Dysfunctional access to 
primary care makes it virtually impossible to develop a consistent, 
system-wide collaborative effort to maximize customer satisfaction and 
consumer health outcomes at the lowest cost per life.
    To further improve access to primary care, we are redefining the 
scope of practice for the different members of the health care team. 
For example: primary care physicians see new patients, provide hospital 
care, do complex follow-up exams, and perform procedures. Nurse 
Practitioners and Physician Assistants do most follow-up care and 
screening (as opposed to diagnostic) exams. Registered Nurses triage 
acute patient symptoms, provide case management, educate, and coach 
behavioral change--all integral elements of disease management.
    Disease Management. Disease Management is a further refinement and 
application of population health principles that we now utilize in the 
Marshfield Clinic. There are four basic steps.\vii\ One, define the 
population. Two, determine what care processes will most effectively 
and efficiently meet the needs of that population. Three, measure the 
effectiveness of those care processes. Four, improve the care processes 
further. The vision for Marshfield Clinic using population health as a 
core strategy is to develop consistent, continually improving, system-
wide collaboration to maximize customer satisfaction and consumer 
health outcomes at the lowest cost per life, and as a result, deliver 
care that is of superior value and liking to the members of its 
communities.
---------------------------------------------------------------------------
    \vii\ Runde, D. (1999). Weaving Disease Management Into the Fabric 
of Patient Care. Health Care Horizons Institute for the Future. Menlo 
Park, CA
---------------------------------------------------------------------------
LDISEASE/POPULATION  HEALTH  MANAGEMENT  AT  MARSHFIELD CLINIC
    In 1995, Marshfield Clinic performed an ``outside-in'' assessment 
of its primary care system. From the patient-as-a-customer perspective, 
we found that our system could improve greatly by addressing the 
following needs: providing symptom-based advice with respect to whether 
patients needed to see a provider; if they don't, how they can self-
manage their symptoms; if they do, when do they need to be seen, and 
with what type of provider.
    The needs of the providers-as-a-customer were different. Our 
providers wanted to provide continuity of care 24-7-365 (although they 
were not willing/able to work 24-7-365) and increase their access (by 
reducing unnecessary patient encounters).
    Marshfield Clinic found that the respective needs of the patients 
and the providers could be met, and exceeded, by a 24-7-365 Registered 
Nurse (RN) call center that systematically answered patients symptom-
based concerns, and, using Marshfield Clinic's electronic medical 
record in combination with the physicians on-call, provide true 
continuity of care. Strictly speaking, we developed a population health 
management/disease management intervention on healthcare resource 
utilization.
    This RN call center department was named ProActive Health. This 
department provided these interventions on behalf of both Marshfield 
Clinic and Security Health Plan (the Clinic's wholly owned insurance 
product). The interventions that this department developed in 
collaboration with its customers include the following: symptom-based 
triage, prenatal health, asthma, secondary cardiac prevention, 
diabetes, and anticoagulation management. The basic principles 
underlying all of these interventions are as follows:

         Patients are selected. In the case of RN ``triage'' 
        and pregnancy, they are self-selected. In other cases they are 
        identified through the use of Health Risk Appraisals or 
        utilization data.

         A condition/symptom-specific assessment is performed 
        telephonically. This assessment includes reviewing the 
        patient's electronic medical record. And for those patients 
        with a chronic condition, particular attention is paid to the 
        providers' care plan.

         Marshfield Clinic has developed an extensive intranet 
        repository of clinical practice guidelines that were/are 
        modified from national guidelines. Provider care plans are 
        checked against those guidelines (particularly for asthma, 
        diabetes, and secondary heart prevention). Our QI department, 
        which organizes the development of these guidelines, is now 
        examining interventions directed towards compliance with these 
        guidelines.

         For acute symptom-based advice, the RNs consult more 
        than 500 guidelines, many of which were specifically modified 
        by Marshfield Clinic physicians to enhance their effectiveness. 
        These guidelines help the RN advise the patient if they need to 
        be seen, in what time frame, and by what type of provider. In 
        addition, the RN helps the patients to develop a self-care 
        plan. For the condition-specific (i.e. ``Disease Management'') 
        interventions, the patients and RNs customize a curriculum of 
        educational messages and behavioral coaching based on the 
        patients' current knowledge base, and the degree to which that 
        individual is at risk for acute decompensation.

         For several of these programs, active RN case 
        management is integrated with the education and behavior 
        coaching. Case management is the heart of population health 
        management. Simply stated, it is a collaborative multi-
        disciplinary process to assess, monitor, and intervene. 
        Physicians are part of the team, but the actual case managers 
        are non-physicians, often nurses. The overall mission is to 
        provide care efficiently, minimizing unneeded office visits, 
        maximizing usefulness. Most of the services can be provided by 
        telephone. In these programs, the RN assumes responsibility for 
        a group of patients. These patients require particularly close 
        monitoring and medication management towards a specific 
        clinical or laboratory indicator. After specialized training, 
        using protocols developed by our physicians, in compliance with 
        the legislatively defined scope of an RN's practice, our 
        Disease Management Nurses help patients adjust their 
        medications (without having to see their physician).

    Marshfield Clinic has a number of disease management programs in 
various states of maturity. These programs include: Diabetes, Prenatal 
Health, Congestive Heart Failure, Asthma, Lifestyle Management, 
Secondary Cardiac Prevention, and Anticoagulation Management. In 
addition, a number of programs are on the ``drawing board''. Those 
programs include Hypertension, Hyperlipidemia, Obesity, Post-natal 
care, and Low Back Pain. Many members of the Medicare population suffer 
from several of these conditions concurrently. To give you a more 
complete picture of how a mature disease management program should 
work, we will describe our Anticoagulation Service Disease Management 
program in more depth.
    The Anticoagulation Service is particularly germane for the 
following reasons. One, it demonstrates how all the essential 
components of a disease management program work together. Two, it is 
the program of ours that is most fully developed with respect to 
clinical and economic outcomes measurement. Three, it demonstrates the 
power of connecting a disease management program directly to physician 
practices.
    Anticoagulation is the process of making the blood less likely to 
clot (form a scab) inside the body. When a clot forms inside the body 
(within the blood vessels), it causes either a stroke or heart attack. 
There are a number of very common conditions in the Medicare problem 
that predispose the formation of these internal clots. These conditions 
include atrial fibrillation (2-3% of the population over 65 years of 
age), congestive heart failure, deep vein thrombosis (especially after 
orthopedic procedures and during cancer chemotherapy), and mechanical 
heart valve replacement. Almost all of these conditions are caused by 
age and chronic disease.
    The most common outpatient drug used for anticoagulation is 
warfarin. While the risk/benefit ratio of using warfarin in this 
patient population is indisputable, the window of therapeutic benefit 
is narrow. That is, under-anticoagulation with this drug doesn't 
prevent stroke and heart attack. Over-anticoagulation can cause 
dangerous internal bleeding. Furthermore, the metabolism of this drug 
(the way that it is broken down by the body) is very sensitive to 
changes in diet, exercise, and many other common medications taken by 
this population (e.g. antibiotics). Therefore, the administration of 
this drug has to be done very carefully. A monthly blood test is 
required to adequately monitor the effects of this medication.
    When this drug is administered in the standard way, the incidence 
of hospitalizations or death is 7-10% per year (the risk of stroke or 
heart attack without this drug is substantially higher). However, with 
our disease management approach to patients taking this medication, 
that risk is reduced to less than 2% per year.
    All five of the `ProActive Health' dot points described above were 
used in this program. The patients are introduced to the program by 
their physicians (to reassure the patient that it is an extension of 
their physician's practice) or are referred immediately upon discharge 
from the hospital. The patients are entered into a special tracking 
database that prevents them from falling through the `cracks' due to 
the complicated monitoring schedule and telephonic follow-up routine. 
Our nurses case manage the patients through guidelines developed by 
Marshfield Clinic. They adjust the patients' warfarin doses according 
to protocol. They educate and coach the patients about recognizing on 
their own the many pitfalls that influence anticoagulation (diet, 
activity, other medications, other illness). The RN case managers have 
access to the Medical Director of the program and the patient's 
personal physician for the 5-10% of time when the protocols don't cover 
a patient's situation. All of the interactions are documented in both 
database and the Clinic's electronic medical record. The RN's EMR note 
is signed by the patient's personal physician (so they always know what 
is going on with their patient). In addition to the RN case manager, 
the patients have access to the 24-7-365 RN ProActive Health Nurseline 
for acute symptom-based advice. This entire program is done 
telephonically without any reimbursement from CMS.
    We recently conducted a study that was funded by the Agency for 
Healthcare Research and Quality under its new Integrated Delivery 
System Research Network initiative. It assessed the impact of 
Marshfield Clinic's Anticoagulation Service on health care utilization 
measures, including urgent care, emergency department and inpatient 
events. In the study, we compared these measures in two study groups of 
individuals receiving warfarin therapy. One group consisted of 
individuals that were enrolled and managed in the Anticoagulation 
Service; the other group consisted of individuals who received standard 
care for their warfarin management needs. All study subjects were under 
the care of Marshfield Clinic cardiologists for at least some of their 
health conditions. The study included a total of 408 study subjects and 
359 years of study observation time.
    In the course of providing this intervention, we noted that two-
thirds of the phone calls were not directly related to warfarin dosing. 
Rather, they resulted from the patients calling in about other health 
concerns that they correctly thought would influence their state of 
anticoagulation. Therefore, in the study funded by AHRQ, we looked at 
all hospital events, not just the events directly related to warfarin. 
Hospital events occurred at a much lower rate in the Anticoagulation 
Service group compared to the standard care group. Based on our 
analyses, the expected difference in hospitalizations per 100 person 
years was approximately 28.7 hospitalizations. This difference was not 
only large but also statistically significant (P<.014).
    For the 86% of the study population that are Medicare 
beneficiaries, total Medicare costs avoided per hospital event were 
estimated at $9,443 in constant year (2000) dollars. Hospital facility 
costs represented about 76% of these costs. Non-hospital costs, 
primarily physician and laboratory costs for both inpatient and 
outpatient care, represented the remaining 24% of costs. Estimated 
avoided CMS costs were $8,221 per hospitalization. The difference 
between total Medicare costs per hospitalization and CMS avoided costs, 
which was $1,222 per hospitalization, is represented by expected 
Medicare beneficiary co-payments and deductible: $446 per 
hospitalization and annual Part B deductible of $776.
    Total avoided Medicare hospitalization-related costs per 100 person 
years of Anticoagulation Service enrollment compared to standard care 
was estimated at approximately $271,014 based on a differential 
hospitalization rate of 28.7 events and an average total Medicare-
related cost of $9,443 per hospitalization. CMS total avoided costs per 
100 person years were estimated at $235,943. Reduced Medicare 
beneficiary co-payments and deductibles were estimated at $35,071. In 
developing estimates of avoided costs, a conservative approach was 
utilized; it is believed a greater savings are likely available than 
those estimated.
    Using the Marshfield Enhanced Charting & Code Acquisition (MECCA), 
we know that our system has 12,477 unique patients on warfarin 
anticoagulation. 95% of those patients are Medicare-eligible. If we 
generalized the Anticoagulation Service to the entire population 
receiving warfarin under the care of Marshfield Clinic, CMS would avoid 
over $28,000,000. It will cost Marshfield Clinic about $3,000,000 to do 
so, none of which is currently reimbursed.
    We are certain that near-equally compelling savings can be achieved 
with our congestive heart failure, diabetes, and other population 
health initiatives. The anti-coagulation example provides clear 
evidence that better health can be achieved at significantly less cost. 
These results can be greatly expedited if Medicare reimbursement policy 
influences the healthcare market to rely less on patient-physician 
encounters, and more on integrated systems of care that extend the 
benefits of patient-physician relationships.
LTHE RELATIONSHIP OF MEDICARE REIMBURSEMENT TO THE HEALTHCARE 
        MARKETPLACE AND POPULATION HEALTH MANAGEMENT
    The health care system that we presently live with is not well 
designed to meet the needs of the chronically ill. The current delivery 
system responds primarily to acute and urgent health problems 
emphasizing diagnosis, ruling out serious conditions, and relieving 
symptoms. Patients with chronic conditions are better served by a 
systematic approach that emphasizes self-management, care planning with 
a multidisciplinary team, and ongoing assessment and follow-up. This 
systematic approach requires a large front-end investment in 
information systems and process change. Marshfield Clinic is making 
that investment. Yet the health care marketplace, largely shaped by CMS 
reimbursement policy, works against developing this type of approach.
    Even without any financial incentive or reimbursement for this 
front-end investment required for population health, clinics like 
Marshfield in the Wisconsin Medicare payment locality, are already 
under-reimbursed by CMS. Marshfield Clinic recently conducted an 
internal analysis to determine to what extent the Medicare program 
covers the cost of providing services to Medicare beneficiaries. Our 
analysis demonstrates that the Clinic presently recovers only about 70% 
of its costs in providing Medicare Part B services. We do not believe 
that we are unique, but suspect that the shortfalls in Medicare revenue 
are common for physicians providing Medicare Part B services. We urge 
you to take steps to remedy this inequity as soon as possible.
    To calculate the percent of its Medicare allowed costs for which 
Medicare reimbursement is received, Marshfield accountants eliminated 
all expenses and revenues received that might potentially be questioned 
by the Medicare program. Our methodology for FY 2000 follows principles 
applied in our annual FQHC cost report that was audited by external 
auditors and submitted to the state. (Marshfield Clinic in conjunction 
with Family Health Center Inc. functions as a federally qualified 
health center (FQHC) under the Medicaid Program.) For the purposes of 
this analysis, all expenses and revenues from activities such as the 
outreach lab, veterinary lab, research and education, rental property 
and optical and cosmetic surgery departments were removed. Our 
accountants also removed all non-Medicare ``Allowed'' costs related to 
our bad debt, interest expenses, marketing programs, government affairs 
activities, National Advisory Council, goodwill amortization and other 
miscellaneous costs.
    For FY 2000, Marshfield Clinic's Medicare revenue was 71.52% of 
costs for fee-for-service Medicare. For FY 2001 Medicare revenue (un-
audited) as a percent of costs goes down to 70.59%. For FY 2002 we 
project that Medicare revenue will decrease as a percent of costs to 
approximately 68.5%.
    Reimbursement shortfalls of this magnitude interfere with the 
Clinic's capacity to further implement disease management programs in 
the many departments where we believe efficiencies can be captured. The 
declines in Medicare reimbursement that Marshfield Clinic experienced 
in FY 2000 and 2001, and has projected for FY 2002 are due in part due 
to payment updates lowered by CMS in anticipation of volume offsets. 
CMS has assumed that increasing volume in response to tightening 
reimbursement takes place uniformly across the country. We believe that 
this simplistic point of view and the pursuant regulatory response by 
CMS are a constant source of frustration and a major obstacle to the 
coordination of care for beneficiaries by organizations whose mission 
is to provide better patient care.
    Marshfield Clinic has demonstrated that by reducing both the volume 
and intensity of services provided to Medicare beneficiaries, savings 
are accruing to Medicare Part A, Medicare Part B, and the beneficiaries 
we serve. Unfortunately, from the point of view of promoting the 
financial viability, disease management activities that serve the 
welfare of beneficiaries and the interest of the Medicare program can 
be potentially self-defeating if not reimbursed. It will be difficult 
to promote the long-term view that disease management strategies are a 
rational response to the current economic incentives of the Medicare 
fee-for-service program.
    Organizations that stake their future to the currency of patient-
physician encounters as the basic unit of medical care value are at 
risk in the present fee-for-service reimbursement environment. At the 
same time, we believe that patients who stake their future to the 
healthcare system that devalues the benefit of patient-physician 
relationships are equally at risk.
CONCLUSIONS

    In summary, we believe that there are significant quality-of-care 
concerns as well as the business case to be made that population/
disease management holds significant promise for the Medicare program. 
However, Congress must take several steps to address the misalignment 
of incentives in the Medicare reimbursement market.
    The Institute of Medicine suggests that fee-for-service payment can 
be adapted to provide incentives for quality improvement by encouraging 
cooperation and providing reimbursement for care outside of the 
traditional office visit, which is not always optimal for meeting 
patients' needs. This approach involves developing relative values for 
the elements of work performed over time by physicians and other health 
professionals.\viii\
---------------------------------------------------------------------------
    \viii\ Institute of Medicine (U.S.). Committee on Quality of Health 
Care in America. (2001). Crossing the Quality Chasm: A new Health 
System for the 21st Century. Washington, D.C. National Academy Press.
---------------------------------------------------------------------------
    That may be a reasonable suggestion, but probably not realistic. It 
still relies on encounters (although not face-to-face), rather than 
care as the unit of value from which reimbursement occurs. And that is 
the reason that capitation, as it has been thus far administered, also 
doesn't work. It also relies on encounters. Although in a capitated 
system, encounters have negative value instead of a positive value.
    We need to develop a reimbursement system that is somewhere in 
between: a system that reimburses for continually improving value 
(quality +quantity , unit cost) in care. Marshfield Clinic looks 
forward to the opportunity to work with you on this.
    Thank you for considering our views.

                                 

    Chairman JOHNSON. Dr. Anderson?

