[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
                   MEDICARE PHYSICIAN PAYMENTS: 2007 AND BEYOND


                                      HEARING

                                     BEFORE THE

                              SUBCOMMITTEE ON HEALTH

                                      OF THE 

                       COMMITTEE ON ENERGY AND COMMERCE

                           HOUSE OF REPRESENTATIVES

                           ONE HUNDRED NINTH CONGRESS

                                 SECOND SESSION

                              SEPTEMBER 28, 2006

                               Serial No. 109-147 

       Printed for the use of the Committee on Energy and Commerce


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                  COMMITTEE ON ENERGY AND COMMERCE

JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas
MICHAEL BILIRAKIS, Florida
  Vice Chairman
FRED UPTON, Michigan
CLIFF STEARNS, Florida
PAUL E. GILLMOR, Ohio
NATHAN DEAL, Georgia
ED WHITFIELD, Kentucky
CHARLIE NORWOOD, Georgia
BARBARA CUBIN, Wyoming
JOHN SHIMKUS, Illinois
HEATHER WILSON, New Mexico
JOHN B. SHADEGG, Arizona
CHARLES W. "CHIP" PICKERING,  Mississippi 
  Vice Chairman
VITO FOSSELLA, New York
ROY BLUNT, Missouri 
STEVE BUYER, Indiana
GEORGE RADANOVICH, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
C.L. "BUTCH" OTTER, Idaho
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
JOHN D. DINGELL, Michigan
  Ranking Member
HENRY A. WAXMAN, California
EDWARD J. MARKEY, Massachusetts
RICK BOUCHER, Virginia
EDOLPHUS TOWNS, New York
FRANK PALLONE, JR., New Jersey
SHERROD BROWN, Ohio
BART GORDON, Tennessee
BOBBY L. RUSH, Illinois
ANNA G. ESHOO, California
BART STUPAK, Michigan
ELIOT L. ENGEL, New York
ALBERT R. WYNN, Maryland
GENE GREEN, Texas
TED STRICKLAND, Ohio
DIANA DEGETTE, Colorado
LOIS CAPPS, California
MIKE DOYLE, Pennsylvania
TOM ALLEN, Maine
JIM DAVIS, Florida
JAN SCHAKOWSKY, Illinois
HILDA L. SOLIS, California
CHARLES A. GONZALEZ, Texas
JAY INSLEE, Washington
TAMMY BALDWIN, Wisconsin
MIKE ROSS, Arkansas


BUD ALBRIGHT, Staff Director
DAVID CAVICKE, General Counsel
REID P. F. STUNTZ, Minority Staff Director and Chief Counsel


                       SUBCOMMITTEE ON HEALTH
NATHAN DEAL, Georgia, Chairman
RALPH M. HALL, Texas
MICHAEL BILIRAKIS, Florida
FRED UPTON, Michigan
PAUL E. GILLMOR, Ohio
CHARLIE NORWOOD, Georgia
BARBARA CUBIN, Wyoming
JOHN SHIMKUS, Illinois
JOHN B. SHADEGG, Arizona
CHARLES W. "CHIP" PICKERING,  Mississippi 
STEVE BUYER, Indiana
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
SUE MYRICK, North Carolina
MICHAEL C. BURGESS, Texas
JOE BARTON, Texas
  (EX OFFICIO)
SHERROD BROWN, Ohio
  Ranking Member
HENRY A. WAXMAN, California
EDOLPHUS TOWNS, New York
FRANK PALLONE, JR., New Jersey
BART GORDON, Tennessee
BOBBY L. RUSH, Illinois
ANNA G. ESHOO, California
GENE GREEN, Texas
TED STRICKLAND, Ohio
DIANA DEGETTE, Colorado
LOIS CAPPS, California
TOM ALLEN, Maine
JIM DAVIS, Florida
TAMMY BALDWIN, Wisconsin
JOHN D. DINGELL, Michigan
  (EX OFFICIO)


                      CONTENTS


Page Testimony of:

Elston, Dr. Kirk M., Department of Dermatology, Geisinger Medical 
Center	
21
Golden, Dr. William, Chair, Board of Regents, American College of 
Physicians 
27
Martin, Dr. Paul A., President and CEO, Providence Medical Group, on 
behalf of the American Osteopathic Association	

37
Morris, Jr., Dr. Albert W., President, National Medical Association 
52
Russell, Dr. Thomas, Executive Director, American College of Surgeons 
60
Weida, Dr. Thomas J., Speaker, American Academy of Family Physicians 
67
Wilson, Dr. Cecil B., Chair, Board of Trustees, American Medical 
Association 
77
Wolter, Dr. Nicholas, Chief Executive Officer, Billings Clinic, 
Director, American Medical Group Association 

87
Thames, Dr. Byron, Board Member, AARP	
94
Cook, Dr. Sallie S., President, American Health Quality Association, 
Chief Medical Officer, Virginia Health Quality Center 


MEDICARE PHYSICIAN PAYMENTS: 
2007 AND BEYOND


THURSDAY, SEPTEMBER 28, 2006

HOUSE OF REPRESENTATIVES,
COMMITTEE ON ENERGY AND COMMERCE,
SUBCOMMITTEE ON HEALTH,
Washington, DC.


The subcommittee met, pursuant to notice, at 2:00 p.m., in Room 2322 
of the Rayburn House Office Building, Hon. Nathan Deal [Chairman] 
presiding. 
Members Present:  Representatives Deal, Upton, Norwood, Cubin, 
Shimkus, Shadegg, Ferguson, Burgess, Barton (ex officio), Pallone, 
Green, Capps, and Dingell (ex officio). 
Also Present:  Representative Price. 
Staff Present:  Ryan Long, Counsel; Brandon Clark, Policy 
Coordinator; Nandan Kenkeremath, Counsel; Chad Grant, Legislative 
Clerk; William O'Brien, Research Analyst; Amy Hall, Minority 
Professional Staff Member; and Jonathan Brater, Minority 
Professional Staff. 
MR. DEAL.  The Chair will call this hearing to order.  We have a 
very distinguished panel today that are going to talk about a 
subject which I think is certainly timely and appropriate, and 
that is Medicare Physician Payments: 2007 and beyond.  
You, as a panel, will represent the physician community, the 
quality improvement community, as well as the beneficiary community. 
 I must tell you in advance that I am not just skipping out on you, 
because after I give my opening statement I am going to have to 
leave.  We have the children's healthcare graduate medical education 
bill that is on the floor that I have to handle.  Then we have the 
Ryan White reauthorization, which will be on the floor immediately 
after that.  So I think you all recognize those are important issues 
we would like to get moving. 
This hearing is intended to provide a forum for our committee 
members to consider legislative proposals for physician payment for 
2007 and subsequent years, including the importance of controlling 
for high growth and volume and the intensity of physician services, 
as well as the promotional quality of physician care.  
To this end the committee has prepared a discussion draft that sets 
forth some of the fundamentals for reform.  We would like to 
consider advancing in the short term a multiyear stabilization of 
physician payments with a bonus payment for participation in 
utilization management and quality programs.  
As my colleagues on this committee are no doubt aware, we are the 
committee of primary jurisdiction on the issue of Medicare physician 
payments.  Without questions, this is an issue that is one of the 
most important and challenging legislative initiatives we must 
undertake and hopefully in some fashion conclude before the end of 
this Congress.  
As always, I look forward to having a cooperative effort with our 
colleagues on the other side of the aisle, and hopefully we can work 
together to find a solution that is going to be an effective 
legislative solution to what has been a very long-term ongoing 
problem.  I would like to thank all of the witnesses in advance 
who are here, and if I can speed things up on the floor, I will at 
least maybe get to hear some of you when I return.  
I am going to at this time turn the gavel over to our vice chairman 
of the Health Subcommittee, Mr. Ferguson of New Jersey.  In the 
meantime, I would like to ask unanimous consent that all members 
would be allowed to submit statements and questions for the record.  
Without objection, it is so ordered.  
While Mr. Ferguson is coming, I will at this time recognize 
Mr. Dingell, who is, of course, the Ranking Minority leader.  I will 
recognize him for his opening statement for 5 minutes and turn the 
gavel over to Mr. Ferguson.  
[Prepared statement of Hon. Nathan Deal follows:] 

PREPARED STATEMENT OF THE HON. NATHAN DEAL, CHAIRMAN, SUBCOMMITTEE ON 
HEALTH 

 The Committee will come to order, and the Chair recognizes himself 
for an opening statement. 
* Today's hearing is entitled "Medicare Physician Payments:  2007 and 
Beyond," and I am pleased to say that we will be hearing from an 
expert panel of witnesses representing the physician, quality 
improvement, and beneficiary communities. 
* This hearing is intended to provide a forum for Committee members 
to consider legislative proposals for physician payment for 2007 
and subsequent years, including the importance of controlling for 
high growth in volume and intensity of physician services and 
promotion of quality, efficient care. 
 To this end, the Committee has prepared a discussion draft that 
sets forth some of the fundamentals for reform we would like to 
advance in the short term - a multi-year stabilization of physician 
payment with bonus payment for participation in utilization 
management and quality programs. 
 As my colleagues are no doubt aware, this Committee is the 
committee of primary jurisdiction on the issue of Medicare physician 
payment, and without question, this issue is one of the most 
important and challenging legislative tasks we will undertake. 
 As always, I am looking forward to having a cooperative and 
productive conversation on this topic today and to working with my 
colleagues on both sides of the aisle to produce an effective 
legislative solution to this ongoing problem. 
 Again, I would like to thank all of our witnesses for 
participating today, and we look forward to hearing your testimony. 
 At this time, I would also like to ask for Unanimous Consent that 
all Members be allowed to submit statements and questions for the 
record. 
 I now recognize the Acting Ranking Member of the Subcommittee _____
_______ for five minutes for his/her opening statement. 

MR. DINGELL.  Mr. Chairman, you are most courteous, I thank you, and 
I commend you for holding this hearing.  I look forward to hearing 
again the testimony of organizations represented at this hearing 
regarding the Medicare physician payment cut.  
I note this is the fifth hearing in 12 months this committee has 
held on physician payment issues.  On these matters, I think the 
doctors feel a little like we used to when we were in the Army.  We 
had a song we sang, which said, I am forever signing the payroll, 
but I never get a damn cent.  
What we need now is action.  The doctors are entitled to adequate 
Medicare payments.  They are grateful, I am sure, for hearings, but 
they need action.  Given the late date and with no legislation 
being marked up in this committee, it appears that the Congress has 
neglected our responsibility to provide a remedy for the 
anticipated 5.1 percent cut which will take place early next 
year.  
I am not critical of my colleagues on this committee, but there 
is an abundance of criticism available which can honestly be made 
against the budgeteers, the Appropriations Committee, the 
Administration, the Department of Health and Human Services, and 
the White House.  
Even if a remedy is eventually enacted, this lack of progress 
indicates not only uncertainty for both beneficiaries and their 
doctors, but also for the system, and it will threaten, indeed, 
the delivery of health care services to our people in all areas.  
It also shows a supreme lack of congressional leadership on an 
issue that everybody has known about for years, that has been 
looming and for which holding hearings has become a response 
rather than a solution.  
Of course, some will say paying physicians adequately will cost too 
much.  That is a lot of malarkey.  They are entitled to decent 
treatment.  But there is an easy, simple solution that we can apply 
here.  Why don't we just shift some of the billions in Medicare 
overpayments that are now made to HMOs so that we can pay adequate 
wages to doctors and health care providers?  There is absolutely no 
reason why HMOs should receive more generous payments than a 
senior's doctor, excepting, perhaps, that they have more expensive, 
more and better lobbyists, who have better access to the 
Administration.  
We should ensure fairness and fiscal integrity by creating a payment 
system that adequately compensates providers, whether they are HMOs 
or physicians.  Simple justice says we should do no less.  
If Congress does belatedly act to improve physician payments, we 
must do so without increasing Medicare patient premiums.  That is 
quite unnecessary in view of the fat hog that our friends at the 
insurance companies are cutting.  To those who say it would be too 
expensive to protect beneficiaries, I say it would be too expensive 
not to protect beneficiaries, and failure to protect them is far 
too costly for us to accept.  
More hardships would clearly fall on seniors and people with 
disabilities who live on fixed income if we don't do something about 
this and do it soon.  
I note that some of the Congress believe that if Congress increases 
physician payments this year, it must include an intricate and 
complex system for reporting quality data that is called 
pay-for-performance.  But if we need pay-for-performance, there is 
time to develop it, but let us develop it right, and let us not 
hold these matters hostage to that.  
We would be hard pressed, I believe, to enact such an ambitious 
system in the time remaining, at least not in a careful, thoughtful 
and well-done way.  The physician payment system, as I have said, 
should not be held hostage to it.  
While such a reporting system is a laudable goal, we must ensure 
that this system is crafted with care, with thorough collaboration 
and cooperation with the medical community.  Otherwise we are very 
likely to end up causing more harm than good for all concerned, 
providers and beneficiaries alike.  
There is a way here to do this right.  I, along with my colleagues 
on this side of the aisle, have introduced H.R. 5916.  It would 
provide a 2-year period of stable payments for Medicare providers.  
This bill would allow ample time for Congress to explore issues 
associated with the quality reporting data; for instance, 
pay-for-performance, and it would help us develop a system that 
is meaningful to providers, as well as offering the right incentives 
for care.  We need to work on a bipartisan basis, and we have done 
so in this committee, as you well know, Mr. Chairman.  
If we are to succeed in this in the remaining time, we have no 
choice but to do so.  Failure to do so offers fine opportunities 
for great troubles, not only currently, but in the future, and it 
will threaten the entire system of health care in this country.  
We have to work with provider groups, beneficiary organizations, 
policy experts to create a fair and patient-centered quality 
reporting and a pay-for-performance system.  This is going to 
require a longer timeframe and will delay very important business 
that must be done more immediately.  
In the meantime, we can't delay in devising a remedy for the coming 
physician pay reductions, because they are very much in the offing, 
and will have still worse consequences.  Let us then act immediately 
to stabilize Medicare payments to doctors to protect premium 
increases for patients while Congress explores longer term issues.  
We have the talent, we have the public support, we have the justice 
of the matter on our side.  I beg you, Mr. Chairman, let us begin.  
Thank you for your kindness.  
MR. FERGUSON.  [Presiding.]  Thank you for your opening statement.  
Medicare physician payment is an issue that demands our attention 
because it directly affects the abilities of our Nation's physicians 
to provide care.  If we fail to act by the end of this year, 
physicians will see a cut of almost 5 percent in payments for 
Medicare.  
If the SGR were allowed to continue to be applied in subsequent 
years, the cuts would continue to mount by as much as 37 percent by 
2015.  As physician payments go down, practice costs during the 
same period are expected to increase 22 percent.  As medical 
liability premiums spiral upwards and the baby boomers approach 
Medicare age, we cannot cut the legs out from under our doctors by 
slashing their Medicare payments.  
The SGR is fatally flawed, and, as I have said in the past, it is 
time that we start writing its obituary today.  I think the ideas 
that have been put forward on both sides of the aisle, I 
particularly appreciate Chairman Deal's leadership, Chairman 
Barton's leadership.  I think they have put together some important 
principles and ideas.  I am hopeful and optimistic that we will make 
progress, and I am particularly interested to hear today from this 
distinguished panel of witnesses.  It is your expertise, opinions, 
suggestions, thoughts, and ideas which will be crucial to us as we 
craft a product which will help to address this problem.  So I 
appreciate you being here today.  
I recognize Ms. Capps for an opening statement.  
MS. CAPPS.  I thank you, Mr. Chairman, and I want to say first that 
one of our colleagues, Bart Gordon, wanted to acknowledge that he 
would have intended to be here, would like to be here, but is 
involved in a Science Committee markup or hearing and will submit a 
statement for the record.  I have a feeling that there are many of 
our colleagues who are not here, not because they are not 
interested in this topic, but because of the press of the last 
couple of days of being here.  
We have an esteemed panel of witnesses, and I want to move quickly 
to get to the hearing, to the testimony that you all want to give.  
But I do want to say that I think there is agreement in this 
Congress that we need to reform the current Medicare physician 
reimbursement system.  In fact, as my ranking member has mentioned, 
we must all agree because now we have had five hearings on the 
very same subject in this very year.  
So, sitting in this room today, I have this overwhelming sense of 
deja vu.  We are about to hear yet again about the very real problems 
we know are facing physicians and beneficiaries.  But we have only 
a day or two left before we break for recess.  Quite frankly, 
holding this hearing at 2:00 p.m. today without any confirmed plans 
to bring corrective legislation to the floor makes this an exercise 
of which I question its value.  
We know what needs to be done.  We know that the SGR formula is 
fundamentally flawed, needs to be scrapped so that we can develop a 
better system.  We know that we cannot allow the impending 5.1 
percent decrease in reimbursements to occur, and I want to echo my 
support or give my support to our Ranking Member Dingell, who has 
introduced a very smart piece of legislation cosponsored by all 
Energy and Commerce Democrats which takes the important first steps 
and would provide doctors with a fair update in payments for 2007 
and protect beneficiaries from increased premiums.  
We certainly should be able to do this, to start with.  It sets the 
stage also for a long-term solution that does not rely on enacting 
these last-minute, one-year updates that really do threaten the 
future of the whole system and also threaten long-term solvency 
concerns.  
As I have said, we already know what needs to be done to fix the 
yearly update system.  I want to urge our Chairman to move on to 
another related subject that deserves its own hearings and its own 
fix, and that is the geographic adjustment issue.  I know that is 
on the minds of many of you here.  Even though you have been asked 
to testify on the different topics, they are very related.  
I have brought this up before in this committee, and I will continue 
to do so, because it is something that many of my colleagues here 
know about firsthand from the physicians and providers in their 
districts.  We should be more vocal about this on your behalf, 
including our Chairman, Mr. Deal, because his district is affected 
more greatly than many of the rest.  
But 175 counties, in 32 different States, where physicians are paid, 
this is the number, there are that many counties where physicians 
are paid 5 to 14 percent less than their Medicare-assigned geographic 
cost factors because they are assigned to inappropriate localities. 
 My own district knows this very well.  Santa Barbara and San Luis 
Obispo Counties in California currently receive reimbursements much 
lower than the geographic cost factors for those counties.  Add to 
that, add to that the overall cut in payment, you wonder why any of 
them stay in practice.  There are proposals out there but none of 
them have really been acted on.  
I want to take this opportunity to stress how important a fix would 
be to so many of our constituents.  It is really heartbreaking to me 
as I hear physicians closing up shop, beneficiaries who can't find a 
doctor who will take a new patient on Medicare.  This is happening 
more and more across this country.  
With each physician who leaves, a number of patients are left then to 
find new doctors, wait longer for their appointments, travel further 
for their visits.  This is a very fragile population to begin with.  
We are really not stepping up to meet this challenge.  We can't 
allow this to go on any longer.  
I want to call out, I know we have a family practice physician among 
those testifying today.  I am a nurse, and I have worked hard since 
I have been in Congress to deal with the shortage of nurses.  They 
are related.  Some of the factors are related, and I find it 
interesting that we had a demonstration here on Capitol Hill by 
family practice physicians yesterday.  I know about it because one 
of our former colleagues, Congressman Gansky from Iowa, a physician 
himself, came with his wife, who is a family practice physician.  
This shortage that was written up in an AP article a couple of days 
ago, I believe, goes to the heart of what this is about today.  
The serious shortfall of family physicians in at least five States 
by 2020 is directly related to this kind of reimbursement.  I 
believe it could be said they treat a lot of Medicare patients.  
They are the ones who, along with the nurses, are the front-line 
providers of care in many communities in many areas.  When we are 
seeing this kind of shortage, we are only seeing the tip of the 
iceberg, in my opinion.  
So I am very interested to hear the testimony that will be offered.  
I yield back.  
MR. FERGUSON.  I am pleased to recognize for an opening statement 
the gentleman from Texas, the distinguished chairman of the Energy 
and Commerce Committee, Mr. Barton. 
CHAIRMAN BARTON.  Thank you, Chairman Deal, although you look 
strangely like Congressman Ferguson, for holding this important 
hearing.  I want to welcome our numerous witnesses here.  I think 
this is a record for most witnesses on one panel, although we had 
an O and I hearing downstairs that had almost as many that started 
this morning.  
MR. BURGESS.  But they all took the Fifth. 
CHAIRMAN BARTON.  Yes, they all took the Fifth Amendment against 
self-incrimination, unfortunately.  
This is an important hearing.  I think you are going to have an 
action item result hopefully from this hearing, so it really is 
important that you all be here.  
In July this subcommittee held a number of hearings to examine 
how we currently pay physicians, what we need to think about when 
we talk about how to pay physicians, and how to protect the 
taxpayers from falling prey to the use of unnecessary services. 
We heard about rapid growth in physician spending from imaging 
services.  We heard of the many concerns concerning Medicare's 
payment for those services.  We heard about the flaws in the 
current physician payment system that may contribute to overuse 
of physician services.  We heard about the promise of a system 
that more fairly pays physicians for the services that they 
provide, those that reflect the best quality and efficient care 
that a physician can provide for any particular patient.  
I have said this before publicly, and I will say it again at this 
hearing: Our current payment system for physician reimbursement is 
broken, it doesn't work.  We can't fix it.  We can't put another 
Band-Aid on it like we have been doing.  We keep coming back every 
year to try to provide a one-year override.  Because of the way 
the current system is structured, every year that we do that we 
just dig the hole deeper for next year.  We are spending billions 
and billions of dollars each year, and we are getting further and 
further behind.  It is time, in my opinion, for real reform and 
real change.  
I want to thank each of you today for coming here to discuss how we 
can do that, how we can roll up our sleeves in the next few weeks 
and come together to provide a multiyear--and I want to emphasize 
that--multiyear payment stabilization plan with some bonuses for 
those that will work with us to contain growth in spending and 
advance quality and efficient health care.  
I want to reiterate that.  I am prepared to repeal the SGR system.  
I am prepared to put on the table a multiyear approach that holds 
physicians harmless, at a minimum, and provides some incentives 
for some additional payments based on what physicians themselves 
voluntarily do to advance quality and efficient health care.  
I don't have the system planned.  I want to tell each of you that.  
We have a concept, but this committee and our staffs are willing 
to work with the witnesses and the trade groups that are represented 
before us today to find the solution in the next month or month 
and a half before we come back for the lame duck after the election. 
 We want to build a better system, one that provides the correct 
incentives for proper care, instead of the wrong ones, ones that 
recognize that their savings accrued when chronic care is managed 
effectively.  
I want to assure everyone in this room that I am 100 percent 
committed to enacting legislation this year.  We are not talking 
about something for next year.  We are talking about something for 
this year. 
Again, I am more than willing to support totally scrapping the SGR 
system and holding doctors harmless for that deficit.  I think it is 
kind of funny money anyway.  I don't really believe that it is an 
accounting mechanism, I think we can wipe that off the books and 
then start from scratch.  But we are going to have to do it, and 
we are going to have to do it working in a complementary, 
cooperative way.  
Again, my principles are, let us start with a clean sheet of paper, 
let us take a multiyear approach, let us provide some incentives for 
better quality care and more efficient use, and then we will go from 
there.  
Thank you, Chairman, for holding this hearing today.  I want to thank 
our witnesses.  We are about to have the Ryan White AIDS 
reauthorization bill on the floor.  It passed out of this committee 
last week, 38-10.  
I am supposed to manage the floor time, so I am going to have to go 
to manage that.  As soon as I get that done, I am going to try to 
dash back over here, so I can at least ask some questions of these 
panelists.  Thank you, and I look forward to hearing the testimony 
and reading the testimony today.  
[Prepared statement of Hon. Joe Barton follows:] 

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON 
ENERGY AND COMMERCE 

	Good afternoon.  I want to thank Chairman Deal for holding 
this hearing, and for his great work as a subcommittee chairman this 
Congress.  I would like to welcome all of our witnesses here today.  
I look forward to hearing your ideas for legislation that will 
avert the Medicare physician payment cut for next year and beyond. 
	In July, this subcommittee held a series of hearings to 
examine more closely how we currently pay physicians, what we need 
to think about when we talk about how to pay physicians tomorrow, 
and how we protect the taxpayer dollar from falling prey to the use 
of unnecessary services.  We heard about rapid growth in physician 
spending for imaging services and the concerns of many regarding 
Medicare's payment for those services.  We heard about the flaws 
in the current physician payment system that may contribute to 
overuse of physician services.  We heard about the promise of a 
system that more fairly pays physicians for the services they 
provide - those that reflect the best quality and efficient care 
that a physician can provide for any particular patient.  
	I said it before and I'll say it again, the current payment 
system must be broken if we have to keep coming back each and every 
year to override cuts.  Every year we provide some form of payment 
relief, although arguably we are still not actually paying you for 
the true cost of your services.  Each and every year we are 
pressured to spend billions, repeat, billions, of taxpayers dollars 
to do something, and each year it costs even more to do just the 
minimum. 
	And for what?  Even if we continue with this Band-Aid 
strategy for treating the physician-payment complaint, the disease 
will never be cured.  We'll be back here next year, and then the 
next year, peeling off the old Band-Aids and putting on a new ones. 
	This is just simply not responsible behavior, it is not 
rational behavior and it is just plain not sustainable. 
	I want to thank the panelists for coming here today to 
discuss how we can roll up our sleeves in the next few weeks and 
come together to provide a multi-year payment stabilization with 
some bonus for those that work with us to contain growth in spending 
and advance quality and efficient health care.  I'd like to work 
with you to build a better payment system, one that provides the 
right incentives for care instead of the wrong ones, and one that 
recognizes that there are savings accrued when chronic care is 
management effectively.  I want to assure everyone in this room 
that I am one hundred percent committed to enacting legislation 
this year to avoid the impending physician cuts, scheduled to go 
into place in January.  
	Thanks again to Chairman Deal for calling this hearing, and 
to all the witnesses for coming today.  I look forward to their 
testimony.  I also look forward to working with them and my 
colleagues to find a viable, long-term solution to the Medicare 
physician payment system. 

MR. FERGUSON.  I am pleased to recognize Mr. Green for an opening 
statement.  
MR. GREEN.  Thank you, Mr. Chairman.  I would like to ask unanimous 
consent for all members to be able to place a statement in the record 
if they couldn't be here during this time.  
MR. FERGUSON.  Without objection.  
MR. GREEN.  I want to welcome our panel, although by seeing all your 
first names is Doctor it reminds me of that movie Spies Like Us a 
few years ago with Dan Aykroyd and Chevy Chase where everybody was 
a doctor in his tent and they couldn't get anything done because 
they were calling each other Doctor so much.  
I say that because I have a daughter and son-in-law who are also 
physicians.  But I want to thank the Chairman of the committee, 
Chairman Deal, and even stand-in Chairman Ferguson now for holding 
the hearing on the looming cut in physician payments under the 
Medicare program.  
There isn't one of us in this room who hasn't been well educated by 
our local physicians about the problems of physician fee schedule 
and the 5.1 percent rate reduction doctors are scheduled to see 
next year.  Every time I meet with a physician group on this issue, 
I tell them I would like to see a permanent solution to the problem, 
which comes before us nearly every year and we address with a 
short-term fix.  
I am glad to hear the Chairman, because he has told me many times 
he would like to see a permanent fix to this.  There is no question 
that the SGR system is fundamentally flawed.  While physicians point 
out that the formula produces updates which are out of line with 
current practice costs, there are many elements of the SGR that 
are inconsistent with the goals we have for the Medicare program. 
On the individual physician level, the system does not produce 
the incentives we expect it to.  That is, a reduction in the fee 
schedule on a nationwide level would not cause physicians to reduce 
the volume of services in their individual offices.  
On the programmatic level, the system does not acknowledge the 
increasing focus on preventive health care.  In fact, the SGR system 
would seem to discourage the use of preventive services because that 
would increase volume, despite the logical conclusion that increased 
volume and cost-effective preventive benefits would reduce the more 
costly hospitalizations for medicare beneficiaries.  
On the beneficiary level, the system does not provide adequate 
assurances that Medicare remains an affordable option for 
beneficiaries.  Each fix Congress puts in for physicians increases 
the Part B premium, since beneficiaries pay 25 percent of the total 
cost.  
In the past few years we have seen double digit increases in the 
Part B premium, which is slated to be $93.70 a month by 2007.  But 
make no mistake about it, I agree with physicians--that this issue 
could easily turn into an access problem.  I will add, I have a 
very urban district in Houston, and physicians in my area cannot 
afford not to have Medicare.  But I know what will happen when 
that physician retires or passes away.  There will not be a family 
practice, that we heard earlier, or someone to take their place.  
So we will have an access problem even in areas where 40 or 50 
percent of the patient load may be Medicare.  
But I am just as worried implementing a fix without premium 
protection for beneficiaries may create a separate access problem, 
by potentially pricing them out of the program.  
That is why I am a cosponsor of a solution promoted and put forward 
by Ranking Member John Dingell that provides a positive update of 
2.7 percent, while also protecting beneficiaries from any premium 
increases or result in any increased cost in the program as a 
whole.  
The Dingell legislation would give us time to make sure the changes 
we make strike the right balance between providing physicians with 
appropriate payments and ensuring that these payments don't have 
un-intended negative consequences on beneficiaries served by the 
Medicare program.  
I appreciate our witnesses today, but it seems like we are here 
every year.  We are talking about a short-term fix, whereas the 
Chairman wants a full long-term fix, I would hope we could do it 
in the lame duck, in the few days we will be here, but I would like 
to at least make sure we send a message to physicians that the 
5.1% cut will not go into effect next year.  I would love to be 
able to work on a long-term fix, whether it is in November or 
January of next year.  
I yield back my time.  
MR. FERGUSON.  Dr. Norwood is recognized for an opening statement.  
MR. NORWOOD.  Thank you very much, Mr. Chairman.  I would like to 
start by saying to Chairman Deal and Chairman Barton how much we 
appreciate their efforts in trying to solve this problem.  I was 
delighted to hear what Mr. Barton was telling you.  When he says 
you are going to have legislation, you can pretty near count on 
it.  This has to be done this year.  
Unlike Mrs. Capps, I think this is not a total waste of time.  I 
think this is extremely important we have this hearing.  You may 
not understand how vicious the competition is for hearing time.  
For this subject to have five hearings in the Commerce Committee 
is a very good thing.  That is indication that there are a lot of 
people sitting up here, know this problem must be fixed, and we 
have to do it very soon.  
I also want to thank Mr. Dingell for his remarks.  I think he was 
right on the money with what he was saying, and that implies to me 
that there is absolutely no reason that both sides of the aisle 
here can't work out a solution to this problem, from what I am 
hearing from the Ranking Member and from the Chairman.  
We are finally, and it has taken over a year, focusing on concrete 
proposals addressing physician payment Medicaid.  If we need to 
focus today, hear you, maybe we could get all 10 doctors--it is 
not often Commerce Committee gets 10 doctors before them.  That is 
always a good thing.  But if you could just go spend about 3 hours 
over at Ways and Means, that would probably help the Congress a 
great deal, too.  
There may be three committees of jurisdiction over this issue, but 
in my mind, and I am certain, too, in Mr. Dingell's mind, this is 
the committee that needs to take the lead, and this is the 
committee that needs to solve this problem.  We have all shared our 
thoughts in past hearings.  Admittedly, I probably shared more than 
my 2 cents worth, but this is an issue that I know how important 
it is, you know how important it is, and it has got to be 
addressed.  It is not going to be easy.  You can't find a solution 
with this without understanding where the money comes from.  
You can't just simply say, go spend it.  For us, we have to find 
offsets.  That is hard.  That means it has to come from somebody 
else.  As I told Chairman Deal, so what if it is hard.  This is a 
top priority that should be fixed, and it is monies that has to 
come from somewhere.  Let us buckle it up and get it done, figure 
out where it is coming from.  Frankly, nothing in health care is 
easy in this town if you do it right.  
Dr. Burgess and I have H.R. 5866, which I like.  It is not a 
temporary fix, it is a long-term fix.  We honest-to-Pete look for 
offsets trying to find where this money would come from.  I think my 
friend John Dingell will agree that HMOs need to cough up some.  
Dr. Burgess' bill replaces the SGR and updates the program.  I am 
glad the Chairman's proposal incorporates some of our ideas, that 
is great, by further utilizing quality improvement organizations 
to help doctors adapt to health IT.  I have long supported QIOs 
and hope we will also be able to modernize them under this bill.  
Generally speaking, I support Chairman Barton's effort to enact 
a multiyear fix.  I am happy, I think, Mr. Dingell and Chairman 
Barton can work this out so everybody can support it.  
I want to see, however, a permanent solution, but we will have a 
very short time left, as you know.  I will suggest this.  Maybe we 
shorten this plan to the next 2 years and give our doctors a 
guaranteed 1 percent raise instead of a half a percent raise.  I 
know it isn't enough, but maybe it would keep a few more doctors 
in the programs for a couple of years.  
You give us more than a year of guaranteed updates and Dr. Burgess 
and myself and others will sit down and develop a very real 
long-term solution.  I am not going to sit on my hands on this and 
I know neither is my friend right next to me.  Neither is, by the 
way, our friend from Georgia who is not on our committee, 
Dr. Price, from Georgia, who is here today.  I thank you for 
attending.  I like the idea of HHS reporting on a long-term 
replacement to the SGR.  
Maybe we should insert a provision, however, that says doctors get 
another percent every time it takes HHS to solve the problem.  We 
need to give them some incentives, too.  I will be happy to write 
language to cut a few bureaucrat paychecks to make sure seniors in 
my district keep their doctor.  
That includes me, too, Mr. Chairman.  I am a new Medicare recipient.  
A new survey found that 19 percent of the doctors in Georgia said 
they stopped accepting new Medicare patients last year.  That 
is true.  That did happen, is happening.  Twenty-six percent are 
out there telling us they will stop accepting new patients next 
year if this cut goes through.  I am also for avoiding mandatory 
reporting or mandatory pay-for-performance, which I hope you will 
think very long and hard about, could be very short-sighted and 
could be an absolute recipe for disaster down the road, considering 
who CMS is.  
The proposal before us ensures that any reporting is not tied to 
penalties.  That is good, because it would be, for me, a nonstarter. 
 I wish I could tell the providers out there we could get something 
to the floor this week, I would love it.  But I am sorry, I don't 
think that is going to happen, but you heard my Chairman, and he 
doesn't tell a story.  He is committed to get this thing done 
before Christmas, and it is all right with me if it is Christmas 
Eve, if that is what it takes, but we will try to get this done 
for you this year.  
With that, I yield back, Mr. Chairman.  
MR. FERGUSON.  Dr. Burgess is recognized for an opening statement. 
MR. BURGESS.  Thank you, Mr. Chairman, I will be brief, because I 
have stated my feelings on this subject many times in hearings during 
this summer and the past several months, and I am anxious to hear 
from our panelists, many who have come from a long ways away.  
But this hearing, today, is probably our best messaging apparatus to 
convey to the physician community those who have been visiting us 
up on the Hill this week and last week and the week before that, 
really, literally, all year long, and let them know that we are 
listening, that we understand the magnitude of the scheduled 
Medicare cuts, and we are working to develop a sustainable 
solution.  
Alan Greenspan, in one of the last meetings I saw him talk, was kind 
of doing a victory lap around the Hill right before he left, and he 
addressed a group of us saying Medicare, Social Security, they will 
bankrupt the country.  He said, yes, I am concerned about what those 
are going to cost.  
But let me tell you what I am more concerned about.  I am more 
concerned about whether or not there will be anyone there to provide 
the services that people want.  I don't know that he was talking about 
doctors that morning, but it certainly struck me that he is talking 
about physicians my age who are no longer accepting new Medicare 
patients, no longer treating Medicare patients, are limiting the 
procedures that they provide for Medicare patients, because I hear 
it from every community in my district, Doctor, how come I turned 65 
and I had to change doctors.  
With the 5.1 percent cut in Part B schedule rate to take place in 
January, access to care will become a greater issue.  It is simple 
economics that physicians and small business owners cannot 
consistently spend more on care than they earn.  The old saying 
goes, if you are losing a little bit on every patient, don't try to 
make it up in volume.  
Over a span of 9 years physicians face annual costs averaging 5 
percent a year, it is foolhardy to think that anyone who has the 
educational background of a physician, which means they are marginal 
in their business sense, but still even a marginal business person 
is not going to be able to continue under that venue.  
Dr. Norwood, I thank you for your leadership on this over the years, 
the years before I got here, and certainly, I thank you for your help 
with 5866.  It is too bad we didn't have more people sign on that.  
It certainly would have increased my stature with the Speaker.  It 
might not have helped your problem but would have made life better for 
me.  
I encourage my friends on the other side of the aisle.  I don't know 
what you have been told, but please look at this legislation.  It is 
good legislation, and even if we are not getting something done 
before Saturday at midnight, it sends a message to whoever is in 
leadership next year that every Member of this Congress wants this 
fixed, and they want it fixed in a sustainable way that doesn't just 
keep making the problem worse.  
I also share with Dr. Norwood his commitment to not tying increases 
in compensation to reporting.  I think voluntary reporting is the way 
to go, and I am concerned not just that doctors haven't kept pace and 
that punitive reporting will drive, will have the perverse effect of 
driving more doctors out of Medicare, but I am also concerned about 
driving an additional wedge in the health care disparities we already 
have in this country.  
What young doctor in their right mind will go to a community where 
health literacy is low if they are going to be penalized by their 
quality reporting when they could bring it back to CMS.  
I could extend a special welcome to literally everyone on the panel. 
I know I have spoken to most of you, if not once, at least many 
times over my short tenure here in Congress.  But since my brother 
is a pathologist, let me acknowledge Dr. Cook, who is with us, 
specializing in blood banking and serves as both the President of 
the American Health Quality Association and the Chief Medical Officer 
of the Virginia Health Quality Center.  
She and her staff have been invaluable working with my staff to 
develop language that would improve QIO function and accountability. 
I think the QIOs represent a vital component and an integral part of 
the reforms that we are going to discuss here today.  
Mr. Chairman, I apologize, I used all my time.  I will yield back 30 
seconds.  
MR. DEAL.  [Presiding.]  I thank the gentleman.  Mr. Shimkus, you 
are recognized for an opening statement.  
MR. SHIMKUS.  I am just glad Dr. Burgess was brief, and I will yield 
back my time so I can hear the panel.  
MR. DEAL.  Mr. Shadegg, you are recognized for an opening statement.  
MR. SHADEGG.  I am going to try to be brief.  I won't be as brief 
as Mr. Shimkus, but I will try to be shorter than my friend, 
Dr. Burgess.  I commend him and my friend, Dr. Norwood. 
I think my views on this are well-known.  I believe the current 
system is broken, I believe it is fundamentally flawed in design.  
I think it needs to be corrected.  I think it is absurd to tell 
doctors in America you are expected to perform these services, 
but we are going to give you cut after cut after cut.  
My view on that issue is that it is fundamentally dishonest for 
politicians to promise benefits and then not pay the price tag 
to pay for those benefits.  I may not be a doctor, but I have those 
strong views, and I will continue to fight for them.  
The only way we can handle this issue fairly is either pay for the 
services that we have promised or, if we can't afford those and 
can't find the money, as Dr. Norwood said elsewhere as promised, 
then cut back on what you promised, because running a system on 
the backs of the providers is fundamentally unfair.  It is 
deceitful to the American public, and it is simply a practice that 
we cannot continue to tolerate.  
I do want to, in my brief remarks, echo what Dr. Norwood say about 
pay-for-performance.  I wholeheartedly believe in 
pay-for-performance, but that is performance judged by the 
consumer, not performance judged by the government.  I understand 
that the intentions of those who think that pay-for-performance is 
a good idea may be very solid and very sound.  
But the government will never be able to accurately measure the 
performance of physicians or hospitals.  At the end of the day, 
people need to be able to walk with their feet when they have a 
doctor who is not performing.  They need to be able to get away 
from that doctor when they have a hospital that isn't performing, 
they need to be able to leave that hospital and send the message. 
I have introduced a number of bills in my career in Congress to 
give consumers choice in the health care market.  Let them pick 
the doctor they want.  Let them pick the hospital they want, and 
you will see quality go up.  Is it wrong for the government to try 
to look at performance?  No.  But to say we are going to pay for 
performance, meaning doctors get rewarded for meeting a government 
set standard, I believe perverts the system.  It is not the way 
the market works.  
I do not believe it will function well.  I think Dr. Norwood and I 
share the same view on that issue.  So, with that, I will shut up 
and let these learned scholars inform us of what we can do next.  
I join Dr. Norwood in saying I hope we can do it soon.  
With that, I yield back.  
[Additional statements submitted for the record follow:] 

PREPARED STATEMENT OF THE HON. TOM ALLEN, A REPRESENTATIVE IN 
CONGRESS FROM THE STATE OF MAINE 

	Thank you, Mr. Chairman for convening this hearing to 
examine the Medicare physician payment system and the effect of 
future reductions of the Medicare payment rate on patients' access 
to care.   
	This Subcommittee has convened four hearings on this subject 
in the past twelve months, and it doesn't appear that we are any 
closer to a solution.  
	We cannot stand by and do nothing about the scheduled 5.1 
percent Medicare payment cut to physicians set to begin in January. 
Unless Congress acts to fix the current reimbursement formula, 
physicians can expect a 26 percent decline in payments over the 
next 6 years.  By 2013, Medicare payment rates will be less than 
half of what they were in 1991 after adjusting for practice cost 
inflation.  
	Our failure to act will have a devastating impact on 
physicians and the patients they serve.  A recent survey conducted 
by the AMA indicates that that if the scheduled cuts go into effect 
on January 1st , 45 percent of doctors will decrease the number of 
Medicare patients they accept and 40 percent of group practices 
will be forced to limit the number of new Medicare patients they 
can accept. 
	Although physicians across the country are experiencing the 
impact of low Medicaid reimbursement and rising practice costs, 
Maine physicians face challenges unique to a relatively poor, 
rural state.  Maine has the highest per capita number of residents 
enrolled in Medicaid, and our Medicaid reimbursements are among the 
lowest in the country.  
	Insufficient payment, by both Medicaid and Medicare, hurts 
rural states like Maine particularly hard, because they have a 
disproportionate share of elderly citizens and patients have limited 
access to physicians, particularly specialists. 
	Failure to fix the current system will reduce our capacity 
to train physicians and keep them in the U.S.  We are already seeing 
a decline in medical school applications.  Residency programs are 
relying more and more on foreign medical graduates. 
	Time is running out, and Congress needs to act now to avert 
the 2007 physician pay cut by enacting a positive physician payment 
update that accurately reflects the increases in medical practice 
costs, as indicated by the Medicare Economic Index (MEI).  Over the 
long-term, Congress must repeal the SGR and replace it with a system 
that that more fully accounts for physicians' practice costs, new 
technology, and the age and health status of the patient population 
being served.  

