[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
HEARING ON GAINSHARING
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
OCTOBER 7, 2005
__________
Serial No. 109-44
__________
Printed for the use of the Committee on Ways and Means
_____
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
E. CLAY SHAW, JR., Florida CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania WILLIAM J. JEFFERSON, Louisiana
J.D. HAYWORTH, Arizona JOHN S. TANNER, Tennessee
JERRY WELLER, Illinois XAVIER BECERRA, California
KENNY C. HULSHOF, Missouri LLOYD DOGGETT, Texas
RON LEWIS, Kentucky EARL POMEROY, North Dakota
MARK FOLEY, Florida STEPHANIE TUBBS JONES, Ohio
KEVIN BRADY, Texas MIKE THOMPSON, California
THOMAS M. REYNOLDS, New York JOHN B. LARSON, Connecticut
PAUL RYAN, Wisconsin RAHM EMANUEL, Illinois
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON HEALTH
NANCY L. JOHNSON, Connecticut, Chairman
JIM McCRERY, Louisiana FORTNEY PETE STARK, California
SAM JOHNSON, Texas JOHN LEWIS, Georgia
DAVE CAMP, Michigan LLOYD DOGGETT, Texas
JIM RAMSTAD, Minnesota MIKE THOMPSON, California
PHIL ENGLISH, Pennsylvania RAHM EMANUEL, Illinois
J.D. HAYWORTH, Arizona
KENNY C. HULSHOF, Missouri
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
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unintentional errors or omissions. Such occurrences are inherent in the
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C O N T E N T S
Page______
Advisories announcing the hearing................................ 2
WITNESSES
Office of Inspector General, U.S. Department of Health and Human
Services, Lewis Morris......................................... 6
______
American Association of People with Disabilities, Andrew J.
Imparato....................................................... 39
American Medical Systems, Martin Emerson......................... 24
Goodroe Healthcare Solutions, Joane Goodroe...................... 21
Grand View Hospital, Stuart H. Fine.............................. 34
New Jersey Hospital Association and Affiliates, Gary S. Carter... 30
The Society for Thoracic Surgeon's Task Force on Pay for
Performance, Jeffery Rich, M.D................................. 44
SUBMISSIONS FOR THE RECORD
Goodroe, Joane H., Goodroe Healthcare Solutions, Norcross, GA,
statement...................................................... 59
Leahey, Mark, Medical Device Manufacturers Association, letter... 66
HEARING ON GAINSHARING
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FRIDAY, OCTOBER 7, 2005
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Health
Washington, DC.
The Subcommittee met, pursuant to notice, at 9:40 a.m., in
room 1100, Longworth House Office Building, Hon. Nancy L.
Johnson (Chairman of the Subcommittee), presiding.
[The advisory, revised advisory, and revised advisory #2
announcing the hearing follow:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
September 29, 2005
No. HL-10
Johnson Announces Hearing on Gainsharing
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 gainsharing to align the interests
of health care providers. The hearing will take place on Friday,
October 7, 2005, in the main Committee hearing room, 1100 Longworth
House Office Building, beginning at 10:00 a.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 representatives from groups affected by
Medicare's payment policies. 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:
Improvements in the quality and efficient delivery of health care
in the Medicare system is of paramount importance to Congress. In order
to achieve these goals, it is essential that physicians and hospitals
work together in the delivery of medical services. However, certain
impediments prevent full cooperation between physicians and hospitals.
For example, Medicare maintains separate payment systems for physicians
and hospitals, and statutory and regulatory constraints make it
difficult for physicians and hospitals to work together.
The use of certain operational and financial incentive
arrangements, commonly referred to as gainsharing arrangements, may
assist in improving the alignment of physician and hospital interests.
One type of gainsharing arrangement uses methodologies designed to
enable hospitals to directly increase payments to physicians for
measurable contributions to, and for improvements in, all areas of
hospital operational and financial performance, while improving the
quality of care.
In announcing the hearing, Chairman Johnson stated, ``To ensure
that fee-for-service Medicare continues to be a viable option for
America's seniors and people with disabilities, it is imperative to
implement system changes which include the creation of opportunities
for skilled medical service professionals to work together to improve
both health care quality and efficiency. Gainsharing arrangements, if
designed properly, have the power to create fundamental changes to
systems that can help integrate the delivery of medical services across
different groups of providers to achieve higher quality care and
improved efficiency. This hearing will provide the Subcommittee with
the opportunity to hear from witnesses on this important issue.''
FOCUS OF THE HEARING:
The hearing will focus on the current Medicare payment system,
identification of legal and regulatory considerations associated with
the ability of physicians and hospitals to engage in gainsharing
arrangements, and an examination of potential solutions. On the first
panel, CMS and the Office of Inspector General will present information
on the Medicare payment structure and gainsharing demonstrations, and
the legal and regulatory considerations involved in gainsharing
arrangements. The second panel will provide input from affected
parties, including testimony from witnesses with experience in
gainsharing arrangements, hospital and physician issues.
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ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
September 29, 2005
No. HL-10 Revised
Witness Announcement for Hearing on Gainsharing
The witnesses at the Subcommittee on Health, Committee on Ways and
Means, hearing on gainsharing to align the interests of health care
providers, will include a representative from the U.S. Department of
Health and Human Services, Office of Inspector General, not the Centers
for Medicare and Medicaid Services.
All other details for the hearing remain the same. (See Health
Advisory No. HL-10, dated September 29, 2005).
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
October 05, 2005
No. HL-10 Revised #2
Change in Time for the Hearing on Gainsharing
Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on
Health of the Committee on Ways and Means, today announced that the
Subcommittee hearing on gainsharing to align the interests of health
care providers, previously scheduled for 10:00 a.m. on Friday, October
7, 2005, in the main Committee hearing room, 1100 Longworth House
Office Building, will now be held at 9:30 a.m.
All other details for the hearing remain the same. (See Health
Advisory No. HL-10, dated September 29, 2005).
Chairman JOHNSON. We do have a closing time certain. I am
sorry to get us starting a little bit late, but to make up for
it, I am not going to use my opening statement, which is rather
long. Instead, I am just going to say that this is as important
a hearing as I have chaired in my years in Congress. There
isn't a sector of economy that has improved quality without
people working together in a different way than our current
silo system allows, incentivizes, encourages, or even makes
possible. So, we do need to think through the challenge that
the gainsharing demonstrations that have already taken place
pose to us. Because the next round of improvement in quality is
going to come from the embedding of technology into the
delivery system The inclusion of all actors in that system--the
whole team--in the understanding of measurement, in the
commitment to quality, in the transparency of the system. So,
we have a real challenge before us, but it is one we cannot
afford not to meet. So, we have a very good panel today that
will both give us better understanding of some of the tools
that we have at our disposal as well as some of the concerns
that we also have to meet. So, I welcome all of you. I welcome
the panel. I am very pleased to have Mr. Morris from the
Inspector General's Office here. I yield to Mr. Stark.
Mr. STARK. Madam Chair, it is so seldom that I take
exception to your approach to these problems, but with the
other issues we have before us--implementing the new private
drug coverage, which evidently the Centers for Medicare and
Medicaid Services (CMS) has screwed up again in their latest
booklet. I recall 20 years ago in this Subcommittee we examined
this gainsharing. We called it ``kickbacks'' in those days. We
decided that wasn't such a good idea, to encourage profit
sharing at the expense of beneficiaries Taxpayers, because they
suffered. When the hospital prospective payment system was
implemented, hospitals began enlisting physicians through
incentive plans to help contain costs. But this created
inducements for the docs to withhold care or create early
discharge. We enacted new penalties in Title 9 of the Social
Security Act. Bluntly stated, what we are going to talk about
today is whether to turn back time Allow kickbacks, which will
benefit nobody but either the doctor or the hospital, but saves
money. The taxpayers The beneficiaries will suffer.
I would like to insert in the record a New York Times
article of September 22nd, which outlines some shyster doctor
down in Louisiana who was collecting hundreds of thousands of
dollars for getting kickbacks, The New York Times can say it
more eloquently than can I. But we have heard from Dr.
Kassirer, The New England Journal of Medicine, about financial
relationships between physicians, the pharmaceutical Biotech
Medical device industries that are adversely affecting the
quality of care. I understand the U.S. Department of Justice
has recently issued subpoenas in an investigation of orthopedic
device manufacturers' relationships with surgeons. It is
possible that at least some of these relationships include
illegal kickbacks. We should be considering ways to curb these
relationships, not propagate them. I believe that gainsharing
is not only misguided, it is very dangerous. The overall
direction of the program we may disagree with, but we should
reduce fraud Abuse. This idea of kickbacks--which is the only
thing that you can call gainsharing--is wrong. If there is
money to be saved, the hospitals should give it back to
Medicare. There is no reason on God's green Earth that they
should give it to the doctors. It should go to the taxpayers,
or back to Medicare to increase benefits for the beneficiaries.
I look forward to the witnesses trying to explain why they
should do otherwise.
Chairman JOHNSON. Thank you, Mr. Stark. I appreciate your
comments. Because certainly, those are the concerns that are
raised by what I consider to be the historic system. I don't
think it will meet the challenges of the 21st century, That is
what we need to work on. So, Mr. Morris, welcome.
STATEMENT OF LEWIS MORRIS, CHIEF COUNSEL TO THE INSPECTOR
GENERAL, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF HEALTH
AND HUMAN SERVICES
Mr. MORRIS. Good morning, Madam Chair, Members of the
Subcommittee. I am Lewis Morris, Chief Counsel at the U.S.
Department of Health and Human Services (HHS), Office of
Inspector General (OIG). I appreciate the opportunity to
discuss the OIG's views on gainsharing programs offered by
hospitals. While there is no fixed definition of
``gainsharing,'' the term has typically referred to an
arrangement in which a hospital gives physicians a share of any
reduction in the hospital's costs attributable to the
physicians' efforts. Although there are a number of different
types of gainsharing arrangements, one purpose of gainsharing
is to align physician incentives with those of the hospital,
and thereby hospital cost reductions. The OIG recognizes the
potential benefits of gainsharing arrangements That hospitals
have a legitimate interest in enlisting physicians in efforts
to reduce and eliminate unnecessary costs. Nonetheless, the OIG
has historically been very wary of gainsharing arrangements
because these arrangements implicate the fraud Abuse laws. With
respect to the civil monetary penalty (CMP) law, the major
concern is the impact of gainsharing on the quality of care
provided to Medicare Medicaid beneficiaries. The CMP is an
intentionally broad prohibition reflecting congressional
concern that under the prospective payment system hospitals
would have an economic incentive to pay physicians to discharge
patients too soon--quicker Sicker--or otherwise stint on
patient care.
Put simply, any hospital gainsharing plan that encourages
physicians through direct or indirect payments to reduce or
limit clinical services violates the law. Gainsharing
arrangements may also implicate the Federal anti-kickback
statute, if one of the purposes of the payments is to influence
referrals of Federal health care program business. For example,
gainsharing arrangements that encourage physicians to ``cherry
pick'' healthier patients for hospitals offering gainsharing,
while sending the sicker, more costly patients to hospitals not
offering gainsharing, implicates the anti-kickback statute.
Although the OIG has significant concerns about the risks posed
by gainsharing, we have issued seven favorable advisory
opinions on gainsharing arrangements. The cost-saving measures
in the improved arrangements generally fall into one of the
following categories: product standardizations, product
substitution, opening packaged items only as needed, or
limiting the use of certain supplies or devices. We understand
that the Committee is considering legislation that would allow
the CMS to conduct demonstration projects to test and evaluate
gainsharing methodologies. When considering the structure and
requirement of such projects, we would recommend the inclusion
of criteria that focuses on three aspects: accountability,
quality controls, and safeguards against payments for referral.
To promote accountability, the actions that will result in
cost-saving incentives should be clear and separately
identified. By ensuring transparency and full disclosure to
patients, the demonstration projects would foster
accountability, as well as allow for meaningful assessment of
the arrangement's potential effects on quality of care. Quality
controls are a second key safeguard. It is critical that the
cost-saving measures for which gainsharing payments are made do
not adversely affect patients. For example, establishing
baseline thresholds below which physicians do not receive any
money for savings may protect against inappropriate reductions
in service. A third category of safeguards is directed at
preventing gainsharing payments from being used to reward or
induce patient referrals in violation of the anti-kickback
statute. In this regard, the demonstration projects should
contain limitations on how the payments are calculated
distributed to physicians, including caps on the scope Duration
of arrangements. Finally, in establishing the authority for a
gainsharing demonstration, we recommend a careful review of any
waiver of fraud abuse authorities, to ensure that it is not
overly broad or undercuts the integrity of the project. In
conclusion, gainsharing arrangements may help reduce hospital
costs by aligning the economic interests of the hospital Its
physicians. However, gainsharing arrangements violate the civil
monetary penalty law and, improperly structured, pose
substantial risks under the Federal anti-kickback statute. The
OIG has approved several arrangements that have been structured
very carefully in order to minimize the risk to quality of care
The abuses associated with kickbacks. These arrangements
incorporate a number of safeguards to promote accountability,
quality, and protections against payment for referrals. We
recommend that any gainsharing demonstration project
incorporate these safeguards. Thank you.
[The prepared statement of Mr. Morris follows:]
Statement of Lewis Morris, Chief Counsel to the Inspector General,
Office of Inspector General, U.S. Department of Health and Human
Services
Good morning Madam Chairman and Members of the Subcommittee. I am
Lewis Morris, Chief Counsel at the U.S. Department of Health and Human
Services' Office of Inspector General (OIG). I appreciate the
opportunity to discuss OIG's views on gainsharing programs offered by
hospitals.
While gainsharing promotes hospital cost reductions by aligning
physician incentives with those of the hospital, these arrangements
also implicate the fraud and abuse laws. When evaluating the risks
posed by a gainsharing program, OIG looks for three types of
safeguards: measures that promote accountability, adequate quality
controls, and controls on payments that may change referral patterns.
Properly structured, gainsharing arrangements may offer opportunities
for hospitals to reduce costs without causing inappropriate reductions
in medical services or rewarding referrals of Federal health care
program patients. In a number of specific cases, OIG has concluded that
the arrangement presents a low risk of abuse and, therefore, exercised
its prosecutorial discretion not to impose sanctions. However, absent a
change in law, it is not currently possible for gainsharing
arrangements to be structured without implicating the fraud and abuse
laws.
My testimony begins with a brief overview of gainsharing and a
discussion of the Federal laws that are implicated by these types of
arrangements. I will then describe some useful considerations in
evaluating the risk of fraud and abuse posed by gainsharing
arrangements.
Background on Gainsharing Arrangements
While there is no fixed definition of gainsharing, the term has
typically referred to an arrangement in which a hospital gives
physicians a share of any reduction in the hospital's costs
attributable in part to the physicians' efforts. Gainsharing can take
several forms. Some arrangements are narrowly targeted, giving the
physician a financial incentive to reduce the use of specific medical
devices and supplies, to switch to specific products that are less
expensive, or to adopt specific clinical practices or protocols that
reduce costs. Other more problematic arrangements are not targeted at
utilization of specific supplies or specific clinical practices, but
instead offer the physician payments to reduce total average costs per
case below target amounts.
A purpose of gainsharing is to align physician incentives with
those of the hospital and thereby promote hospital cost reductions.
Under Medicare's prospective payment system, hospitals have a strong
incentive to reduce per patient admission costs, because they receive a
fixed amount for inpatient services without regard to actual costs.
Physicians, on the other hand, are reimbursed separately based upon a
fee schedule and may have little or no incentive to choose less costly
supplies or devices, or to support hospital efforts to negotiate lower
prices from suppliers of physician-chosen items and supplies, such as
stents and cardiac and prosthetic devices. In fact, there are reports
of medical device manufacturers having financial relationships with
some physicians that create conflicts of interest and potentially
reward the physician for loyalty to the device manufacturer at the
expense of the hospital and the health care system in general.
Gainsharing arrangements are an attempt to bridge the gap between
the hospital and physician payment systems. By giving the physician a
share of any reduction in the hospital's costs attributable to his or
her efforts, hospitals anticipate that the physician will practice more
cost effective medicine. For example, gainsharing programs that include
product standardization may provide a physician with an incentive to
choose clinically equivalent and medically appropriate devices that are
also less expensive. The hospital then shares with the physician a
portion of the hospital's savings resulting from the physician's use of
the standardized product.
Perspective on Gainsharing
OIG recognizes the potential benefits of gainsharing arrangements
and that hospitals have a legitimate interest in enlisting physicians
in efforts to reduce and eliminate unnecessary costs. Nonetheless, OIG
has historically been very wary of gainsharing arrangements, because
these arrangements implicate the Civil Monetary Penalty (CMP) and
Federal anti-kickback statutes. There may also be physician self-
referral or ``Stark'' law implications. However, the physician self-
referral issues are more appropriately addressed by the Centers for
Medicare & Medicaid Services (CMS) because the ``Stark'' law falls
under the purview of that agency.
With respect to the CMP, the major concern is the impact of
gainsharing on the quality of care provided to Medicare and Medicaid
beneficiaries. The CMP, sections 1128A(b)(1) and (b)(2) of the Social
Security Act, prohibits a hospital from knowingly making a payment
directly or indirectly to a physician as an inducement to reduce or
limit items or services furnished to Medicare or Medicaid beneficiaries
under a physician's direct care. The CMP is an intentionally broad
prohibition,reflecting Congressional concern that under the inpatient
prospective payment system hospitals would have an economic incentive
to pay physicians to discharge patients too soon--quicker and sicker--
or otherwise truncate patient care.
Any hospital gainsharing plan that encourages physicians, through
direct or indirect payments, to reduce or limit clinical services
violates the CMP. The payment need not be tied to an actual reduction
in care or to a reduction in medically necessary services, so long as
the hospital knows that the payment may influence the physician to
reduce services to his or her patients. There may be limited cost-
saving measures that do not have the potential to reduce services, such
as not opening certain supplies until needed. Even then, the
circumstances must be closely scrutinized to ensure that the delay in
opening the supplies does not have the potential to cause a reduction
in services.
Gainsharing arrangements may also implicate the Federal anti-
kickback statute, section 1128B(b) of the Social Security Act, if one
purpose of the cost-saving payments is to influence referrals of
Federal health care program business. Examples of gainsharing
arrangements that give rise to concerns under the anti-kickback statute
include, without limitation: an arrangement intended to encourage
physicians to ``cherry pick'' healthier patients for hospitals offering
gainsharing while sending the sicker, more costly patients to other
hospitals not offering gainsharing; an arrangement intended to foster
loyalty and attract more physician referrals to the hospital; or an
arrangement that allows a physician to continue for an extended period
of time to reap the benefits of previously-achieved savings or to
receive cost-saving payments unrelated to anything done by the
physician. Moreover, OIG is concerned that gainsharing arrangements may
lead to unfair competition among hospitals competing for physician-
generated business.
Guidance on Gainsharing Arrangements
OIG has expressed significant concerns about the risks posed by
gainsharing. In 1999, OIG issued a Special Advisory Bulletin on
Gainsharing outlining its analysis of arrangements call ``black box''
gainsharing. Black box gainsharing refers to arrangements that give
physicians money for overall cost-savings without knowing what specific
actions the physicians are taking to generate those savings. Under
these types of arrangements, there is little accountability,
insufficient safeguards against improper referral payments, and a lack
of objective performance measures to ensure that quality of care is not
adversely affected. For example, the drive for savings could motivate
the physician to discharge a patient prematurely or otherwise
inappropriately influence length of stay decisions, the very abuses
that led to the enactment of the CMP law.
OIG also has issued seven favorable advisory opinions on
gainsharing arrangements that are significantly different from the
black box arrangements discussed in the 1999 Special Advisory Bulletin.
The cost-saving measures in the approved arrangements generally fall
into one of the following categories: product standardization; product
substitution; opening packaged items only as needed; or limiting the
use of certain supplies or devices. While each advisory opinion is
limited to the specific facts presented by the requestor and cannot be
relied upon by any other party, the considerations identified in the
opinions are relevant when assessing gainsharing arrangements.
When evaluating a particular gainsharing program, OIG has generally
focused on three aspects: accountability; quality controls; and
safeguards against payments for referrals. With respect to
accountability, a transparent arrangement that clearly and separately
identifies the actions that will result in the cost-savings promotes
accountability in several ways. First, it allows for a meaningful,
objective assessment of the arrangement's potential effects on quality
of care. By contrast, black box gainsharing involves payments based on
overall cost-savings, without any way to identify what specific and
measurable actions the physician has taken to generate the cost-
savings. Second, full disclosure to the patient of his or her
physician's participation in the gainsharing program promotes
accountability. Finally, transparency permits scrutiny of the actions
of physicians that are attributable to gainsharing payments, thus
allowing the medical malpractice liability system to act as a further
safeguard against inappropriate care.
Quality controls are a second key aspect OIG looks at when
evaluating a gainsharing arrangement under the advisory opinion
process. It is critical that the cost-saving measures for which
gainsharing payments are made do not adversely affect patients.
Accordingly, OIG looks for features that protect quality care. For
example, OIG believes it is important to have a qualified, outside,
independent party perform a medical expert review of each cost-savings
measure to assess the potential impact on patient care. The hospitals
that obtained favorable advisory opinions established baseline
thresholds based upon historic utilization and national data to protect
against inappropriate reductions in services and to ensure that
physicians would not receive any money for savings that accrued beyond
the baseline thresholds. This structure helped protect against the
physicians receiving payments for savings resulting from limiting
necessary items and services. The arrangements OIG approved also
include ongoing monitoring of quality of care and compliance with the
gainsharing program. This oversight allows for the detection and
appropriate handling of any inappropriate variation in treatment or
uses of supplies or devices.
A third category of safeguards is directed at preventing
gainsharing payments from being used to reward or induce patient
referrals in violation of the anti-kickback statute. In this regard,
OIG focuses on how payments are calculated and distributed to the
physicians. Examples of safeguards that minimize the risk of abuse
include, but are not limited to: calculating savings based on the
hospital's actual acquisition costs; limiting participation to
physicians already on the hospital's medical staff (to prevent enticing
other physicians to change referral patterns); limiting the amount,
duration, and scope of the payments (there is less incentive for a
physician to switch referral patterns for short-term dollars); and
distributing the gainsharing profits on a per capita basis to all
physicians in a single-specialty group practice (reducing the incentive
for individual physicians to generate disproportionate cost-savings).
In short, there need to be safeguards that minimize the physician's
incentives to change referral patterns or cherry pick healthier
patients for the hospitals offering gainsharing payments, while
steering sicker, more costly patients to other facilities.
It must be stressed that any evaluation of the risks presented by a
gainsharing arrangement is highly fact specific. For example, with
respect to the product standardization cost-saving measures approved in
the favorable advisory opinions, OIG knew the specific vendors and
products at issue and were able to have a medical expert evaluate the
impact on quality of care. Furthermore, the physicians participating in
the gainsharing arrangements could make patient-by-patient
determinations of the appropriate supply or device, because the
hospital continued to stock the full range of supplies and devices, not
just those that would result in cost-saving payments. It is important
to note that OIG did not approve every cost-saving measure proposed by
the requestors of the opinions. As noted in the opinions, some measures
were rejected and withdrawn from the arrangements. As such, any broad
reading of the opinions should be done with caution. Different cost-
saving measures or different payment structures could have produced
different results.
Conclusion
Gainsharing arrangements may help reduce hospital costs by aligning
the economic interests of the hospital and its physicians. However,
gainsharing arrangements violate the CMP and, improperly structured,
pose substantial risk under the Federal anti-kickback statute. OIG has
approved several arrangements that had been structured very carefully
in order to minimize the risk to quality of care and the abuses
associated with kickbacks. These arrangements incorporated a number of
safeguards to promote accountability, quality, and protections against
payments for referrals.
Chairman JOHNSON. Thank you very much, Mr. Morris. Let me
just ask you a couple of things. You say in your testimony on
page 2 that any hospital gainsharing plan that encourages
physicians through direct or indirect payments to reduce or
limit clinical service violates CMP. To me, it is an example of
how backward-thinking our law is, because there is nothing in
this statute that talks about medical necessity or quality. I
mean, if the same device is on the market for about $1,000
differential in payment, why isn't that kind of limit a
reasonable limit? You see, to reduce or limit clinical services
violates the CMP: that is what we used to think. Now there is
such a plethora of services that medical necessity and quality
care really should be the drivers of service determination. So,
if we have a Federal law, it is kind of like defensive
medicine. If courts are going to require you to be exposed on
all fronts, well, then you are going to do every test under the
sun. If they are going to hold you accountable for appropriate
treatment of that disease, then you can look at the protocols
of your specialty organization and the specific information
about that patient, You can provide appropriate, high-quality
care, without doing inappropriate and unnecessary tests, which
we have seen a plethora of. So, doesn't it concern you that the
civil monetary penalty law, as well as the anti-kickback law,
really don't look at quality?