 STATEMENT OF GERARD ANDERSON, PH.D., PROFESSOR, PUBLIC HEALTH 
 AND MEDICINE, JOHNS HOPKINS UNIVERSITY, BALTIMORE, MARYLAND, 
    AND DIRECTOR, PARTNERSHIP FOR SOLUTIONS, JOHNS HOPKINS 
                UNIVERSITY, BALTIMORE, MARYLAND

    Dr. ANDERSON. Chairwoman Johnson, Ranking Member Stark, 
Members of the Subcommittee, thank you for inviting me to 
testify this afternoon.
    I am Gerard Anderson, a Professor at Johns Hopkins 
University and Director of the Robert Wood Johnson National 
Program Partnership for Solutions: Better Lives for People with 
Chronic Conditions.
    In my testimony this afternoon, I want to focus your 
attention on the large number of Medicare beneficiaries with 
multiple chronic conditions and how this creates challenges and 
opportunities for disease management. Our analysis suggests 
that 63 percent of Medicare beneficiaries have two or more 
chronic conditions, and this is in contrast to only 5 percent 
of children and 20 percent of adults with multiple chronic 
conditions.
    So, when we think of disease management in the Medicare 
program, we need to be considering the complex, multiple 
conditions of a disabled and aged population. This is probably 
the most critical differences between disease management 
programs in the private sector and in the Medicare program. It 
is much easier to design a disease management program for a 
patient with a single chronic disease, such as diabetes, 
arthritis, or congestive heart failure than it is to design a 
disease management program for a patient with diabetes, 
arthritis, and congestive heart failure.
    If Medicare is going to pursue a disease management program 
strategy, then these programs must be able to demonstrate they 
are equipped to handle Medicare beneficiaries with multiple 
chronic conditions. In the working age population, multiple 
chronic conditions are the exception. In the Medicare 
population, they are the norm.
    Caring for Medicare beneficiaries requires that disease 
management programs make certain modifications. For example, 
and as we have heard today, many disease management programs 
rely on self-management as a backbone to their success. 
However, many Medicare beneficiaries are unable to self-manage 
because of their dementia or their problems with multiple 
chronic conditions.
    Medicare beneficiaries are very likely to see many 
physicians. For example, 1 in 5 Medicare beneficiaries sees 14 
or more doctors during the year. Therefore, all disease 
management programs should have the information capability to 
allow physicians to know what other physicians are doing when 
they treat a patient in common.
    Now we know that doctors recognize the need for better care 
coordination. We, ourselves, conducted a national Survey of 
Physicians, surveying physicians who provide more than 20 hours 
of patient care per week. These physicians told us they were 
having difficulty coordinating care with other doctors and 
other health professionals. Two-thirds of them told us they 
were not well-trained in care coordination. The payoff to the 
Medicare program of better coordination is fewer unnecessary 
hospitalizations, fewer nursing home placements, and fewer 
drug-drug interactions.
    In our survey of physicians, 44 percent of them told us 
that poor care coordination results in adverse drug reactions; 
36 percent said that it resulted in unnecessary 
hospitalizations; and 24 percent of them said it leads to 
unnecessary nursing home placements.
    Lack of care coordination is also a problem expressed by 
people with chronic conditions. We did a survey of Americans, 
and we found that about 16 million Americans go to the 
pharmacist every year only to be told of a drug-drug 
interaction.
    Now, think of the Medicare beneficiary going to the 
pharmacist, those fortunate enough to have drug coverage, they 
go to the drug store only to be told that their drug can't be 
filled because another medication, probably ordered by a 
different doctor, is going to give them a potential problem. So 
what do they do? Do they fill it anyway? Do they ask the 
pharmacist? Do they call the doctor who ordered the 
prescription? Do they call their primary care physician? Do 
they phone a friend? What do they do? Disease management 
programs must be able to help this Medicare beneficiary 
standing at the pharmacy counter.
    An alternative to disease management programs for fee-for-
service Medicare is to pay explicitly for care coordination. 
For example, our data suggests that cost utilization and poor 
outcomes really started about four or more different chronic 
conditions. So perhaps an enhanced payment, a monthly 
management fee, for example, would be appropriate for 
physicians who are willing to take on the clinical and possibly 
other service coordination activities for this group of complex 
patients. These physicians would have to meet certain criteria 
in order to be able to be eligible for payment; for example, 
having appropriate office staffing, information and 
communication systems.
    I would like to leave you with a fact and a concept. The 
fact is that two-thirds of Medicare spending is for Medicare 
beneficiaries with five or more chronic conditions, two-thirds 
of Medicare spending. The concept is that Medicare is a program 
for people with chronic conditions. It just doesn't know it.
    [The prepared statement of Dr. Anderson follows:]
   Statement of Gerard Anderson, Ph.D., Professor, Public Health and 
Medicine, Johns Hopkins University, Baltimore, Maryland, and Director, 
    Partnership for Solutions, Johns Hopkins University, Baltimore, 
                                Maryland
    Good morning and thank you for inviting me to testify on the 
important topic of disease management in Medicare. I am Dr. Gerard 
Anderson, Professor of Public Health and Medicine at Johns Hopkins 
University, and Director of a Robert Wood Johnson Foundation project, 
Partnership for Solutions: Better Lives for People with Chronic 
Conditions.
    My role today is to provide this Committee with information about 
chronic conditions in the Medicare population and talk about some 
aspects of disease management that are particularly important to 
consider for Medicare.
Chronic Conditions in Medicare

    The top five chronic conditions in the Medicare population overall 
are: hypertension, diseases of the heart, diseases of the lipid 
metabolism, eye disorders, and diabetes.\1\ There is not a great deal 
of variability by age or eligibility status in the top disease rankings 
although there is some variation by age and eligibility status.
---------------------------------------------------------------------------
    \1\ The top 15 most common chronic conditions in Medicare are: 
hypertension; diseases of the heart (including coronary 
arteriosclerosis and congestive heart failure, cardiac disrhythmia, 
among others); disorders of the lipid metabolism (including 
hyperlipidemia and pure hypercholesterolemia among others); eye 
disorders (including senile nuclear sclerosis, senile cataract, 
glaucoma among others); diabetes mellitus; non-traumatic joint 
disorders (including osteoarthritis and rheumatoid arthritis among 
others); thyroid disorders (including hypothyroidism and thyrotoxicosis 
among others); COPD and bronchiectasis (including chronic airway 
obstruction and chronic bronchitis among others); diseases of the male 
genital organs; diseases of arteries, arterioles, and capillaries 
(including peripheral vascular disease, arteriosclerosis of extremities 
or aorta, among others); senility and organic mental disorders 
(including Alzheimer's and senile dementia among others); spondylosis, 
intervertebral disc disorders, and other back problems; affective 
disorders (including neurotic depression, major depressive disorder 
among others); osteoporosis; diseases of the urinary system; viral 
infection (chronic); chronic ulcer of the skin; other connective tissue 
disease; other nutritional, endocrine, and metabolic disorders; other 
endocrine disorders; nutritional deficiencies; anemia, schizophrenia 
and related disorders; anxiety, somatoform, dissociative, and 
personality disorders; other nervous system disorders; cerebrovascular 
disease (including cerebral arteriosclerosis among others); asthma.

         Senility and organic mental disorders are most 
        prevalent in the 85 years and older population. They begin 
        appearing among the top 15 conditions in the 75-79 year old 
        group.
         Affective disorders are the fifth most prevalent 
        group of conditions for the disabled population but rank 13th 
        for the general Medicare population. Other conditions related 
        to mental health appear more prevalent in the disabled 
        population than in the aged Medicare population.
         Asthma is one of the top 15 most common conditions 
        among disabled Medicare beneficiaries but asthma is not 
        otherwise very prevalent in the Medicare population.
General Prevalence and Cost

    About 78% of the Medicare population has at least one chronic 
condition while almost 63% have two or more. Of this group with two or 
more conditions, almost one-third (20% of the total Medicare 
population) has five or more chronic conditions, or co-morbidities.
[GRAPHIC] [TIFF OMITTED] 82324C.003

    In general, the prevalence of chronic conditions increases with 
age--74% of the 65 to 69 year old group have a least one chronic 
condition, while 86% of the 85 years and older group have at least one 
chronic condition. Similarly, just 14% of the 65-69 year olds have five 
or more chronic conditions, but 28% of the 85 years and older group 
have five or more. Fourteen percent of the people with disability-
related eligibility have five or more chronic conditions but 46% of the 
ESRD patients have five or more.
    Average per beneficiary spending increases gradually with age but 
the variation in average costs related to number of chronic conditions 
is more significant. In 1999, the average per person costs for people 
with no chronic conditions was $160 (including the under 65 entitled), 
while the average per person cost jumps to $13,700 for people with five 
or more chronic conditions. The average per beneficiary spending across 
all ages and eligibility groups is $4,200. Per beneficiary spending 
increases more than 2\1/2\ times between two and four chronic 
conditions, and nearly triples again from four to five chronic 
conditions.
[GRAPHIC] [TIFF OMITTED] 82324D.004


    People with one chronic condition are 15% of the Medicare 
population but only 3.5% of the spending. People with 3 chronic 
conditions are also 15% of the population but 10% of the spending. 
People with 5 chronic conditions are 20% of the population but 66% of 
program spending.
[GRAPHIC] [TIFF OMITTED] 82324F.006

Key Utilization

    There is strong pattern of increasing utilization as the number of 
conditions increase. Fifty-five percent of beneficiaries with five or 
more conditions experienced an inpatient hospital stay compared to 5% 
for those with one condition or 9% for those with two conditions. 19% 
of Medicare beneficiaries have an inpatient stay. Inpatient days per 
thousand beneficiaries jumps from 335 days for those with one condition 
to over 7000 days per thousand among those with 5 or more conditions. 
The average days per thousand across all beneficiaries was 1944.
    In terms of physician visits, the average beneficiary has just over 
15 physician visits annually and sees 6.4 unique physicians in a 
year.\2\ There is almost a four-fold increase in visits by people with 
five chronic conditions compared to visits by people with one chronic 
condition. The number of unique physicians seen increases almost two 
and half times for people with five or more chronic conditions relative 
to those with just one chronic condition.
---------------------------------------------------------------------------
    \2\ This number of unique physician visits is 6.7 when people who 
died are included and is 4.6 when only outpatient settings among the 
age-entitled are included in the analysis.
[GRAPHIC] [TIFF OMITTED] 82324G.007

    The average Medicare beneficiary fills almost 20 prescriptions. 
Within this average, the under 65 year old population fills on average 
26.3 prescriptions and those 65 years and older fill 19.1 on average. 
We found that beneficiaries with no chronic conditions fill an average 
of 3.7 prescriptions per year while those with any chronic conditions 
fill an average of 22.7.
     There is a strong trend in utilization of prescriptions when 
examined by number of chronic conditions.

         Average annual prescriptions filled jumps from 3.7 
        for all people studied with no chronic condition to 49.2 for 
        people with five or more chronic conditions.

         Growth in usage between those with no chronic 
        conditions and those with one chronic condition is over 180 
        percent--from 3.7 to 10.4 prescriptions filled.

         Usage grows 72% between one and two chronic 
        conditions, from 10.4 to 17.9 prescriptions filled.

         There is a 48% growth in average annual usage between 
        four and five chronic conditions (33.3 to 49.2).
        [GRAPHIC] [TIFF OMITTED] 82324H.008
        
Implications

    So what does all this information mean for beneficiaries, the 
providers that serve them and the program overall. There are 
indications in the data that there is a lot of care provided to 
beneficiaries with chronic conditions--particularly those with multiple 
chronic conditions. There are also indications that the care may not be 
well-coordinated and that for beneficiaries with multiple chronic 
conditions there are adverse outcomes.
    For instance, we have found that as the number of chronic 
conditions increase, so too do the number of inappropriate 
hospitalizations for illnesses that could have received effective 
outpatient treatment (Ambulatory Care Sensitive Conditions). Per 1,000 
beneficiaries, these hospitalizations increase from seven for people 
with one chronic condition to 95 for beneficiaries with five chronic 
conditions, and jumps again to 261 for people with 10 or more chronic 
conditions.\3\
---------------------------------------------------------------------------
    \3\ This analysis includes only age-eligible beneficiaries.
    [GRAPHIC] [TIFF OMITTED] 82324I.009
    
    These poor outcomes are likely a result of poor care coordination 
among the many services used and providers seen. It may be that 
different providers are recommending conflicting treatments that result 
in poor outcomes including adverse drug events. It could be that one 
condition is receiving treatment, while other chronic conditions go 
unattended and then become acute episodes.
    There is other information to support this theory. In our surveys 
of people with chronic conditions and people with serious chronic 
conditions, we know that care coordination is a problem.
    We hired Gallup to conduct a national survey people with serious 
chronic conditions:

         26 percent report receiving contradictory advice from 
        different doctors in the past year

         20 percent report they were often or sometimes sent 
        for unnecessary or duplicate tests or procedures

         23 percent report that they often or sometimes 
        received conflicting information from different health care 
        providers

         25 percent report that they were often or sometimes 
        diagnosed with different medical problems for the same set of 
        symptoms from different providers

    Our work at Partnership for Solutions shows that physician think 
that care coordination is both important and difficult to do. We 
conducted a national survey of physicians who provide more than 20 
hours of direct patient care during the week. Almost two-thirds of 
these physicians reported that their medical education training was not 
adequate to the task of caring for people with chronic conditions and 
17 percent reported that they had problems coordinating care with other 
physicians. Most importantly, physicians in our survey think that poor 
care coordination leads to poor outcomes.
[GRAPHIC] [TIFF OMITTED] 82324J.010

What Can Be Done to Change the Situation?

    I believe policymakers, payors, and providers are increasingly 
attentive to the issue of chronic conditions. The Centers for Medicare 
and Medicaid Services (CMS), for example, is becoming more actively 
engaged in the issues of chronic care in Medicare, in part thanks to 
the efforts of Congress in the Balanced Budget Act of 1997 and more 
recent legislation.
    As you know, CMS is implementing a 15-site Medicare Coordinated 
Care Demonstration that will provide case management and disease 
management services to different Medicare populations. An important 
aspect of these demonstrations is coordination with community-based 
services. There is also a more recent CMS call for proposals for a 
demonstration testing disease management strategies and the benefit of 
prescription drugs for beneficiaries with specific diseases (congestive 
heart failure, diabetes, and coronary heart disease).
    These demonstrations are important and will test the idea of 
integration and coordination in larger health care settings. I think 
there are issues in traditional disease management that need to be 
explored and addressed in order for them to be successful in the 
Medicare population whether these programs are applied only in 
demonstration or directly into the larger program.
    Disease management programs in Medicare must be able to demonstrate 
that they are equipped to handle Medicare beneficiaries with multiple 
chronic conditions. In the working age population, multiple chronic 
conditions are the exception, in the Medicare population they are the 
norm. Unlike the working age population, it is more common in Medicare 
to have patients who cannot adequately self-manage their care because 
of dementia or other problems. Many disease management programs rely on 
improving self-management. Any disease management program should have 
the information capacity to allow physicians to know what other 
physicians are doing to treat a shared patient, which can be 
particularly challenging in a program where the average beneficiary 
sees slightly more that six unique doctors in a year. Finally, disease 
management programs need to have protocols for handling people with 
multiple, complex chronic conditions.
    Beyond disease management, there are other options worth exploring 
that will improve care for Medicare beneficiaries with multiple chronic 
conditions. These options would be interim, modest steps in for 
Medicare program. We know a great deal about Medicare beneficiaries and 
their conditions, as well as the lack of coordination within the system 
that affects them.
    Unlike the traditional method of disease management, which targets 
enrollees with particularly high cost conditions, it may be useful to 
look at some of the people who are having the most difficult time with 
multiple medical conditions (whatever those conditions may be). We 
should focus on people with four or five chronic conditions who, for 
whatever reason, have difficulty self-managing one or more of their 
conditions. These are people who typically see many physicians, who 
fill a large number of prescriptions, who need an array of health care 
services, and who are at risk of poor outcomes if the clinical care and 
other care is not well-coordinated.
    For this group of target beneficiaries, there could conceivably be 
a physician payment adjustment that compensates physicians for the 
additional visit and other office time necessary to work with these 
patients. This type of adjustment could be available to all physicians 
treating any Medicare patient who meets the criteria.
    Unlike a broad-based payment available to all physicians, a more 
targeted approach could also be considered. Again, the target 
beneficiary population would be those with four or five conditions who 
have difficulty self-managing one of their conditions. This approach is 
modeled roughly on Medicaid Primary Care Case Management programs and 
would reimburse certain providers for complex clinical care management 
and coordination. In this model, a treating physician accepts added 
responsibility to coordinate the clinical care provided by all treating 
physicians. Beneficiary enrollment would be voluntary.
    Physicians could participate to the extent that they agreed to 
follow certain administrative procedures to track and monitor all 
aspects of a beneficiary's care, act as a referral, receive and 
coordinate clinical reports from others involved in the patient's care, 
maintain a comprehensive medical record and be available to provide 
greater consultation time surrounding a qualified beneficiary's care.
    There are a number of payment options that could apply to this 
clinical care management model, two of which are used in Medicaid. One 
would be a monthly per patient management fee which is separate and 
apart from billing for specific services rendered. Another option is a 
monthly capitation to the physician for a range of primary care 
services and the care coordination activities.
    There are a number of design issues that would have to be 
considered in applying a PCCM-type approach to Medicare. Under either 
payment structure, the model would require some sort of provider 
designation such that participants would have to meet certain standards 
for care, quality, and administrative capabilities. Because only one 
provider can be paid for the clinical care management of a particular 
patient, more administrative capabilities may be required of the 
carriers.
    Another possible modest step for Medicare would be to develop a 
modified home visit benefit. The current home health benefit is for 
people in need of extended home nursing and personal care services and 
who meet a technical definition of ``homebound.'' The current 60-day 
episode of care payment reflects the extended nature of the benefit. 
There seems to be need, however, for another type of benefit that is 
not as extensive or intensive as the current home health benefit.
    Although current rules require direct physician supervision of 
staff seeing Medicare patients, direct supervision is not always 
practical. Physicians have said it would be helpful to clinical care if 
they could authorize their office nurses or physician assistants to 
periodically conduct home visits to check on patients. This benefit 
would be limited in scope to infrequent medical monitoring when a 
patient is not able to come to the office due to temporary or otherwise 
acute health conditions but allows the physician more direct knowledge 
of health status and functioning than a service delivered through a 
separate agency.
    There could be limits built into the design of any new benefit such 
as limiting the number of visits per beneficiary per year, defining the 
qualifications of practitioners who might make such home visits, 
restricting services within the benefit, and having the visits related 
to patient-specific events such as acute exacerbations of chronic 
conditions, or times when a patient's treatments have been altered due 
to a change in health status.
    One other option, that is not mutually exclusive with anything else 
discussed here has to do with physician training and physician ability 
to care appropriately for people with chronic conditions. I note that 
the Medicare program is providing almost $8 billion in direct and 
indirect medical education support in 2002. For this money Medicare 
could ask the training programs to emphasize care coordination as part 
of their curriculum. The Medicare program could encourage analysis of 
the appropriate treatments for people with multiple chronic conditions, 
given that most Medicare beneficiaries have multiple chronic problems, 
this should be a priority.
Summary

    Chronic care in Medicare is an important issue although a difficult 
one. Chronic conditions affect both program beneficiaries and program 
financing in significant and growing ways.
    It is important for the program to begin to take steps to address 
the growing disparity between what the program is currently designed to 
do and the changing needs of its beneficiaries.
    I have proposed some ideas today that we are working on at 
Partnership for Solutions. Indeed, there are many other ideas as well 
that need to be debated and refined. In general, I would ask Members to 
think about solutions to the current problems keeping in mind a few key 
principles or goals.