PREPARED STATEMENT OF THE HON. FRED UPTON, A REPRESENTATIVE IN 
CONGRESS FROM THE STATE OF MICHIGAN 

	Mr. Chairman, thank you for convening today's hearing 
focusing on a draft proposal you've circulated to ensure physicians 
will have a positive update for the next three years and 
encourage coordinated, high-quality care. We cannot let things 
just roll along as they are, continuing to subject physicians to 
year-to-year uncertainly over whether or not their reimbursement 
will be significantly reduced and limiting their ability to provide 
care for their current Medicare patients and accept the onrush 
of new beneficiaries who will join the rolls as the Baby Boom 
retires. 
	Carefully crafted reform is particularly needed to 
preserving access to care for Michigan's Medicare beneficiaries. 
With 13.2 physicians per thousand Medicare beneficiaries, Michigan 
is below the national average, and that ratio is going to get 
worse.  Further, about 33 percent of today's Michigan physicians 
are over 55 and approaching retirement.  
	According to a recently released study of Michigan's 
physician workforce, Michigan will see a shortage of specialists 
beginning in 2006 and a shortage of 900 physicians overall in 2010, 
rising to 2,400 in 2015 and 4,500 in 2020.  Cuts in Medicare 
reimbursement will only exacerbate these shortages and seriously 
undermine access to care in our state. 
	Since coming to Congress in 1987, one of my top priorities 
has been strengthening access to health care for all Americans, 
and particularly for our senior citizens and persons with 
disabilities.  I look forward to working with you and my colleagues 
on both sides of the aisle to develop a stable, predictable 
physician reimbursement system that links reimbursement to the 
true cost of care and the prudent delivery of quality care. 

MR. DEAL.  I thank the gentleman.  I am pleased to have as an 
observer here today, a gentleman who is a member of my Georgia 
delegation.  He is not, unfortunately, on our committee but we are 
pleased to have him here, Dr. Price, and thank you for attending 
this very important hearing.  
It is my pleasure to introduce now--I believe everybody has made an 
opening statement, have they not--it is my pleasure to introduce 
our very distinguished panel:  
Dr. Dirk Elston, Department of Dermatology at Geisinger Medical 
Center in Pennsylvania; Dr. William Golden, Chair of the Board of 
Regents of the American College of Physicians; Dr. Paul A. Martin 
from Ohio; Dr. Albert W. Morris, Jr., President of the National 
Medical Association; Dr. Thomas Russell, Executive Director of the 
American College of Surgeons; Dr. Thomas Weida, Speaker of the 
American Academy of Family Physicians; Dr. Cecil B. Wilson, Chair, 
Board of Trustees of the American Medical Association; Dr. Nicholas 
Wolter, who is the Chief Executive Officer of the Billings Clinic 
and Director of the American Medical Group Association; Dr. Byron 
Thames, who is a Board Member of the AARP; and Dr. Sallie S. Cook, 
President of the American Health Quality Association. 

STATEMENTS OF DR. DIRK M. ELSTON, DEPARTMENT OF DERMATOLOGY, 
GEISINGER MEDICAL CENTER; DR. WILLIAM GOLDEN, CHAIR, BOARD OF 
REGENTS, AMERICAN COLLEGE OF PHYSICIANS; DR. PAUL A. MARTIN, 
PRESIDENT AND CEO, PROVIDENCE MEDICAL GROUP, ON BEHALF OF THE 
AMERICAN OSTEOPATHIC ASSOCIATION; DR. ALBERT W. MORRIS, JR., 
PRESIDENT, NATIONAL MEDICAL ASSOCIATION; DR. THOMAS RUSSELL, 
EXECUTIVE DIRECTOR, AMERICAN COLLEGE OF SURGEONS; 
DR. THOMAS J. WEIDA, SPEAKER, AMERICAN ACADEMY OF FAMILY 
PHYSICIANS; DR. CECIL B. WILSON, CHAIR, BOARD OF TRUSTEES, 
AMERICAN MEDICAL ASSOCIATION; DR. NICHOLAS WOLTER, CHIEF 
EXECUTIVE OFFICER, BILLINGS CLINIC, DIRECTOR, AMERICAN MEDICAL 
GROUP ASSOCIATION; DR. BYRON THAMES, BOARD MEMBER, AARP; AND 
DR. SALLIE S. COOK, PRESIDENT, AMERICAN HEALTH QUALITY 
ASSOCIATION, CHIEF MEDICAL OFFICER, VIRGINIA HEALTH QUALITY 
CENTER  

MR. DEAL.  Ladies and gentlemen, we are pleased to have all of 
you here.  Dr. Elston, we will start with you.  I would remind 
everybody that your prepared testimony has been made a part of 
the record.  We would ask you in your 5 minutes please to 
summarize it as quickly as you possibly can.  Thank you. 
DR. ELSTON.  Mr. Chairman, members of the subcommittee, thank you 
for holding this hearing.  I am Dirk Elston, Director of the 
Department of Dermatology at Geisinger Medical Center, the 
Nation's largest rural health care provider.  I am the Academy 
of Dermatology's representative to the CPT coding panel and the 
Institute for Quality in Laboratory Medicine, and I cochair the 
AMA Physician Consortium's Skin Cancer Work Group.  
I am here today representing the Alliance of Specialty Medicine 
and a coalition of 11 medical societies representing nearly 200,000 
specialty physicians.  We are all aware of the 5.1 percent cut in 
Medicare reimbursements scheduled to take place next year unless 
Congress acts this year to prevent the reduction.  
At the heart of the problem is the SGR formula.  No physician wants 
to turn away patients, but problems with SGR are forcing 
physicians to consider their degree of Medicare participation and 
what degree they can afford.  Data presented by the AAMC last year 
indicate that 40 percent of physicians had to consider and plan to 
decrease the number of new Medicare patients in their practice, 
and almost 20 percent say that cuts may force them to reduce the 
number of established Medicare patients they continue to treat.  
SGR is jeopardizing access to care for the elderly and the 
disabled, and we urge Congress to fix SGR once and for all.  
Congress is weighing options for adding quality initiatives to the 
Medicare physician payment system.  The Alliance believes that 
central principles must be upheld.  Improved quality should be 
the primary objective of any initiative so adopted.  The program 
must be voluntary, based on guidelines of care developed by 
physicians, specialty societies.  They must be clinically 
relevant, continually updated.  Quality measures must have 
widespread acceptance by the physician community before they are 
implemented, and reporting data must be adjusted for case mix, 
severity, patient demographics to avoid penalizing physicians who 
care for sicker patients.  
Results must be kept confidential.  Physicians must be able to 
review and correct data errors.  To avoid duplication of services, 
measures must be attributable to the appropriate physician when 
multiple physicians provide care. 
Physicians must not be penalized for volume increases resulting 
from compliance with performance measures.  Reporting should be 
exempt from HIPAA, and a phase-in period for any such program is 
the first recommendation of the recent IOM report on the lining 
incentives in Medicare.  Programs must be phased in so that 
physicians who cannot participate in existing measures are not 
penalized.  
Evaluation of the program would require an initial pay-for-reporting 
period prior to any pay-for-performance period.  Physician 
participation in any such program requires investment in HIT, and 
there is an increased burden to physician practices in personnel, 
education, infrastructure.  This is at a time when Medicare 
reimbursement has not kept pace with the cost of furnishing services.  
Incentives must be sufficient to compensate physicians for the 
disruption in practice and the cost for required resources.  Each 
Alliance organization member is a member of the AMA's physician 
consortium for performance.  The consortium provides an effective 
forum where all specialties work together to develop measures.  
Measures must be refined by the full consortium to ensure consensus 
among the medical societies.  We are aware of an effort by CMS to 
circumvent the development process affected by all development 
groups.  
Changing the process midstream will jeopardize physician trust and 
acceptance of quality measures.  We urge Congress to define the 
progress of measured development and ensure that if measures go 
forward, the AMA consortium remains the proponent for the process.
We applaud the leadership of the committee on both sides of the 
aisle for addressing the serious issue of declining Medicare 
physician reimbursement.  We would like to thank committee Chairman 
Barton and subcommittee Chairman Deal for soliciting input from 
physicians and the community.  
Regarding the Barton proposal, the Alliance appreciates the menu of 
reporting options, and the proposal to remove limitations on 
balanced billing would boost physician payment and make the Medicare 
program more competitive.  Chairman Barton's legislation provides 
a 3-year positive point 5 update and does not impose penalties on 
physicians who cannot report quality measures.  
The legislation's P-for-P elements are nonpunitive and allow time 
to ramp up quality reporting with bonus for reporting.  In its 
favor, the Barton proposal would be included as part of law and 
regulation, beginning the process of digging us out of the payment 
hole.  
We are grateful for all the efforts of Ranking Member Dingell and 
Congressman Burgess.  The proposals outline updates reflecting 
physician costs under an MEI-based payment system to produce more 
equitable payment schedule.  
We share the same goal, access to high-quality, efficient, 
patient-centered care.  We thank you for your willingness to work 
with the physician community, and I would be happy to answer any 
questions.  
[The prepared statement of Dr. Elston follows:] 


PREPARED STATEMENT OF DR. DIRK M. ELSTON, DEPARTMENT OF DERMATOLOGY, 
GEISINGER MEDICAL CENTER 

	Mr. Chairman and members of the subcommittee, thank you for 
holding this hearing on the Medicare physician payment issue. I 
appreciate the opportunity to present the perspective of medical 
specialists on legislative proposals pending before the committee, 
as well as to provide recommendations for modifying the Medicare 
physician payment formula to ensure continued beneficiary access 
to timely, quality healthcare.  I also thank the committee for its 
leadership in preventing reimbursement cuts since 2003 and for your 
continued bipartisan support through proposals to fix the current 
payment system.  
	I am Dirk Elston, Director of the Department of Dermatology 
at Geisinger Medical Center in Danville, Pennsylvania. I co-chair 
the American Medical Association's (AMA) Physician Consortium's 
Skin Cancer Work Group. I am a member of the American Academy of 
Dermatology Association (AADA).  I am here today representing the 
Alliance of Specialty Medicine - a coalition of 11 medical 
societies, representing nearly 200,000 specialty physicians. 

The Un-Sustainable Growth Rate 
	As we are well aware, sharp cuts in Medicare physician 
payments will take effect on January 1, 2007 unless Congress takes 
action this year to avert this reduction, and keep the program 
strong for seniors and disabled patients and the physicians who care 
for them.  At the heart of the problem is the Sustainable Growth 
Rate (SGR) formula which calculates annual updates in Medicare 
payments for Part B physician services.  Under this flawed formula: 
Payments are tied to fluctuations in the Gross National Product 
(GDP) instead of the costs of furnishing medical care to Medicare 
patients and running a medical practice; 
Costs for Medicare Part B covered drugs are in the payment formula 
although drugs are separate and distinct from physician services; 
and 
Physicians are penalized for increases in the volume of services 
they provide that are beyond their control - such as new benefits 
authorized by legislation, regulations, coverage decisions, new 
technology, growing patient demand for services, and the growing 
number of beneficiaries. 

	If the SGR formula is not fixed, physicians will receive 
negative updates of approximately five percent each year from 2007 
until 2015.1  These reductions may prompt a number of physicians 
to reconsider their participation in the Medicare program, to limit 
services to Medicare beneficiaries, or to restrict the number of 
new Medicare patients they are able to accommodate in their 
practice. 
	As advocates for patients and their specialty physicians, 
the Alliance of Specialty Medicine is very concerned that failure 
to correct the flaws in the Medicare physician payment system will 
put the healthcare of seniors and disabled patients in the Medicare 
program at risk. No physician wants to turn away patients or 
limit health care to our nation's elderly and disabled patients, 
but decreasing reimbursement will negatively impact the ability 
to provide these services. Therefore, for the sake of our 
patients, the Alliance urges Congress make the prevention of the 
scheduled 5.1 percent reimbursement cut in 2007, the first order 
of legislation business when lawmakers return to work in 
November. 

Pay-For-Reporting/Pay-For-Performance 
	As Congress seeks methods to incorporate quality incentives 
into the Medicare physician payment system, the Alliance believes 
that several crucial principles must be kept in mind to ensure the 
final result preserves patients' access to specialty care and 
promotes the stability and security of the Medicare program.  If 
a quality-based payment system is eventually adopted, it should 
not be implemented in a budget-neutral manner that would penalize 
some physicians and thereby provide a disincentive for further 
measurement development.  And, physicians must not be penalized 
for any volume increases resulting from compliance with 
performance measures as some measures may involve additional 
office visits or procedures that would only exacerbate the volume 
calculation in the current SGR formula.   Indeed, for these reasons, 
the Alliance believes that the SGR and pay-for-performance 
reimbursement systems are incompatible. 
	A quality incentive system should be phased in over several 
years.  Phasing in should begin with adequate pilot testing and 
a "pay-for-reporting" period.  Any pay-for-performance program 
should be voluntary and based on evidence-based guidelines of care 
developed by physicians and physician specialty societies. Quality 
and safety process and outcome measures used in the Medicare 
system must have widespread acceptance in the physician community 
prior to adoption by Medicare.   
	Over a very short period of time the specialty physician 
community has come a long way towards the incorporation of quality 
reporting and performance measures based on these principles.  During 
the past year, every Alliance organization has become a member 
of the Physician Consortium for Performance Improvement (Physician 
Consortium) of the AMA.  In addition, each Alliance organization 
has a committee within its individual organizational structure 
focused on Pay-for-Performance (P4P) or Quality Improvement.  
Each organization also has mobilized quickly to develop new 
guidelines of care if they did not exist or work with existing 
evidence-based clinical guidelines to draft quality measures.  
However, there are challenges in creating standard quality 
measures for the diverse medical specialists and sub-specialists 
that we represent.  

Measure Development Process 
	The Alliance of Specialty Medicine's member organizations 
have worked diligently to prepare physicians for quality 
improvement.  As members of the AMA Physician Consortium, we 
understand the current measure development, validation, and 
implementation processes to include specific steps.  In summary, 
a medical specialty organization proposes quality measures, based 
on practice guidelines, and the measures are developed and approved 
by the AMA Physician Consortium. The AMA Physician Consortium 
process involves private sector insurance companies, state medical 
societies, organizations geared to ensure quality patient care, 
methodologists, multiple medical specialty societies, and others 
to make sure the quality measures are properly vetted. After a 
public comment period, the AMA Physician Consortium-approved 
measures are then submitted to a multi-stakeholder group for 
endorsement.  Those endorsed measures are then sent to another 
multi-stakeholder group that selects a uniform, consistent set 
of endorsed measures that are warranted for implementation by 
public and private payers. 
	It can take up to two years or more for quality measures 
to go from the initial AMA Physician Consortium submission to 
implementation.  This timeline does not take into account the 
medical society's own timeline for discussing, developing, 
testing, and approving the original practice guideline that is 
the evidence-based foundation for the quality measure.  In 
addition, most of the Alliance member organizations have not 
been able to participate in Centers for Medicare and Medicaid 
Services (CMS)'s 16-measure Physician Voluntary Reporting Program 
(PVRP) because the PVRP measures are not applicable to our 
specialty physicians. Thus, most Alliance member physicians 
lack the experience with measurement reporting. 
	While the measure development process should be fully 
understood and applied across all organized medicine, as well as 
scrupulously followed, the process has been vulnerable to 
misunderstanding.  For example, we are aware of an effort by CMS 
to circumvent the consensus-driven measure development process by 
requesting that measures go through a multi-stakeholder 
implementing body before approval by the AMA Physician Consortium. 
 Changing the process midstream will jeopardize physicians' 
acceptance of the established quality measurement development 
process currently in place.  Furthermore, shifts in the process 
could lead to the promulgation of measures that do not result in 
genuine quality gains for patients and physician practices - an 
outcome that would defeat the purpose of our work to date on 
measurement development. 
	Therefore, we urge Congress to ensure that the AMA Physician 
Consortium remains the proponent for the measure development process. 
The AMA Physician Consortium has established credibility and plays 
a critical role in the consensus building process. This process, in 
which physicians have placed their trust, should not be circumvented. 
Defining the development process and the AMA Physician Consortium's 
role in that process is a necessary step before implementing a 
Medicare Pay-for-Reporting or Pay-for Performance initiative. 

Legislative Proposals 
	As mentioned earlier, the Alliance is greatly appreciative of 
the work of this committee on the Medicare physician payment issue. We 
would particularly like to thank Committee Chairman Barton and 
Subcommittee Chairman Deal for soliciting input from the physician 
community. Chairman Barton's proposal is a step in the right 
direction for averting the payment crisis over the next three 
years.  We are also grateful for the efforts of Ranking Member 
Dingell and Congressman Burgess - a physician himself who has 
interacted with the Medicare program firsthand as a provider. 

Chairman Barton's Draft Legislation 
	Chairman Barton's draft legislation providing a three-year, 
positive .5 percent update that does not impose penalties on 
physicians who do not (or cannot) report quality measures is 
greatly appreciated by the Alliance of Specialty Medicine.  The 
legislation is consistent with our principles on P4P as it does 
not contain punitive elements and allows a full year (in 2007) 
to ramp up to quality reporting in 2008, with a bonus for 
reporting.  In its favor, the positive updates in the Barton 
proposal would be changes in law and regulation, effectively 
beginning to dig us out of the SGR payment hole. Thus, the 
updates will not serve to deepen the scheduled SGR payment 
cuts in the out years. 
	Furthermore, the Alliance appreciates the menu of reporting 
options in the Barton proposal; physicians can report from either 
the CMS PVRP or from 3-5 structural measures to be determined by 
the physician community. This is important since, as we have 
previously stated, because most Alliance member organizations are 
unable to participate in the PVRP at this time.  As members of 
the AMA Physician Consortium, the Alliance organizations have 
been engaged in the process of measurement development for the 
past year.  It will take some time for our organizations to 
work through the process and we greatly appreciate ramp-up period 
in 2007. 
	The Alliance would appreciate clarification on how 
provisions in the Barton proposal that provide for contracts with 
Medicare quality improvement organizations (QIO) or state medical 
societies for reporting on utilization would be implemented.  
Additionally, we are concerned that reporting quality measures 
will require a good deal of physician practice resources. This 
may be an increased burden to physician practices in staff time, 
education, and additional personnel at a time when Medicare 
physician reimbursement has not kept pace with the cost of 
furnishing services to beneficiaries.  Incentive must be adequate 
to cover the cost of these resources. 
	Lastly, removing limitations on balance billing would boost 
physician payment, while making the Medicare program more 
competitive.  Balance billing, when means-tested as stipulated in 
the Barton proposal, adds coverage options for beneficiaries, 
allowing them to compare physician fees and make their decisions 
accordingly. 

H.R. 5916, the "Patients' Access to Physicians Act of 2006" 
	Ranking Member Dingell's legislation outlines a positive 
physician update reflecting physicians' costs under a Medicare 
Economic Index (MEI) based payment system for 2007 and 2008, and 
would produce a much more equitable payment schedule in the short 
term than is currently in place.  Furthermore, the temporary 
relief provided under the legislation offers lawmakers the necessary 
time to develop an alternative to the SGR payment formula. 

H.R. 5866, the "Medicare Physician Payment Reform and Quality 
Improvement Act of 2006" 
	As a fellow physician, Congressman Burgess is personally 
aware that the current SGR payment system inequitably ties updates 
in Medicare physician payments to fluctuations in the Gross 
Domestic Product (GDP) and not the costs of health care inputs.  
Congressman Burgess's legislation replaces the SGR formula with 
the MEI minus 1 percent. Cognizance of physicians' costs under 
an MEI-based payment system would produce a much more equitable 
payment schedule.  
	The Alliance also appreciates the legislative language that 
any voluntary system of quality measurements that may be established 
must produce relevant, accurate, and useful data in a manner not 
unduly burdensome to physicians.  H.R. 5866 recognizes that 
measurement development should take place in conjunction with 
medical specialty organizations and we strongly agree.  It is 
equally important that new funding be allocated as part of a 
quality-based Medicare payment system.  Attempting to launch 
such a system under the current constraints of budget neutrality 
could have the adverse consequence of discouraging quality 
measurement development and utilization.  Further, like the Barton 
proposal, Dr. Burgess's legislation also contains a provision for 
balanced-billing, and we applaud this. 

Conclusion
	The Alliance of Specialty Medicine recognizes the challenges 
that lawmakers face in creating an equitable Medicare physician 
payment system that includes quality improvement, and which will 
lead to genuinely improved quality for Medicare beneficiaries.  
We applaud the leadership of Chairman Barton, Ranking Member 
Dingell, Dr. Burgess, and other Republicans and Democrats on this 
committee for addressing the serious, perennial crisis with 
declining Medicare physician payments.  We sincerely thank you 
for your willingness to work cooperatively with the physician 
community.  The Alliance is ready to work with the committee to 
ensure that the Medicare physician payment system is sustainable 
for the long-term for patients and their specialty physicians, 
and would ask that this issue be the first order of business when 
Congress returns from the elections. At this time, I would be happy 
to answer questions from the subcommittee members. Thank you.


MR. DEAL.  Thank you.  
Dr. Golden.
	DR. GOLDEN.  Thank you, Chairman Deal, and members of 
the subcommittee.  Good afternoon.  I am William Golden.  I am a 
general internist and a professor of medicine at the University of 
Arkansas for Medical Sciences.  I am also Vice President for 
Quality Improvement for the Arkansas Foundation for Medical Care, 
the State's quality improvement organization; and I serve on the 
steering committee of the AMA Physicians Consortium for 
Performance Improvement.  
Today, I come to you as Chairman of the Board of Regents of the 
American College of Physicians, the largest specialty society in 
the United States with 120,000 internal medicine physicians and 
medical students.  Internal medical physicians see more Medicare 
patients than any other specialty in this country.  
The College urges Congress to enact a plan that stabilizes physician 
payments in the immediate term while creating building blocks for 
longer term solutions.  A centerpiece should be recognition of the 
value of care that is managed by a patient's personal physician, 
using systems of care centered on patients' needs.  
We have called this model the patient-centered medical home, and we 
think it has enormous potential to improve care and achieve cost 
savings for patients with multiple chronic diseases.  
Chairman Barton has developed a discussion draft that incorporates 
many of these important elements.  We also commend Mr. Dingell and 
Mr. Burgess for introducing bills to eliminate the SGR cuts.  I am 
pleased to share the College's views on each of the key elements 
addressed in Chairman Barton's proposal.  
First, Congress must replace the 2007 SGR cuts with a positive 
update.  
Second, Congress should provide several years of stable, positive 
and predictable updates as a transition to eliminating the SGR.  
This will give physicians the stability needed for them to 
participate in programs to measure and report their performance.  
It will also give Congress time to explore important alternatives 
to the SGR and assess its impact on participation in the program 
and in demonstration projects.  
The College believes that the updates during this transition period 
are to reflect increases in physician costs and to provide a 
substantial enough bonus for reporting on quality measures to 
encourage physician participation.  We believe the updates and the 
discussion draft should be increased accordingly.  
Third item, Congress should treat increased expenditures as a change 
in law and regulation that is included in the Medicare baseline 
spending.  The alternative financing mechanism suggested would 
treat a positive update as a one-year bonus, would not affect 
baseline spending, and perhaps result in severe cuts a couple of 
years out in 2008.  For this reason we believe it is preferable 
to bring the costs of eliminating the SGR down by treating them 
as higher updates, rather than bonuses.  
Fourth, Congress should institute the patient-centered medical 
home demonstration.  There is strong evidence that hospitalization 
rates for chronic diseases like diabetes and heart failure can be 
reduced when care is managed effectively by a personal physician 
in partnership with patients.  We believe that legislation should 
outline a process for practices to demonstrate that they can 
provide patients and services supported by HIT, Health Information 
Technology, and it should direct the Secretary to reimburse 
appropriate practices, qualified practices for the time and costs 
associated with this kind of patient centered services.  
This should include--could cover time that physicians spent outside 
the office visit to coordinate care amongst health professionals 
initiating disease management plans in partnerships with their 
patients and the use of evidence-based clinical support schools.  
It should also give the Secretary authority for cost sharing for 
patients who received care through a patient-centered Medicare 
home.  We should begin a voluntary, nonpunitive pay-for-reporting 
program in 2008 with multiple pathways for physicians to 
participate.  
Through my work with the Arkansas Foundation for Medical Care, I 
know that physicians welcome voluntary programs that provide them 
with meaningful information and assistance to help them improve 
quality.  But to succeed, they must acquire tools to track their 
performance and devote time in their practice and with their staffs 
to collect the information and to apply the information in 
performance improvement.  
Clinical measures should be developed by the multispecialty PCPI 
to a consensus process endorsed by the NQF and submitted to the 
AQA for implementation.  This kind of uniformity is essential so 
that physicians are not faced with reporting on different or 
conflicting measures.  
Chairman Barton's discussion draft would also require that 
physicians participate in utilization management programs, and we 
believe that this should be one of the options that should qualify 
for bonus payments rather than being required.  
Finally, during the multiyear transition period, Congress should 
enact legislation to go beyond initial pay-for-reporting and move 
toward a more robust pay-for-performance program.  We believe that 
it should get prioritized funding for measures that have greatest 
impact on improving quality and reducing costs, and it should help 
physicians gain performance payments based on their performance 
and the efforts they put into reporting.  
It should include safeguards against patient deselection based on 
health status or noncompliance, and such a program could be funded 
through a separate quality performance pool in addition to the 
annual updates that reflect increases in costs.  
I appreciate the opportunity to share our views and will be pleased 
to answer questions later. 
	[The prepared statement of Dr. Golden follows:] 

PREPARED STATEMENT OF DR. WILLIAM GOLDEN, CHAIR, BOARD OF REGENTS, 
AMERICAN COLLEGE OF PHYSICIANS 

SUMMARY 

	ACP believes that Congress should embrace the opportunity to 
pass legislation this year that will transition the dysfunctional 
Medicare payment policies to a bold new framework that will 
ultimately improve quality and lower costs by aligning incentives 
with the need of patients.  We believe the elements of this 
transition should do the following: 
1. Replace the 2007 SGR cuts with a positive update for all 
physicians;  
2. Provide a multi-year stable, positive and predictable updates for 
all physicians; 
3. Treat any increased expenditures resulting from such stable and 
positive updates as a "change in law and regulation" that will be 
reflected in Medicare baseline spending, reducing the eventual 
costs of repealing the SGR; 
4. Begin a voluntary and non-punitive pay-for-reporting program in 
2008, with multiple pathways for physicians to meet the reporting 
requirements to qualify for a higher (positive) update. This should 
begin with "high impact"  measures that have been approved by the 
NQF and AQA and that reimburses physicians on a weighted basis 
related to the number, impact, and commitment of resources 
associated with the measures being reported; 
5. Require the Secretary of Health and Human Services report to 
Congress on a strategic and implementation plan for eliminating the 
SGR; 
6. Institute a Medicare demonstration of the patient-centered 
medical home, a new model for organizing, financing, and reimbursing 
care of patients with chronic diseases that has enormous potential 
for improving quality and reducing costs; and 

Allow physicians to share in system-wide savings in other parts of 
Medicare that can be attributed to their participation in 
performance measurement and improvement. 

	Thank you, Chairman Deal and Ranking Member Brown: 
	I am William E. Golden, MD, FACP, chair of the Board of 
Regents of the American College of Physicians.  The 120,000 internal 
medicine physicians and medical student members of the American 
College of Physicians congratulate Chairman Barton and the members 
of the House Energy and Commerce Subcommittee on Health for 
convening today's hearing on "Medicare Physician Payment: 2007 and 
Beyond."  
	The American College of Physicians believes that it is 
essential that Congress take immediate action to reform the 
dysfunctional Medicare physician payment system.  Medicare payments 
are dysfunctional because they reward high volume, episodic, and 
fragmented care that undervalues the relationships between 
physicians and their patient and, as a result, often does not 
produce desired outcomes.  Instead, we need a payment system that is 
centered on patients' needs, one that recognizes the value of a 
patient's relationship with their personal physician, and one 
that provides incentives for physicians to engage in continuous 
quality improvement and measurement supported by health 
information technology.   
	As a general internist in Little Rock, Arkansas and 
Professor of Medicine and Public Health at the University of 
Arkansas for Medical Sciences, I have personal experience with 
the challenges that primary care physicians face in taking 
care of Medicare patients under a payment system that 
systematically undermines and devalues the relationships elderly 
patients have with their personal physicians.   
	My perspective on pay-for-reporting is based on decades of 
experience with quality improvement at both the national and state 
level.  I am vice president for quality improvement for the 
Arkansas Foundation for Medical Care, the state's Quality 
Improvement Organization (QIO), and I serve on the Steering 
Committee for the AMA/Physician Consortium for Performance 
Improvement (PCPI).  I am a former member of the Board of Directors 
of the National Quality Forum, and a past president of the American 
Health Quality Association. 

Creating a Pathway for Physician Payment Reform 
	The College urges Congress to enact a step-by-step plan 
that stabilizes physician payments in the immediate term, while 
creating the building blocks for longer term reforms. 
	Over the past several weeks, the College's Washington staff 
has had the privilege of working with House Energy and Commerce 
Committee staff to provide recommendations on immediate and 
longer-term relief from Medicare cuts while taking important first 
steps toward creating a better payment system for Medicare 
patients.  I congratulate Chairman Barton and the committee staff 
for opening discussions on draft legislation. 
	I also wish to thank Dr. Burgess, who has made an 
enormous contribution to creating a better payment system by 
introducing H.R. 5866, the "Medicare Physician Payment Reform and 
Quality Improvement Act of 2006."  The College also appreciates 
Ranking Member Dingell's commitment to replacing the sustainable 
growth rate (SGR) and reforming Medicare physician payments, as 
evidenced by his introduction of H.R.  5916, the "Patients' 
Access to Physicians Act of 2006."  It is encouraging to see that 
there is broad bipartisan support for halting the pending Medicare 
cuts and instituting other needed reforms in Medicare payment 
policies.  
	Our understanding is that Chairman Barton's discussion draft 
includes the following key elements: 
1. It replaces the 2007 SGR cuts with a positive update for all 
physicians. 
2. It provides three years of stable, positive and predictable updates 
for all physicians. 
3. It treats any increased expenditures resulting from such stable 
and positive updates as a "change in law and regulation" that will 
be reflected in Medicare baseline spending, reducing the eventual 
costs of repealing the SGR. 
4. It begins a voluntary and non-punitive pay-for-reporting program 
in 2008, with multiple pathways for physicians to meet the reporting 
requirements to qualify for a higher (positive) update. 
5. It requires that the Secretary of HHS report to Congress on a 
strategic and implementation plan for eliminating the SGR. 
6. It institutes a Medicare demonstration of the patient-centered 
medical home, a new model for organizing, financing, and reimbursing 
care of patients with chronic diseases that has enormous potential 
for improving quality and reducing costs.  

I am pleased to share the College's views on each of these elements. 

Providing Positive, Predictable and Stable Updates 
	The College believes that it is imperative Congress enact 
legislation to replace the 5.1 percent SGR cut scheduled to occur 
on January 1, 2007 with positive updates.  Halting the 2007 cut and 
replacing it with a positive update must be Congress's top priority, 
because it will be impossible to move forward on other needed 
payment reforms in an environment when physicians are facing another 
deep cut. 
	To this end, we urge the members of the House Energy and 
Commerce Committee to work with your colleagues on the House Ways 
and Means Committee, the House leadership, and your colleagues on 
the Senate Finance Committee to reach agreement on legislation to 
halt the 2007 cut and replace it with positive updates.   It is 
understandable that there are different perspectives on the amount 
of the 2007 update, the mechanisms to pay for it, and subsequent 
steps to achieve reform of the payment system, but these should 
not stand in the way of halting the 2007 cuts.   If action to halt 
the cuts and replace them with positive updates is not taken before 
the House of Representative recesses later this week, then it 
will be essential that an agreement be reached before Congress 
returns for a post-election "lame duck" session so that immediate 
action can be taken at that time. 
	The College believes  that it is preferable to provide 
several years of predictable, stable and positive updates for all 
physicians, as Chairman Barton's discussion draft would do, rather 
than providing only one year of relief from the SGR cuts.  By 
setting the updates in statute for the next three years, the 
Chairman's discussion draft will provide physicians with the 
sense of certainty and financial stability needed for them to 
begin participating in programs to improve, measure and report 
their performance.  
	Three years of positive, predictable and stable updates 
will also give Congress the time needed to explore alternatives to 
the SGR and to assess the impact on quality and cost of physician 
participation in voluntary programs and demonstration projects to 
improve quality and manage the care of patients with multiple 
chronic diseases.   By comparison, providing only one year of 
guaranteed positive updates, with no assurance that there will 
be positive updates in 2008--and with the prospect of deep cuts 
if the update reverts to the SGR formula--would create great 
uncertainty in physicians' minds on whether they can afford to 
invest in the health information technology and other tools 
needed to effectively assess, measure and improve on the care 
provided to Medicare patients.  
	As much as the College prefers that Congress stabilize 
physician payments for several years, we believe that even one 
year of stable, positive and predictable updates is clearly 
better than allowing the SGR cut to go into effect.  
	Chairman Barton's discussion draft would provide all 
physicians with a 0.5 percent update in 2007.  In 2008 and 2009, 
the guaranteed updates will also be 0.5 percent for those 
physicians who do not report on quality measures, and an 
additional 0.25 percent bonus payment for physicians who 
voluntarily select from a menu of specified pathways to report 
on quality or structural measures or improve care of patients 
with chronic diseases.  
	We are appreciative that Chairman Barton wants to assure 
that all physicians will get positive updates, and we very much 
agree that pay-for-reporting should result in positive incentives 
for participation in such programs, not punitive cuts for those 
who cannot participate.  We encourage the Committee to consider 
increasing the update to at least 1 percent each year, and to 
provide a greater reporting incentive-e.g. another 1 or 2 
percent-for physicians who voluntarily participate in one or 
more of the pathways. Providing updates of only 0.5 percent 
per year, after five years of updates that have not kept pace 
with inflation, would still leave many physicians in the 
precarious position of trying to deliver good care to Medicare 
patients at a time when reimbursement will continue to fall 
further and further behind their actual costs.  
	The College is also pleased that the positive updates in 
Chairman Barton's discussion draft would be considered a change 
in "law and regulation" and incorporated into calculations of 
Medicare baseline spending, thereby reducing the costs of 
repealing the SGR. Alternative financing mechanisms have been 
suggested that would treat the positive updates as one year 
bonuses that would not affect baseline spending, the result of 
which would be to revert to the cuts that would have resulted 
from the SGR.  For instance, if a one year bonus in 2007 was 
not included as baseline spending and payments were to revert 
to the SGR in 2008, physicians would be facing a combined 
10-13 percent cut in 2008 (the equivalent of the 5.1 percent 
cut in 2007 combined with another SGR cut of five or six percent 
cut in 2008).  For this reason, we believe that it is preferable 
to bring down the costs of eliminating the SGR, as Chairman Barton 
proposes, rather than the alternative of treating the higher 
updates as "bonus" payments not accounted for as Medicare baseline 
spending.

Creating Incentives for Performance Measurement and Improvement 
	Through my work with the Arkansas Foundation for Medical 
Care, I have found that physicians welcome voluntary programs that 
provide them with meaningful and actionable information and 
assistance to help them improve quality.  To succeed in such 
programs, physicians must acquire tools to assist them in assessing, 
measuring and improving care and to devote a considerable amount of 
their own and their staff's time toward the programs. 
	Providing a small bonus of only 0.25 percent is unlikely 
to be sufficient to cover the costs physicians will incur in 
reporting on the measures. For many physicians in small practices, 
the benefit of participating in the quality reporting programs will 
not be worth the substantial increase in their practice expenses 
and time required.  
	Congress should also allow sufficient time for physicians to 
identify the clinical and structural measures that are most 
applicable to their specialty or patient population and to institute 
the practice changes needed to report on such measures.  Although we 
believe that many physicians could begin reporting on a core set of 
structural or clinical measures by the end of 2007, a "ramp up" year 
would allow for more clinical measures to be developed, validated 
and implemented and for more physicians to acquire the necessary 
tools and health information technologies associated with most 
structural measures.  
	If Medicare pay-for-reporting begins in 2007, we recommend 
that it start with a menu of structural or clinical measures that 
most physicians report on, from which physicians could choose to 
report on the three to five measures most applicable to their 
specialty and patient population.   The data collection process 
should be structured in such a way to be time efficient and not 
overly burdensome on the physician practice. 
	The College also supports the idea of offering physicians 
several different options for qualifying for the pay-for-reporting 
bonuses payments, as Chairman Barton's discussion draft proposes.  
We are pleased that physicians would be given the option of 
reporting on evidence-based clinical measures, or on structural 
measures that demonstrate they are acquiring the tools and 
technologies needed to support quality improvement and patient 
safety.  
	The College recommends that any legislation to initiate 
a Medicare pay for reporting program should recognize and support 
the complementary efforts of the AMA/PCPI the National Quality 
Forum, and the AQA.  The Secretary should be required to use measures 
that are developed through these processes and should not be 
permitted to substitute different measures. 
	Any clinical measures that apply to physicians should be 
developed by the AMA/PCPI, a multi-specialty consensus process that 
is making remarkable progress in developing measures for all 
specialties, having completed work on 150 measures in the past year 
alone.  Once developed by the consortium, they should be submitted 
to the National Quality Forum for validation based on review of the 
scientific evidence behind the measure.  Finally, the measures 
should be reviewed by the AQA, a multi-specialty stakeholder 
organization that works to identify measures for implementation 
that will be applied consistently and uniformly across different 
performance improvement programs, regardless of the payer 
administering the program.  Such uniformity is essential so that 
physicians are not faced with reporting on different and conflicting 
measures for the same clinical condition for different reporting 
programs.  The AQA also looks at the feasibility of implementing a 
measure.  For instance, the AQA will consider if it is 
administratively practical for physicians to collect the data 
needed to report on a measure.  
	Structural measures should also be based on evidence that 
they can contribute to improvements in patient safety and quality 
improvements in physician offices.  Structural measures that are 
used in private sector pay-for-reporting programs, such as the 
Physician Practice Connection modules developed by NCQA and used 
in the Bridges to Excellence programs, should be considered as a 
starting point for identifying structural measures for the 
Medicare program.  
	Chairman Barton's discussion draft would also require that 
physicians participate in a utilization management program 
administered by a state or regional QIO or state medical society in 
order to qualify for the reporting bonus.  The College suggests 
that participation in such a program should be one of the options 
to qualify for the bonus payments-along with reporting on clinical 
or structural measures or participating in a demonstration project 
on the patient centered medical home-rather than being required of 
all physicians in order to qualify for the performance bonus.  The 
legislation should also specify that the program is intended solely 
to provide physicians with confidential and comparative information 
on how their utilization compares with their peers, and will not be 
used for claims audits, denials or public reporting. 