Mr. MORRIS. You are correct that the CMP law is very broad
Would sanction a hospital or a physician that receives payments
to reduce care, regardless of whether that care was medically
unnecessary or otherwise. The anti-kickback statute also
addresses incentives that could potentially distort physician
decision-making. The concern in both cases is that those
incentives to physicians could adversely affect care. The CMP,
however, does not distinguish between reduction of services
that are medically unnecessary from those that are medically
necessary.
Chairman JOHNSON. Certainly, we are going to hear later
from the next panel from a company that you actually have
worked quite a bit with, I understand, Joane Goodroe's
company--``Something Solutions,'' I have kind of forgotten its
name. But anyway, would you say that the technology of
measurement has advanced in recent years? Could we have
benchmarked physicians 10 years ago the way we can benchmark
them now? Could we have tracked specific actions of physicians
that committed to gainsharing arrangements 10 years ago the way
we could now?
Mr. MORRIS. I think I would defer to Ms. Goodroe on that
question. I would tell you that in the advisory opinions we
have issued we relied heavily on the ability of both experts
within HHS as well as the quality measures that the particular
arrangements provided, to give us those sorts of assurances. I
think, frankly, that much of this would turn on the specific
arrangement, the particular sorts of services under the
gainsharing arrangement, and the measures that would be
available. But I think Ms. Goodroe could probably tell you more
about what specific measures are available.
Chairman JOHNSON. I did want to make that point early; that
you really couldn't have overseen a system like this in the old
days. Now that we have learned so much about chronic disease
management, we have also learned a lot about measuring, a lot
about oversight, that we didn't know even five years ago. You
do have to have that kind of system capability or, you are
right, you really expose the system to those who would most
criminally manipulate it. Mr. Stark.
Mr. STARK. Thank you. Mr. Morris, in your testimony you
used the word ``share.'' As you think of that ``share,'' you
mean sharing money, I suspect.
Mr. MORRIS. In the context of the gainsharing arrangement?
Mr. STARK. Yes.
Mr. MORRIS. Yes, it would be sharing some of the proceeds
that result from savings.
Mr. STARK. Could those not be synonymous with--the
financial words, I suppose, would be ``commission,'' ``profit
sharing,'' even ``kickback'' if one wanted to use the
vernacular. All of those things similar; would they not?
Mr. MORRIS. Yes, they would. I think we always have a
concern when sharing, commissions, or call them what you will,
occurs between anyone who has the ability to control referrals
and anyone who would benefit from those referrals.
Mr. STARK. Now, you mentioned just a minute or two ago that
this idea of paying physicians might, I think you said, distort
the doctors' decision-making process. You are a lawyer?
Mr. MORRIS. Yes, sir.
Mr. STARK. If a doctor--I am not, but I wanted to think
this through, and perhaps you could help me. But if a doctor
were routinely taking money for using a particular device or a
particular drug or a particular procedure--say, earlier
discharge--the patient was subsequently harmed, wouldn't that
information to be detrimental to the physician in a malpractice
case, in your opinion as a lawyer?
Mr. MORRIS. If I understand the question, if physicians
inappropriately changed practice as a result of gainsharing or
commissions or kickbacks, that resulted in harm, that would
seem to be highly relevant to both the government's law
enforcement efforts--because we would pursue that as a
kickback--Also, certainly in the private sector, as a
malpractice variable.
Mr. STARK. Okay. Now, let me tell you what the VA does. The
only reason I want to go through this is just to see, off the
top of your head, whether you think there would be any problems
with current law if we assumed for the minute that the VA was a
state hospital association, or a single hospital or a chain.
They bring together the clinicians, the docs--I suppose, maybe
some other people, but the doctors principally who are involved
in a procedure. The VA hospital people say, ``Look, we would
like to standardize. We would like to use one drug or piece of
equipment, or whatever. Doctors, as a group, can you all agree
on one item that we would agree is the right one to use?``
Guess what? Generally, they can. So, they usually get somewhere
between one and three items that are acceptable. They can
define these in language so you could measure whether or not a
piece of equipment or a drug met the standards. Then they go
out to the manufacturers and say, ``Do any of you make or
provide equipment that meets these standards?`` The ones that
do are then allowed to submit a bid. They pick the lowest
price, and that is how they proceed to buy those. I am not
sure. I was talking with the VA; I forgot to ask whether
somebody who wasn't the lowest price could also sell at that
lower price that was established. Now, if that were set up,
obviously, it would be a good thing for CMS to do that, and
that would solve all of the problems. That would get us better
results than this. But if a hospital did that, let's say, a
large hospital, do you see anything in that kind of a procedure
that would be considered a kickback or violating any current
laws that you can think of?
Mr. MORRIS. Under the hypothetical you have offered, there
would not be any money or remuneration going back to the
doctors who participated both in that decision and who then
conformed their clinical practice. There would not likely be a
kickback, based on the scenario as you have described it.
Although we would need to know an awful lot about the
particular docs.
Mr. STARK. The doctors would just be helping the hospital
save some money, They would be practicing good medicine.
Mr. MORRIS. I think a distinction--I don't profess to have
a full understanding of how the VA system works, but my
understanding is most of the physicians working in the VA
system are employees of the VA; Therefore, under the direction
and control of the hospital.
Mr. STARK. No. I mean, physicians are allowed to practice
medicine in their own best judgment, so that they are no more
under ``the control.'' I suppose, if they were lousy and goofed
up or weren't productive, they could be fired. Any more than a
lawyer who works for a salary would give an opinion that was
any less valid than a lawyer who was working by the hour. I
mean, they have a code of ethics--even as government employees.
Mr. MORRIS. Well, as the New York Times article you
referenced at the beginning indicates, one of the challenges
that faces private-sector hospitals is having physicians order
services or devices consistent with the procurement interests
of the hospital. Device manufacturers can use various
incentives.
Mr. STARK. I suspect we would have to do that. I think you
are right. I don't think they would have a lot of trouble. But
there is always the CMS--could not follow a procedure like
this. Then that would solve the problem. Thank you very much.
Mr. MORRIS. Yes, sir.
Mr. STARK. Mr. McCrery.
Mr. MCCRERY. I will be very short, Madam Chair. Mr. Morris,
you are from the Inspector General's Office with HHS; is that
right?
Mr. MORRIS. Yes, sir.
Mr. MCCRERY. So, your focus is on enforcement of current
laws, with respect to kickbacks and all those kinds of
considerations; is that right?
Mr. MORRIS. That is correct.
Mr. MCCRERY. So, you are not here in a policy position with
HHS to comment on potential changes to the law which might vary
the scope of your examinations in the Inspector General's
Office, right?
Mr. MORRIS. That is correct.
Mr. MCCRERY. But even working with the current set of laws
that are in place, your office has found some of these kinds of
arrangements to be acceptable under the laws we have right now;
is that right?
Mr. MORRIS. We have found the arrangements we looked at to,
in each case, implicate the civil monetary penalty law. They
violate the law by providing incentives to physicians to reduce
care. They also implicate the kickback statute. But because our
advisory opinion authority allows us in the specific instance
to indicate that we will exercise prosecutorial discretion and
not pursue a particular arrangement, provided there are
adequate safeguards, in these instances we found that there
were specific safeguards that would warrant us not pursuing a
sanction or other action against these particular requesters.
Mr. MCCRERY. Okay. Thank you. Madam Chair, it might be
interesting to have HHS testify at another time as to any ideas
they have for curtailing the increases in costs that we are
seeing in the system. Obviously, we are looking at a very
dangerous, I think, result of current law at the end of this
year, when physicians' payments are going to be reduced
dramatically because of the current law. If we don't find some
way to curtail the increase in these costs, I am afraid we are
going to be stuck with some of the old ways of living within
our means; which is just to cut reimbursement rates. So, I am
hopeful that HHS will bring us some positive ideas as to how to
accomplish our task.
Chairman JOHNSON. Thank you. I hope the Inspector General
will work with us, from his experience in this regard, because
we are just in a different world. The plethora of possibilities
is just simply too great for the law not to notice the
difference between necessary and unnecessary, or appropriate
Inappropriate, care. Mr. Ramstad.
Mr. RAMSTAD. Thank you, Madam Chair. Mr. Morris, a study
published in yesterday's New England Journal of Medicine
concluded that innovative new implantable cardiac
defibrillators represent good value to the Medicare Program. I
could have offered that voluntarily, but the empirical data
don't lie. It was, as I said, a study released yesterday. This
study's authors, as I read the article, noted that a key
contributor to improved outcomes for patients, including heart
patients, is the flexibility--I am quoting now from the study,
``A key contributor to improved outcomes is the flexibility to
change systems of care to incorporate new knowledge into
practice.'' My question is this: How specifically would
gainsharing recognize and reward important new medical
breakthroughs, new medical knowledge such as the technology
that led to the development of implantable defibrillators?
Mr. MORRIS. I believe Ms. Goodroe could give you more
specifics. I think the general answer would be this.
Gainsharing, if properly structured, would provide for
sufficient quality controls and accountability so that if
physicians received incentives to try new devices or take into
account savings that would result from certain cost-effective
measures, we could both ensure that patient care was secured
and cost savings were realized.
Mr. RAMSTAD. I am sure you are aware, Mr. Morris, speaking
of empirical data, of the studies in the field that show
overall, if you look at the macro picture, health care, medical
technology saves dollars for the system. There is ample
research to support that assertion that conclusion. My concern
is that we are going to provide an incentive for doctors and
providers to do it in the cheap, to coin a phrase, to avoid the
use of life-saving, life-enhancing medical technology--which at
the time for that patient might cost more, but, if you look at
that patient's longer view, could save his or her life or
enhance their lifestyle, enhance their very life--it is, again
looking at the macro picture, going to save the system money.
So, don't you share that concern that perhaps we are going to
provide incentive for providers to do it on the cheap?
Mr. MORRIS. That is one of the concerns that we have, It
was taken into account when we looked at these particular
arrangements. As I mentioned, one of the reasons that these
particular arrangements were approved was because we felt that
there were adequate safeguards to ensure quality. For example,
in the arrangements we looked at, the physicians, although they
would receive incentives if they used some of the standardized
cardiac devices, were all still able to get any device they
wanted to use. So, their ability to provide the best device for
a particular patient was preserved.
Mr. RAMSTAD. What do you base that on, that the access has
not been thwarted?
Mr. MORRIS. Because as part of analyzing these particular
arrangements, the requesters laid out in great detail the
specific measures and both the accountability and quality
control measures that were in place. They certified that those
measures will be in place. We also relied on clinicians,
experts within the department, to review all of the safeguards
to ensure that patient care would not be compromised. So, we
basically relied on both experts as well as the representations
of the requester.
Mr. RAMSTAD. Well, you know, they always say the proof is
in the pudding. I don't think we know enough, the experience of
gainsharing is not that long in terms of time span. But I am
really concerned about access and quality, I think we need to
keep those. I am glad you share those concerns as we work
together on this legislation.
Mr. MORRIS. Thank you.
Mr. RAMSTAD. Thank you. Yield back, Madam Chair.
Chairman JOHNSON. Thank you very much. Mr. Lewis.
Mr. LEWIS. Thank you very much, Madam Chair. Thank you, Mr.
Morris, for being here. Madam Chair, before I ask my questions,
I would just like to say that I am very concerned about the
mistake in the Medicare new handbooks that have been sent out
to seniors. The mistake is in the table that helps
beneficiaries compare plans. The mistake is in the column that
tells beneficiaries whether they will have to pay extra
premiums. So, beneficiaries choose a plan, think there are no
extra costs; when in fact, they will be hit with extra
premiums. I understand that CMS does not plan to correct this
handbook. Instead of correcting the handbook and sending out
new ones, CMS suggests that people can go to the Medicare
website. Well, most seniors do not use computers. The CMS also
says you can call the organization offering the drug plan, or
call CMS. This prescription drug plan is already complicated
enough. Seniors should not have the burden of making sure the
information is accurate. People need to make informed choices.
If the seniors see this information in print, they should be
able to depend on it. The CMS should reprint the handbook.
Otherwise, CMS should cover the costs of additional premiums
for people who are surprised by additional costs. Madam Chair,
I renew again my call for oversight hearings for Medicare part
B. Now, Mr. Morris, what are the potential dangers for patients
under gainsharing arrangements? Do you support codifying the
safeguards that were in the OIG advisory opinion? If not, why
not?
Mr. MORRIS. The potential risks to patients posed by poorly
designed gainsharing arrangements would include giving
physicians incentives to reduce the length of stay, get the
patient out of the hospital quicker and sicker; to skimp on
devices or supplies that would be necessary to care for the
patient; or otherwise cut costs in such a way that would
compromise care. The particular arrangements that we looked at,
and the many cost-saving measures that would be recognized as
part of a gainsharing program, were carefully scrutinized by
us, experts within the department, as well as outside
consultants. Because each of those arrangements is very fact
determinative, and there were many of the cost-saving measures
which we did not find sufficiently safeguarded for quality, I
think it would be dangerous to take any of the advisory
opinions and codify a gainsharing standard based on those. The
approach that we have recommended in our testimony is to take
into account three general principles--accountability, quality
controls, and measures to ensure kickbacks are not in play--and
use those principles to oversee a demonstration project and the
arrangements that would come out of it.
Mr. LEWIS. When the OIG issued its advisory opinion on the
six gainsharing arrangements earlier this year, what steps did
you take to ensure that incentive was not included in
arrangements to encourage physicians to reduce care to Medicare
patients?
Mr. MORRIS. What incentives were in place?
Mr. LEWIS. Yes.
Mr. MORRIS. There are a number of incentives we took into
account. There were caps on the amount of money that a
physician could realize. There were baselines established, so
that a physician could not reduce the level of services he or
she was providing based on historic baselines. There were
quality oversight measurements. There is an ongoing monitoring
of the arrangement itself to ensure that quality is preserved.
So, there is a wide range of safeguards, both in terms of
specific caps and ceilings, structural safeguards, as well as
ongoing oversight. We believe that those in combination
adequately protected the interests of the patient as well as
the program.
Mr. LEWIS. Thank you. Mr. Morris, why do you limit approval
of a gainsharing program to just 1 year? What was the
rationale?
Mr. MORRIS. The rationale was that we did not want the
payout coming from gainsharing savings to be spread out over
multiple years, because it could implicate remuneration for
kickbacks. We wanted to have a fairly tight, focused return to
the physician for specific acts done within a tight timeframe.
We thought a 1-year timeframe was appropriate.
Mr. LEWIS. You think it would work?
Mr. MORRIS. Well, I think we will be interested to see what
the results are. We are going to be watching this area very
carefully, to see whether gainsharing actually does
successfully align the incentives of hospitals and physicians
without compromising quality of care.
Mr. LEWIS. Thank you very much. Madam Chair, yield back.
Chairman JOHNSON. Thank you, Mr. Lewis. Mr. English. Oh,
sorry. Mr. Johnson.
Mr. JOHNSON. Mr. Morris, do you believe in gainsharing that
doctors will place financial incentives above patient care if
given the opportunity?
Mr. MORRIS. I can't say as to any particular arrangement. I
will say that our experience has been, as a law enforcement
agency, that physicians respond to economic incentives. We have
seen, both in their opportunity to invest in imaging centers
and laboratories and the like, that if they can enhance their
financial position by making referrals to a particular entity,
they will do so. We have also seen at times that that results
in both inappropriate costs to our program also can implicate
quality of care. So, I think the short answer would be I think
that some physicians may inappropriately allow financial
incentives to affect their medical judgment.
Mr. JOHNSON. Depends on the guy, is what you are saying.
Mr. MORRIS. Or lady, yes.
Mr. JOHNSON. Or lady. You know, since 1999, you only
approved seven arrangements for gainsharing. It seems like it
is exceedingly difficult to implement a meaningful program.
Could you comment?
Mr. MORRIS. I think that is a fair perception. We have
worked very hard to ensure that any gainsharing arrangement has
sufficient controls to assure accountability, quality controls,
Inhibit kickbacks or referrals. We have scrutinized each one
very carefully. A lot of the arrangements we have looked at did
not pass the bar and were not deemed acceptable.
Mr. JOHNSON. Well, you must have some criteria set up. What
is it? Let me ask you this question. If you do approve a
gainsharing operation in some hospitals, do they continue to
have access to all of, let's say, the medical devices, for
example? Or do they go to one company and try to cut costs?
Have you run into that?
Mr. MORRIS. In the arrangements that we approved,
physicians continued to have access and were able to use
devices that they felt, on a patient-by-patient basis, were in
the best interests of the patient. They would realize the
gainsharing benefits if they picked one of the products which
had been standardized. In the arrangements we looked at, there
was more than one vendor who was providing the devices that
were standardized. But even so, physicians continue to have the
ability to select particular devices or equipment that they
felt was in the best interests----
Mr. JOHNSON. But they wouldn't participate in gainsharing
if they did that, according to you.
Mr. MORRIS. They would not realize the gainsharing benefits
from that particular decision. But most of these gainsharing
arrangements had multiple--19, 20 different cost-saving
measures. If they conformed their clinical practice to those
measures, they would realize the benefit of gainsharing as to
those measures. So, for example, they might choose not to pick
a particular device, although it was part of the list of
standardized products; but they might agree to use other cost-
saving measures that were part of the gainsharing arrangement.
Mr. JOHNSON. I can't see much difference in that and
specialty hospitals, for example, in which the docs get
together and try to form their own gainsharing, if you will. Do
you consider that a difference?
Mr. MORRIS. Well, specialty hospitals are different. I
mean, a gainsharing arrangement exists between a hospital and
physicians who are not its owners, generally, and for whom it
is trying to align their interests. Obviously, if the
physicians own the hospital you have a very different matrix.
Mr. JOHNSON. Okay. Thank you very much. Thank you, Madam
Chairman.
Chairman JOHNSON. Thank you. Mr. Camp.
Mr. CAMP. Thank you very much. I, too, am interested in
these pilot programs that OIG implemented. I just wonder if you
could elaborate a little bit more on why OIG selected the sites
that it did.
Mr. MORRIS. Oh, let me clarify. We did not implement any
pilot projects. The Inspector General's Office does not engage
in any programmatic functions. What we did was, consistent with
our advisory opinion authority, tell entitles that were setting
up arrangements whether we felt there were adequate safeguards
to warrant not pursuing our enforcement authorities. So, we did
not pick the arrangements, and we did not pick the entities
that came in and requested advisory opinions from us.
Mr. CAMP. Thank you. Do you think there are adequate
safeguards for further implementation of the gainsharing
agreements for a wider-scale implementation or a larger-scale
implementation of these agreements?
Mr. MORRIS. It would really depend on the specific facts of
the specific arrangement.
Mr. CAMP. Are you satisfied, then, with the safeguards that
were in place for those pilot programs that did occur?
Mr. MORRIS. For the seven arrangements that we reviewed, we
believe there were adequate safeguards to ensure
accountability, quality control, and protections against
kickbacks. We articulated those in the advisory opinions. So,
as to those specific arrangements, we indicated that we would
not use our enforcement authorities.
Mr. CAMP. Does that allow you to make any judgment on a
broader or a larger-scale implementation of the gainsharing
programs in other places? I mean, you are satisfied with what
occurred? Do you think that protections are in place? Are they
adequate for larger implementations of the gainsharing
agreements?
Mr. MORRIS. It would depend on the agreement. It is, you
know, the old adage: if you have seen one gainsharing
agreement, you have seen one gainsharing agreement. It would
have to be a case-specific analysis. If there was to be a
demonstration whereby there were a larger number of gainsharing
arrangements underway, we would urge that there be a range of
safeguards put in place so that all of those arrangements
conform to the three touchstones that we have touched upon:
quality, insurance against referrals, and accountability.
Mr. CAMP. Some have said that these agreements could lead
to a lessening of the quality of care. What do you think about
that?
Mr. MORRIS. I think that is a real risk. I think it is one
of the reasons why it is so important that there be a great
number of safeguards and ongoing monitoring, to assure that
patient care is not compromised through gainsharing. We do
believe, based at least on the arrangements that we have
reviewed and approved of, that it is possible, at least in the
context of those arrangements, to structure a gainsharing
arrangement so that patient care and the interests of the
program are safeguarded. But vigilance is critical.
Mr. CAMP. So, if there were a broader implementation of
these agreements, you see that that could happen if the proper
safeguards were put in place on a case-by-case basis?
Mr. MORRIS. On a case-by-case basis.
Mr. CAMP. All right. Thank you. Thank you.
Chairman JOHNSON. You know, I am stunned at your comments.
I want my colleagues on the Committee to think about this. You
are saying only on a case-by-case basis, under a law that
doesn't discriminate between medical necessity and non-medical
necessity. Now, we have hip devices that are plastic, that are
$3,000, that are good for 3 years. We have titanium hips that
are good for 40 years, that are $8,000. Now, should a health
care system that is getting increasingly unaffordable to the
people of America have no ability to look at appropriateness of
when to use the plastic and when to use titanium? Is that
really what you are saying; that on their own they should have
no ability to do this; that only if the government gets in
there and approves this relationship, that only then should
they have that ability? Because remember, the CMP law doesn't
allow any consideration for anything other than access. Device
numbers. They are all lined up on the shelf; you have to have
access to every one. Now, are we nuts?
Mr. MORRIS. I won't answer the second question, for lack of
competence.
[Laughter.]
Chairman JOHNSON. Okay. Let me ask you--I do know the
answer to that one. Let me ask you one other thing. The way you
describe this, are you aware that hospitals and device
manufacturers currently--currently--negotiate agreements that
involve price and volume usage, just like the pharmaceutical
companies do?
Mr. MORRIS. Yes, I am aware of that.
Chairman JOHNSON. Do you oversee those contracts?
Mr. MORRIS. No.
Chairman JOHNSON. No. You don't know in how many hospitals
people have access. I have heard that there are some community
hospitals that provide one device. I think our gainsharing bill
will guarantee a far better selection than that, and a far more
doctor-centered, doctor-controlled situation than that. I also
know that there are contracts that are based on getting 70, 80
percent of your business. Now, you are not looking at that. The
government either can't see it, or doesn't want to see it. We
are acting as if the gainsharing agreements are in a vacuum.
The world is changing. If you don't think the big guys with big
devices aren't negotiating in a way that keeps little guys out,
you aren't noticing.
Mr. MORRIS. The distinction I think I would make is that we
certainly are very much in favor of volume discounts; provided
that they are passed on to our program so we realize savings on
behalf of the Medicare program. The concern that I think
gainsharing raises is that if a physician shares in those
savings, agrees to change his or her clinical practice so as to
only use the less expensive hip, to use your analogy, and
realizes profit or part of the revenues of it, and it doesn't
go back to the program, the risk is that that may--may--affect
his or her medical judgment. So, it is not a question of being
in favor of discounts being passed on to our program. We
strongly favor that. The question is ensuring that the
decisions are made in a way that ensures quality of care.
Chairman JOHNSON. But we are not overseeing that now. In a
transparent gainsharing agreement we will actually know much
more about that. There will be measurements; there will be
parameters. What is going on now is happening, and we do not
know how much it is happening, and we can't see it if it does
happen. The money isn't going back to Medicare. It is keeping
the hospital alive, and there is some value in that. But we
don't know the interaction of the savings there with
subsidizing hospital services that we don't recognize in
Medicare and don't pay for, that Medicaid doesn't pay for, and
the private sector no longer subsidizes. So, it is not quite as
easy as: the money all has to flow back to Medicare. So, I
don't want to put you in an awkward position, but I just want
to point out that I agree with everything you said about
gainsharing and how important it is to have a structure over it
so that we can measure and hold people accountable. But I don't
want the Members of the Committee to think that we have this
structure in place now. Because I think gainsharing will give
us more ability to assure that hospital care is physician-
patient-centered and accountable than we are seeing develop
now, whether it is in the boutique hospital sector, the
specialty hospital sector, or whether it is in some of the
arrangements that the market of course is very ingenious at
developing. So, I will conclude the comments of the panel,
then, because we want to hear the other panel, and we are under
a time constraint. Thank you very much, Mr. Morris, for your
good answers to the questions and for your excellent testimony.
