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



                                                        S. Hrg. 109-680
 
     THE NEXT GENERATION OF HEALTH INFORMATION TOOLS FOR CONSUMERS

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

                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 10, 2006

                               __________

          Printed for the use of the Joint Economic Committee




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                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

HOUSE OF REPRESENTATIVES             SENATE
Jim Saxton, New Jersey, Chairman     Robert F. Bennett, Utah, Vice 
Paul Ryan, Wisconsin                     Chairman
Phil English, Pennsylvania           Sam Brownback, Kansas
Ron Paul, Texas                      John Sununu, New Hampshire
Kevin Brady, Texas                   Jim DeMint, South Carolina
Thaddeus G. McCotter, Michigan       Jeff Sessions, Alabama
Carolyn B. Maloney, New York         John Cornyn, Texas
Maurice D. Hinchey, New York         Jack Reed, Rhode Island
Loretta Sanchez,  California         Edward M. Kennedy, Massachusetts
Elijah Cummings, Maryland            Paul S. Sarbanes, Maryland
                                     Jeff Bingaman, New Mexico

               Christopher J. Frenze, Executive Director
                  Chad Stone, Minority Staff Director


                            C O N T E N T S

                              ----------                              

                      Opening Statement of Members

Hon. Robert F. Bennett, Vice Chairman, a U.S. Senator from Utah..     1
Hon. Carolyn B. Maloney, a U.S. Representative from New York.....     3

                               Witnesses

Statement of Carolyn M. Clancy, M.D., Director, Agency for 
  Healthcare Research and Quality, Rockville, Maryland...........     4
Statement of Arnold Milstein, MD, MPH, Medical Director, Pacific 
  Business Group on Health; Worldwide Partner, Mercer Human 
  Resource Consulting, San Francisco, California.................     6
Statement of Michael D. Parkinson, M.D., MPH, Executive Vice 
  President and Chief Health and Medical Officer, Lumenos, 
  Alexandria, Virginia...........................................     8
Statement of Paul Ginsburg, Ph.D., President, Center for Studying 
  Health System Change, Washington, DC...........................     9
Statement of Walton J. Francis, MA, MPA, MPP, Author and 
  Independent Consultant, Fairfax, Virginia......................    23
Statement of Donald W. Kemper, MPH, Chairman and CEO, Healthwise, 
  Inc., Boise, Idaho.............................................    25
Statement of Douglas G. Cave, Ph.D., MPH, President, Cave 
  Consulting Group, Foster City, California......................    26

                       Submissions for the Record

Prepared statement of Senator Robert F. Bennett, Vice Chairman...    34
Prepared statement of Representative Carolyn B. Maloney..........    36
Prepared statement of Carolyn M. Clancy, M.D., Director, Agency 
  for Healthcare Research and Quality, Rockville, Maryland.......    38
Prepared statement of Arnold Milstein, MD, MPH, Medical Director, 
  Pacific Business Group on Health; Worldwide Partner, Mercer 
  Human Resource Consulting, San Francisco, California...........    45
Prepared statement of Michael D. Parkinson, M.D., MPH, Executive 
  Vice President and Chief Health and Medical Officer, Lumenos, 
  Alexandria, Virginia...........................................    62
Prepared statement of Paul Ginsburg, Ph.D., President, Center for 
  Studying Health System Change, Washington, DC..................    67
Prepared statement of Walton J. Francis, MA, MPA, MPP, Author and 
  Independent Consultant, Fairfax, Virginia......................    72
Prepared statement of Donald W. Kemper, MPH, Chairman and CEO, 
  Healthwise, Inc., Boise, Idaho.................................    81
Prepared statement of Douglas G. Cave, Ph.D., MPH, President, 
  Cave Consulting Group, Foster City, California.................    96


     THE NEXT GENERATION OF HEALTH INFORMATION TOOLS FOR CONSUMERS

                              ----------                              


                        WEDNESDAY, MAY 10, 2006

             Congress of the United States,
                          Joint Economic Committee,
                                                    Washington, DC.
    The Committee met at 10 a.m., in room 106 of the Dirksen 
Senate Office Building, the Honorable Robert F. Bennett (Vice 
Chairman of the Committee) presiding.
    Senators present: Senator Bennett.
    Representatives present: Representatives Maloney, Sanchez, 
and Cummings.
    Staff members present: Tom Miller, Jeff Schlagenhauf, 
Colleen Healy, Katie Jones, Daniel Dowler, Chad Stone, and John 
McInerney.