HHS Report on Alternatives to the SGR 
	Any legislation to provide predictable, positive and stable 
updates must have as its goal the complete elimination of the SGR.  
	We understand that the price of repeal is very high, but we 
believe that the price of maintaining a flawed SRG formula is even 
higher.  If the SGR is maintained, Medicare patients will suffer 
reduced access, as established physicians are forced to limit how 
many Medicare patients they will see and medical students and young 
physicians decide not to enter the two primary care specialties--
internal and family medicine--that most Medicare patients rely on 
for their medical care. 
	Short of repeal, we believe that legislation should at least 
create a process that will lead to a recommendation and decision on 
repeal of the SGR.  We are pleased that Chairman Barton's discussion 
draft requires that the Secretary of HHS provide an implementation 
and strategic plan repealing the SGR, but urge Congress to act before 
then and replace it with a system that provides positive, predictable 
and fair updates to all physicians that reflect increases in 
practice expenses. 

Pilot Program of the Patient-Centered Medical Home 
	The College is extremely pleased that Chairman Barton's 
discussion draft includes a demonstration project on the 
patient-centered medical home.  The premise behind the 
patient-centered medical home is that patients who have an 
ongoing relationship with a personal physician, practicing in 
systems of care centered on patients' needs, will get better care 
at lower cost.  
	Under the Chairman's discussion draft, participation in 
the demonstration project would be one pathway for physicians to 
qualify for the reporting bonus payments, and qualified practices 
would also be eligible for a new payment methodology that covers 
the practice expenses and physician and non-physician work 
associated with care coordination.  The discussion draft outlines a 
process for practices to qualify for this different reimbursement 
model based on demonstration that they have the ability to provide 
patient-centered services for patients with chronic diseases.  It 
also gives the Secretary authority to reduce co-payments or 
deductibles for Medicare patients who choose to receive care through 
a patient centered medical home. 
	We believe that this model has enormous potential to improve 
quality and lower costs, principally through reduced hospitalizations, 
for patients with multiple chronic diseases.  
	The key attributes of the patient-centered medical home, as 
described in a joint statement of principles from the ACP and the 
American Academy of Family Physicians, are attached.  
[See Appendix A] 

Achieving Long Term Reform 
	By including the patient-centered medical home in the 
discussion draft, Chairman Barton is creating the foundation for a 
long-term reform of Medicare physician payments that recognizes 
the value of care that is coordinated and managed by a personal 
physician in partnership with a patient.  A recent study published 
in Health Affairs (Thorpe, Kenneth and Howard, David, "The Rise in 
Spending Among Medicare Beneficiaries: The Role of Chronic Disease 
Prevalence and Changes in Treatment Intensity," 22 August 2006) 
concluded that all of Medicare's cost increases in recent years are 
due to the increased numbers of beneficiaries with multiple chronic 
diseases.  The patient-centered medical home demonstration will 
create a pathway for developing an entirely new financing and 
delivery model that can achieve better care for such patients at 
lower cost. 
	The pay-for-reporting provisions in Chairman Barton's 
discussion draft will also allow Medicare to gain experience with 
the potential of performance measurement and improvement, linked 
to financial incentives, to improve outcomes and potentially, 
achieve cost savings.  We recommend, however, that during the 
three-year transition period envisioned in Chairman Barton's 
discussion draft, Congress move toward creating a new system 
that fundamentally restructures the physician payment system, 
including providing a means to fund pay-for-performance programs 
that have the greatest potential to improve quality and reduce 
costs.  
	First, the SGR should be replaced by a system that allocates 
a set portion of Medicare spending towards providing an annual 
update to physicians based on inflation.  
	Second, Congress should set aside an additional amount to 
fund a performance improvement pool.  This pool would fund 
physician-directed programs that have been shown to have the 
potential to improve care and, potentially, achieve cost 
savings. 
	Third, Congress should specify that a portion of savings 
associated with reductions in spending in other parts of Medicare, 
which are attributable to quality improvement programs funded out 
of the physicians' quality improvement pool, would be redirected 
back to the pool. Such savings would include: reductions in Part 
A expenses due to avoidable hospital admissions related to 
improved care in the ambulatory setting and savings resulting 
from non-physician Part B expenses (such as reductions in 
avoidable durable medical equipment expenses or laboratory testing 
resulting from better management in the ambulatory setting that 
results in fewer complications). 
	Fourth, the performance improvement pool should include 
prioritized funding for pay-for-performance programs that use 
measures having the greatest potential impact on improving quality 
and reducing costs. We believe that robust evidence-based clinical 
measures for chronic disease will have a greater impact on quality 
and cost rather than simple and basic cross-cutting measures 
broadly applicable to all physicians. 
	Fifth, performance-based payments funded out of the pool 
should pay individual physicians on a weighted basis related to 
performance: 
 	Reporting on high impact measures should receive higher 
performance payments than lower impact measures; 
 	The weighted performance payments should acknowledge that 
reporting on a larger number of robust quality measures typically 
will require a greater commitment of time and resources than 
reporting on one or two basic measures; 
 	The weighted performance payments should take into account 
physician time and practice expenses associated with reporting on 
such measures; and 
 	The weighted performance payments should also provide 
incentives for physicians who improve their own performance as 
well as those who meet defined quality thresholds based on the 
measures; 
	 The weighted performance payments should allow individual 
physicians to benefit from reductions in spending in other parts 
of Medicare attributable to their performance improvement efforts. 

	Particularly for chronic disease conditions, reporting on 
measures will require a substantial investment of physician time 
and resources to implement the technologies needed to coordinate 
care effectively, to follow-up with patients on self-management 
plans, to organize care by other health care professionals, and 
to measure and report on quality.  These differences should be 
recognized in the weighted pay-for-performance payments. 
	During the transition period, Congress should also enact 
legislation to make the elements of the patient-centered medical 
home a permanent part of the Medicare program, rather than limiting 
it to a demonstration project.  This should include enacting a 
new reimbursement model for patients with chronic diseases that 
recognizes and supports the value of care managed and coordinated 
by a personal physician in partnership with the patient. 

Conclusion 
	The College commends Chairman Barton and the members of the 
House Energy and Commerce Subcommittee on Health for holding this 
important hearing. 
	We believe that Congress should embrace the opportunity to 
pass legislation this year that will transition the dysfunctional 
Medicare payment policies to a bold new framework that will 
improve quality and lower costs by aligning incentives with the 
needs of patients.  This transition should: 
1. Replace the 2007 SGR cuts with a positive update for all 
physicians; 
2. Provide multi-year stable, positive and predictable updates for 
all physicians; 
3. Treat any increased expenditures resulting from such stable and 
positive updates /as a "change in law and regulation" that will be 
reflected in Medicare baseline spending, reducing the eventual costs 
of repealing the SGR; 
4. Begin a voluntary and non-punitive pay-for-reporting program in 
2008, with multiple pathways for physicians to meet the reporting 
requirements to qualify for a higher (positive) update. This should 
begin with "high impact"  measures that have been approved by the 
NQF and AQA and that reimburses physicians on a weighted basis 
related to the number, impact, and commitment of resources 
associated with the measures being reported; 
5. Require the Secretary of Health and Human Services report to 
Congress on a strategic and implementation plan for eliminating 
the SGR; 
6. Institute a Medicare demonstration of the patient-centered 
medical home, a new model for organizing, financing, and reimbursing 
care of patients with chronic diseases that has enormous potential 
for improving quality and reducing costs; 
7. Allow physicians to share in system-wide savings in other parts 
of Medicare that can be attributed to their participation in 
performance measurement and improvement. 

APPENDIX A 

	AAFP and ACP recently adopted a joint statement of principles 
that describes the key attributes of a patient-centered medical home:
	Personal physician - each patient has an ongoing relationship 
with a personal physician trained to provide first contact, 
continuous and comprehensive care.
	Physician- directed medical practice - the personal physician 
leads a team of individuals at the practice level who collectively 
take responsibility for the ongoing care of patients. 
	Whole person orientation - the personal physician is 
responsible for providing for all the patient's health care needs or 
taking responsibility for appropriately arranging care with other 
qualified professionals.  This includes care for all stages of 
life: acute care; chronic care; preventive services; end of life 
care. 
	Care is coordinated and/or integrated across all domains of 
the health care system (hospitals, home health agencies, nursing 
homes, consultants and other components of the complex health care 
system), facilitated by registries, information technology, health 
information exchange and other means to assure that patients get 
the indicated care when and where they need and want it. 
	Quality and safety are hallmarks of the medical home: 
 Evidence-based medicine and clinical decision-support tools guide 
	decision making; 
 Physicians in the practice accept accountability for continuous 
quality improvement through voluntary engagement in performance 
measurement and improvement;	
 Patients actively participate in decision-making and feedback is 
sought to ensure patients' expectations are being met; 
Information technology is utilized appropriately to support optimal 
patient	care, performance measurement, patient education, and 
enhanced communication; 
 Practices go through a voluntary recognition process by an 
appropriate non-governmental entity to demonstrate that they have 
the capabilities to provide patient-centered services consistent 
with the medical home model. 

	Enhanced access to care through systems such as open 
scheduling, expanded hours and new options for communication between 
patients, their personal physician, and office staff. 
	Payment appropriately recognizes the added value provided to 
patients who have a patient-centered medical home.  The payment 
structure should be based on the following framework: 
   It should reflect the value of physician and non-physician staff 
work that falls outside of the face-to-face visit associated with 
patient-centered care management; 
  It should pay for services associated with coordination of care 
both within a given practice and between consultants, ancillary 
providers, and community resources; 
 It should support adoption and use of health information technology 
for quality improvement; 
 It should support provision of enhanced communication access, such 
as secure e-mail and telephone consultation; 
 It should recognize the value of physician work associated with 
remote monitoring of clinical data using technology; 
 It should allow for separate fee-for-service payments for 
face-to-face visits. (Payments for care management services that 
fall outside of the face-to-face visit, as described above, should 
not result in a reduction in the payments for face-to-face visits); 
 It should recognize case mix differences in the patient population 
being treated within the practice; 
 It should allow physicians to share in savings from reduced 
hospitalizations associated with physician-guided care management 
in the office setting; 
 It should allow for additional payments for achieving measurable 
and continuous quality improvements. 

	Such payments could be organized around a "global fee" for 
care management services that encompass the key attributes of the 
patient-centered medical home. 

MR. DEAL.  Thank you.  Dr. Martin. 
	DR. MARTIN.  Chairman Deal and distinguished members of the 
committee, I am honored to be here today on behalf of the American 
Osteopathic Association, the AOA, and the Nation's 59,000 
osteopathic physicians practicing in all specialties and 
subspecialties of medicine.  
The title of today's hearing accurately reflects the AOA's outlook 
on this issue.  As noted in the title, we have an immediate problem 
in 2007 and an ongoing problem after 2007.  
Mr. Chairman, the AOA wants to acknowledge and thank you, Chairman 
Barton, Ranking Member Dingell, Congressman Burgess, and other 
members of this committee, for proposing legislative solutions 
aimed at addressing this ongoing issue, either in the short term 
or in a long-term manner.  
We also must thank the staff that has devoted countless hours 
working with physician organizations on this issue.  Your efforts 
are well appreciated.  Reform of the Medicare physician-patient 
formula, specifically the repeal of sustainable growth rate, the 
SGR formula, is a top legislative priority for the AOA.  
The SGR formula is unpredictable, inequitable and fails to account 
accurately for physician practice costs.  We will continue to 
advocate for the establishment of a more equitable and predictable 
payment formula that reflects the annual increases in physician 
practice costs.  The AOA believes that a multifaceted approach 
is needed.  
We support provisions included in the Barton discussion draft, 
H.R. 5866 introduced by Congressman Burgess, and H.R. 5916, 
introduced by Ranking Member Dingell.  Each of these bills offers 
valuable policy concepts that contribute to the committee's 
efforts.  We have factored many of the concepts included in 
these bills into the following recommendations offered as a 
framework for the committee's actions.  
The top priority for the AOA is the impending physician payment 
cuts in 2007.  
Congress must act to ensure that the 5.1 percent cut is not 
implemented, and that all physicians participating in the Medicare 
program receive a positive update.  
We continue to support MEDPAC's recommendation that physicians 
receive a 2.8 percent increase in 2007, but recognize at the same 
time the financial burden of this request.  However, we do believe 
that an update for 2007 should be significant, given the fact that 
physician payments are well below inflation over the past 5 years.  
The committee and Congress should consider extending positive 
updates for 2 to 3 years.  By ensuring positive updates over a 
longer period of time, Congress would restore stability and 
predictability to the physician payment formula and provide 
physicians some degree of confidence in the future of the Medicare 
program and may hold this with respect for reimbursement. 
Additionally, multiple years of positive payment updates provides 
Congress time to focus on long-term solutions and the development 
of a new Medicare physician payment methodology.  However, we do 
not believe that the length of the payment provision should come 
at the expense of the amount of the payment update.  Quality 
reporting programs should provide maximum opportunity for 
participation, be voluntary initially and phased in over a 
2- to 3-year period.  The AOA supports the menu approach suggested 
by Chairman Barton rather than a program that requires all 
physicians to report on a standard set of measures.  
The menu of options should include quality measures, structural 
measures as well as a standard set of measures.  Additionally, 
we encourage the committee to recognize physician participation 
in an existing data collection and evaluation program operated 
by public and private entities such as the AOA's clinical 
assessment program as meeting the participation requirement.  
The development of quality measures must originate with 
physicians.  We strongly promote the Physician Consortium for 
Performance Improvement as the most appropriate body for the 
development of physician quality measures.  
Resource management programs should be confidential and end up 
educating individual physicians, not as a means of forcing 
physicians to reduce the types of services they offer their 
patients based upon financial and not medical guidelines.  
We agree that physicians should be stewards of the Medicare 
program.  However, we do not believe that physicians should be 
hesitant to provide the needed services for fear of undue 
scrutiny aimed at the use of medical resources.  
Looking beyond 2007, we agree that Congress should develop a new 
physician payment formula.  This formula should provide annual 
payment updates equal to increases in practice costs.  
Physicians participating in quality improvement programs should 
be provided additional compensation.  Physicians practicing in 
rural and other underserved communities should be rewarded for 
their service.  The basis for a future payment formula should 
be aligned closely to all Medicare spending on physician services 
and move away from the faulty data currently being used for the 
SGR formula.  The new formula should be flexible and capable of 
capturing changes due to growth in beneficiaries and advances in 
medical sciences.  
I appreciate the opportunity to testify before the committee, and 
again, the AOA applauds your continued efforts to assist physicians 
and more importantly their patients. 
	[The prepared statement of Dr. Martin follows:] 

PREPARED STATEMENT OF DR. PAUL A. MARTIN, PRESIDENT AND CEO, 
PROVIDENCE MEDICAL GROUP, ON BEHALF OF AMERICAN OSTEOPATHIC 
ASSOCIATION 

	Mr. Chairman, my name is Paul Martin.  I am a family 
physician from Dayton, Ohio and currently serve as the Chief 
Executive Officer and President of the Providence Medical Group, 
a 41-member independent physician owned and governed multi-specialty 
physician group in the greater Dayton metropolitan area.  I am 
honored to be here today on behalf of the American Osteopathic 
Association (AOA) and the nation's 59,000 osteopathic physicians 
practicing in all specialties and subspecialties of medicine. 
	The AOA and our members appreciate the continued efforts of 
you and the Committee to improve the nation's health care system.  
You are to be commended for your ongoing efforts to reform the 
Medicare physician payment formula and improve the quality of care 
provided by physicians.  These are goals that we share.  
	I want to acknowledge and thank you, Chairman Barton, 
Ranking Member John Dingell, and Congressman Michael Burgess for 
proposing legislative solutions aimed at addressing this ongoing 
issue either in a short-term or long-term manner.  The AOA supports 
these efforts. 

MEDICARE PHYSICIAN PAYMENTS: 2007 AND BEYOND 
	Since its inception in 1965, a central tenet of the Medicare 
program has been the physician-patient relationship.  Beneficiaries 
rely upon their physician for access to all other aspects of the 
Medicare program.  Over the past decade, this relationship has 
been compromised by dramatic reductions in reimbursements, increased 
regulatory burdens, and escalating practice costs. Given that the 
number of Medicare beneficiaries is expected to double to 72 million 
by 2030, now is the time to establish a stable, predictable, and 
accurate physician payment formula.  Such a formula must: 
 Reflect the cost of providing care 
 Implement appropriate quality improvement programs that improve 
the overall health of beneficiaries 
 Reflect that a larger percentage of health care is being delivered 
in ambulatory settings versus hospital settings. 

     The AOA strongly supports the establishment of a new payment 
methodology that ensures every physician participating in the 
Medicare program receives an annual positive update that reflects 
increases in the costs of providing care to their patients.  
Moreover, the AOA is committed to ensuring that any new physician 
payment methodology reflects the quality of care provided and 
efforts made to improve the health outcomes of patients.  As a 
result of this commitment, we support the establishment of 
standards that, once operational, will allow for the reporting and 
analysis of reliable quality data.  Additionally, we support the 
establishment of a fair and equitable evaluation process that aims 
to improve the quality of care provided to beneficiaries.  
    The AOA continues to encourage Congress to take appropriate 
steps to ensure that all physicians participating in the Medicare 
program receive positive payment updates for 2007 and subsequent 
years.  In its 2006 March Report to Congress, the Medicare Payment 
Advisory Commission (MedPAC) stated that payments for physicians 
in 2007 should be increased 2.8 percent.  We strongly support 
this recommendation.  Additionally, since 2001, MedPAC has 
recommended that the flawed sustainable growth rate (SGR) formula 
be replaced.  Again, the AOA strongly supports MedPAC's 
recommendation.  
	It remains our opinion that the current Medicare physician 
payment formula, especially the sustainable growth rate methodology, 
is broken and should be replaced with a new formula that reimburses 
physicians in a more predictable and equitable manner.  We recognize 
that comprehensive reform of the Medicare physician payment formula 
is both expensive and complicated.  However, we believe that the 
long-term stability of Medicare, the future participation of 
physicians, and continued access to physician services for 
beneficiaries are dependent upon such actions. 
	The AOA believes that a future Medicare physician payment 
formula should provide annual positive updates that reflect 
increases in practice costs for all physicians participating in 
the program.  Additionally, while we support the establishment 
and implementation of "pay-for-reporting" programs, we believe 
that these programs should be phased-in over a period of two to 
three years and that physicians choosing to participate in such 
programs receive bonus payments above the annual payment updates 
for their participation.  Additionally, we do not believe that 
the current Medicare payment methodology can support the 
implementation of a quality-reporting or pay-for-performance 
program.  
	Finally, we believe that a future Medicare physician 
payment formula should provide the framework for a more equitable 
evaluation and distribution of Medicare dollars.  Under the 
current program, various components are isolated from each 
other, thus preventing a fair and thorough evaluation of overall 
spending.  As Congress and the Centers for Medicare and Medicaid 
Services (CMS) establish new quality improvement programs, it is 
imperative that Medicare reflect fairly the increased role of 
`physicians and outpatient services as cost savers, especially to 
the Part A Trust Fund.  Quality improvement programs may increase 
spending in Part B, but very well could result in savings in Part 
A or even Part D.  These savings should be credited to physicians. 
 We encourage the Committee to pursue this as a means of 
stabilizing Medicare financially.   

109th CONGRESS LEGISLATIVE PROPOSALS 
	Several bills aimed at providing both short-term and 
long-term solutions to the Medicare physician payment issue have 
been introduced in the 109th Congress.  The AOA supports many of 
these bills and applauds the continued efforts of several Members 
of Congress and this Committee to find achievable solutions to 
this ongoing policy issue.  Like most Members of Congress, the AOA 
believes that the year-to-year approach is not in the best interest 
of our members, beneficiaries, or the Medicare program.  A 
long-term solution must be found.  However, we also recognize that 
short-term interventions by Congress are essential to preserving 
physician participation in the program and beneficiary access to 
care while a permanent solution is debated. 


Chairman Barton Discussion Draft 
	In general, we support the framework outlined in the "Barton 
Discussion Draft."  Specifically, we support provisions of the draft 
that provide an immediate payment update for all physicians in 2007 
while establishing a structure that provide annual positive updates 
for all physicians over multiple years, allow for a phased-in 
quality-reporting program, and provide positive payment incentives 
above the annual payment update for those physicians choosing to 
participate in the quality-improvement program.  Additionally, we 
are supportive of including provisions that would allow physicians 
to balance bill beneficiaries, even if on a limited basis, for 
services provided. 
	Under the "Barton Discussion Draft," all physicians 
participating in the Medicare program would receive a 0.5 percent 
update in years 2007, 2008, and 2009.  Physicians choosing to 
participate in both a quality reporting and resource utilization 
management program would be eligible for an additional 0.25 percent 
payment bonus. 
	We encourage the Committee to consider increasing the annual 
payment update to a level that more closely reflects annual 
increases in practice costs and to create a greater differential 
between the annual update and the bonus payments for participation 
in quality-improvement programs.  While we appreciate the intent to 
establish predictability in physician payments over the next three 
years, we are concerned that the bill falls short of ensuring that 
physician reimbursements keep pace with annual increases in 
physician practice costs.  Under the proposal, physician payments 
would increase 1.5 percent over the next three years, but practice 
costs likely will increase 7 percent to 8 percent.  
	The AOA agrees with the quality-reporting framework included 
in the draft bill.  The AOA continues to advocate for a more 
deliberate and phased-in approach to the establishment of a 
pay-for-reporting and, ultimately, pay-for-performance program.  
We also agree that a "menu of options" is both advisable and 
appropriate.  We applaud your intent to provide physicians with 
a variety of participation opportunities.  By providing physicians 
options, the bill aims to maximize the number of physicians able 
and willing to participate in quality-improvement programs. 
	Additionally, the AOA encourages the inclusion of provisions 
that recognize participation in the AOA's web-based quality-reporting 
program, the Clinical Assessment Program (CAP), as meeting the 
requirement of participation in a quality-improvement program under 
the proposal.  The CAP provides evidence-based measurement sets on 
eight clinical conditions including diabetes, coronary artery 
 disease, hypertension, women's health screening, asthma, COPD, 
childhood immunizations, and low back pain.  Data elements 
collected include both demographic and clinical information.  The 
CAP is designed to collect data from multiple clinical sites and 
provide information regarding performance to participating physicians 
or group practices.  This allows for the evaluation of care provided 
at a single practice site in comparison to other similar practice 
settings around the region, state, or nation. 
	The CAP is widely acknowledged by health care quality 
improvement experts and commercial insurers as a valuable tool 
that enhances quality in ambulatory care settings. The CAP produces 
valuable data on quality improvement.  The AOA looks forward to 
 working with the Committee to explore ways that the CAP may be 
incorporated into the Barton proposal. 

Medicare Physician Payment Reform and Quality Improvement Act of 
2006 (H.R. 5866) 
	The AOA thanks Congressman Burgess for introducing the 
"Medicare Physician Payment Reform and Quality Improvement Act 
of 2006" (H.R. 5866).  The legislation is consistent with many 
AOA policies related to Medicare physician payment, quality 
reporting, and Medicare financing.  For these reasons, the AOA 
is on record as a supporter of H.R. 5866. 
	H.R. 5866 eliminates the sustainable growth rate (SGR) 
and replaces it with a payment methodology that uses the Medicare 
Economic Index (MEI) for the purposes of the single conversion 
factor beginning in 2007.  The provision requires that the single 
conversion factor shall be the percentage increase in the MEI 
minus 1 percentage point.  This provision meets the AOA's 
policy objective of eliminating continued use of the SGR formula.  
The AOA does have concerns about including, in statute, a 
mandatory reduction in the MEI.  We believe that all physicians 
should receive annual increases that reflect increases in costs, 
which we believe the MEI accomplishes.   We recognize that 
Congressman Burgess and many Members of the Committee share this 
goal, but fiscal realities may make the adoption of a full MEI 
update impractical.  The AOA looks forward to working with the 
Committee to ensure that the deduction of one percentage point 
in the MEI is eliminated at the earliest possible time following 
enactment. 
	The bill also establishes a voluntary quality reporting 
program for physicians, beginning in 2009.  The AOA supports the 
phased-in approach used by H.R. 5866.  We also are supportive of 
provisions that require quality measures used in the program to 
be developed by physician organizations and verified by a 
consensus organization.  
	Additionally, we strongly support provisions in H.R. 5866 
that require the Secretary of Health and Human Services (HHS) to 
study the financial relationship of the independent components of 
the Medicare program and authorize balanced billing for physicians. 
 It is important for Congress to consider changes in the Medicare 
funding formulas that allow for spending adjustments based upon 
the financial health of the entire program.  As Congress and CMS 
establish new quality improvement programs, it is imperative that 
Medicare reflects fairly the increased role of physicians and 
outpatient services as potential cost savers to the Part A Trust 
Fund.  Quality improvement programs may increase spending in Part 
B, but very well could result in savings in Part A or even Part 
D.  These savings should be credited to physicians.  We appreciate 
Congressman Burgess for including this important study in his 
bill.  

Patients' Access to Physician Services Act of 2006 (H.R. 5916) 
	The AOA thanks Ranking Member John Dingell for introducing 
the "Patients' Access to Physicians Act of 2006" (H.R. 5916).  By 
ensuring positive payment updates for all physicians in 2007, the 
bill is consistent with AOA policies.  For this reason, the AOA is 
on record as a supporter of H.R. 5916. 
	H.R. 5916 closely follows the recommendations put forth by 
MedPAC.  H.R. 5916 would require that the annual update to the 
single conversion factor not be less than MEI plus 1 percentage 
point in 2007 and 2008.  If enacted, our understanding is that 
H.R. 5916 would provide physicians with an approximate 2.8 percent 
update in both years. 
	The physician payment methodology in H.R. 5916 is supported 
strongly by the AOA.  We recognize that the bill contains other 
provisions, which may or may not influence the cost of the 
legislation.  The AOA does not have policies on these provisions. 

A NEW PAYMENT METHODOLOGY FOR PHYSICIANS-THE SERVICE CATEGORY 
GROWTH RATE (SCGR) 
	The AOA worked with the American College of Surgeons (ACS) 
to develop a payment methodology that would provide positive annual 
updates to physicians based upon increases in practice costs, 
while being conducive to quality improvement and pay-for-performance 
programs. 
	The AOA and ACS propose replacing the universal volume 
target of the current sustainable growth rate (SGR) with a new 
system, known as the service category growth rate (SCGR), that 
recognizes the unique nature of different physician services by 
setting targets for six distinct service categories of physician 
services. The service categories, which are based on the 
Berenson-Eggers type-of-service definitions already used by 
CMS, are: evaluation and management (E&M) services; major 
procedures (includes those with 10 or 90 day global service periods) 
and related anesthesia services; minor procedures and all other 
services, including anesthesia services not paid under physician 
fee schedule; imaging services and diagnostic tests; diagnostic 
laboratory tests; and physician-administered Part B drugs, 
biologicals, and radiopharmaceuticals. 
	The SCGR target would be based on the current SGR factors 
(trends in physician spending, beneficiary enrollment, law and 
regulations), except that the gross domestic product (GDP) would 
be eliminated from the formula and be replaced with a statutorily 
set percentage point growth allowance for each service category.  
To accommodate already anticipated growth in chronic and 
preventive services, we estimate that E&M services would require 
a growth allowance about twice as large as the other service 
categories (between 4-5 percent for E&M as opposed to 2-3 percent 
for other services).  Like the SGR, spending calculations under 
the SCGR system would be cumulative.  However, the Secretary would 
be allowed to make adjustments to the targets as needed to reflect 
the impact of major technological changes. 
	Like the current SGR system, the annual update for a 
service category would be the Medicare medical economic index (MEI) 
plus the adjustment factor.  But, in no case could the final update 
vary from the MEI by more or less than 3 percentage points; nor 
could the update in any year be less than zero.  The formula allows 
for up to one percentage point of the conversion factor for any 
service category to be set aside for pay-for-performance incentive 
payments.  
	Like the SGR, the SCGR would retain a mechanism for 
restraining growth in spending for physician services.  It recognizes 
the wide range of services that physicians provide to their 
patients.  Unlike the current universal target in the SGR, which 
penalizes those services with low volume growth at the expense of 
high volume growth services, the SCGR would provide greater 
accountability within the Medicare physician payment system by 
basing reimbursement calculations on targets that are based on a 
comparison of like services and providing a mechanism to examine 
those services with high rates of growth.  Reimbursement for low 
growth services would not be forced to subsidize these higher 
growth services.  By recognizing the unique nature of different 
physician services, the SCGR would enable Medicare to more easily 
study the volume growth in different physician services and 
determine whether or not volume growth is appropriate.  
	Additionally, the AOA believes the SCGR would provide a 
sound framework for starting a basic value-based purchasing 
system.  Given the diversity of physician services provided to 
patients, it is difficult to find a set of common performance 
measures applicable to all physicians.  However, development of 
common performance measures is much easier when comparing similar 
services. 

CLINICAL ASSESSMENT PROGRAM (CAP)-A MODEL FOR QUALITY-REPORTING 
	In 2000, building on the hypothesis that some barriers to 
transforming evidence into practice may begin during physician 
post-graduate training and that measurement is key to identifying 
opportunities for incorporation of evidence-based measures into 
practice, the AOA launched the web-based Clinical Assessment 
Program (CAP).  The goal of the CAP is to improve patient 
outcomes by providing valid and reliable assessments of current 
clinical practices and process sharing of best practices in care 
delivery.  
	The CAP provides evidence-based measurement sets on eight 
clinical conditions including diabetes, coronary artery disease, 
hypertension, women's health screening, asthma, COPD, childhood 
immunizations, and low back pain.  Data elements collected by the 
residency training programs include both demographic and clinical 
information. CAP has been widely acknowledged as a tool to improve 
quality in ambulatory care and is beginning to provide data on 
quality improvement.  For example, the percent of diabetics having 
foot exams performed routinely increased 24% in programs 
re-measuring as of June 2006. Likewise, in outcome of care 
measures, the LDL cholesterol levels and diabetic HgbA1c have 
decreased.  
	The CAP collects data from multiple clinical programs and 
provides information regarding performance back to participating 
residency programs.  This allows for evaluation of care provided 
at a single practice site in comparison to other similar practice 
settings around the region, state, or nation. 
 	The CAP initially measured the quality of care in clinical 
practice in osteopathic residency programs.  In December 2005, the 
CAP became available for physician offices offering initial 
measurement sets on diabetes, coronary artery disease, and women's 
health screening.  The "CAP for Physicians" measures current 
clinical practices in the physician office and compares the 
physician's outcome measures to their peers and national measures.  
The AOA looks forward to working with Congress and CMS to explore 
ways that the CAP may be incorporated into broader quality 
reporting and quality measurement systems.  

QUALITY IMPROVEMENT AND PAY FOR PERFORMANCE
	Today's health care consumers-including Medicare 
beneficiaries-demand the highest quality of care per health care 
dollar spent.  The AOA recognizes that quality improvement in the 
Medicare program is an important and worthy objective.  For over 
130 years osteopathic physicians have strived to provide the 
highest quality care to their millions of patients.  Through 
those years, standards of care and medical practice evolved and 
changed.  Physicians changed their practice patterns to reflect 
new information, new data, and new technologies.  
	As a physician organization, we are committed to ensuring 
that all patients receive the appropriate health care based upon 
their medical condition and the latest research information and 
technology.   The AOA recognized early on the need for quality 
improvement and the national trend toward quality improvement 
programs.  In response, we took steps to ensure that our members 
were prepared for these new programs.  

Measure Development, Verification, and Adoption 
	The AOA believes that physicians, on a specialty-by-specialty 
basis, should develop all quality measures that will be used in 
quality improvement programs-both public and private.  The AOA is 
an active participant in the Physician Consortium for Performance 
Improvement (Physician Consortium).  The Physician Consortium 
develops measures in a cross-specialty manner that allows for 
input by all relevant physician specialties, CMS, private insurers, 
and consumer groups throughout the process.  Public and private 
payers also have an opportunity for input as part of the process.  
Quality measures developed are subjected to public comment before 
being sent to the full Physician Consortium for final approval.  
	The Physician Consortium, in our opinion, should be 
recognized as the entity charged with the development of physician 
quality measures under any new program.   Additionally, we believe 
safeguards should be put in place that protect against the undue 
influence of public agencies or private interest groups who could 
gain by the adoption of certain standards.  However, the AOA does 
support the ability of appropriate outside groups with acknowledged 
expertise to already endorse developed standards. 
	We do not believe that CMS or other Federal agencies should 
be allowed to implement quality measures unless they were developed 
by physicians, vetted by the Physicians Consortium, and verified 
by an independent consensus body.  This process, while time 
consuming, is essential to ensure that the measures are 
evidence-based and promote positive outcomes for patients.  We 
support the interim adoption of some quality measures, so long 
as they originate within a physician organization.  

Quality-Reporting Principles
	As the national debate on the issues of quality reporting and 
pay-for-performance began, the AOA established a set of principles 
to guide our efforts on these important issues.  These principles 
represent "achievable goals" that assist in the development of 
quality improvement systems while recognizing and rewarding the 
skill and cost benefits of physician services.  
	To support this goal, the AOA adopted the following five 
principles: 
1. Quality-reporting and/or pay-for-performance systems whose 
primary goal is to improve the health care and health outcomes of 
the Medicare population must be established. Such programs should 
not be budget neutral.  Appropriate additional resources should 
support implementation and reward physicians who participate in the 
programs and demonstrate improvements.  The AOA recommends that 
additional funding be made available through the establishment of 
bonus-payments. 
2. To the extent possible, participation in quality reporting and 
pay-for-performance programs should be voluntary and phased-in.  
The AOA acknowledges that failure to participate may decrease 
eligibility for bonus or incentive-based reimbursements, but feels 
strongly that physicians must be afforded the opportunity to not 
participate. 
3. Physicians are central to the establishment and development of 
quality standards.  A single set of standards applicable to all 
physicians is not advisable.  Instead, standards should be developed 
on a specialty-by-specialty basis, applying the appropriate risk 
adjustments and taking into account patient compliance.  
Additionally, quality standards should not be established or 
unnecessarily influenced by public agencies or private special 
interest groups who could gain by the adoption of certain standards. 
 However, the AOA does support the ability of appropriate outside 
groups with acknowledged expertise to endorse developed standards 
that may be used. 
4. The exclusive use of claims-based data in quality evaluation is 
not recommended.  Instead, the AOA supports the direct aggregation 
of clinical data by physicians.  Physicians or their designated 
entity would report this data to the Centers for Medicare and 
Medicaid Services (CMS) or other payers. 
5. Programs must be established that allow physicians to be 
compensated for providing chronic care management services.  
Furthermore, the AOA does not support the ability of outside 
vendors, independent of physicians, to provide such services.  

Resource Utilization and Physician Profiling Principles 
	Over the past few years, Congress, MedPAC and other health 
policy bodies have placed greater emphasis on controlling the use 
of "resources" by physicians and other health care providers.  The 
AOA supports, in concept, a systemic evaluation of resource use 
that measures overuse, misuse, and under use of services within 
the Medicare program.  
	Additionally, we do not oppose programs that confidentially 
share with physicians their resource use as compared to other 
physicians in similar practice settings.  However, any effort to 
evaluate resource use in the Medicare program must not be motivated 
solely by financial objectives.  Instead, the AOA believes that 
physician utilization programs must be aimed at improving the 
quality of care provided to our patients.  In measuring the 
performance of physicians, the singular use of utilization measures 
without evaluation of clinical process and outcomes can lead to 
 adverse impact on care delivery.  Tracking methods to determine 
the unintended consequences of reduced utilization on patient safety 
should be incorporated in any utilization reports developed. 
	If the intent of the program is to improve the quality of 
care, then the validity, reliability, sensitivity, and specificity 
of information intended for private or public reporting must be 
very high.  Comparative utilization information cannot be attained 
through administrative or claims-based data alone without adequate 
granulation for risk adjustment. 
	To support the establishment of quality improvement programs 
that stand to benefit the quality of care provided to patients, the 
AOA adopted the following ten principles that guide our policy on 
comparative utilization or physician profiling programs: 
1. Comparative utilization or physician profiling should be used 
only to show conformity with evidence-based guidelines. 
2. Comparative utilization or physician profiling data should be 
disclosed only to the physician involved.  If comparative 
utilization or physician profiling data is made public, assurances 
must be in place that promise rigorous evaluation of the measures 
to be used and that only measures deemed sensitive and specific to 
the care being delivered are used. 
3. Physicians should be compared to other physicians with similar 
practice-mix in the same geographical area.  Special consideration 
must be given to osteopathic physicians whose practices mainly 
focus on the delivery of osteopathic manipulative treatment (OMT).  
These physicians should be compared with other osteopathic 
physicians that provide osteopathic manipulative treatment. 
4. Utilization measures within the reports should be clearly defined 
and developed with broad input to avoid adverse consequences.  Where 
possible, utilization measures should be evidenced-based and 
thoroughly examined by the relevant physician specialty or 
professional societies. 
5. Efforts to encourage efficient use of resources should not 
interfere with the delivery of appropriate, evidence-based, 
patient-centered health care.  Furthermore, the program should 
not impact adversely the physician-patient relationship or unduly 
intrude upon a physician's medical judgment.  Additionally, 
consideration must be given to the potential overuse of resources 
as a result of the litigious nature of the health care delivery 
system. 
6. Practicing physicians must be involved in the development of 
utilization measures and the reporting process.  Clear channels 
of input and feedback for physicians must be established 
throughout the process regarding the impact and potential flaws 
within the utilization measures and program. 
7. All methodologies, including those used to determine case 
identification and measure definitions, should be transparent 
and readily available to physicians. 
8. Use of appropriate case selection and exclusion criteria 
for process measures and appropriate risk adjustment for patient 
case-mix and inclusion of adjustment for patient compliance/wishes 
in outcome measures, need to be included in any physician specific 
reports.  To ensure statistically significant inferences, only 
physicians with an appropriate volume of cases should be 
evaluated.  These factors influence clinical or financial 
outcomes. 
9. The utilization measure constructs should be evaluated on a 
timely basis to reflect validity, reliability and impact on 
patient care.  In addition, all measures should be reviewed 
in light of evolving evidence to maintain the clinical relevance 
of all measures. 
10. Osteopathic physicians must be represented on any committee, 
commission, or advisory panel, duly charged with developing 
measures or standards to be used in this program. 

	As quality-reporting, pay-for-performance, and resource 
utilization programs become more prevalent, fundamental issues 
must be addressed.  Some of our top concerns are: 
 Quality and pay-for-performance programs must be developed and 
implemented in a manner that aims to improve the quality of care 
provided by all physicians.  New formulas must provide financial 
incentives to those who meet standards and/or demonstrate 
improvements in the quality of care provided.  The system should 
not punish some physicians to reward others.  
 The use of claims data as the sole basis for performance 
measurement is a concern.  Claims data does not reflect severity 
of illness, practice-mix, and patient non-compliance. These 
issues and others are important factors that must be considered.  
Sole reliance on claims data may not indicate accurately the 
quality of services being provided.  We believe that clinical 
data is a much more accurate indicator of quality care. 
 The financial and regulatory burden quality and 
pay-for-performance programs will have upon physician practices, 
especially those in rural communities, must be minimized.  
Physicians, and medicine in general, have one of the highest 
paperwork burdens anywhere.  We want to ensure that new programs 
do not add to physicians' already excessive regulatory burden. 
* Quality and pay-for-performance programs should have some 
degree of flexibility.  The practice of medicine continuously 
evolves.  Today's physicians have knowledge, resources, and 
technology that didn't exist a decade ago.  This rapid discovery 
of new medical knowledge and technology will transform 
the "standards of care" over time.  It is imperative that 
the quality reporting and pay-for-performance system have the 
infrastructure to be modified as advances are made. 