We look forward to working with you.
Mr. MORRIS. Thank you very much.
Chairman JOHNSON. As the next panel assembles at the dais,
let me recognize Mr. Ferguson of New Jersey to introduce one of
the participants. Also, let me recognize Mr. Gingrey, who is a
Member of Congress but also a physician, and has taken a great
interest in the work of this Subcommittee because he
understands the nature of what we are doing and its importance
to the evolution of the medical community. We thank you for
being here. Mr. Ramstad, did you wish to speak?
Mr. RAMSTAD. Yes. Madam Chair, I would also like the
privilege of introducing one of the witnesses from my district.
Chairman JOHNSON. Well, why don't you start, Mr. Ramstad?
Sorry, I was unaware of that.
Mr. RAMSTAD. Not at all. Madam Chair, Members of the
Committee, thank you for the privilege of introducing an
outstanding chief executive officer, a great corporate citizen,
and a personal friend, Martin Emerson, who is Chief Executive
Officer of American Medical Systems in Minnetonka Minnesota, my
hometown. So, it is great to have you here, Marty, as well as
the other witnesses. Thank you, Madam, Chair.
Chairman JOHNSON. Mr. Ferguson.
Mr. FERGUSON. Thank you, Madam Chair. I very much
appreciate your graciousness in allowing me to introduce a
friend and constituent; I certainly appreciate your interest in
this gainsharing issue. I serve as Vice Chair of the Health
Subcommittee on the Energy Commerce Committee, and have a great
deal of admiration for your work and the work of this
Subcommittee. I also appreciate the fact that you have come to
New Jersey to review and get a better understanding for our New
Jersey demonstration project that is the topic of this
conversation today. I am particularly pleased to be able to
support something as creative as the New Jersey Physician
Hospital Demonstration Project, and am very pleased to be able
to welcome a friend Constituent, Gary Carter, who is President
and CEO of the New Jersey Hospital Association (NJHA). Gary has
been advocating for hospitals and improving health care for
many years; the last 11 spent leading the health care advocacy
group, the NJHA. Prior to coming to my home state of New
Jersey, Gary was the President of the New Hampshire Hospital
Association for 8 years. Before coming east, he had a number of
executive management posts with Intermountain Health Care,
which is a system of hospitals in Utah, Idaho, and wyoming, and
Nevada. He is known as an association leader who builds
consensus, who fosters cooperation. He is certainly dedicated
to working in New Jersey to improve hospital-physician
relations and broader advocacy on behalf of the NJHA's member
hospitals; Certainly, I think, will have some great insights
for your Subcommittee with regard to gainsharing. So, thank you
very much.
Chairman JOHNSON. Thank you for that nice introduction. I
would say, I say this to all of you, it was a very important
experience for us to go sit with the New Jersey people. I am
going to invite all Members of the Subcommittee to repeat that
experience. Because we got to talk to doctors; we got some
sense of how the relationships changed as they got into this,
and what it means to move to a patient-centered hospital
system, which is not exactly what I believe we have now. So, I
agree with you: he is a consensus builder. We are delighted to
have him here. I consider his testimony, his contribution
today, very crucial to our ability to move forward. I do think
all Members need to do that. I think we need to go to other
sites where people are doing creative things, and we need to
understand how the current law is a barrier, actually, to
deeper, more powerful relationships within the caring
community. That much said, Ms. Goodroe?
STATEMENT OF JOANE GOODROE, PRESIDENT CHIEF EXECUTIVE OFFICER,
GOODROE HEALTHCARE SOLUTIONS, NORCROSS, GEORGIA
Ms. GOODROE. Chairman Johnson Distinguished Members of the
Committee, I want to thank you for the opportunity to appear
before you today to share my thoughts on the topic of
gainsharing. My name is Joane Goodroe. I received a bachelor of
science in nursing and a masters in business administration,
and have extensive clinical and administrative background in
hospitals.
Chairman JOHNSON. Excuse me, Ms. Goodroe. I did forget to
mention that the timer gives you 5 minutes. This goes for
everybody. Your whole statement will be included in the record,
but you will have only 5 minutes. Now, the bells have rung for
two votes: a 15-minute vote, followed by a 5-minute vote. I
have read all the testimony. While I regret that I won't be
here to hear your statement, I am going to leave immediately.
Then I will come back Chair the hearing up until the point I
have to go for the second vote. I would urge some of the
members of the panel to go now, and come back and question, so
that we can keep the panel moving through these two votes. So,
know that I have read your testimony, Ms. Goodroe and Mr.
Emerson, I will be back as promptly as possible. Meanwhile, Mr.
McCrery will take the chair.
Mr. MCCRERY. [Presiding.] Please continue, Ms. Goodroe.
Ms. GOODROE. I am currently the CEO of Goodroe Healthcare
Solutions, which was acquired this week by VHA, Inc. Goodroe
Healthcare is the company that developed the gainsharing model
which has received seven separate approvals from the OIG. These
approvals were obtained only after our gainsharing methodology
was highly scrutinized to assure that any decrease in cost
would not negatively impact patients. As part of the
gainsharing plan, there are safeguards to protect the patient,
including that any technology a physician requests must be
available. My first experience with gainsharing started in
1989, when I was an administrator at Saint Joseph's Hospital of
Atlanta, which was one of the hospitals that worked with CMS on
the Medicare Coronary Artery Bypass Demonstration Project. In
this well-studied project, we created a gainsharing model that
aligned incentives to decrease costs while maintaining quality.
As you consider legislation, I want to comment on three
important aspects of gainsharing. The first: Gainsharing is
important because it is the physicians who are the ones who can
control costs. This has been well documented, and once again
validated in the February 2005 Boston University School of
Public Health study that was recently released. The summary was
simple: Health care costs are soaring unsustainably.
Their solution to the problem is economic alignment of
physicians with these thoughts: physicians control 87 percent
of spending; very important, physicians know where the waste
exists; also, it is the individual doctor's decision that is
the best way to assure that patient care is not compromised
when saving money. The physician is the one with the ultimate
responsibility of the patient. It is the physician who takes
personal risk when caring for patients. It is the physician who
has the knowledge to decrease costs without compromising
quality. In our current system, the hospital pays for the
products Services that are utilized, even though it is the
physician who determines how to use them. Most people do not
realize that each physician delivers care to the same type of
patient in a unique manner. For example, in any procedure
performed, each physician will have a preference card outlining
the way he wants the procedure done. You can use the
comparisons of a chef or an artist who wants to create the best
possible product. Each takes pride in their individual process,
because physicians believe they are delivering the best care to
their patients.
Yet each of these practices have not been studied to assure
quality care to the patients. In gainsharing, cost-saving
practices are analyzed before implementation, with safeguards
in place to protect the patient. The second point: Gainsharing
targets the waste of resources in the health care system, in
order to improve quality. Physicians practicing with a unique
preference is a waste of resources. More importantly, there is
no way that so many different methodologies result in the best
quality for patients. This diversity in patient practice begins
in training. Physicians may have three different professors who
teach them the same procedure three different ways. Each
physician then takes all of these practices, and develops an
additional methodology specific to their practice. There are as
many ways to perform a procedure in this country as there are
physicians performing that procedure. For the physician there
has been no incentive for them to change their practice. Matter
of fact, changing a way a physician practices is hard work, and
requires a substantial amount of effort. From the physician's
point of view, why take the risk of changing the way you
perform a procedure, if you feel good about the outcomes?
It is important to understand that no other industry could
remain competitive on quality and cost without key engineers--
which are the physicians--determining how to maintain quality
while decreasing costs. Physicians reengineering the care of
patients is the best way to save billions of dollars, while
assuring that quality is maintained. The final point: There are
many misconceptions of gainsharing; most importantly, the idea
that quality of patient care may be harmed. In order for
gainsharing programs to work, you must make sure that quality
of care is maintained by looking at quality, predetermining
changes, and measuring data. If you look at 50 physicians
performing the same procedure, you will see 50 different ways
the procedure is formed. Gainsharing is a process where the
physicians study how colleagues perform their procedures and
determine the best processes to adopt in order to increase
efficiency while assuring quality. In addition to a body of
knowledge being created where physicians will constantly invent
more efficient ways of delivering care to their patients, the
best way to think of this is to look at how other industries
operate. They look at not just quality, but also cost. That is
what we must do in health care today, because we do not have
the dollars to continue to just think that quality is the only
thing that will be delivered to these patients. Quality will be
withheld from patients if we can't afford to give patients
quality. Thank you for your time.
[The prepared statement of Ms. Goodroe follows:]
Statement of Joane Goodroe, President and Chief Executive Officer,
Goodroe Healthcare Solutions, Norcross, Georgia
Chairman Johnson and distinguished members of the Committee, I want
to thank you for the opportunity to appear before you today to share my
thoughts on the topic of gainsharing. My name is Joane Goodroe. I
received a bachelor of science in nursing and a masters in business
administration and have an extensive clinical and administrative
background.
I am currently CEO of Goodroe Healthcare Solutions, LLC, the
company that developed the gainsharing model which has received seven
separate approvals from the Office of Inspector General. These
approvals were obtained only after our gainsharing methodology was
highly scrutinized to assure that any decrease in cost would not
negatively impact quality. As part of the gainsharing plan, there are
safeguards to protect the patient including that any technology a
physician requests must be made available.
My first experience with gainsharing started in 1989, when I was an
administrator at Saint Joseph's Hospital of Atlanta, one of the
hospitals that worked with CMS on the Medicare Coronary Artery Bypass
Demonstration Project. In this well studied project, we created a
gainsharing model that aligned incentives to decrease costs while
maintaining quality.
As you consider legislation, I would like to comment on three
important aspects of gainsharing.
One: Gainsharing is important because the physicians are the ones who
can control costs.
This has been documented many times and again validated in the
February 2005, Boston University School of Public Health study on
Health Care Costs from 2000-2005. The summary was simple: Healthcare
costs are soaring unsustainably. Their solution to the problem is
economic alignment of physicians with these thoughts.
Physicians control 87% of spending.
Physicians know where the waste exists.
An individual doctor's decision is the best way to assure
that patient care is not compromised when saving money.
The physician is the one with the ultimate responsibility for the
patient. It is the physician who takes personal risk when caring for
patients, and it is the physician who has the knowledge to decrease
costs without compromising quality.
In our current system, the hospital pays for the products and
services that are utilized even though it is the physician who
determines the products and services for each patient. Most people do
not realize that each physician delivers care to the same type of
patient in a unique manner. For example, in any procedure performed,
each physician will have a preference card outlining the way he wants
the procedure done. You can use the comparisons of a ``chef'' or an
``artist'' who wants to create the best possible product. Each takes
pride in their individual process because physicians believe they are
delivering the best care to their patients. Yet, each of these
practices has not been studied to assure quality care for patients. In
gainsharing, cost saving practices are analyzed before implementation
with safeguards in place to protect the patient.
Two: Gainsharing targets the ``waste'' of resources in the healthcare
system in order to improve quality.
Physicians practicing with a unique preference is a waste of
resources and more importantly there is no way that so many different
methodologies result in the best quality for patients. This diversity
in physician practice begins in training. Physicians may have three
different professors who teach them to perform the same procedure three
different ways. Each physician then takes all of these practices and
develops an additional methodology specific for their practice.
There are as many ways to perform a procedure in this country as
there are physicians performing a procedure. For the physicians, there
has been no incentive for them to change their practices.
Matter of fact, changing the way a physician practices is hard work
and requires a substantial amount of effort. From the physician's point
of view, ``why take the risk of changing the way you perform a
procedure if you feel good about the outcomes?''
It is important to understand that no other industry could remain
competitive on quality and cost without the key ``engineers'' (this
would be the physicians) determining how to maintain quality while
decreasing overall costs. Physicians reengineering the care of patients
is the best way to save billions of dollars while assuring that quality
is maintained.
Three: There are many misconceptions of gainsharing, most importantly
the idea that quality of patient care may be harmed.
In order for gainsharing programs to work, there must be careful
measurement of existing quality, pre-determination of where changes may
be appropriate, and data to measure outcomes of changes. These simple
tasks assure that quality patient care is maintained while cost are
decreased.
If you look at 50 physicians performing the same procedures, you
will see 50 different ways the procedure is performed. Gainsharing is a
process where the physicians study how colleagues perform their
procedures and determine to best which processes to adopt in order to
increase efficiency while assuring quality.
Our gainsharing model was designed for complex cardiac procedures.
With appropriate safeguards to assure quality, gainsharing concepts can
be applied throughout all services.
If physicians first make changes based on best practice outcomes,
followed by eliminating unnecessary costs, then quality will actually
improve.
In addition, a body of knowledge is created where physicians
constantly invent more efficient ways of delivering care to their
patients. Again, the best way to think about this is to look at how any
other industry operates today. For example, if you are making washing
machines, you will not be able to produce the best product at an
affordable product unless the engineer is considering both quality and
cost of the products being made. No one but the engineers of this
product are qualified to make the decisions of how changes will affect
quality. In health care, the physician is the engineer.
The physician has been concerned about quality but has never been
concerned about costs. Today, healthcare is not affordable. This means
that all patients are not currently receiving the care that they need.
Physicians working with hospitals to assure that resources are
available to pay for needed technology and services is the best to
guarantee quality care.
Gainsharing is simply:
Physicians assuring that patients have access to all needed
technology in order to deliver the best quality care while eliminating
waste in the system.
Mr. MCCRERY. Thank you, Ms. Goodroe. Mr. Emerson.
STATEMENT OF MARTIN J. EMERSON, CHIEF EXECUTIVE OFFICER,
AMERICAN MEDICAL SYSTEMS, WEST MINNETONKA, MINNESOTA
Mr. EMERSON. Thank you, Mr. Chairman, Ranking Member Stark,
other Members of the Committee. My name is Marty Emerson. I am
President CEO of American Medical Systems, a leading innovator
today in the field of urology and gynecology. I am here today
on behalf of the Advanced Medical Technology Association,
AdvaMed. I ask that my full written statement be entered into
the record. AdvaMed would like to thank the Subcommittee for
holding this important hearing today to begin discussions on
gainsharing. We strongly believe that significant changes to
Medicare law require a thorough review of all potential impacts
on patients. You will hear some things today that may sound
appealing about gainsharing, but this is a complex issue. You
are considering rolling back some basic provisions for
protecting patients. We have two primary concerns about
gainsharing. The first is setting up a system that incentivizes
delivering cheaper care, versus delivering quality care. The
second is creating a system that could limit patient access to
beneficial technologies. We are entering an era of
technological advance that is revolutionizing patient care. In
the last few years, patients have benefited from new
technologies like drug-eluting stents that open up clogged
arteries without major surgery, and diagnostic tests that
identify which patients will benefit from new cancer drugs.
As I mentioned earlier, we are concerned that a policy like
gainsharing will have a negative effect on these advances. This
policy might reward short-term savings, not better treatments,
and might impact patients' access to those better treatment
options. My company recently introduced an innovative device,
``Perigee,'' which is designed to significantly improve the
treatment of bladder prolapse, a painful condition in which a
woman's pelvic muscles become weak or damaged and the bladder
shifts out of its normal position. Our Perigee product replaces
the current procedure which requires significant recovery times
and has a one-year failure rate of 30 to 50 percent. Our new
technology provides consistent successful results that
significantly reduce recovery times and prevent the need for
further surgery. I ask you, what would have happened to
thousands of patients who have already benefited from our new
technology under gainsharing? Currently, a healthy tension
exists between physicians who advocate for patient care via
advanced medical treatments, and the hospital administrators
who actively work to manage costs. Under a gainsharing program,
this balance between patient care and cost cutting might be
skewed, and access to innovative approaches, approaches like my
company introduces, could be compromised, as hospitals might
choose to focus on short-term savings over technologies that
may cost more up front, but will also generate larger savings
for our health care system in the long run.
This is especially concerning to small company innovators.
As you know, small companies create most of our new
technologies. At least two-thirds of AdvaMed's membership is
comprised of companies that are classified as small businesses.
These companies already must overcome real hurdles to make our
technologies available to Medicare beneficiaries. Gainsharing
would create yet another hurdle within a marketplace where the
largest manufacturers would have a significant advantage.
Gainsharing could also negatively impact patient choice among
current technologies. Medical devices are not always
interchangeable commodities. For example, physicians are now
able to choose between mechanical, porcine, and different heart
valves made from the pericardium of a cow. The physician and
patient together select a heart valve based on the assessment
of the benefits and risks of each valve, and the lifestyle,
age, and medical condition of the patient. Choosing the cheaper
porcine valve would save money today, but would require another
costly and painful surgery down the road. Even in situations
where average results from two devices would be expected to be
similar, factors unique to the patient--such as patient size,
or the configuration of the patient's anatomy where an
implantable device will be placed--may indicate that one brand
of a device is superior for that patient.
We are concerned that gainsharing arrangements would lack
adequate safeguards to prevent these concerning situations for
patients. We share the Subcommittee's desire to eliminate
excess cost and waste from our health care system. We believe
that there are a number of steps that can be taken to reduce
costs without compromising quality care, such as: additional
efforts to prevent and treat diseases early; reduction in
medical errors; improvements to the management of chronic
diseases; and advances to the infrastructure and organization
of care through the adoption of information technology. Should
the Committee choose to move forward on gainsharing, we welcome
the opportunity to work with you on achieving mutual
objectives, if we can find a carefully targeted and limited
approach that does not create incentives to cut back on patient
care, limit the therapeutic choices available to doctors and
the patients, or slow the development and diffusion of medical
innovation. Thank you.
[The prepared statement of Mr. Emerson follows:]
Statement of Martin Emerson, Chief Executive Officer, American Medical
Systems, West Minnetonka, Minnesota
AdvaMed and its member companies would like to thank the
Chairwoman, Ranking Member, and Members of the Subcommittee for holding
this important hearing today to begin the discussion on the topic of
gainsharing. We strongly believe that significant changes like this to
Medicare law require thorough review of any and all potential impacts
on the people the program is designed to serve, Medicare beneficiaries.
The Medical Technology Industry
AdvaMed represents over 1300 of the world's leading medical
technology innovators and manufacturers of medical devices, diagnostic
products and medical information systems. Our companies produce
approximately 90% of the medical technology products used in the United
States. AdvaMed is proud to represent an industry that brings new hope
to patients around the world, and U.S. companies that are benchmark
manufacturing leaders in terms of total production, innovation and
highest quality products. The medical technology industry directly
employs about 350,000 workers in the U.S.
Our industry is fueled by innovative energy and competition, which
drives very rapid product development cycles that, in many cases, can
lead to new technology iterations every 18 months. Two-thirds of
AdvaMed's membership is comprised of companies with sales of under $30
million annually.
Innovative medical technology saves and enhances peoples' lives.
Our products enrich patients' productivity and quality of life, thereby
improving living standards and benefiting society overall. Medical
technology also contributes substantially to economic growth. Our
products increase productivity by allowing workers to recover from
illness faster, remain longer in the workforce, and thrive without
expensive long-term care. Studies show that funds invested in health
care yield far greater benefits than costs to a nation's economy over
the long term.
The role of medical technology will become even more important as
our nation's population ages. According to the 2002 Commission on
Global Aging, medical advances will bring ``longer, healthier, more
productive lives with declining rates of disability for the elderly.''
Innovative medical technologies offer an important solution for nations
that face the challenges of balancing serious budget constraints and
the demands of serving aging populations.
To deliver value to patients, our industry invests heavily in
research and development (R&D). The level of R&D spending in the
medical devices and diagnostic industry, as a percent of sales, more
than doubled during the 1990s, increasing from 5.4% in 1990 to 8.4% in
1995 and over 11% last year. In absolute terms, R&D spending has
increased 20% on a cumulative annual basis since 1990. Our industry's
R&D spending is over three times the overall U.S. average.
The Potential Impact on Patient Care
As the Members of the Subcommittee know, gainsharing is an
arrangement between a hospital and a physician to share in any savings
as a result of specific actions taken by the physician in directing the
use of items or services for patient care. These arrangements have been
considered to be in violation of the federal anti-kickback provisions,
physician self-referral laws, and the civil monetary penalty (CMP)
prohibition on hospital payments to physicians. Under the CMP rules, a
hospital cannot pay a physician to induce reductions or limitations of
patient care services to Medicare or Medicaid beneficiaries under the
physician's direct care.
The greatest concern about relaxing these existing laws designed to
protect patients is the potential negative impact on patient care.
Patients deserve the best treatment options and technologies available
for their unique circumstances. They deserve to reap the fruits of this
new century of the life sciences, unhindered by policies that will slow
the progress of medical knowledge from the lab bench to the bedside.
They expect government policies that support providing the most
appropriate and highest quality care.
American Medical Systems, Inc. (AMS) and the medical technology
industry are very concerned about proposals to relax these laws and
legalize gainsharing. We believe gainsharing should be carefully
studied by Congress before any decision is made to move forward with
relaxing the existing rules that prohibit gainsharing. We believe that
gainsharing would have an immediate and significant negative effect on
public health by encouraging the use of the least expensive option
without consideration of long-term effects or overall health economics.
It would be a severe impediment to the development and rapid diffusion
of beneficial new technology, could have an especially negative impact
on small companies, and could eliminate important therapeutic and
diagnostic choices for doctors and patients. We are concerned that, in
the end, patients could suffer most.
At the same time, we share this Subcommittee's desire to reduce
excess cost and waste in our health care system, and we want to work
with you on ways to achieve this goal in a way that truly protects
patients and medical innovation.
The Potential Impact on Technology Development and Diffusion
We are entering an era of technological advance that has the
potential to revolutionize patient care. In just the last few years, we
have seen such remarkable new technologies as drug-eluting stents to
open up clogged arteries and prevent heart attack without major
surgery, new artificial hips and knees that may never need to be
replaced, electrical implants to treat Parkinson's disease and
epilepsy, and diagnostic tests to identify which patients will benefit
from a new cancer drug and which will not.
We are concerned that a policy like gainsharing will have a
negative impact on these advances in technology development and
diffusion. If not designed with adequate safeguards for patients,
gainsharing could easily reward cheaper treatments, not better
treatments. It could be based solely on the short-term cost of a
hospital stay, not the longer term cost of treatment over the course of
an illness. It is primarily focused on the issue of cost, not value.
AMS is a medical device company that develops and markets
minimally-invasive, life-restoring therapies. Recently, we introduced
an innovative device, Perigee, which is designed to significantly
improve the treatment of bladder prolapse in women. Bladder prolapse is
a painful and distressing condition in which a woman's pelvic muscles
become weak or damaged, and the bladder shifts out of its normal
position. Our device integrates a specialty surgical mesh with a set of
delivery tools to deliver superior efficacy in correcting the
condition. This device replaces the current ``gold standard'' procedure
for bladder prolapse in which the physician plicates (or pulls
together) the patient's existing tissue to resupport the bladder.
Plication procedures demonstrate a one-year failure rate of 30-50%,
while our technology provides consistent, successful results that
reduce and prevent the need for further surgeries.
Despite the failure rates of the current plication procedure and
the success rate of our technology, some patients do not have access to
the technology when hospitals are reluctant to make them available for
use. Currently, a healthy tension exists between the physician
advocates for patient care and the use of advanced and new technologies
and the hospital administration that seeks to manage costs. This is a
good balance between patient care and efficient use of resources. Under
a gainsharing program, the balance between patient care and cost-
cutting will be skewed. Patient access to the best care could be
compromised and virtually insurmountable hurdles for adoption of
beneficial new technologies could be created.
Our company is also evaluating a number of innovative and minimally
invasive techniques to treat benign uterine fibroids and their
debilitating symptoms. The current standard of care for treating
fibroids is a hysterectomy, an invasive procedure in which the uterus
and offending fibroids are removed. While efficient for the healthcare
system, the recovery period for a hysterectomy is long and there are
significant risks associated with surgery. In addition, many women and
physicians believe it is critical to leave the healthy uterus intact
and treat this condition with the least invasive procedure possible.
If gainsharing were implemented, our company would be forced to re-
evaluate our decision to invest in the design and development of new
minimally invasive technologies in this area. We believe we would face
overwhelming obstacles in the adoption of this new technology since,
even though it offers the potential for improved patient care, it would
not provide hospitals and physicians with the short-term savings that
would be rewarded under gainsharing.