         OPENING STATEMENT OF HON. ROBERT F. BENNETT, 
            VICE CHAIRMAN, A U.S. SENATOR FROM UTAH

    Chairman Bennett. The Committee will come to order. We're 
expecting some Members of the House to join us fairly quickly, 
but we will move ahead in respect to the witnesses and their 
willingness to be with us and to share their expertise.
    We welcome you all to this hearing on the next generation 
of health information tools for consumers. We need to provide 
health care consumers, employee plan sponsors, doctors, 
hospital administrators, and health care program administrators 
with better information to improve their choices and 
decisionmaking.
    I sit on the Banking Committee where we're always using the 
word transparency, and talking about the importance of 
transparency in capital markets. Well, we need transparency in 
health care choices. I remember the time, which I hope is past 
now, when policymakers would say: Customers are not intelligent 
enough to make decisions with health care. They are at the 
mercy of providers, because they don't have the education, the 
background, the understanding of science that can allow them to 
make intelligent decisions. So they simply take whatever the 
provider or the payment administrator decides is the best 
decision.
    We're in ``Health Care Week'' in the Senate right now, 
discussing health care issues. This is a logical time to 
examine the current and future state of health information. 
That's essential to improve our current health care 
arrangements, whether we're talking about consumer-driven 
health plans or health savings accounts, traditional employer-
sponsored plans, Medicare, Medicaid, charitable care, or 
concierge care; cash payment at the moment of service. Whatever 
it is, we need better information; more transparency, to use 
the capital market's word, with respect to our health care 
choices.
    We need information about price, quality and value of 
health care options as well as support tools to assist and 
improve decisionmaking all across the board. We may differ in 
how much information we wish to or can absorb, but something 
more than what we currently have is available is better for 
just about all of us.
    Now, neither stronger financial incentives to consumers nor 
top-down efforts to re-engineer health care delivery will by 
themselves be able to change the future trends without better 
information.
    We've witnessed the transformative power of better 
information in other parts of the economy. Information 
technology is king in such mundane areas as retailing. Health 
care need not continue to be a lagging exception with respect 
to the importance of information technology.
    So today's hearing will go into this area, and we have two 
panels, of whom we're very proud and to whom we're very 
grateful.
    Our first panel of witnesses includes Dr. Carolyn Clancy, 
who directs the Agency for Healthcare Research and Quality, and 
they're at the forefront of coordinating public and private 
efforts to improve the data measurement, aggregation, and 
reporting activities that can produce more valuable and 
actionable consumer health information.
    Then we have Dr. Arnold Milstein, who is the medical 
director of the Pacific Business Group on Health and the U.S. 
Health Care Thought Leader at Mercer Health & Benefits.
    He heads performance measurement activities for both the 
Leapfrog Group and the Consumer-Purchaser Disclosure Project 
and is a MedPAC Commissioner.
    I like somebody with a scientific background who embraces 
the name of the Leapfrog Group. It shows a little bit of 
flexibility.
    Dr. Michael Parkinson is executive vice president and chief 
health and medical officer for Lumenos, one of the country's 
leading providers of consumer-driven health care. And the 
company's goal is to improve consumers' health outcomes and 
achieve long-term cost efficiency for employers that sponsor 
health plans.
    Paul Ginsburg is an economist and president of the Center 
for Studying Health System Change. HSC's main research tool is 
the Community Tracking Study, which consists of national 
surveys of households and physicians in 60 nationally 
representative communities across the country and site visits 
to 12 of these communities.
    So that will be our first panel. I'll introduce the members 
of our second panel when we're through with the first panel, 
but we express gratitude for you all for your willingness to 
come share your insights here. Now we've been joined by Mrs. 
Maloney from the House, and we're happy to have her for 
whatever opening statement she might wish to make.
    [The prepared statement of Senator Robert F. Bennett 
appears in the Submissions for the Record on page 34.]