         Care coordination for people with multiple chronic 
        conditions should be a top priority.

         Any new benefit or service should address the common 
        problems of beneficiaries with multiple chronic conditions 
        rather than address similar needs disease by disease.

         Any new benefit or service should be accessible to 
        all beneficiaries and not be designed such that it only can be 
        provided in special settings or by providers who are not widely 
        available to beneficiaries.

    I thank you for this opportunity and will be happy to answer any of 
your questions.

                                 

    Chairman JOHNSON. Dr. Henschke?

  STATEMENT OF CLAUDIA I. HENSCHKE, M.D., PH.D., PROFESSOR OF 
RADIOLOGY, WEILL MEDICAL COLLEGE, CORNELL UNIVERSITY, NEW YORK, 
                            NEW YORK

    Dr. HENSCHKE. Madam Chairman, thank you very much for 
having this important hearing and for including me. For the 
record, I am Claudia Henschke, Professor of Radiology of Weill 
Medical College of Cornell University.
    Each year, approximately 160,000 Americans die of lung 
cancer. That is more than 50 times the number of people who 
died in the attack on New York City in Washington on September 
11. The overall cure rate of lung cancer is dismal, somewhere 
around 10 percent.
    About 85 percent of the lung cancers found in our usual 
care today are of late stage, and their cure rate is 
essentially zero. None of the other major cancers--that is 
colon, breast, prostate--for which screening is provided has 
such a poor outcome.
    The prognosis of patients found with early stage lung 
cancer is much brighter. It is well accepted that early stage, 
Stage I, non small-cell lung cancer has a 5-year survival rate 
of over 70 percent. Thus, early detection is compelling as the 
probability of cure is significantly increased.
    However, today's usual care results in less than 15 percent 
of the non small-cell lung cancer being found in early stage. 
Low-dose CT screening, on the other hand, finds about 80 
percent of cancers in this early stage, and this high 
percentage has been well documented in studies in the United 
States, Japan, and Europe. This improvement is due to the many 
more detailed images obtained by the CT Scan, currently about 
300 images per person and, thus, lung cancers can be found as 
small as a grain of rice, as compared to being recognized when 
they are the size of a grapefruit. This resulting dramatic 
shift from finding 15 percent of cancers in the early stage to 
over 80 percent, suggests a concomitant improvement in the cure 
rate. However, further follow up is still needed of the 
currently ongoing studies to confirm the exact amount of this 
improvement.
    Analysis of Medicare cost data has shown that the cost 
associated with treatment of late-stage lung cancer is at least 
twice the cost of treatment of early stage lung cancer. Thus, 
there is considerable financial incentive for early detection 
as well. The charge of a low-dose screening CT is currently set 
at $300 at our institution, although in some places it is lower 
and in other places higher. This test is painless, the images 
are acquired in a single breath hold in less than 20 seconds, 
and this equipment is already available in private practice 
offices, community hospitals, as well as major medical centers 
throughout the country.
    In my opinion, the most realistic scenario suggests that 
the cost is less than $3,000 per life year saved, much less 
than the benchmark value of $50,000 for renal dialysis, and the 
worst-case scenario is still less than that benchmark amount.
    Today, under usual care, thoracic surgery is performed on 
many individuals with no cancer at all. By following the 
recommended management plan of nodules, either incidentally 
detected by chest X-ray or CT, many unnecessary biopsies and 
surgeries may be avoided by assessment of nodule growth on 
subsequent CT scan one or several months later. A rational lung 
cancer management plan of screening and standardized workup, in 
terms of actual nodule growth, provides the benefit of early 
diagnosis and early treatment and thus could save many lives.
    Current cost of care of the 170,000 annually diagnosed 
patients with lung cancer averages at least $50,000 per case, 
totaling more than $8.5 billion a year. The majority of these 
dollars are spent on late-stage treatment, with a very poor 
outcome. This does not include the work of many benign nodules, 
which often undergo surgery as well.
    We are most concerned about the currently planned National 
Cancer Institute (NCI) randomized trial for assessment of CT 
screening for lung cancer. It will be the most expensive 
screening trial ever planned, well over $200 million, and it 
will take at least 10 years to complete. It is, however, 
unlikely to provide an answer, as it has the same design flaws 
that recently caused the firestorm about mammography screening. 
Our published article points out these fundamental flaws, and 
this article was widely endorsed.
    Even the front page article in the New York Times noted 
that our article caused the NCI to continue to endorse 
mammography. It is simply not rational for the NCI to embrace 
the design considerations when it comes to mammography and yet 
ignore these same considerations when it comes to lung cancer. 
Now is an opportune time to intervene before the planned trial 
starts, so as to avoid the misleading results and resulting 
confusion seen in mammography screening.
    However, despite numerous attempts for open discussion of 
the currently planned trial or design alternatives that are 
less costly and more efficient, we have been ignored. Such 
alternative designs allow for assessment of the effectiveness 
of CT screening as a part of a practice management plan. These 
designs provide the benefit of CT screening to all participants 
and allow for careful assessment of the improvement in the lung 
cancer cure rate and the associated costs.
    These alternative studies will lead to more definitive 
answers in much less time than the contemplated NCI trial. It 
is important to recognize that our group in New York has been 
doing lung cancer screening over 10 years. We have found that 
the costs to perform the trial being contemplated by the NCI to 
be at least six times the cost per patient as other 
alternatives.
    We think this is a very important topic for the 
Subcommittee to address and appreciate the opportunity to 
present our views. A thoughtful approach to the careful 
evaluation of the benefit and cost of CT screening now has the 
potential to save more lives than all of the other treatments 
developed for cancer to date. Such a benefit should not be 
delayed for years by a very expensive and probably inclusive 
trial.
    I suggest to the Subcommittee that the issue of cancer 
screening and how such screening is evaluated is the most 
important health care issue of our time. With our rapidly 
changing technology, we need to make rapid and accurate 
decisions regarding the scientific application of these 
potential screening tests.
    The prevailing methodology has overwhelming design flaws 
and an open scientific debate is essential. The confusion about 
mammography screening for breast cancer, despite seven large 
trials involving more than $500,000 women over 30 years make 
this point abundantly clear.
    Thank you.
    [The prepared statement of Dr. Henschke follows:]
Statement of Claudia I. Henschke, M.D., Ph.D., Professor of Radiology, 
     Weill Medical College, Cornell University, New York, New York
    Each year, approximately 160,000 Americans die of lung cancer, that 
is more than 50 times the number of people who died in the attack of 
September 11, 2001. The overall cure rate of lung cancer is dismal, 
somewhere around 10%.
    About 85% of the lung cancers found by our `usual' care are late-
stage, and their cure is essentially zero. None of the other major 
cancers (e.g., colon, breast and prostate) has such a poor outcome.
    The prognosis of patients found with early stage lung cancer is 
much brighter. It is well accepted that early stage (Stage I) non-
small-cell lung cancer has a 5-year survival rate exceeding 70%. Thus, 
the emphasis on early detection is compelling, with the probability of 
cure significantly increased.
    Today's `usual' care results in less than 15% of non-small-cell 
lung cancer being found in Stage I. Chest x-ray screening alone 
resulted in less than 30% of cancers being found in this early stage. 
Low-dose CT screening, on the other hand, finds about 80% in this early 
stage and this high percentage has been well documented by studies in 
the United States, Japan, and Europe (1-6). This diagnostic improvement 
of the CT is due to the many more detailed images it produces of the 
lungs (currently over 300/person) as compared to the single chest x-ray 
image. The resulting dramatic shift in early stage cancers from 15% to 
over 80% suggests a concomitant improvement in the cure rate. However, 
further follow-up is still needed of the currently on-going studies to 
confirm the exact amount of this improvement.
    Analysis of Medicare cost data has shown that the cost associated 
with treatment of late stage lung cancer is at least twice the cost of 
treatment of early stage lung cancer. Thus, there is also considerable 
financial incentive for early detection. The charge of a low-dose 
screening CT scan currently set at $300 at our institution, although it 
may be as low as $200, although considerably more is charged in some 
settings. The test is painless, the images are acquired in less than a 
single breath-hold, that is in less than 20 seconds and this equipment 
is already available in private practice offices, community hospitals 
as well as major medical centers throughout the country (7-9). In my 
opinion, the most realistic scenario suggest that the cost is less than 
$3,000 per life-year saved, the worst-case is less than $40,000 per 
life-year saved.
    Today, under `usual' care, thoracic surgery is performed on many 
individuals with no cancer at all. By following the recommended 
management plan for nodules either incidentally detected on chest x-ray 
or CT, many unnecessary biopsies and surgeries may be avoided by 
assessment of nodule growth on a subsequent CT scan one or several 
months later. A rational lung cancer management plan of screening and 
standardized work-up in terms of actual nodule growth provides the 
benefit of early diagnosis and early treatment to over 80% of the 
individuals diagnosed with lung cancer as compared to that less than 
15% as currently found and thus save lives now.
    Current cost of care of the 170,000 annually diagnosed with lung 
cancer averages at least $50,000/case, totally more than $8.5 billion. 
This does not include the work-up of many benign nodules, which often 
undergo surgery as well. The majority of these dollars are spent on 
late-stage treatment, with a very poor outcome.
    We are most concerned about the currently planned National Cancer 
Institute randomized trial (RCT) for assessment of CT screening for 
lung cancer. It will be the most expensive screening trial ever planned 
(well over $300 million currently estimated) and it will take at least 
10 years to complete. It is, however, unlikely to provide an answer as 
it has the same design flaws that recently caused the firestorm about 
mammography screening (10). Our published article pointed out 
fundamental flaws of the design and this article was widely endorsed 
(11-13). Even the front-page article in the Los Angeles Times noted 
that our article in part caused the NCI to continue to endorse 
mammography. It is simply not rational for NCI to embrace the design 
considerations when it comes to mammography yet ignore these same 
considerations when it comes to lung cancer. It is an opportune time to 
intervene before the planned trial starts so as to avoid the misleading 
results that occurred with mammography.
    However, despite numerous attempts for open discussion of the 
currently planned trial, or design alternatives that are less costly 
and more efficient, we have been ignored. Such alternative designs 
allow for the assessment of the effectiveness of CT screening as part 
of the practice management plan; these designs provide the benefit of 
CT screening to all participants and allow for careful assessment of 
the improvement in the cure rate and associated costs. These 
alternative studies will yield more definitive answers in much less 
time than the traditional trial being contemplated. It is also 
important to recognize that our group in New York has been doing lung 
cancer screening for over 10 years and we have found that the cost to 
perform the trial being contemplated by the NCI is at least 6 times the 
cost per patient as other alternatives. In addition, it will take more 
than 10 years to have an answer, which will most likely be misleading.
    We think this is a very important topic for the Committee and 
appreciate the opportunity to present. A thoughtful approach to careful 
evaluation of the benefit and cost of CT screening now has the 
potential to save more lives than all of the treatments developed for 
cancer to date. Such a benefit should not be delayed for years by a 
very expensive but probably inconclusive trial. I suggest to this 
committee that the issue of cancer screening and how such screening is 
evaluated is the most important healthcare issue of our time. With our 
rapidly changing technology, we need to make rapid and accurate 
decisions regarding the scientific application of these potential 
screening tests. The prevailing methodology has overwhelming design 
flaws and an open scientific debate is essential. Just looking at the 
confusion we have in regards to mammography where there have been no 
fewer than 7 large trials involving more than 500,000 women over 30 
years makes this point abundantly clear.

                               References

 1. LHenschke CI, McCauley DI, Yankelevitz DF, Naidich DP, McGuinness 
G, Miettinen OS, Libby D, Pasmantier M, Koizumi J, Altorki N, Smith JP. 
Early Lung Cancer Action Project: Overall Design and Findings From 
Baseline Screening. The Lancet 1999; 354:99-105

 2. LHenschke CI, Naidich DP, Yankelevitz DF, McGuinness G, McCauley 
DI, Smith JP, Libby D, Pasmantier M, Koizumi J, Flieder D, Vazquez M, 
Altorki N, Miettinen OS. Early Lung Cancer Action Project: Initial 
results of annual repeat screening. Cancer 2001;92:153-159

 3. LKaneko M, Eguchi K, Ohmatsu H, Kakinuma R, Naruke T, Suemasu K, 
Moriyama N. Peripheral Lung Cancer: Screening and detection with low-
dose spiral CT versus radiography. Radiology 1996;201:798-802

 4. LSone S, Takahima S, Li F, Yang Z, et al. Mass screening for lung 
cancer with mobile spiral computed tomography scanner. Lancet 
1998;351:1242-5

 5. LSone S, Li F, Yang Z-G et al. Results of three-year mass screening 
programme for lung cancer using mobile low-dose spiral computed 
tomography scanner. British Journal of Cancer 2001;84:25-32

 6. LInternational Collaboration to Screen for Lung Cancer. Proceedings 
of the First, Second, Third, Fourth and Fifth International Conference 
on Screening for Lung Cancer. New York, NY (Website: http://
ICScreen.med.cornell.edu.)

 7. LMiettinen OS. Screening for lung cancer: Can it be cost-effective? 
Canadian Medical Association Journal. 2000;162:1431-6

 8. LMarshall D, Simpson KN, Earle CC, Chu CW. Economic decision 
analysis model of screening for lung cancer. European Journal of Cancer 
2001;37:1759-67

 9. LWisnivesky JP, Mushlin A, Kimmel M, Sicherman N, Henschke CI. 
Cost-effectiveness of baseline low-dose CT screening for lung cancer. 
Chest 2002. Accepted

10. LKimmel M, Gorlova OY, Henschke C. Randomized controlled trials for 
CT screening for lung cancer: The impact of protocol nonadherence. 
Submitted

11. LMiettinen OS, Henschke CI, Pasmantier MW, Smith JP, Libby DM, 
Yankelevitz DF. Mammographic screening: No reliable supporting 
evidence? Lancet 2002;359:404-5

12. LMiettinen OS, Henschke CI, Pasmantier MW, Smith JP, Libby DM, 
Yankelevitz DF. Mammographic screening: No reliable supporting 
evidence? www.Lancet.com Feb 2, 2002

13. LMiettinen OS, Henschke CI. ``Method appears appealing'' but 
``analysis is flawed''! Lancet 2002;309:70613.ab

                                 