ANALYSIS OF CURRENT MEDICARE PHYSICIAN PAYMENT POLICIES 
	In 2002, physician payments were cut by 5.4 percent.  
Thanks to the leadership of this Committee, Congress averted 
payment cuts in 2003, 2004, 2005, and 2006 replacing projected 
cuts of approximately 5 percent per year with increases of 1.6 
percent in 2003, 1.5 percent in 2004 and 2005, and a freeze at 
2005 levels for 2006.  
	The AOA and our members appreciate the actions taken 
over the past four years to avert additional cuts.  However, even 
with these increases, physician payments have fallen further 
behind medical practice costs.  Practice costs increases from 
2002 through 2006 were approximately two times the amount of 
payment increases.  
	According to CMS, physicians are projected to experience 
a reimbursement cut of 5.1 percent in 2007 with additional cuts 
predicted in years 2008 through 2015.  Without Congressional 
intervention, physicians face cuts of greater than 37 percent in 
their Medicare reimbursements over the next eight years.  During 
this same period, physician practice costs will continue to 
increase.  If the 2007 cut is realized, Medicare physician payment 
rates will fall 20 percent below the government's conservative 
measure of inflation in medical practice costs over the past six 
years.  Since many health care programs, such as TRICARE, Medicaid, 
and private insurers link their payments to Medicare rates, cuts 
in other systems will compound the impact of the projected Medicare 
cuts.  
	Physicians should be reimbursed in a more predictable and 
equitable manner, similar to other Medicare providers.  Physicians 
are the only Medicare providers subjected to the flawed SGR formula. 
 Since the SGR is tied to flawed methodologies, it routinely 
produces negative updates based upon economic factors, not the 
health care needs of beneficiaries.  Additionally, the formula 
has never demonstrated the ability to reflect increases in 
physicians' costs of providing care.  Every Medicare provider, 
except physicians, receives annual positive updates based upon 
increases in practice costs.  Hospitals and other Medicare 
providers do not face the possibility of "real dollar" cuts-only 
adjustments in their rates of increase. 
	It is important to recognize that, in 2007, substantial 
changes to other components of the Medicare payment formula will 
shift billions of dollars which will lead to cuts of up to 10 
percent to 12 percent for certain physician services.  Congress 
must act to stabilize the update to the conversion factor in 
order to bring stability to this volatile system and dampen the 
impact of payment cuts caused by unrelated policy changes.  The 
non-SGR related changes to physician payment in 2007 include: 

Geographic Practice Cost Index (GPCI) 
		The Medicare Prescription Drug, Modernization and 
Improvement Act (MMA) (P.L. 108-173) included a three-year floor 
of 1.0 on all work GPCI adjustments.  This provision is set to 
expire on December 31, 2006.  Nationwide, 58 of the 89 physician 
payment areas have benefited from this provision.  If this 
provision is not extended, many physicians, especially those in 
rural areas, will experience additional cuts.  The AOA supports 
the "Medicare Rural Health Providers Payment Extension Act." 
(H.R. 5118) introduced by Rep. Greg Walden.  We urge the 
Committee to include the provisions of H.R. 5118 in any 
legislative package considered this year. 

Five-Year Review 
		Every five years, CMS is required by law to review 
all work relative value units (RVU) and make needed adjustments.  
These adjustments must be made in a budget neutral manner.  Changes 
related to the third five-year review will be implemented on 
January 1, 2007.  
		In total, more than $4 billion will be shifted to 
E&M codes, which will be increased by upwards of 35 percent in 
some instances.  The AOA supports the changes in values for E&M 
codes.  We believe E&M codes have been undervalued historically.  
The proposed changes are fair and should be implemented.  We do 
recognize that increases in E&M codes likely will require decreases 
in other codes as a means to meet statutory budget neutrality 
requirements.  The AOA continues to urge CMS to apply required 
budget neutrality to the conversion factor versus work RVUs as 
proposed by the Agency.  

Practice Expense
		CMS also has announced significant changes to the 
formulas used to determine the practice expense RVU.  These changes 
also are budget neutral and will shift approximately $4 billion. 
Again, these increases will require cuts in other areas of the 
physician fee schedule.  

	This dramatic shift in the allocation of funding will 
have a significant impact on many physicians across the country.  
The AOA is concerned about the impact a reduction in the SGR, along 
with cuts resulting in the reallocation of funding required by 
other policy changes, might have upon physicians.  While the 
total impact of the changes will vary by specialty, geographic 
location, and practice composition; it is clear that physicians 
in certain specialties may see significant cuts prior to any 
adjustments to the conversion factor made as a result of the SGR 
formula.  For these reasons, we call upon Congress to ensure that 
all physicians participating in the Medicare program receive a 
positive payment update in 2007. 

Problems with the Sustainable Growth Rate (SGR) Formula 
	Concerned that the 1992 fee schedule failed to control 
Medicare spending, five years later Congress again examined 
physician payments.  The "Balanced Budget Act of 1997" (BBA 97) 
(P.L. 105-33) established a new mechanism, the sustainable growth 
rate, to cap payments when utilization increases relative to the 
growth of gross domestic product (Congressional Budget Office, 
"Impact of the BBA," June 10, 1999). 
	This explanation of the SGR not only highlights the 
objectives of the formula, but also demonstrates the serious 
flaws that resulted.  The AOA would like to focus on three central 
problems associated with the current formula-physician administered 
drugs, the addition of new benefits and coverage decisions, and 
the economic volatility of the formula. 

	Utilization of Physician Services-The SGR penalizes 
physicians with lower payments when utilization exceeds the SGR 
spending target.  However, utilization is often beyond the control 
of the individual physician or physicians as a whole.  
		Over the past twenty years, public and private 
payers successfully moved the delivery of health care away from 
the hospital into physicians' offices.  They did so through a shift 
in payment policies, coverage decisions, and a trend away from 
acute based care to a more ambulatory based delivery system.  This 
movement continues today.  As a result, fewer patients receive care 
in an inpatient hospital setting.  Instead, they rely upon their 
physicians for more health care services, leading to greater 
utilization of physician services.  
		For the past several years, CMS has failed to 
account for the many policy changes and coverage decisions in the 
SGR spending targets.  With numerous new beneficiary services 
included in the "Medicare Modernization Act" (MMA) (P.L. 108-173) 
and an expected growth in the number of national coverage 
decisions, utilization is certain to increase over the next 
decade.  The Congressional Budget Office (CBO) cites legislative 
and administrative program expansions as major contributors to the 
recent increases in Medicare utilization.  The other major 
contributors were increased enrollment and advances in medical 
technology. 

		Physician Administered Drugs-An additional major 
contributor to increased utilization of physician services is the 
inclusion of the costs of physician-administered drugs in the SGR. 
 Because of the rapidly increasing costs of these drugs, their 
inclusion greatly affects the amount of actual expenditures and 
reduces payments for physician services.  
		Over the past few years, you and the Committee 
encouraged the Administration to remove the cost of 
physician-administered drugs from the formula.  The AOA encourages 
the Committee to continue pressing the Administration on this 
issue.  We do not believe the definition of physician services 
included in Section 1848 of Title XVIII includes prescription drugs 
or biological products.  Removal of these costs would ease the 
economic constraints that face Congress and make reform of the 
physician payment formula more feasible. 

		Gross Domestic Product-The use of the GDP as a 
factor in the physician payment formula subjects physicians to the 
fluctuating national economy.  We recognize the important provisions 
included in the MMA that altered the use of the GDP to a 10-year 
rolling average versus an annual factor.  Again, we appreciate your 
leadership and insistence that that provision be included in the 
final legislation. 
		However, we continue to be concerned that a downturn 
in the economy will have an adverse impact on the formula.  We argue 
that the health care needs of beneficiaries do not change based upon 
the economic environment.  Physician reimbursements should be based 
upon the costs of providing health care services to seniors and the 
disabled, not the ups and downs of the economy. 

BENEFICIARY ACCESS TO CARE 
	The continued use of the flawed and unstable sustainable 
growth rate methodology may result in a loss of physician services 
for millions of Medicare beneficiaries.  Osteopathic physicians from 
across the country have told the AOA that future cuts will hamper 
their ability to continue providing services to Medicare 
beneficiaries.  
	The AOA surveyed its members on July 14-16, 2006 to analyze 
their reactions to previous and future payment policies.  The AOA 
asked what actions they or their practice would take if the 
projected cuts in Medicare physician payments were implemented.  
The results are concerning.  Twenty-one percent said they would 
stop providing services to Medicare beneficiaries.  Twenty-six 
percent said they would stop accepting new Medicare beneficiaries 
in their practice and thirty-eight percent said they would limit 
the number of Medicare beneficiaries accepted in their practice. 
	Many experts concur with these findings.  According to a 
2005 survey conducted by MedPAC, 25 percent of Medicare 
beneficiaries reported that they had some problem finding a 
primary care physician.  MedPAC concluded that Medicare 
beneficiaries "may be experiencing more difficulty accessing 
primary care physicians in recent years and to a greater degree 
than privately insured individuals." 
	While there are some steps that can be taken by physicians 
to streamline their business operations, they simply cannot afford 
to have the gap between costs and reimbursements continue to grow 
at the current dramatic rate.  Many osteopathic physicians practice 
in solo or small group settings.  These small businesses have a 
difficult time absorbing losses.  Eventually, the deficit between 
costs and reimbursements will be too great and physicians will be 
forced to limit, if not eliminate, services to Medicare 
beneficiaries.  
	Additionally, continued cuts limit the ability of physicians 
to adopt new technologies, such as electronic health records, into 
their practices.  

HEALTH INFORMATION TECHNOLOGY
	A viable interoperable health information system is key to 
the implementation and success of quality-improvement and 
performance-based payment methodologies.  For these reasons, we 
support the "Health Information Technology Promotion 
Act" (H.R. 4157).  
	Our main focus is ensuring that software and hardware used 
throughout the healthcare system are interoperable.  There is no 
benefit to be found in the utilization of systems unable to 
communicate with others.  Additionally, the AOA believes strongly 
that systems developed and implemented must not compromise the 
essential patient-physician relationship.  Medical decisions must 
remain in the hands of physicians and their patients, independent 
of third-party intrusion. 
	The AOA remains concerned about the costs of health 
information systems for individual physicians, especially those in 
rural communities.  According to a 2005 study published in Health 
Affairs, the average costs of implementing electronic health 
records was $44,000 per full-time equivalent provider, with ongoing 
costs of $8,500 per provider per year for maintenance of the 
system.  This is not an insignificant investment.  With physicians 
already facing deep reductions in reimbursements, without 
financial assistance, many physicians will be prohibited from 
adopting and implementing new technologies.  
	A July 2006 survey conducted by the AOA demonstrates this 
concern.  According to the survey, 90 percent of osteopathic 
physicians responding agreed that "decreased reimbursements will 
hinder their ability to purchase and implement new health 
information technologies in their practice."  While we continue 
to advocate for financial assistance for these physicians, we 
appreciate inclusion of provisions in H.R. 4157 that provide 
safe harbors allowing hospitals and other health care entities 
to provide health information hardware, software, and training 
to physicians.  This would, in our opinion, facilitate rapid 
development of health information systems in many communities. 

SUMMARY
	Reform of the Medicare physician payment formula, 
specifically, the repeal of the sustainable growth rate (SGR) 
formula, is a top legislative priority for the AOA.  The SGR 
formula is unpredictable, inequitable, and fails to account 
accurately for physician practice costs.  We will continue to 
advocate for the establishment of a more equitable and predictable 
payment formula that reflects the annual increases in physicians 
practice costs. 
	The AOA believes that a multi-faceted approach is needed 
to address this issue.  We support provisions included in the 
Barton discussion draft, H.R. 5866, and H.R. 5916.  Each of these 
bills offer valuable ideas that can contribute to the Committees 
efforts.  We have factored many of the concepts included in those 
bills into the following recommendations offered as a framework 
for the Committees actions: 
1. Congress must act to ensure that all physicians participating 
in the Medicare program receive a positive update in 2007.  We 
continue to support the MedPAC recommendation that all physicians 
receive a 2.8 percent increase in 2007, but we recognize that this 
may be unobtainable.  However, we believe that the update for 2007 
should be "significant" given the fact that physician payments are 
well below inflation over the past five years.  If the 2007 cut 
is realized, physician payments under Medicare will fall 20 percent 
or more below inflation over the past six years.  The steady 
decline in reimbursements and the impact upon physicians and 
beneficiaries are well documented in our testimony and other 
reports.  
2. Congress should consider extending the 2007 positive payment 
update for two to three years.  By ensuring positive payment 
updates, Congress would restore some stability in the physician 
payment formula and provide all physicians some degree of confidence 
in what the future of the Medicare program may hold with respect 
to reimbursement.  Additionally, multiple years of positive 
payment updates would provide Congress time to focus on long-term 
solutions and the development of a new Medicare physician payment 
methodology. 
3. Quality-reporting programs should be voluntary and "phased-in" 
over a two to three year period.  
4. Quality-reporting programs should provide maximum opportunity 
for participation.  The AOA encourages the "menu" approach versus 
a program that requires all physicians to report on a standard set 
of measures.  This menu of options should include quality measures, 
structural measures, patient safety measures, and allow physicians 
to participate in existing data collection and evaluation programs 
operated by public and private entities. 
5. The development of quality measures must originate with 
physicians.  The AOA does not support any program that would allow 
CMS or other payers to develop and implement quality measures 
without the direct involvement of physicians.  We strongly promote 
the Physician Consortium for Performance Improvement as the most 
appropriate body for the development of physician quality measures. 
6. Resource management programs should be confidential and aimed 
at educating individual physicians.  The AOA is concerned that 
resource management programs, if not properly administered, could 
serve as a means of intimidating physicians into reducing the 
types of services they offer their patients based upon financial 
not medical guidelines.  We agree that physicians should be 
stewards of the Medicare program and work to ensure that 
beneficiaries receive optimal care based upon their medical 
condition with an eye on the efficient delivery of such care.  
However, we do not believe that physicians should be hesitant to 
provide needed services due to undue scrutiny aimed at their use 
of medical resources. 
7. Congress should develop a new physician payment methodology that 
provides annual increases equal to increases in practice costs.  
Physicians participating in quality improvement programs should 
be provided additional compensation.  The basis for a future payment 
formula should be aligned closely to actual Medicare spending on 
physician services and move away from the faulty data currently 
used in the SGR formula.  The new formula should be flexible and 
capable of capturing changes due to growth in beneficiaries and 
changes in medical sciences. 
8. Congress should evaluate Medicare financing as a whole, versus 
the individual parts.  The AOA urges Congress to evaluate the 
overall financing structure of the Medicare program to determine 
if increases in Part B as a result of improved access and quality 
of care delivered results in savings in other parts of the 
program.  We view the elimination of "Medicare funding silos" as 
a reasonable and obtainable means of financing, partially, a 
future physician payment formula. 

	I appreciate the opportunity to testify before the Committee 
on Energy and Commerce Subcommittee on Health.  Again, I applaud 
your continued efforts to assist physicians and their patients. 

MR. DEAL.  Dr. Morris you are recognized. 
	DR. MORRIS.  Good afternoon.  My name is Albert W. Morris, 
Jr., and I am a diagnostic radiologist practicing in Memphis, 
Tennessee.  I also serve as the 107th President of the National 
Medical Association.  As the Nation's only organization devoted 
solely to the needs of African-American physicians and their 
patients, the National Medical Association serves as the conscience 
of the medical profession in the ongoing fight to eliminate health 
disparities in our Nation's health care delivery system.  
The National Medical Association stands in league with our 
colleagues here today and the entire physician community in 
calling for the replacement of the current Medicare physician 
payment formula.  The formula is an untenable mechanism that harms 
physicians and Medicare patients.  The National Medical Association 
embraces efforts designed to improve access to and quality of 
health care services.  Successful efforts will ensure that 
pay-for-performance increases the quality of health care and 
decreases health disparities, rather than decreases the quality 
of health care and increases health disparities.  
Our organization is well positioned to provide advice and counsel 
to Congress and other policymakers on this issue because we have 
extensive experience in efforts to decrease health disparities.  
We offer our guidance to you to help develop systems that benefit 
and do not harm those who are in the greatest danger, the 
underserved, the underinsured and the uninsured.  
In March of this year, our organization hosted its seventh national 
colloquium on African-American health which addressed evidence-based 
medicine and pay-for-performance and the projected impact on 
physician practices.  As an outgrowth of the colloquium, we 
convened a Presidential task force on pay-for-performance that 
took a serious and in-depth look at the various proposals being 
advanced in Congress and through the Administration.  
Our physician task force members contributed their direct 
experience with pay-for-performance in various performance-based 
incentive programs in the States where they practice.  Further, 
the National Medical Association leadership recently launched 
a grassroots initiative designed to educate and inform our 
members regarding pay-for-performance.  Through these efforts, 
the National Medical Association developed detailed policy 
statements and guidance for Congress and policymakers.  I 
will summarize our policy and suggest that you refer to our 
written testimony for details.  
Any proposal for pay-for-performance must ensure that racial 
and ethnic disparities in health care are decreased, focus on 
quality, and improve health care outcomes before focusing on cost 
containment, and be culturally relevant to the populations 
served.  Proposals must give due consideration to stratified 
measures associated with socioeconomic status, self-reported 
race, ethnicity, co-morbidities, chronic conditions, high-risk 
and disease-burdened populations.  
Any pay-for-performance proposal must also formally enlist the 
input of patients and physicians who suffer the ill effects of 
ethnic and racial health disparities as Congress and others 
develop, implement and evaluate this process.  Further, support 
must be given to providers in small and solo health care 
practices to ensure that proper infrastructure for quality data 
gathering and reporting and implementation of health technology 
are available.  
Therefore, the National Medical Association recommends that 
quality improvement initiatives targeting minority populations be 
voluntary, patient-focused and have realistic quality measures.  
Second, they must be developed and implemented in conjunction 
with minority physicians.  And third, they must recognize the 
minority physician practice patterns and care dynamics, rewarding 
those physicians who work with minority patient groups.  
We believe following these recommendations will help the Nation 
successfully achieve its goal of quality, improved health care 
and efficiency without exacerbating disparities in health care.  
Today we are pleased to commend Congressman Michael Burgess of 
Texas for introducing H.R. 5866.  We commend Congressmen Hall, 
Rogers, Norwood, Whitfield and Sullivan for cosponsoring this 
legislation.  
Dr. Burgess's legislation is an excellent first step in addressing 
racial disparities because it recognizes the importance of seeking 
the advice and guidance of physicians who have direct experience 
and expertise working in underserved areas where patients are often 
uninsured and suffer greater co-morbidities.  We applaud Congressman 
Burgess for recognizing the unique needs of minority physicians and 
those who serve minority populations.  
We also thank Chairmen Barton and Deal for their recent efforts to 
address the Medicaid physician payment problem and hope that they, 
too, will incorporate Congressman Burgess's language with our 
other suggestions into any other pending legislation.  
The National Medical Association is committed to the highest quality 
care for all patients and to the optimal delivery of such care 
under all circumstances.  We stand firm in our resolve that 
pay-for-performance initiatives should not have the unintended 
consequences of exacerbating racial or ethnic disparities.  We 
look forward to working with you to that end.  Thank you, and 
I will be pleased to answer any questions. 
	[The prepared statement of Dr. Morris, Jr., follows:] 

PREPARED STATEMENT OF DR. ALBERT W. MORRIS, JR., PRESIDENT, 
NATIONAL MEDICAL ASSOCIATION 

Introduction 
	On behalf of our physicians and the patients we serve, the 
National Medical Association (NMA) thanks you for the opportunity 
to testify before the committee today on the issue of "Medicare 
Physician Payments."  We understand that the hearing will focus 
on Medicare payments and various proposals for Pay-for-Performance 
(P4P), or quality measurement. 
	The (NMA) promotes the collective interests of physicians 
and patients of African descent. We carry out this mission by 
serving as the collective voice of physicians of African descent 
and as a leading force for parity in medicine, elimination of 
health disparities, and promotion of optimal health. 
	The NMA is the largest and oldest national organization 
representing African American physicians and their patients in 
the United States. The NMA is a 501(c) (3) national professional 
and scientific organization representing the interests of more 
than  
25,000 African American physicians and the patients they serve.  
NMA is committed to improving the quality of health among 
minorities and disadvantaged people through its membership, 
professional development, community health education, advocacy, 
research and partnerships with federal and private agencies. 
	As the nation's only organization devoted to the needs of 
African American physicians, health professionals and their 
patients, the NMA serves as the conscience of the medical profession 
in the ongoing fight to eliminate health disparities in the 
nation's health care delivery system. 
	The NMA has historically been an unwavering advocate for 
health policies that improve the quality and availability of 
health care of African Americans and other underserved populations. 
For instance, the National Medical Association was a key force 
behind such landmark reforms as Medicare and Medicaid. Today, the 
NMA continues to provide leadership in shaping the national health 
policy agenda through continued involvement in a variety of 
critical policy matters. 

The Medicare Physician Payment Formula Should be Replaced 
	The NMA stands in league with the entire physician community 
or "House of Medicine" in calling for the replacement of the 
current Medicare physician payment formula.  The formula, including 
the so called "sustainable growth rate," is an untenable mechanism 
that harms physicians and Medicare patients.  
	If Congress does not act before the end of 2006, physician 
payments will be slashed by more than 5% beginning in January 2007. 
 We urge Congress to act quickly to redress this wrong, and ensure 
that the Medicare payment system is replaced with a fair and more 
effective system. 

NMA's Views on Pay for Performance/Quality Measurement 
	The NMA embraces efforts designed to improve access to and 
quality of health care services.  P4P is of significant interest to 
the NMA as its implementation will have far reaching effects in 
communities throughout this country.  Successful efforts will ensure 
that P4P increases the quality of health care and decreases 
health disparities, instead of decreasing the quality of health 
care and increasing health disparities.  
	The NMA is committed to the highest quality care for all 
patients, and to the optimal delivery of such care under all 
circumstances. The NMA is focused on the reduction or elimination 
of all disparities in health care, especially those that are racial 
and ethnic in origin.  As such, we remain committed to the 
integrity of America's health care safety net, of which Medicaid 
and Medicare are vital components.  
	We stand firm in our resolve that P4P initiatives should 
not have the unintended consequence of exacerbating racial or 
ethnic disparities in health care.  We also offer our expertise 
and guidance to Congress and other decision-makers in developing 
proper programs that benefit, and not harm, those who are in the 
greatest danger, the underserved and uninsured. 

Racial and Ethnic Disparities Are Real and Must Be Corrected, Not 
Exacerbated by P4P Legislation 
	Last week, the Institute of Medicine released a report 
entitled, "Rewarding Provider Performance: Aligning Incentives in 
Medicare (Pathways to Quality Health Care Series) (2007)."  The 
NMA was pleased to see that the IOM report encouraged a systematic 
and phased-in approach to instituting quality measurement and 
specifically stated: 

"However, pay for performance needs to be closely monitored because 
it could have unintended adverse consequences, such as decreased 
access to care, increased disparities in care, or impediments to 
innovation (emphasis added)." 

	Statistics about racial and ethnic disparities should guide 
Congress, the White House, the Centers for Medicare and Medicaid 
Services (CMS), the Institute of Medicine (IOM), and other 
policymakers in their decision-making on P4P.  
	We urge Congress to review the following statistics about 
racial and ethnic disparities as they craft P4P or any other 
quality measurement legislation.  For example, 
 Racial disparities in health status persist across the entire 
human lifespan.  At the start of life: Black infant mortality is 
two and a half times higher than that of white babies.  And at 
the end of life: White men outlive black men by 7 years; and 
white women outlive black women by a half-decade. 
 Black Americans lead the nation in 12 of the top 15 leading 
causes of death, including heart disease, cancer, diabetes, and 
kidney disease.  
 The uninsured have worse health and higher morbidity compared to 
the insured.
 The uninsured are also more likely to forego needed care and 
obtain inadequate care for even the most serious illnesses like 
diabetes, heart disease, hypertension, kidney disease, cancers, 
and AIDS. 
 The uninsured are also less likely to receive preventive services 
such as screenings for breast, cervical, and colorectal cancer. When 
they do receive these services, they receive them less frequently 
than recommended. 
 When minorities do have healthcare coverage, there are still deep 
disparities in healthcare delivery which results in worse health and 
higher morbidity for minority patients. 
 Further, minority patients have poorer health status, higher levels 
of noncompliance, and greater distrust.  Consequently, patient 
outcomes are significantly influenced by racial disparities in 
health status, compliance, and overall distrust.  
 Well-documented practice patterns among minority physicians are 
exceptionally well-suited for improving minority care and reducing 
racial disparities in care.  
 As minority doctors are more likely to serve at-risk populations 
and patients prefer and are more satisfied with racially-concordant 
physicians, P4P should NOT have the unintended effect of 
compromising care or access for minority patients by negatively 
altering provider service patterns (among both minority and 
non-minority physicians).   

Excellence Centers To Eliminate Ethnic/Racial Disparities (EXCEED). 
AHRQ Publication No. 01-P021, May 2001. Agency for Healthcare 
Research and Quality, Rockville, 
MD. http://www.ahrq.gov/research/exceed.htm; Williams, DR. 2003. 
Racial/Ethnic Disparities in Health, 
www.macses.ucsf.edu/News/willams.pdf; 

2004 U.S. Census

The U.S. Department of Health and Human Services, HRSA Health 
Disparities Collaboratives (HDC) http://bphc.hrsa.gov/quality/Collaboratives.htm. 

NMA Experience and Policy on Pay for Performance/Quality Measurement 

NMA Presidential Task Force on Pay for Performance 
	As an outgrowth of the NMA's March 2006 7th National 
Colloquium on African American Health entitled "Addressing Evidenced 
Based Medicine and P4P: Projected Impact on Physician Practices," 
the NMA convened a "Presidential Task Force on Pay for 
Performance."  The Presidential Task Force took a serious and 
in-depth look at the various P4P proposals being advanced in 
Congress and through the Administration.  Our physician task 
force members contributed their direct experience with P4P and 
various performance-based incentive programs in the states where 
they practice.  Further, the NMA leadership recently launched a 
grassroots initiative to educate and inform our members about 
P4P and enlist their advice and guidance on the issue. 
	The NMA Presidential Task Force found that "responsible 
governance of P4P" requires the following: 
 Quality of care measures must be clearly delineated from cost 
containment measures. 
 All measures must be culturally relevant to the population served, 
with due consideration to and stratified measures associated with 
social economic status, self-reported race, ethnicity, 
co-morbidities, chronic conditions, high risk, and disease 
burdened populations.  
 Quality measures, cost containment measures, and reimbursement 
formulas must be appropriate for the population served. 
 Capacity-building support must be provided to small and 
disadvantaged health care providers to ensure infrastructure allows 
quality data gathering and reporting. 
 Ample input from a diverse population of specialty and culturally 
representative physicians and patients should be used in the 
development, implementation, and evaluation of the effectiveness 
and impact of P4P measures, policies, procedures, regulations, 
and programs. 
 Effectual physician and patient education on P4P measures, policies,
procedures, regulations, and programs must be provided. 

  Following these recommendations will help the nation successfully 
achieve its goal of improved quality of care and efficiency in 
health care cost and systems without exacerbating health care 
disparities.  Without these measures, increased health disparities 
and health care cost will result, accompanied by a decrease in 
access to quality care, physician viability, and community 
economics. 

NMA Policy on Pay for Performance 
	The NMA has developed written policy on P4P that recognizes 
that the P4P framework developed and implemented by the Centers for 
Medicare and Medicaid Services (CMS) is very likely to set the pace 
for the rest of the nation, given that millions of providers serve 
the 100 million or so beneficiaries enrolled in Medicare and 
Medicaid.  Accordingly, any P4P frameworks should be constructed 
with great care, and with the following key considerations in 
mind: 
 Most of the recent experience with P4P has been in large, 
multi-specialty practices.  As many minority physicians practice 
in the solo or small practice setting, extrapolating results to 
all practice settings is misguided.  More research and analysis of 
how P4P will impact small and solo practices is therefore warranted 
and necessary to protect against increased disparities. 
 Implementation of health technology would be an important means to 
effectuate P4P efforts; however, the cost of health technology is 
often prohibitive for physicians practicing in small or solo 
practices.  According to a recent Commonwealth Fund study, 
'Information Technologies: When Will They Make It into Physicians' 
Black Bags?' -- "There remains a technological divide between 
physicians depending on their practice environment and mode of 
compensation.  This is a major discrepancy that will need to be 
addressed since three quarters of U.S. physicians provide care 
in solo and small group practices. 
 The scientific and clinical data that constitute the 'evidence base' 
by which performance is measured should be compiled across 
diverse populations. P4P frameworks should therefore focus on 
'quality improvement', stratified by appropriate demographic 
group. 
 Clinical data are more reliable predictors of quality improvement 
than are claims data and therefore P4P frameworks should therefore 
rely more heavily on clinical data. 
 Patients will not necessarily comply with quality improvement 
protocols just because their health care provider does. In other 
words - an undesirable clinical outcome does not necessarily bespeak 
poor [or non-compliant] 'performance' by the provider. 
 The design, implementation, and evaluation of P4P frameworks should 
include practicing physicians with expertise in working among 
populations that suffer the ill effects of ethnic and racial health 
disparities. 
 P4P frameworks and the current Sustainable Growth Rate [SGR] 
framework cannot co-exist. SGR must be repealed if P4P is to have 
any chance of sustained success. 
 P4P reporting requirements must be voluntary in this preliminary 
stage. Requiring cash-strapped providers to report on quality 
measures while they are still in their infancy further compounds 
the challenge of systematic data collection. 
 Health Information Technology is vital to this process. There must 
be a national commitment to providing financial and technical 
assistance to America's healthcare providers, in order to facilitate 
their transition into the Information Age. 

   In addition, the NMA supports the American Medical Association's 
(AMA's) Minority Affairs Consortium Resolution 210, and AMA's 
Principles for Pay-for-Performance Programs.  The resolution is 
consistent with our position on P4P and a strong statement of AMA's 
commitment to work with us to eliminate racial and ethnic 
disparities. 
	The NMA recognizes that P4P can lead to reduced disparities 
and improved physician viability, quality of care, and community 
economics.  However, reliable and valid measures must be are used; 
providers must be granted adequate resources to sufficiently 
develop their infrastructure; and effective 2-way channels of 
communication must be established allowing physicians and patients 
necessary input and education on P4P measures, policies, 
procedures, regulations, and programs. 
	Therefore, NMA recommends that quality improvement 
initiatives targeting minority populations must be voluntary, 
patient-focused, have realistic quality measurements, recognize 
minority physician practice patterns and care dynamics, reward 
physicians working with minority patient groups with greater 
reimbursement for time spent and patient education. 

NMA Support for Measures to Address Disparities in P4P Legislation 
	The NMA was particularly pleased to see the introduction 
H.R. 5866, the "Medicare Physician Payment Reform and Quality 
Improvement Act of 2006" on July 24, 2006.  The legislation, 
introduced by Congressman Burgess and co-sponsored by a number 
of members of this committee, would address three very important 
concerns directly related to racial and ethnic disparities. 
	The Burgess legislation would direct the Secretary of 
Health and Human Services, to: 
measure quality by "stratified groups and the review of the absolute 
level of quality provided by a physician or medical group;" and 
include "practicing physicians with expertise in eliminating 
racial and ethnic disparities in the design, implementation and 
evaluation of the program."  
Further, the legislation would direct the Secretary to develop 
quality measures with a consensus building organization that would 
include those who "serve a disproportionate number of minority 
patients." 

    The legislation is an excellent first step in addressing racial 
disparities because it recognizes the importance of seeking the 
advice and guidance of physicians who practice in underserved 
areas where patients are often under or uninsured and suffer 
greater co-morbidities and have direct experience in working to 
eliminate racial disparities.  
	We applaud Congressman Burgess for recognizing the unique 
needs of minority physicians and those who serve minority 
populations.  We hope that this committee and others who are 
working on P4P follow his wise and thoughtful lead.  
	We also hope to see legislation and/or regulations that 
adopt other principles that we have outlined in this testimony.  
We also thank Chairman Barton and Deal for their recent efforts 
to address the Medicare physician payment problem and hope that 
they too will incorporate Congressman Burgess' language, and our 
other suggestions, into any pending legislation. 
	Thank you for the opportunity to share the NMA's views 
with this honorable Committee.  The NMA and our leadership look 
forward to working with you to ensure that any P4P/quality 
programs are reasoned approaches that seek to eliminate racial 
disparities. 

MR. DEAL.  Thank you very much. 
	Dr. Russell you are recognized.  
DR. RUSSELL.  Chairman Deal and other distinguished subcommittee 
members, I am Tom Russell, Executive Director of the American 
College of Surgeons, and I thank you for the opportunity to testify 
today on behalf of the 71,000 fellows of the American College of 
Surgeons.  
We are grateful to you for holding this hearing on Medicare 
physician payments and on the legislation that is needed to build 
a system that will provide high-quality care for Medicare 
beneficiaries in the future.  
We are grateful to Chairman Barton, Dr. Burgess and Congressman 
Dingell for drafting bills to stop the 5.1 percent physician payment 
cut that is scheduled to take place on January 1st, and we owe a 
special thanks to Melissa Bartlett, who works on Chairman Barton's 
staff.  All three proposals offer a multiyear approach for 
addressing this issue, and all three would replace the scheduled 
reduction in the fee schedule conversion factor with at least modest 
increases in payments.  
Given all the other payment policy changes that will be taking 
effect in 2007, this certainly is the approach we recommend.  
However, if agreement on a more comprehensive or long-term strategy 
continues to elude us in the closing days of the 109th Congress, it 
is vitally important that you at the very least take the steps that 
are necessary to prevent the 5.1 percent cut on January 1st.  This 
coming year, it will be especially difficult for surgical 
practices due to a confluence of three factors.  
First, due to an increase in payments for certain high-volume 
services that will occur as a result of the recently completed 
5-year review of physician work in the Medicare fee schedule, 
payments for all but a very few surgical services will be 
reduced significantly, even if Congress passes legislation to 
increase the fee schedule conversion factor.  
Second, changes are also being implemented in practice expense 
values listed in the fee schedule both as a result of incorporating 
new data for some specialties and because of downstream effects 
of the 5-year review.  
Third, facility payments are undergoing changes as a result of the 
Deficit Reduction Act which cap payments to ambulatory surgical 
centers at the amounts paid to hospital outpatient departments.  
Some of the specialties that provide a significant portion of 
their services to the ambulatory surgery center are among those 
hit the hardest by the 5-year review and the practice expense 
changes.  
We won't know what the combined impact of all these cuts will be 
until CMS issues its final rule on the 2007 Medicare fee schedule, 
but we estimate that some key surgical services will experience 
net payment decreases of 10 percent or more, even without taking 
into account the conversion factor reductions being produced by 
the SGR system.  
Finally, it is extremely important to realize that the SGR-related 
cuts were not due to service volume growth in the major surgical 
procedures.  Surgical service growth rates have on average remained 
well within the SGR targets for several years so surgeons have been 
paying the price for volume increases occurring elsewhere in the 
health care system.  For this year, the College of Surgeons has 
endorsed the concept of establishing a system of separate 
expenditure targets and conversion factors for various categories 
of physician services.  
The effects of Medicare payment trends are being felt throughout 
the health care system, and surgical care access issues are 
becoming more evident.  In May, the Institute of Medicine issued a 
series of reports on the future of emergency care in the United 
States which noted that many of the Nation's emergency departments 
and trauma centers are experiencing shortages in the availability 
of on-call specialists.  But the cause of concern is not limited 
to the emergency setting.  A recent report from the Association 
of American Medical Colleges confirms that the population of 
surgeons in practice is growing older.  The Nation's training 
system has been producing the same number of surgeons for decades 
despite a growing and aging patient population.  As a result, 
data on the proportion of active physicians over age 55 show that 
every surgical specialty is above the national average of 33 
percent.  
We are growing very concerned that the additional stresses on the 
financial viability of surgical practices will take us to a breaking 
point and that many of the surgeons who are near retirement age 
will finally choose to leave practice altogether.  
I would now like to offer several comments on some of the 
legislative proposals that you are considering.  Update for 
2007:  We believe that final legislative proposals must include 
an increase in Medicare payments for physicians in 2007 and 
hopefully in subsequent years.  And because past efforts to 
avoid conversion factor cuts simply postpone the inevitable by 
pushing the SGR debt off to future years, we believe strongly 
that any long- or short-term solution must be treated as a change 
in law and regulations and thus not contribute to increased 
spending under the SGR.  
Quality reporting:  While the college agrees that value-based 
purchasing can improve the quality of care patients receive, there 
have been many obstacles to surgical participation in Medicare's 
physician voluntary reporting program.  Consequently, we support 
the concept of a ramp-up year as envisioned by Chairman Barton's 
draft legislation as well as a menu of quality programs being 
offered to individual physicians for participation.  
Also, I think it is important to point out that the combined 
efforts of all the medical surgical specialties have been remarkable 
this past year, and significant progress has been made in the 
development of physician performance measures.  In particular, 
the multispecialty process that provided by the AMA's physician 
consortium performance improvement has gained broad acceptance 
across the profession and will soon produce enough well vetted 
measures to cover the majority of specialities.  It is important 
for any value-based purchasing program that is created for Medicare 
to embrace the process of measure development.  
Utilization review:  Two of the legislative proposals place greatest 
emphasis on educating physicians about their treatment and 
utilization patterns.  We agree this kind of effort should prove 
very beneficial although caution will be needed in interpreting 
benchmark reports on individual physicians.  The confidentiality, 
feedback loop and nonpunitive nature of the program are very 
important, and we are grateful that these requirements have been 
included in the legislation.  
I suspect many of our members would also welcome removal of the 
statutory limits on balance billing for high-income beneficiaries.  
However, we do have some practical concerns about this.  First, 
determining the patient's annual income really is not feasible 
for the typical physician practice.  Physicians do not have ready 
access to this information, and raising income issues directly 
with patients at the point of care is not conducive to the 
trusting professional relationship that is so important between 
a surgeon and his or her patient.  
In addition, under current Medicare needs, Medicare sends 
reimbursement for unassigned claims directly to the beneficiary 
rather than to the physician.  This presents a particularly 
difficult situation for surgeons.  The end result is a significant 
lag in payment and, in the worst situation, no payment at all.  
In conclusion, the college greatly appreciates Congress' actions 
over the past 4 years to stop the payment cuts being produced by 
this broken Medicare reimbursement system.  But given all the 
changes coming in 2007, preventing the cuts this coming year is 
more important than ever.  Even with action to prevent the 
conversion factor reduction in 2007, some surgical services are 
likely to experience double digit percentage reduction in medical 
payments, which is one of the reasons that surgeons support a 
multiyear approach to addressing the problem.  
Mr. Chairman, thank you for providing this opportunity to share 
with you the challenges facing surgeons under the Medicare program 
today and to provide specific feedback on the various legislative 
proposals.  Whether the focus is on value-based purchasing or on 
the sustainable growth rate, the college looks forward to 
continuing to work with you and other members of your committee 
to reform the Medicare physician payment system to ensure that 
Medicare patients will have access to high quality surgical care 
when they need it. 
	[The prepared statement of Dr. Russell follows:] 

PREPARED STATEMENT OF DR. THOMAS RUSSELL, EXECUTIVE DIRECTOR, 
AMERICAN COLLEGE OF SURGEONS 

	Chairman Deal, Ranking Member Brown, and distinguished 
subcommittee members, thank you for the opportunity to testify today 
on behalf of the 71,000 Fellows of the American College of 
Surgeons (ACS).  My name is Tom Russell and I am the College's 
Executive Director. 
 	We are grateful to you for holding this hearing on Medicare 
physician payments, and on the legislation that is needed to build 
a system to provide high-quality care for Medicare beneficiaries in 
the future.  We are grateful to Chairman Barton, Dr. Burgess, and 
Ranking Member Dingell for drafting legislation that would stop 
the 5.1 percent cut in physician reimbursement that is scheduled 
to take effect on January 1, and we owe special thanks to Melissa 
Bartlett who works on Chairman Barton's staff. 
	All three proposals offer a multi-year approach for 
addressing this issue, and all three would replace the scheduled 
reduction in the fee schedule conversion factor with at least modest 
increases in payments.  Given all the other payment policy changes 
that will be taking effect in 2007, this certainly is the approach 
we recommend.  However, if agreement on a more comprehensive or 
long-term strategy continues to elude us as the 109th Congress 
draws to a close, it is vitally important that Congress takes, at 
a minimum, the steps that are necessary to prevent the 5.1 percent 
cut on January 1.  
	 While value-based purchasing can improve the overall 
quality of care that patients receive and allow them to make more 
informed decisions about their care, more is needed to fix the 
broken Medicare payment system.  The benefits of a value-based 
purchasing system will not be fully realized until a fair and 
stable physician payment system is implemented.   The College 
urges Congress to prevent the 5.1 percent payment cut that will 
go into effect on January 1, and to actively explore long-term 
solutions to this ever-growing problem.  