         OPENING STATEMENT OF HON. CAROLYN B. MALONEY, 
              A U.S. REPRESENTATIVE FROM NEW YORK

    Representative Maloney. I thank the Senator for calling 
this hearing; thank you so much, Senator Bennett, and I want to 
thank you for holding this hearing on health information tools 
for consumers, and I want to welcome our panels of experts and 
thank them all for testifying today.
    I think the Joint Economic Committee has an important role 
to play in looking at ways that markets for all kinds of goods 
and services can serve consumers, and health care is certainly 
a market that Americans would like to see work better. They 
would like to be sure that they can get affordable health 
insurance and high quality medical care. I think we would all 
agree that more and better health care information is good for 
everyone and is part of the solution to improving the 
performance of the health care market.
    But I would also like to strike a cautionary note. A large 
fraction of medical expenses are accounted for by a small 
percentage of people, and many of those expenses are incurred 
in situations that are largely divorced from normal economizing 
behavior. So I worry that the benefits from better information, 
while real, are often oversold. Better information and 
increased transparency may help people make some routine 
medical decisions more wisely, but they are not likely to 
significantly affect the overall costs of health care or make 
much of a dent in the number of people without health 
insurance.
    I also think we have to be sensitive to privacy issues when 
we talk about making vastly more information available. Those 
pushing hardest for greater information appear to be those who 
are particularly enamored of the ``consumer-driven'' approach 
to health care with its emphasis on high-deductible health 
insurance and tax-sheltered health savings accounts.
    The President's push for consumer-driven health care would 
shift more costs onto individuals, while creating additional 
tax incentives for high-deductible insurance and HSAs that 
ordinary families will have little opportunity to use. High 
deductible plans don't reduce costs or cover the uninsured, but 
they do have a tendency to discourage people from using health 
care services.
    Consumer-driven health plans rely on consumers to obtain 
reliable information on treatment choices, quality, and charges 
by providers. But the concept of ``empowering'' consumers to 
make cost-conscious choices about their health care decisions 
is misleading, because purchasing health care is not like 
buying a car or a washing machine. You simply don't have a lot 
of time to shop for a doctor when your appendix bursts. Health 
care needs are often unanticipated, and patients rely on their 
doctors' expertise to guide their medical decisions.
    Finally, for years we have heard that our information 
technology systems are inadequate, and that patients die 
because of mistakes that could have been corrected if we had 
better technology and record keeping. Clearly government and 
the private sector have a responsibility to close the 
information gaps that are affecting the health of or having a 
life or death impact on Americans.
    I look very much forward to the testimony, as always, and 
to your comments, Senator. Thank you.
    [The prepared statement of Representative Carolyn B. 
Maloney appears in the Submissions for the Record on page 36.]
    Chairman Bennett. Thank you very much.
    Dr. Clancy, we'll begin with you.

        STATEMENT OF CAROLYN M. CLANCY, M.D., DIRECTOR, 
          AGENCY FOR HEALTHCARE RESEARCH AND QUALITY, 
                      ROCKVILLE, MARYLAND