    Chairman JOHNSON. Thank you very much, Dr. Henschke, and 
thank you all for your testimony.
    Dr. Wennberg, I have been interested in your work 
documenting the really tremendous variations across the Nation 
in patterns of practice and the lack of any evidence of 
parallel variations in quality. Yet, solutions to this 
irrational and costly variations have been difficult to 
develop.
    Do you think that disease management, because the protocols 
are developed through professional experience based on outcomes 
research and best practices, could help us not only establish a 
more uniform approach to core illnesses nationwide, but reduce 
the costs in some regions without compromising quality?
    Dr. WENNBERG. That is quite a question. I believe that the 
evidence seems to be pretty clear that when we have scientific 
consensus that something should be done based on clinical trial 
evidence, as the best quality of evidence, and that particular 
intervention does not involve tradeoffs that imply preferences, 
that disease management programs have definitely shown 
themselves capable of getting the beta blockers out, getting 
the A1C hemoglobin done, and so I think that we can count on a 
quality improvement along those dimensions.
    The cost issues are more complicated. First of all, the 
costs that we see that are associated with the variations in 
regional costs have nothing to do with beta blockers, failures 
to do them, and so forth. It has to do with the intensity with 
which chronically ill people are treated across the board. I 
have always been aware that there is a balloon effect in health 
care, namely, if you improve the way that a certain subgroup of 
the population is treated, the rest of the population is likely 
to get the spillover effects of the supply side problem.
    For example, we have observed in some of our studies that 
patients have engaged in decision support systems for shared 
decision making will become more conservative in their 
treatment choices, but the overall workload of surgery in the 
region continues at the same level. In other words, other 
patients that aren't involved in the study are getting it. So, 
I am concerned that, for example, a successful disease 
management program may be apparently working, in terms of 
reducing overall cost, but unless the control group is 
carefully defined, namely, as those others at risk of receiving 
the care that is in that region that isn't being used by that 
population, you can get a very different opinion on that.
    I think that, and I said in my testimony, that I think 
ultimately the cost issues are going to have to come back to an 
open debate about what is an efficient capacity of the system, 
and some of our systems have just twice as many resources in 
them as others do. Until we come to terms with that, we will 
continue to see regional variations.
    As we continue to increase the capacity of the system by 
training more physicians and building more technologies, we can 
count on the costs going up, and the reason is because this 
kind of care is not driven by science. It is not driven by 
well-articulated medical theories about intervention. It is 
done basically by the simple hypothesis or the simple fact that 
if you have twice as many physicians in a region, you have 
twice as many office hours to offer, and you therefore have 
twice as many visits, and visits associated with all sorts of 
other kinds of activities.
    Chairman JOHNSON. I appreciate what you are saying, and the 
significance of your response. On the other hand, as Dr. 
Anderson says, Medicare is increasingly going to be about 
managing chronic illness and is----
    Dr. WENNBERG. Right.
    Chairman JOHNSON. A chronic disease management program, 
though we don't have chronic disease management capability. As 
we get that capability in place, and we begin to manage those 
chronic illnesses, and then if we do, as you suggest in your 
article, which is a little different than any disease 
management demonstration I am aware of, look at end-of-life 
illness management from the same point of view, then I think we 
are going to, at a very profound level, change the way we 
practice.
    Now that brings me to my second question. Disease 
management does depend on patient participation. A number of 
you had really marvelous, pithy ways of describing this. Dr. 
Lord, you said supported self-management in a systemless world 
and the supported self-management, and then you did point out 
that somebody with Alzheimer's can't self-manage. This issue of 
self-management, outside of Medicare you can create systems in 
which the right of physician to educate a patient about self-
management can be absolute, and it is no surprise that it is 
outside of the fee-for-service reimbursement system of Medicare 
that this capability for physicians to act differently in order 
to get patients to act differently has developed.
    All of you know perfectly well our coding process, all of 
the experts we have involved in coding, all of the complexities 
of coding, we can't even--and I see my colleague, Mr. McDermott 
isn't here, but we were on the phone when we asked experts who 
have been in the Medicare program for 10 years what the 
difference between a comprehensive physical is and a detailed 
physical, and they can't tell you till this moment.
    I spent a year and a half trying to get my intermediary to 
figure out what partial hospitalization is versus outpatient 
mental health for seniors, and we can hardly do that.
    Now, the idea that Medicare could define, and one of you 
mentioned a management fee, could define a management fee or 
could define a physician visit education component in a fee-
for-service system that whether it is in government or in the 
private sector focuses on encounters is, in my mind, simply not 
possible or else we cannot wait for it. If we did, it would be 
so complicated that there would be mostly war over whether this 
was or was not eligible for a management reimbursement.
    That is one of the reasons why I am so focused on systems. 
I brought systems out in terms of technology, and some of you 
talked about the need for that, but this issue of patient 
involvement goes very directly to physician activity. If 
reimbursements don't encompass that activity, you will never 
get management education. In the disease protocols that I am 
familiar with, that management education function moves from 
the physician to the disease management company, who then 
educates the patient in the guidelines of the doctor.
    So, I don't know that you can do this through fee-for-
service. I don't really see any opportunity to do that because 
while you can, a system can contract management or can develop 
management within its capability, I don't see how Washington 
can develop the definition of management, and how the 
complexity of our coding system for a moment will enable us to 
reimburse for this in a way that the Inspector General won't 
destroy in the course of events.
    So, I would like for you to comment on that issue of 
physician involvement and the degree to which disease 
management does require a different attitude toward physician 
education of the patient.
    Dr. WENNBERG. Me?
    Chairman JOHNSON. Yes, and anyone else who wants to comment 
as well.
    Dr. WENNBERG. Well, let me say that I am not here defending 
the current fee-for-service system. The questions about how 
that payment system is organized is really what a lot of this 
debate is all about, and I would think some way of paying for 
the management of chronically ill people, where we have 
organizations that are responsible for that, can work in many 
ways. For example, at least several of the organizations that 
are represented around this table have fully salaried 
physicians and have health care organizations that are already 
serving defined populations. The question is how do we modify 
the current payment systems to make it work.
    Capitation is one strategy, but capitation has always been 
presented as a competitive model, and many parts of the country 
there simply is only one system, and we have got to figure out 
somehow how to make that system work. Clearly, the kind of 
models we are talking about, patient education, group visits, 
is a wonderful idea, and it works, but you can't bill for it. 
In fact, it is very efficient, and it breaks this kind of 
supplier-induced demand problem between the doctor supply and 
that because they are suddenly no longer being paid just for 
doing piecework. That is where we need to get to.
    So, the question is how can we get there? In our proposal 
that we put in the Health Affairs article, we basically wanted 
to allow certain health care organizations that are intimately 
involved now in chronic disease management, in fee-for-service 
environments, to see if they could not come up with some 
suggestions for modifications in the fee structure that would 
support the fundamental reforms which, Madam Chairman, I hear 
you asking for.
    Chairman JOHNSON. Thank you. Dr. Lord?
    Dr. LORD. Several comments. First, with respect to self-
management, I think one of the things that we have been focused 
on, in terms of program design, and an area that Jack and I 
have collaborated on for the last several years, is trying to 
level the ball field so that people have a fair shake in the 
health care system, understanding their disease and 
understanding their choices.
    I think if anybody on the panel holds up a hand-mirror 
about their experiences in the system or their family's 
experience, it is confusing. It is very confusing when you are 
sick. It is even more confusing and scary when you are facing a 
fateful decision. How can we help people at that time of 
absolute need just deal with the confusion and the lack of 
``systemless,'' the combination of fragmentation of care, 
coupled with what was described by Dr. Anderson as multiple co-
morbidities? It creates real problems and challenges for folks.
    Now the world has changed. The world has changed from a 
technology perspective, the world has changed from access-to-
information perspectives, the world has changed in a number of 
ways that we can work with, collectively and individually, with 
people who are facing significant illness. I think there are 
opportunities within the Medicare structure to create a fee-
for-service model that would pay for someone to serve as a 
concierge or coordinator or adviser to people who have chronic 
illness. It may be another function that hasn't been defined 
yet in the health care system, but it is something that if you 
think about people's experience, they really need. It may be 
unreasonable to expect that is only a physician's role out into 
the future, and I believe, through some of the demonstration 
projects that CMS is presenting, we have an opportunity to try 
some different approaches that really help deal with a very 
common and a very human issue that all of us have touched or 
faced somewhere in our family's lives.
    Chairman JOHNSON. Dr. Anderson?
    Dr. ANDERSON. In the long run, I agree with you that we 
have got to change the payment system, but in the short run, we 
have to deal with the existing fee-for-service system. So, what 
I would take a look at is the Medicaid program, which has been 
running primary care case management programs quite 
successfully for a number of years, and has dealt with the 
payment issues with this, has dealt with the coding issues in 
the primary care case management program. So there is a model 
for Medicare to take a look at to do many of these functions.
    The way I would set it up in the Medicare program is to 
take a look at people that had four or five different chronic 
conditions, different chronic conditions. These people see an 
average of 10 to 12 doctors in the course of the year. They 
need their care coordinated desperately.
    The care that is actually being provided to them is not 
very good, as my example about the prescription drugs 
illustrated, but I could also give you examples about 
unnecessary hospitalizations or unnecessary nursing home 
patients. There would be savings from care coordination if we 
could figure out a way to get these 10 doctors to talk to each 
other. Part of it is information system, but we need a primary 
care physician to be responsible for saying, ``What is the 
endocrinologist doing, what is the cardiologist doing for my 
patient?'' To get that to happen, I think you need to pay them.
    Chairman JOHNSON. Those are very interesting comments. I 
think they underestimate the problem of getting the information 
from all of the people involved when you have got a lot of 
chronic illnesses, and I think they completely ignore the 
liability concerns. If you have Medicaid, you are sheltered 
from liability. I don't know who would want to take the 
liability on their shoulders of coordinating the care, when you 
have multiple chronic illnesses, and possibly disagreeing with 
one of the doctors so that you can better integrate the care.
    So, I think this is a pretty big and difficult issue. It is 
one that systems are solving themselves. So, right now we can 
reimburse the system, and the system can do it. In the long 
run, of course, we have to have a way for the whole system to 
do it, but I feel real urgency about pressing ahead and 
encouraging systems that can take on this responsibility to 
move rapidly because this is--I agree with you--this is already 
a chronic care program.
    Dr. Hillman?
    Dr. HILLMAN. Yes, I agree completely with you. I think to 
rely on physicians, first of all, to educate patients is a 
misuse of health care resources. Physicians have no training in 
patient education, patient behavior paradigms, that type of 
thing. It is just not part of physician training.
    Likewise, to ask physicians to be coordinators of care is 
also probably a misuse of their capabilities. I think that 
there are other types of health care providers that can provide 
these functions as long as they have coordination in terms of 
having an electronic medical record. For example, that is 
portable from site-to-site or physician to physician. Those 
information systems allow a case manager, such as a registered 
nurse, well within their scope of practice, to perform these 
functions.
    I don't think that it is going to be beneficial to put an 
individual in a role where they are going to be adversarily 
questioning other people's judgments. If the system keeps the 
care in mind itself, as opposed to the encounters in mind, is 
what our current reimbursement system does, I think we will do 
a lot better.
    Chairman JOHNSON. Mr. Stark?
    Mr. STARK. Well, I thank you all for taking the time.
    One of the things that troubles me--the Chair asked if I 
would yield to----
    Chairman JOHNSON. Let me recognize Mr. Houghton, since he 
has to leave and has taken a very, very great interest in the 
issue of lung cancer detection. Congressman Houghton.
    Mr. HOUGHTON. Thank you very much.
    Listen, I am sorry to do this, Pete. Thank you very much 
for your letting me--I have just got to get out of here----
    [Laughter.]
    Mr. HOUGHTON. It is not because I want to, but because of 
something else.
    Dr. Henschke, if I understand it, you have got two points; 
one, get it early, and then don't go into these expensive 
trials which are going to push off the inevitable. I would like 
to ask you really two questions. The first is this.
    We talk about lung cancer, and then obviously you get into 
the idea of smoking. Smoking inevitably enters the discussion, 
and don't smoke, and you won't get cancer. Do you agree with 
this? Also, why should we put money into research on early 
screening detection, when perhaps it would be better spent on 
prevention, and cessation programs and things like that?
    Dr. HENSCHKE. Well, I certainly agree that we should put a 
lot of effort in smoking cessation programs particularly in 
those of younger individuals. However, there are 50 million 
currently smoking individuals in this country and some 50 
million former smokers. Even if we stop smoking today, if no 
one smoked, we would have lung cancer deaths for a considerable 
time, 20 or 30 years in the future, and we should do something 
for these individuals, and we can save many of those lives.
    So, we think that screening should go hand-in-hand with 
smoking cessation, that actually you can give them a lot of 
information, and people who come to screening programs also are 
interested in stopping. So, these two should go hand-in-hand.
    Mr. HOUGHTON. The second question, and I will be brief, 
there was a report presented to the National Cancer Institute 
in August last year that presents really a very pessimistic 
picture. It talks about lack of progress in research, and high-
death rate, and unenthusiastic attitude of doctors, and 
researchers, and other health care providers, and also total 
lack of communication and cooperation among those involved in 
treating and managing the disease that you might want to 
comment on that.
    Dr. HENSCHKE. Well, I was a participant of that program 
project review for lung cancer, and, yes, lung cancer has, 
there has been a pessimistic attitude in these past years, but 
now with screening really making its changed the attitudes. At 
that meeting, there was emphasis on collaborative efforts, 
there were a whole set of priorities that were detailed that 
are very good priorities. The problem is that funding for lung 
cancer has been much less than funding for the other cancers, 
even though, for example, it kills more than seven times as 
many cancers--it causes seven times as many deaths as breast 
cancer, it gets about a tenth of the funding or so.
    So, the pessimism is more due to the lack of funding, and 
we do have now a lot of information that we could obtain about 
the biology and the innovative treatments that could be used in 
view of these new techniques. So, there is a lot of excitement, 
there has to be funding, and there has to be implementation of 
those priorities that were set by that report.
    Mr. HOUGHTON. Thank you very much. Thank you, Madam 
Chairman.
    Chairman JOHNSON. Thank you for being with us today, 
Congressman Houghton. Congressman Stark?
    Mr. STARK. Well, thank you again, as I said. I am glad to 
see that the Marshfield Clinic, it used to be the Doege Clinic?
    Dr. HILLMAN. It used to be the Dayton Clinic?
    Mr. STARK. Dr. Doege?
    Dr. HILLMAN. Doege, yes.
    Mr. STARK. I grew up next door to him in the summers, a 
long time ago. He is no longer--Marshfield is easier to spell.
    I am troubled, and I want to say at the outset that Dr. 
Lord had nothing to do with this, but what was absent in his 
testimony and what can happen in case management as a result, I 
suppose, of clinical strategy and innovation, was the Chipps 
case that Humana was involved with, where they terminated 100 
critically ill children to save $78.5 million for the Humana 
program. Fortunately, the court decided to whack them with 
punitive damages for $78.5 million, but that was overturned. My 
question is of concern of might this be used, and I would be 
more concerned in the for-profit part of medical delivery than 
I would in the not-for-profit because the incentives would not 
be so high there is how do we prevent mischief?
    If you begin to identify people with chronic diseases, as I 
presume you would in the workplace before they mature into 
Medicare, do we run the risk of tremendous selectivity, 
companies like Humana or Aetna, Marshfield Clinic, Johns 
Hopkins saying we don't want you or finding whatever ways they 
can to discourage these people? Are we all going to have the 
red mark of ``C'' on our foreheads saying we are chronic and 
therefore become the great unwashed of the people running 
around hat in hand looking for health care.
    Now, this is a panel of physicians, and I am far more 
comfortable with your training and approach to taking care of 
me than I am your company treasurer or whomever may make these 
decisions at some point to, say, terminate or design recruiting 
or advertising programs to subtly select. There is a new health 
care gang out, Sterling, I guess it is, who does a fee-for-
service Managed Care Plus Choice. They have got some cute 
tricks--50-percent co-pay for durable medical equipment. What 
does that tell you? Nobody in a wheelchair or walker should 
apply or 50-percent deductible, as many have for mental illness 
procedures.
    I guess I am worried that this could turn on us if we are 
not careful, and that is my question, how do we prevent and, 
Dr. Lord, I impugned your company here by sort of indirection, 
and I will let you respond, but I am concerned that we not 
begin, and the privacy issues come up this morning. I don't 
think that is as bad for a Democrat that is probably blasphemy, 
but I really think that we have got to sacrifice some privacy 
to get the kind of research that I would like to see in 
outcomes research done.
    How can we assure that this won't just kind of categorize 
the people we end up getting back to the Hansen's disease farms 
and sort of putting all of these Medicare critical people off 
in one corner, and then we will have trouble getting them into 
the best of the plans?
    I am sorry, Dr. Lord, go ahead. You were not there. I want 
to stipulate, you did not come aboard until this case was 
behind you.
    Dr. LORD. First of all, the Chipps case really has nothing 
to do with today's testimony, but beyond that, I think in terms 
of the disease management programs that we provide, we provide 
to all beneficiaries, regardless of plan design and regardless 
of program--government, commercial, TriCare, programs that are 
provided, as my 20-year-old daughter would say 
``disregardless'' of how people have shown up at our doorstep 
and provide a set of services that really are intended to try 
to get rid of waste that exist in the system.
    I think the theme-line, from Jack through all of the 
panelists here, is that there is waste and inefficiency in the 
system because it does not act like a system. The more that we 
can do a few things, one, help provide information, coordinate 
services, allow people to be sovereign in terms of making some 
choices that are right for them, which in many cases people 
have been disenfranchised of choice, how can we do that and how 
can we make that work on a systematic base?
    I believe that it is the incentives that exist for, for-
profit enterprises, nonprofit enterprises, but most importantly 
people, that we somehow rationalize the kinds of care that we 
provide and allow the fact that we live in a world with a lot 
of abundance and don't live in the paradox of abundance that 
creates waste and get rid of the waste that exists in the 
system today.
    Dr. ANDERSON. I think it is not that most Medicare 
beneficiaries have one ``C'' on their forehead, Mr. Stark, but 
it is probably two or three or four ``C's.'' We have 
essentially got to deal with the issue of multiple chronic 
conditions, not just the single ``C,'' and we have got to deal 
with it in two different ways. In fee-for-service Medicare, I 
think we do have to pay for coordination of care. If we don't 
pay for it, we make the person or their care giver the de facto 
care coordinator. I think in many cases self-care coordination 
is fine, but I would like to have the advice and really the 
guidance of a physician in many cases, and I think I, 
unfortunately, need to pay for those types of activities.
    Mr. STARK. I would like that. I mean, as a patient, I would 
rather talk to one of you guys than I would some kind of social 
worker who has been trained to tell me the kind of stuff I can 
find on the Internet. I am not very comfortable or I wasn't 
before I went to see Dr. Walsh reading about it on the 
Internet, and he is not the most charming, bedside manner guy 
in your institution, I might add, but, nonetheless----
    Dr. ANDERSON. Technically, very good.
    Mr. STARK. Yes, thank God, but nonetheless, what I am 
suggesting is that we patients would just as soon talk with the 
guy that has got the knife, what is going to happen, Doc? Don't 
send me over there to somebody who is going to just give me the 
stuff I can read. I want to know what are you going to do 
relative to me.
    Dr. ANDERSON. I am taking into account your specific 
circumstances, because your collection of chronic conditions 
that you have, which is different from the next person, and you 
have got----
    Mr. STARK. Does Marshfield still--Dr. Hillman wants to say 
something--does Marshfield deal with fee-for-service? Do you 
take fee-for-service patients?
    Dr. HILLMAN. Yes.
    Mr. STARK. I guess what I want to ask, and then you can say 
whatever you want, is would Dr. Anderson's idea of having a 
fee, a physician whose job it would be to be a coordinator work 
in your system, for example?
    Dr. HILLMAN. Most definitely. Just to reinforce that, I 
forgot which management guru said that you can't manage what 
you don't measure. I can tell you 100 percent that what you 
don't reimburse, you certainly aren't going to measure, and you 
are certainly not going to manage, and we have to do that.
    Marshfield Clinic is a 501(c)(3) clinic, and as a public 
trust, we see everybody. One of the things that you had asked a 
question before of Mr. King-Shaw was why couldn't physicians be 
required, for example, to follow clinical practice guidelines 
and provide care plans in order to participate in Medicare? I 
can tell you that, for example, in our area, which is one of 
the under reimbursed areas in the country, that our competitors 
would welcome that because they would say, ``Hey, look. We are 
no longer qualified to take care of Medicare patients. Ship 
them to Marshfield,'' which is what they do right now anyway.
    That is why we have had to develop the systems that we 
have, and that is why we have made the investment to develop an 
electronic medical record, to develop the epidemiological 
database that we have, basically, so that we can take care of 
people in a more effective manner.
    I would also point out one other thing. You may feel better 
right now, and I agree that if you were going to have a surgery 
or a specific care intervention that is dangerous to you, you 
would feel more comfortable talking to a physician, but the 
majority situations that arise in chronic care aren't related 
to that. They are related to behavioral changes, to monitoring 
the effectiveness of dosage changes in the medications, and 
those things don't need to be done by a physician. We are 
wasting a huge amount of health care resource by not employing 
the right type of provider to provide those services. As the 
Anticoagulation program that I detailed in my testimony showed, 
those things can be done by nurse case managers, and the 
patients like it a lot better. It is done on a 24-hour basis, 
it is done when it is convenient for the patient. It is backed 
up by another nurse call center that has access to the 
patient's medical records so that people know what is going on, 
not just from their physician at Marshfield, but among any of 
the other 38 regional centers that Marshfield Clinic provides 
care at, many of which are in disproportionately socioeconomic-
challenged populations.
    Mr. STARK. I grew up there.
    [Laughter.]
    Dr. HILLMAN. Well, you made it out.
    [Laughter.]
    Mr. STARK. I miss it. I am sorry. Thank you, Madam Chair.
    Chairman JOHNSON. Thank you. That was very interesting. 
Congresswoman Thurman?
    Mrs. THURMAN. Thank you.
    Dr. Anderson, in reviewing and looking over the testimony 
by Ruben King-Shaw, it struck me that many of the demonstration 
programs that they are embarking on in fee-for-service seemed 
to concentrate on maybe one specific illness, as versus what 
you are suggesting is I think, which I actually think is a very 
good idea, it seemed to me that where you would want to start 
is where those are four or five so that you could have a real 
idea of how you were managing.
    I think, for the most part, a doctor that deals with 
somebody with CHF for whatever, I mean, pretty much manages 
that patient. So, the real management of disease is when you 
are talking about many kinds of disease that would be a 
problem. So, I would hope that maybe one of the messages this 
Subcommittee could carry back in a demonstration issue is to 
maybe look at a demonstration where you are looking at a 
patient with several chronic conditions, as versus one. That 
does concern me a little bit. I think that is a very good idea.
    The liability issue, and, of course, we have all been 
through this Patient's Bill of Rights, and this issue and that 
issue, but, Dr. Lord, because you do this now, that is what 
your company does is supposedly manages for managed care, and 
how do you work through this? I mean, doctors, maybe you as an 
individual or as Humana can't be held liable, but the fact of 
the matter is your doctors and others could. So, I am not sure 
that I understand this liability issue when it comes to a 
managed or when you are trying to manage different disease 
management. I kind of got lost in that argument there. Can you 
help me a little bit here?
    Dr. LORD. Sure. The disease management function is to 
support the care between practitioner and patient, and it is to 
provide access to resource, in terms of information for both 
groups as they enter what Dr. Anderson described as a very 
complex world. Very few people have just a single disease to 
contend with. They have multiple pieces of challenges going on 
clinically, as well as in their family life, as well as 
economically, that all make a full picture. The only person who 
could be making the kinds of decisions that are right for that 
individual are, first, the individual and, second, with the 
advice of their practitioner, whether that is a physician or 
another type of practitioner.
    What we have tried to do is get out of the management 
business and be in a position to provide best-in-class 
information to both the patient, as well as to the 
practitioner, to provide information that helps reinforce 
things that the patient should be doing.
    For instance, if a patient is receiving a drug after a 
heart attack, they need to take that drug on a regular basis. 
We can send out an automated reminder that lets them know they 
haven't gotten the refill. Why can we do that? In our 
commercial programs, our pharmacy benefits manager lets us know 
within about 24 hours every time we fill the position. We can 
go ahead and use automated systems and use some logic around 
our electronic data warehouses to provide that information to 
people.
    Now, we are not prescribing the drug, we are reminding the 
individual about their care. Health plans are not care 
providers. They are not hospitals, they are not doctors, but 
what we can do is a much better job, and what we are trying to 
do is a much better job of getting information back to people. 
We are the hub and spoke of a lot of the transactions that take 
place in the health care system. We know and we have insights 
about what works for people and what are best practices, and we 
can serve that up in ways that both practitioners can take 
advantage of, as well as patients. I think that really is the 
focal point for our business as we go forward, and clearly it 
is the insight that we want to try to give to people who face 
the complex problems that Dr. Anderson described.
    Mrs. THURMAN. It is not insurmountable to believe that 
Medicare fee-for-service could do very similar. I think that 
Dr. Anderson mentioned that. Dr. Hillman, you seem like you 
want to just jump right in here. Did you have something you 
wanted to add to this?
    Dr. HILLMAN. Yes, and I will be a little bit careful 
because I am going to be a little bit provocative.
    Mrs. THURMAN. We love it.
    Dr. HILLMAN. I think that information is very helpful, but, 
quite frankly, information is of limited use. For example, I 
don't know how many people know how many teeth they have in 
their mouth. You don't need that information to know that you 
have to brush them twice a day.
    When you have multiple chronic diseases, and you have 
multiple facets of information about complex systems and drugs, 
and a lot of these people that are seeing 5 and 10 physicians 
are taking 15 and 20 medications and that type of thing. There 
is only so much information that you are going to be able to 
pass on to something that they are going to be able to act 
responsibly with before they become overwhelmed, dejected, and 
decide to forget the whole thing. That is why I think that case 
management is a very critical part of this.
    The other thing that I think has been ignored by it----
    Mrs. THURMAN. Earlier you thought this couldn't be done in 
one of your responses. So, I am curious to what you think case 
management is. I got the indication that you thought only a 
doctor could do it or----
    Dr. HILLMAN. No, quite the opposite.
    Mrs. THURMAN. Okay.
    Dr. HILLMAN. I think a physician doing case management is 
not an appropriate use of health care resources. That is why I 
detailed the Anticoagulation program, because it is basically a 
nursing program that has medical direction, has prescribed 
protocols. All of the interactions that the nurses have with 
patients are documented in the electronic record, which is 
confirmed and electronically signed off with the providers, but 
they all work on very specific guidelines.
    The point about that program that I think I failed to make 
in my written testimony is that that case manager for 
anticoagulation basically is acting as a chronic disease 
manager, because when we looked at hospitalization rates 
between the control group, the usual care group, versus the 
group that was in the Anticoagulation Service, we looked at 
global hospitalizations. The difference there was huge, and I 
have the numbers in the written testimony. The reason we looked 
at global hospitalizations is because we found that in the 
education process or the behavioral training or development 
process of patients, that we were able to get them to call the 
nurses the minute something else changed in their health care. 
By getting that information sooner, the nurse was able to 
advise them on what to do either about their medication or 
about seeing a provider on an outpatient basis or adjusting 
some other aspect of their regimen that allowed them to avoid 
those hospitalizations.
    I agree with basically everything that Dr. Anderson said, 
but we actually have a program that basically, with a little 
bit of expansion, accomplishes what he said. Unfortunately, we 
get no reimbursement for this whatsoever. While we have 1,000 
patients enrolled in this program right now, and many of those 
patients incidentally have a trial fibrillation and heart valve 
replacements that have been caused by chronic diseases related 
to sachemic or coronary artery disease, diabetes, and 
hypertension. That is the value of the case manager.
    Mrs. THURMAN. I would just say, based on the testimony on 
page 5, it says they are talking about giving M+C organizations 
that meet specific quality indicators extra payments, 
recognizing the cost of successful outpatient management. In 
this case, it was just the CHF. So, it sounds to me like they 
are noticing it in one area, but it should be recognized, I 
guess, in the fee-for-service for any kind of demonstration 
program we would do there as well.
    Dr. HILLMAN. I agree with you 100 percent.
    Mrs. THURMAN. Thank you.
    Dr. HILLMAN. That is why we didn't participate in that 
disease management demonstration. It was too narrowly focused. 
There was a huge risk associated with it, in terms of its 
budget neutrality, and you were required to provide 
medications, and I think that is a fair criticism of that 
demonstration project. I don't really see that we are going to 
get much out of it, quite frankly.
    Mrs. THURMAN. Thank you.
    Chairman JOHNSON. Thank you, Karen.
    There have been some questions raised. To just pursue 
Karen's questions in two aspects. First of all, I want the 
record to reflect very clearly that all of you at the table who 
are involved in disease management programs are providing 
disease management services, whether they are sort of narrow 
and computer-driven or whether they are more interactive and 
have a human being there actually doing a lot of following, and 
advising and communicating, and that Medicare does not 
reimburse you for them, for that aspect of your service.
    I thought it was very interesting that you pointed out in 
Mr. King-Shaw's testimony, and I noticed it, too, that in the 
demonstrations, they are going to pay for this function, but in 
the Choice plans. It is one of the ways in which the Choice 
plans bear costs that Medicare doesn't bear, and it is one of 
the reasons I am so intent on at least reimbursing them at 100-
percent fee-for-service because if they are going to perform, 
they have additional costs they have to bear.
    I was very interested, Dr. Hillman, with your description 
of the amount of technology you have put in place just to have 
electronic records available throughout the very large serving 
area of your system, which I believe is multi-county, is it 
not, in Wisconsin?
    Dr. HILLMAN. Yes, it is.
    Chairman JOHNSON. It is a big system over rural and urban 
areas, but without that technology, you could not possibly 
implement disease management protocols, correct?
    Dr. HILLMAN. That is correct. Here is the perverse 
incentive of the whole thing. Our reimbursement for Medicare 
fee-for-service is so low, about 70 percent of our costs, done 
by the CMS methodology. We have to raise our commercial fee-
for-service rates, which increases, indirectly, the number of 
uninsured, which indirectly increases the number of people that 
are on Medicaid, which indirectly causes even lower fee-for-
service payments on the services that we started providing to 
begin with. This is an untenable situation, and the only reason 
that you have it at Marshfield Clinic is because we are so 
mission-driven and passionate about delivering the quality-of-
care that we do, that we have to believe, at some point in 
time, what goes around comes around.
    Chairman JOHNSON. You are the only system I know of 
nationwide, and that doesn't mean there aren't any, it just 
happens to be that the others haven't come to my attention, 
that is systemically involved in disease management with no 
reimbursement and serving a very low-paying, but also a needy 
population.
    Mr. Stark?
    Mr. STARK. Are your Medicare fee-for-service rates lower 
than Wisconsin's Medicaid? I am curious. I don't----
    Dr. HILLMAN. No. Despite the fact that we get probably I 
think it is 50 cents on the dollar for our Medicare 
reimbursement, Medicaid is actually a little bit less, 
although----
    Mr. STARK. Does anybody pay a dollar?
    Dr. HILLMAN. No, but they pay a whole lot more than 50 
cents on the dollar.
    Mr. STARK. Do you own your own hospitals or do you contract 
with----
    Dr. HILLMAN. We do not. We are completely outpatient. I 
will tell you we do have a capitation contract with the State 
for medication, at least Security Health Plan, our subsidiary 
does, and that plan actually does retain some net earnings 
above what they pay us. So, we are able to sustain it on a 
capitated basis, but we do not have a gatekeeper system with 
that. We use the system that I described with the 
anticoagulation management in order to make that margin.
    Chairman JOHNSON. In other words, a management system.
    Dr. HILLMAN. That is correct.
    Mr. STARK. If Medicare pays you 50 cents on the dollar, 
what is the next lowest commercial contract on fee-for-service; 
does it pay you 60 cents? You don't have to tell me the name of 
it, but the private insurer that then pays you the next lowest.
    Dr. HILLMAN. Seventy cents.
    Mr. STARK. Seventy cents, it is that big a gap.
    Dr. HILLMAN. That is our own health plan.
    Chairman JOHNSON. That is 70 cents versus 50 cents for 
Medicare and less than that for Medicaid?
    Dr. HILLMAN. Yes.
    Chairman JOHNSON. So, we are not so great.
    Mr. STARK. Thank you.
    Chairman JOHNSON. Let me go back to the malpractice issue 
that I had raised because I didn't actually raise it in the 
context that Karen heard it. Within a plan, I understand that 
there would be whatever the plan's liability is under that 
State law or whatever we do in Patient's Bill of Rights. If you 
are trying to coordinate care across individual physicians 
reimbursed under Medicare, now I think you do have a problem. 
If they are not part of the same group practice, if they are 
not part of the same system, I do not know how you identify 
that responsibility, and how you reimburse it. I think in 
identifying it, you would not be able to provide the nurse 
practitioners and stuff because the liability is--I mean, to 
me, that is a real can of worms.
    Dr. Hillman?
    Dr. HILLMAN. The only way we can do it so to be self-
insured, and that is what we do. That is why we have such a 
high interest in maintaining quality-of-care.
    Chairman JOHNSON. That is interesting. You are self-insured 
for malpractice as well.
    Dr. HILLMAN. That is correct.
    Chairman JOHNSON. That is outstanding.
    Before I conclude, I just want to say that I really 
appreciate Dr. Henschke's comments. We will work with you on 
your thoughts and opinions on the clinical trials program that 
is being proposed, if only because 10 years, give me a break. 
With the pace of medical change, at the end of 10 years we will 
know about a procedure that is no longer the state-of-the-art, 
so truly a ludicrous proposal on their part.
    If you were to advise us as to how we could do a better job 
in terms of Medicare being a force for early diagnosis of lung 
cancer, what would you suggest we do?
    Dr. HENSCHKE. Well, I don't know all of the complications 
of Medicare, but I----
    Chairman JOHNSON. Well, the big complication, of course, is 
money, but, nonetheless, what would you suggest that we do in 
order to have a program that did do for lung cancer, basically, 
what we have done for breast cancer and colon cancer.
    Dr. HENSCHKE. I think one could develop demonstration 
projects. Medicare, I have talked to Medicare. They were very 
interested in the results, but they said it is Congress who has 
to mandate any screening policy. So----
    Chairman JOHNSON. That is true. For instance, sometimes we 
are able to mandate screening policies when there are a 
combination of factors that will identify those who are prone. 
So, sometimes we have done that. We do that in colonoscopies. 
Certain procedures are available--am I correct, staff? Yes, 
certain procedures are available if you meet certain criterion, 
and other lower cost procedures are available if you don't meet 
those criteria.
    So, if you will give that some thought and get back to us, 
we will be very grateful.
    Dr. HENSCHKE. Thank you very much.
    Chairman JOHNSON. Thank you very much.
    I thank the panel for their thoughtful comments today, and 
I thank the Members for their participation on a Tuesday. I 
notice the Democrats are in town, and the Republicans aren't. I 
thank you for that and commend you.
    [Whereupon, at 5:29 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]
  Statement of Richard Burford, Product Marketing Manager, 3M Health 
             Information Systems, Wallingford, Connecticut