A significant amount of new technologies are created by small
companies. These companies already confront significant hurdles to
bring technologies to market and have them accepted into the Medicare
system. Gainsharing would place an additional barrier to the adoption
of their advanced devices. Patients currently face notable barriers in
accessing several innovative technologies made by AMS, even thought
they offer clearly beneficial outcomes for patients. We are concerned
that gainsharing would exacerbate this problem, especially since AMS
does not have vast resources to overcome the additional market adoption
hurdles that could be presented by gainsharing. Gainsharing's
standardization measures would create an anti-competitive marketplace
where the largest manufacturers would have a significant advantage.
The Potential Impact on Therapeutic and Diagnostic Choices
Gainsharing could negatively impact patient access to new
technologies as well as choice among current technologies. Advanced
medical devices are not always interchangeable commodities. For
example, physicians are now able to choose between mechanical heart
valves, porcine heart valves, and valves made from the pericardium of a
cow. The physician and patient select a prosthetic heart valve based on
an individual assessment of the benefits and risks of each valve and
the lifestyle, age and medical condition of the patient. When
considering the use of a tissue valve, the porcine heart valve is
cheaper, but may not last as long as the more expensive alternatives.
For some patients, choosing the cheaper porcine valve would save money
today, but could require another costly and painful surgery down the
road. Plastic, metal, and ceramic replacement hips all have different
characteristics that could affect their durability for individual
patients and the likelihood that they would need to be replaced.
Even when the choice is between two brands of devices made from
similar materials, the best choice for an individual patient is not
always obvious. In situations when average results from two devices
would be expected to be similar, factors unique to the patient, such as
the patient's size and the configuration of the area where an
implantable device will be placed, may suggest that one brand of device
is superior for that patient. Physician familiarity and comfort with a
particular device is also critical. Typically, it is the match between
a physician's skills, training, and familiarity with a specific device
which produces the best outcome for a patient.
Physician use is also important in medical device innovation.
Physicians help generate the next generation of devices by coming up
with new ideas in the clinical setting. Removing the choices available
to physicians will only hinder the industry in device innovation.
Oversight of Quality and Accountability
As you may know, the OIG issued advisory opinions in February 2005
on six different requests by hospitals proposing gainsharing
arrangements. In all six advisory opinions, the OIG noted that the
gainsharing arrangements could violate the CMP statute, but the OIG
wrote that it would not impose sanctions against the hospitals if
several protections were included in the arrangements. The protection
from sanctions was not granted for any other arrangements beyond these
six specific requests, and under current law, the OIG will continue to
scrutinize any gainsharing arrangement requests on a case-by-case
basis.
The tailored patient safeguards delineated by the OIG in the
advisory opinions addressed maintaining patient access to quality care,
designing quality controls with the input of credible medical experts,
limiting the scope of the arrangements, ensuring public awareness and
accountability on the details of the arrangements, and restricting
actions allowed for yielding savings and methods of distributing the
savings. The OIG required these elaborate and extensive safeguards to
ensure that hospitals would not stint on care because it recognized
that gainsharing could result in economic incentives undermining
clinically appropriate decisions by physicians.
Since we do not have feedback from the six arrangements to review
and little experience with gainsharing, it seems premature to push
ahead without careful study. For example, the several hospitals that
have received advisory opinions are blinded to the public and
stakeholders. We are concerned about how the quality will be measured
given the difficulty of risk adjustment, lags in data, and the
pervasive lack of measurement of value as opposed to cost across our
whole system. It will also be hard to assess quality in the short term
since different patient outcomes for some technologies will not be
apparent for years after the procedure is performed, and it may be
impossible to account for lost quality from failure to adopt new
technology.
The Impact on Long-Term and Overall Program Costs
We are strongly concerned that when gainsharing is permitted to
occur, arrangements will be designed to find savings by limiting the
range of medical technologies. While these approaches may yield short-
term savings to an individual hospital and the physicians working
there, they may well be eclipsed by far greater overall health system
costs in the long-run.
Current contracting patterns at the hospital, regional, and
ownership level already drive down the cost of devices without
jeopardizing the physician or the patient in the quality of care
provided. The medical technology industry is highly competitive and
under immense market pressure to keep costs down. According to figures
from the Bureau of Labor Statistics, price increases for medical
devices have consistently been below the increases in the consumer
price index for the last five years. According to Department of
Commerce and CMS figures, medical devices as a share of national health
spending have remained constant at about 5%. When the American Hospital
Association (AHA) studied the increase in hospital costs over the last
five years, it found that the cost of purchasing medical devices as a
component of the increase was not even large enough to warrant breaking
it out as a separate item.
Conclusion
We share the Subcommittee's desire to eliminate excess cost and
waste from our health care system and we strongly support evidence-
based medicine. We believe that there are a number of steps that can be
taken to achieve the objective of reducing costs without compromising
quality care, such as additional efforts to prevent and treat diseases
early, reduction in medical errors, improvements to the management of
chronic diseases, and advances to the infrastructure and organization
of care through the adoption of information technology. Incentives
should also be adopted to encourage treatments and innovations that
focus on improved patient outcomes and overall savings to the health
care system.
As you know, Congress passed laws to prohibit gainsharing out of
concern about conflicts of interest that could influence a physicians'
ability to exercise independent professional judgment about the best
interests of his or her patients. Congress did not want hospitals
paying physicians to reduce or limit services to Medicare patients.
Congress must continue to ensure that high-quality patient care is not
jeopardized by financial incentives to cut costs.
Thank you again for providing us the opportunity to submit the
views of our industry on this important topic. We welcome the
opportunity to work with this Subcommittee on achieving mutual
objectives if we can find a carefully targeted and limited approach
that does not create incentives to cut back on patient care, limit the
therapeutic choices available to doctors and patients, or slow the
development and diffusion of medical innovation.
Mr. MCCRERY. Thank you, Mr. Emerson. There are only about 3
minutes left on the vote. Mrs. Johnson obviously got tied up on
the floor. So, I am going to recess the Subcommittee hearing
until such time as Mrs. Johnson returns. It shouldn't be but
just a few minutes. So, the Subcommittee is in recess.
[Recess.]
Chairman JOHNSON. The hearing will reconvene. While Members
are on their way back from the floor, since some in our
audience are fairly new to Washington, I do want to just take a
point of personal privilege and say, if you haven't walked
through the tunnel between Longworth and the Capitol, you owe
it to the children of America. Every year, we have an artist
from every district, through competition. We bring their work
to Washington and we hang it in that tunnel. This year, it is
just exceptional. There are some pieces there that will knock
your socks off. You owe it to yourself, as well as to the youth
in our high schools, to go by and look at it.
Mr. STARK. Will the gentlelady yield?
Chairman JOHNSON. Yes, I will be happy to yield.
Mr. STARK. You weren't here at the time, but guess which
elderly Member of the House of Representatives walked through
that tunnel for years, looking at those stupid bare walls, and
went to Architect White and said, ``Why can't we hang state
posters or something in this hallway?`` Guess who that Member
was who found the place to hang that art?
Chairman JOHNSON. Outstanding! Pete, you have always been
high on my list of creative thinkers and real contributors to
this process, and you are now the best. Okay. Now, it rained.
When I realized how hard it was raining, we all have to go
around, and it takes longer. The best laid plans don't work.
So, I understand that Ms. Goodroe concluded. I am not sure that
Mr. Emerson concluded.
Mr. STARK. Concluded, yes.
Chairman JOHNSON. You concluded? Okay.
Mr. EMERSON. I have concluded.
Chairman JOHNSON. Mr. Carter.
STATEMENT OF GARY S. CARTER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NEW JERSEY HOSPITAL ASSOCIATION AND AFFILIATES,
PRINCETON, NEW JERSEY
Mr. CARTER. Good morning. I am Gary Carter, President and
CEO of the New Jersey Hospital Association. I would like to
thank Chairwoman Nancy Johnson and the Members of the Committee
for allowing me the opportunity to meet with you today. In
particular, I would like to thank Mrs. Johnson and the members
of her staff for their visit to New Jersey to get a better
understanding of what we were trying to accomplish with our
demonstration project; and I would let you know that, if you
would like, we would be happy to bring physicians and CEOs to
visit with you here to talk about what we were doing. Aligning
the performance incentives of physicians, hospitals, and the
Medicare Program is an efficient and practical way to encourage
optimal quality of care decisions. Although it was stalled by a
few hospitals that wanted to be included but were precluded by
a CMS cap on participation, I feel that the New Jersey
Demonstration experience I am about to describe held the
promise to achieve this goal. If reimplemented in some form,
hospital participation in this project should remain voluntary,
with opportunities to opt out at the end of years one and two
of the project if the participating hospital is not achieving
an appropriate level of physician participation, quality
improvement, or cost savings.
Prior to granting New Jersey a waiver, CMS originally
required participating hospitals to guarantee a savings to the
Medicare Program of not less than 2 percent of a hospital's
Medicare payments beginning in the second year of the
demonstration. While participating hospitals would prefer a
project without the guarantee, I believe it is critical that
any guaranteed savings requirement begin no sooner than the
second year. Also, a guarantee that is lower than 2 percent
will stimulate greater hospital participation, and should be
considered moving forward. Finally, while specialty hospitals
do not exist in New Jersey, NJHA does not view the
implementation of this project as a reason to lift or ease
current efforts to implement a moratorium on specialty
hospitals. They are very separate issues. Now I would like to
provide a brief overview of our project. Traditionally,
hospitals and physicians operate with different economic
incentives. For the last 20 years, hospitals have been paid on
a per-case basis, while physicians are paid on a fee-for-
service basis. Long lengths of stay, by default, tend to
consume more services and accumulate additional costs and
create potential quality problems. In order to guarantee proper
oversight, a rigorous structure was created to ensure that
everyone stayed focused on physician-hospital collaboration and
quality performance. The NJHA created its own demonstration
steering committee; each hospital also required to form its own
internal oversight committee staffed by not less than 50
percent physicians.
In September of 2003, the CMS awarded to the New Jersey
Hospital Association a waiver to demonstrate what is commonly
referred to as gainsharing. The incentives were structured as
follows: The objective of the demonstration was to reempower
physicians, under a rational economic structure, to partner
with hospitals in patient care; Physician participation is
strictly volunteer; The project provided a bonus only for
physicians; therefore, no risks or penalties; the purpose is to
incentivize improvement and reward achievement, not to punish;
The incentives are based on individual physician performance,
adjusted for severity of illness; The demonstration was
designed to place no additional paperwork demands on
physicians; there are no changes in claims processing or
payment routines; Quality and responsibility for quality are
the project's highest priorities. It is the hospitals
themselves who provide sources of funds for demonstration. I
have been asked why hospitals would be willing to take on this
responsibility. The obvious answer is that improved operational
performance can lead to improved quality and financial
performance. Quality monitoring is a key component of this
demonstration. Process measures selected to evaluate
performance were associated with acute myocardial infarction,
heart failure, and community acquired pneumonia. These quality
measures were chosen based on their relevance to the Medicare
population. Participating hospitals also integrated their own
individual quality programs into the project.
Hospitals were given the power to condition participation
in the demonstration by individual physicians on participation
in institution-specific quality programs, including clinical
quality protocols. As physician interest in the demonstration
grew, interest also grew in promoting its success by utilizing
the demonstration framework as a tool to further improve
quality. In conclusion, I am here today to support legislation
that would allow New Jersey and other states to participate in
a program where we could align incentives of physicians and
hospitals. We appreciate your efforts in this regard, and look
forward to continuing our work with the Subcommittee in
developing gainsharing policies. Thank you.
[The prepared statement of Mr. Carter follows:]
Statement of Gary S. Carter, President and Chief Executive Officer, New
Jersey Hospital Association and Affiliates, Princeton, New Jersey
Good morning. I am Gary Carter, President and CEO of the New Jersey
Hospital Association. I'd like to thank Chairwoman Nancy Johnson and
members of the committee for allowing me the opportunity to meet with
you today. In particular I would like to thank Mrs. Johnson and members
of her staff for their visit to New Jersey to get a better
understanding of what we were trying to accomplish with our
Demonstration project.
Aligning the performance incentives of physicians, hospitals and
the Medicare program is an efficient and practical way to encourage
optimal quality of care decisions. Although it was stalled by a few
hospitals that wanted to be included, but were precluded by a CMS cap
on participation, I feel that the New Jersey Demonstration experience
that I am about to describe held the promise to achieve this goal. If
re-implemented in some form, hospital participation in this project
should remain voluntary with opportunities to opt-out at the end of
year's one and two of the project, if the participating hospital is
unhappy for any reason, is not achieving an appropriate level of
physician buy-in, quality improvement or cost saving success.
Prior to granting New Jersey a waiver, CMS originally required
participating hospitals to guarantee savings to the Medicare program of
not less than 2 percent of a hospital's Medicare payments beginning in
the second year of the demonstration. While participating hospitals
would prefer a project without the guarantee, I believe it is critical
that any guaranteed savings requirement begin no sooner than the second
year. Also, a guarantee that is lower than 2 percent will stimulate
greater hospital participation and should be considered moving forward.
Finally, while specialty hospitals do not exist in New Jersey, NJHA
does not view the implementation of this project as a reason to lift or
ease current efforts to implement a moratorium on specialty hospitals.
These are separate issues.
Now I would like to provide a brief overview of our project.
Traditionally, hospitals and physicians operate with different economic
incentives. For the last twenty years hospitals have been paid on a
per-case basis while physicians are paid on a fee-for-service basis.
Long lengths of stay, by default, tend to consume more services and
accumulate additional cost for which the hospital receives no
additional reimbursement from Medicare. This has the potential to
create an adversarial atmosphere between hospitals and physicians.
New Jersey's Medicare Demonstration of Performance Based Incentives
project was designed as an attempt to identify, pilot test and evaluate
a specific methodology to better align current payment methods with
quality improvement goals. Almost half of the hospitals in the state of
New Jersey expressed interest in participating in the project.
In order to guarantee proper oversight, a rigorous structure was
created to ensure that everyone stayed focused on physician/hospital
collaboration and quality performance. NJHA created its own
Demonstration Steering committee staffed by participating hospital
CEOs, CFOs and Medical Directors, as well as Quality Oversight and
Finance sub-committees. Each hospital was also required to form its own
internal Oversight Committee staffed with not less than 50 percent
physicians. Hospital specific internal Quality and Finance sub-
committees were also a required component of participation.
In September of 2003, the Centers for Medicare and Medicaid
Services (CMS) awarded to the New Jersey Hospital Association a waiver
to demonstrate what is commonly referred to as gainsharing. By properly
aligning physician and hospital incentives the New Jersey demonstration
held the promise to achieve several objectives:
1. Facilitate collaboration between physicians and hospitals;
2. Infuse efficiency through greater access to needed services,
quicker turn around time on procedure scheduling and test results;
3. Provide a new source of funds to support quality initiatives;
4. Add incremental payments to augment depleted physician fee
schedules;
5. Return patient care decisions to physicians in consultation
with their patients;
6. Improve the financial health of hospitals;
7. Improve the long-term viability of the Medicare Trust Fund.
Physician and hospital economic incentives are, at best,
inconsistent. This means that there will be a significant amount of
inefficiency in the delivery system so long as this situation persists.
Real progress cannot be made on the challenge of improving
performance--both quality and operational--without returning
responsibility to the doctors and making them partners.
The way in which physicians in the field perceive this program is
critical to its success. The incentives were structured as follows:
The objective of the Demonstration was to re-empower
physicians--under a rational economic structure, to partner with
hospitals in patient care.
Physician participation is strictly voluntary.
The project is bonus only for physicians; therefore, no
risks or penalties. The purpose is to incent improvement and reward
achievement; not to punish.
Incentives are based on individual physician performance,
adjusted for severity of illness.
The Demonstration was designed to place no added
paperwork demands on physicians; there are no changes in claims
processing or payment routines.
Quality, and responsibility for quality, are the
project's highest priorities.
It is the hospitals themselves who provide the source of funds for
the Demonstration. I have been asked why hospitals would be willing to
take on this responsibility. The obvious answer is that improved
operational performance can lead to improved financial performance.
This, in turn, creates a source of funds for important needs including
quality of care initiatives, care to the uninsured and capital
improvement.
For the hospital, aligning incentives can result in:
Shorter inpatient stays;
Improved quality of patient care;
Fewer marginal but costly diagnostic tests;
Reductions in pharmacy expense;
Efficient use of operating rooms;Cost effective use of
critical care and telemetry units;
Evidence-based selection and purchase of medical devices
and hardware;
Improved discharge planning.
In addition, if the Demonstration were to be implemented and
successful, it should:
Improve the financial health of hospitals;
Augment physician fee schedules;
Provide a new source of funds to Medicare and its
beneficiaries; and
Provide a model that could improve the performance of the
Prospective Payment System (PPS).
Quality monitoring is a key component of this demonstration.
Process measures selected to evaluate performance were associated with
Acute Myocardial Infarction (AMI), Heart Failure, and Community
Acquired Pneumonia. These quality measures were chosen based on their
relevance to the Medicare population. Participating hospitals also
integrated their own individual quality programs into the project.
Hospitals were given the power to condition participation in the
demonstration by individual physicians on participation in institution-
specific quality programs, including clinical quality protocols. As
physician interest in the Demonstration grew, interest also grew in
promoting its success by utilizing the Demonstration framework as a
tool to improve quality.
In conclusion, I am here today in support of legislation that would
allow New Jersey and other states to participate in a program where we
could align incentives of physicians and hospitals. We appreciate your
efforts in this regard and look forward to continuing our work with the
Subcommittee in developing gainsharing policies.
I would now be happy to answer any questions.
Chairman JOHNSON. Thank you, Mr. Carter. Mr. Fine.
STATEMENT OF STUART H. FINE, CHIEF EXECUTIVE OFFICER, GRAND
VIEW HOSPITAL, SELLERSVILLE, PENNSYLVANIA, ON BEHALF OF THE
AMERICAN HOSPITAL ASSOCIATION
Mr. FINE. Good morning. My name is Stuart Fine, I am the
CEO of Grand View Hospital in Pennsylvania. I am here today on
behalf of the American Hospital Association, its 4,800 member
hospitals and health systems. Part of Grand View's mission is
to provide and coordinate the appropriate utilization of
quality, cost-effective health care and related services for
our community. There are approximately 300 full- and part-time
physicians on our medical staff and more than 1,500 employees
of Grand View who help us to accomplish our mission. Madam
Chairman, we commend your leadership, and thank the Committee
for its work in seeking public policy changes that can help
hospitals and doctors work together to improve the quality and
efficiency of patient care delivery. But we believe very
strongly that gainsharing can do the most good for the most
people if we move beyond thinking of it only as a way to
achieve cost savings. We need to be able to use incentives in
working with physicians to improve quality of care and patient
safety and to ensure that our communities have access to the
care and services that they require. We believe it is time to
move beyond demonstration projects. Such projects benefit only
a limited number of communities, but doctors and hospitals
everywhere need help. We need to clear away the underbrush of
what are confusing laws and regulations that prevent doctors
and hospitals from focusing on the bigger picture: providing
quality care at an affordable price.
Hospitals and doctors currently have only a few ways in
which they can share incentives to come together. Hospitals can
employ doctors, or they can spend large sums of money and years
of time to take advantage of remarkably limited and confusing
case-specific gainsharing opportunities. We urge you to amend
Federal law and regulation. Many changes are desperately
needed. The CMP law prohibition against any incentive to reduce
care, regardless of medical necessity, is far too all-
encompassing. It prohibits inducements to reduce services even
when such services may be unnecessary or duplicative. The HHS
Secretary should be authorized to create safe harbors to foster
this broader range of care improvement initiatives with proper
safeguards. Those safe harbors should apply across all Federal
that restrict them. The current Federal focus on limiting
incentives to the sharing of cost savings feeds consumer fears.
This causes folks to worry that this could result in stinting
on care or delaying adoption of new technologies and
treatments. For providers, gainsharing is often not a realistic
option, because such collaborative programs have generally been
limited to a year's duration. That simply does not support the
needed investment, both in time and money, for either hospitals
or physicians.
Any proposal that would seek to guarantee up-front savings
to the Medicare Program would likely stifle most providers'
incentive to participate. For example, an initiative to adopt
technologies that improve patient safety might require
significant capital investment to purchase hardware and
software, as well as to train hospital staff, physicians, and
physician support staff in their use. That investment could
reduce medical errors and complications, but might not yield
monetary savings for the hospital. Yet it is the right thing to
do for patients and for the Medicare Program. Hospitals should
not be penalized or have impediments put in their way to making
such investments on behalf of their communities. Because
physician-owned limited-service providers can offer incentives
without the same constraints that apply to facilities not owned
by physicians, requiring payments to Medicare would be an
unfair penalty against community hospitals. Importantly,
patient safeguards could govern the incentive arrangements we
are recommending. However, there are no patient safeguards
covering the incentives allowed by physician-owned limited-
service providers. The financial rewards associated with our
recommended approaches would never equal those of ownership.
Therefore, we strongly urge that action to remove barriers to
the use of incentives must not be considered a substitute for
the needed ban on physician self-referral to limited-service
providers.
The actions we have recommended will help create productive
working relationships with physicians. They can do nothing,
however, to change the conflict of interest inherent in
physician ownership under the physician self-referral
prohibition. In conclusion, while the roles of hospitals and
physicians are different, each needs the other, and our
patients need us both. Too many legal and legislative barriers
still in the way of hospital and physician efforts to
collaborate in making health care better. Congress can help by
modernizing law and regulations so that hospitals and
physicians can work together in ways that benefit everyone
having a stake in providing, or in receiving, high-quality
care. Thank you very much for this opportunity to participate
in today's hearing, I remain available to respond to your
questions.
[The prepared statement of Mr. Fine follows:]
Statement of Stuart H. Fine, Chief Executive Officer, Grand View
Hospital, Sellersville, Pennsylvania
I am Stuart Fine, CEO at Grand View Hospital in Sellersville,
Pennsylvania. I am here today on behalf of the American Hospital
Association (AHA) and our 4,800 member hospitals, health systems and
other health care organizations, and our 33,000 individual members. We
appreciate the opportunity to share with you our thoughts on the
potential of gain sharing to help patients, physicians, hospitals, and
the Medicare program itself.
Formed in 1913 as Bucks County's first hospital, Grand View
Hospital is in most ways a typical community, not-for-profit hospital.
We provide a broad array of patient services, from obstetrics to
orthopedics, and from hospice/home care to oncology. Our mission, in
brief, calls for us to ``provide and coordinate the appropriate
utilization of quality, cost-effective health care and related
services'' for the people of our community. More than 250 physicians
comprise our medical staff.
Madam Chairman, all health care is about teamwork. It involves the
talent and dedication of a wide range of very special people--from
doctors and nurses to technicians and nutritionists and many, many
more. Hospital care is especially dependent on the ability of hospital
leaders to work with physicians to make sure they have the resources
needed to get patients the right care, at the right time, and in the
right setting.
We therefore commend your consideration of public policy changes
that could improve the ability of hospitals and physicians to work
together to improve the efficiency of hospital care delivered to
Medicare patients. When we talk about gain sharing as a way to improve
the efficiency of our health care system, we are talking about much
more than just cost efficiency--gain sharing can also bring gains in
quality, patient safety and community access.
For this reason, we urge the committee to revise various federal
laws that affect hospital-physician working relationships, so that they
can foster the teamwork needed to address the many challenges facing
the delivery of health care today and in the future.
Currently, federal laws are focused on prohibiting or limiting
interactions between hospitals and physicians that might have monetary
value to either party. While the intent is honorable--to avoid
conflicts of interest--the effect is to impede the ability of hospitals
and physicians to work together using incentives to improve quality,
patient safety and community access to services. The current federal
focus on sharing ``cost savings'' gives rise to a fear among
beneficiaries and consumers that such efficiency-only incentives would
result in things like curtailed care and slower adoption of new
technologies and treatments. We believe Congress should modernize the
current concept of gain sharing and focus on the broader goal of
fostering hospital-physician arrangements that provide incentives for
care improvement.
At the same time, we also urge that Congress not view action in
this area to be a substitute for a permanent ban on the use of the
whole hospital exception under the Ethics in Patient Care Referrals Act
by physician-owned limited-service hospitals.
Gain Sharing in Today's Environment
Gain sharing is currently understood to be the sharing between
hospitals and physicians of cost savings that stem from specific
actions to improve the efficiency of care delivery. Very little gain
sharing is currently allowed. The Department of Health and Human
Services (HHS) Office of Inspector General (OIG), which is charged with
enforcing some of the laws that affect hospital-physician
relationships, in 1999 issued a ruling that effectively banned gain-
sharing arrangements. In that ruling, the OIG noted that well-designed
arrangements could result in better care at lower cost by, for example,
encouraging physicians to reduce the use of unnecessary ancillary
services and inpatient days. Nevertheless, the OIG concluded that the
Civil Money Penalties Law prohibited gain sharing, and that the OIG
lacked the statutory authority to impose safeguards to ensure that
cost-saving measures do not reduce quality.