    Dr. Clancy. Good morning, Mr. Chairman, Representative 
Maloney. I ask that my written statement be entered into the 
official record.
    Chairman Bennett. Without objection.
    Dr. Clancy. Mr. Chairman, before I deliver my prepared 
remarks, I'd like to ask you and Representative Maloney, as 
well as my fellow witnesses and members of the audience, to 
raise their hands if you've looked for information about health 
or health care quality on the Internet, in the library, or from 
any other source.
    [Show of hands.]
    And to keep your hands up if the information was what you 
needed.
    [No hands.]
    I usually begin speeches by posing those two questions to 
the audience, and unfailingly, the number of people who look 
for information vastly exceeds the number who find what they 
need. This has to change, and I commend you, Mr. Chairman, for 
recognizing the significance of engaging consumers in their 
health care, and for holding this hearing.
    I don't think I can overemphasize Secretary Leavitt's and 
HHS's commitment to ensuring that all Americans can easily 
obtain understandable information about the quality and price 
of health care. To realize this vision, Secretary Leavitt has 
articulated four strategies for achieving this goal: Promoting 
quality transparency, promoting price transparency, 
facilitating the greater use of health information technology, 
and transforming health care so its incentives support a 
consumer-oriented or patient-focused healthcare system.
    My written testimony goes into great detail in how the 
Agency for Healthcare Research and Quality, working in 
partnership with the public and private sectors, is working on 
those strategies.
    Consumers make two types of decisions. The first that we're 
calling marketplace decisions, for example, involves selecting 
a health plan, a clinician, a hospital, or a long-term care 
facility.
    The second are decisions that patients and their caregivers 
must make among alternative treatments in the management of 
clinical conditions. Both types of decisions require unbiased, 
reliable, and science-based information that's user-friendly 
and readily accessible. AHRQ has a long track record of 
providing information to consumers and other purchasers, and 
I'd like to highlight three lessons that we've learned in our 
efforts.
    The first lesson is that informed choice only occurs when 
consumers can assess the value of a health care good or 
service, and consumers can only assess value when they have 
information on both price and quality.
    Research has demonstrated that the highest quality 
providers are often not the most expensive. Therefore, 
consumers and purchasers need to have both types of information 
to make an informed choice.
    I'd like to also note that there are other elements in 
consumer choice. We all know that we make decisions based on 
other factors such as personal preferences, tolerance for risk 
or uncertainty, unique circumstances, and the assessment of 
acceptable trade-offs. However, it's important to have a 
foundation of objective scientific facts for all decisions.
    The second lesson is that transparency is critical for 
enhancing consumer choice and improving competitiveness. 
Research sponsored by my Agency clearly demonstrates that where 
the message comes from makes a profound difference. If you 
think about what many people do when they make a major purchase 
like a car or appliance, they turn to a source like Consumer 
Reports, which is a trusted source of unbiased information that 
reviews the quality and value of a product based upon 
independent testing.
    We need to create a similar, unbiased, trusted source of 
information for health care services. This is particularly 
important now as consumers need to make more decisions about 
their health and health care, and they grow increasingly 
skeptical of the vast and growing array of information 
available to them on the Internet and other sources.
    The final lesson is that we simply can't assume that 
providing information is enough. In that well known movie, The 
Field of Dreams, the refrain was, ``If you build it, they will 
come.'' That's not true for health care information.
    Assuming that consumers and patients will come and get the 
information isn't enough. We must ensure that information is 
available when and where consumers need it, and we also need to 
help make them aware that information can help them get better 
health care and play a more active role in their health and 
health care.
    The best information for consumer choices needs to be 
linked with decisions under patients' control. For example, 
elective admissions to the hospital, questions they should ask, 
and other steps that they can take to improve a health care 
encounter.
    In a strange way, the problem we're facing is not a lack of 
information. As the title of this hearing suggests, Mr. 
Chairman, the need is for information that is pulled together 
so that alternatives can easily be compared, easily understood, 
and easily acted upon.
    And finally, we need to make sure that that information is 
easily understandable. Our research has shown that some 90 
million adults have lower than average reading skills, or low 
health literacy, and are less likely than other Americans to 
get potentially life-saving screening tests such as mammograms 
and pap smears, flu and pneumonia vaccines, and to take their 
children for well child care visits.
    The bottom line is, we can't possibly get to better value 
in health care without the full engagement and participation of 
consumers. They need to play an active role in their own health 
and health care, and make informed choices about providers and 
treatments.
    Thank you for your attention, and I'd be happy to answer 
any questions.
    [The prepared statement of Dr. Clancy appears in the 
Submissions for the Record on page 38.]
    Chairman Bennett. Dr. Milstein.