    ``On behalf of 3M Health Information Systems (3M HIS), I am pleased 
to submit written comments to the House Ways and Means Subcommittee on 
Health hearing to be held on disease management on April 16th, 2002. 
Our comments make the case for the importance of coordinated of care 
and the need for greater coordination of care in federally funded 
health care programs. For the sake of simplicity, our comments are 
submitted in the attachment in a question and answer format.
    3M HIS is a market leader in the healthcare information technology 
business. 3M HIS specializes in coding and classification tools in 
acute care and the payer market. The views advanced in our written 
comments result from our experience in working in the managed care 
arena and, particularly, with companies in the business of delivering 
care management and case management services.''
                                 ______
                                 

                 A Case for Better Coordination of Care

What is coordinated care and care management? Why is it important?

         ``Coordinated care'' is getting the right health care 
        services to the right patients at the right time and in the 
        right setting. Delivering well-coordinated care is important 
        for maintaining and improving the health status of 
        beneficiaries.

         Effective care management is also important for 
        successfully managing the financial risk of an enrolled 
        population.
        What are the basic steps in the care management and care coordination 
        process?
         The first step to delivering high quality care 
        management services is understanding the disease burden of the 
        enrollees. Enrolled members with chronic health conditions must 
        be identified, classified into clinically meaningful groups and 
        stratified according to severity. Disease progression and 
        anticipated costs must be projected.

         Next, specific beneficiaries are then targeted for 
        case management intervention. Case management interventions 
        (care plans) are devised and implemented to promote effective, 
        high quality care. The result is effective case management 
        programs that meet the needs of enrollees by improving their 
        health status while reducing health plan financial risk.
        How did the original intent of managed care related to better 
        coordination of care?

         In managed care, payment methods were originally 
        designed to foster and promote the provision of coordinated 
        care. However, capitation, which is the predominant method of 
        payment under managed care, does not provide adequate 
        incentives to foster well coordinated care.

         Under capitation, health plans accept an annual fixed 
        fee to deliver a defined set of health care services to an 
        enrolled population and, thereby, assume financial risk.

         If the capitated revenues health plans receive do not 
        cover the costs of administering and delivering covered health 
        care services, health plans lose money. This creates an 
        incentive for health plans to enroll healthy beneficiaries that 
        are expected to have low costs and to avoid beneficiaries with 
        chronic illnesses that are expected to have high costs.

         The beneficiaries with chronic illnesses are the very 
        ones that would benefit most from care coordination and case 
        management services.

         To introduce positive incentives for the delivery of 
        well coordinated care, payments to health plans must be 
        adjusted to compensate for differences in the health status or 
        disease burden of beneficiaries enrolled in the plan (risk 
        adjustment) Also, direct payments for case management services 
        can be made, specifically, for those beneficiaries that would 
        benefit most from care coordination.
Why is effective case management and care coordination important to 
        the future success of the Medicare+Choice program?

         Just 15.7 percent of Medicare beneficiaries account 
        for 76.6 percent of all Medicare program payments. (1997 
        Medicare data)

         76.2 percent of Medicare beneficiaries are relatively 
        healthy and account for only 7.1 percent of Medicare program 
        payments. (1997 Medicare data)

         Because of this high concentration of expenditures in 
        a small number of Medicare beneficiaries, targeting enrollees 
        for case management services and implementing effective 
        programs of care coordination is vital to the future success of 
        the program.

         Coordinated care is especially important for the high 
        cost, chronically ill beneficiaries. These are the patients 
        that, frequently, are at highest risk for deteriorating health 
        status and the related ``exponentially'' increasing costs for 
        health care services.
What are some key characteristics of a properly designed system of 
        coordinated care?

    An effective system of coordinated care should accomplish the 
following:

        - Predict future health care resource use of beneficiaries 
        (costs), especially for the frail elderly and individuals with 
        special health care needs.

        - Provide for effective systems of targeting cases for case 
        management intervention and tracking the cases over time.

        - Pay health plans fairly for the delivery of case management 
        services, taking into account differences in the health status 
        of the populations they serve.

        - Be based on a clinical model that is easy to understand and 
        verify.

        - Provide clinically meaningful information to health plans in 
        order to promote care coordination, quality improvement, 
        disease management and provider profiling.

        - Demonstrate value, i.e., the efficacy of the care management 
        processes.

        - Provide Medicare with accurate data on the competitive 
        performance of health plans in delivering coordinated care.
What are the benefits of an effectively designed system of coordinated 
        care?

         Health plans are paid fair and equitable capitation 
        rates that give them incentive to serve all beneficiaries, 
        regardless of their health status. Thus, negative program 
        incentives that promote selective enrollment of healthy 
        beneficiaries and the ``de-selection'' of sick beneficiaries 
        are eliminated.