Unique issues facing surgery 
	The coming year will be especially difficult for surgical 
practices, due to a confluence of three factors: 
 Five-year review.  Every five years, CMS is required by law to 
comprehensively review all work relative value units (RVUs) in the 
Medicare physician fee schedule and make any needed adjustments 
in a budget-neutral manner.  This coming year, there will be a 
significant shift in payments that will increase reimbursement for 
visit services by over $4 billion--an amount that exceeds total 
Medicare spending for services provided by the specialties of 
general surgery, neurosurgery, cardiac surgery, and colorectal 
surgery combined.  As a result, payments for all but a very few 
surgical services will be reduced significantly even if Congress 
passes legislation to increase the fee schedule conversion factor. 
Practice expense payments.  Changes are also being implemented in 
practice expense RVUs, both as a result of incorporating new 
practice cost data for some specialties and because of 
"downstream" effects of the increase in work RVUs.  Practice 
expense RVUs are determined by a formula that takes into account 
the amount of work involved in providing each service.  As work 
RVUs increase or decrease following the five-year review, 
subsequent changes are produced in the practice expense values.  
Because work values for surgical services overall are falling, 
the practice expense values for surgery will be reduced, as well. 
* ASC payment changes.  Facility payments are undergoing changes 
as a result of the Deficit Reduction Act provisions that cap 
payments to ambulatory surgical centers (ASCs) at the amounts 
paid under the hospital outpatient prospective payment system.  
Other regulatory changes planned in 2008 will further impact 
these payments.  For some specialties, a significant portion of 
their services are provided in ASCs, and many of these facilities 
are physician-owned.  For a specialty like ophthalmology, which 
is experiencing payment reductions as a result of the five-year 
review and practice expense changes, the compound effect will be 
very significant. 

	Finally, it is important to realize that the conversion 
factor reductions produced by the sustainable growth rate system 
(SGR) were not due to increased service volume in major procedures. 
 Surgical service volume growth, on average, has remained well 
within the SGR target rates.  In effect, surgeons have been paying 
the price for volume increases occurring elsewhere in the healthcare 
system.  It is for this reason that the College has endorsed the 
concept of establishing a system of separate expenditure targets 
and conversion factors for various categories of physician 
services. 

Access issues are beginning to emerge 
	The effects of Medicare payment trends are being felt 
throughout the health care system, and surgical care access issues 
are becoming more evident.  In May, the Institute of Medicine 
issued a series of reports on the Future of Emergency Care, which 
noted that many of the nation's emergency departments and trauma 
centers are experiencing shortages in the availability of on-call 
specialists.  Surgeons provide lifesaving care to patients suffering 
from both traumatic injuries and medical emergencies.  Patients 
suffering from strokes, blockages, and injuries often require timely 
treatment in order to prevent permanent disability or even death.  
Without the prompt availability of on-call surgeons, these patients 
do not receive the services they desperately need.  
	In an ensuing report entitled A Growing Crisis in Patient 
Access to Emergency Surgical Care, the College documented this 
problem further.  The supply of surgeons has not kept pace with the 
patient population, a significant number are reaching retirement 
age, and more are taking advantage of hospital bylaws provisions 
that allow older surgeons to opt out of emergency call service.  
	But, the cause for concern is not limited to the emergency 
setting.  A recent report from the Association of American Medical 
Colleges confirms that the population of surgeons in practice is 
getting old.  The nation's training system has been producing the 
same number of surgeons for decades, despite a growing and aging 
patient population.  As a result, data on the proportion of active 
physicians over age 55 show that every surgical specialty is above 
the national average of 33.3 percent.  In four specialties that 
provide significant amounts of care to elderly patients-general 
surgery, orthopaedic surgery, urology, and thoracic surgery-the 
number is well over 40 percent.  
	We are growing very concerned that additional stress on 
the financial viability of surgical practices will take us to the 
breaking point, and many of those surgeons who are near retirement 
age will opt to leave practice altogether.  Given the length of 
time it takes to train a surgeon (averaging six to nine years 
following medical school, depending on the specialty), any access 
problems that may result because of early retirements will be 
difficult to remedy. 

Legislative proposals 
	Rather than individually addressing each of the legislative 
proposals pending before the committee, I would like to offer 
comments on various aspects they encompass, most of which are common 
to all of them. 
	Update for 2007.  Surgeons cannot continue to shoulder steep 
cuts in reimbursement for major procedures.  This trend first 
emerged in the late 1980s, and Medicare payments for many procedures 
already are half what they were nearly two decades ago, without 
taking into account the effects of inflation.  It is important that 
any final legislative proposal includes an increase in Medicare 
reimbursements to all physicians in 2007, and in any subsequent 
years.  And, because past efforts to avoid conversion factor cuts 
had the effect of simply postponing the inevitable by pushing the 
sustainable growth rate (SGR) debt to future years, we believe 
strongly that any long- or short-term solution must be treated as 
a change in law and regulations and so not contribute to increased 
spending under the SGR. 
	Quality Reporting.  While the College agrees that value-based 
purchasing can improve the quality of care patients receive, there 
have been numerous obstacles to surgical participation in Medicare's 
Physician's Voluntary Reporting Program (PVRP).  Consequently, we 
support the concept of a "ramp up" year as envisioned in Chairman 
Barton's draft legislation.  
	Many had hoped that by the end of 2006, enough evidence-based 
quality measures would have been developed to allow all physicians 
to participate in a Medicare quality reporting program beginning 
January 1, 2007.  In fact, the combined effort of all the specialties 
has been remarkable and significant progress has been made.  
Notably, the multi-specialty process provided by the Physician's 
Consortium for Performance Improvement has gained broad acceptance 
across the profession, and will soon produce enough well-vetted 
measures to cover the majority of specialties, if not yet the 
majority of physicians.  It is important that any value-based 
purchasing program embrace this process of measure development.  
	Because of the challenge in developing evidence-based 
measures that cover all physicians, the College strongly supports 
Chairman Barton's proposal to allow physicians the option of 
participating in the PVRP or reporting on three structural measures. 
  We also recommend that legislation include a "hold harmless" 
provision so that no physician is unfairly penalized if there are 
no PVRP or structural measures that apply to them.  
	With respect to the medical home demonstration project in 
Chairman Barton's draft, we have two concerns.  First, we believe 
the care coordination language should not be limited to chronic 
conditions.  Other conditions and services-notably cancer 
care-frequently involve the expertise of multiple specialists and 
extend over long periods of time, although they are not considered 
"chronic."  We would like to see this language expanded to provide 
authority to CMS to create demonstration projects related to 
long-term disease management beyond primary care services. 
	Second, the draft legislation also counts physicians who 
are participating in the medical home demonstration project as 
fulfilling the quality reporting requirement.  Since the 
demonstration project involves additional payments for services 
not currently reimbursed under Medicare, we question whether it 
is appropriate to also provide bonus payments for the very same 
activities.  We recommend that the demonstration project be 
considered a separate component of the legislation and not be 
treated an option for quality reporting.  
	Utilization review.   Two of the legislative proposals 
would also provide a greater role for the Quality Improvement 
Organizations (QIOs) and expand their purview to include utilization 
review.   We agree that an educational program that informs 
surgeons about regional variations in care and that compares 
their utilization and service volume to others should prove very 
beneficial.  However, it is important to keep in mind that many 
physicians sub-specialize, and for them physician-specific volume 
comparisons may be of little value.  Practice trends and utilization 
will also vary by practice settings-a trauma surgeon in a Level 
I trauma center, for example, will likely provide more critical 
care services than other general surgeons in the community.  
Nonetheless, making the data available will no doubt be 
constructive and provide the basis for close examination at 
local clinical education sessions. 
	In addition, the confidentiality, feedback loop, and the 
non-punitive nature of the program are all very important for 
physicians to actively participate and we are grateful that these 
requirements have been included in the legislation. 
	We have some concern, however, about whether state medical 
societies typically have the resources needed to coordinate 
utilization review programs.  We would suggest that some 
consideration be given to allowing national organizations to 
manage such efforts if they are able to provide state-specific 
feedback. 
	Removing limits on balance billing.  Surgeons have always 
had the highest rates of participation in the Medicare program.  
Nonetheless, after decades of cost controls and payment cuts, I 
suspect many of our members would welcome removal of the statutory 
limits on balance billing for high-income beneficiaries.  We do, 
however, have some practical concerns with the language included 
in Dr. Burgess' bill (and that we expect will be included in 
Chairman Barton's bill).  
	Determining a patient's annual income really is not feasible 
for the typical physician practice.  Physicians do not have ready 
access to this information, and raising income issues directly 
with patients at the point of care is not conducive to the 
trusting relationship that is so important between a surgeon and 
his or her patient. 
	In addition, under current rules Medicare sends 
reimbursement for unassigned claims directly to the beneficiary 
rather than to the physician.  This presents a particularly 
difficult situation for surgeons providing major procedures in 
the hospital setting.  Surgical patients do not bring their wallets 
to the operating room.  So, unlike office-based services, it simply 
is not feasible to ask for payment at the time of service.  
Instead, a surgeon's bill that is received after discharge must 
compete for payment with many other-often significantly 
larger-invoices that the patient receives from other physicians, 
the hospital, labs, and so forth.  The end result is a significant 
lag in payment and, in the worst situations, no payment at all. 
	Significant changes would need to be made in the current 
rules governing balance billing before removing the 115 percent 
limit could have any meaningful impact on surgical services. 

Conclusion 
	While the College greatly appreciates Congress' actions over 
the past four years to prevent the payment cuts, it is more 
important than ever that action be taken to prevent the 5.1 percent 
conversion factor reduction that is scheduled to take effect on 
January 1, 2007.   Not only have payments failed to keep pace with 
the rising cost of caring for Medicare patients in recent years, 
but other payment policy changes will compound the impact on an 
aging surgical workforce in 2007.  Even with action to prevent the 
conversion factor reduction in 2007, some surgical services are 
likely to experience double-digit percentage reductions in Medicare 
payments, which is one of the reasons that surgery supports a 
multi-year approach to addressing the problem. 
	Mr. Chairman, thank you for providing this opportunity to 
share with you the challenges facing surgeons under the Medicare 
program today, and to provide specific feedback on the various 
legislative proposals.  Whether the focus is on value-based 
purchasing or on the sustainable growth rate, the College looks 
forward to continuing to work with you to reform the Medicare 
physician payment system to ensure that Medicare patients will 
have access to the high-quality surgical care they need. 

MR. DEAL.  Thank you.  
Dr. Weida.
	DR. WEIDA.  Good afternoon, Chairman Deal, and members of 
the committee.  
I am Dr. Tom Weida, a family physician and Speaker of the Congress 
of Delegates of the American Academy of Family Physicians.  I am 
pleased to be here to testify on an issue of critical importance 
to the 94,000 members of the American Academy of Family Physicians 
and the patients we serve.  
AAFP appreciates the committee's commitment to avoid the looming 5.1 
payment reduction in the Medicare physician fee schedule for 2007 
and to put plans in place to replace the current unsustainable 
payment system.  Under the so-called sustainable growth rate, 
physicians face steadily declining payments into the foreseeable 
future, nearly 40 percent over the next 9 years, even while their 
practice costs continue to increase.  
According to the government's own calculations, the Medicare payment 
rate for physician services has for several years not kept pace with 
the cost of operating a small business which delivers medical care.  
Simply put, this formula does not work and must be replaced.  But 
in the short term, the 5.1 percent payment rate decrease for 2007 
must be prevented.  
The AAFP supports restructuring Medicare payments to reward quality 
in care coordination.  However, restructuring must be built on 
fundamental reform of the underlying fee-for-service system and a 
revaluing of physician services, especially primary care.  
The academy is committed to working with the committee to help 
design a new payment system that meets the needs of patients and 
physicians.  While other developed countries have a better balance 
of primary care doctors and subspecialists, primary care physicians 
make up less than one-third of the U.S. physician workforce.  
Compared to those in other developed countries, Americans spend 
the highest amount per capita on health care but have some of the 
worst health care outcomes.  More than 20 years of evidence shows 
that having a primary care-based health system has both health and 
economic benefits.  Two years ago, a study comparing the health 
and economic outcomes of the physician workforce in the U.S. reached 
the same conclusion, Health Affairs, April 2004.  By not using a 
system of health care based on primary care physicians coordinating 
patients' care, the U.S. Medicare system pays a steep price.  
What is needed is a system designed to encourage the delivery of 
the type of care that Medicare beneficiaries need.  Finding that 
more efficient and effective method of compensating physicians for 
services delivered to Medicare beneficiaries with diverse health 
conditions is a difficult but necessary task and one that has 
tremendous implications for millions of patients and for the 
specialty of family medicine.  
From the outset, the Medicare program has based physician payment 
on a fee-for-service system.  This system of nonaligned incentives 
rewards individual physicians for ordering more tests and performing 
more procedures.  The system lacks incentives for physicians to 
coordinate the tests, procedures or patient health care generally, 
including preventive services and care to maintain health.  This 
payment method has resulted in an expensive fragmented Medicare 
program.  Such a payment scheme is outdated and misaligned because 
it does not adequately compensate physicians who do manage and 
organize their patients' health care.  Currently, there is no 
compensation to physicians in recognition of the considerable time 
and effort associated with coordinating health care in a way that 
is understandable to patients and cost-effective for the Medicare 
program.  
A more aligned payment system would encourage patients to select a 
personal medical home in which their care is coordinated and 
expensive duplication of services is eliminated.  Such a model, 
with its emphasis on care coordination, which is advanced by both 
the AAFP and the American College of Physicians, has been tested 
in some 39 studies and has repeatedly shown its value especially 
in patients with multiple chronic conditions which typifies the 
Medicare population.  For example the work of Barbara Starfield, 
Ed Wagner and others has shown that patients, particularly the 
elderly who are a usual source of care, are healthier and cost 
less because they use fewer medical resources than those who do 
not.  
Currently, 82 percent of the Medicare population has at least one 
chronic condition, and two-thirds have more than one.  However, it 
is the 21 percent of beneficiaries with five or more chronic 
conditions that accounts for two-thirds of all Medicare spending.  
The medical home model is predicated on the fact that most health 
care for those chronically ill takes place in primary care settings, 
such as the offices of family physicians.  The Institute of Medicine 
has repeatedly praised the value of and cited the need for care 
coordination, and while there are a number of possible methods to 
build this into the Medicare program, the academy recommends a 
blended model that combines fee-for-service with a 
per-beneficiary/per-month stipend for care coordination in 
addition to meaningful incentives for delivery of high-quality 
and effective services.  Patients should be given incentives to 
select a personal medical home by reduced out-of-pocket expenses 
such as copays and deductibles.  
The academy also supports efforts to transition to value-based 
purchasing to improve the quality of patient care.  We believe that 
quality, access and positive health outcomes must be the primary 
goal of any physician reimbursement system.  Prevention, early 
diagnosis and early treatment will simultaneously improve quality 
of life and ultimately save valuable health care dollars.  
But implementing a system for collection and reporting the necessary 
data requires an initial investment from the health care provider 
in the form of electronic information technology.  The most recent 
IOM report on pay-for-performance states that aligning pay 
incentives with quality improvement goals represents a promising 
opportunity to encourage higher levels of quality and provide 
better value for all Americans.  
The objective of aligning incentives through pay-for-performance is 
to create payment incentives that will encourage the most rapid 
feasible performance improvement by all providers; support 
innovation and constructive change throughout the health care 
system; and promote better outcomes of care, especially through 
coordination of care across provider settings and time.  We concur 
with these recommendations.  
It is time to modernize Medicare by recognizing the importance of 
and appropriately valuing primary care and by embracing the 
patient-centered medical home model as an integral part of the 
Medicare program.  The academy advocates for a new Medicare 
physician payment system that embraces the following:  Adoption 
of the medical home model that provides a per-month care management 
fee for physicians whom patients designate as their patient-centered 
medical home; continued use of the resource-based relative value 
scale using a conversion factor updated annually by the Medicare 
economic index; no geographic adjustment in Medicare allowances 
except as it relates to identified shortage areas; a phased-in 
voluntary pay-for-performance system consistent with the IOM 
recommendations.  
The academy commends the committee for its consideration of 
incorporating the medical home concept within Medicare physician 
payment reform and, based on the existing literature, would urge the 
committee to move beyond a demonstration project to permanent 
adoption of this model by authorizing CMS to promulgate regulations 
to make the patient-centered medical home a permanent part of 
Medicare.  
The academy also commends Chairman Barton, Ranking Member Dingell, 
Subcommittee Chairman Deal, and Dr. Burgess for their initiatives 
in attempting to identify a more aligned and contemporary Medicare 
payment methodology for physician services.  
And the academy is eager to work with the committee toward the 
needed system improvements in the efficiency of the program and 
also in the quality and effectiveness of the services delivered 
to our Nation's elderly.  Thank you very much.  
[The prepared statement of Dr. Weida follows:] 

PREPARED STATEMENT OF DR. THOMAS J. WEIDA, SPEAKER, AMERICAN ACADEMY 
OF FAMILY PHYSICIANS 

Introduction 
	Mr. Chairman and members of the committee, I am Dr. Tom 
Weida, Speaker of the Congress of Delegates of the American Academy 
of Family Physicians (AAFP).  I am pleased to be here to testify on 
an issue of critical importance to the 94,000 members of the American 
Academy of Family Physicians and the patients we serve. 
	The AAFP appreciates the Committee's commitment to avoid the 
looming 5.1 percent payment reduction for fiscal year 2007 and to put 
plans in place to replace the current unsustainable payment system. 
 We would like to take the opportunity to discuss the provisions of 
the legislation. 
	The AAFP appreciates the work this committee has undertaken 
to examine how Medicare pays for services physicians deliver to 
Medicare beneficiaries and we share the subcommittee's concerns 
that the current system is flawed, outdated and unsustainable.  
For this reason the AAFP supports the restructuring of Medicare 
payments to reward quality and care coordination.  Such a 
restructuring must be built on a fundamental reform of the 
underlying fee-for-service system and a revaluing of the services 
offered by all physicians providing care. 
	Most Americans receive the majority of their health care 
in primary care settings.  These are often small or medium size 
practices.  Specifically, about a quarter of all office visits 
in the U.S. are to family physicians, and Medicare beneficiaries 
comprise about a quarter of the typical family physician's 
practice.   Finding a more efficient and effective method of 
paying for physicians' services delivered in such diverse settings 
to Medicare patients with a large variety of health conditions 
is a difficult but necessary, and one that has tremendous 
implications for millions of patients and for the specialty 
of family medicine.  The Academy, therefore, is committed to 
involvement in the design of a new payment system that meets the 
needs of patients and physicians. 

Current Payment Environment 
	The environment in which U.S. physicians practice and are 
paid is challenging at best.  Medicare, in particular, has a history 
of making disproportionately low payments to family physicians, 
largely because its payment formula is based on a reimbursement 
scheme that rewards procedural volume and to fails to foster 
comprehensive, coordinated management of patients.  More broadly, 
the prospect of steep annual cuts in payment resulting from the 
flawed payment formula is, at best, discouraging.  In the current 
environment, physicians know that, without Congressional action, 
they will face a 5.1 percent cut in January 2007. Clearly, the 
Sustainable Growth Rate (SGR) formula does not work. 
	Under the SGR, physicians face steadily declining payments 
into the foreseeable future - nearly 40 percent over the next six 
years-- even while their practice costs continue to increase.  
According to the government's own calculations, the Medicare 
payment rate for physician services has for several years not 
kept pace with the cost of operating a small business which 
delivers medical care. 

Primary Care Physicians in the U.S. 
	While other developed countries have a better balance of 
primary care doctors and subspecialists, primary care physicians 
make up less than one-third of the U.S. physician workforce.   
Compared to those in other developed countries, Americans spend 
the highest amount per capita on healthcare but have some of the 
worst healthcare outcomes.  More than 20 years of evidence shows 
that having a primary care-based health system has both health 
and economic benefits.  Two years ago, a study comparing the 
health and economic outcomes of the physician workforce in the 
U.S. reached the same conclusion (Health Affairs, April 2004).  
By not using a system of health care based on primary care 
physicians coordinating patients' care, we the U.S. health care 
system pays a steep price.  

Measures of quality and efficiency sh ould include a mix of outcome, 
process and structural measures.  Clinical care measures must be 
evidence-based.  Physicians should be directly involved in 
determining the measures used for assessing their performance.
Aligning Incentives   
	Beyond replacing the outdated and dysfunctional SGR formula, 
a workable, predictable method of determining physician 
reimbursement, one that is sensitive to the costs of providing 
care, should align the incentives to encourage evidence-based 
practice and foster the delivery of services that are known to 
be more effective and result in better health outcomes for 
patients.  Moreover, the reformed system must facilitate 
efficient use of Medicare resources by paying for appropriate 
utilization of effective services and not paying for services 
that are unnecessary, redundant or known to be ineffective. 
Such an approach is endorsed by the Institute of Medicine (IOM) 
in its 2001 publication Crossing the Quality Chasm. 
	Another IOM report released just last week entitled 
Rewarding Provider Performance: Aligning Incentives in Medicare 
states that aligning payment incentives with quality improvement 
goals represents a promising opportunity to encourage higher levels 
of quality and provide better value for all Americans.  The 
objective of aligning incentives through pay for performance is 
to create payment incentives that will:  (1) encourage the most 
rapid feasible performance improvement by all providers; (2) 
support innovation and constructive change throughout the health 
care system; and (3) promote better outcomes of care, especially 
through coordination of care across provider settings and time.  
The Academy concurs with the IOM recommendations that state: 
 Measures should allow for shared accountability and more 
coordinated care across provider settings. 
 P4P programs should reward care that is patient-centered and 
efficient. And reward providers who improve performance as well as 
those who achieve high performance. 
 Providers should be offered (adequate) incentives to report 
performance measures. 
 Because electronic health information technology will increase 
the probability of a successful pay-for-performance program, the 
Secretary should explore ways to assist providers in implementing 
electronic data collection and reporting to strengthen the use of 
consistent performance measures. 

	AAFP concurs with these IOM recommendations. 
	Aligning the incentives requires collecting and reporting 
meaningful quality measures.  AAFP is supportive of collecting and 
reporting quality measures and has demonstrated leadership in the 
physician community in the development of such measures.  It is 
the Academy's belief that measures of quality and efficiency 
should include a mix of outcome, process and structural measures. 
 Clinical care measures must be evidence-based and physicians should 
be directly involved in determining the measures used for assessing 
their performance. 

Care Coordination and a Patient-Centered Medical Home 
	From the outset, the Medicare program has based physician and 
supplier payment on a fee-for-service system.  This example of 
non-aligned incentives has produced distortions by rewarding 
individual physicians for ordering tests and performing procedures. 
 The system lacks incentive for physicians to coordinate the 
tests, procedures, or patient health care generally, including 
preventive services or care to maintain health.  This payment 
method has resulted in an expensive, fragmented Medicare program. 
	This out-of-date payment scheme does not adequately compensate 
physicians who do manage and organize their patients' health care.  
Currently, there is no direct compensation to physicians for the 
considerable time and effort associated with coordinating health care 
in a way that is understandable to patients and cost-effective 
for the Medicare program.   
	To correct these inverted incentives, the American Academy 
of Family Physicians recommends Medicare compensate physicians for 
care coordination services.  Such payment should go to the personal 
physician chosen by the patient to perform this role.  Any physician 
practice prepared to provide care coordination could be eligible to 
serve as a patient's medical home.  
	In its reports, the Institute of Medicine (IOM) has 
repeatedly praised the value of, and cited the need for, care 
coordination. And while there are a number of possible methods to 
build this into the Medicare program, AAFP recommends a blended 
model that combines fee-for-service with a per-beneficiary, 
per-month stipend for care coordination in addition to meaningful 
incentives for delivery of high-quality and effective services.  
Patients should be given incentives to select a personal medical 
home by reduced out-of-pocket expenses such as co-pays and 
deductibles. 
	The more efficient payment system should place greater value 
on cognitive and clinical decision-making skills that result in more 
efficient use of resources and that result in better health 
outcomes.  For example, the work of Barbara Starfield, Ed Wagner 
and others has shown that patients, particularly the elderly, who 
have a usual source of care, are healthier and cost less because 
they use fewer medical resources than those who do not.  The 
evidence shows that even the uninsured benefit from having a usual 
source of care (or medical home).  These individuals have more 
physician visits, get more appropriate preventive care and receive 
more appropriate prescription drugs than those without a usual 
source of care, and do not get their basic primary health care 
in a costly emergency room, for example.  In contrast, those 
without this usual source have more problems getting health care 
and neglect to seek appropriate medical help when they need it.  
A more efficient payment system would encourage physicians to 
provide patients with a medical home in which a patient's care is 
coordinated and expensive duplication of services is eliminated. 
	A reimbursement system with appropriate incentives for the 
patient and the physician recognizes the time and effort involved 
in ongoing care management.  The Academy commends the committee 
for its consideration of incorporating the medical home concept 
into Medicare physician payment reform and, based on the existing 
literature, would urge the committee to move beyond a demonstration 
project to permanent adoption of this model by authorizing the 
Centers for Medicare and Medicaid Services (CMS) to make the 
Patient-centered Medical Home a permanent part of Medicare. 
	The patient-centered, physician-guided medical home being 
advanced jointly by the American Academy of Family Physicians and 
the American College of Physicians would include the following 
elements: 
 Personal physician - each patient has an ongoing relationship with 
a personal physician trained to provide first contact, continuous                                                                                                                          and comprehensive care.

 Physician directed medical practice - the personal physician leads 
a team of individuals at the practice level who collectively take 
responsibility for the ongoing care of patients. 

 Whole person orientation - the personal physician is responsible 
for providing for all the patient's health care needs or taking 
responsibility for appropriately arranging care with other 
qualified professionals.  This includes care for all stages of 
life; acute care; chronic care; preventive services; and end of 
life care. 

 Care is coordinated and/or integrated across all domains of the 
health care system (hospitals, home health agencies, nursing homes, 
consultants and other components of the complex health care system), 
facilitated by registries, information technology, health information 
exchange and other means to assure that patients get the indicated 
care when and where they need and want it. 

 Quality and safety are hallmarks of the patient-centered medical 
home: 
	Evidence-based medicine and clinical decision-support tools 
guide decision making.  Physicians in the practice accept 
accountability for continuous quality improvement through voluntary 
engagement in performance measurement and improvement. 	Patients 
actively participate in decision-making and feedback is sought to 
ensure patients' expectations are being met. 

Information technology is utilized appropriately to support optimal 
patient care, performance measurement, patient education, and 
enhanced communication. 

Practices go through a voluntary recognition process by an 
appropriate non-governmental entity to demonstrate that they 
have the capabilities to provide patient centered services 
consistent with the medical home model. 

 Enhanced access to care through systems such as open scheduling, 
expanded hours and new options for communication between patients, 
their personal physician, and office staff. 

  Payment of the care management fee for the medical home would 
reflect the value of physician and non-physician staff work that 
falls outside of the face-to-face visit associated with 
patient-centered care management, and it would pay for services 
associated with coordination of care both within a given practice 
and between consultants, ancillary providers, and community 
resources.  The per beneficiary, per month stipend should be at 
least $15, which reflects an average among chronic disease 
management programs offered by private payers (AAFP Task Force 
on the Future of Family Medicine).  Most Medicare beneficiaries 
have one or more chronic illnesses. 
	Finally, given the increasing prevalence of 
pay-for-performance in the public and private sector and the 
advent of Medicare's Physician Voluntary Reporting Program, the 
AAFP believes the Medicare physician payment system should include 
a phased-in performance bonus based for voluntary reporting of 
quality improvement measures.  

Reporting 
	AAFP is supportive of collecting and reporting quality 
measures and has led the physician community in the development of 
meaningful measures.  Consistent with the philosophy of aligning 
incentives, the reward for collecting and reporting data must be 
commensurate with the effort and processes necessary to comply and 
must be sufficient to obtain the desired response from providers.  
The Academy believes that one currently contemplated incentive of 
a quarter of a percent (0.25 percent) for reporting quality would 
fall short of covering the actual cost of operationalizing such a 
mandate and is therefore insufficient incentive for 
participation..  Moreover, CMS has indicated it does not have 
processes in place to collect, analyze and determine payment on 
such data by the first of the year. Thus, we are concerned that 
mandating the collection and submission of quality measures without 
the administrative infrastructure to be able to reward such data 
collection and reporting efforts could be counter productive. 
	To realize the benefits of such a program, it is critical to 
provide a sound foundation and to have parameters in place to allow 
data to be effectively analyzed.  In addition, legislation should 
provide adequate incentives to encourage the maximum number of 
participants to gather a true sample of the population served by 
the program. 
	The AAFP supports efforts to transition to value-based 
purchasing to improve the quality of patient care.  We believe that 
quality, access and positive health outcomes must be the primary 
goal of any physician reimbursement system.  Prevention, early 
diagnosis and early treatment will simultaneously improve quality 
of life and ultimately save valuable health care dollars.  But 
implementing data collection and reporting requires an initial 
investment from the health care provider in the form of electronic 
data and decision support systems. 

A Chronic Care Model in Medicare  
	If we do not change the Medicare payment system, the aging 
population and the rising incidence of chronic disease will 
overwhelm Medicare's ability to provide health care.  Currently, 
82 percent of the Medicare population has at least one chronic 
condition and two-thirds have more than one illness.  However, 
the 20 percent of beneficiaries with five or more chronic conditions 
account for two-thirds of all Medicare spending. 
There is strong evidence the Chronic Care Model (Ed Wagner, Robert 
Wood Johnson Foundation) would improve health care quality and 
cost-effectiveness, integrate patient care, and increase patient 
satisfaction.  This well-known model is based on the fact that 
most health care for the chronically ill takes place in primary 
care settings, such as the offices of family physicians.  The model 
focuses on six components:  
 self-management by patients of their disease 
 an organized and sophisticated delivery system 
 strong support by the sponsoring organization 
 evidence-based support for clinical decisions 
 information systems; and 
 links to community organizations.  

  This model, with its emphasis on care-coordination, has been tested 
in some 39 studies and has repeatedly shown its value.  While we 
believe reimbursement should be provided to any physician who 
agrees to coordinate a patient's care (and serve as a medical home), 
generally this will be provided by a primary care doctor, such as a 
family physician.  According to the Institute of Medicine, primary 
care is "the provision of integrated, accessible health care 
services by clinicians who are accountable for addressing a large 
majority of personal health care needs, developing a sustained 
partnership with patients, and practicing in the context of family 
and community." Family physicians are trained specifically to 
provide exactly this sort of coordinated health care to their 
patients.  
	The AAFP advocates for a new Medicare physician payment 
system that embraces the following: 

 Adoption of the Medical Home model which would provide a per month 
care management fee for physicians whom beneficiaries designate as 
their Patient-centered Medical Home; 
 Continued use of the resource-based relative value scale (RBRVS) 
using a conversion factor updated annually by the Medicare Economic 
Index (MEI); 
 No geographic adjustment in Medicare allowances except as it relates 
to identified shortage areas; 
 A phased-in voluntary pay-for-reporting, then pay-for-performance 
system consistent with the IOM recommendations. 
 Phase 1:  "Pay for reporting" based on structural and system 
changes in practice (e.g., electronic health records and registries)
 Phase 2:  "Pay for reporting" of data on evidence-based performance 
measures that have been appropriately vetted through mechanisms such 
as the Physician Consortium for Performance Improvement and the 
Ambulatory Care Quality Alliance (AQA), without regard to outcomes 
achieved  
 Phase 3:  Incentive payments to physicians for demonstrated 
improvements in outcomes and processes, using evidence-based 
measures; e.g., the AQA starter set. 

Value-Based Purchasing - Development of Quality Measures 
	The AAFP supports moving to value-based purchasing 
(pay-for-performance) in Medicare if the central purpose is to 
improve the quality of patient care and clinical outcomes.  As we 
have stated previously in a joint letter to Congress with our 
colleague organizations American College of Physicians (ACP), 
American Academy of Pediatrics (AAP) and the American College of 
Obstetricians and Gynecologists (ACOG), "we believe that the 
medical profession has a professional and ethical responsibility to 
engage in activities to continuously improve the quality of care 
provided to patients...   Our organizations accept this challenge." 
  We have committed to work for the improvement of the practice of 
family medicine, to strengthen the infrastructure of medical 
practice to support appropriate value-based purchasing, and to 
engage in development and validation of performance measures.  
	While several specific issues remain that must be 
addressed in implementing pay-for-performance in Medicare, the AAFP 
has a framework for a phased-in approach for Medicare consistent 
with IOM recommendations. 
	First, the development of valid, evidence-based performance 
measures is imperative for a successful program to improve health 
quality.  The AAFP participates actively in the development of 
performance measures through the Physician Consortium.  We believe 
multi-specialty collaboration in the development of evidence-based 
performance measures through the consortium has yielded and will 
continue to yield valid measures for quality improvement and 
ultimately pay-for-performance. In addition, these measures should 
provide consistency across all specialties. 
	Secondly, the National Quality Forum (NQF) or an NQF-like 
entity can review and clear valid quality measures developed by the 
Physician Consortium. With its multi-stakeholder involvement and 
its explicit consensus process, the NQF provides essential 
credibility to the measures it approves - measures developed by 
the Physician Consortium. 
	Lastly, the Ambulatory Care Quality Alliance (AQA) of which 
AAFP is a founding organization (along with the ACP, America's 
Health Insurance Plans and the Agency for Healthcare Research and 
Quality) determines which of the measures approved through the NQF 
consensus process should be implemented initially and which should 
then be added so that there is a complete set of measures, including 
those relating to efficiency, sub-specialty performance, and 
patient experience.  
	Having a single set of measures that can be reported by a 
practice to different health plans with which the practice is 
contracted is critical to reducing the reporting costs borne by 
medical practices.   Measures that ultimately are utilized in a 
Medicare pay-for-performance program should follow this path. 

Information Technology in the Medical Office Setting 
	An effective, accurate and administratively operational 
pay-for-performance program is predicated on the presence of health 
information technology in the physician's office.  Using advances in 
health information technology (HIT) also aids in reducing errors 
and allows for ongoing care assessment and quality improvement in 
the practice setting - two additional goals of recent IOM reports,. 
 We have learned from the experience of the Integrated Healthcare 
Association (IHA) in California that when physicians and practices 
invested in electronic health records (EHRs) and other electronic 
tools to automate data reporting, they were both more efficient 
and more effective, achieving improved quality results at a more 
rapid pace than those that lacked advanced HIT capacity. 
	Family physicians are leading the transition to EHR systems 
in large part due to the efforts of AAFP's Center for Health 
Information Technology (CHiT).  The AAFP created the CHiT in 2003 
to increase the availability and use of low-cost, standards-based 
information technology among family physicians with the goal of 
improving the quality and safety of medical care and increasing 
the efficiency of medical practice.  Since 2003, the rate of EHR 
adoption among AAFP members has more than doubled, with over 30 
percent of our family physician members now utilizing these systems 
in their practices. 
In an HHS-supported EHR Pilot Project conducted by the AAFP, we 
learned that practices with a well-defined implementation plan and 
analysis of workflow and processes had greater success in 
implementing an EHR.  CHiT used this information to develop a 
practice assessment tool on its Website, allowing physicians to 
assess their readiness for EHRs.  
	In any discussion of increasing utilization of an EHR 
system, there are a number of barriers and cost is a top concern 
for family physicians.  The AAFP has worked aggressively with the 
vendor community through our Partners for Patients Program to lower 
the prices of appropriate information technology.  The AAFP's 
Executive Vice President serves on the American Health Information 
Community (AHIC), which is working to increase confidence in these 
systems by developing recommendations on interoperability.  The AAFP 
sponsored the development of the Continuity of Care Record (CCR) 
standard, now successfully balloted through the American Society 
for Testing and Materials (ASTM).  We initiated the Physician EHR 
Coalition, now jointly chaired by ACP and AAFP, to engage a broad 
base of medical specialties to advance EHR adoption in small and 
medium size ambulatory care practices.  In preparation for greater 
adoption of EHR systems, every family medicine residency will 
implement EHRs by the end of this year.  
	To facilitate accelerate reporting, the AAFP joins the IOM 
in encouraging federal funding for health care providers to purchase 
HIT systems.  According to the US Department of Health & Human 
Services, billions of dollars will be saved each year with the 
wide-spread adoption of HIT systems.  The federal government has 
already made a financial commitment to this technology; 
unfortunately, only a few dollars trickle down to wherethe funding 
is not directed to these  systems that will truly have the most 
impact and where ultimately all health care is practiced - at the 
individual patient level.  We encourage you to include funding in 
the form of grants or low interest loans for those physicians 
committed to integrating an HIT system in their practice. 

A Framework for Pay-for-performance 
	The following is a proposed framework for phasing in a 
Medicare pay-for-performance program for physicians that is designed 
to improve the quality and safety of medical care for patients and 
to increase the efficiency of medical practice. 
 Phase 1 
All physicians would receive a positive update in 2007, based on  recommendations of MedPAC, reversing the projected 5.1-percent 
reduction.  Congress should establish a floor for such updates in 
subsequent years. 
 Phase 2 
Following completion of development of reporting mechanisms and 
specifications,  Medicare would encourage structural and system 
changes in practice, such as electronic health records and 
registries, through a "pay for reporting" incentive system such 
that physicians could improve their capacity to deliver quality 
care.  The update floor would apply to all physicians. 
 Phase 3 
Assuming physicians have the ability to do so, Medicare would 
encourage reporting of data on evidence-based performance measures 
that have been appropriately vetted through mechanisms such as the 
National Quality Forum and the Ambulatory Care Quality Alliance.  
During this phase, physicians would receive "pay for reporting" 
incentives; these would be based on the reporting of data, not on 
the outcomes achieved.  The update floor would apply to all 
physicians.
 Phase 4
Contingent on repeal of the SGR formula and development of a long 
term solution allowing for annual payment updates linked to 
inflation, Medicare would encourage continuous improvement in the 
quality of care through incentive payments to physicians for 
demonstrated improvements in outcomes and processes, using 
evidence-based measures; e.g., the provision of preventive 
services, performing HbA1c screening and control  for diabetic 
patients and prescribing aspirin for patients who have experienced  
a coronary occlusion. The update floor would apply to all 
physicians. 

	This type of phased-in approach is crucial for appropriate 
implementation.  While there is general agreement that initial 
incentives should foster structural and system improvements in 
practice, decisions about such structural measures, their reporting, 
threshold for rewards, etc., remain to be determined.  The issues 
surrounding collection and reporting of data on clinical measures 
are also complex.  For example, do incentives accrue to the 
individual physician or to the entire practice, regardless of size.  
In a health care system where patients see multiple physicians, to 
which physician are improvements attributed. 
	The program must provide incentives - not punishment - to 
encourage continuous quality improvement.  For example, physicians 
are being asked to bear the costs of acquiring, using and maintaining 
health information technology in their offices, with benefits 
accruing across the health care system - to patients, payers and 
insurance plans.  Appropriate incentives must be explicitly 
integrated into a Medicare pay-for-performance program if we are 
to achieve the level of infrastructure at the medical practice 
to support collection and reporting of data. 