Earlier this year, the OIG issued several advisory opinions that
allowed a very narrow approach to reducing costs of cardiac procedures.
The opinions allowed a specific arrangement to provide incentives for
physicians to adhere to clinical best practices and reduce the
inappropriate use of supplies. Though judged illegal under current law,
the OIG elected not to challenge those arrangements at present because
they included multiple safeguards to protect quality of care for
beneficiaries and to guard against inappropriate use of Medicare funds.
This slight alteration in the OIG's position on gain sharing may have
been stimulated by recommendations from the Medicare Payment Advisory
Commission (MedPAC) in March 2005. MedPAC urged that Congress provide
HHS with the authority to allow a much broader use of hospital-
physician gain sharing arrangements, as long as they are regulated to
protect the quality of care and minimize financial incentives that
could affect physician referrals.
A Broader Approach
The AHA believes that broadening gain sharing to focus not just on
cost reduction but also on care improvement initiatives would benefit
patients, hospitals and physicians. Specifically, we believe federal
laws that affect hospital-physician relationships should be amended to:
Foster hospital-physician incentive arrangements designed to
improve or maintain community access to services, or to achieve one or
more of the six aims for health care delivery articulated by the
Institute for Medicine ( IOM) in its report, Crossing the Quality
Chasm. The six aims are that health care be safe, effective, patient-
centered, timely, efficient, and equitable.
Foster hospital-physician incentive arrangements that are designed
to:
Achieve needed improvements in the health care delivery
system even if they do not produce an immediate cost savings.
Sustain community access to services that are essential.
With physicians less dependent on hospitals as a place to practice, new
incentives should be allowed in order to maintain community access to
services (such as trauma and emergency department services), support
community outreach efforts, care for the uninsured, and other aspects
of hospital operations that require physician support.
Promote the integration of clinical care across
providers, across settings, and over time.
Adopt and integrate information technology (IT) systems
and technology. IT linking hospitals, physicians, and other providers
together is essential to improving patient safety, productivity,
quality monitoring, and coordination across care settings.
Enhance institutional or practitioner productivity or
achieve other efficiencies.
Establish a simpler, consistent set of rules for how hospitals and
physicians construct their working relationships. The complexity,
inconsistency and sometimes-conflicting interpretations of federal laws
and regulations affecting hospital-physician arrangements is a
significant barrier. Few arrangements can be structured without very
significant legal expense. Even then, it is often unclear whether the
arrangements might be challenged in the future.
Enable hospital-physician contracting with health plans and
purchasers as a single unit, especially when pay-for-performance
provisions are utilized. Health plans and purchasers often adopt
different approaches to payment for hospitals and physicians that in
turn create different and sometimes-conflicting incentives. As more
purchasers move toward pay-for-performance methods, the need to align
hospital and physician payment incentives becomes critical.
More specifically, AHA believes that the following types of
arrangements should be allowed if they are designed to achieve an
acceptable purpose, there are mechanisms in place to protect the
quality of care provided to beneficiaries and avoid inappropriate
influence on physician referrals, and the incentive arrangements are
transparent to patients. These arrangements may not yield tangible
savings to a hospital, but they may yield savings to the health care
system overall and can improve the care we provide.
Sharing of cost savings from efficiencies
Incentives to meet quality indicators (even when savings
do not accrue to the hospital)
Incentives to clinically integrate services and
coordinate care across settings
Sharing of pay-for-performance bonuses from payers
Joint recruitment of physicians by hospitals and
physician practices
Joint hospital and physician contracting with payers to
ensure aligned performance incentives
Service contracts with physicians to build new service
capacities
Management contracts with physicians
IT and other technology sharing to enable communication
across settings
Ability to purchase or operationally support IT for other
providers to increase IT adoption and integration
Hospital assistance to physicians in obtaining
malpractice insurance
Moving from Gain Sharing to Incentives for Care Improvement Initiatives
Federal law affecting hospital-physician relationships is extremely
complex and comes from multiple sources. These are the most-relevant
federal laws:
Medicare's Civil Money Penalty Law (CMPL) prohibits any
direct or indirect hospital payments to physicians that are aimed at
reducing or limiting services, regardless of medical necessity.
Focusing this prohibition on preventing incentives to
reduce medically necessary services would spawn many care-improvement
initiatives, including those that would significantly improve the
quality and safety of patient care both in the short and long terms. It
also would allow hospitals to share with physicians the result of
reduced costs.
Medicare's Ethics in Patient Care Referrals Law prohibits
physician self-referrals to any entity in which he/she has an ownership
or financial interest for any of a lengthy list of designated health
services, one of which is hospital inpatient and outpatient care. These
provisions basically prevent any financial relationship between a
hospital and a referring physician unless that relationship satisfies
an exception. There are few exceptions that apply to non-ownership
relationships between hospitals and physicians and the exceptions that
do apply are very rigid.
Medicare's Anti-kickback Law prohibits any payment for
referrals, or inducement or reward for, the purchase, order, or lease
of any covered item or service. The effect of these provisions is to
limit arrangements to those that share verifiable cost savings. In many
respects these provisions clash with those of the CMPL.
Tax Exemption Law prohibits private benefit or inurement.
These provisions prohibit payments to physicians that are based on a
portion of gross or net revenues, or any payments that violate
physician self-referral or anti-kickback laws.
Development of a Legislative Proposal
We applaud the Chairman's leadership in examining how to modify
current law to foster productive relationships between hospitals and
physicians that also benefit Medicare beneficiaries and the Medicare
program itself. As you develop your legislative proposal, we have
several recommendations:
Allow incentive relationships between hospitals and physiciansto
support care improvement initiatives affecting quality, patient safety,
and access to services, in addition to cost efficiency. Quality of care
for beneficiaries, and cost savings to the Medicare program, will be
the likely result in the form of reduced medical complication rates,
reduced readmissions, reduced duplication of services by different
providers, reduced admissions, and improved operational efficiency.
Reach beyond demonstration projects and amend current federal laws
to eliminate inconsistent and counterproductive provisions.Clearly
there are some changes that must be made. For example, the CMPL
prohibition on any incentive to reduce care, regardless of medical
necessity, should be limited so that it only prevents incentives to
reduce medically necessary care. We also believe that the imperative to
systematically address health care delivery issues calls for immediate
change in the complex maze of federal requirements governing hospital-
physician relationships. The HHS Secretary should be authorized to
create safe harbors to foster care improvement initiatives with proper
safeguards, and those safe harbors should be applied across all the
federal laws that currently restrict them.
Do not require that hospitals guarantee savings to the Medicare
program as a condition for incentive arrangements. Such a requirement
would have an overwhelmingly chilling effect on the development of care
improvement initiatives for several reasons:
Hospitals would be taking the risk of upfront investment
in incentive approaches that might or might not yield cost savings to
the hospital. For example, an initiative focused on adopting
technologies that improve patient safety would require significant
upfront investment. That investment could bring increased patient
safety and fewer complications, which might prevent readmissions. Most
of those gains would not yield operating cost savings for the hospital,
and in fact might reduce revenues to the extent that admissions are
reduced. But it is the right thing to do for patient care, and the
hospital should not be penalized by a requirement to pay Medicare for
the right to do it.
The viability of incentive arrangements would be limited
to those hospitals or areas where costs and/or length of stay (LOS) are
high. Per-case costs and LOS are the primary areas where reductions
would yield savings to the hospital under Medicare's inpatient
prospective payment system. Hospitals that already are very efficient,
or are in areas where they are historically very efficient, might
achieve limited or no savings. They would have to generate enough
savings or other funds to cover the payment to the program, the
investment cost of the incentive arrangement, and the cost of incentive
payments to physicians.
The long-term viability of the approach would be limited.
We question whether the savings each year would cover a payment to the
program, as well as the cost of investments and physician incentives.
This is especially the case when any productivity gains might generate
MedPAC recommendations for further reductions in the update factor.
Any required payments to the Medicare program would be an
unfair penalty against community hospitals compared to physician-owned
hospitals. Physician-owned hospitals are able to provide incentives
without the same constraints as hospitals not owned by physicians, and
they would not be subject to the same payment requirement. MedPAC has
demonstrated that physician-owned specialty hospitals do not provide
care at lower cost, even though they have shorter lengths of stay. Such
differences under the program would not be appropriate.
Do not substitute action in this area for the much-needed ban on
physician self-referral to limited-service hospitals. The actions we
have recommended will help create productive working relationships with
physicians without entering into joint ownership arrangements. They can
reshape hospital-physician relationships at a time when physicians
depend much less on hospitals as a place to practice. They can do
nothing, however, to change the conflict of interest inherent in
allowing physician-owned limited service hospitals access to the whole
hospital exception under the physician self-referral prohibition.
Safeguards would govern the incentive arrangements we are recommending;
the incentives allowed under the whole hospital exception have no
patient safeguards. Further, the rewards associated with our
recommended approach would never equal those associated with physician
ownership.
Conclusion
The relationship between hospitals and the physicians who practice
in them has always been central to quality care. Hospital managers and
governing boards are responsible for providing the facilities,
equipment, and staff required to deliver health care services, but it
is the physicians who provide or direct the delivery of those services.
While the roles of hospitals and physicians are different, they are
highly interdependent--we need each other, and patients need both of
us.
But in today's environment, too many legal and legislative barriers
stand in the way of hospital and physician efforts to make health care
better for all they serve. The major delivery system changes called for
by the IOM and others are within reach. Congress can help us reach
those goals by easing federal law so that hospitals and physicians can
work together in ways that will benefit everyone with a stake in high
quality health care.
Chairman JOHNSON. Thank you very much, Mr. Fine. Mr.
Imparato.
STATEMENT OF ANDREW J. IMPARATO, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AMERICAN ASSOCIATION OF PEOPLE WITH DISABILITIES
Mr. IMPARATO. Good morning, Madam Chair and Members of the
Subcommittee. My name is Andy Imparato. I am the President and
CEO of the American Association of People With Disabilities
(AAPD). We have about 120,000 members around the country, and
our mission is political and economic empowerment for children
Adults with all types of disabilities. I wanted to start by
thanking all three of you for your leadership on disability
issues. I know Congressman Ramstad is the Co-Chair of the
Bipartisan Disabilities Caucus, and we really appreciate your
raising the issues that you raised at this hearing today that
are particularly important for folks with disabilities. This
year, we celebrated the 15th anniversary of the Americans With
Disabilities Act. The goals for that law is how we evaluate
public policy: equality of opportunity, full participation,
independent living, and economic self-sufficiency. We hold
those goals up against the Medicare Program as it currently
exists. Oftentimes, the program is not meeting the needs of
people with disabilities who want to participate fully in their
communities. We have had big fights with Medicare about getting
coverage for a wheelchair for people who are able to take one
step when they get out of their bed. So, there are a lot of
real basic things that people need that Medicare oftentimes
fights in terms of being willing to pay for them.
That is the backdrop that we look at as we evaluate the
practice of gainsharing. The AAPD is part of a coalition with
seniors and health advocates who have some serious concerns
regarding gainsharing, many of which have been mentioned;
concerns that have to do with the potential of this practice to
exacerbate preexisting problems with how Medicare meets the
needs of beneficiaries with disabilities. It may harm the
physician-patient relationship. It may produce illusory short-
term cost savings at the expense of long-term health. It may
punish physicians who have developed a specialty practice with
an emphasis on higher-cost patients with disabilities and
chronic health conditions. In my written testimony I cite two
studies that were done recently that document how Medicare is
inadequately serving patients currently. There was a 2004 RAND
report on quality of care received by older adults that found
that vulnerable and disabled seniors receive about half of the
care that would be recommended for people with their
conditions. Also, a 2003 Kaiser Family Foundation survey of
health experience of people with disabilities found that
Medicare beneficiaries had the biggest cost-related problems of
all of the respondents who had health insurance. Within this
population, almost 70 percent reported going without needed
items, such as equipment and eyeglasses. So, that is the
backdrop that we look at this new practice of gainsharing.
On the physician-patient relationship, I think we all want
our doctor to be our advocate. When a doctor is evaluating what
treatment to prescribe, we want the doctor to be using their
medical training and making a medical decision that is in the
best interests of the patient. Anything that gives the doctor a
financial incentive around what they are going to prescribe
raises a red flag. I know one of the things that the Inspector
General has recommended is disclosure forms, so that patients
know if there is a practice like this going on. But I really
worry about how that is going to operate in practice. If you
are getting that disclosure form as you are checking in for a
procedure to a hospital, are you really in a good position to
say, ``No, I don't like this gainsharing relationship``? Our
fear is that it is going to be fine print that a lot of people
won't notice. Again, it may affect the trust that the patient
has for the physician. On the short-term versus long-term
costs, just a basic example is the type of seating that
somebody gets prescribed for their wheelchair. It may be
cheaper to prescribe a seating system that may result in
pressure sores, which could result in longer-term costs down
the road. So, really, taking that into account is important.
Last, on this issue of penalizing doctors, there was a
reference by the Inspector General to ``cherry picking,'' where
patients that are higher cost might get referred to hospitals
that don't have gainsharing. We are also concerned about
physicians who develop specialties and have a high-cost patient
base. We don't want them to be penalized in a gainsharing
context. So, I would like to close just by asking questions for
the Subcommittee to consider as you look at this issue: Will
patients be able to benefit from the latest technology, as
Congressman Ramstad raised? What will be the impact on
research, development, and innovation, if physicians aren't
prescribing the latest technologies? Will people be able to get
treatment or devices that are best suited to their individual
needs, or will they be forced to select from a pre-approved
list from the hospital that may not meet their individual
needs? Will people with hard-to-diagnose conditions be
obstructed from seeing an experienced specialist because of
cost concerns? Thank you again for the opportunity to be here.
[The prepared statement of Mr. Imparato follows:]
Statement of Andrew J. Imparato, President and Chief Executive Officer,
American Association of People with Disabilities
Madame Chair, Ranking Member Stark, and Members of the
Subcommittee:
Thank you for inviting me to testify at this important hearing. My
name is Andrew J. Imparato, and I am the President and CEO of the
American Association of People with Disabilities (AAPD), the largest
membership organization representing children and adults with all types
of disabilities in the U.S. AAPD's pursues its mission of political and
economic empowerment through programs in the area of public policy
advocacy and research, leadership development, civic participation, and
mentoring and career exploration.
Prior to joining AAPD, I was general counsel and director of policy
at the National Council on Disability, an independent agency advising
the President and the Congress on public policy issues affecting people
with disabilities. I have also worked as an attorney with the U.S.
Equal Employment Opportunity Commission, the U.S. Senate Subcommittee
on Disability Policy, and the Disability Law Center in Boston,
Massachusetts.
AAPD was founded on the fifth anniversary of the signing of the
Americans with Disabilities Act (ADA), and we promote public policies
that are consistent with that law's important goals for people with
disabilities: equality of opportunity, full participation, independent
living, and economic self-sufficiency. As we look at the potential
impact of ``gainsharing''--the topic of today's hearing--on Medicare
beneficiaries with disabilities, we will want to know whether or not
this practice will lead to greater opportunity, participation,
independence and self-sufficiency for the consumer population.
Based on our preliminary analysis of the potential impact of this
new practice on beneficiaries with disabilities and chronic health
conditions, we have some important questions for the Subcommittee to
consider.
Will patients be able to benefit from the latest technology if
doctors feel pressure to use older, less costly options? What impact
will changes in physician behavior brought about by gainsharing have on
research and development and innovation? Will people be able to get the
treatment or device best suited to their individual needs, or will they
be forced to settle for whatever the hospital decides to include in its
inventory of low-cost options? Will people with hard-to-diagnose
conditions be obstructed from seeing an experienced specialist because
of cost concerns?
As you know, Medicare is a critical program that serves millions of
people with disabilities across the lifespan. Approximately 6 million
current Medicare beneficiaries are people with significant disabilities
who are under 65. Unfortunately, when Medicare was created, society's
expectations for people with disabilities were not as robust as they
are today. These artificially low expectations created restrictions in
the Medicare program like the requirement that disabled beneficiaries
with mobility impairments can only be covered for items they need to
get around their home or apartment.
AAPD has worked with other disability and seniors organizations to
modernize Medicare so that it is made more consistent with the goals of
the ADA. We welcome creative approaches to improve the Medicare program
so that it works better for beneficiaries, including efforts to
eliminate wasteful health care costs. We believe it is important that
reform proposals be assessed so that they do not inadvertently harm
patients or jeopardize quality care.
The Wrong Incentives Can Take a Bad Situation and Make it Worse
Last year, RAND issued a report examining the quality of care
received by older adults.\1\ In their report, the researchers found
that vulnerable and disabled seniors receive about half the care that
would be recommended for people with their health condition, and that
care for geriatric conditions, such as incontinence or falls, is poorer
than care for general medical conditions. They also found that
physicians often fail to prescribe recommended medications for older
adults.
---------------------------------------------------------------------------
\1\ ``The Quality of Health Care Received by Older Adults,'' RAND
2004, available at www.rand.org.
---------------------------------------------------------------------------
These findings are particularly significant as the Subcommittee
examines whether physicians should be given an incentive to reduce the
costs of providing care to their Medicare patients. If patients are
already being under-treated, do we really want to reward doctors
financially for doing even less?
In seeking to explain the reasons why geriatric conditions may get
inadequate attention in primary care settings, the RAND researchers
noted that medical schools and primary care residency programs may not
emphasize the skills needed to diagnose and treat diseases limited
largely to the geriatric population. This same concern applies in the
diagnosis and treatment of many disabling conditions for people under
65.
When the Kaiser Family Foundation (KFF) did a survey looking at the
health care experience of people with disabilities in 2003, they found
that nearly half of those surveyed reported that they go without
medically necessary equipment and other items due to cost; more than
one-third postponed care because of cost; and more than one-third spent
less on basics such as food, heat, and other services in order to pay
for health care.\2\ Focusing in on the Medicare beneficiaries, the KFF
researchers found that among the survey respondents with any type of
health insurance, those with Medicare alone reported the highest rates
of serious cost-related problems. Within this population, nearly seven
in ten reported going without needed items, such as equipment and
eyeglasses; 60 percent said they had put off or postponed care due to
cost; and more than half said they spent less on basic needs, such as
food or heat, in order to pay for health care.
---------------------------------------------------------------------------
\2\ ``New Survey Shows People with Disabilities Face Major
Barriers,'' Kaiser Family Foundation 2003, available at www.kff.org/
newsroom/Disability-Health-Coverage.cfm.
---------------------------------------------------------------------------
Many of the problems experienced by people with disabilities and
chronic health conditions stem from the inadequacy of the Medicare
benefits package. When the incentives associated with gainsharing are
superimposed on this already problematic situation, my concern is that
disabled Medicare beneficiaries will have even greater difficulty
getting the health care services that they need.
Harming the Physician-Patient Relationship
In addition to the concerns about gainsharing exacerbating
preexisting problems with the quality and adequacy of care being
delivered to Medicare beneficiaries with disabilities, I have a
parallel concern about what these kinds of financial incentives will do
to the physician-patient relationship. People with disabilities and
chronic health conditions often have a difficult time finding a
physician with the skills and experience necessary to help them manage
what are often complex and highly individualized medical conditions.
Once a patient finds the right physician, s/he expects that physician
to be an advocate for the patient when there are disputes with insurers
about what is medically necessary and whether a particular course of
treatment is justified over other, potentially less costly,
alternatives. If a patient knows that his or her physician has a
financial incentive to keep costs down, that knowledge is likely to
make it more difficult for the patient to trust that s/he is getting
objective medical advice. We should be very cautious about setting up a
health care system where the physician comes to be viewed as an agent
of the insurer and not as an advocate for providing the best possible
care for the patient. Gainsharing raises many of the same issues for
disabled consumers as the earlier proliferation of managed care. People
with disabilities often ran into serious barriers in getting the right
care from the right provider in the managed care environment. The
difference in the gainsharing context is that the doctor now has a
financial stake in limiting a patient's options.
Short-term Savings can Harm Long-term Outcomes
For consumers with long-term disabilities and chronic health
conditions, it is important for the health care system to take a long-
term view of how best to help the patient manage their condition. In a
gainsharing system that rewards physicians for producing short-term
savings, it is unclear that doctors will have the right incentives to
take a long-term view about what equipment and procedures will produce
the best long-term outcomes for a particular patient. In such an
environment, savings may be short-lived and patient health and quality
of life are likely to suffer. For example, if a patient with
quadriplegia is prescribed a low-cost seating system, that might create
short-term savings over a more expensive product, but it can also
result in costly future emergency room visits to deal with the ensuing
pressure sores.
As AAPD noted in a letter from a range of patient advocacy groups
sent to members of Congress earlier this week (a copy of the letter is
attached to this testimony), we have a range of other concerns related
to how the physician incentives associated with gainsharing will play
out for patients.
The letter raises several specific examples of how gainsharing
might affect the quality of care patients receive in the context of
artificial hips or heart valves, spinal fusions, heart monitoring
devices, female Alzheimer's patients, and cancer detection and
treatment. And once again, all of these concerns should be viewed in
the context of a Medicare program that is already proving to be
inadequate in meeting the health needs of disabled and vulnerable
Medicare beneficiaries.
There are currently powerful economic forces within the Medicare
payment system, which are designed to drive costs down. Moreover,
market competition and entities such as group purchasing organizations
also force economies. We believe that additional efforts to contain
costs should be focused on measuring and rewarding improved quality of
care and outcomes as well as efforts to improve system efficiency
through electronic medical records and greater use of health
information technology. Also, if there are really savings to be
realized from changing physician behavior, why not allow the Medicare
program, as opposed to individual physicians, to benefit from these
savings?
Penalizing Physicians Who Serve Difficult-to-Treat Patients
A final concern that I would like to raise regarding gainsharing
has to do with how it will affect physician decisions about which
patients to treat. Physicians who have developed highly specialized
skills and experience may find themselves penalized for having a
practice that produces high per-patient costs associated with more
expensive diagnostics and care. Although hospitals may attempt to risk
adjust in these situations, there is no guarantee that the risk
adjustment will be adequate to create a level playing field for
physicians that have a particular expertise resulting in consistently
high expenditures because of the complex nature of their patients'
disabilities. Ultimately, this can create disincentives for doctors to
go into certain specialties, and it can create disincentives for
general practitioners to agree to treat patients who have unusually
complex or chronic health conditions.
Given the concerns that I and other patient advocates have raised
regarding gainsharing, I strongly encourage the members of this
subcommittee to proceed with great caution as you evaluate whether to
encourage the use of this practice in the Medicare program. It is my
understanding that limited use of the practice has been authorized by
the Office of the Inspector General at the Department of Health and
Human Services. I am hopeful that we will study how the practice is
affecting patient care in these approved programs, paying particular
attention to the quality of care being received by patients with
disabilities and chronic health conditions, before taking up the issue
of whether the practice should be expanded through new legislation.
Thank you for the opportunity to testify on this important topic.
----------
Dear Member of Congress:
We, the undersigned consumer, patient and health care organizations
are aware of various legislative proposals aimed at reducing waste and
unnecessary costs in the health care system through the use of
``gainsharing'' arrangements and by rewarding physicians for their
``efficiency.''
While we strongly support the need to eliminate wasteful health
care costs, we are very concerned about the policies that create
incentives to achieve short term savings at the expense of patients and
quality care. These reforms could result in the following:
The doctor-patient relationship could be undermined by
creating a potential conflict between physicians' responsibility to
provide the best possible care for patients and physicians' economic
interests.
Gainsharing could cause physicians both to forgo a more
long-term, holistic approach to patient care in favor of short-term
savings, and to view patients as data points.
Patients may be denied the latest technology as
physicians feel pressure to use older, less costly options.
Research and development innovation could be severely
impacted due to lack of physician adoption based on cost, making it
even more difficult to bring new research that could benefit patients
to market.
Patients may not have access to the most appropriate
treatment or device for their individual needs, due to the hospitals'
inventory of lowest cost options.
Patients with particularly hard to diagnose conditions
may be obstructed from seeing an experienced specialist who would
provide more extensive (and costly, but essential) tests, procedures
and/or care.
Groups that already suffer from undertreatment of their
conditions--women, minorities, and people with disabilities or chronic
conditions--may find their situation worsened.