         Health plans are able to shift their operating 
        emphasis from managing risk to delivering coordinated care that 
        was the original vision of managed care.

                                 

   Statement of the Advanced Medical Technology Association (AdvaMed)
    AdvaMed, the Advanced Medical Technology Association, is pleased to 
submit this comment for the record on the important role that disease 
management can play in the delivery of high quality, cost effective 
medical care to the growing number of seniors and people with 
disabilities under Medicare.
    AdvaMed is the world's largest association of medical technology 
manufacturers, with over 1,100 members worldwide. Our members develop 
and produce the advanced medical technologies that are integral to 
disease management and other innovation forms of high quality health 
care delivery.
    Disease management technologies have a key role to play in Medicare 
in the 21st century: improving patient care, improving health system 
efficiency, and reducing overall costs. Realizing these benefits will 
be critical in the coming years as Medicare faces a rapid increase in 
the number of beneficiaries it serves. AdvaMed supports efforts by 
Congress and the Centers for Medicare and Medicaid Services (CMS) to 
expand access to technologies that facilitate the management of 
disease--by ensuring adequate reimbursement and coverage.

    AdvaMed believes the following three key points are important to 
keep in mind when considering the increasingly important role of 
disease management technologies:

        L(1) The aging population of the U.S. demands technology 
        solutions to manage chronic disease and reduce disability.

        L(2) Technologies will likely bring the greatest strides in the 
        future towards improving the management of chronic and short-
        term diseases.

        L(3) Medicare should take steps to encourage more timely 
        adoption of medical technologies that facilitate disease 
        management.
The aging population of the U.S. demands technology solutions to 
        manage chronic disease and reduce disability.

    The United States faces unprecedented challenges in the number of 
elderly patients who will rely on Medicare to ensure their health and 
well-being. Based on historic trends, the most expensive patients are 
those that need ongoing institutional care--and the costs of caring for 
patients in nursing homes accounts for a growing share of our health 
care budgets. Other expensive critical care services also are expected 
to become more numerous as the elderly population grows.
    Fortunately, technologies offer the potential for many to change 
the paradigm of care and reduce hospitalizations and allow patients 
with serious chronic conditions to lead active, productive, independent 
lives. Recent advances offer cost-effective solutions to some of the 
conditions that are the costliest to Medicare, such as congestive heart 
failure, diabetes, and coronary artery disease.
    Study results announced in March at the 2002 American College of 
Cardiology Annual Scientific Session show one way that advanced medical 
technology can improve health care quality and efficiency. The study 
found that a breakthrough technology called cardiac re synchronization 
therapy can reduce by 50% the number of hospitalizations for congestive 
heart failure. Heart rhythm disorders currently account for more than 
761,000 hospital visits annually at a cost of more than $6,000 apiece.
    Drug-eluting stents (stents that slowly release medication after 
being implanted to keep the coronary artery open) show promise in 
eliminating the problem of arteries renarrowing, or restenosis--which 
is a major cause of repeat medical procedures in patients with coronary 
artery disease. In recent clinical trials, drug-eluting stents 
completed eliminated restenosis. This ``could become one of the biggest 
breakthroughs in treating cardiovascular disease,'' according to the 
American Heart Association.
    A landmark study published last year by Duke University researcher 
Kenneth Manton, PhD illustrates one way that innovative tests and 
treatments are reducing the number of people who need disease 
management and yielding long-term savings. Manton's research finds 
that, due in part to advances in medical technology, the rate of 
chronic disability among Medicare-age patients has fallen significantly 
over the last two decades. In fact, today there are 1.4 million fewer 
Medicare beneficiaries with chronic disability than would have been the 
case without these gains. This reduction saved Medicare an estimated 
$19 billion in 1999.

Technologies will enable the greatest strides in the future towards 
        improving the management of chronic and short term diseases.

    Medical technology innovations are helping make effective disease 
and case management a reality. Many emerging breakthroughs are 
empowering patients to take a more active role in the effective 
management of their disease or condition.
    Recently FDA approved the first-ever cardiac pacemakers with remote 
monitoring capability. This technology enables patients to transmit 
information about their heart condition and pacemaker performance from 
home directly to their caregiver. These ``virtual office visits'' 
promise to improve patient care and increase efficiency in treating 
patients with chronic heart conditions through more timely follow-up 
and better overall patient management.
    Advances in diabetes detection and monitoring are playing key roles 
in the management of the disease. Diabetes and its related 
complications consume one of every four Medicare dollars. The Centers 
for Disease Control and Prevention (CDC) warns it is ``a major public 
health threat of epidemic proportions.''
    Recently, the first-ever non-invasive blood glucose monitor became 
available in the U.S. HHS Secretary Tommy Thompson remarked that 
introduction of the device ``heralds the advent of new technologies 
that promise dramatic improvements in the quality of life for the 
millions of Americans who have diabetes.''
    In 2001, new technologies also were introduced to make blood 
glucose monitoring simpler and less painful. One product made available 
last year was the world's first combined blood glucose monitoring and 
insulin dosing system. In addition, a growing number of monitors were 
introduced that allow patients to draw blood samples from sites other 
than the fingertip, such as the arm. HHS Secretary Thompson also 
recently called on doctors to test many people for ``pre-diabetes,'' a 
condition of elevated blood glucose levels that often leads to 
diabetes.
    Advanced diagnostic technology called prothrombin self-testing 
allows patients on blood-thinning drugs like Coumadin to closely 
monitor their clotting time (prothrombin time) at home. Information 
from the test enables the physician to adjust the blood-thinning 
medication to avoid serious complications like bleeding and stroke.
    The genomics revolution also is yielding gains in disease 
management. New genomic disease management tests, by providing new 
information not currently available through existing methods, enable 
physicians to diagnose disease more quickly and accurately, to 
determine the most appropriate treatment and to monitor disease 
progression and reoccurrence during therapy. These tests also enable 
the detection of disease at the very early or developing stages when 
treatment is likely to be most effective.
    In addition, many new information management technologies are 
emerging to help providers successfully monitor and care for patients 
across the spectrum of the health care delivery system.
LMedicare should take steps to encourage more timely adoption of 
        medical technologies that facilitate disease management.

    Unfortunately, Medicare procedures and policies often discourage 
the adoption of new medical technologies that can facilitate disease 
management--or reduce the need for it altogether.
Diabetes testing policy:

        CMS has issued several policies to reduce reimbursement and 
        restrict access to the glucose monitoring technologies patients 
        need to achieve tight glucose control. Congress and CMS must 
        work to remove these restrictive policies and ensure that 
        Medicare patients have access to advanced monitoring 
        technology.

        Recently CMS finalized a policy to cut reimbursement for blood 
        glucose testing by 26%. The Congressional Diabetes Caucus had 
        expressed concern to CMS that it was employing a flawed process 
        to make this cut.

        In early 2000, CMS issued an extremely burdensome policy that 
        is discouraging close monitoring of glucose levels for patients 
        in nursing homes. Despite the fact that glucose monitoring is 
        designed to show a trend in glucose levels over time, CMS has 
        said that nursing home caregivers must obtain a physician's 
        order for each individual measurement that is taken. Because it 
        is impractical and time consuming to obtain a physician's order 
        for each measurement, this requirement has meant that nursing 
        homes must either perform fewer glucose tests or absorb the 
        cost of perform needed tests.

        CMS further restricted Medicare patients' access to glucose 
        testing in a recent policy that allows them to purchase glucose 
        monitors and test strips only from retailers that are Medicare 
        suppliers. However, because of Medicare's burdensome and 
        complex requirements for gaining recognition as a Medicare 
        supplier, many small retailers choose not to apply for this 
        status. This policy, which has never been applied to any other 
        product or service under Medicare, could make it difficult for 
        many patients to purchase the glucose monitors and supplies 
        they need, especially in rural areas that lack a Medicare 
        supplier.
Innovative diagnostic tests:

        In addition to problems specific to diabetes tests, other 
        diagnostic tests integral to successful disease management face 
        significant barriers at Medicare.

        A report issued by the Institute of Medicine (IoM) on Medicare 
        policy and procedures for diagnostic tests states that 
        ``current Medicare payment policy for outpatient clinical 
        laboratory services seems not only outdated, but also 
        irrational.'' The report concluded that ``Medicare needs a more 
        timely and appropriate method for integrating the proliferation 
        of new technologies anticipated in the near future.''

        Legislation pending in the Senate and passed by the House as 
        part of the Medicare Regulatory Relief bill (H.R. 3391) would 
        help address the serious problems in Medicare's procedures for 
        new diagnostic tests. It would establish an open public process 
        for gathering input on reimbursement decisions for new tests 
        and require Medicare to establish objective criteria for 
        setting payment rates.
Hospital inpatient coding and payment:

        CMS typically takes two years or more to fully integrate new 
        medical technologies like coronary stents into the hospital 
        inpatient payment program. A regulation published by the agency 
        last year on adoption of new medical technologies into the 
        inpatient setting leaves in place current delays in Medicare 
        coding and payment decisions that create barriers to patient 
        access to medical technologies.

        Congress and CMS must take steps to support patient access by 
        eliminating delays in assignment of new codes and adequate 
        payment rates for new inpatient technologies. H.R. 2973, 
        bipartisan legislation introduced in the House by Reps. Jim 
        Ramstad (R-MN) and Karen Thurman (D-FL), would take steps to 
        improve patient access to innovative technologies in the 
        inpatient hospital setting.
Medicare technology adoption delays:

        According to a report by the Lewin Group, Medicare can take 15 
        months to five years or more to integrate new medical 
        technologies into the program. This has a significant impact on 
        patient and provider access to innovative disease management 
        technologies like remote monitoring devices, gene-based testing 
        and diabetes monitoring.

        H.R. 3391 contains provisions from H.R. 2973 to improve 
        accountability and coordination between offices in CMS that 
        make coverage, coding and payment decisions on new 
        technologies.
Healthcare information technology:

        In its report Crossing the Quality Chasm, the IoM said 
        ``health care delivery has been relatively untouched by the 
        revolution in information technology that has been transforming 
        nearly every other aspect of society.'' Many of these 
        information technologies play a key role is successful disease 
        management. Medicare must ensure that health care providers 
        have the resources they need to adopt effective new information 
        technologies.

    AdvaMed appreciates the Subcommittee's interest in technologies 
that facilitate disease management and other innovative forms of high 
quality health care delivery. Given the vital role disease management 
technologies play in improving patient care, spurring health system 
efficiency, and reducing overall costs, AdvaMed and its member 
companies look forward to the opportunity to work with the Subcommittee 
on these issues in the future.

                                 
   Statement of Robert Bonow, M.D., President-Elect, American Heart 
                              Association
    My name is Robert Bonow, MD, and I am the president-elect of the 
American Heart Association. On behalf of the American Heart Association 
and its over 22.5 million volunteers and supporters, I am pleased to 
submit this statement for the hearing record.
    Since 1924, the American Heart Association has dedicated itself to 
reducing disability and death from cardiovascular disease and stroke 
through research, education, community-based programs and advocacy. 
Providing effective, credible scientific information is vital to our 
mission. The American Heart Association and the American Stroke 
Association, a division of the American Heart Association, actively 
participate in efforts to improve the delivery of disease-specific 
health care through the widespread adoption and implementation of 
scientifically based standards and guidelines.
LCardiovascular Disease and Stroke Contribute Significantly to Chronic 
        Illness in the United States

    More than 125 million Americans have at least one chronic illness. 
This number is approximately 40% of the total U.S. population, and 
approximately 40% of those patients have at least two chronic 
conditions. The direct medical costs of chronic conditions in the U.S. 
will total $600 billion per year, and the care and management of 
patients with chronic disease represents the single largest cost to our 
health care system.\1\ Significantly, the cost of cardiovascular 
disease and stroke in the United States in 2002 is estimated at $329.2 
billion.
---------------------------------------------------------------------------
    \1\ Lawrence Fisher & Karen L. Weihs, Can Addressing Family 
Relationships Improve Outcomes in Chronic Disease? 561 Journal of 
Family Practice 561 (June 2000).
---------------------------------------------------------------------------
    Of these chronic illnesses, cardiovascular disease accounts for 
almost as many deaths as the next seven leading causes of death 
combined, costing this country almost $300 billion a year in healthcare 
expenditures and lost productivity--more than any other single disease. 
Some 60 million Americans--about 1 in 5--suffer from some form of 
cardiovascular disease, ranging from high blood pressure to myocardial 
infarction, angina pectoris, stroke, congenital vascular defects and 
congestive heart failure. One form of cardiovascular disease alone, 
heart disease, is the number one killer in the U.S., and another form 
of cardiovascular disease, stroke, is the third leading killer.
Disease Management as an Approach to Confronting Chronic Illness

    Disease management is one strategy used to confront the challenges 
presented by chronic illness. It is a term widely and inconsistently 
used. Hundreds of ``disease management programs'' exist for a wide 
array of chronic illnesses, including congestive heart failure, 
diabetes, asthma and depression. Increasingly, disease management is 
being offered as an approach to health care management in the public 
and private sectors. For example, Federal agencies are currently 
evaluating the cost effectiveness and patient outcomes of programs that 
rely on disease management techniques to deliver patient care; a number 
of states are offering disease management services through their 
Medicaid programs; key members of Congress are introducing legislation 
to fund new disease management initiatives; and pharmaceutical benefit 
managers (PBMs) are contracting with states to provide disease 
management services through pharmaceutical assistance programs for 
seniors. There are as many definitions of ``disease management'' as 
there are programs that claim to provide disease management services.
    Although advocates for the approach argue that it lowers costs, 
improves patient care, and allows for effective evaluation of services, 
some policy experts suggest that disease management programs may 
actually lower costs at the expense of patients' healthcare needs, or 
alternatively, that it may actually increase health care costs through 
added services (which may include administrative costs and other 
indirect costs). In addition, the effectiveness of disease management 
in improving clinical outcomes is currently being evaluated.\2\
---------------------------------------------------------------------------
    \2\ Finley A. McAlister et al., A Systematic Review of Randomized 
Trials of Disease Management Programs in Heart Failure, 110 American 
Journal of Medicine 378, 381 (April 1, 2001).
---------------------------------------------------------------------------
The American Heart Association Urges Policymakers to Focus on Quality 
        as the Guiding Principle

    Disease management is an evolving concept. As government, health 
plans and clinicians have adopted disease management models to fit 
their own needs and goals, the various meanings of disease management 
have diversified. In practice, disease management can cover a range of 
potential activities, from distributing pamphlets to patients that 
instruct them on self-management techniques related to their particular 
condition to relying on a case manager to develop patient-specific care 
plans.\3\
---------------------------------------------------------------------------
    \3\ Jeff Tieman, Disease Management Making a Case for Itself 
Clinically and Financially, Modern Healthcare, July 9, 2001.
---------------------------------------------------------------------------
    The American Heart Association finds the concept of disease 
management promising, but also urges the Subcommittee to consider two 
issues----

        (1) any quality standards or performance measures for 
        cardiovascular disease and stroke must be based appropriate, 
        objective and scientifically-derived, evidence-based 
        guidelines; and

        (2) quality of care must be prioritized over cost-containment 
        or other financial incentives in all disease management 
        initiatives. Disease management should be primarily about 
        improving patient outcomes and only secondarily about cost 
        containment.

    For disease management to truly put patients first, clinical 
guidelines must rely on a template that emerges from medical community 
consensus. Additionally, appropriate disease-specific programs should 
reach low-risk patients as well as high-risk patients to best serve 
long-term health needs. In short, to focus on appropriate patient-
centered clinical guidelines, medical community standards must serve as 
the fundamental framework for any disease management program that hopes 
to draw widespread approval and acceptance.
    How Congress chooses to confront this issue for Medicare 
beneficiaries will likely impact the entire U.S. healthcare system. As 
noted in a recent MedPAC report to Congress, ``. . . because Medicare 
is the single largest purchaser of health care in the country, its 
actions influence the care that all patients receive nationwide.'' \4\
---------------------------------------------------------------------------
    \4\ Medicare Payment Advisory Commission (MedPAC), Report to the 
Congress: Applying Quality Improvement Standards in Medicare (January 
2002).
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The American Heart Association Provides Leadership and Consensus

    It is fitting that the American Heart Association adds its voice to 
the many that are currently speaking to the issue of disease 
management. Although within most clinical areas there are many 
organizations, health plans and manufacturers that promote clinical 
guidelines based in part on the clinical literature, few organizations 
have the expertise or resources to establish and continually update 
consensus based standards that represent a holistic view of 
cardiovascular and stroke care. Importantly, the American Heart 
Association represents not just providers but all stakeholders in 
cardiovascular and stroke care--physicians, nurses, emergency medical 
support personnel and others. Most significantly, the American Heart 
Association represents the patient.
    The American Heart Association is at the forefront of investigating 
ways to improve the quality of care for patients with cardiovascular 
disease and stroke. We have developed and are currently operating a 
number of patient-centered programs. Our programmatic efforts have 
increased and evolved with the dynamic advances made in cardiovascular 
and stroke care.
    In essence, the American Heart Association's existing programs and 
guidelines provide a foundation for managing disease. We are extremely 
proud of the process through which our guidelines are developed and 
place great emphasis on ensuring objectivity and sound science. The 
American Heart Association and the American College of Cardiology have 
developed joint guidelines on the treatment and management of heart 
disease, including guidelines for acute myocardial infarction, unstable 
angina, congestive heart failure, chronic coronary disease and 
secondary prevention.
    The American Heart Association and the American College of 
Cardiology also work in partnership in the development of performance 
measures, including developing measures for acute myocardial infarction 
and chronic heart failure. The American Stroke Association, a division 
of the American Heart Association, develops scientific guidelines for 
managing and treating stroke and is currently developing performance 
measures for stroke.
    Our programs are developed based on our scientific guidelines. The 
following is a brief description of two of our programs designed to 
improve the quality of care for cardiovascular and stroke patients.