Conclusion 
	The AAFP encourages Congressional action to reform the 
Medicare physician reimbursement system in the following manner: 
 Repeal the Sustainable Growth Rate formula at a date certain and 
replace it with a stable and predictable annual update based on 
changes in the costs of providing care as calculated by the 
Medicare Economic Index. 
Adopt the patient-centered medical home by giving patients incentives 
to use this model and compensate physicians who provide this 
function.  The physician designated by the beneficiary as the 
patient-centered medical home shall receive a per-member, per-month 
stipend in addition to payment under the fee schedule for services 
delivered. 
 Begin to phase in value-based purchasing by starting with a 
pay-for-reporting program.  Compensation for reporting must be 
sufficient to cover costs associated with the program and provide 
a sufficient incentive to report the required data. 
 Ultimately, payment should be linked to health care quality and 
efficiency and should reward the most effective patient and 
physician behavior. 

	The Academy commends the subcommittee for its commitment to 
identify a more accurate and contemporary Medicare payment 
methodology for physician services.  Moreover, the AAFP is eager 
to work with Congress toward the needed system changes that will 
improve not only the efficiency of the program but also the 
effectiveness of the services delivered to our nation's elderly. 

MR. DEAL.  Thank you.  
Dr. Wilson you are recognized. 
DR. WILSON.  Well, thank you, Mr. Chairman.  
My name is Cecil Wilson.  I am chair of the Board of Trustees of 
the American Medical Association and also an internist in practice 
in Winterpark, Florida.  On behalf of the AMA, I commend you, 
Chairman Barton, Mr. Dingell, Dr.  Burgess and members of the 
subcommittee for your leadership in addressing the Medicare 
physician payment problem, and we look forward to continuing to 
work with you.  
The Medicare physician payment system is broken.  You have heard 
that physicians face drastic payment cuts of almost 40 percent 
over the next 9 years due to the flawed sustainable growth rate 
formula, while practice costs are projected to increase about 
20 percent during the same period.  And that is not all.  These 
cuts follow 5 years of payment updates that have not kept pace 
with medical practice cost increases.  Payments in 2006 are at 
about the same level as in 2001.  A 5 percent cut is scheduled 
for January 1, 2007, and other Medicare payment policy changes 
in 2007, as you have heard, will exacerbate the cut for as many 
as half of all physicians.  
For example, 45 percent of Texas physicians will face cuts ranging 
from 6 to 15 percent; 5 percent will see even steeper cuts of 16 
to 20 percent, and we fear patient access will suffer.  An AMA 
survey this year shows that 45 percent, almost half of 
physicians, have indicated they will be forced to limit the 
number of new Medicare patients they can accept if the 5 percent 
cut takes effect in January.  
In addition, more than 35 States will lose in excess of $1 billion 
each by 2015.  For example, Texas will lose $13 billion; Michigan 
over $8 billion.  Time is running out.  As you know, 265 members 
of this House signed a letter urging passage of legislation before 
adjournment to provide physicians with Medicare payments that 
reflect increases in medical practice costs.  The AMA urges 
Congress to act.  We support a multiyear SGR solution instead of 
the 3 years of modest updates in the committee draft.  We would 
urge a modification to include 2 years of higher updates that 
could reflect practice cost increases.  
And we do appreciate that the committee draft sets forth a framework 
for physicians to report quality information under Medicare and 
have the following comments:  
First, instead of designating those structural measures for which 
physicians would report data, we would suggest that the draft should 
establish a specific process by which such measures could be 
developed by physicians through the Physician Consortium for 
Performance Improvement.  
The AMA's convened consortium is a physician consensus-building 
organization with over 100 national medical societies, State medical 
societies and special societies.  The AMA is fulfilling and exceeding 
our commitment regarding development of quality measures.  As 
promised, the consortium has to date developed 98 quality measures 
with an additional 70 expected by the end of the year.  The 
consortium will, in addition, use the 2007 ramp-up period to expand 
the scope of these measures including developing structural measures 
to ensure that a broad cross-section of physicians could participate 
in the reporting program.  
Second, the AMA agrees that the reporting program should be 
voluntary.  Third, the program should provide payments to offset 
physicians' administrative costs in reporting data.  And fourth, 
the AMA supports the concept of the medical home demonstration and 
would recommend expansion to specialties in addition to primary 
care.  
And finally, it is critical that Congress recognize that a quality 
improvement program is incompatible with the use of the SGR.  
Quality improvements may save dollars for the Medicare program as 
a whole by avoiding costly Part A hospitalizations and readmissions. 
The dilemma is that this will increase Part B spending, and under 
the SGR, this triggers physician payment cuts.  
So, in order to maintain access to the highest quality of care for 
our Medicare patients, we urge Congress to act promptly to ensure 
a positive payment update in 2007 and make progress toward a 
long-term solution, both of which should reflect increases in 
medical practice costs and support a voluntary program of 
participation and quality improvement.  The AMA looks forward to 
working with the subcommittee to achieve our shared goals, and 
thank you for the opportunity to be here today. 
	[The prepared statement of Dr. Wilson follows:] 

PREPARED STATEMENT OF DR. CECIL B. WILSON, CHAIR, BOARD OF 
TRUSTEES, AMERICAN MEDICAL ASSOCIATION 

	The American Medical Association (AMA) appreciates the 
opportunity to provide our views regarding "Medicare Physician 
Payments: 2007 and Beyond."  We commend you, Chairman Barton, 
Mr. Deal, Mr. Dingell, and Members of the Subcommittee, for all 
your hard work and leadership in recognizing the fundamental 
need to address the fatally flawed Medicare physician payment 
update formula, called the sustainable growth rate, or SGR, and 
avert the 5% physician payment cut scheduled for 2007. 

MEDICARE PHYSICIAN CUTS IN 2007 AND BEYOND 

Congress Must Act Now To Avert Pay Cuts in 2007 

	The AMA is grateful to the Subcommittee and Congress for 
taking action in each of the last four years to forestall steep 
Medicare physician payment cuts, due to the flawed SGR physician 
payment formula.  Yet, a crisis still looms, and, in fact, is 
getting worse.  
	Payments to physicians today are essentially the same as 
they were five years ago.  Yet, due to the SGR, physicians now 
face drastic Medicare payment cuts totaling almost 40% over the 
next nine years.  The first of these cuts is scheduled to take 
effect on 
	January 1, 2007, and according to surveys by the American 
Medical Association (AMA) and Medical Group Management Association 
(MGMA), 45% of physicians and 40% of group practices will be 
forced to limit the number of new Medicare patients they can accept 
when the first cut of at least 5% goes into effect 
January 1, 2007.  Time is running out, and Congress needs to act 
promptly to avert the 2007 physician pay cut by enacting a positive 
physician payment update that accurately reflects increases in 
medical practice costs, as indicated by the Medicare Economic 
Index (MEI).  
	Further, over the long-term, Congress must repeal the SGR 
and replace it with a system that keeps pace with increases in 
medical practice costs. 

Congress Must Repeal the SGR and Avert Long-Term Pay Cuts Over Nine 
Years 

	As this Subcommittee focuses its attention on Medicare, we 
appreciate the efforts of the Full and Subcommittee to address the 
problems due to the SGR.  In addition to the Subcommittee's 
efforts, there is widespread consensus that the SGR formula needs 
to be repealed: (i) there is bipartisan recognition in this 
Subcommittee and Congress that the SGR, with its projected 
physician pay cuts, must be replaced with a formula that reflects 
increases in practice costs; (ii) MedPAC has recommended that the 
SGR be replaced with a system that reflects increases in practice 
costs, with an update equivalent to the MEI for 2007; (iii) CMS 
Administrator McClellan has stated that the current physician 
payment system is "not sustainable;" and (iv) the Military 
Officers Association of America (MOAA) has stated that payment 
cuts under the SGR would significantly damage military 
beneficiaries' access to care under TRICARE, which will have 
long-term retention and readiness consequences.  Further, 265 
Representatives signed a letter calling on House leaders to pass 
legislation before they adjourn this week to provide physicians 
with Medicare payments that reflect increases in medical 
practice costs.  
	The AMA looks forward to working with the Subcommittee and 
Congress to repeal the SGR and replace it with a system that 
adequately keeps pace with increases in medical practice costs.  
We emphasize that every time action to repeal the SGR has been 
postponed, the cost of the next solution, whether short- or 
long-term, has become significantly higher and increased the 
risk of a complete meltdown in Medicare patients' access to care.  
	Beginning January 1, 2007, and extending over the next 
nine years, almost 200 billion dollars will be cut from payments 
to physicians for care provided to seniors - just as baby boomers 
are aging into Medicare by the millions.  These cuts follow five 
years of congressional intervention to prevent the cuts and 
modest updates that have not kept up with practice cost increases, 
 and payment rates in 2006 remain about the same as in 2001.  
Data in CMS' rule on the "Five-Year Review of Relative Value 
Units Under the Physician Fee Schedule and Proposed Changes to 
the Practice Expense Methodology," proposed earlier this year, 
indicate that Medicare now covers only two-thirds of the labor, 
supply and equipment costs that go into each service.  
	Only physicians and other health professionals face steep 
cuts under this flawed payment formula.  Other providers have been 
receiving updates that fully keep pace with their costs (and will 
continue to do so under current law), including Medicare Advantage 
plans which are already paid 11% in excess of  fee-for-service 
costs.  Physicians and other health care professionals (whose 
payment rates are tied to the physician fee schedule) must have 
payment equity with these other providers.  Physicians are the 
foundation for our nation's health care system, and thus a stable 
payment environment for their services is critical.  
	Finally, in addition to the 2007 physician cuts due to the 
flawed SGR, other Medicare physician payment policy changes will 
take effect on January 1, 2007.  These changes were discussed at 
length in our July testimony and relate to: (i) expiration of 
the MMA provision that increased payments in 58 of the 89 Medicare 
payment localities; and (ii) recent CMS proposals that will 
change both the "work" and "practice expense" relative values, 
each of which are components in calculating Medicare physician 
payments for each individual medical service; and (iii) payment 
cuts in imaging services furnished in physicians' offices, as 
mandated by the Deficit Reduction Act of 2005. 
	These policy changes will have a significant impact on a 
large number of physicians who could experience combined pay cuts 
of 10% or more for many physicians' services.  In fact, a recent 
AMA analysis indicates that if the 5% SGR cut is allowed to take 
effect in 2007, 13% of physicians will face cuts exceeding 10% 
and 32% will see cuts of 6% to 10%.  We caution the Subcommittee 
that, taken together, all of the foregoing cuts will make it 
nearly impossible for most physicians to make the necessary 
financial investment and staff commitment to participate in 
quality improvement programs.  The medical profession has made 
significant investment and progress over the past few years in 
the development of a system that enhances the quality of care 
in this country.  If that momentum is to be maintained, however, 
Congress now must do its part by providing physicians with an 
adequate payment system that supports that goal.  

Spending Targets Do Not Achieve their Goal of Restraining Volume 
Growth 
	Some have argued that the SGR formula is needed to restrain 
the growth of Medicare physicians' services.  The AMA disagrees.  
As discussed extensively in our written testimony presented to 
this Subcommittee in July, spending targets, such as the SGR, 
cannot achieve their goal of restraining volume growth by 
discouraging inappropriate care.  
	If there is a problem with inappropriate volume growth 
regarding a particular type of medical service, Congress and CMS 
should address it through targeted actions that deal with the 
source of the increase.  

ACCESS PROBLEMS FOR MEDICARE BENEFICIARIES UNDER THE SGR 

AMA Survey Shows Patient Access Will Significantly Decline 
if the Projected SGR Cuts Take Effect 

	Physicians cannot continue to absorb the draconian Medicare 
cuts that are projected for 2007 though 2015, especially when 
medical practice costs are projected to increase about 20% during 
this same time period, as estimated by the governments' own 
conservative measure.  A recent AMA survey, as presented to the 
Subcommittee in our July testimony, confirmed that patient access 
will suffer as a result.  
	Further, a recent national poll conducted by the AMA shows 
that the vast majority of Americans, 86% are concerned that seniors' 
access to health care will be hurt if impending cuts in Medicare 
physician payment take effect on January 1, 2007.  Further, 82% 
of current Medicare patients are concerned about the cuts impact 
on their access to health care.  Baby boomers are also very 
concerned about the impact of the cuts on Medicare patients' 
access to care.  A staggering 93% of baby boomers age 45-54 are 
concerned about the cuts impact on access to care.  In just five 
years, the first wave of baby boomers will reach age 65, and 
will turn to Medicare for their health care.  

IMPACT OF PROJECTED SGR CUTS ON INDIVIDUAL STATES 

	If Congress allows the pay cuts forecast by the Medicare 
Trustees to go into effect, there will be serious consequences in 
each state across the country.  As the map below illustrates, 
more than 35 states will see their health care funds reduced by 
more than one billion dollars by the time the cuts end in 2015.  
Florida and California are the biggest losers, with each of 
these states losing close to $300 million in 2007 alone.  Medicare 
payments in Florida would be cut by more than $18 billion from 
2007-2015; California will lose more than $17 billion over the 
9-year period, and Texas is not far behind with nearly $13 
billion in cuts.  Ohio is facing losses of more than $7 billion 
and Georgia will see about $5 billion in cuts.  

	Seniors cannot afford to have their access to physicians 
jeopardized by further reducing Medicare payment rates below the 
increasing costs of running medical practices.  Ohio's 1.6 million 
Medicare beneficiaries comprise 14% of the state's population and 
Florida's nearly 3 million beneficiaries are 16% of its 
population.  Even before the forecast cuts go into effect, Georgia 
only has 208 practicing physicians per 100,000 population and 
Texas has 207 practicing physicians per 100,000 population, which 
means both states are far below the national average of 256.  
Florida only has 15 practicing physicians for every 1,000 
Medicare beneficiaries, 25% below the national average. 
	The negative effects of the cuts in the Medicare physician 
payment schedule are not only felt by patients, but also by the 
millions of employees that are involved in delivering health care 
services in every community.  Data from the Bureau of Labor 
Statistics show that the physician payment cuts will affect:  
80,274 employees in Georgia; 112,176 employees in Ohio; 195,288 
employees in Florida; 200,469 employees in Texas; and 292,171 
employees in California. 
	We urge the Subcommittee to avoid the serious consequences 
for patients that will occur if the projected SGR cuts take effect, 
and establish a Medicare physician payment system that helps 
physicians serve patients by providing payment updates that 
recognize continual increases in cost of providing care and 
incentives needed to invest in HIT and quality improvement programs. 

LEGISLATIVE PROPOSALS TO ADDRESS THE SGR 

	The AMA appreciates the efforts of Chairman Barton and 
Members of the Subcommittee and their staffs to address the 
projected physician pay cuts, caused by the flawed SGR formula.  
This update formula for physicians' services is broken beyond 
repair and needs to be replaced with a new system.  Indeed, 
Chairman Barton and other Members of the Subcommittee have 
expressed the need to repeal the SGR, and legislation currently 
being developed by the Chairman would set the stage and allow 
Congress time to achieve this goal.  In addition, H.R. 5866, 
the "Medicare Physician Payment Reform and Quality Improvement 
Act of 2006" introduced by Rep. Burgess (R-TX), would repeal 
the SGR and replace it with a payment system that is based on 
the MEI.  Finally, Ranking Member Dingell's legislation, 
H.R.5916, the "Patients' Access to Physicians Act of 2006," 
would ensure that physicians would be paid at least the percentage 
increase in the MEI in 2007 and 2008.  
	We appreciate that each of these bills would take an 
important step in preserving patient access to high quality medical 
care by addressing the flawed SGR and implementing positive payment 
updates for physicians.  While the AMA supports a multi-year 
physician payment solution, we understand that funding for such a 
solution is limited.  Therefore, we urge the Subcommittee to 
consider legislation that would provide physicians with updates 
over two years that reflect practice cost increases, as measured 
by the MEI, instead of longer-term solutions with more modest 
updates.  Such updates are needed to cover increases in medical 
practice costs, especially since updates over the last five years 
have fallen far behind increases in such costs.  An additional 
payment for reporting quality data, as discussed further below, 
should also be provided along with these updates.  Finally, we 
urge that any legislation providing positive physician updates 
be fully funded up front, and any offsets to cover the cost of 
these updates should not come from Medicare Part B services, as 
this would undermine the impact of a positive payment update.  
	The chart below shows the gap in Medicare payment to 
physicians from 2001 through 2015, as compared to increases in 
medical practice costs under the MEI, as well as the payment 
updates for 2007 through 2009 set forth in Chairman Barton's 
proposal. 

Physician Cost Increases vs. Physician Payment Updates 
Under the SGR Formula:  2001-2015 

	We look forward to continuing our work with Congress to 
achieve this year our shared goals of averting the 2007 Medicare 
physician payment cut and adequately addressing the SGR to ensure 
that future physician payment updates reflect the MEI and keep 
pace with increases in medical practice costs. 

QUALITY IMPROVEMENT LEGISLATIVE PROPOSALS 

	Chairman Barton's legislative proposal to address the SGR, 
as well as Representative Burgess' bill, H.R. 5866, would also 
implement a voluntary quality reporting program for physicians 
under Medicare.  The AMA has supported the advancement of quality 
care since our inception and that goal remains paramount to the 
AMA and its physician members today.  
	We applaud the efforts of Chairman Barton and Representative 
Burgess, and respectfully urge Congress to consider the following 
comments as it moves forward with quality reporting legislation.  

Quality Improvement Programs Cannot Co-Exist with the SGR 

	It is important to recognize that the current Medicare 
physician payment update formula cannot coexist with a payment 
system that rewards improvement in quality.  Quality improvements 
are aimed largely at eliminating gaps in care and are far more 
likely to increase rather than decrease utilization of physician 
services.  Specifically, quality improvements are expected to 
encourage more preventive care and better management of chronic 
conditions.  While such results would reduce spending for hospital 
services covered by Part A of Medicare, they do so by increasing 
spending for the Medicare Part B physicians' services that are 
included in the SGR.  In fact, data from the Medicare Payment 
Advisory Commission (MedPAC) suggest that some part of the recent 
growth in Medicare spending on physicians' services is associated 
with improved quality of care.  
	Increased Medicare spending on physician services, however, 
conflicts with the SGR, which  imposes an arbitrary target on 
Medicare physician spending and results in physician pay cuts 
when physician spending exceeds the target.  Thus, additional 
and appropriate physician services encouraged under a quality 
reporting program will result in more physician pay cuts.  
	Further, pay-for-performance programs depend on greater 
physician adoption of information technology at great cost to 
physician practices.  A study by Robert H. Miller and others 
found that initial electronic health record costs were 
approximately $44,000 per full-time equivalent (FTE) provider 
per year, and ongoing costs were about $8,500 per FTE provider 
per year. (Health Affairs, September/October, 2005).  Initial 
costs for 12 of the 14 solo or small practices surveyed ranged 
from $37,056 to $63,600 per FTE provider.  Without positive 
payment updates, it will be difficult for physicians to make 
these HIT investments.  In fact, a 2006 AMA survey shows that 
if the projected nine years of cuts take effect, 73% of 
responding physicians will defer purchase of new medical 
equipment, and 65% will defer purchase of new information 
technology.  Even with just one year of cuts, half of the 
physicians surveyed will defer purchases of information 
technology.  
	We urge the Subcommittee to ensure that any quality 
reporting program is premised on: (i) positive and adequate 
physician payment updates that reflect increases in medical 
practice costs; and (ii) additional payments that fully offset 
physicians' administrative costs in reporting quality data and 
thus provide an incentive to report.  

Quality Improvement Legislation Should Establish a Specific 
Process for Developing Measures for Which Physicians Report Data 
 
	Chairman Barton's proposal provides a framework with certain 
options to allow physicians to report quality information under the 
Medicare program.  To enhance this framework even further, we 
encourage certain refinements of the proposal. 
	We urge that the Chairman's proposal establish a specific 
process for designating the measures for which physicians are to 
report data.  The legislation should also specifically provide that 
under this process: 
 Clinical and structural measures would be developed by the 
physician medical specialty societies through the Physician 
Consortium on Performance Improvement (the Consortium).  
 Measures must be: (i) evidence-based, and developed 
collaboratively across physician specialties; (ii) consistent, 
valid, practicable, and not overly burdensome to collect; and 
(iii) relevant to physicians and other practitioners, and 
Medicare beneficiaries. 
 The Secretary would adopt and publish the Consortium measures for 
the Medicare program and could not make modifications without the 
Consortium's consent. 
 Solo physicians or group practices (as well as non-physicians who 
provide services under the physician fee schedule) would report data 
to CMS on the measures chosen by the physician or group from among 
those adopted and published by CMS. 
 Physicians would provide the Secretary with an attestation that the 
data will be submitted as required for reporting purposes. 

   Setting forth this overall process in the legislation would ensure 
that it builds on existing structures that are in place to facilitate 
quality improvement programs and that have already completed 
significant work in this regard.  As the AMA promised Congress 
last year, the Consortium has already developed about 100 quality 
measures and an additional nearly 70 are expected by the end of 
the year.  Further, since the Chairman's proposal would provide 
a "ramp-up" period in 2007, the Consortium could use that time to 
develop measures similar to, but more cross-cutting than, those 
now contained in the proposal.  
	The AMA convened the Consortium in 2000 for the development 
of performance measurements and related quality activities. The 
Consortium is currently comprised of over 100 national medical 
specialty and state medical societies; the Council of Medical 
Specialty Societies, American Board of Medical Specialties and 
its member-boards; experts in methodology and data collection; 
the Agency for Healthcare Research and Quality; and Centers for 
Medicare & Medicaid Services.  The Joint Commission on 
Accreditation of Healthcare Organizations and the National 
Committee for Quality Assurance (NCQA) are also liaison members. 
	The Consortium is a physician-consensus-building 
organization and has become the leading physician-sponsored 
initiative in the country in developing physician-level performance 
measures.  CMS is now using the measures developed by the 
Consortium in its large group practice demonstration project 
on pay-for-performance, and plans to use them in demonstration 
projects authorized by the MMA.  Further, the Consortium has 
been working with Congress to improve quality measurement efforts, 
as well as with CMS to ensure that the measures and reporting 
mechanisms that could form the basis of a voluntary reporting 
program for physicians reflect the collaborative work already 
undertaken by the AMA, CMS, and the rest of the physician 
community. 
	A process that requires measures to be developed by 
 physicians through the Consortium also ensures that measures are 
as cross-cutting as possible, thus expanding on the reporting 
options contained in the Chairman Barton proposal.  This would 
provide all physician specialties with the opportunity to 
participate in any voluntary reporting program.  

A Physician Quality Improvement Program Should Be Voluntary, with 
Additional Payments to Offset Physicians' Administrative Costs in 
Reporting Data 

	The AMA appreciates that Chairman Barton's proposal would 
implement a voluntary physician reporting program and provide 
additional bonus payments for meeting the reporting requirements. 
A voluntary program is especially critical since physician 
specialties are at varying levels of readiness with respect to 
the development of quality measures.  Further, since the time 
dedicated to meeting the reporting requirements is an additional 
financial and paperwork burden on physicians, we also encourage 
Congress to provide bonus payments that fully offset physicians'
administrative costs in meeting these.  Without adequate offsets, 
the program simply becomes another unfunded mandate for 
physicians, which would undermine any incentive to participate 
in the program.  
	The Institute of Medicine, in its recently-released report, 
Rewarding Provider Performance:  Aligning Incentives in Medicare, 
emphasized that a voluntary approach for physicians should be 
pursued initially, relying on financial incentives sufficient to 
ensure broad participation and recognizing that the initial set 
of measures and the pace of expansion of measure sets will need 
to be sensitive to the operational challenges faced by providers 
in small practice settings.  The report also highlights the need 
for investment dollars to create adequate resources to affect 
change due to the unique challenges of physician payment relating 
to the SGR, and further indicates that access could suffer if 
additional funds are not used to initiate a quality improvement 
program for physicians.   
 
Medical Home Demonstration 

	The AMA supports the concept of managing chronically ill 
Medicare patients under a "medical home" demonstration project, 
as is currently included Chairman Barton's proposal.  We urge that 
any such demonstration project apply to all physicians, not just 
primary care physicians.  Many other medical specialty physicians 
manage patients with chronic conditions, including such physicians 
as oncologists and cardiologists, and thus these other physicians 
should be permitted to participate in the medical home 
demonstration as well.  
	Under the Barton proposal, the Secretary would consider 
care management fees to the personal physician that covers the 
physician work that falls outside the face-to-face visit as a 
method of reimbursement under the medical home demonstration 
project.  We note that there are existing CPT codes for care 
management.  Thus, new codes for these services may not be 
needed. 

Utilization Review 

	We appreciate that the utilization review provisions in 
Chairman Barton's proposal would direct that such activities be 
carried out at the local level, where there is more ability to 
appropriately evaluate individual physician claims data and 
determine whether any changes in treatment protocol are 
necessary.  
	The AMA encourages, however, more specificity in the 
utilization review provisions to: (i) ensure that such programs 
are educational and not punitive - these programs should be for 
the purpose of providing physicians with utilization data to 
determine whether any changes to improve quality are needed in 
the treatment process; (ii) ensure that such programs protect 
the privacy of the claims data and do not allow such data to be 
discoverable in any legal proceeding against a physician; and 
(iii) allow aggregate data to be shared with appropriate medical 
specialty organizations.  
_____________________________

	The AMA appreciates the opportunity to provide our views 
to the Subcommittee on these critical matters.  We look forward 
to working with the Subcommittee and Congress to pass legislation 
immediately that preserves patient access, averts the 2007 
physician pay cut, and provides a positive payment update that 
reflects medical practice cost increases.   

	MR. DEAL.  Thank you.  
Dr. Wolter, you are recognized. 
	DR. WOLTER.  Thank you.  And thank you, Chairman Deal and 
members of the committee for the opportunity to be here.  
I have also been appreciating the opportunity to hear from my 
colleagues.  I must say, finding so much agreement and common 
ground from 10 different physicians is a rare but enjoyable 
experience.  
I am a pulmonary critical care physician and chief executive officer 
at the Billings Clinic in Montana.  We are a 200-plus physician 
group practice, a 270-bed hospital, and we also operate a number 
of rural physician clinics and manage seven critical access 
hospitals.  We are one of 10 medical groups in the CMS physician 
group practice demo which is testing pay-for-performance in a 
very vigorous way looking at ways to both improve quality measures 
but at the same time reduce costs for the program.  
I also serve as commissioner on the Medicare Payment Advisory 
Commission and am here today, though, as a member of the Board of 
Directors of the American Medical Group Association, which includes 
many large multispecialty groups around the country.  
We very much applaud the committee's commitment to working on the 
problems facing us in terms of payment.  The agreement about the 
sustainable growth rate flaws seems to be quite widespread.  
It is certainly neither controlling volume nor providing 
appropriate physician updates at this time.  
Chairman Barton, Mr. Dingell and Chairmen Thomas and Johnson of 
the Ways and Means Committee have all developed proposals which 
are thoughtful in their attempt to deal with the SGR problem.  
We would support a blend of some elements of all of these 
proposals and certainly agree that the 3-year transition plan 
would be very helpful in terms of providing some stability while 
we look at longer-term solutions to redesign physician payment.  
And we do have some specific examples of thoughts of what might 
be included over those 3 years that we have included in our 
written testimony.  
We also wanted to mention that, from our standpoint, the issue of 
reporting is critical.  We really are hoping that Congress will 
work with the physician community and CMS to refine the CMS 
physician voluntary reporting program so that it will become 
usable for physicians and so that it can be done in a way that 
does not add tremendous expense and difficulty to physician 
practices.  
We would also ask Congress to work with CMS to ensure that adequate 
capacity exists on the part of CMS to administer, collect, analyze 
and demonstrate quality data to PDRP participants.  Participants 
in other CMS demonstrations have voiced some concern that CMS 
and its contractors at times have difficulty performing this 
function.  
We are supporters of Chairman Barton's inclusion of structural 
measures in the qualifications for bonus payments.  However, the 
process that might be done to arrive at those, physicians' use of 
structural measures, especially those related to health information 
technology and the use of allied health professionals are key 
components of how one can tackle improvements in cost and quality.  
So the structural measures in essence reflect the presence of 
infrastructure necessary to execute improvements.  
On care coordination, we would like to say that SGR reform really 
is critical if we are going to move ahead with care coordination.  
Broader reforms over time to the entire delivery system may be 
needed, however, in particular structuring incentives for the 
provision of care coordination.  Technology that can identify, 
enroll and create registries of patients with chronic illnesses 
is very critical, and creating a new reimbursement mechanism 
within CMS that pays for true coordinated care will, in our 
view, dramatically improve quality and also allow us to create 
significant cost savings.  
Through the use of information technology and mid-level providers, 
for example, as part of our participation in the CMS demonstration 
project, we, over a recent 5-month period, managed to avoid 65 
congestive heart failure admissions, saving the program 
approximately $500,000.  Those types of activities spread across 
the country would be a source of funding for some of the payment 
changes we need for physicians.  
There is, in Chairman Barton's legislative language, a demonstration 
related to care coordination designed for primary care medical 
homes.  This is a good first step.  We also believe that Congress 
should look at legislation creating new care coordination 
reimbursement  systems for physician groups that have already 
invested in appropriate infrastructure and are able to coordinate 
care for patients with high costs and complex illnesses.  
The committee has spent much time looking at pay-for-performance 
systems.  One of the things I have come to believe is that we might 
choose to have a bit more focus around the issue of 
pay-for-performance.  For example, if we were to focus on four or 
five of the high-cost, high-volume chronic illnesses in this 
country, a significant improvement in quality and a significant 
amount of savings could be created with a little bit of focus. 
The IOM said in its report on Crossing the Quality Chasm, that 
current care systems cannot do the job.  Trying harder will not 
work.  Changing systems of care will.  Delivery system redesign 
will require greater cooperation between physicians and 
hospitals, a fact which both Congress and CMS recognize.  
Congress did require in the MMA a demonstration project examining 
the effects gain sharing may have on aligning financial incentives 
to enhance quality and efficiency of care.  Recently, the recent 
MMA section 646 physician hospital collaborative demonstration 
is an example of this, and we think that these cooperative 
efforts between physicians and hospitals offer us great 
opportunity for both cost savings and quality.  
In fact, in the report issued just last week by the Institute of 
Medicine, one of the recommendations is that, in the years ahead, 
goals of new payment incentives should be to stimulate 
collaboration and shared accountability among providers across 
settings.  The Institute of Medicine added that Congress should 
give HHS the authority to aggregate financing pools for different 
care settings into one consolidated pool from which all providers 
would be rewarded.  These would be design elements in the years 
ahead and, of course, couldn't happen in the short run.  Such 
cooperation and coordination, in my view, would lead to the 
type of integrated delivery systems and accountability care 
networks which could lead to significant improvements in cost 
and quality.  Thank you. 
	[The prepared statement of Dr. Wolter follows:] 

PREPARED STATEMENT OF DR. NICHOLAS WOLTER, CHIEF EXECUTIVE OFFICER, 
BILLINGS CLINIC, DIRECTOR, AMERICAN MEDICAL GROUP ASSOCIATION 

SUSTAINABLE GROWTH RATE (SGR) 

Physician Fees Cuts for 2007 and Beyond 
	The underlying cause of the problem of physician fee cuts is 
the Sustainable Growth Rate (SGR) methodology, the basis used to 
determine physician fee schedule adjustments.  While intercessions 
by Congress have ameliorated payments for doctors in the short 
term, they exacerbate the problem in the long term. Since the SGR 
target level is set to recapture cumulative overspending, excess 
spending is carried forward to be recovered in future years.  

Medicare Sustainable Growth Rate 
	The Balanced Budget Act of 1997 (BBA) established the SGR 
methodology that sets yearly spending targets for physicians' 
services under Medicare. These SGR targets are intended to control 
the growth in aggregate Medicare expenditures for physicians' 
services.  The fee schedule update is raised or lowered to echo 
the comparison of actual expenditures to target expenditures.  
If expenditures exceed the target, the update is reduced and 
conversely is raised if expenditures are less than the target. 
	Target expenditures for each year are equal to target 
expenditures from the previous year increased by the SGR, a 
percentage computed by combining estimates of the changes in 
each of four factors: 
1.	The estimated percentage change in fees for physicians' 
services 
2.	The estimated change in the average number of Medicare 
fee-for-service beneficiaries 
3.	The estimated 10-year average annual growth in real gross 
domestic product (GDP) per capita 
4.	The estimated change in expenditures due to changes in 
law or regulations 

Make the Methodology Better 
	AMGA has long called for changes in the physician payment 
update system, including, among others, a call for eliminating 
SGR from the update calculation.   Each one of the four data 
estimates used in the formula has been criticized for having 
insufficient, inaccurate, or irrelevant elements.  The GDP 
imposes the volume and intensity spending target on the SGR, but 
the GDP has no relationship to physician services.  A cost-based 
approach would be a more realistic and equitable basis to use.  
	The matter of volume control will still need to be 
addressed in an alternative to the SGR methodology.  Criticisms 
of nationally applied volume controls such as the SGR method, 
fault the fact that it is too broadly based, an umbrella approach 
that is too unrefined for the purpose intended.  It applies the 
same "fix" of payment reductions to all, irrespective of and 
causal linkage to the problems being addressed, significant 
medical services volume growth.  One approach that has been 
suggested is the creation of geographically based volume control 
groupings as a means to address regional variations in medical 
service volumes.  It has been postulated and to some extent 
demonstrated that there is no correlation between the increase in 
services and improved quality of care.  
	The Medicare Payment Advisory Commission (MedPAC), an 
independent body charged with making recommendations to Congress 
about Medicare, in its March 2006 Report, suggested implementing 
multiple SGR target pools, instead of the current, single 
national pool.  While the AMGA does not favor continuation of 
the SGR, it could support the creation of methods that are not 
nationally applied to all, one that groups volume control methods 
in a more even handed and equitable way.   In particular, we 
favor a multiplicity of groupings, one of which takes into 
account the effectiveness and efficiencies of highly organized 
and integrated delivery systems, a grouping that is based on 
membership in organized physician group practices or networks. 

Medical Group Practice Volume Proposal 
	If Congress eliminates the SGR, but still requires a type 
of volume control mechanism for physician services, AMGA supports 
the idea of a separate volume control method using an aggregation 
for medical group practices.  Some of the key concepts for such a 
pooling include: 
 Being based on multi-specialty medical groups because of their 
systematic approach to integrating quality and technological 
improvements, their evaluation of patient outcomes, and their 
application of HIT. 
 Criteria for participation would include: 
 Proof of a group's accountability, organization, and commitment to 
evidence-based medicine and quality measurement/improvement, 
demonstration of an appropriate HIT infrastructure; 
 Participating groups would have their services aggregated into a 
collective group practice pool; 
 Continued participation would be dependent upon meeting performance 
 standards; such as,  
 Broad application of health information technology (HIT); 
 Demonstration of a systematic approach to quality improvement 
 Development of coordinated care for beneficiaries with multiple 
chronic conditions; 
 Appropriate risk adjustment factors for the patient population 
served should be developed and used to assure fairness and equity 
in computation of the pool. 
 Design features need to assure correct matching, i.e. assignment 
of patients to the respective group practices; 
 The pool would be designed to encompass participation beyond already 
existing medical groups, with incentives to encourage physicians to 
develop alliances with health plans, hospital medical staffs, and 
specialty group practices to meet the participation criteria;  
 Savings realized in actual expenditures that fall below the target 
levels, should be shared with groups to provide incentives and 
reward success (this dovetails with emerging pay for performance 
focuses and might prove an effective alternative or supplementary 
approach for multi-specialty medical group practices). 

Group Practices and System Redesign 
	The seminal Institute of Medicine (IOM) report issued in 
2001, Crossing the Quality Chasm:  A New Health System for the 
21st Century,  broadly address medical care quality issues and 
provides strategic direction for improved, redesigned health care 
delivery in the U.S. 
	The IOM report enumerates six key challenges for the 
redesign of health care organizations.  They are "redesigning care 
processes; making effective use of information technologies; 
managing clinical knowledge and skill; developing effective 
teams; coordinating care across patient conditions, services, 
and setting over time, and incorporating performance and outcome 
measurements for improvement and accountability1.  
	These systems attributes and characteristics are largely 
present in today's AMGA members.  There is a growing body of 
emerging evidence that suggests that medical practices embodying 
these systems produce a delivery system that is better able than 
small physician practices to make effective use of health 
information technology (including electronic medical records, 
patient registries, e-prescribing, etc.); is more likely to 
utilize evidence-based patient care processes; have physicians 
organized to practice in teams, collaborating with each other 
and non-physician health care givers; and  use performance and 
outcome data with metrics for quality improvement; and for 
coordinating care among providers and settings2.  
	This body of evidence will likely be expanded as findings 
from several on-going Medicare demonstration projects on group 
practice and care coordination become known as the projects 
conclude.  While yet in their early days, pay for performance 
systems may, as they evolve over time, also play evidentiary roles 
for systems redesign.  

FOSTERING THE GROWTH, DEVELOPMENT AND CREATION OF MULTI-SPECIALTY 
MEDICAL GROUP PRACTICES  
	AMGA believes that integrated delivery systems of health 
care are the most effective and efficient vehicle to provide the 
highest quality of medical services to Americans. The strongest 
underpinning of truly integrated delivery systems is the 
multi-specialty medical group practice model.  The group practice 
model should be a significant national health care policy to 
stimulate formation, foster growth, and support development of 
multi-specialty group medical practices.  
	Multi-specialty medical group practices are often already 
the foundation of integrated delivery systems and when not, serve 
as the best underpinning for integrated health care delivery 
system formation.  Doctors are the only professionals qualified 
to provide diagnosis and treatment of patients.  As such they are 
the fundamental element, the core of medical care delivery.  The 
most efficient mode of organization for their practices is the 
multi-specialty group medical practice and it should be the 
lynchpin of health care delivery in the United States.  

Care Coordination 
	In an effort to address the issues of cost and quality in 
the Medicare program, Congress has appropriately focused on 
transforming Medicare into a value-based purchaser of care.  CMS 
announced the implementation of its Physician Voluntary Reporting 
Program and healthcare leaders in Congress have introduced a similar 
approach in "pay for performance" (P4P) legislation.  These P4P 
efforts generally rely on provider adherence to clinical practice 
guidelines that apply to single diseases or health conditions. 
	While adherence to disease specific guidelines will 
decrease treatment variation for a particular disease and increase 
quality of care for some patients, this strategy fails to address 
the needs of a majority of Medicare patients, those with multiple 
chronic conditions.  In 1999, almost half (48%) of Medicare patients 
aged 65 or older had at least 3 chronic conditions; more than 
twenty percent (21%) had 5 chronic conditions.  Costs for treating 
these high service volume patients accounted for 89% of Medicare's 
annual budget.  As the population ages, the number of chronically 
ill patients is expected to grow dramatically, with serious 
financial implications to the Medicare program.  
	Patients with chronic illnesses typically see multiple 
physicians and are prescribed multiple medications.  Due largely to 
the complexity of treating these patients, health care for patients 
with chronic illnesses is often fragmented and poorly coordinated 
across providers and practice settings.  
	This lack of coordinated care has negative ramifications.  
According to a recent study, patients who reported seeing four or 
more physicians were three times as likely to report at least one 
type of adverse event (e.g., medicine, medication, or lab).  
Additionally, only 41 percent of U.S. patients who were taking more 
than 4 medications had a physician review their medication use 
during the past year, putting them at risk for adverse reactions. 
  Not surprisingly, these complications increase the likelihood 
of hospital re-admissions, and additional office visits and 
procedures.  Further, lack of coordination among providers can 
lead to costly inefficiencies such as duplicative testing, and 
unnecessary or inappropriate treatment. 
	In order to address the unique needs of patients with 
multiple chronic conditions, AMGA recommends that Congress broaden 
its approach beyond the current focus on single medical 
specialty/disease specific guidelines and measures to strategies 
that encourage the provision of coordinated care that emphasizes 
the necessary interdependency of primary care and specialty care. 
	In a Veterans' Health Administration clinical 
demonstration project that targeted high cost/use veterans and 
utilized care coordinators and home monitoring devices, ER visits 
were reduced by 40%, hospital admissions were reduced by 63%, and 
hospital bed days of care (BDOC) were reduced by 60%.  Nursing home 
admissions were reduced by 64% and nursing home BDOC were reduced 
by 88%.  Most importantly, quality of life indicators, as measured 
by patient survey responses, were significantly improved for 
participating veterans3. 
	AMGA has developed a Chronic Care Model that encourages 
care coordination across practice settings and disease conditions. 
 AMGA's Model focuses on patient-centered care that includes:  
proactive daily monitoring of health status; reinforcement of 
self-care behaviors; early detection of problems and early 
intervention; and coordination of and collaboration among health 
care disciplines.  Treating the "whole" patient is most 
successful when supported by innovative technologies including 
centralized electronic medical records, patient registries, and 
patient monitoring devices that allow the sharing of patient 
specific information when and where it is needed. Specifically, 
AMGA recommends incentives for providers that meet these 
performance measures:  
 Structural Measures:  EMR systems, patient registries, patient 
monitoring devices, professional care coordinator(s), integrated 
teams of primary and specialty care. 
 Process Measures:  Daily monitoring, case management, medication 
management, written (electronic or paper) feedback between primary 
and specialty physicians regarding treatment changes and referrals, 
multi-specialty treatment plans, patient self-management training. 
 Outcomes Measures:  Reduced hospitalizations, re-admissions, and 
BDOC, reduced nursing home admissions, re-admissions and BDOC, 
reduction in ER visits, patient satisfaction surveys, savings 
compared to Medicare FFS baseline. 