When translated into actual patient care, we are worried
that the following kinds of examples may occur:
Physicians may choose short-term savings solutions, such
as less-expensive artificial hips or heart valves with a 5 year life
expectancy versus a 10 year life expectancy, to receive a financial
incentive.
Patients requiring spinal fusion may only have access to
the low-cost option of Allograft Bone products (which offer a limited
choice of shapes and sizes), even though alternative, albeit more
expensive, products offer an extensive range of sizes, angles, shapes
and strengths to meet individual patient needs.
For patients with Congestive Heart Failure, new medical
devices are available which measure fluid levels in patients' chests,
helping to prevent or minimize edema. However, these devices are more
expensive than traditional devices and specialized implanting
physicians have no incentive (in fact, they have disincentive) to
implant the newer, improved, and more expensive devices.
Female patients may be disproportionately impacted, as
much of the new research and technology focused specifically on women
has occurred in recent years. New information about the role gender
plays in Alzheimer's disease may never reach patients if physicians are
unable to justify the cost of understanding the differences of the
disease in men and women.
Cancer patients may be negatively affected from initial
discovery of their disease thru treatment. Improved technology allowing
oncologists to provide earlier, unequivocal cancer diagnoses could have
a major impact on individual patient outcomes, but only if the medical
environment continues to encourage research and development. Treatment
breakthroughs in radiation therapy, such as brachytherapy and IMRT
(allowing for more targeted radiation therapy) may be overlooked for
older, less-expensive options.
Highly specialized, experienced physicians may be most
negatively impacted by physician profiling, as they are more likely to
be involved with high risk or special needs patients, who require more
expensive diagnostics and care. A specialist certainly couldn't compete
with the ``cost-savings'' score of, for example, a family physician.
We are deeply concerned about the consequences of legislation
establishing gainsharing or ``efficiency'' standards for physicians.
Before any legislation is enacted in this area, there should be a full
and open consultation process with patient advocacy organizations, as
well as experts in the field.
Sincerely,
American Association of People with Disabilities
Alliance for Aging Research
Families USA
Family Voices
Kidney Cancer Association
National Association For Continence
National Disability Rights Network
National Mental Health Association
National Spinal Cord Injury Association
Parkinson's Action Network
Prevent Blindness America
Society for Women's Health Research
United Spinal Association
WomenHeart
Chairman JOHNSON. Thank you, Mr. Imparato. Dr. Rich.
STATEMENT OF JEFFREY RICH, M.D., CHAIRMAN, THE SOCIETY OF
THORACIC SURGEON'S TASK FORCE ON PAY FOR PERFORMANCE, NORFOLK,
VIRGINIA
Dr. RICH. Thank you, Madam Chairman Johnson, Ranking Member
Stark, and Members of the Subcommittee, for inviting me to
testify on behalf of the cardiac surgeons about gainsharing and
aligning incentives for quality improvement and cost savings. I
am the Chair of the Virginia Cardiac Surgery Quality
Initiative, an organization that has been restricted by current
laws in our attempt to advance quality improvement. We support
the intent of these laws, but believe their broad
interpretation has led to the stifling of innovation in health
care delivery and payment. Finding a balance between these two
goals will be critical as we move forward with value-based
purchasing; for in this difficult budget environment,
incentives for these programs can come from the sharing of
savings between hospitals and physicians that stem from
improvements in quality. It is critical that we make a key
distinction between two types of gainsharing. The common model
of gainsharing that many are discussing today occurs through
the coordination of supply-based purchasing to manage resources
and create cost savings that are shared with physicians. This
model can be appropriate with routine items used in care
delivery where quality is not significantly impacted by the
choice of supplies. We must be careful, however, not to impede
access to advanced technology and devices where clinical
indication and quality are critical.
The other model for gainsharing is very different. We
believe this is the model on which the future of value-based
purchasing will be built. This is the model that I will refer
to as ``quality sharing,'' because improved quality is the
primary factor that drives cost containment. While there is
debate regarding the benefit of purchasing decisions, there is
no question that reducing complications is best for patients,
can lower costs, and can be fostered through quality sharing.
Quality sharing does not create incentives to use inexpensive
but sub-optimal supplies. It refers to the savings that accrue
from improving quality of care. The Virginia Initiative has
tested this model, and we believe we can now achieve and
quantify cost savings associated with quality improvement, as I
noted in my testimony before you in March. In 2002, we proposed
the CMS demonstration that would achieve savings by the sharing
of data between hospitals and physicians on outcomes, costs,
and best practices. The purpose was to show how we could
simultaneously improve quality and reduce costs in cardiac
surgery by aligning incentives for physicians and hospitals.
Payments to surgeons were to be adjusted based upon the outcome
of their patients. A portion of the savings was to be returned
to CMS. Secretary Thompson announced approval of our project in
2003. The CMS issued strong statements in support of it. In
July 2004, CMS advised us that our quality improvement demo was
in violation of Federal law. The OIG maintained that a
redistribution of a global payment by the hospital with
incentives for performance violated ``Stark'' regulations and
civil monetary penalty laws, despite quality controls,
accountability through public reporting, and monitoring of
referral patterns.
The project was effectively terminated due to broad
interpretation of the current statutes. Our work in Virginia
now forms the basis for a proposed Medicare pilot program yet
to be approved by Congress. The STS seeks to establish a
national program whereby we reduce complications from cardiac
surgery for all Medicare beneficiaries, while potentially
saving the program hundreds of millions of dollars annually. We
will accomplish this by combining our National cardiac clinical
database with the Medicare part A claims database, to determine
exactly the level of quality that is being delivered at each
site, and at what cost. We will improve outcomes, reduce costly
complications, Achieve savings. Under our pilot program, cost
savings will occur from improved outcomes. The majority of
these savings accrue to the hospital, but some is also returned
to CMS. However, without changes in existing laws, none of the
savings will go to the surgeons who bear the responsibility for
achieving them. This is why restrictions such as the ``Stark''
CMP laws must be reexamined to allow and encourage quality-
focused cost containment. The laws should allow the sharing of
Parts A and B savings with the hospital and the physicians who
create these savings, as long as quality improvement is
demonstrated. Shared savings are one way to help finance value-
based purchasing programs.
Can quality sharing offer a solution to the health care
financing crisis? Most definitely, but it will require the
approval of the shared savings models that are quality-focused,
patient-centered, and safe. Current laws have stifled
innovation in health care reform and prevented the
implementation of some of these more unique programs. Perhaps
it is time for a change. Physicians, hospitals, and device
manufacturers are striving for ways to simultaneously protect
beneficiaries, improve quality, and reduce costs. I am here to
tell you that we have shown that it is possible. All we need is
trust granted us by the government, to allow us to create these
models of care delivery and realize these shared goals. Thank
you for your time this morning.
[The prepared statement of Dr. Rich follows:]
Statement of Jeffery Rich, M.D., Chairman, The Society for Thoracic
Surgeon's Task Force on Pay for Performance, Norfolk, Virginia
Good morning Madam Chairman Johnson, Ranking Member Stark, and
members of the Subcommittee. Thank you for inviting me to this hearing
on gainsharing and to discuss our experience with sharing incentives
between Medicare parts A and B to improve the quality of care for
Medicare Beneficiaries. My name is Jeffrey Rich. I am Chairman of the
Society of Thoracic Surgery (STS) Taskforce on Pay for Performance. I
am also the Chair of the Board of Directors of the Virginia Cardiac
Surgery Quality Initiative (VCSQI) an organization that has felt the
implications of current laws in attempting to advance quality
improvement.
The term gainsharing can carry a negative connotation to patients,
providers, industry and even some in Congress. This has occurred as a
result of the perception that gainsharing works explicitly to reduce
choice and services to patients in an effort to save money through the
sharing of these dollars with physicians. Congress enacted legislation
to protect populations at risk against some gainsharing activities, and
we support the intent of these laws. As we will discuss, the broad
interpretation of these laws, however, has led to the stifling of
innovation in healthcare delivery and payment reform. We fear that this
may continue. In the current healthcare financing crisis as
stakeholders attempt to craft potential solutions, it has become
apparent that Pay for Performance leading to Value-Based Purchasing has
ascended to the option of choice. It has also become apparent that
these proposals, including the Chariman's H.R. 3617, the Medicare
Value-Based Purchasing for Physician Services Act of 2005, will utilize
incentives for achieving measures of economic efficiency, translated as
cost savings. Money to finance these programs will almost certainly
come in part from the sharing of Part A/B savings that result from
physician's improving quality. These incentives may first be shared
between CMS and physicians and ultimately between physicians and
hospitals as the savings potential is greatest on the Part A side.
Proper interpretation and application of current Stark and CMP laws or
modifications of them will be decisive in their success.
Gainsharing--or Qualitysharing
It is critical that we make a key distinction in our discussions of
``gainsharing'' arrangements. Much like Pay for Performance, which is
in a rapid evolutionary phase, gainsharing can have a variety of
meanings to different people and we must be certain that we understand
the intended definition as we discuss health policy and legislative
action. Two types of gainsharing need to be understood and considered
separately in order for us to move rapidly towards innovative payment
reform. The first is perhaps the most commonly understood which is
coordination of supply-based purchasing to manage resources and create
reduction in costs. This model can be appropriate with routine items
used in care delivery such as gloves, masks, intravenous tubing, and
other medical supplies where clinical indication and outcomes are not
significantly impacted by the choice of supplies. This model, however,
can impede a very critical component of high quality care, and that is
access to advanced technology and devices such as heart valves and
artificial joints. It is essential that gainsharing arrangements not
restrict the physician's choice of the most beneficial clinical device
or treatment solely on the basis of cost. Additionally, gainsharing
agreements that promote buying consortia for advanced technologies are
acceptable but must provide equivalency in outcomes related to the use
of the product and include the proviso that providers continue to have
access to clinically appropriate alternate products which may be
considered superior.
The other model for gainsharing is very different, and we believe
this is the model for the future of P4P with the potential for savings
of a much larger magnitude. This is a model that I will refer to as
``Qualitysharing'' because quality must be the primary factor that
drives resource utilization management and cost containment in
healthcare through the development of cost savings models.
We know that medical complications lead to a higher cost of care
because complications are linked to prolonged hospitalization and
increased use of diagnostic and therapeutic interventions. As I
demonstrated in my testimony here in March, the highest quality
hospitals in our project were also those with the lowest costs. As
quality increases, complications--and therefore costs--are decreased.
Qualitysharing refers to the savings that accrue from improving quality
of care.
Qualitysharing does not create incentives to use inexpensive but
suboptimal resources. The quality of care is ensured through careful
development of the models and is measured prior to the sharing of
savings. We believe that qualitysharing can appropriately align
incentives between physicians, hospitals, and CMS to improve the
quality of care for all Medicare beneficiaries leading to reductions in
costly complications, the creation of quality guided resource
utilization, and the achievement of sustained savings. This should be
the ``Holy Grail'' of Value-Based purchasing. It will, however, require
the development of physician incentive programs that allow in the
sharing of savings generated by these QI efforts, a concept quite
different from the currently perceived gainsharing arrangements.
VCSQI Demo
I'd like to explain how ``Qualitysharing'' would have worked
through our experience, and why it ultimately was prevented from moving
forward by the Civil Monetary Penalty Laws and, with no offense to the
Ranking member, ``Stark'' laws.
In 2000, we had proposed a demonstration program that would achieve
savings through hospitals and physicians sharing data on outcomes,
cost, and best practices. The purpose was to increase quality and
contain costs in cardiac surgery statewide in the Commonwealth of
Virginia through an initiative called the Virginia Cardiac Surgery
Quality Initiative (VCSQI).
The VCSQI is a voluntary consortium of 16 hospitals and 10 cardiac
surgery practices providing open-heart surgery in Virginia. Hospitals
include four multi-hospital systems (one for-profit), two state
university medical centers, and 6 regional medical centers and
community hospitals. They perform 99% of Virginia's open-heart
procedures. The VCSQI was established through a grass roots, self
funded effort in 1996 with a mission to improve the quality of cardiac
surgical care on a statewide basis, contain healthcare costs, and test
reimbursement methodologies that reward quality improvement. It sought
to demonstrate that an inclusive collaboration between hospitals and
physicians would improve clinical outcomes across an entire state in
programs of all size through the sharing of data, outcomes analysis,
and process improvement driven by use of the Society of Thoracic
Surgeons (STS) National Cardiac Database. Its cost containment goals
were to occur through the creation of a unique IT platform, a database
linking clinical and financial outcomes. The VCSQI's intent was to
demonstrate that through a focus on quality, cost containment in
cardiac surgical care could be achieved through a reduction in
complications, improved efficiencies of care and reduced resource
utilization driven by explicitly defined savings models.
The VCSQI in conjunction with ARMUS Corporation developed a unique
clinical/financial IT platform. Clinical data from the Society of
Thoracic Surgeons (STS) Adult Cardiac Surgery database was mapped with
financial data from standardized hospital (Medicare Part A ``UB-92'')
claims files. These Part A, UB-92 files were further refined by
organization of 239 ICD 9 revenue codes into 21 Revenue Categories to
allow more definable hospital-to-hospital comparisons. Hospital
specific Medicare defined Ratio of Cost-to-Charges (RCCs) were then
applied to the charge driven UB-92 record to normalize charges and
create applicable cost profiles. Tracking of the financial impact of
quality improvement was, and currently is possible and forms the
cornerstone of many current VCSQI QI initiatives. A business case for
quality has been developed within the state.
In March 2000 an application to CMS for a demonstration project
(Demo) entitled ``Statewide Quality Focused Global Pricing for Cardiac
Surgery'' was submitted. The 3 year project was to combine Part A and B
payments into a single hospital specific global payment for cardiac
surgical DGRs, and would allow payment redistribution at the local
level based on physician performance as measured by quality metrics.
The intent was to create financial incentives for meeting quality goals
tied to clinical performance in open-heart surgery. The demonstration
was designed to align clinical and financial incentives between
hospitals and physicians while elevating the standard of care and
reducing costs. On the physician side, it provided a method for
physicians to remove themselves from the much-maligned Resource-Based
Relative Value System (RBRVS) through the use of Pay for Performance
models. For CMS, there was potential to reduce financial risk (outliers
included), stabilize payments for costly procedures, and reduce
administrative costs (simplified billing). On the hospital side there
was the potential to increase profitability by the application of
explicit savings models aimed at reducing resource utilization while
always maintaining a focus on quality. Patients benefited from
statewide access to high quality care and a single co-pay.
In early 2001, the VCSQI Demo application was introduced to
Secretary of Health and Human Services (HHS) Thompson who immediately
was in support of the project. Subsequent meetings with CMS
Administrator Scully and the Division of Demonstration Projects at CMS
occurred. Concurrent with these efforts the Institute of Medicine (IOM)
had issued its report on ``Crossing the Quality Chasm'' which described
exactly the VCSQI efforts to improve quality and ``better align current
payment methods with quality improvement''. Additionally on April 12,
2001 Reuters Health announced ``upcoming White House efforts to reform
Medicare are likely to include financial incentives to hospitals and
doctors who successfully--improve the quality of care''.
The VCSQI project gained tentative approval at CMS in March 2002
and final approval in November. Secretary Thompson announced approval
of the project to a standing ovation at the STS annual meeting in
January 2003. The project was temporarily derailed when budget
neutrality as defined by the Office of Management and Budget included a
post-acute care component that placed hospitals at-risk for financial
losses occurring beyond the hospitalization discharge DRG. An
acceptable risk model was eventually developed and the VCSQI hospitals
and physicians began an intense implementation design for the project
while the project was under review at the Office of the Inspector
General (OIG). Simultaneously, CMS was describing this project's
ability to ``achieve savings for the Medicare program through increased
efficiencies and, in the longer term, reductions in complications'' and
stating that ``the global payment will align financial incentives of
hospitals and physicians and give providers flexibility to allocate
resources as they determine appropriate''. In July 2004 CMS advised the
VCSQI that the Demo payment incentive plans would be a violation of
federal law. The Department of Justice maintained that redistribution
of a global payment by the hospital with incentives for performance
violated Stark Regulations and Civil Monetary Penalty laws. Although
told to proceed if desired, it was in the context of the statement that
the VCSQI ``would be in violation of the law but the department would
not prosecute''. Furthermore, we were simultaneously advised that any
other entity could file civil suit. This was occurring in the same
timeframe that a group of hospitals in New Jersey followed similar
advice and had their project halted by court order. This directly led
to the VCSQI hospitals and physicians collectively deciding not to
pursue any further efforts to implement the project. Despite widespread
support from HHS, CMS, and the entire state of Virginia, and in line
with IOM directives, a project that appeared to have ``all the right
stuff'' was dismantled by a federal agency.
Since that time additional voices have weighed in about the value
and efficiency of reducing the artificial barrier between Parts A and B
for some services. In a letter dated December 30, 2004 from MedPAC
Chairman Hackbarth to Vice President Cheney, he described the global
payment model as a solution to payment reform whereby ``the quality of
a surgery and its related pre--and post-surgical care could be measured
as a whole; and the hospital and surgeon would be held jointly
accountable. Combining hospital and physician payments would make it
possible for Medicare to reward good quality outcomes directly, and
leave it to the participants in the care to divide the reward among
themselves.'' The VCSQI model exactly!
Since the undoing of the VCSQI demo, Dr. David Brailer at the then
newly formed Office of the National Coordinator for Health Information
Technology had a high profile IT projected in metropolitan Chicago
halted by OIG on grounds of violation of Stark Regulations. At this
point red flags should be flying high for any private or government
agency wishing to embark on Pay for Performance or any other payment
reform methodology. An important solution, I believe, will be for
Congress to create carefully crafted leeway in the Stark and CMP rules
to remove barriers to implementation for similar projects. Exceptions
are needed that protect patient choice and quality of care, yet still
align incentives to accelerate quality improvement, reduce costly
complications, and develop patient centered, safe cost savings models,
all of which will work to achieve significant savings in healthcare
costs.
Future STS and VCSQI Initiatives
Where does that leave the VCSQI? VCSQI remains a collaborative
effort actively improving quality on a regional basis. In fact we are
leading the private P4P effort. We have entered into agreements with
the largest private insurer in the state, Anthem BC/BS of Virginia, to
utilize our STS quality data in a private P4P program. We hope to
continue to be a test bed for policy formulation/ payment reform in
cardiac surgery with a model that can be replicated nationally. Our
collaborative will continue to address the quality/ cost relationship
in an attempt to achieve cost containment through a focus on quality.
In fact, the VCSQI is the basis for a national pilot program that
the STS has submitted to Congress entitled ``Quality Focused Cost
Containment in Cardiac Surgery for Medicare Beneficiaries''. It is a
national program designed on the Virginia model with a blended STS
clinical and Medicare UB-92 financial database. It will focus on
quality improvement through the creation of regional collaborations
that will share data and develop and share national best practices.
Clinical performance will be based on the National Quality Forum
National Voluntary Consensus Standards for Cardiac Surgery, a project
that the STS was instrumental in bringing to fruition. Cost containment
will occur through the reduction of costly complications and the
development of cost savings models using quality guided resource
utilization management and measures of efficiency that are patient
centered and quality focused. Through this mechanism we hope to achieve
significant and sustainable reductions in Medicare healthcare spending.
Implicit will be the need to provide performance-based incentives to
physicians that are meaningful and can drive change. This will require
the sharing of Part A/B savings with CMS and hopefully between
hospitals and physicians consistent with the principles outlined
previously for ``QualitySharing''. We hope that CMS and Congress will
join us in another attempt to improve quality for Medicare
beneficiaries while reducing costs and ask respectfully for relief of
the legislative and regulatory barriers that we have encountered
previously.
The Future of quality improvement without incentives
This debate is really about where to locate incentives to
accelerate quality improvement in health care delivery. However, it is
impossible to have this debate without some suggesting that physicians
ought to improve quality without incentives, but rather because it is
what they do. I agree with those sentiments. I think the same ought to
be true of hospitals and device manufacturers and purchasing
consultants, but that is not the reality that we are living in today.
The STS has some strong feelings on this central topic that I must
share with you.
Through our STS National Cardiac Database cardiac surgeons have
improved quality by dramatically reducing mortality in open-heart
surgery. These reductions in operative mortality were achieved in the
face of dramatic progressive increases in the risk and acuity of our
patient population.
In the last two decades, the STS has taken the lead in objective,
data-centered quality improvement on a national level. We will continue
to do so with the resources available, but I must emphasize that:
1. Quality Improvement requires significant investments in time and
money. The much sicker patient population mandates increased resources
to provide safe care. The well-recognized quality improvements
associated with IT require significant capital investments. The STS
Database itself is an unfunded financial burden on an already strained
system. We can improve quality and we can reduce costs, but we can not
continue to do while the government continues reduce our payments and
undervalue our services.
2. Our financial resources are greatly diminished. We improved
quality over a period during which our Medicare payment rates were cut
by over 50%, and while our practice costs skyrocketed. Unfortunately, a
major consequence of these payment cuts has been an unsustainable
reduction in applicants to our specialty and the early retirement of a
large portion of our workforce. One third of our residency programs did
not fill this year. This is occurring at a time when the population
ages and the potential pool of Medicare beneficiaries in need of
cardiac surgery is expanding rapidly. By our estimates, we are on the
verge of an access crisis in cardiothoracic surgery--the specialty that
treats the top six causes of death in the country. Under the current
payment system you may witness the slow death of a specialty that quite
literally none of us can live without. The STS believes that under
``QualitySharing'' agreements meaningful incentives can and should be
provided to reverse this trend.
Furthermore, there is a related problem that now serves to prevent
cardiothoracic surgeons from continuing to improve quality and achieve
cost savings. As the IOM has pointed out, in high-risk surgery such as
open-heart surgery, having a consistent team in place in the OR is a
key to quality. Cardiothoracic surgeons currently employ such a team
and bring those team members to the hospital to give clinical
assistance. In 1999 CMS decided to remove the payment for these
clinical staff from the practice expense calculations. Very rarely do
hospitals pay for such a skilled team, and Medicare no longer will. In
fact, we have recently seen examples of hospitals charging the surgeons
to bring clinical staff to the hospital! This is a direct barrier to
our ability to improve patient outcomes, is counter to the IOM
recommendations, and more to the point, is directly in violation of the
BBA '97 language on practice expense.
Rather than compromise the quality of care, most CT surgeons
continue to employ these clinical staff at their own expense, and again
the costs are borne not by Medicare, not by hospitals, but by the
surgeons--who have no opportunity to share in the savings these staff
generate. For most, the improvement in lives saved is enough
compensation, but the cost of $50 to $100 million per year of
uncompensated expense in this specialty has further decreased
reimbursement making the specialty less attractive to trainees and has
furthered the reduction in applicants. ``Quality Sharing'' would allow
incentives that may once again maintain consistent teams for high
quality care in cardiothoracic surgery.
Current and future implementation potential
It is important to highlight that not all physician groups can
presently achieve quality-based savings. It requires the development of
a set of the most clinically relevant specialty performance measures
that must be vetted through the consensus development process at the
NQF as we have done with our NQF approved cardiac measure set. It
requires a database of clinical data mapped into Medicare claims data
with a high match rate. It requires not only process measures but also
outcome measures that use scientifically validated risk adjustment. And
it requires the will and determination of physicians, hospitals, data
managers, and Government. Most importantly, it requires the creation of
shared savings models that provide meaningful incentives to create
change. I must say CMS has been a tremendous asset to us, with
intelligent and well motivated people sharing our goals of striving for
ways to improve quality and simultaneously reduce costs. I am here to
tell you that it is possible, all we need is trust granted us by
government to create these models of care delivery and realize these
shared goals.
Since it is the goal of the Congress and CMS to one day have all
physicians electronically submit clinical data on their patient
encounters through EMRs, it is important that we undertake pilot
programs now with those who are prepared. Credible models must be
developed prior to implementing these payment systems for all
physicians in the future.
QualitySharing: the New Metric
In conclusion, the STS and its regional collaborations such as the
VCSQI have been involved in QI for the past 15 years. These
improvements have occurred in an era of declining reimbursements and
without incentive payments primarily because we feel that this is our
professional responsibility. I personally feel that the greatest
privilege society has given us as physicians is the ability to care for
patients. But on behalf of all physicians, as perhaps the primary
drivers of quality improvement, and hence health care savings, I must
ask a central question about gainsharing. Why should physicians, who
drive much of the ``gain,'' be the only group excluded from the
``sharing''?