         Get With the Guidelines--This program is an acute 
        care hospital-based program that helps manage risk factors in 
        coronary artery disease and stroke patients. Get With the 
        Guidelines strives for long-term behavioral change by focusing 
        on workable patient management strategies in the hospital 
        setting. Get With the Guidelines incorporates a multi-
        disciplinary approach to risk factor management. The program 
        encourages links between cardiologists, neurologists, primary 
        care physicians, nurses and pharmacists. It also provides 
        resources to build consensus and optimize discharge protocols.

         Acute Stroke Treatment Program--This multimedia 
        toolkit includes guidelines and criteria for hospitals to use 
        in meeting the standards of a primary stroke center. The 
        criteria follow the consensus of the Brain Attack Coalition 
        guidelines and helps hospitals evaluate their capacity to 
        threat stroke patients.

    The American Heart Association's work on disease management is 
ongoing. We are currently reviewing various models of disease 
management, particularly in the area of cardiovascular disease and 
stroke. We are analyzing the effectiveness of these models and hope to 
use this information to refine our current policies, programs and other 
efforts, if needed.
Conclusion

    In addition to the use of appropriate clinical guidelines, it is 
critical to ensure that disease management programs are driven by the 
clinical needs of patients rather than cost containment or financial 
profit. While we recognize the need for cost containment and careful 
allocation of health care resources, improving the quality of care must 
be the primary goal of any disease management program. The American 
Heart Association appreciates the opportunity to provide these comments 
to the Ways & Means Health Subcommittee on this timely and important 
issue, and we look forward to working with the Subcommittee as it 
continues to consider the appropriate integration of disease management 
into the Medicare program.

                                 
 Statement of the Hon. Richard Burr, a Representative in Congress from 
                      the State of North Carolina
    I would like to offer my thanks and praise to the Chairman for 
calling this hearing on disease management in Medicare. I have long 
been committed to providing the best possible services to Medicare 
beneficiaries and to creating incentives for the development of 
innovative new medical technologies that will improve care. Disease 
management offers the opportunity to do both.
    I have introduced a bill that takes a simple but important first 
step toward Medicare coverage of emerging remote technologies that play 
an increasing role in disease management. The bill would improve 
patient care while moving forward the modernization of Medicare's 
benefit package. I look forward to working with you on disease 
management, and enlisting your support for H.R. 3572, the Medicare 
Remote Monitoring Services Coverage Act.
Emerging Disease Management Approaches Emphasize Technology

    Several broad market trends are placing new focus on disease 
management today.

         Managed care plans are shifting their focus from 
        tightly controlled access to services to more loosely 
        structured preferred provider organizations, resulting in 
        increased outsourcing of disease management services.

         A growing sense of self-empowerment among patients 
        with chronic conditions is leading to the development of 
        patient-focused solutions.

         Finally, advances in telecommunications are 
        facilitating improved interactions between patients and health 
        care professionals. Data advances that automate information 
        collection and patient tracking are making it easier to 
        identify and treat patients with chronic conditions.

    Emerging disease management vendors are employing technology to 
enhance their product offerings. Patient-focused services feature 
disease assessment surveys, personal action plans, and on-line 
information and support, while services tailored to clinicians include 
tools to track patients, frequently asked practice questions, and 
online clinical care guidelines.
    Among the most significant technology-focused services are those 
that strengthen the link between patients and physicians. These 
services provide for interactive case management and support, ``push'' 
surveys that solicit patient information and feedback, live chats with 
nurses or other health experts, and home monitoring with automatic or 
manual data transmission.
    While traditional disease management approaches have emphasized 
case management by nurses as a key interaction between patients and 
clinicians, emerging disease management techniques feature home data 
monitoring and interactive case management and support, along with 
nurse case management, to create greater linkages between patients and 
clinicians.
    Analyses by firms that specialize in disease management show that 
technology-centered approaches reduce hospitalizations and medical 
costs and lead to greater physical health and patient satisfaction. The 
development of new technologies expands the promise of emerging disease 
management approaches.
LLack of Medicare Coverage Hinders Broader Adoption of Remote 
        Monitoring

    Despite the innovations emerging in disease management, many new 
clinical information and remote management technologies have failed to 
diffuse rapidly. A significant barrier to wider adoption of disease 
management approaches that utilize remote monitoring services is the 
lack of payment mechanisms in fee-for-service Medicare to reimburse for 
remote, non-face-to-face management services provided by a physician.
    Consider the implications for an elderly Medicare beneficiary with 
a heart condition similar to the Vice President's. If, for example, the 
beneficiary receives a shock from her implantable cardioverter 
defibrillator (ICD) over the weekend when her heart specialist is not 
in the office, the patient would likely go to the emergency room where 
there may not be a heart specialist on staff familiar with her 
condition.
    Yet if the beneficiary had remote monitoring technologies in her 
home, she could immediately forward information concerning her heart 
and the ICD securely through the Internet to her physician. The heart 
specialist could then decide if the patient should come into the clinic 
on the next business day or to proceed immediately to an emergency 
room. More likely, the patient would be reassured that everything is 
appropriate, thus saving an often stressful and expensive trip to a 
hospital emergency room.
    Under existing Medicare payment rules, many physician billing codes 
are primarily for face-to-face interactions between the physician and 
patient. The payments often do not account for the clinician time 
involved in non-face-to-face interactions that are necessary for 
interpretation and response to data from remote management 
technologies. As a result, the payment systems do not adequately 
reflect the value of physician services involving remote monitoring 
services, and serve as an impediment to disease management approaches 
that involve remote monitoring services.
The Medicare Remote Monitoring Services Coverage Act

    To provide greater incentives for the adoption of remote patient 
management services, changes in Medicare reimbursements are necessary. 
My bill--H.R. 3572, the Medicare Remote Monitoring Services Coverage 
Act--takes an initial step toward covering remote monitoring services. 
It would create parity between certain face-to-face and remote 
services. Under the bill:

         Remote monitoring services that are found to be 
        comparable to face-to-face, encounter-based, monitoring 
        services will be given the same coverage and level of Medicare 
        payment as the comparable encounter-based physician service.

         Remote monitoring services are defined to be services 
        provided through a system of technology that allows a remote 
        interface to collect and transmit clinical quantitative data 
        between a patient and a provider, for the purposes of clinical 
        review or response by the provider.

         The Secretary of Health and Human Services would have 
        the discretion to determine comparability between face-to-face 
        and remote monitoring services. The remote monitoring services 
        would be subject to the same frequency guidelines developed now 
        or in the future for the comparable in-office services.

         LThe provision is designed to be budget-neutral. We 
        anticipate that remote monitoring services will substitute for 
        the existing in-office services only when appropriate. In the 
        event utilization increases, the bill includes a mechanism to 
        ensure budget neutrality.

    There are several benefits of the legislation.

         It will improve patient access, care, and management, 
        as well as spur the development of new technologies and disease 
        management approaches that will improve services further. For 
        patients in more rural settings, it may be the most practical 
        means for patient management in order to make timely 
        adjustments in the program of care before a more serious health 
        event occurs.

         The proposal attaches value to physician time 
        dedicated to remote management technology and will encourage 
        physician use of tools that improve services to patients. It 
        will also enable enhanced care and real-time feedback that will 
        avoid unnecessary hospitalizations and patient anxiety.

         It ensures that payment will only be provided for 
        services that are comparable to those provided in face-to-face 
        interactions. The Centers for Medicare and Medicaid Services 
        would retain authority through existing initiatives to monitor 
        the quality of such services.
Conclusion

    Madam Chairman, let me once again commend you for your leadership 
in calling this hearing today. Advances in technology are expanding the 
promise of disease management, and Medicare must take advantage of the 
opportunity to improve care for those with chronic conditions. My bill 
provides a simple but important first step toward the coverage of new 
remote technologies featured in emerging disease management approaches 
today. I urge you to join me as a cosponsor of the bill, and I look 
forward to working with the members of this Committee, as well as with 
my fellow colleagues on the Energy and Commerce Committee, to passing 
the bill this year. Thank you very much for the opportunity to present 
my views.

                                 
 Statement of Christobel Selecky, Chair, Government Affairs and Health 
      Policy Committee, Disease Management Association of America
    Chairwoman Johnson and distinguished members of the Subcommittee, 
it is a pleasure to have the opportunity to provide testimony to the 
Subcommittee on the strong value of disease management programs to 
improve quality and control costs under the Medicare program. My name 
is Christobel Selecky and I am a member of the Board of Directors of 
the Disease Management Association of America (DMAA) and also the Chair 
of their Government Affairs and Health Policy Committee. I am also the 
Chief Executive Officer of LifeMasters Supported SelfCare, a privately 
held Disease Management Organization (DMO).
Overview.

    Comprehensive Disease Management (``DM'') programs have 
demonstrated their effectiveness in improving health status, health 
care quality, patient and provider satisfaction, and financial outcomes 
for populations with congestive heart failure (CHF), diabetes, coronary 
artery disease (CAD), chronic obstructive pulmonary disease (COPD), 
end-stage renal disease (ESRD), asthma, obesity, and several other 
chronic illnesses. Commercial, Medicare FFS, Medicare+Choice, and some 
state Medicaid plans have already implemented DM programs and benefited 
from these clinical and financial outcomes. A majority of large private 
payors have already launched major disease management programs and have 
signaled their commitment to DM as the core element of their new 
medical management strategy.
    The Disease Management Association of America fully supports and 
commends the Congress and the Centers for Medicare and Medicaid 
Services (``CMS'') for promoting the expansion of DM programs in its 
efforts to modernize and revitalize Medicare+Choice, and through the 
coordinated care, Benefits Improvement and Protection Act (BIPA), and 
other demonstration projects.
    In order to build on the incremental progress made to date, DMAA 
strongly urges federal policymakers to offer the benefits of full-
service DM programs to all enrollees in:

         The traditional Medicare fee-for-service (``FFS'') 
        program;

         Any new Medicare+Choice programs, such as point of 
        service, PPO, or MSA products; and

         All State Medicaid programs, including FFS and 
        managed care alternatives.
Disease Management and the DMAA.

    Disease Management is an approach to patient care that seeks to 
limit ``preventable'' events by maximizing patient adherence to 
prescribed treatments and to health-promoting behaviors. For patients 
with chronic diseases, the anticipated benefits of disease management 
include superior clinical outcomes; improved functional capacity and 
quality of life; lower health care costs; reduced need for 
hospitalization, surgery or other invasive care; and greater access to 
care support service.
    The Disease Management Association of America (DMAA) is the only 
association in America dedicated exclusively to the DM industry. The 
DMAA draws members from throughout the United States and has 
representatives from all segments of the DM industry, including health 
plans, hospitals, employers, pharmaceutical companies, physicians, and 
stand-alone DM organizations. The DMAA seeks to advance the use of DM 
programs as a means to build a better system of care that will 
predictably improve quality and reduce costs in private and public 
sector health care programs. DMAA also works to promote research, 
accreditation, education, and the science of DM, and to increase the 
effectiveness of DM programs.
    The DMAA has established an industry-standard definition \1\ of 
qualified disease management programs and entities. The DMAA 
definition--established in consultation with primary care and specialty 
physicians, and incorporating private practice, health plan and 
institutional perspectives--has been relied upon widely by CMS (the 
definition is cited by CMS in its February 22, 2002 solicitation for 
proposals to conduct the DM demonstration projects authorized in the 
BIPA, by DM accreditors (NCQA, URAC and potentially JCAHO) and by 
payors and providers.
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    \1\ Disease management is a multidisciplinary, systematic approach 
to health care delivery that: (1) includes all members of a chronic 
disease population; (2) supports the physician-patient relationship and 
plan of care; (3) optimizes patient care through prevention, proactive, 
protocols/ interventions based on professional consensus, demonstrated 
clinical best practices, or evidence-based interventions; and patient 
self-management; and (4) continuously evaluates health status and 
measures outcomes with the goal of improving overall health, thereby 
enhancing quality of life and lowering the cost of care. Qualified 
Disease Management programs should contain the following components:

       Population Identification processes;
       Evidence-based practice guidelines;
       Collaborative practice models that include physician 
and supp  ort-service providers;
       Risk identification and matching of interventions with 
need;
       Patient self-management education (which may include 
primary prevention, behavior modification programs, support groups, and 
compliance/surveillance);
       Process and outcomes measurement, evaluation, and 
management;
       Routine reporting/feedback loops (which may include 
communication with patient, physician, health plan and ancillary 
providers, in addition to practice profiling); and
       Appropriate use of information technology (which may 
include specialized software, data registries, automated decision 
support tools, and call-back systems).
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Disease Management Improves Health Status & Quality and Helps Control 
        Costs.

    Disease management programs produce significant clinical 
improvements at the same time that they achieve financial savings. For 
example, one study published in a peer-reviewed cardiology journal (Am 
Heart J 1999; 138: 633-640) followed the progress of a population of 
CHF patients enrolled in a multidisciplinary DM program including 
patient education, interactive vital sign and symptom monitoring, nurse 
support and physician intervention. Clinical impacts measured twelve 
months after enrollment included an 18 percent reduction in inpatient 
days, a 36 percent reduction in inpatient admissions, a 31 percent 
decrease in emergency department visits, and a 20 percent decline in 
average length of stay. Patient satisfaction surveys showed a 16 
percent improvement. Financial savings for the group were reflected in 
a 54% drop in disease specific claims and a 42% average reduction in 
all claims. Numerous similar examples of such impressive outcomes are 
fully described in DMAA's Medicare and Medicaid ``White Paper'' 
(available at www.dmaa.org).
    DM has already been proven to be successful in Medicare and 
Medicaid populations. In Hawaii, American Healthways, a DMAA member DM 
company, provided diabetes disease management services to 6,000 
Medicare FFS cost contract beneficiaries enrolled in HMSA. In the first 
year, the program yielded a 17.2% reduction in total claims savings 
over the population resulting in a $5 million net savings to CMS. In 
Florida, LifeMasters has been providing CHF disease management services 
to approximately 3,000 FFS Medicaid recipients in the northern half of 
the state for almost two years. After just one year, total claims costs 
for this population were reduced by 21% resulting in a $3 million net 
savings to the state. In addition to cost savings, quality of care and 
satisfaction for these populations was significantly improved.
    One DMAA member company's calculations indicate that the difference 
between annual baseline costs for CHF in the Medicare FFS program and 
the company's claims-reconciled costs for patients in a disease 
management intervention for one year is over $14,000. Extrapolating 
savings across the Medicare program using a conservative figure of 
$11,000 for both the Medicare+Choice and FFS programs, CHF disease 
management alone could produce total Medicare savings of over $8.3 
billion annually. The FFS program would account for $7 billion, or 
nearly 85 percent of the total savings opportunity, suggesting the 
critical need for testing the expansion of disease management to this 
segment of Medicare.
    DM programs also improve access to care. Sophisticated information 
technology is used to both identify and enroll all persons with a given 
health condition. This proactive outreach process helps to include 
individuals who are otherwise isolated from the health care system. And 
many programs run by DMAA members are administered on a multi-lingual 
basis in languages such as Spanish, Cantonese and Mandarin.
    DM programs can also play a crucial role in reducing medical errors 
and improving quality. The recent Institute of Medicine (IOM) reports 
on medical errors \2\ and the deteriorating quality of healthcare in 
America \3\ argue that DM is not only integral to preventing medical 
errors, but also to protecting and improving overall health care 
quality, especially for the chronically ill. As the IOM studies 
emphasized:
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    \2\ To Err is Human: Building a Safer Health System, Linda T. Kohn, 
Janet M. Corrigan, and Molla S. Donaldson, Eds., Committee on Quality 
of Health Care in America, Institute of Medicine, National Academy 
Press, Washington, D.C. (1999). 
    \3\ Crossing the Quality Chasm: A New Health System for the 21st 
Century, Committee on Quality of Health Care in America, Institute of 
Medicine, National Academy Press, Washington, D.C. (2001). 

         One of the chief culprits in medical errors is the 
        lack of care management and coordination, resulting from the 
        decentralized and fragmented nature of the health care delivery 
        system, and the multitude of unaffiliated providers practicing 
        in different settings without access to complete medical record 
        information or coordination (such as can be provided by DM 
---------------------------------------------------------------------------
        organizations).

         More than 100 million Americans have at least one 
        chronic illness. ``Clinicians, health care organizations, and 
        purchasers . . . should focus on improving care for common, 
        chronic conditions such as heart disease, diabetes, and asthma 
        that are now the leading causes of illness in the United States 
        and consume a substantial portion of health care resources. 
        These ailments typically require care involving a variety of 
        clinicians and health care settings, over extended periods of 
        time . . . who work so independently from one another that they 
        frequently provide care without the benefit of complete 
        information about patients' conditions, medical histories, or 
        treatment received in other settings.''
Disease Management is Needed ``Inside'' Medicare and Medicaid.

    Diseases such as arthritis, asthma, cancer, chronic obstructive 
pulmonary disease, CHF, depression, and diabetes account for 60 percent 
of medical costs in the United States. Cardiovascular disease is the 
leading cause of death among both men and women and across all racial 
and ethnic groups. About 58 million Americans live with some form of 
the disease. In 1999 alone, cardiovascular disease cost the nation an 
estimated $287 billion in health care expenditures and lost 
productivity, and this burden is growing as the population ages. In the 
Medicare population, a 1993 chronic care demonstration proposal 
indicated that roughly 10 percent of the Medicare beneficiaries 
accounted for 70 percent of the $129.4 billion in total Medicare 
expenditures. The majority of these 10 percent suffered from chronic 
illnesses. Medicare has recognized that an acute care system is no 
longer appropriate where the major morbidity, mortality and cost 
drivers of our era are chronic conditions. However, Medicare and 
Medicaid have thus far lacked the legislative and regulatory authority 
to implement demonstrations on a wide scale to provide fair access to 
all beneficiaries.
    DMAA believes that comprehensive DM, if fully employed in Medicare 
and Medicaid, can:

         Improve the safety and quality of care by adhering to 
        evidence-based treatment guidelines and outcomes data, and by 
        providing patients with a safety net between physician and 
        hospital visits, thereby reducing drug and treatment errors and 
        improving care coordination (identified by the Institutes of 
        Medicine as the two principal problems with the America health 
        care system)

         Improve access to care by around the clock nursing 
        and high-tech contacts, and by assisting rural caregivers and 
        their patients who do not have the benefit of easy entre to in-
        person care

         Improve patient self-management of, and 
        responsibility for, preventing and treating their conditions by 
        its innovations in patient-centered and collaborative education

         Improve financial cost containment without 
        sacrificing quality or patient satisfaction by serving as an 
        alternative to the increasingly unacceptable cost-containment 
        techniques of managed care, such as utilization review, 
        gatekeeper restrictions, referral limitations, and drug 
        restrictions

         Enhance efforts in the Public Health arena by 
        providing health improvement programs on a population basis; 
        creating financial incentives to promote and deliver preventive 
        interventions on a large scale using advanced outreach 
        technologies, especially secondary preventive measures; and 
        encouraging those segments of the private sector that have not 
        yet embraced DM to do so.