    This approach to caring for the chronically ill is fundamentally 
different than the traditional episodic care geared toward "fixing" 
patients when they develop a problem.  Therefore chronic care 
requires a different definition of "quality" and a different 
approach to measurement.  It calls for indicators of care 
coordination or "system-ness" that go beyond process measures 
for specific disease conditions.  
	AMGA believes the Model will provide patients with the best 
care, at the right time in the most appropriate setting.  Moreover, 
the Model will produce significant cost savings due to decreased 
utilization and duplication of services. 
	AMGA recommends that Congress and CMS provide incentives to 
encourage coordinated care in the Medicare program.  

Physician Voluntary Reporting Program 
	PVRP represents CMS' interest in gathering clinical 
information that can be measured by evidence-based quality 
indicators.  Collection and reporting of these measures will likely 
serve as part of the foundation of a new Medicare value-based 
purchasing system.  Currently, participation by physicians is 
elective and involves the use of HCPCS G-codes, or as an 
alternative, submission of already existing data via the Doctor's 
Office Quality - Information Technology (DOQ-IT) program.  
	However, there are barriers inherent in both of these 
approaches that pose significant obstacles to participation for 
medical groups.  Retooling sophisticated and often unique 
electronic capabilities to accommodate the keying of G-codes on 
each generated bill is prohibitively expensive and 
administratively burdensome.  Furthermore, some systems are not 
currently capable of accommodating G-codes because their software 
vendor's systems do not handle "zero charges".  Also, other medical 
groups have had difficulty sharing medical records with 
non-affiliated institutions.  Additionally, the DOQ-IT vehicle has 
too many limitations to make it a broadly available alternative.  
While technical capabilities may indeed exist, structural 
limitations caused by funding restrictions, make this approach 
"hit or miss"-depending on local QIO capacity.  
	Large multi-specialty group practices are quite different 
from other types of physician practices.  They are, by and large, 
organized care delivery systems, and as such have built into their 
fabric an advanced model for performance measurement, quality 
control and continuous quality improvement.  Some medical groups 
are fully integrated delivery systems and already participate in 
the Hospital Compare reporting program.  Medical groups also 
participate in CMS demonstrations, as well as other projects 
focusing on quality and efficient care.  
	Medical groups provide integrated care, furnished by a team 
rather than by an individual physician.  Within this kind of 
delivery system, multiple physicians, and other health care 
professionals, provide care that crosses traditional specialty 
lines and settings. 
	Medical groups often have in place internal systemic quality 
controls, based on continuous peer review and EMRs and other 
infrastructural support systems.  Such medical groups perform as 
a single entity and therefore should be measured as a single 
entity.  They are large enough for sampling to provide sufficiently 
robust data to measure quality.  They also have a proven track 
record as efficient providers of care and have existing mechanisms 
to distribute data and rewards.  
	Given these differences, AMGA proposes that CMS permit 
medical groups to collect and submit quality data in the form of 
periodic, aggregate reporting, rather than through individual 
billings.  This allows medical groups to provide complete data, 
dramatically reduce physician administrative work and reduce 
information technology expenses.  
	The proposal builds upon the strengths of the medical group 
model and also fulfills CMS' goals for PVRP:  
 capturing and reporting on quality data; 
 increasing physician participation in PVRP; 
 encourage the use of health information technology (HIT), 
particularly, electronic medical record systems (EMR). 

Promoting Effective Use of Health Information Technology (HIT) 
	Increased adoption and implementation of HIT, which can 
range from electronic patient registries to sophisticated electronic 
medical record systems (EMRs), has the potential to increase quality 
and decrease costs.  
	Because HIT has the potential to dramatically improve the 
quality and safety of patient care, some hospitals and medical 
groups with sophisticated HIT systems are ready to begin exchanging 
clinical data with community physicians.  While many hospitals and 
medical groups already have web portals that allow physicians 
access to patient data, there is little two-way exchange of data.  
Therefore, these providers would like to assist physicians to take 
the next step and adopt EMRs.  
	Increased physician adoption of HIT begins to create a 
culture of use and reliance on sophisticated HIT systems, easing 
the transition to a wholly electronic system in the future.  Of 
course, not all hospitals and medical groups are in a position 
to help physicians adopt EMRs, but those that would like to 
cannot, due to, in large part, to the Stark and AKB laws.  
	These arrangements implicate the Stark and AKB laws and, 
because of the draconian sanctions associated with these laws, 
providers have been reluctant to enter into these arrangements.  
Notably, in an August 13, 2004 report on barriers to HIT, the 
General Accountability Office (GAO) stated that Stark and AKB 
"present barriers by impeding the establishment of arrangements 
between providers-such as the provision of IT resources-that 
otherwise promote the adoption of IT."  Additionally, the Office 
of the National Coordinator for Health Information Technology 
(ONCHIT) stated that these fraud and abuse statutes pose barriers 
to greater HIT adoption. 
	AMGA members have pioneered the use and application of HIT 
in their practices and have, by and large, made significant 
investments in this important infrastructural element both as a 
practical matter and for philosophical reasons.  Appropriate 
incentives will have to be forthcoming to advance broad adoption 
and implementation of HIT to realize its potential for reducing 
medical errors, improving patient safety, enhancing care 
coordination, etc.  However, any financial support, direct or 
indirect, that may evolve over time, must take into consideration 
the investments and leadership demonstrated by those entities, 
including many AMGA members, by recognizing and repaying them for 
having had the vision to install and apply HIT.  

Conclusion 
	The SGR "fix" is a critical focus for the short term to 
avert the dire consequences of the impending 5.1% physician fee 
schedule negative update and for the longer term to address the 
projected cuts for the next years.  If left unchecked, there is 
a high likelihood that access to care for Medicare patients may 
become increasingly difficult.  This fatally flawed methodology 
must be abolished.  
	In addition much broader health delivery system redesign is 
necessary, particularly in the realignment of incentives to assure 
progress in the attainment of national health care policy objectives 
such as, delivery of efficient, high quality health care, and 
coordination of care, particularly for those with chronic diseases.  
The specifics enumerated in this testimony are all steps in the 
right direction.  
	The body of evidence is growing that multi-specialty group 
medical practices are a delivery mode that offers many advantages 
and benefits.  Many of the national policy goals are already being 
undertaken and realized by AMGA's members.  It is time for Congress 
to recognize the value and importance of this delivery model and to 
take legislative action to foster creation, development and growth 
of multi-specialty medical group practices. 
	Should you have questions or wish additional information, 
please contact Chet Speed, J.D., L.L.M., Vice President of Public 
Policy, American Medical Group Association, at [email protected], or 
(703) 838-0033, extension 364. 

MR. DEAL.  Thank you.  
Dr. Thames. 
	DR. THAMES.  Mr. Chairman, members of the committee, I am 
Dr. Byron Thames, a member of the Board of Directors of AARP, and 
thank you very much for asking me--inviting me to testify today.  
Medicare and the millions of beneficiaries who rely on it should 
get more for their health care dollar.  Medicare now pays nothing 
more to recognize physicians who give beneficiaries high-quality 
care.  Instead, Medicare sometimes pays more to those who provide 
poor quality care by reimbursing for services that are inefficient. 
Rather than addressing the underlying issue of paying for good 
quality, short-term SGR fixes have been limited to annual payment 
increases that simply shift costs on to beneficiaries.  As a result, 
increased Part B premiums erode Social Security COLAs.  Higher 
coinsurance further limits retirement income and the quality of 
care does not improve.  
AARP believes there must be a comprehensive approach to Part B 
payments that protects beneficiaries from unreasonable premium 
coinsurance and balance billing increases and aligns incentives 
to encourage high-quality care.  
Tying Medicare's payment to the quality of the care provided is a 
reasonable way to achieve that goal.  Paying providers to simply 
report quality data may be a necessary first step in this effort, 
but it cannot be the only step.  Congressional efforts to address 
physician payment concerns this year should, at the very least, 
make payment increases contingent upon reporting of quality data.  
Eventually, payment updates should be provided to those physicians 
who meet gradually increasing requirements for both reporting data 
and demonstrating quality improvements.  
America already spends more per capita on health care than any other 
nation, but clearly we are not getting our money's worth.  
Researchers at Dartmouth Medical School estimate that Medicare 
could reduce spending by at least 30 percent while improving the 
medical care of the most severely ill Americans if the practices of 
low-cost, high-quality providers were followed nationwide.  
A well structured pay-for-performance approach could promote the use 
of these best practices.  In the long run, pay-for-performance also 
may help control spiraling health care costs.  It could reduce 
costly errors, avoid unnecessary service duplication, and lessen 
improper utilization.  Congress should seize this opportunity to 
forge a truly sustainable Part B payment system by moving towards 
a pay-for-performance system that realigns payment with high 
performance and protects beneficiaries from unnecessary costs.  
Thank you very much, Mr. Chairman. 
[The prepared statement of Dr. Thames follows:] 

PREPARED STATEMENT OF DR. BYRON THAMES, BOARD MEMBER, AARP 

	Mr. Chairman and members of the committee, my name is Byron 
Thames.  I am a physician and a member of AARP's Board of Directors. 
Thank you for inviting AARP to testify on the important topic of 
Medicare physician payments.  
	Over 41 million Americans rely on Medicare for their health 
insurance.  Changes in how Medicare pays physicians have a direct 
impact on whether we continue to keep this program affordable for 
beneficiaries.  
	Unfortunately, recent short-term measures to address the SGR 
issue have been limited to annual payment increases that simply 
shift more out-of-pocket costs to beneficiaries without any 
material improvements in the quality of care they receive.  AARP 
believes there must be a comprehensive approach to Part B payments 
that not only protects beneficiaries from unreasonable premium and 
coinsurance increases, but also aligns incentives to encourage 
high quality care.  Medicare and beneficiaries should be getting 
more for their health care dollar.  Tying Medicare's payment to the 
quality of the care provided is a reasonable way to achieve that 
goal.  

Short Term "Fixes"- No Bargain for Beneficiaries or Medicare 
	The recent announcement that the 2007 Medicare Part B 
monthly premium of $93.50 (a 5.6 percent increase from the current 
$88.50 premium) is lower than originally projected is better than 
expected.  But the calculations for the 2007 premium assume that 
Medicare physician spending will be cut by 5.1 percent next year as 
called for under the current payment formula.  If Congress acts this 
year to prevent the physician cut - as many assume - the added 
cost will further increase the Part B premium.  Since the 2007 
premium has already been calculated, these increased costs will 
be rolled into the 2008 - and possibly 2009 - Part B premium.  That 
means that beneficiaries can expect even higher Part B premiums in 
2008 and beyond. 
	The increase in the 2007 premium comes on the heels of a 
13.2 percent increase in 2006, a 17.4 percent increase in 2005 and 
a 13.5 percent increase in 2004.  In each year, the premium 
increase significantly eroded or eliminated the Social Security 
COLA for beneficiaries with lower or moderate incomes.  
(See chart 1).  These increased costs also erode some of the 
savings that beneficiaries were to realize from the new Medicare 
Part D drug coverage 
	Increased costs to beneficiaries are not limited to 
premiums.  Cost-sharing obligations - which usually reflect 20 
percent of Medicare's payment - also jump each time provider 
reimbursement rates increase.  
	The impact of the premium and cost-sharing increases 
cannot be ignored.  The average older person already spends about 
one quarter of his/her income on health care.  That does not 
include the additional, and often substantial, costs of services 
that Medicare does not cover - including long term home and nursing 
home care.  If Part B premiums and cost-sharing continue to 
escalate, many beneficiaries will find it increasingly difficult 
to pay for the care they need. 
	Further, Congress should also recall that every Part B 
reimbursement increase accelerates the Medicare "trigger".   
Enacted in the Medicare Modernization Act, the trigger requires 
Congress to consider potentially harmful cost containment action 
when the Medicare Trustees project for two consecutive years 
that general revenues will account for more than 45 percent of 
total program costs in the next seven program years.  Increasing 
provider payments - without rationalizing the payment 
system - only contributes to the trigger.  (See chart 2).  
 	AARP urges Members of Congress to improve the Part B 
payment system in a way that protects beneficiaries from unreasonable 
increases in the Part B premium and coinsurance.  This is necessary 
to ensure that health care does not continue to become increasingly 
unaffordable for Medicare beneficiaries over time.  

Making Medicare a Better Payer of Quality Care 
	AARP believes that Medicare's Part B payment system should 
include incentives to promote high quality care.  Paying providers 
to simply report quality data may be a necessary first step in this 
effort, but it cannot be the only step. 
	Medicare now pays nothing more to recognize those physicians 
and other providers who give beneficiaries high quality care.  
Instead, Medicare sometimes pays more to those who provide poor 
quality care by reimbursing for services that are inefficient or 
needed to treat the harm resulting from preventable medical 
errors. 
	Congressional efforts to address physician payment concerns 
this year should, at the very least, make payment increases 
contingent upon reporting of quality data.  Eventually, payment 
updates should be provided to those physicians who meet gradually 
increasing requirements for both reporting data and demonstrating 
quality improvements 
	It simply makes no sense to continue giving providers higher 
payment rates that are not linked to quality improvement.  America 
already spends more per capita on health care than any other 
nation, but clearly, we are not getting our money's worth.  
 	Researchers at the Dartmouth Medical School have documented 
that regions of the United States with the highest health care 
spending do not have sicker patients or better outcomes than regions 
with lower spending.  They estimate that Medicare could reduce 
spending by at least 30 percent, while improving the medical care 
of the most severely ill Americans, if the practices of low-cost, 
high-quality providers were followed nationwide.  A well-structured 
pay for performance approach could promote the use of those best 
practices.  
	The time has come to improve our approach to paying Medicare 
providers.  Offering rewards for high quality, quality improvement, 
and use of health information technology (HIT) simply makes good 
business sense. 
	In the long-run, pay for performance also may help control 
spiraling health care costs.  It could reduce costly errors, avoid 
unnecessary service duplication, and lessen improper utilization.   
	Pay for performance might further help temper the tendency 
to increase the volume of services billed to Medicare following any 
limits on growth in reimbursement rates.  This well-documented volume 
increase is arguably a greater health threat than the oft-predicted 
but rarely seen specter of physicians refusing to see Medicare 
patients if rates do not continue to rise.   The Government 
Accountability Office and MedPAC report that nationwide beneficiaries 
are not reporting increased difficulties in finding a physician.  
In fact, the number of services provided, the number of physicians 
billing Medicare, and the number of physicians accepting Medicare 
fees as payment in full have all risen. 
	This volume adjustment phenomenon poses a real health threat 
because it suggests that Medicare beneficiaries may be receiving 
many unnecessary services. Increased volume also threatens the 
financial health of Medicare and of beneficiaries charged 
coinsurance for unnecessary services.  And it is among the reasons 
why the current physician reimbursement formula, which takes 
volume into account, repeatedly results in potential pay cuts. 

Conclusion 
	While the repeated threat of physician cuts resulting from 
the current formula may seem like a crisis, it is in fact an 
opportunity.  Congress should seize this opportunity to forge a 
truly sustainable Part B payment system by moving towards a 
pay-for-performance system that realigns payment with high 
performance.  This new system should also be designed with the 
beneficiary in mind by holding cost-sharing and premium increases 
down and improving the quality of care beneficiaries receive.  
	AARP looks forward to working with Members of the Committee 
to seize this opportunity and advance quality health care. 

Chart 1 

Percent Increase in Part B Premium Dwarfs 
Social Security Adjustments 


Source:  Premiums:  2006 Medicare Trustees Report; 2007:  
CMS Sept. 12 Press Release 
	  COLA:  www.ssa.gov/OACT/COLA 

Chart 2

MR. DEAL.  Thank you.  
Dr. Cook you are recognized. 
 	DR. COOK.  Good afternoon, Chairman Deal, and distinguished 
members of the subcommittee.  
My name is Dr. Sallie Cook, and I serve as the President of the 
American Health Quality Association, AHQA.  AHQA is the national 
association representing quality improvement organizations, QIOs, 
working to improve health care quality in communities across 
America.  I am also the chief medical officer of the Virginia 
Health Quality Center, Virginia's QIO.  Thank you for the 
opportunity to provide testimony about the QIO program.  
H.R. 5866 outlines a vision for a stronger QIO program, and we 
commend the superb leadership of Congressman Burgess and the 
bipartisan roster of now 36 cosponsors of this bill.  Health care 
quality is not what it should be.  Americans get only about half 
of the recommended care they should for their condition, and more 
patients die each year from medical errors than from car 
accidents.  The cost of health care keeps rising.  Patients, 
providers, payers--none of them are satisfied.  These outcomes 
are rarely the fault of individual health care providers but arise 
from unsafe systems of care.  
QIOs have experts in every State who work with hospitals, doctors, 
nursing homes, home health agencies and others to improve patient 
care.  Under our performance-based contracts with Medicare, QIOs 
work collaboratively with physicians and other health care 
providers to redesign systems of care so that every patient 
receives the right care every time.  
Health care quality does not improve by itself.  It takes hard work. 
Physicians, nurses and others work hard every day and benefit from 
our expert help identifying quality gaps and learning how to close 
those gaps.  
As an example, my written testimony includes an anecdote and data 
from the Gordon Health Care Nursing Home in your district, 
Mr. Chairman, eliminating the use of physical restraints in their 
facility, thanks to the work of the Georgia QIO.  This March, in 
a report requested by Congress, the Institute of Medicine said 
that the country's QIOs must play an integral role in the Federal 
Performance Improvement Initiatives.  The QIO provisions in 
Title II of Congressman Burgess's bill would enact most of the 
recommendations made in the IOM's report on QIOs.  The bill would 
modernize the law by requiring that QIOs help providers in all 
settings to redesign their systems of care, adopt health 
information technology, decrease health disparities and submit 
data on valid measures of quality that can be used for reporting 
and incentive programs.  
QIOs do these things today, and the bill will bring the law up 
to speed with current efforts.  For example, right now, QIOs are 
helping more than 4,000 small- and medium-sized primary care 
practices to adopt health IT and to use it to improve care.  In 
this way, we are helping doctors improve care as well as helping 
to build the data collection infrastructure needed for quality 
measurement and pay-for-performance.  
H.R. 5866 would also improve the way QIOs handle complaints from 
Medicare beneficiaries about quality of care.  Congress entrusted 
this important function to us in 1986, and many QIOs have now 
integrated their quality improvement methods into the way they 
respond to complaints.  However, the law must permit QIOs to 
make the complaint process more transparent for beneficiaries.  
Dr. Burgess's legislation does that.  
We also support the QIO governance reforms in this bill.  Any 
organization entrusted with the work of serving Medicare 
beneficiaries and health care providers must be held to high 
standards of accountability.  Every nonprofit member of AHQA has 
adopted the association's high standards for organizational 
integrity.  
We also support provisions to increase contractor competition and 
improving quality under Medicaid.  In its August report to Congress 
on the QIO program, Health and Human Services Secretary Michael 
Leavitt said, "The QIO program has the potential to make a 
substantial contribution to the efficiency of resource use in 
Medicare."  We agree with that vision.  The QIOs can collaborate 
with physician stakeholder organizations to share efficiency and 
quality data with physicians.  
For those with quality and cost data that is outside the norms of 
their peer group, these physicians could work voluntarily with the 
QIO to implement efficient, high-quality processes in areas where 
there is reliable data and its accepted treatment guidelines.  We 
know from public reports that the QIO program is making a critical 
difference in the lives of America's seniors.  The latest article 
appeared 2 weeks ago in the Annals of Internal Medicine.  It shows 
intensive efforts by QIOs led to nationwide improvements in the 
quality of health care in a wide variety of settings.  In 18 of 
the 20 measures studied, great improvement was observed among 
providers working closely with the QIO.  
Medicare is getting a good value for its investment in QIOs, which 
amounts to less than one-tenth of 1 percent of Medicare spending.  
The quality improvement budget of this successful program has been 
shrinking both in relative and absolute terms, but we are working 
hard with Medicare's investment to produce substantial returns 
in quality and efficiency, and we will do much more with additional 
resources.  
On behalf of the QIO community, thank you for your thoughtful 
deliberation on the future of this important program. 
[The prepared statement of Dr. Cook follows:] 

PREPARED STATEMENT OF DR. SALLIE S. COOK, PRESIDENT, AMERICAN HEALTH 
 QUALITY ASSOCIATION, CHIEF MEDICAL OFFICER, VIRGINIA HEALTH 
QUALITY CENTER 

	Good afternoon Chairman Deal, Ranking Member Brown and 
distinguished members of the Subcommittee.  My name is Dr. Sallie 
Cook, and I serve as the President of the American Health Quality 
Association (AHQA).  AHQA is the national association representing 
Quality Improvement Organizations (QIOs) and professionals working 
to improve health care quality in communities across America.  
I am also Chief Medical Officer of the Virginia Health Quality 
Center, the Medicare QIO for the Commonwealth of Virginia.  Thank 
you for this opportunity to provide testimony about the QIO 
program and ways to strengthen this important national 
infrastructure. 
	The Medicare Physician Payment Reform and Quality 
Improvement Act of 2006, HR 5866, outlines a vision for a stronger 
QIO program, and we commend the superb leadership of Congressman 
Burgess and the bipartisan roster of 33 cosponsors of this bill. 
As we all know, health care quality is not what it should 
be -- Americans get only about half of the recommended care for 
their condition and more patients die each year from medical 
errors than from car accidents.  All the while, the cost of 
health care keeps rising.  Neither patients, nor providers, nor 
payers are satisfied.  These outcomes are rarely the fault of 
individual health care providers, but mostly arise from unsafe 
systems of care. 
	QIOs are community-based experts in every state and 
territory who work with hospitals, doctors, nursing homes, home 
health agencies, pharmacies and health plans to improve patient 
care.  Under our performance-based contracts with Medicare, QIOs 
work collaboratively with health care providers to redesign 
systems of care so that every patient receives the right care 
every time. 
	Health care quality does not improve by itself - it takes 
hard work.  Physicians, nurses, and others are working hard every 
day, and these professionals benefit from our expert help 
identifying quality gaps, and learning how to close those gaps.  
QIOs offer the only nationwide field force of experts dedicated 
to understanding the latest strategies in quality improvement 
and working with health professionals at the local level to make 
good care better. 
	As an example of some of the great partnerships between 
QIOs and providers, I'd like to relay to you a story, Mr. Chairman, 
from your 10th district of Georgia.  There, the Georgia Medical 
Care Foundation, the QIO for the state, has been working with 
dozens of local providers, including the Gordon Health Care nursing 
home in Calhoun.  Together, the QIO and Gordon have reduced the 
number of residents in physical restraints from 11% of residents 
in 2004 to zero.  Dawn Davis, Gordon's director of nursing, 
credited help from the QIO for the success, saying GMCF provided 
facility staff with "much needed information" and training on the 
dangers of restraints and potential alternatives. Ms. Davis reports 
that the facility is now restraint free, and plans to keep it 
that way. 
	This March, in a report requested by Congress, the Institute 
of Medicine said that the country's QIOs should play an integral 
role in federal performance improvement initiatives like the work 
I just described, and recommended modernization of the program to 
fully realize its potential.  The QIO provisions in Title II of 
Congressman Burgess' bill would enact most of the recommendations 
made in the IOM's report on QIOs.  The bill would modernize the 
law by requiring that QIOs help providers in all settings to 
redesign their systems of care, adopt health information 
technology, decrease health disparities, and submit data on 
valid measures of quality that can be used for reporting and 
incentive programs.  
	QIOs do these things today and the bill will bring the law 
up to speed with current efforts.  For example, right now QIOs 
are helping more than 4,000 small and medium-sized primary care 
practices to adopt health IT and use it to improve care.  Many 
of these practices treat higher proportions of underserved 
patients.  In this way, we're helping doctors improve care, as 
well as helping build the data collection infrastructure needed 
for quality measurement and pay for performance. 
	HR 5866 would also improve the way QIOs handle complaints 
from Medicare beneficiaries about quality of care.  Congress 
entrusted this important function to us in 1986, and many QIOs 
have now integrated their quality improvement methods into the 
way they respond to complaints.  However, regulations have 
lagged behind today's understanding of effective quality 
improvement.  Congress must reform this process to make it 
more patient-centered.  The law must permit QIOs to make the 
complaint process more transparent for beneficiaries. 
Dr. Burgess' legislation does that.  
	We also support the QIO governance reforms in this 
bill.  Any organization entrusted with the work of serving 
Medicare beneficiaries and health care providers must be held 
to high standards of accountability.  Every nonprofit member 
of AHQA has adopted the Association's high standards for 
organizational integrity.  We also support provisions to 
increase contractor competition and improving quality under 
Medicaid. 
	We encourage the Subcommittee to utilize the QIOs to help 
improve the efficiency of health care by directing them to focus 
on efficiency measures which, we believe, should be based on the 
cost of providing high quality care.  QIOs already share quality 
data with providers and work with them to improve.  The same 
could be done with efficiency data, especially if coupled with 
data on clinical quality.  
	In his August Report to Congress on the QIO program, Health 
and Human Services Secretary Michael Leavitt said: "The QIO program 
has the potential to make a substantial contribution to efficiency 
of resource use in Medicare."  We agree with that vision.  The QIOs 
can collaborate with physician stakeholder organizations, 
particularly state medical societies, to share efficiency and 
quality data with physicians.  For those with quality and cost 
data that is outside the norms of their peer group, these physicians 
could work voluntarily with the QIO to implement efficient, high 
quality processes in areas where there is reliable data and accepted 
treatment guidelines.  For example, QIOs could coordinate exchange 
visits that convene doctors to share effective change methods.  
	Another efficiency topic we are already working on is 
preventing avoidable hospital admissions among patients receiving 
home care.  In just a little more than a year, by partnering with 
home health agencies, this QIO initiative has already saved 
Medicare approximately $130 million in reduced unnecessary 
hospital admissions.  
	We know from published reports, summarized in an attachment 
to my written testimony, that the QIO program is making a critical 
difference in the lives of America's seniors.  The latest article 
appeared just two weeks ago in the Annals of Internal Medicine.  
It showed intensive efforts by the QIOs led to nationwide 
improvements in the quality of health care in a wide variety of 
settings.  In 18 of the 20 measures studied, greater improvement was 
observed among providers working closely with the QIO.  
	This and other studies show that Medicare is getting good 
value for its investment in QIOs, which currently amounts to less 
than one-tenth of one percent of Medicare spending.  We are troubled 
that the quality improvement budget of this successful program 
 has been shrinking both in relative and absolute terms.  But we 
are working hard with Medicare's investment to produce substantial 
returns in quality and efficiency, and we will do much more with 
additional resources. 
	On behalf of the QIO community, thank you for your 
thoughtful deliberation on the future of this important program. 

Closing the Quality Gap 
	Published evidence continues to mount documenting the 
positive impact QIOs are having on improving patient care in 
America.  In addition to the strong endorsement from the 
distinguished IOM panel in their March report, the value of the 
QIO program was recently extolled by Secretary Leavitt in his 
August report to Congress in response to the IOM's report. 
	The Secretary's report characterized the QIO program as 
"a cornerstone [of CMS] efforts to improve quality and efficiency 
of care for Medicare beneficiaries," saying that "The Program has 
been instrumental in advancing national efforts to measure and 
improve quality, and it presents unique opportunities to support 
improvements in care in the future."  Many of the Secretary's 
recommendations are aligned with HR 5866.  
	And those who directly benefit from our help also say that 
our impact on patient care is positive and strong.  A January 
independent study confirmed that these stakeholders are deriving 
tremendous value from the services provided by the QIOs.  The 
study found that three out of four stakeholders agreed that 
"providers are providing better care because of QIOs." 
	Among other results, the survey showed that: 
 91% found the information and assistance provided by their QIO 
valuable. 
 90% were satisfied with all interactions and partnerships with 
their QIO. 
 Of those respondents who have an "on-going partnership" with their 
QIO - nearly all (98%) reported being satisfied with QIO efforts, 
including 84% who were very satisfied.  

	Survey respondents included a broad cross-section of key 
stakeholders, including members of several of the organizations 
testifying before the Subcommittee today, including the American 
Academy of Family Physicians, American College of Physicians, 
and the American Medical Association.  The survey findings are 
a strong endorsement of the QIO contribution at the front lines 
of the effort to improve health care quality, and further 
confirm that QIOs are making health care better. 
	Additional data was released earlier this month documenting 
the impact of the QIO program during the most recent three-year 
period of performance, from 2002-2005.  According to a study in 
the September 5 Annals of Internal Medicine, intensive efforts by 
the nation's QIOs likely led to nationwide improvements in the 
quality of health care in a wide variety of settings.  And care 
tended to improve more among providers working with QIOs. 
	The study, conducted by federal researchers, assessed 
improvement in care in areas such as diabetes management, 
appropriate heart failure treatment, and pain management in 
nursing home residents.  QIOs worked intensively with a subset of 
health care providers in physician offices, nursing homes, and home 
health agencies.  These providers achieved greater improvement on 
18 of 20 clinical quality measures than providers that did not 
work intensively with a QIO, including significant progress among 
nursing homes and home health agencies-two new areas of QIO work 
that began nationwide in 2002.  Among the most significant 
findings: 
 Nursing homes working with QIOs improved on all five measures 
studied - while those working intensively with a QIO improved to 
the greatest degree.  For example, QIOs and nursing homes working 
most closely together halved the number of nursing home residents 
in chronic pain (from 13% of residents to 6.2%), and halved the 
percentage of nursing home residents who were restrained (reduced 
from 16.5% to 8.4%). 
 Home health providers working with QIOs improved to a greater 
extent than providers not working with QIOs on eight of 11 clinical 
quality measures.  Those working most closely with the QIOs improved 
to a greater extent than other agencies on all 11 measures. 
 Physician offices working with QIOs improved in all four measures 
studied, and improved by greater amounts than offices that did not 
work with the QIOs.  The greatest improvement was seen in the 
quality of care for patients with diabetes. Timely blood sugar 
testing improved by about 9% and timely lipid profile testing 
improved by about 11%.  QIOs working more intensively with physician 
practices were able to reverse two apparent trends.  These practices 
increased the number of women receiving timely mammograms and the 
number of patients with diabetes receiving a key retinal eye exam. 
 Practices not working with their QIO saw decreases in these two 
measures. 
 Hospital care improved in 19 of 21 measures studied.  The study 
could not compare hospitals that worked with QIOs with those who 
did not because QIOs were asked to help hospital providers 
throughout their state to improve.  However, substantial 
improvement in surgical infection prevention occurred at a time 
preceding the adoption of surgical infection measures by the JCAHO 
and public reporting of hospital performance on these measures. 

	The findings underscore other recent research showing how 
QIO assistance helps providers improve care they deliver to 
Medicare beneficiaries.  The 2005 National Healthcare Quality 
Report, released by the Agency for Healthcare Research and Quality 
earlier this year, found that QIO measures for heart disease and 
pneumonia showed a combined rate of improvement that was almost 
four times higher than all other non-QIO measures.  The American 
Journal of Surgery last year published a report on a national 
QIO project involving 43 hospitals that reduced their post-surgical 
infection rate by 27% with QIO assistance.  
	All of these studies are consistent with our experience that 
when QIOs and providers work together, the quality of care improves 
faster.  Of course, much of the credit for these improvements goes 
to providers who are willing to change and work with QIOs to 
improve patient care.  

Pay for Performance
	Last week, in its highly anticipated report on pay for 
performance, the IOM called for a phased-in national pay for 
performance program that will provide financial incentives for 
care that is safe, effective, timely, patient-centered, 
efficient, and equitable.  In its report, the IOM said QIOs 
offer an "important national resource in building the necessary 
infrastructure" for the technical assistance that providers need 
to qualify for payment incentives.  "Technical assistance for 
quality improvement will become increasingly important throughout 
Medicare as pressure to contain health care costs grows, and 
providers place more emphasis on quality improvement with the 
expansion of pay for performance programs," the IOM said. 
	We support payment to reward high levels of quality and 
improvements in quality.  But the IOM is right to say that payment 
rewards alone won't get the job done, and that quality improvement 
technical assistance through the QIO program should be available 
to more providers to help them succeed.  These recommendations 
would become law if HR 5866 is enacted.  
	We also encourage Congress to utilize QIOs as an independent 
national feedback mechanism for the "active learning system" that 
the IOM recommended in its payment for performance report.  QIOs 
can report back to federal agencies on consumer, employer, and 
provider perceptions regarding federal transparency initiatives.  
QIOs serve as expert feet on the ground and could alert these 
agencies to measurement problems and unintended consequences of 
pay for performance efforts - such as decreased patient access.  
Feedback from consumers and stakeholders is essential in developing 
a sustainable program to meets the needs of the public and the 
providers.  QIOs are a uniquely qualified national infrastructure 
with both the strong local relationships and the expertise needed 
to help the Secretary continuously improve this program. 
	The primary role for QIOs in pay-for-performance is to 
support local providers through technical assistance and the 
provision of evidence-based guidelines.  We agree with the IOM's 
finding that QIO assistance must be a central part of future 
performance improvement initiatives because it reflects our 
experience that success in quality improvement happens faster 
when doctors work in partnership with experts who understand 
cutting-edge improvement techniques. 

Helping Physicians Adopt Health Information Technology 
	There is great interest in Congress and the administration 
in promoting health information technology as a tool for improving 
care and supporting data collection.  And we know that many barriers 
stand in the way of widespread adoption among physician practices.  
Chief among these barriers is of course a real and perceived 
financial burden. 
	While financial help is of paramount importance, our 
 experience tells us that even free equipment and software is 
unlikely to improve quality on its own.  The promise of HIT lies 
not in simply automating current practices, but in transforming 
them.  To achieve transformation, physicians need help from local 
experts to guide them through the process of preparing and planning, 
selecting a product and vendor, redesigning their clinical 
operations and then using their new system to improve care.  
These are daunting tasks for busy clinicians who cannot stop 
seeing patients. 
	Literature and experience tell us that as many as half of 
all IT implementations fail for one reason or another, often because 
practices did not go through the rigorous preparation and 
development necessary for success.  QIOs across the country are 
helping physicians protect the value of their investments by 
providing this help at no cost. 
	In Utah, for example, one clinic had been using their EHR 
system for seven years, but had never turned on the clinical 
decision support or disease management functions because using 
those functions on a regular basis simply did not fit into their 
daily workflow.  The clinic asked their QIO, HealthInsight, for 
help.  HealthInsight showed the clinic how to evaluate their 
existing workflow and redesign their care processes so that the 
practice could utilize these high-level functions of their IT 
equipment - functions which are central to improving quality. 
	Despite the fact that QIOs don't subsidize physician 
purchase of HIT or implement these systems, in just one year, 
4,308 practices signed up for assistance from their local QIO, 
including 1,162 practices that treat higher proportions of 
underserved patients.  Of the total number of practices we are 
working with, nearly three quarters have just one to three 
physicians, while the remaining quarter practice in groups of 
four to eight physicians.  These are exactly the kind of practices 
that most need help - those who cannot afford to buy the kind of 
expert consultants that can have a tremendous impact on the cost 
and effectiveness of the IT adoption and implementation process. 
 As Congress considers two very important health IT bills, we 
hope you will expand the availability of this assistance. 

Helping the frail and elderly 
	Nursing Homes 
	As part of the CMS National Nursing Home Quality Initiative 
(NHQI), QIOs have been assisting long-term care facilities on a 
national basis since 2002.  QIOs educate nursing home staff on the 
 principles of quality improvement with guideline-based clinical 
training that is relevant to publicly-reported measures.  QIOs 
work with all nursing homes throughout their states to set quality 
improvement targets for certain measures on an annual basis.  
	Historically, most nursing homes have focused on compliance 
with regulations and quality assurance.  But the impetus of 
public reporting and the availability of QIOs for technical 
assistance on these measures have resulted in more nursing homes 
developing a quality improvement approach to improving resident 
outcomes and quality of life.  Across the country, QIOs are 
training nursing home managers to implement quality improvement 
systems in a culture where front line staff not only participate 
in quality improvement projects, but also are empowered to 
continually identify and solve problems.  
	QIOs also work with a group of nursing homes to collect 
information on resident and staff satisfaction and assist these 
nursing homes to decrease staff turnover.  QIO staff train nursing 
home administrators and directors of nursing to promote a culture 
of quality improvement in their facilities. 
	Although this work is relatively new, our partnerships with 
nursing homes and other long-term care stakeholders have already 
produced remarkable progress nationwide.  According to the Annals 
article, nursing homes working intensively with a QIO improved more 
on all five measures studied.  For example, QIOs and nursing homes 
cut in half both the number of nursing home residents in chronic 
pain and the percentage of nursing home residents who were 
restrained. 
	QIO assistance for nursing homes is coordinated with the 
quality improvement efforts of the federal government and the 
nursing home industry, such as the new provider-driven, national 
quality campaign called Advancing Excellence in America's Nursing 
Homes, which is scheduled to kick off at a summit meeting tomorrow.  

	Home Health 
	QIOs also are working to accelerate the pace of quality 
improvement among patients receiving care in their own home.  In 
particular, QIOs are partnering with home health agencies (HHAs) 
to reduce acute care hospitalizations, promote the adoption of 
telehealth systems, increase immunization screenings during 
patient assessments, and evaluate and improve HHAs' organizational 
culture.  
	Since 2002, thousands of HHAs have formed effective 
partnerships with their local QIO and committed to improving care 
on publicly-reported home health quality measures using the 
Outcomes-Based Quality Improvement process.  This has been a 
fruitful relationship that is achieving better quality care for 
patients receiving treatment at home.  For example, according to 
the Annals article, home health providers working with QIOs 
improved to a greater extent than providers not working with QIOs 
on 8 of 11 clinical quality measures.  Those working most closely 
with the QIOs improved to a greater extent than other agencies on 
all 11 measures. 
	But there are opportunities for even greater advancement, and 
QIOs are now working with home health agencies and other community 
health care stakeholders-including hospitals, consumers, physicians, 
survey agencies, nursing homes, and others-to help prevent 
avoidable hospitalizations.  Currently, 28% of all home care 
episodes end in an acute care hospitalization-with more than 
3.6 million home health episodes each year, that means there are more 
 than 1 million hospitalizations.  While many sick patients need to 
utilize hospital services, research indicates that there are best 
practices, such as effective hospital discharge planning, better 
medication administration, improved communication, and the use of 
telehealth services that are effective in preventing the exacerbation 
of patient's conditions and therefore preventing an unnecessary 
hospitalization.  Furthermore, a recent report on hospitalizations 
among home health patients found that a 3% reduction in the national 
hospitalization rate could save $1.2 billion.  As noted above, QIO 
efforts to reduce avoidable hospitalizations by working with home 
health agencies have made a substantial down payment toward these 
potential savings.  
	In addition, QIOs are helping home care agencies ensure 
that America's seniors receive their influenza and pneumococcal 
immunizations.  Health care providers and stakeholders have a 
shared responsibility to ensure that vulnerable elders are 
immunized, and the QIOs are ready to help incorporate immunization 
screening into comprehensive patient assessments and deliver 
vaccinations safely.  QIO also are working with agencies to utilize 
home telehealth technology to improve the effectiveness and 
efficiency of home care.  QIOs have information and tools about 
telehealth that agencies can use to reduce hospitalizations and 
improve care. 