       STATEMENT OF ARNOLD MILSTEIN, M.D., MPH, MEDICAL 
DIRECTOR, PACIFIC BUSINESS GROUP ON HEALTH; WORLDWIDE PARTNER, 
      MERCER HUMAN RESOURCE CONSULTING, SAN FRANCISCO, CA

    Dr. Milstein. Last fall's National Academy of Sciences 
report on the U.S. health care system estimated that 30 to 40 
percent of health care spending is what they described as 
waste. Many of the large employers and labor unions with which 
I work believe that estimate may be low.
    Much of this waste could be eliminated by enabling the 
identification and reward of physicians who demonstrate more 
affordable patterns of resource use and favorable quality. Over 
the past 10 years, methods have been developed to measure, for 
individual physicians in most medical specialties, both average 
total cost of health care resource use per treatment, which 
I'll refer to as relative affordability, and quality of care.
    Though criticized by some as imprecise, pioneering 
employers, labor unions and insurers that have used these 
methods have lowered their per capita spending by 2 to 17 
percentage points compared to other regional payers without 
lowering quality of care scores.
    Any payer can generate these measures from health insurance 
claims data, via off-the-shelf software. Measurements 
demonstrate that at all levels of measured quality, physicians 
in the same specialty and in the same community vary up to 
2 in their average total cost of resources used per 
treatment, as demonstrated via the chart on the easel.
    Chairman Bennett. Let me give you a little extra time, and 
ask you to walk through the easel. I have seen it close up, but 
I think the people in the audience probably don't get it from 
just having you refer to it in that fashion.
    So can you take a few minutes to walk through that?
    Dr. Milstein. Certainly, Mr. Chairman.
    Chairman Bennett. We'll put it back on your clock.
    Dr. Milstein. Thank you.
    On the easel is an exhibit that was commissioned jointly by 
the Boeing Company and the Machinists Union, who are working 
collaboratively to manage health care costs and quality in the 
markets in which Boeing has many workers.
    This is a study that they commissioned that was implemented 
by Regence Blue Shield in the Puget Sound area.
    In essence, this displays physician performance on two 
dimensions. The vertical dimension is the quality of care 
dimension.
    Chairman Bennett. So everything above the line is good.
    Dr. Milstein. Right, above the dark line is defined as 
upper half quality of care, meaning relatively high rate of 
compliance with evidence-based scientific guidelines for health 
care. The horizontal axis is analogous to miles per gallon 
consumption of health insurance fuel. And the way it's laid out 
is, as you move from left to right, there is less total 
spending per episode of treatment.
    Chairman Bennett. So if you're on the left side of the 
line, you're cheaper?
    Dr. Milstein. Your fees may or may not be cheaper, but the 
total amount of health insurance fuel burned per treatment is 
less. It is not counting just physician fees.
    Chairman Bennett. So I want to be above the line for 
quality and to the left of the line for price?
    Dr. Milstein. You want to be to the right of the line for 
total resources expended. The far left side is the equivalent 
of burning 10 miles per gallon of health insurance fuel, and 
the right side of the line is 30 miles per gallon of health 
insurance fuel.
    Chairman Bennett. OK, so I want to be on the right side of 
the line, and as high as possible.
    Dr. Milstein. Yes, in the Northeast quadrant.
    Chairman Bennett. The Northeast quadrant.
    And all of the little dots clustered around the cross are 
all of the doctors in Seattle?
    Dr. Milstein. Like most health insurers, Regence Blue 
Shield, even though it is the largest insurer in that region, 
only had enough data to characterize the performance of about 
40 percent of the doctors. It's a 40 percent sample of doctors.
    Chairman Bennett. You've got a 40 percent sample, and 
you've got as many doctors in each quadrant.
    Dr. Milstein. Yes.
    Chairman Bennett. So you've got doctors that are giving you 
high quality and good value for your money in the Northeast 
quadrant----
    Dr. Milstein. Correct.
    Chairman Bennett [continuing.] And just as many who are 
giving you low quality but high price in the Southwest 
quadrant.
    Dr. Milstein. Correct.
    Chairman Bennett. And as far as the individual is concerned 
or the employer is concerned, without this information a doctor 
is a doctor is a doctor.
    Dr. Milstein. Correct. And I would also say from the 
perspective of physicians, a doctor is a doctor is a doctor. 
The physicians themselves, before this profile, did not have 
any information telling them where they stood in their 
community of peers.
    Chairman Bennett. OK. Thank you. I appreciate your walking 
through that, because I think this is a stunning piece of 
research that informs what we're talking about at the hearing.
    Now you can go back, and let's put another three, three and 
a half minutes back on Dr. Milstein's clock, because I'm the 
one who burned up his time with that. But thank you for making 
that figure clear for us.
    Dr. Milstein. Thank you, Mr. Chairman.
    Most private payers lack a sufficient volume of claims data 
to make valid comparisons for even half of a region's 
physicians, as I mentioned was the case in this particular 
example in Seattle.
    Medicare could remove this barrier. The key is adding a new 
permitted routine use of the 100 percent Medicare claims data 
file. Such a routine use would enable requestors to access a 
beneficiary-anonymized form of the data file, specifically for 
the purpose of producing physician performance measures by 
combining claims data pertaining to multiple beneficiaries.
    Americans already have relative affordability, or what some 
people would refer to as ``total cost of ownership'' measures 
for appliances and for automobiles. But not for physicians, 
whose patterns of resource use consume a much greater share of 
American income.
    If routinely paired with quality of care measures, such 
physician relative affordability measures would comprise a new 
navigational system by which patients, physicians, and health 
benefits sponsors can lower health care spending growth rates 
for all payers, including Medicare, while improving quality of 
care.
    Physician performance measures can be used to inform 
physicians, to engage consumers, to set payment policy or to 
set consumer cost-sharing. They can also send a pivotal 
upstream signal to new biomedical technology developers, that 
innovations will be judged not only on their unit price and 
clinical effectiveness, but also on their contribution to 
lowering total health care spending growth.
    Thank you for the opportunity to describe how Medicare can 
speed the private sector's removal of large, but currently 
invisible inefficiencies in American health care delivery, and 
foster the emergence of a better, faster and leaner American 
health care system.
    [The prepared statement of Dr. Milstein appears in the 
Submissions for the Record on page 45.]
    Chairman Bennett. Thank you very much.
    Dr. Parkinson.