    DM should be implemented in Medicare FFS, Medicare+Choice, and 
Medicaid according to the following principles endorsed by the DMAA:

         There should be no discrimination against FFS 
        enrollees, who currently lack any access to the benefits of DM 
        programs available to Medicare+Choice and certain Medicaid 
        enrollees (or have lost access to these programs as a result of 
        the loss of their Medicare+Choice coverage).

         Medicare and Medicaid FFS programs should directly 
        contract with DM organizations to offer such benefits on a 
        population basis. Further, DM programs and demonstration 
        projects sponsored by CMS should reflect models of DM which 
        have been successfully utilized in the commercial sector. 
        Specifically, these programs should not require that DM be 
        linked with the provision of a drug benefit which is not a 
        standard offering of DM providers.

         Medicare and Medicaid managed care programs should 
        provide financial and other incentives to private health plans 
        and public managed care programs and their enrollees to join 
        HMOs, PPOs, MSAs, point of service plans, and other 
        alternatives to traditional FFS.

         DM programs should be compensated for their services 
        on an equitable and competitive basis that compensates them for 
        their investments, provides them with incentives to maximize 
        both clinical and financial outcomes. Historically fees paid to 
        DM organizations are a fraction of the savings generated for 
        their payor customers.

    As the only association in America dedicated exclusively to the DM 
industry, we would like to offer the services and expertise of DMAA's 
staff and member organizations to serve as a resource to the 
Subcommittee as you explore the various ways in which Disease 
Management can improve the delivery of healthcare in the United States.
    Thank you for the opportunity to provide these views to the 
Subcommittee.

    I63The Disease Management Association of America, a non-profit, 
voluntary membership organization, founded in March of 1999, is the 
only industry organization dedicated to advancing disease management. 
DMAA's members represent disease management organizations, health 
plans, employers, pharmaceutical companies and benefits managers, 
hospitals, physicians, and other stakeholders in the disease management 
community.

                                 
    Statement of Sandeep Wadhwa, M.D., MBA, Vice President, Disease 
 Management Services, McKesson Health Solutions, McKesson Corporation, 
                       San Francisco, California
    I am pleased to submit this statement on behalf of McKesson 
Corporation to the Subcommittee on Health of the House Committee on 
Ways and Means, subsequent to the April 16 hearing on Promoting Disease 
Management in Medicare. McKesson Corporation strongly supports the 
creation of a disease management benefit for Medicare and Medicaid 
recipients. Furthermore, McKesson recommends the expansion of disease 
management services to recipients of Federal government sponsored 
health care benefits (Veterans Health Administration beneficiaries, 
military personnel and dependents and Federal employees) and to rural 
underserved populations.
    As the world's largest healthcare services company, McKesson is an 
industry leader in the provision of disease management services for 
commercial, Medicaid and Medicare populations. The Disease Management 
Purchasing Consortium and the Health Industry Research Company have 
both recognized McKesson as a Top Ten disease management firm from more 
than 160 companies. Our disease management clients cover a broad host 
of purchasers of health care, including commercial health plans such as 
Blue Cross Blue Shield of Texas, Anthem Midwest, and Blue Cross Blue 
Shield Federal Employees Plan; state Medicaid programs and managed care 
plans such as the State of Washington and Columbia United Providers; 
and high risk insurance pools like CoverColorado. As such, we are 
uniquely positioned to provide Congress with information on currently 
available solutions, as well as ideas for improving the health status 
of populations while decreasing health care costs through the use of 
disease management programs.
    McKesson is the industry leader in care management services and 
software and has market leadership positions in demand management and 
utilization criteria. Furthermore, we are leading providers of 
physician and quality profiling software and case management workflow 
software. As an early provider of these programs, we have been 
delivering disease management services since 1996. McKesson's disease 
management programs leverage our experience with patient services, 
pharmacy management, and health care quality improvement activities. 
Many of these programs and services reflect the capabilities and 
expertise of our 165 year old company, one of the largest nationwide 
distributors of pharmaceuticals and health care products and the 
largest health information technology company in the world.
    The disease management industry arose from the recognition that the 
nation's health care system is largely geared towards meeting the acute 
and symptomatic needs of patients, rather than the long-term needs of 
those with chronic diseases. However, by providing proactive rather 
than reactive care, disease management services can help retard the 
progression of disease by encouraging a more rapid adoption of 
evidence-based standards of care which reduces the likelihood of acute 
care intervention.
    Disease management is one of the few health care innovations that 
can improve health status and access to care while reducing net 
expenditures. In developing this program for Medicare beneficiaries, 
McKesson recommends that Congress initially focus on those conditions 
for which there are national, evidence-based guidelines of care and 
that lend themselves to a net savings. In addition, it is important to 
focus on conditions where the gap between the standards of care and 
actual practice leads to hospitalizations and emergency room visits, 
both of which might otherwise be avoided through adherence to the 
guidelines. Conditions that meet these criteria include congestive 
heart failure, diabetes, asthma, and chronic obstructive pulmonary 
disease (COPD).
Demonstrated Results

    McKesson's success with disease management is a function of 
leveraging information technology through the creation of clinical 
decision support software, utilization of advanced relational database 
management systems, and application of state-of-the-art call center 
technology. Our system relies on both ``high tech'' information 
technology and ``high touch'' nursing to achieve its impact. We 
position our services to complement and extend, and not threaten or 
disrupt, the patient-physician relationship. Our aim is to reinforce 
physician treatment plans that are often misunderstood or incompletely 
understood as well as to promote awareness and adherence to evidence-
based guidelines.
    McKesson's disease management services are delivered by health care 
professionals. We rely primarily on nurses to provide patient 
counseling and education through telephonic nursing, also known as 
telenursing. These health care professionals are able to impart 
evidence-based education and assess patients' understanding of their 
condition and barriers to compliance. In addition to proactive 
monitoring and counseling, our disease management programs offer 
patients around the clock access to nurses who are able to answer 
patients' symptom-related concerns and safely direct patients to the 
appropriate level of care. Telephone access to nurses for health care 
advice and support also benefits the Medicare patient or those living 
in rural, underserved areas without ready access to a physician's 
office or to emergency room facilities. Our nurse triage function 
complements the proactive components to reduce inappropriate 
utilization of services.
    McKesson programs have demonstrated dramatic improvements in the 
health status of patients, with marked reductions in hospitalization 
and emergency room visits that have resulted in net reductions in 
health care costs. In order to achieve improved outcomes, our programs 
focus on teaching patients self-management principles, symptom control 
strategies, and optimal medical management practices. In patients with 
congestive heart failure, which is the leading cause of admissions in 
Medicare, we demonstrated for one disease management client an 89% 
increase in the usage of ACE-inhibitors, heart failure drugs which 
lower mortality and morbidity rates. With the same client, we also 
documented a 24% increase in influenza vaccination and a 44% increase 
in patients' adherence to a low salt diet. These changes in care 
management and patient behavior led, over the course of one year, to a 
51% reduction in inpatient costs, 36% reduction in emergency room 
visits and an overall reduction in claims costs of 24%. Furthermore, 
patients in this program reported very high satisfaction with the 
service and noted improvements in their overall quality of life.
    Our diabetes program not only helps patients improve their blood 
sugar values, but also focuses on reducing risk of strokes and heart 
attacks, which account for the overwhelming morbidity and mortality in 
diabetics. For one client, we have demonstrated a 33% increase in 
patients' use of glucose meters and a 70% increase in the use of 
aspirin, which contributed to a documented 35% reduction in 
hospitalization and 28% reduction in diabetes-related missed work days.
    Overall, annual net savings in health care costs inclusive of 
program fees for disease management for our congestive heart failure 
program range from $610 to $4,872 per patient. For diabetes, annual net 
savings range from $755 to $2,138 per patient, and for asthma, we have 
net savings ranging from $223 to $899 per patient. We have demonstrated 
these results in commercial, Medicare and Medicaid settings, and with 
government employees. McKesson has conducted evaluations using 
different study designs, including pre/post evaluations, prospective 
cohort evaluations, and randomized controlled trials. We believe that 
the benefits of disease management programs can be evaluated using the 
most rigorous study designs
Market Segments
Medicare


    To date, disease management programs have largely been an 
innovation in the commercial insurance market and serve the families of 
adult workers. However, the burden of chronic disease is 
disproportionately higher in the elderly, and concomitantly leads to 
increased costs of care and utilization of services in that population 
segment. McKesson believes that Medicare rates of hospitalization and 
emergency room use can be reduced, sometimes dramatically, in patients 
with chronic diseases, particularly those with congestive heart 
failure, asthma, diabetes, and COPD. These conditions are highly 
prevalent in the Medicare population, and the avoidance of unnecessary 
hospitalizations and emergency room visits can result in sizable 
savings while improving the quality of lives of Medicare beneficiaries. 
For example, for one Medicare+Choice client, we demonstrated a 48% 
reduction over six months in bed days in a program designed to treat 
congestive heart failure.
    The Medicare population is expected to double over the next 30 
years.\1\ Disease management programs can serve as a fiscally prudent 
measure to temper the rate of growth in the costs of Medicare services. 
In addition, when a prescription drug benefit is created for Medicare 
recipients, disease management programs can help rationalize the 
appropriate use of medications and greatly improve healthcare outcomes.
---------------------------------------------------------------------------
    \1\ Board of Trustees of the Federal Hospital Insturance Trust 
Fund. Annual report of the Federal Hospital Insurance Trust Fund. 
Washington, D.C.: USGPO, 2000.
---------------------------------------------------------------------------
Medicaid 

    As states continue to grapple with rising Medicaid expenditures, 
disease management can serve as an important service to control health 
care costs. McKesson believes that the greatest opportunity is in the 
Medicaid elderly and disabled categories. Eleven million of the 40 
million Medicaid recipients qualify for Medicaid on the basis of 
disability or age.\2\ Despite being roughly 25% of the population, this 
group accounts for nearly 66% of the Medicaid costs.\3\ Furthermore, 
very few disabled and elderly Medicaid recipients are covered by 
managed care organizations due to their very high costs and pre-
existing conditions. Therefore, these vulnerable patients lack many of 
the care coordination services common to managed care organizations. 
Disease management programs provide patient counseling, care 
coordination, and a patient advocate who is able to counsel patients 
and help them navigate through a complex health care system.
---------------------------------------------------------------------------
    \2\ Hoffman C, Schlobohm A. Uninsured in America: a Chart book. 2nd 
ed. Washington, D.C.: Kaiser Commission on Medicaid and the Uninsured, 
March 2000.
    \3\ Medicaid: a primer. Washington, D.C.: Kaiser Commission on 
Medicaid and the Uninsured, 2001.
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    McKesson has several Medicaid clients. We have contracted directly 
with the state in some cases and with Medicaid managed care plans in 
other cases. Although Medicaid reimbursements are lower than 
reimbursements from commercial payers, there is usually higher 
utilization of services in Medicaid programs. In an asthma disease 
management program conducted for Medicaid recipients in a Mid-Atlantic 
state, we have demonstrated a 37% reduction in hospitalizations and a 
22% reduction in emergency room visits, which resulted in a 19% return 
on investment for the health plan.
Government Employees

    McKesson also recommends that the benefit design for Federal 
Government employees be expanded to include disease management 
services. Focusing on conditions such as asthma, diabetes, congestive 
heart failure, and COPD can result in net reductions in health care 
costs and an improvement in the health status of employees or 
dependents with these conditions.
    We believe that current and former military personnel also should 
be included in this initiative. The Veterans Health Administration 
(VHA) system is rapidly expanding and faces increased costs associated 
with providing care for veterans, particularly those who served in 
World War II and Korea. Tricare and the VHA are beginning to conduct 
pilot trials of disease management services and have solicited bids 
from companies including McKesson. We strongly support expansion of 
these trials with a focus on solutions that are scalable across wide 
geographic settings.
Rural, underserved populations

    Disease management services are particularly relevant in 
underserved areas. For the 61 million Americans who live in rural 
settings, access to health care is an issue of major concern.\4\ In 
these settings, investments to promote patient self-management and 
education are particularly fruitful. By increasing compliance and self-
reliance, disease management can help lessen the demand and, therefore, 
the need, for scarce health care resources. Telenursing services in 
disease management programs are able to efficiently and economically 
overcome geographic barriers for care provision. Disease management 
services can act as a physician extender in these underserved areas. 
McKesson strongly recommends the implementation of disease management 
programs in rural, underserved areas and suggests pilot projects to 
demonstrate the effectiveness of disease management services in these 
settings.
---------------------------------------------------------------------------
    \4\ National Rural Health Association. Annual Report 2000.
---------------------------------------------------------------------------
Conclusion

    Disease management has emerged as a private sector solution that 
provides incremental technology and professional resources to improve 
care for those with chronic conditions. These services improve the 
health of patients by decreasing symptoms and improving their quality 
of life. Disease management also reduces the frequency of emergency 
room visits and hospitalizations as patients learn to effectively 
manage their diseases. Overall, we believe that the savings from 
reductions in hospitalizations and emergency room visits outweighs the 
costs of delivering these programs.
    McKesson urges the creation of a disease management benefit for 
Medicare recipients. The impact of these programs is greater for 
vulnerable populations such as the poor, elderly, and disabled, where 
the frequency and costs of chronic conditions are higher and health 
care delivery is generally highly fragmented. The outcomes-focused, 
evidence-based interventions provided in disease management programs 
improve patients' ability to participate in their care and help 
physicians by reinforcing medical recommendations. As Congress grapples 
with improving the quality and delivery of health care, we support the 
greater utilization of disease management programs as a vital way to 
enhance care outcomes for the elderly while concurrently reducing the 
cost of delivering better care.
    We look forward to working with members of this subcommittee as you 
address these important concerns.

                                 
     Statement of RMS Disease Management Inc., McGaw Park, Illinois
    RMS Disease Management Inc., an affiliate of Baxter Healthcare 
Corporation, provides disease management (DM) services for patients 
with chronic kidney disease. Founded in 1996, RMS coordinates care for 
approximately 5,000 patients across the United States. Clients include 
regional and national health plans as well as the State of Florida's 
Medicaid program.
    We strongly support the Subcommittee's efforts to expand disease 
management programs in the Medicare fee-for-service (FFS) population. 
Disease management has been proven to improve both clinical and 
economic outcomes while concurrently increasing patient and provider 
satisfaction. Applying DM to the FFS population offers the government a 
singular opportunity to improve the quality of care for Medicare 
beneficiaries, while also addressing increasingly critical funding 
issues.
    Comprehensive disease management programs directly address the 
issues raised in the March 2001, Institute of Medicine 2 Report 
``Crossing the Quality Chasm: A New Health System for the 21st 
Century''. Specifically, DM programs supply the patient centered data, 
necessary information systems, aligned incentives, and integrated care 
coordination that the report authors believe are required to close the 
chasm.
    End-stage renal disease provides an ideal opportunity for applying 
disease management principles due to the characteristics of this 
population and its care. These characteristics include:

        - A clearly defined population using the HCFA 2728 form

        - Patients typically have multiple co-morbidities in addition 
        to their renal disease which requires complex care that takes 
        place in a variety of care settings

        - Care delivered is fragmented as a result of multiple 
        physician specialists and allied care professionals working in 
        an uncoordinated manner

        - High annual costs

        - Incomplete capture of patient care data in one medical 
        record file

        - Important need for ongoing patient counseling and education

    The RMS program has been designed and implemented to address all of 
these issues and needs. RMS uses evidence-based medicine, state-of-the-
art information technology, and highly experienced nurses to provide 
care support for renal patients and their attending physicians 24 hours 
per day, 7 days a week. Patients receive education, counseling, and 
care coordination based on individual care plans created by their 
physicians. Physicians receive incremental nursing support and 
comprehensive patient data that otherwise would not be available to 
them. Activities in the field are overseen by board certified 
nephrologists and a nationally recognized Medical Advisory Board.
    Program results published in the peer-reviewed American Journal of 
Kidney Diseases, May 2001, showed a 35 percent reduction in 
hospitalization and 20 percent reduction in mortality for patients 
whose care was coordinated by RMS. Emergency room visits have dropped 
by over 75 percent compared to the pre-program baseline. Further, self-
reported patient and provider satisfaction is also consistently very 
high.
    We believe expanding the availability of disease management to the 
fee-for-service ESRD population will achieve similar benefits to those 
that have been obtained in managed care populations. In its 
deliberations, we would suggest the Subcommittee consider the 
following:

        (1) Establish high standards for defining disease management 
        programs. There is widespread variability as to what 
        constitutes ``true'' disease management. As a starting point, 
        we propose that the accreditation guidelines established by 
        NCQA be used as a baseline.

        (2) Ensure that payment mechanisms for patient categories are 
        properly risk adjusted and funded. For example, current ESRD 
        AAPCC rates do not fully account for the impact of diabetic 
        status, MSP, and transplant. This results in wide disparities 
        between the actual cost of care and the AAPCC payments for ESRD 
        patients.

        (3) Create payment methodologies that reflect how most disease 
        management organizations are structured. Unlike managed care 
        organizations, most disease management organizations are not 
        set up to contract with providers or pay claims.

        (4) View disease states in their totality. In the case of 
        chronic kidney disease, costs can be reduced significantly if 
        disease management intervention begins before onset of ESRD and 
        dialysis. Currently, the care and payment systems are not 
        constructed in a way that captures patients before the emergent 
        need for dialysis. Therefore, the appropriate patient care and 
        education does not take place, which results in unnecessarily 
        high costs and sub-optimal clinical outcomes.

    Again, RMS is strongly supportive of the Subcommittee's initiative 
to capture the benefits of disease management for the fee-for-service 
population and appreciates the opportunity to comment.

                                
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