In the current healthcare financing crisis, the STS now realizes
that our next greatest responsibility is the delivery of high quality
care in a fiscally responsible manner. Is traditional gainsharing a
partial solution? Possibly, if done properly. Is ``QualitySharing'' a
more complete solution? Most definitely, but it will require the
development of shared savings models that are quality focused, patient
centered and safe and that will hopefully lead to reductions in
healthcare expenditures and the stabilization of the Medicare Trust
Fund. To date, current laws have stifled innovation in healthcare
reform and prevented the implementation of some of these more unique
programs. Perhaps it is time for a change. ``QualitySharing'' appears
to be the right thing to do, at the right time, and for the right
reasons.
Thank you for this opportunity and your attention this morning.
Chairman JOHNSON. Thank you very much, Dr. Rich. I have
basically two questions that I want to bring to people's
attention. Mr. Emerson, in your testimony you clearly state
what others have raised concerns about; that gainsharing could
have an especially negative impact on small companies and could
eliminate important choices for doctors and patients. You go on
to state that gainsharing would place an additional barrier to
the adoption of smaller companies' devices, and would create an
anti-competitive marketplace where the largest manufacturers
would have a significant advantage. Now, isn't it true that in
today's world hospitals negotiate with device manufacturers and
agree and develop purchasing contracts where larger device
companies provide reduced prices to hospitals that promise 70
to 80 percent of annual revenue from device-related procedures;
that 70 to 80 percent of the annual revenues will go directly
to that company's devices? Aren't there a lot of things going
on right now between device manufacturers and hospitals that
are clearly barriers to smaller companies getting their devices
onto the market, clearly barriers to competition?
Mr. EMERSON. Madam Chairman, I would agree with your
statement. But I would draw one clear distinction between an
era of gainsharing as it is currently being discussed, and the
era that we live in today. What we live in today as a small
company is, yes, we have significant hurdles in front of us;
but when we bring innovation to the market, we always know that
we can count on physicians to be an advocate for that
technology. The concern I would have in an era of gainsharing
is that we have put the physician on the other side of that
advocacy equation. As we move forward as a small company trying
to bring innovation to market, who at a hospital will we find
that we can hope to look for a friendly ear, who will be
looking to advocate for patient care and new technologies?
Certainly, we have competitive issues today; but the
competition, in and of itself, is not bad.
Chairman JOHNSON. Well, it is these controlling contracts
that I think are very concerning. If 80 percent of the revenues
from device-related procedures will be directly tied to the use
of that company's devices, you have really closed a lot of the
market to any other competitor, large or small. But the other
thing I wanted to mention, too, is in terms of the doctor being
an advocate, unfortunately, we are seeing more and more
evidence that the doctor is an advocate because the doctor gets
a cut. So, we can't answer this one way or another. I know you
don't condone that, but I think to notice that the way devices
are marketed now does not assure either physician choice or
patient choice--nor does it assure easy access for small,
innovative companies--is important. You know, the heart of this
matter is exactly what Mr. Imparato said. The heart of this
matter: Is this going to be a more doctor-centered system, or a
less doctor-centered system? Is it going to increase the voice
of physicians in the running of hospitals? Now, when I sat with
Mr. Carter's people, doctors and others, at first the doctors
didn't believe this was going to give them any more. So, I want
you to talk about--those of you who have tried it, Dr. Rich Mr.
Carter Ms. Goodroe, who have had experience--at first, doctors
are suspicious. At least, that has been my experience.
You have been in this a long time, Dr. Rich, over many
years now. What happens? Why is it doctors change their
attitude? What happens afterward? What are the systems
consequences of the attitudinal changes that take place, when
you really can work together for quality Cost, but cost is
secondary to the quality changes that take place? Now, that is
my impression. So, I want you to either affirm or deny. Don't
feel uncomfortable denying. Remember, my knowledge is about as
big as a thimble. So, why don't we start from the left. Ms.
Goodroe, would you comment on this issue of systems change in
quality and doctor control? Because that is at the heart of
this whole thing.
Ms. GOODROE. There is a lot of misunderstanding when people
think that the technology is going to be withheld. If anything,
the opposite happens. What you have are physicians finally,
under these economic arrangements, physicians working together
to look to see what is the best quality. Then, how do you apply
costs to that? How do you figure out how to get the physicians
all going in the same direction to get the best quality? That
turns around to be less cost. So, it is not about not putting
in something. Matter of fact, there is no reward if you don't
put in an internal defibrillator that we heard earlier. A
defibrillator would be that you would look at the options of
the types of defibrillators you would put in. Is it right to
put in a single chamber versus a dual chamber that has a huge
price difference? Then, you have a lot of different vendors.
So, it is not about ever the technology not being available.
There is no reward for that, whatsoever.
Chairman JOHNSON. Mr. Carter?
Mr. CARTER. Madam Chairman, we actually have seen a
tremendous amount of collaboration between the physicians and
the administration. I think what happened, as you found when
you visited our State, there was a concern: what was the
agenda? But once we explain we are trying to improve the
quality of care through discussion about the way in which we
are doing it--as Ms. Goodroe said, at the beginning, your
physicians are trained by a variety of different teachers; have
different techniques of doing things. The whole staff could be
trained by different physicians and all have a unique way of
doing it. Once we got together and talked about a better way of
doing it from a scientific standpoint, there was great
collaboration. We weren't allowed to proceed, because of
litigation, but there is still interest in improving this by
working together.
Chairman JOHNSON. How did you select medical devices? You
say in your testimony that it was an evidence-based selection
and purchasing process.
Mr. CARTER. What we did was, we brought together the
physicians and asked them what was the best approach to this.
It wasn't a CEO-driven issue or a CFO-driven issue. It was the
physicians talking about what they thought was the best
technique for the patient.
Chairman JOHNSON. Could they have a range of choices?
Mr. CARTER. Yes.
Chairman JOHNSON. If they decided they wanted something
that wasn't on the shelf, could they get that?
Mr. CARTER. Yes.
Chairman JOHNSON. They were not in any way dinged, in terms
of their payment, if they used devices that were not part of
the original plan?
Mr. CARTER. Well, again, it was all outcome basis. So, with
the patient, if there were no complications and they were
discharged in a timely fashion, then there was no ding, as you
call it.
Chairman JOHNSON. Yes. I meant to bring this up earlier,
because a big point was made of how voluntary this is, both on
the institution's part and on the doctor's part; that is very
important; That you can come in or you can go out, You have
control over that. But in terms of payment, are the doctors all
paid the same?
Mr. CARTER. I honestly cannot remember how they were done.
I think it was individual-based, but I can't remember for sure.
Can I just turn around and look at somebody?
Chairman JOHNSON. Yes.
[Pause.]
Mr. CARTER. It was individual-based.
Chairman JOHNSON. Okay. Dr. Rich?
Dr. RICH. For us, collaboration with the hospital has been
incredibly important. I will speak from my own personal
experience at Sentara Health Care, where we put together
collaborative arrangements between cardiologists, cardiac
surgeons, The hospital administrators a decade ago. The focus
of those collaborations was, and always will be, quality
improvement. It was designed to bring people together to
continue to improve quality, with the realization that by
improving quality we could reduce complications and potentially
save money for the system. We used that model in the private
sector, and had enormous benefit from it. We had no restriction
to any technologies. The determinations of the results of the
program on quality and on the financial side were all done at
the programmatic level, so no physician was ever stopped from
using any technology. Every technology was available. There
were, of course, groups put together that looked at perhaps
picking three valves, or three devices that would be the
preferred devices; but never any restriction beyond that in
terms of being able to obtain technologies.
Chairman JOHNSON. But what you were able to do in the
private sector, you were not able to do in the public sector?
Dr. RICH. No. This is just a model that we used for our
demonstration project. Basically, the restrictions were put on
us through these current laws that said that any redistribution
of payments--in our payment mechanism, there was a pay-for-
performance mechanism that we developed with variable payment
rates to physicians Surgeons. We went at-risk as well as at-
benefit, so we could potentially reduce our payments on any
annual basis. The problem was that the interpretation of the
law said that one penny above our medical allowable charge in
an incentive program violated these laws.
Chairman JOHNSON. Right.
Dr. RICH. Despite focusing on quality, providing absolute
improvement in quality, monitoring of quality, and
accountability through public reporting.
Chairman JOHNSON. Okay. Those of you who have had
experience in this, we have a premiere hospital demonstration
that is electing to meet a far greater number of quality
criteria--I think it is 62, or something--than the 12 required
under the law. We are looking to see what are the consequences
of this. What we are finding is that there is a dynamic that
happens when you reach the 62 that doesn't happen when you
reach the 50. A dynamic that results from closer collaboration,
mutual respect, broadening of the team, so on. So, are you
seeing that? Can you measure that, Ms Goodroe?
Ms. GOODROE. That is exactly what you are seeing, is a
collaboration between hospital and all the different physician
colleagues. Right now, everybody is working very independently,
on their own. These types of economic alignments bring all
physicians together, and the hospital together with the
physicians. It is all based on data, looking, discussing
things; instead of people doing the things they think work
best, which may get a quality outcome but you are going to have
a huge cost differentiation, and that is why there is so much
waste in the system right now.
Chairman JOHNSON. So, you actually can measure specifically
what they are doing? For instance, if they get together and
discuss the way one person is working, another person, what the
protocols are in that discipline?
Ms. GOODROE. Yes. I will give you an example. Every surgeon
sutures differently. They use different lengths, types,
everything. Now, those are $1, $5, $10 items that can cost
millions of dollars at the end of the year. They will sit down
and discuss, ``Well, why do you suture that way? Why do you
suture this way? What is good about this? What is the best
way?''
Chairman JOHNSON. They never did that before?
Ms. GOODROE. Never. It is not in the literature. They have
never discussed it. It is truly in this very artistic way the
physicians have practiced.
Chairman JOHNSON. Yes, Dr. Rich?
Dr. RICH. Yes. We did exactly that. I would say, you know,
we talk about standardized treatment protocols; we developed
within the system standardized practice protocols. Those are
exactly as Ms. Goodroe described. Tracking quality and tracking
outcomes is important, and we do this through the Society of
Thoracic Surgery database. We blended it with the UB-92
database, the Medicare claims database, so that we can actually
look at the impact on quality.
Chairman JOHNSON. Let me call myself to a halt, because I
am over my time I want the others to have a chance before we
have to adjourn at 12:00. But both of you have databases. I
think I have to point out from your testimony that the burden
of these databases is almost greater than any one organization
can bear. That is another reason why you really have to have
collaborative efforts. But technology and measurement are at
the heart of what you have been able to do. Mr. Stark.
Mr. STARK. Thank you, Madam Chair. Dr. Rich, have you ever
opened a bag of charcoal briquettes?
Dr. RICH. Yes, sir.
Mr. STARK. You know if you pull that string, sometimes, if
you get the right string, the whole top comes right off, and if
you don't get the right string, you sit there and pull? Can you
assure me--I can't look at my latest wound here in public, but
can you assure me that they never used those stitches on me?
Dr. RICH. Yes.
Mr. STARK. Okay. I feel much better. I will pull on this
string.
[Laughter.]
Mr. STARK. Actually, I want congratulate the thoracic
surgeons.
Dr. RICH. Thank you.
Mr. STARK. In pedestrian parlance, you were back here in
March, suggesting to us that, while you thought pay-for-
performance had its good qualities, we weren't ready for it
yet. I think I am going to hark back to your testimony. This
excludes the thoracic surgeons, but for the most part, most
specialties don't have the database, the outcomes research that
your specialty has built up, I think over the last 5 or 6
years--which may be long enough or not. But I think what you
indicated is that we need more information More database to
effectively do pay-for-performance. I am further advised, or
guess, that the anesthesiologists may be the one other
specialty besides the thoracic surgeons. This was to defend
themselves from malpractice, but I don't care why. But at any
rate, they have gathered a great database on anesthesia
procedures that they have found have saved lives and been more
efficient as they worked on this. Is it fair to suggest that
there aren't any--at least, I am unaware--specialties,
procedural specialties, that have done as advanced research and
building a database as you and the anesthesiologists?
Dr. RICH. Actually, the cardiologists have a very
sophisticated database.
Mr. STARK. That is separate? That is different from
thoracic?
Dr. RICH. Yes.
Mr. STARK. Okay. But don't we need that across the
procedural specialties to really accomplish any kind of
measuring of quality? Don't we need to collect more and more
sophisticated and detailed databases and outcomes research?
Dr. RICH. Yes. Absolutely.
Mr. STARK. Thank you. That, I think, is key. Also, I want
to congratulate you. Again, in your testimony, slipped in here
someplace, you suggest that you think that it is impossible to
have this debate that we are having today without some
suggesting that physicians ought to improve quality without
incentives, but rather because it is what they do. I think that
is a very good statement, because I notice that Ms. Goodroe
suggests that there is no incentive for physicians to change
their practices. I just go down the list, other than dollars:
professional recognition; pride; successful treatment of
patients; psychic remuneration; for those of you who care,
under this faith-based Administration you get brownie points
from Saint Peter. All kinds of incentives out there.
[Laughter.]
Mr. STARK. So, I would just like to suggest that there are
incentives other than dollars. Then I would like to talk with
Mr. Carter and Mr. Fine. I was up early this morning reading
``Pig Will and Pig Won't.'' I suspect, unless your children are
very small like mine, you haven't read ``Pig Will and Pig
Won't'' lately. You can skip it. But you guys remind me of
that, because both of you in your testimony say--Mr. Carter
says, ``Finally, while specialty hospitals don't exist in New
Jersey, the New Jersey Hospital Association does not view the
implementation of this project as a reason to lift or ease
current efforts to implement a moratorium on specialty
hospitals.'' Mr. Fine, you suggest that you don't substitute
action in this area for the much-needed ban on physician self-
referral to limited-service hospitals. Gentlemen, we don't have
time in my allotted time, but I am going to submit to you that
there is no difference; that this gainsharing is just the
camel's head going into the tent of specialty hospitals. The
only difference is a matter of degree. Some legal basis to make
that statement is that if we allowed the gainsharing, we would
just open the doors to specialty hospitals, and for general
acute care hospitals this could be financially disrupting. I am
one to say that is up to what the hospitals want to do. I am
not going to tell you how best to organize. But I just want you
to think carefully. I mean, I would want to get the savings
back for Medicare that you guys think you would get, and not
let you give it to the doctors. You don't like that idea. But
the other side of it is, you may just open the floodgates to
specialty hospitals, because there isn't much difference. It is
only in degree Intensity. So, go back and think about that with
your members and colleagues, Think how much you really want to
share all these savings with the docs. I yield back.
Mr. FINE. Well, may I offer a comment concerning that?
Mr. STARK. Oh, sure. I would love to hear it.
Mr. FINE. I believe my comments spoke not only about
limited-service hospitals, but limited-service providers. In my
region in southeastern Pennsylvania, we have a vast number of
private endoscopy centers, private imaging centers, things of
that ilk. We, like in Mr. Carter's state, do not have specialty
hospitals of the types referred to.
Mr. STARK. Right.
Mr. FINE. We certainly have rehab hospitals like Children's
Hospital.
Mr. STARK. But Mr. Fine, it is the same thing. It takes the
high-profit, high-margin services out of your members'
hospitals, and sets them over here where there is more profit
to be made. That is profit that you have to use in cost
shifting to pay for the emergency room or whatever is the least
profitable part of your members' services.
Mr. FINE. We have no ability to work with members of our
medical staff to try to come out with something that addresses
both of our needs. They are now incented to construct these
freestanding facilities and skim the cream and leave us dealing
with the more complicated higher----
Mr. STARK. To the credit of the physicians, most of those
things are promoted by the ``Shylocks'' of the medical care
promotion industry, who are neither hospital administrators nor
physicians, but people out there creating a good--they are
entrepreneurs of a sort. It is something you guys have to deal
with. I don't have any answers. But I mean, the question I am
only saying is, do you really want to cannibalize the whole
hospital, and put the emergency room here and the birthing
center there and the acute care center there? Traditionally,
you have kept it together for cost shifting. That is a
discussion I think needs to go on before we just open the gates
to letting people cannibalize the various procedures within.
Mr. FINE. Yes, we would certainly enjoy working with you
and your staff to pursue that further.
Mr. STARK. Great. Talk to the Chairman. She is the one in
charge around here.
Chairman JOHNSON. Mr. Ramstad.
Mr. RAMSTAD. Thank you, Madam Chair. Mr. Imparato, first of
all, I want to thank you for your kind words and for the
privilege, really, of working with you and your group, the
American Association of People With Disabilities. Both Jim
Langevin, my colleague and friend from Rhode Island, I, and the
rest of our bipartisan Disabilities Caucus really enjoyed it
and appreciated working with you and your group. My first
question for you, Mr. Emerson, if you will, please, as all of
you know, the Committee is considering proposals to ensure,
really, that Medicare genuinely receives value for the
physicians' services that it purchases. Hardly an Earth-
shattering concept, and certainly a worthy one, an important
one. But again, the devil is in the details. In determining
value, these proposals must rely on quality and efficiency
measures selected through a careful consensus-based review
process based on recommendations of physician specialty
services--or societies, rather. Various societies determine the
standards. Now, if gainsharing were implemented, wouldn't it be
problematic--or irresponsible, really--to subject patients to
possible cuts in services that haven't been similarly reviewed;
that is, that haven't gone through the same careful review and
selection process based on the judgments of national specialty
societies or a consensus of the peer-reviewed literature? Is
that a different standard?
Mr. EMERSON. Yes, Mr. Ramstad, it would be difficult. One
of the challenges facing the health care system today is the
disparity of data across different disease states and different
specialties. There are clearly some disease states and some
specialties where the data is well understood and the dataset
is very solid; which can lead to a fruitful conversation as to
the ultimate goal of delivering better patient outcomes. Across
different specialties, and quite honestly in areas where we are
talking about introducing new technologies, by definition, the
dataset isn't as robust. So, one of the challenges then in a
gainsharing environment would be, how would those new
technologies be assessed from a perspective of being able to
deliver the innovations that we believe they will deliver? I
think the outcome of that would be patients running the risk,
again, of not having a physician advocate on their side, in
terms of trying to bring forward new technologies as a way of
bettering outcomes.
Mr. RAMSTAD. Well, those are pretty important caveats, and
certainly my concerns, as well. The other question I have is
for you, Ms. Goodroe, if you please. You have publicly talked
about the rise in acquisition costs of devices in coronary
stenting procedures, and the increase in total costs per
procedure. This is a little bit puzzling to me, and perhaps you
can help me understand. My understanding is that the newer
drug-eluting stent products have resulted not in increases, but
in substantial reductions in the need for retreatment and
hospital readmissions caused by rhestinosis. In addition,
according to the literature I have read and the studies that I
have seen, the newer devices have really become more
sophisticated. Doctors are dealing with more complex cases that
previously would have required more invasive, and therefore
more expensive procedures; more expensive, more invasive
surgeries. For example, people like my dad, who had a blockage
in the left main artery, or multiple arteries, and require more
stents per procedure. Diabetics is another example, with
multiple problems; and others. Do you, when you make those
statements, acknowledge those factors?
Ms. GOODROE. Yes, sir. Our technology measures cost,
quality, and utilization. You are referring to studies that
were very small studies that were to the approval of those
devices. Our technology actually captures data on every patient
that had a stent procedure. We look at how those stents were
used What happened. An example is when drug-eluting stents were
released about a year and a half ago, the cost of the stents
was very, very high for drug-eluting. They actually came down
when another stent came on the market that offered the same
thing. But the cost per case went up immensely over the last
year and a half, even though the price came down. Our database
can show that the physicians started utilizing more devices per
patient; that right now, out of our database--and we are hoping
now to get these studies published; we are working with
Stanford University and others on it--it is showing that you
can't measure a benefit from that increase in cost. That is our
problem right now. It is that we use technologies without
evaluating where we are getting the benefits. I am the first
one that is for new technology. We need the best technology for
patients. But we have got to make sure that we put an incentive
in there that people study how these technologies are really
being utilized. The initial studies that look at the
effectiveness of this are not enough. Because the effectiveness
has nothing to do with how those devices are really used once
they come into the market.
Mr. RAMSTAD. Well, I think your assertion that you cannot
quantify--not to use your words, but to use my words--cannot
quantify a benefit from the increase in costs, I am not sure
all the literature, all the studies would support that.
Ms. GOODROE. We are working on studies right now that there
has been a $4 billion increase in costs based on drug-eluting
stents, alone. We are working on studies right now--that have
not been accepted yet, but we are looking at it--that will look
at what kind of benefit there has been.
Mr. RAMSTAD. How many people's lives have been saved, like
my dad's life, in that expenditure? How many people's lives
have been enhanced so they can function?
Ms. GOODROE. It is interesting because it----
Mr. RAMSTAD. I hope your studies measure----
Ms. GOODROE. Yes, that is what we----
Mr. RAMSTAD. --the human value, as well.
Ms. GOODROE. Yes. We are looking at that. Rhestinosis--and
the cardiac surgeon probably could answer this the best--but
rhestinosis does not often result in death. Rhestinosis does
send you for another procedure, but not often in death.
Mr. RAMSTAD. I see my time is up. Thank you, Ms. Goodroe,
and thank you to the rest of the panelists, too. We appreciate
your input counsel.
Chairman JOHNSON. I certainly take my colleague from
Minnesota, Mr. Ramstad's, concerns very seriously. I do think
if we had more time for dialog around this issue we could get a
clearer public understanding of what has to be done to assure
that physician choices aren't limited and that patients aren't
denied access to the technology they need; while at the same
time hospitals aren't compelled to stock devices that are
roughly similar. I mean, there are now in the device group,
like there are in the pharma area, medications that are very,
very similar. It doesn't mean you might not want a different
prescription drug than the one covered by your plan. You have
to have access to that. But I think we are losing sight of the
degree to which the environment of technology has changed, like
the environment of pharmaceutical therapeutics has changed in
the last five to 10 years. We do have to get a physician-
controlled process, just like in the physician payment system;
the physicians control the clinical data that may be selected
for their quality standards.
So, this is a new world. We hope to work this in a way that
you all are going to be at least relatively comfortable with
the outcome. But it is a time of change. My point in asking the
question of Mr. Emerson is that the change has happened. It is
going on. We can't even see it, It is having some of the very
effects that Mr. Ramstad is concerned about. So, to do nothing
is to let it all happen pell-mell. To do something is to give
some form and structure that results in public accountability
and quality. This is actually not about money. It is about
quality. It is about relationships. It is about a dynamic of
quality that is parallel to what happens in continuous
improvement in other parts of the economy and cannot by law
happen in health care. So, we look forward to working with all
of you, as well as Mr. Stark and his staff. He does have a
different point of view. He certainly has legitimate concerns.
But it is true, the world has changed. My hope is that we can
help Medicare keep pace with the quality changes that the
delivery system now has an opportunity to realize, for the sake
of the patients. Thank you.
[Whereupon, at 11:58 a.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of Joane Goodroe, Goodroe Healthcare Solutions, Norcross,
Georgia
Presentation Summary
Drug-eluting stents quickly replaced bare-metal stents as the
arterial revascularization device of choice because trials show that
in-stent restenosis is markedly reduced with the new device. Most of
the available data comparing drug-eluting stent (DES) to bare-metal
stents (BMS) arises from randomized trials designed for the purposes of
gaining FDA approval.\1\
In our current outcomes analysis of nearly 17,000 bare-metal stent
patients we found that, prior to DES release, population-level stent
outcomes were markedly better than those reported in the control arms
of the FDA-oriented randomized trials. Consequently, reliance on the
trials results substantially overstates the magnitude of the clinical
problem that DES are designed to reduce. The potential for improvement
in post-stent outcomes with widespread DES use in our population is
markedly smaller than reported by the randomized trials. We expect that
the cost-effectiveness of new stent technology adoption in this
population is much less attractive than the FDA-oriented trials would
suggest.
Reimbursement and policy decisions for technology adoption based on
the outcomes reported in the FDA-oriented trials of emerging therapies
may not align with decisions that would be made if population-level
analyses were used to assess the opportunity for outcomes improvement.
Our goal is to provide information and analyses that are useful to
policymakers and to both clinical and reimbursement decision makers. We
welcome your feedback and questions.
