- MEDICARE PHYSICIAN PAYMENTS: 2007 AND BEYOND

[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

Available via the World Wide Web: http://www.access.gpo.gov/
congress/house

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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).