	Hospitals 
	QIOs are providing educational support and information on 
preventing surgical complications to hospitals under the Surgical 
Care Improvement Project (SCIP).  QIOs also are offering hospitals 
assistance on collecting data and publicly reporting their 
performance in implementing clinical processes proven to make 
surgery safer.  QIOs are bringing hospital teams together for 
collaborative learning sessions; offer hands-on assistance helping 
teams adopt safer practices, and provide guidance on overcoming 
 barriers to change.  
	QIOs are also engaging in a patient-centered approach to 
improve care across multiple inpatient topics using a composite 
measure, called the "Appropriate Care Measure" (ACM).  The ACM 
combines 10 publicly reported quality measures (five acute 
myocardial infarction measures, two heart failure measures, and 
three pneumonia measures) into one rate that provides a more 
accurate description of how a hospital treats patients across 
the spectrum of care.   
	In addition, QIOs are partnering with hospitals to redesign 
their organizational culture and systems of care -- including the 
use of computerized physician order entry, barcoding and 
telehealth -- to boost performance on all of these clinical 
topics.  QIOs also are helping rural and critical access hospitals, 
through a new rural-focused task, to use telehealth and other 
technology, collect and submit performance data, as well as 
identify and resolve gaps in patient safety. 

Future QIO Assistance 
	As I've outlined today, the field force of QIOs offers 
health care providers in every state free, necessary assistance for 
improving quality.  From supporting and accelerating physician 
adoption of EHRs to working with nursing homes, hospitals, home 
health agencies and others, QIOs are helping health professionals 
utilize the latest techniques in quality improvement to eliminate 
medical errors, reduce suffering and improve the quality of life 
for patients across the country.  As HIT, pay-for-performance and 
health information exchange increasingly become vital tools for 
transforming quality, all providers will need performance 
improvement assistance from quality experts like QIOs.  
	The QIO program represents the largest coordinated federal 
investment in improving health care quality - right now, that 
investment accounts for less than one tenth of one percent of 
overall Medicare spending.  We hope you will strengthen this 
invaluable program by passing Dr. Burgess' visionary legislation 
and making the program a central fixture in our collective drive 
to provide the right care to every patient, every time. 

MR. DEAL.  Well, thank you all.  
I will recognize myself to begin the questions.  
Dr. Wolter observed, I believe, that all the physicians agree on one 
thing, and that is, they ought to get more money.  I am shocked.  
This is indeed a complex issue, and solving it in the short term 
is certainly a whole lot simpler than solving it in the long term. 
Unfortunately, over the last several years, we have only tried to 
do it on a short-term basis, on an annual basis, actually.  I would 
like to talk about a few basic concepts here and sort of see where 
the group is on it.  
I suppose the best place to start might be at the very beginning, 
which I think the concept of a medical home is one of those 
beginning points.  Does anyone disagree that the idea of 
establishing a medical home should be a part of whatever future 
structure we might try to put into place?  Does anybody disagree 
with that?  
Then let me move to the second stage of that, because I believe 
Dr. Wilson and maybe someone else suggested that there may be a 
medical home concept or at least a coordination of care concept 
that is appropriate at a level other than just at the primary 
care level.  Dr. Weida, of course, addressed it from the primary 
care physician side of a coordination of care, and I believe, 
Dr. Wilson, did you mention that?  And someone else did, too.  
Yes, Dr. Golden.  Would you and Dr. Golden comment about that 
and explain to me exactly what you are talking about?  
DR. WILSON.  My comments were in the context which suggests that 
there may be specialties in addition to primary care who could 
provide a medical home based on qualifications.  One example that 
comes to mind would be cardiologists providing chronic care for 
chronic cardiac disease.  
DR. GOLDEN.  The college recognizes the concept of principal care, 
in addition to primary care.  And there are some patients with 
complex diseases that see a specialist for 90 percent of their 
care.  
MR. DEAL.  And that is where they return to on a frequent basis.  
DR. GOLDEN.  That is correct.  Some oncologists take over all the 
care of some of the chronic cancer.  Endocrinologists often can 
be very comprehensive.  But we believe that whoever serves in 
this medical home should meet certain criteria, and they should 
be qualified to serve as a comprehensive home for that patient.  
MR. DEAL.  That makes sense to me.  Does anybody disagree with 
that?  We are confronted with some very different points of view 
on the same subject matter, and that is reporting of information. 
 I, frankly, am one of those that sort of tends to agree with 
Mr. Shadegg in terms of, consumers are the ones who can make the 
choices rather than the government maybe in some artificial 
fashion trying to make choices for them.  
However, we run into a real conflict.  And that is, for consumers 
to be able to make choices, they have to have information.  And 
that is where we sometimes run into conflicts with the medical 
community, quite frankly, in the reporting of the information that 
consumers need in order to make good choices.  I think everybody 
understands where I am coming from.  And there is a very delicate 
balance between reporting information that may be able to make 
good choices--it is a little easier I think in a hospital 
environment where you can report, you know, so many procedures, 
average cost for the procedure, number of return visits following 
the surgery and so forth.  
How do we deal with this issue of reporting of information that 
is going to lead to a meaningful choice, either by a consumer 
making a choice based on the information that is made available 
to them, or go to the other side of the model and have the 
government make a choice based on the information that is 
reported to the government?  Quite frankly, we are all sort of 
in the latter mode right now.  Would anyone care to talk about 
that?  Because I think this reporting issue is certainly an 
important part of what we go to in the future.  
Dr. Thames.  
DR. THAMES.  Mr. Chairman, I would like to speak to that, and 
commend the words Dr. Wilson gave from the consortium from the AMA 
that is working on quality guidelines, so that if we know what to 
ask in the questions of reporting, this material can be assessed 
with guidelines that are set by the specialists who know best what 
constitutes the best care with the best outcomes for evidence-based 
medicine.  
So he has indicated they already have over--I have forgotten how 
many--they are going to have 70 more before the end of this year.  
So I commend them for that work, and I suggest to you that it is 
a group of knowledgeable physicians who are establishing those 
guidelines rather than some vague government entity or someone 
who is not on the front lines who is doing only administrative 
medicine.  
MR. DEAL.  I agree with you, and that I think is one of the real 
concerns about who is establishing the criteria.  I think we are 
pretty much all in agreement that the professions--and I know you 
all have been working on it in your specialty group in establishing 
that.  I commend you for that.  Some are more difficult to establish 
than others, and I understand that as well.  But I think that is 
a point well made.  
Anyone else want to comment?  I am out of time, but I will let 
somebody else respond.  
DR. RUSSELL.  Mr. Chairman, I would agree that, with some 
specialties, it is easier.  In surgery, I think it is easier in 
a way.  The surgical part has a beginning and an end and a result.  
It needs to be risk adjusted.  So we are very enthusiastic about 
establishing in hospitals a risk-adjusted system that had actually 
been done in the VA hospitals in the early nineties.  And that is 
our major thrust at the College of Surgeons--the risk-adjusted 
measures to look at outcomes, which is a very good way to 
evaluate surgery:  outcome as opposed to processes or structure.  
The problem is, of course, a lot of surgery in America is done 
now in doctor's offices and outpatient facilities, so we then have 
to take the in-hospital model and be able to bring it into the 
outpatient surgical arena which is a real challenge, and we are 
working on it.  
DR. GOLDEN.  I would like to add that consumers at this point are 
limited with what they can do with the information.  But the 
accountability of these measures brings about changes at the 
community level that I think have real impact on quality.  So I 
think one of the things to look at is not necessarily how consumers 
use it per se but the impact across the community as the information 
becomes transparent and people are accountable for their 
performance.  
MR. DEAL.  Well, I apologize for having to leave you all once again, 
but I think you agree that I need to go to the conference on trying 
to work out health IT.  We are still hopeful that we are going to 
get that issue finalized.  
I would just leave with one final observation, and I think 
Dr. Thames and maybe--I know Dr. Thames said this.  We are 
confronted with a system right now that does not reward quality.  
In fact, it might even reward lower quality by repeat procedures 
that may be unnecessary.  
There is no financial incentive for the folks who are really making 
the effort to do the best job.  That is sort of like the debate we 
have had in the education community for a long time.  We pay teachers 
the same thing, whether they are the bottom of the rung or the 
very best.  But you start talking about incentives in education 
for teachers, everybody goes crazy.  Nobody trusts the one who 
makes the judgment as to what the quality is.  
And we are faced with exactly the same situation here.  And it is 
not easy.  It is not going to be easy.  But I think, for the sake 
of the citizens of this country and the health care system, on a 
continuing basis, we need to continue to struggle with it, and I 
appreciate all of your inputs today.  
Mrs. Cubin, are you going to take the--Dr. Burgess is going to take 
the Chair.  I don't know whether to turn it over to Dr. Burgess.  
He already has the big head from all that you all have said about 
him.  He is certainly qualified.  
I recognize Mrs. Capps for her questions at this point, if you will 
excuse me.  
MS. CAPPS.  Thank you.  
As you leave, Mr. Chairman.  I just want to reference one 
remembrance that came up as the idea of designating a specialist 
as a care coordinator was asked about, and it reminds me that, a 
few years ago, we had a bill called the Patient's Bill of Rights 
that received quite a bit of attention in the consumer as well as 
the provider community.  We got that legislation through two 
chambers, but it, unfortunately, was not signed into law.  It is 
an idea that has been around for a long time.  It is still a very 
good idea.  
I can't help also but referencing, as our Chairman leaves, everyone 
holds out this ideal of having choices about your physician.  That 
was part of the Patient's Bill of Rights as well.  I think that may 
be a moot point.  And I go back to what I commented on in my opening 
remarks, with the knowledge that there has been such a decline in 
physicians, family physicians especially.  
And Dr. Weida, I want you to expand on some things I brought up.  
As I mentioned, the prediction of family physician shortages and 
then address how much of your practice for your group is Medicare 
patients.  
I am a public health nurse, and my focus has always been on primary 
and preventive care, which is the focus of many in your practices 
as well.  I was astonished to read the number of medical graduates 
going into family medicine has fallen by more than 50 percent since 
1997.  I think that is very remarkable and perhaps you could 
indicate how you see that in the future.  What I want to see in 
light of this hearing is how you would describe the Medicare 
reimbursement system; whether or not it plays into this decline.  
And also, as you discuss this, if you would talk about the way the 
number of family physicians could translate that decline into an 
overall national increase in health care spending because of a 
decreased availability of primary and preventive care.  
If that delays the onset of care by people who can't find a 
physician close at hand, therefore, the care is more expensive when 
they do reach it.  
DR. WEIDA.  Thank you, we have just completed a workforce reform 
study.  That is what you are referring to.  What that showed is we 
will need a 39 percent increase of family physicians to the health 
care needs by 2020.  That is coupled with, as you mentioned, a 
decline of American medical students from American medical schools 
going into family medicine.  Some of that gap has been filled by 
international medical graduates.  However, overall, it has been 
very difficult in family medicine.  A lot of that is predicated 
on reimbursement or payment and hassles of payment.  
We talk about the pay-for-performance.  One of our concerns is if 
the system is too cumbersome, we will not be able to really do 
anything about it, because we see a number of patients that have 
relatively small charges.  So that is a major concern for us.  
What we do know, and this is from the Barbara Starfield data, is 
that in States that have more primary care, their health care 
quality is better and their cost is less.  This is on Medicare 
 data.  That amounts, and can amount to as much as a 
$2,000-per-year/per-beneficiary difference between the States with 
the best ratios and States with the worst.  That is a tremendous 
difference.  
I would be happy to get you copies of our workforce reform report, 
if you would like.  It is a State-by-State analysis, and we would 
certainly be happy to provide this committee with this report as it 
seems you have quite an interest in that.  
MS. CAPPS.  We could actually access it too.  I think it would be 
good.  If we could request your statement then--as it reflects this 
topic.  
I only have a couple of seconds, there might not be time to do this.  
But Dr. Thames, I wanted to get to the topic of so-called balanced 
billing.  In the 1980s we passed protections, because doctors who 
were accepting Medicare began charging more so as to, as they call 
it, balance the billing.  The legislation has been referred to 
this committee.  It is a related topic that would lift the balanced 
billing protections.  
I wonder if AARP would support a balanced billing protection staying 
in place and what concerns would you have about such an action? 
DR. THAMES.  Well, we are very concerned about balanced billing 
without limitations.  I am one of those physicians who practiced 
before 1989 when limits were put on there.  I am aware and AARP is 
aware of evidence, much evidence of very excessive billing, and we 
would not support doing away with a limit on billing.  We believe 
that it will raise the costs excessively.  It will make health care 
costs go up.  It doesn't do anything for health care reform, and 
this is what I think this committee is looking at:  payment and 
health care reform and trying to contain costs.  
We feel that having a limitation on the billing--balanced billing 
is  important.  
MS. CAPPS.  Thank you, I have overextended my time.  Thank you.  
MR. BURGESS.  I thank the gentlewoman for yielding back.  I will 
recognize myself for such time as I may consume.  I mean, 5 
minutes for questions.  
We need to stay on that concept of balancing billing for just a 
moment, if I could.  The gentlewoman referred to them as 
protections.  I had actually referred to them as restrictions.  
Now in the Medicare Modernization Act that we passed one morning 
in the last Congress, we referred to--we weren't allowed to use 
the words "means" and "testing" together in a sentence, but we 
did use the word income, relating to Part B premium, together in 
a sentence.  
If we tied the balanced billing provisions to those levels that 
have already been set by the income relating to Part B premiums, 
we have already identified those individuals who could afford more 
for their medical care.  Why restrict them from their doctor of 
their choice, if they are willing to pay a portion of their fee?  
Is that a fair thing to do?  
DR. THAMES.  You know, again, I am going to go back to personal 
experience.  When I went into practice, we didn't have Medicare.  
MR. BURGESS.  That is correct.  
DR. THAMES.  And we had poor people that we delivered care to as 
physicians, and if they had something they grew they wanted to give 
you, they did.  We charged more to bankers and others.  You know, it 
never was easy for me to decide how much I ought to charge someone 
else, because even if he was an attorney, if he was young, how 
many children did he have, how many of them were in college, the 
other things, I didn't know what was fair in billing.  
So, personally, I am one of the physicians who, when the 1989 
restriction was put on there to balance billing, and I didn't 
accept--and I was a participating physician and I didn't accept 
the balanced payment--but I was glad to see some restriction put 
on there.  
I don't, personally--would not want to try to assess what people 
can pay in balanced billing, because I don't know what the bottom 
line is for 1044.  As a physician, I want to be paid for what I do 
for the patient.  
MR. BURGESS.  So it is better to have the government make that 
decision than you-- 
DR. THAMES.  It is better to have some, I think, finite number about 
how much is correct, which is what we did in 1989. 
MR. BURGESS.  If I may interrupt, the finite number exists.  What we 
are talking about is, usually customary, the Medicare maximum 
allowable fee table.  I am going to run out of time.  We could 
debate this into next week.
MS. CAPPS.  We should have a hearing on this. 
MR. BURGESS.  I would be happy to recommend to the real Chair we 
have a hearing.  
Before I run out of time, I would like to ask Dr. Elston, I think 
you referenced this, your home is in the great State of 
Pennsylvania.  
DR. ELSTON.  Yes, it is.  
MR. BURGESS.  We love our friends from Pennsylvania.  Do you have 
an opinion as to whether or not, when we did not fix the SGR decline 
January 1--we thought we had, and then on a technicality we were 
put into overtime and it didn't get fixed, so on January 1, 
Medicare rates go down--what was it, 4.4 percent--do you have an 
opinion as to whether or not that affected your State's 
reimbursement for private insurers?  
DR. ELSTON.  Yes, it didn't help.  
MR. BURGESS.  Do private insurers peg their prices to Medicare in 
the--
DR. ELSTON.  Yes, we see in rough proportion, yes.  
MR. BURGESS.  So there are, in a sense, Federal price controls on 
the practice of medicine as it exists today, even in the private 
sector?  
DR. ELSTON.  Yes.  
MR. BURGESS.  Now, I know Dr. McClellan quickly stepped up to the 
plate and said you guys won't even have to resubmit those bills, we 
will get that update to you quickly, as soon as Congress passes 
it and as soon as the President signs it.  How quickly were the 
private insurers coming to you with their additional checks for 
moneys that were inappropriately withheld between January 1 and 
February 4?  
DR. ELSTON.  It may shock you, but they were not lining up at the 
door to do that. 
MR. BURGESS.  It doesn't shock me.  Does anyone even know in their 
practice if that has even happened to this day?  Those are small 
amounts of money, it is difficult to track.  But it is a small 
amount of money on each patient; cumulatively, it is a significant 
amount of money.  
DR. ELSTON.  It is.  I know it was a concern to our organization, 
and it was very difficult, and difficult with each of the different 
payers to communicate and to track.  To my knowledge, we have 
recouped little.  
MR. BURGESS.  Dr. Golden, if I could ask you, it is a shame our 
Chairman had to go to the conference on health IT, because I think 
he really should have heard you talk and the other QI organization's 
opinions about health IT.  When you guys in Arkansas--you do a 
great job of helping the individual physicians' offices with these 
decisions and these types of purchases; is that not correct? 
DR. GOLDEN.  We are one of the demonstration States.  In fact, we 
got involved, we had the ACP help us, a consultant in that activity 
 as well.  But we had in a rural State, over 174 different practices, 
hundreds of our practice sites, sign up to learn about practice 
redesign and how to go about assessing their practice and going 
about the purchasing of HIT.  
MR. BURGESS.  Dr. Cook, in your written testimony, you did discuss 
it, but you had about the literature and experience, about half as 
many as all IT health implementations fail for one reason or another, 
often because practices don't go through rigorous development 
necessary for success.  
In Utah, one clinic had been using their EHR system for 7 years but 
had never turned on the clinical decision support or disease 
management functions.  That it seems is almost unbelievable. 
DR. COOK.  We are encountering more and more of those types of 
scenarios where physicians may have purchased systems that may not 
be using part of it--the billing part or some--but not exercising 
the rest of the system.  
MR. BURGESS.  Now, Mr. Deal is in a conference right now that is 
going to place these systems in every physician's office in the 
country.  You are telling us from your experience, they may not 
be getting value for their dollar if they do that. 
DR. COOK.  Well, the point we would like to make is that the 
quality improvement organizations are working with physician 
practices to help them understand how they can best use HIT.  
MR. BURGESS.  My time is up.  I hope you packed a lunch, 
because you are going to have a lot of work ahead of you. 
DR. COOK.  We do.  We are underfunded to do this work.  We are 
only working with a very small number of practices.  In Virginia, 
for example, we are working with 200 physicians who are in 
primary care.  We have 16,000 licensed physicians in our State.  
So that tells you, we are making a very small dent in the 
technical assistance we are able to provide.  
MR. BURGESS.  Thank you.  I will recognize the gentleman from New 
Jersey.  If I could, unless there is an objection, we may go to a 
second round of questions.  
MR. PALLONE.  Sure.  I just want to thank you, Mr. Chairman.  
There is some interest--this is for Dr. Thames-- there is some 
interest in legislating a new utilization management program in 
Medicare where State-based organizations would review a 
physician's practice pattern and compare it to its peers.  
The goal, obviously, to inform doctors when they are providing 
too many services for a particular illness, and another doctor is 
in the same specialty, you know, encourage them to cut back.  That 
might be, you know, obviously the motivation.  
But what I worry about is, if designed improperly, such a program 
would provide the wrong incentives to doctors to cut back on 
needed services and negatively affect patient care.  There are 
a lot of reasons one physician may be providing more services to 
his patients than another.  
Perhaps a doctor treats more patients who are sicker or patients with 
multiple chronic conditions.  Perhaps a doctor works in conjunction 
with a trauma center where injuries are more severe.  There are a 
lot of possibilities. 
If a utilization results in penalizing a doctor just because they 
provide some more service to what is right for an individual patient, 
 we might be setting a bad incentive.  I wanted to ask you if you 
would comment on keeping the patient as the central focus to any 
changes in Medicare physician payment systems, and what dangers do 
we have to watch out for if Congress were to move down the path of 
utilization review?  
DR. THAMES.  First we are, and our primary focus from AARP is that 
quality care and patient care should be the primary and most 
important focus in the whole program.  Having said that, we believe 
that with the use of proper medical specialties and proper 
guidelines, we can look at utilization management and we can 
decide, like in chronic disease cases, that there are certain 
things that you do which lead to better outcomes, less emergency 
room visits, less hospitalizations.  
Now we recognize that there are physicians who will have a higher 
percentage of very complicated cases, or have a lot of patients 
who are not very compliant, so that when you begin to look at 
utilization of services, they will be outliers, and those kinds 
of outliers--and there are those outliers who use inefficient 
practices or just aren't knowledgeable enough to do what the 
guidelines called for.  Or don't do them.  Those are two different 
things.  
So you have to work out risk adjusters to be sure that those 
outliers who are doing very complicated cases are not penalized 
by the utilization management.  That is one of the reasons we don't 
have all of the tools for the risk adjustment available through 
medicine today.  We are developing those in some specialties 
better than others, but that is why AARP has said we want 
reporting to go first, and then we want to look at the 
pay-for-performance and the utilization management that goes 
with it, to have those risk adjusters that are based on solid 
medical evidence.  
MR. PALLONE.  Thanks.  All right, I would like to ask some of 
the other panelists--I guess I can't ask them all because there 
are so many--about the whole risk adjustment phenomena; in other 
words, whoever wants to comment.  Would you agree that Congress 
should guard against the prospect of utilization review 
inappropriately penalizing doctors who treat sick patients or 
have a different doctor-patient risk?  
What do you think about this idea of a risk adjustment in a 
payment system?  Do you think we need it?  Is a good way to adjust 
for risk?  How long will it take, or how easy it is to develop 
one?  Dr. Wilson.  
DR. WILSON.  I think what you are addressing is how complicated 
this all is, and risk adjustment is only one part of that.  
Certainly the answer to the question, you said of course, we do 
think risk adjustment is critical for whatever you do in terms of 
reporting.  
The other thing is just sample size.  You know, if you are 
evaluated--and our hospitals have been doing this for years--and if 
you are evaluated on a quarter on the pneumonia patients, and you 
only had two that quarter, it is hard to imagine that reflects the 
kind of sample size that gives you good information about where you 
might rank in comparison with your peers.  
So the challenges are there, and that is the concern physicians 
have; not that we don't think that information is going to be 
helpful, but when you get the information it needs to be information 
that is going to be valuable and valid because of those things.  
MR. PALLONE.  I don't know if we will get through all of them, 
but Dr. Morris. 
DR. MORRIS.  Yes.  Not only in terms of the sample size you need 
to be concerned, but you also need to be concerned about the 
patient populations that are included in the information that 
we get.  Those of us who see patients with a greater disease 
burden that was already described--sicker patients with multiple 
morbidities--it becomes very difficult to make sure that if a 
patient has socioeconomic restrictions that does not allow them 
to get their medication, versus a neighborhood that they live in 
where their healthy living isn't a priority and therefore they 
are not getting their exercise and they are not doing all the 
other things they need to do in order to maintain appropriate 
health, that we take that into consideration, and the physicians 
who treat these populations.  
MR. PALLONE.  Thank you.  My time is up.  I don't know if you want 
to continue with that.  
MRS. CUBIN.  [Presiding.]  Yes, it is.  It is all right with me if 
you would like to continue.  
MR. PALLONE.  There are a couple others.  Why don't a couple others 
of you answer?  
DR. RUSSELL.  I would simply like to say in answer to your 
question, physicians who do surgery or procedures, if you don't 
risk adjust, you will create perverse incentives which will be 
very, very unacceptable and will be discriminatory against certain 
patients.  
Doctors just won't touch high-risk patients.  They won't do surgery 
on patients that need to have it done, because they are too high 
risk.  
Unless you recognize that with a good solid means of risk adjusting, 
then I believe you will create these perverse incentives.  
MR. PALLONE.  Sure.  Dr. Cook. 
DR. COOK.  If I might add, just to add to the comments that have 
already been made, which I agree with, I believe that in addition 
to having rigorous methodology--which includes having valid 
information, timely and peer-grouped information, and those sorts 
of methodological issues--it is also possible to combine 
utilization information, workforce quality information, and that 
produces--efficient information so if, for example, you want to 
look at end-of-life issues and appropriate utilization of services 
at that time to ensure good quality of care, good coordination of 
care, I think there is a lot of room for development of good 
efficiency measures in addressing some of the issues.  
MR. PALLONE.  Okay.  We have one more, then we will finish.  Go 
ahead, Dr. Martin. 
DR. MARTIN.  I wanted to comment.  I think what everyone is talking 
about, here is the difference of what we are looking at.  Generally 
what we are looking at is claims data and what we really need to 
move to is clinical data, if we have a system that looks at 
clinical data, which will be much more affordable, if we in fact 
have good health information technology, not adjust for that 
patient compliance, severity of illness, risk adjustment, patient, 
things like that.  So we need to move away from claims and we need 
to go more to clinical data. 
MR. PALLONE.  Claims data, you mean in conjunction with a suit?  
What kinds of claims? 
DR. MARTIN.  If a patient has a diagnosis of congestive heart 
failure, we give that a score.  Or we look at the risk utilization 
or risk management.  However, that patient that has got congestive 
heart failure may say, I am on four medicines, I am not going to 
take the fifth medicine.  We would know that from the clinical 
data, not from the claims data. 
DR. GOLDEN.  Claims data being billing information.  
DR. ELSTON.  Right.  And specific CPC category 2 codes are designed 
to capture performance data. 
MR. PALLONE.  Thank you very much.  Thank you, Madam Chairwoman. 
MRS. CUBIN.  Please excuse our musical chairs up here.  Everyone 
is busy trying to finish up before we go into recess.  
I want to talk about something that isn't exactly the subject that 
the hearing was called for, but it something that I think is very 
important; and, as Dr. Weida discussed, how important it is to 
have primary care doctors, or someone who is able to take care of 
a doctor, be the quarterback most of the time, if not a family 
practice or internist, how the fact that we--factors, I should 
say, that contribute to not being able to get primary care 
physicians.  
I represent the State of Wyoming.  I have a husband that is a 
physician, now retired, and a son that is a physician.  I know that 
it used to be that rural areas, number one, weren't reimbursed at 
the same level that urban areas were reimbursed.  We have tried to 
fix that because, you know, the effect of that was when these 
people would get out of medical school, they would have the same 
amount in student loans that they had to pay back.  
They had to pay the same amount for equipment; that office space 
might have been the only thing that might have been a little bit 
cheaper.  But if you live in Jackson Hole, Wyoming or Sheridan, 
Wyoming, it would be higher than the national average.  So that 
was something that made it less likely for primary care, or any 
physicians, to want to come to rural America.  
Well, now another factor, I think, is the fact that primary care 
physicians are basically reimbursed at a lower level.  Cognitive 
medicine isn't recognized to be as valuable in dollars as technical 
practice.  I am not trying to pit one against the other because 
I have a son who is an intervention radiologist and a husband who 
is an internist, so I don't want to take sides.  
But in our newspaper today, there was a story about the need for 
primary care physicians in Wyoming, the State that I represent.  
I guess I would pose this question to Dr. Thames:  In your 
testimony you mentioned the often predicted but rarely seen 
specter of physicians refusing to see Medicare patients if rates 
do not rise.  
Now, I assume that is a nationwide picture that you are painting, 
because I know in rural Wyoming that doctors don't take Medicare 
patients anymore, for the most part.  Some do because they are 
generous and they can.  But I don't know any that refuse to see 
a Medicare patient if the patient has been in their practice a 
while.  
But are you troubled, nonetheless, by the effect of that access to 
care, due to the impending schedule of payment cuts?  Are you 
concerned about that?  
DR. THAMES.  Madam Chairman, I would have to say that my testimony 
did not address that.  But I would tell you from AARP, we are 
concerned about access to care.  I do have family practitioners, 
as I was still in practice, doing that; and they would not refuse 
to see those patients who are already their Medicare patients.  
But they would, as has been indicated, decide whether they would 
take any new ones; and if so, how many could they afford to have. 
 Now, someone who actually said that in their testimony may be 
able to identify that, may be able to answer a question 
otherwise.  
MRS. CUBIN.  Do any of you have a feeling about the reimbursement 
rate for special cognitive disabilities being reimbursed at a lower 
level than the other specialties?  Anyone who would like to respond. 
I would like to hear from Dr. Wilson.  Do you want to start?  
DR. WILSON.  Thank you, as one of them, a cognitive physician.  
MRS. CUBIN.  Right.  
DR. WILSON.  It is a different world now.  First of all, I really 
enjoy what I do.  I like being an internist.  I like seeing 
patients.  
The reality, though, of the reimbursement world now is that if I 
were starting my practice, and I had a mortgage and I was going to 
be raising children, if I were smart it would be--I would choose a 
different area of medicine to practice in.  Just the economics of 
it.  
That is one of our concerns.  And we are already seeing that in 
bright medical students who make choices other than primary care 
based in part, not solely, on reimbursement; based also on a desire 
to have a certain life-style in terms of your own time with your 
family and those kinds of things.  But they are making those 
choices.  
Our concern for the long run, and I think certainly ACP and 
Dr. Golden are on that track, is that in the long run, if medicine 
becomes even more unattractive in terms of the financial rewards 
or compensation, then these bright young people who are choosing 
medicine would then start choosing other equally good professions 
where the rewards are greater. 
DR. GOLDEN.  Let me follow up.  Can I follow up on Dr. Wilson for a 
second?  
MRS. CUBIN.  Another thing that weighs in on your point, I think, is 
that in rural areas, primary care physicians don't have someone to 
take calls for them, and so the quality of life for their family is 
really difficult.  
Dr. Golden. 
DR. GOLDEN.  Yes, very quickly.  One of the things we have seen is 
that the office visit has changed.  We get paid in primary care for 
when you are in the office.  Increasingly, a lot of activity is 
between visits.  We have no--there is no incentive to do e-mails, 
to follow up and see if Mrs. Jones is taking her medicine, so it is 
hard to do continuity in that regard and do outreach.  
The other piece is that we can talk about access now, the 
attractiveness of the career has really deteriorated.  We are 
talking 5 or 10 years from now--in internal medicine, in my program 
in Arkansas, we used to graduate eight or nine residents a year who 
would go into office practice.  We are now graduating one.  This 
is international graduates and American graduates.  
So we are not building my replacement for the future while the 
population is aging.  This is going to be a big problem in the 
very near future.  
MRS. CUBIN.  That is right.  
Dr. Martin. 
DR. MARTIN.  But at the same time, I want to also recognize the RUC 
Committee of the AMA who did review the cognitive value of our 
office visits and have made the recommendations which should be 
approved by CMS to increase some of the payment for cognitive value 
for our visits.  Some of the codes may be going up as high as 37 
percent on the physician work component.  There is some 
recognition there.  That was through the 5-year review--again, 
that may come up in 5 years, which may help us again.  
MRS. CUBIN.  Is that the adjustment that was made on the backs 
of the radiologists?  I heard all about that. 
DR. MARTIN.  Well, all of these adjustments have to be budget 
neutral.  So, in fact, if there is going to be a specific increased 
payment, it has got to come from someplace else.  What CMS has said 
is they will look at the work component of the physician and take 
10 percent away, so that 37 percent, for example, on level 3 E&M 
code, may be only a 34 percent in the E&M code for the physician 
work component.  That was a way that you had to take it away.  
Rather than adjust it at the conversion factor level, CMS is 
choosing to adjust it at the work level of the physician, across 
the board, of all physicians.  
MRS. CUBIN.  Dr. Russell.  
DR. RUSSELL.  Thank you very much.  After practicing surgery in San 
Francisco for 30 years, there is a lot of cognition in surgery, 
too; it is not all just technical. 
MRS. CUBIN.  Sure.  
DR. RUSSELL.  You get referred some difficult cases that you ought 
to think through whether you ought to even do the surgery or not.  
So it is not black and white on this issue.  
MRS. CUBIN.  No, issues never are.  
DR. RUSSELL.  Yes, exactly.  Also, having a daughter in medical 
school now, which I am extremely pleased about, the reimbursement 
is very, very important as far as what direction people take.  
Because I am sure, as you all know, people are finishing medical 
school now with about $150,000 in debt, and there is no question 
that what you are setting up today with reimbursement policies 
is going to have a real effect on the workforce 5, 10 or so years 
from now.  
I think what Dr. Golden has experienced is a very real thing.  It 
makes me wonder about primary care and who will be doing primary 
care in the future.  Will it be physicians or will it be nurses 
or physician assistants?  So this is a very important issue which 
you are considering.  It has long-term implications.  
MRS. CUBIN.  Dr. Weida.  
DR. WEIDA.  Yes.  The RUC update certainly is well appreciated by 
family medicine, and we appreciate all colleagues who participated 
in that process.  But I think part of the solution to what you are 
asking about goes back to the creation of the personal medical 
home and having payment for the personal medical home based on a 
per month, per member--per-member, per-month reimbursement.  
Because that takes it out of this, you know, fight of one 
specialty versus another, but puts it in the realm of providing 
service to the Medicare patients that can extend just beyond a 
visit.  Because a current CPT coding is primarily visit-based 
coding.  It is not care-based.  
I think if we have a personal medical home and a payment system 
that reimburses that, that then provides incentives to really expand 
the care to the elderly.  Because for many elderly, transportation 
to an office is an issue.  This way we can start looking at 
electronic communication and really be very helpful and take the 
 care to where the home is and to where the patient is.  So I 
really think that is a critical piece, if you are looking at 
redesigning the future, that really makes an impact.  
MRS. CUBIN.  Thank you. 
DR. MORRIS.  One more, please.  
MRS. CUBIN.  Yes. 
DR. MORRIS.  Thank you for recognizing me.  I just wanted to say in 
that same vein, that one of the reasons primary care is important 
in our organization is because our doctors are twice as likely to 
go into primary care.  African physicians and minority physicians 
are twice as likely to go into primary care than other groups in 
this country, and we are five times more likely to go to 
underserved communities to serve those communities.  
So I think increasing the number of African American and minority 
physicians in this country is another strategy that was used back 
in the 1960s to increase the number of physicians in this country 
in primary care.  
MRS. CUBIN.  Well, Wyoming needs you both for the reason that you 
just mentioned, but also because we need more minorities, 
seriously.  
I thank you.  Now, if the panel would like to do a second round I 
would be willing to stay for that.  Do you have time?  
DR. ELSTON.  This is important to us.  We will take whatever time 
it takes.  
MRS. CUBIN.  By the way, Dr. Burgess had a question that he wanted 
me to ask.  He would like to know your opinions regarding silos, 
funding silos in Medicare.  He would like to ask you to respond 
to that in writing to his office, if you would do that.  
The record will remain open for 7 legislative days.  So that is 
going to be quite a while, since we will be leaving tomorrow.  
Anyway, he would appreciate that response.  
If the panel has time for one more, I won't ask any further 
questions.  Lois, did you have any further?  
MS. CAPPS.  I was actually very interested in this round--that you 
were initiating to my colleague, Barbara Cubin.  The underserved 
areas and the rural areas have been a big source of concern for 
many of us who have large populations where the reimbursement 
formulas are way, way out of whack.  We are seeing difficulty 
with primary care physicians who will take Medicare, or going out 
of medicine, transferring to a different setting like a prison or 
some kind of institution.  
You know the heart and soul of medical practice is the doctor's 
office or clinic and whoever is providing it, because the number 
of people in acute care, there is only a certain percentage at a 
certain time in their life.  
If we are really going to talk about delivering health care, we will 
have to talk about you folks, Dr. Weida and others, in attracting 
people to rural areas.  
I think that is a whole different topic for discussion.  Certainly, 
I would urge that Mr. Deal be convinced that we have a hearing, 
with all of you coming back and going into this other area.  
We have to catch up to the 21st century of where medicine should 
be.  One of the things really is the cuts in Medicare that is 
primary.  We all know we need to do that.  That was why I was 
rather impatient in the beginning, but there is so much else 
that you all are so good at expressing that we should really 
listen to.  
We need to have this follow-up, particularly with Wyoming and rural 
America at the heart and soul--not that it is just there--there are 
urban areas, underserved areas, minority communities have the same 
problem.  There is no area that is actually immune to this now.  
I think we are seeing a train wreck coming with the aging 
population.  
MRS. CUBIN.  Thank you.  Dr. Elston.  
MS. CAPPS.  I started something.  
MRS. CUBIN.  That is okay.  I would like to give you the opportunity 
to close.  
Dr. Elston.  
DR. ELSTON.  We are a rural State.  I practice in a very rural area.  
We have an aging demographic.  We are, I believe, the oldest State 
per capita in the Nation right now.  And, absolutely, the 
reimbursement is driving physicians--making it very difficult for 
them to return to rural areas after their training.  
I am here today representing the Alliance of Specialty Medicine, 
and you raised the question about cognitive and the concern for 
people not going into primary care fields.  We share the concern 
as well.  It is a concern for all of us.  It really scares me 
who is going to take care--who will be the internists in the 
next generation.  
We share concern for patient care, and the issues of reimbursement 
and fair and equitable reimbursement affect every one of us and 
our patients.  
MRS. CUBIN.  Dr. Martin. 
DR. MARTIN.  I would like to make a comment both from my 
organization, the American Osteopathic Association, as well as for 
my State, the State of Ohio.  I mentioned that we had 59,000 members 
in the American Osteopathic Association.  Of those 59,000 members, 
25,000 of those are in primary care, and specifically the American 
College of Osteopathic family physicians, so we have got 25,000 
family physicians.  
It has been the tenet of the Osteopathic Association to set up 
schools in rural areas and develop physicians who will go to the 
rural areas to practice an in underserved areas.  
I can tell you also in our State of Ohio, the Ohio University 
College of Osteopathic Medicine, the tenet for its starting was 
basically to provide physicians to serve those underserved rural 
areas.  
We always used to always graduate--so I am talking about 5 years 
ago, not a long time ago, 70 percent of our people would go into 
primary care.  That would be family practice, internal medicine, 
pediatrics, or OB/gynecology.  I will use the Federal definition 
of all four.  
Now the proportion has dropped to under 50 percent.  So the rural 
areas, those underserved areas that the osteopathic professionals 
provided physicians for, we are no longer getting those 
physicians, or the interest in those students who are coming 
through to go into those areas.  
Again, a lot of it has to do with what other panelists brought up, 
with the debt these people are coming out of school with; what 
are the proportions of payment that they will receive in future 
years.  
I do want you to make consideration for that so we do, in fact, 
take care of those areas that are rural, underserved.  
Thank you.  
MRS. CUBIN.  The reasons that you discussed are exactly the reasons 
that my son first chose to go into radiology.  Then he said, Mom, 
I have got to be somebody's doctor.  Then he decided to give up 
the quality-of-life issues and go into the interventional aspect 
of it.  
But I would like to ask one thing to help me convince Chairman Deal 
that this might be the subject of another hearing, although he 
will never let me have the gavel again, since I have done this.  
Is there anyone who thinks that the issue we have just been 
discussing wouldn't be worthy of it?  Or how many think it would 
be worthy of a hearing on its own?  Thank you.  
As I stated earlier, the legislative record will be held open for 
7 days, and we would respectfully request that you answer any 
further questions that committee members have to submit to you.  
Thank you so much for being here and being patient with us.  
The hearing is adjourned.  
[Whereupon, at 4:48 p.m., the subcommittee was adjourned.] 


1 2006 Annual Report of the Boards of Trustees of the Federal 
Hospital Insurance and Federal Supplementary Medical Insurance. 
April 2006. Pgs. 135-136.  http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2006.pdf 
1 Institute of Medicine, op. cit., page 117. 
2 Crosson, Francis J. "The Delivery System Matters."  Health 
Affairs 24:6 (Nov/Dec 2005):  1543-1548. 
3 Meyer, Kobb, Ryan, "Virtually Healthy: Chronic Disease Management 
in the Home", Disease Management 5:2 (2002). 

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