Background
The major health and economic consequence of in-stent restenosis is
symptom-driven repeat revascularization, usually treated with
additional percutaneous coronary intervention (PCI).\2\ Rapid
acceptance of drug-eluting stents (DES) was based on evidence that they
reduce bare-metal stent restenosis by as much as 75%.\3,4\
However, in-stent restenosis is just one cause of recurrent angina
after stenting, and the proportion of all subsequent procedures that
might be averted with restenosis prevention is uncertain. Because
coronary artery disease is progressive in nature, many patients require
additional procedures to relieve symptoms caused by newly symptomatic
lesions even when the initially-stented segment remains fully patent.
Cutlip et al analyzed 5-year follow-up data for 1,288 randomized stent
trial patients and observed that after the first follow-up year the
hazard rate for target lesion events (including death, infarction, and
revascularization) was 1.7% while that related to non-target lesions
was 6.3%.\5\ Accordingly, we examined bare-metal stent outcomes in
unselected patients during a period immediately prior to the market
release of DES to identify the relative clinical importance of stented-
segment lesion recurrence (restenosis) and development of other
arterial lesions.
Methods
The data analyses described herein were conducted in compliance
with the Privacy Rule contained in the Health Insurance Portability and
Accountability Act of 1996, and with approval from the Stanford
University Panel for Human Subjects in Medical Research.
We examined combined data from 17 hospitals that use
CathSourceTM Enterprise software (Goodroe Healthcare
Solutions, LLC, Norcross Georgia) for cardiac catheterization
laboratory data management. Contributing hospitals were geographically
distributed throughout the United States and submitted all their
cardiac catheterization records to the Goodroe Data Warehouse every 3
months. To ensure accuracy, an automated rules engine validated the
clinical and device usage data. We were able to observe patients who
returned to the catheterization laboratory for any reason after initial
stenting and the details for the procedures they received after the
index procedure. The database does not include information about
clinical events that occur outside of the catheterization laboratory,
and so we cannot report the rates of stroke, out-of-lab mortality. Nor
are we able to observe subsequent procedures done in laboratories that
do not submit data to the Goodroe Healthcare Solutions Warehouse.
Analysts at the Warehouse reviewed the procedural data collected
for all patients who underwent PCI to identify patients who received
bare-metal stents between December 1, 1998 and March 31, 2003. Patients
who underwent atherectomy or brachytherapy were excluded. Patients
whose PCI records did not include physician-entered data describing the
stented arterial segment, or lesion type and severity were also
excluded. We reviewed the data-harvesting pattern from all sites to
ensure that the Warehouse received data from that site for at least 9
months subsequent to each index procedure date. Unique patient
identifiers were employed to search the database for evidence of repeat
PCI or diagnostic catheterization up to 365 days following the index
bare-metal stent procedure. Angiographic data from any subsequent
catheterization laboratory procedures were examined to determine the
anatomical targets of repeat PCI, or diagnostic catheterization results
that advised coronary artery bypass surgery (CABG) referral.
Angiographic data were collected in accordance with guidelines set
forth by the American College of Cardiology National Cardiovascular
Data Registry (ACC-NCDR).\6\ Recurrent coronary artery lesions were
defined as those with 50% lumen diameter reduction at the time of
subsequent diagnostic catheterization, or those in which repeat PCI was
performed regardless of percent stenosis. The arterial segment in which
a bare-metal stent was placed is called the target segment, or stented
segment.
The records for all stent procedures subsequent to the market
release of DES were examined to illustrate the dissemination pattern of
the new technology. We calculated the average device acquisition cost
for single-vessel stent procedures in aid of observing the economic
effect of DES adoption.
Results
Of 16,950 patients, 63.5% were male and the average age was 64.3 (
12.2 years). Previously untreated (denovo) lesions were the sole
therapeutic target of the index stent procedure in 94% of the patients,
and 87% of the procedures were single-vessel treatments.
Diagnostic catheterization was performed on 3,623 (21.4%) of the
patients between 9- and 12-months follow up follow-up year, Table 1.
One third of those angiograms resulted in medical management
recommendations without further revascularization. Subsequent PCI was
performed in 2,070 and CABG was recommended for 209, for a total of
2,158 patients (12.7% of the cohort), including 144 patients who had
both repeat PCI and subsequent CABG referral. The average time from the
index stent procedure to the first (or only) repeat PCI was 114 91
days.
Table 1. Follow-up diagnostic catheterization recommendations
n % of cohort
Diagnostic catheterization within--365 days 3,623 21.4
Unique patients with repeat PCI
Subsequent PCI performed 2,070 12.2
PCI referral but procedure not observed in 118 0.7
databank
Unique patients with any CABG recommendation 209 1.2
Medical management or non-cardiac 1,253 7.4
recommendation
Diabetes (28.1%) and hypercholesterolemia (with or without statins,
47.3%) were more common, and the average number of lesions 50% was
higher (2.24) in patients who required follow-up PCI than in patients
for whom we observed only one stent procedure (23.2% diabetes, 44.3%
hypercholesterolemia, 1.78 lesions 50%). The rate of subsequent PCI
was lowest, 8.2%, for patients with single-segment disease who
underwent single-segment stenting at the initial procedure and highest,
15.3%, for patients with multi-segment disease and who underwent
initial multi-segment stenting, Table 2.
Table 2. Subsequent PCI rate by disease burden and extent of index
stenting
Disease burden at time of index procedure
Single- Multi-
segment segment
Segments stented
Single 8.2% 14.4%
Multiple 13.9% 15.3%
Patient-level analysis of follow-up procedures
We examined the anatomical target of repeat revascularization for
2,158 patients with observed follow-up PCI or diagnostic
catheterization that resulted in CABG referral, Table 3. Target vessel
revascularization (TVR) was documented in 1,584 patients (9.3% of the
cohort). However, 624 (39.3%) of the patients who required TVR also
underwent PCI to relieve lesions in previously unstented arteries or
had other lesions identified for CABG. Stented-segment (stent plus
peri-stent margins) revascularization, with or without treatment of
other lesions, was documented in 1,194 patients (7.0% of the cohort).
Of the patients who required target-segment revascularization 65.7%
also underwent either PCI or were referred to CABG with lesions ( 50%)
in previously untreated arterial segments. Target-segment
revascularization was the sole indication for repeat revascularization
in 409 patients, or 2.4% of the cohort. Almost half (964, or 44.7%) of
the patients who required subsequent revascularization did not have
recurrent lesions within previously-stented segments at the time of
their follow-up procedure.
Table 3. Anatomical site of subsequent revascularization, patient level
n %
Patients with repeat PCI data or CABG 2,158 12.7
recommendation
Patients with any target-vessel 1,584 9.3
revascularization
PCI 1,375 8.1
CABG 209 1.2
Revascularization limited to target vessel 960 5.7
Combined target and non-target vessel 624 3.7
revascularization
Revascularization limited to non-target 574 3.4
vessel
Patients with any target-segment 1,194 7.0
revascularization
PCI 1,037 6.1
CABG 157 1.0
Revascularization limited to target segment 409 2.4
Combined target and non-target segment 785 4.6
revascularization
Revascularization limited to non-target 964 5.7
segment
Anatomical analysis of follow-up PCI procedures
Within 1-year follow up after index stenting 2,070 (12.2% of the
cohort) patients underwent further PCI. One additional PCI procedure
was observed for the majority of the returning patients (1,741, 84%),
while 329 patients returned to the catheterization laboratory for
further intervention more than once (2x 255 patients, 3x 58 patients,
4x 11 patients, 5x 5 patients). In sum, we observed 2,494 subsequent
PCI for the 2,070 returning patients. For the 2,494 subsequent PCI
procedures, the anatomical revascularization target was the initially
stented segment in 31%, other arterial segments not treated at the
index procedure in 54%, and both the stented segment and other arterial
segments in 15%. Hence, 46% of the follow-up PCI procedures included
any intervention to the initially stented arterial segment.
We observed a concentration of non-stented segment PCI within 8
weeks after the index stent procedure, constituting 18% of all follow-
up procedures, Figure 1. Same segment PCI within the first follow-up
month accounted for 3.4% of all comeback procedures and 10.9% of all
same-segment reinterventions.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
OS = arterial segment other than that stented at the index
admission
SS = the same arterial segment that was stented at the index
admission
Both = both the stented segment and other arterial segments treated
at comeback PCI
In April of 2003, the first DES was FDA approved and within a few
weeks 50% of all stent procedures performed in the Goodroe network
involved DES. With approval of a second brand of DES in March of 2004
the dissemination of this technology proceeded further. In this network
more than 90% of all stent procedures currently involve DES use and
approximately 80% of all stent devices used are DES, Figure 2.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Figure 2. Drug eluting stent adoption from March 31, 2003 to December
31, 2004.
For patients who underwent elective single-segment stenting (as
seen in 82% of this cohort), the catheterization laboratory acquisition
costs for devices used in single-segment stent procedures (including
guidewires, catheters and stents) increased 27% between the second
quarter of 2003 and the end of 2004, Figure 3.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Figure 3. Device acquisition costs for single-segment, non AMI setting
stent procedures
Stented segment revascularization was indicated in 55% of the
patients who underwent additional PCI or who were referred to CABG.
However, improved restenosis prevention with use of DES would have
averted only some of those repeat procedures because 65.7% of the
patients who required target-segment revascularization also had
intervention in lesions in non-stented arterial segments. Just 7% of
this bare-metal stent population returned to the catheterization
laboratory for any repeat PCI to treat an arterial segment that had
been previously stented with a bare-metal stent.
The randomized DES trials report substantially higher event rates
subsequent to bare-metal stenting than those in this longitudinal
study. In the Sirolimus-Eluting Balloon Expandable Stent in the
Treatment of Patients With De Novo Native Coronary Artery Lesions
(SIRIUS) trial, the target-lesion revascularization (TLR) rate for the
bare-metal stent subset was 20.0%,\4\ compared with 7% target-segment
revascularization in our bare-metal stent cohort. In one of Boston
Scientific's paclitaxel-eluting stent trials, TAXUS IV, the one-year
TLR rate was 15.1%.\5\ This rate is also substantially higher than the
rate for observed target-segment reintervention in our series. Routine
angiography is known to result in higher follow-up PCI rates than are
observed in patient cohorts without angiographic follow-up
assessment.\7\ Because the DES trials performed for FDA approval
incorporated mandatory angiographic follow up, we would logically
expect the subsequent PCI rates to be higher than would be the case in
practice settings in which follow-up events are symptom driven.
Kimmel reported a 6-month repeat PCI rate of 9.9% in 1,240
consecutive patients who received stents in the later part of 1995.\8\
Based on chart review, Kimmel estimated that 85% of those follow-up PCI
procedures were performed to treat restenosis. Recently Clark et al
reviewed 1998 Medicare claims data in 9,868 PCI patients predominantly
treated with stents, but including other forms of PCI. Compared to the
Goodroe cohort, the Medicare patients were older (73.4 versus 64.3
years) \9\ and contained a larger proportion of diabetics (33.8% versus
24.1%). The one-year repeat revascularization rate in the Medicare
population was 16.9%, compared to 12.7% for the stent patients
described here. Clark applied the 85% finding from Kimmel's work to
their observed revascularization rate to derive an estimated clinical
restenosis rate of 14.4%. However, since 1998 stent design evolution
has resulted in improved stent patency rates, and those improvements
could be reflected in the lower follow-up event rates in our study. In
two trials of bare-metal stents, Baim et al \10\ reported 9-month TLR
rate of 7.7% and Serruys et al \11\ observed that 7.0% of the patients
underwent 9-month TVR. Our angiographically based findings are more
aligned with these more recent stent trials: The one-year target-
segment revascularization rate was 7.0% and the TVR rate was 9.3% in
our cohort.
Clinical progression of coronary lesions accounted for repeat
procedures in 5.8% of the PCI patients studied in a recently published
report from the National Heart, Lung, and Blood Institute Dynamic
Registry.\13\ We observed that 5.7% of the patients in this series
underwent subsequent PCI solely to treat lesions other than those
stented at the time of the initial PCI. Additionally, 4.6% of the
cohort received subsequent PCI to treat both the initially stented
segment and lesions in other portions of the coronary anatomy and 69%
of the follow-up PCI procedures included treatment of arterial segments
not treated during the index stent admission.
Conversely, only 2.4% of the cohort returned for subsequent PCI
solely to relieve symptoms related to the initially-stented segment.
Notably, 34% of all subsequent PCI procedures were performed on
non-stented arterial segments within the first 8 weeks of follow-up
after index stenting. These procedures reflect either intentionally
staged treatment for multi-segment coronary disease or rapid clinical
progression of lesions that were not responsible for symptoms at the
time of index stenting.
Within the first follow-up month 20% of all comeback procedures
were performed on non-stented lesions.
In another recently published study, Aegma et al reported on a
series of 3,146 bare-metal stent patients with 9-month follow up.\12\
The TVR rate was 10.3%, which compares favorably to 9.3% in this
Goodroe patient cohort. An additional 66 patients (2.1%) in the Aegma
study suffered cardiac death or acute myocardial infarction that may be
attributable to clinical restenosis (events that we were unable to
observe in the databank). These authors also reported that same-segment
reintervention within one month of successful stenting was due to sub
acute thrombosis and other sub-acute stent placement issues.\13\ Of the
same-segment reinterventions in this cohort, 10% occurred within the
first month which would indicate a sub-acute in-stent event rate of
less than one percent. Once we exclude all one-month reinterventions
and any subsequent PCI procedures that solely targeted non-stented
segments, 1,049 follow-up PCI procedures remain that included any same-
segment reintervention and could potentially be restenosis-related.
Hence we estimate that, at most, 42% of the PCI procedures done in
follow-up could be associated with in-stent restenosis, and that these
events affected 6.2% of the cohort.
The majority of repeat PCI procedures in this population were
performed to treat lesions other than those stented in the index
procedure, and so would have been required even if drug-eluting stents
had been used as the initial therapy. The opportunity to improve stent
outcomes by reducing in-stent restenosis in this group of unselected
stent patients would be much smaller than is suggested by results of
the randomized DES trials. Because the cost-effectiveness of any new
therapy depends on its effectiveness relative to the existing therapy
and the in-stent clinical restenosis rate in this cohort is
considerably less than the control arms of the DES trials, we would
expect that DES use in this cohort would be substantially less cost
effective than is suggested by analysis of the DES trial results.\2\
Drug-eluting stents are intended to reduce in-stent restenosis, and
while a small proportion of all stent patients suffer events related to
restenosis we observe that DES are currently used in more than 90% of
the stent procedures done in Goodroe participating hospitals. This new
technology disseminated quickly after its market release and the costs
related to stent procedures grew. The global market for drug-eluting
stents is estimated at $5 billion and there is intense competition for
market share among stent manufacturers. However, one effect of the
promotion of drug-eluting stents may be costly overuse of this new
technology in low clinical value situations. Concerns persist about the
sub-acute complications related to DES use, and more study is required
to see if widespread dissemination of this new therapy includes a
tradeoff between restenosis-related events and stent-related
complications.
Limitations
The stent-related clinical event rate in this study population may
be affected by a variety of factors that we did not study and are
unable to observe given the nature of the databank. Stent patients who
suffered out-of-lab death, stroke, or recurrent cardiac symptoms may
have returned to cardiologists or hospitals other than their original
provider, and those subsequent events would not have been captured in
the Data Warehouse. We did not survey the contributing hospitals to see
how their interventional case complexity and volume compares to other
centers.
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Medical Device Manufacturers Association
Washington, DC 20006
October 7, 2005
The Medical Device Manufacturers Association (MDMA) and its member
companies would like to thank the Subcommittee for holding this hearing
on Gainsharing and for beginning the discussion on this critical public
policy debate. It is important that all stakeholders (patients,
hospitals, physicians and manufacturers) engage in a broad discussion
and that a thorough review of all the possible ramifications is
assessed before Congress enacts legislation.
MDMA is a national trade association representing the innovative
and entrepreneurial sector of the medical device industry. Our
membership is comprised of over 200 device manufacturers, including
makers of medical devices, diagnostic products, and health care
information systems. MDMA seeks to improve the quality of patient care
by encouraging the development of new medical technology and fostering
the availability of innovative products in the marketplace.
Attempting to make the health care system more effective and
efficient is a worthwhile goal shared by many and there has been much
progress made in the area of ``pay for performance'' (P4P) initiatives.
P4P initiatives are programs that create financial incentives for
physicians to collect better data or deliver better outcomes and they
are consistent with the evidence-based medicine movement that has
generated broad-based support in the medical community as well as in
Washington. However, ``device contract gainsharing'' (DCG) is separate
and distinct from P4P initiatives. DCG provides physicians with
incentives to limit care by using the cheapest alternative or through
using only one device vendor.
Because the term gainsharing does not have a uniform definition
there is much confusion surrounding the term. The U.S. Department of
Health and Human Services' Office of the Inspector General (OIG) has
defined the term as ``an arrangement in which a hospital gives
physicians a share of any reduction in the hospital's costs
attributable in part to the physicians' efforts.'' This aligning of
incentives can include giving a physician a financial incentive to
``reduce the use of specific medical devices and supplies and to switch
to specific products that are less expensive.'' Gainsharing, as defined
by the OIG, is very concerning to many in the medical device industry
as it is inferred to mean that a physician will receive a kickback for
using cheaper and less advanced medical technology.
Currently illegal, gainsharing arrangements violate the Civil
Monetary Penalty (CMP) law, federal anti-kickback statutes; and the
Stark, physician self-referral law. Legalizing gainsharing could have
long lasting ramifications that are detrimental to patient care,
medical device innovation and the long term cost of health care.
MDMA defines DCG, one element within the broader discussion of
gainsharing, as an attempt to cut health care costs by offering
financial incentives to doctors who reduce expenditures through using
cheaper medical devices or by limiting physician choice for clinical
preference products. Device contract gainsharing forces doctors to make
unacceptable choices between patient care and larger paychecks. MDMA
believes that in order to protect patient quality of care and medical
technology innovation, it is essential that doctors do not have a
conflict of interest in providing patient care.
DCG Conflicts With Personalized Patient Care
Proponents of DCG argue that hospitals may achieve cost savings by
offering ``different'' forms of care. Certainly, reducing hospital
over-treatment, if it exists, by more carefully examining medical
necessity and lowering supply costs through simple administrative
changes are worthwhile goals. However, these cost-saving mechanisms do
not justify the implementation of DCG arrangements.
Any hospital may make adjustments to protocol, such as
changing the packaging of surgical tools, in order to reduce costs.
Hospital administrators and doctors can and should look for creative
ways to make health care more efficient. However, offering financial
incentives to doctors to ``create efficiencies'' presents a troubling
conflict of interest; doctors are forced to choose between personal
financial gain and a potential reduction in patient care. The personal
financial conflict undermines a physician's responsibility to focus
exclusively on patient outcomes.
ADMA supports attempts to better align physician payments
with improved data collection and better outcomes. These types of ``pay
for performance'' initiatives are worthwhile since they focus on
financial incentives for enhanced clinical practices that improve
patient outcomes. However, MDMA is opposed to any programs that would
create a financial incentive for doctors to limit patient access to
medical technologies. These device contract gainsharing arrangements
will negatively affect personalized patient care, stifle medical device
innovation and may ultimately result in higher long-term costs to the
health care system.
DCG arrangements threaten personalized patient care initiatives by
creating a ``one size fits all'' approach to medicine. The Centers for
Medicare and Medicaid Services (CMS) has recognized the value of moving
towards patient centered care as the best way to improve the quality of
care and reduce costs. Gainsharing will prevent this goal from being
realized because it penalizes physician choice.
No single brand of medical device is superior for all
patients and physicians, as each device has unique features and
functionalities. An artificial hip or pacemaker that produces an
optimal clinical outcome for one person may pose a serious health risk
to another patient. Similarly, a device that one physician may use with
complete confidence and familiarity may pose serious concerns for
another doctor. Many companies produce an array of devices that
accommodate the hand size, eyesight, and individual preference of
surgeons. Proposed DCG arrangements, by demanding a ``one size fits
all'' approach to medicine, would jeopardize patient safety by denying
patients and physicians access to necessary technologies.
In Iowa, doctors constrained by a hospital's agreement
have reported having to transfer patients to other hospitals in order
to get them the brand of medical device that they need. In
Pennsylvania, a physician has sued his hospital for using a
standardization contract as a facade for receiving illegal kickbacks
from a major manufacturer. This type of financial pressure to
standardize medical devices can reduce a physician's ability to offer
the most effective and appropriate medical care.
DCG will require doctors to undergo a retraining and
education period to learn how to properly use and monitor devices they
are required to use. This training period will be costly, and medical
mistakes and patient injuries are inevitable during this learning
period. Any possible efficiency benefits of DCG may be substantially
offset by the costs, in terms of money, patient safety, and device
innovation that standardization of medical devices entails.
DCG Standardization Stifles Innovation:
Standardization of medical devices, in addition to posing immediate
concerns regarding patient care, also may have the unintended effect of
reducing medical device innovation. Exclusive contracts and the
incentive structure of DCG discourage medical device innovation, hurt
small businesses, and create anticompetitive market forces.
DCG offers doctors strong financial incentives to
maintain the status quo and avoid upgrading to those new and innovative
medical technologies that could enhance patient outcomes. Doctors in
DCG arrangements are encouraged to cut costs by using the cheapest
medical devices, not to improve care by using the newest and most
effective medical devices.
DCG encourages doctors to ignore or reject the medical
benefits of new technologies in exchange for personal income. DCG
encourages doctors to purchase exclusively from large companies, which
negotiate with GPOs to provide low-priced, exclusive and bundled
contracts. However, innovation in the medical device market is driven
by small and new companies; entrepreneurial companies are responsible
for the overwhelming majority of medical device breakthroughs. They
have revolutionized patient care, but they cannot be expected to
compete and innovate if doctors are offered substantial financial
incentive to accept exclusive contracts from large producers.
Important and lifesaving medical devices such as the
drug-eluting stent may never have been developed if DCG had been in
place ten years ago. DCG arrangements encourage stagnation in the
medical device industry by financially penalizing doctors for buying
new and innovative medical devices.
The Potential for Overall Cost-reduction Under DCG is Small and
Uncertain:
Doctors and health care professionals have expressed concern that
DCG may not offer substantial and sustainable health care cost
reductions. Current profit-sharing hospital models have failed to
produce tangible cost savings, and the potential for increased long-
term costs reduces the feasibility of controlling health care expenses
through DCG.
Over the last three years, the Senate, the New York
Times, Los Angeles Times, Government Accountability Office, the OIG,
and Department of Justice all have launched investigations about the
potential inefficiencies of GPOs and their drive to standardize devices
within their member hospitals. Evidence does not support the assertion
that standardization reduces contract prices, and GPOs, in many cases,
increase health care costs. The financial justification for
standardization, therefore, is based primarily on the suspect
assertions of GPOs.
MedPAC has indicated that physician owned hospitals, for-
profit ventures that specialize in cutting costs to increase physician
payments, have not succeeded in reducing per-procedure health care
costs. Despite that fact that the interests of physicians and the
hospital are perfectly aligned in the physician-owned hospital model,
cost savings have not been achieved. The success of DCG arrangements,
which are predicated on the same incentive-based theory as physician-
owned hospitals, thus is substantially in doubt.
The long-term cost-effectiveness of DCG agreements is
also mitigated by the possibility that cheaper medical devices and
fewer medical procedures will result in higher rates of medical
complications, malpractice liability, and hospital re-admittance. While
these decisions may result in reductions in immediate health care
costs, the decreased durability of lower-cost medical devices may cause
higher rates of medical complications and follow-up surgeries. Cheaper
devices and cheaper medical procedures may cut short-term costs, but
the likelihood of hospital re-admittance make DCG an unstable mechanism
for producing long-term health care price reductions.
MDMA urges Congress to prohibit DCG
MDMA recognizes that rising hospital costs are a drain on health
care resources, and reducing health care costs is necessary to ensure
that health care is affordable. However, DCG is not an effective or
adequate way to achieve these results. Containing the rising cost of
health care by better aligning incentives of physicians and hospitals
should be a priority and we hope Congress will recognize that the P4P
model rewarding quality and appropriate care is the correct approach.
Device contract gainsharing will simply create a race to the bottom,
adversely impacting patient care, innovation, and the long-term cost of
health care. MDMA urges Congress to oppose any legislation which would
legalize DCG agreements.
Again, we thank Chairman Johnson and the Subcommittee for providing
us the opportunity to express the gainsharing perspective of the
entrepreneurial, innovative medical technology sector. We are
encouraged by the prospect of working together to achieve reductions in
the cost of health care without jeopardizing patient safety, curtailing
device innovation or limiting physician choice.
Thank you.
Sincerely,
Mark Leahey
Executive Director