 STATEMENT OF MICHAEL D. PARKINSON, M.D., MPH, EXECUTIVE VICE 
   PRESIDENT AND CHIEF HEALTH AND MEDICAL OFFICER, LUMENOS, 
                      ALEXANDRIA, VIRGINIA

    Dr. Parkinson. Good morning, Mr. Chairman, Mrs. Maloney.
    I want to thank you for the opportunity to testify today. 
My name is Mike Parkinson, I'm Chief Health and Medical Officer 
for Lumenos, a pioneer in consumer-driven health care and a 
subsidiary of WellPoint.
    My comments today are based on nearly 5 years of experience 
with self-insured employers, and direct feedback from consumers 
and patients enrolled in our consumer-driven plans.
    At Lumenos, we created an integrated and incentivized 
health improvement strategy, targeted at the major drivers of 
excessive health care costs, with a particular emphasis on 
those with chronic illness. In fact, 25 percent of our 
employers are full replacement clients, meaning that they only 
offer HRAs or HSAs account-based programs to their employees.
    In general, consumers and employers are highly satisfied 
with the current information, tools and supports that Lumenos 
provides. Year over year, both employers and consumers are 
seeking more specific and actionable information about the cost 
and quality of medical services.
    To Carolyn's point, however, reinforcement of why the 
information is important, how to access it, how to engage to 
better manage one's care; for example, health coaching, and how 
to use it in concert with one's physicians are likely more 
important than the availability, or in some cases, the 
specificity and accuracy of the data itself.
    Quality efforts to date have concentrated on plan and 
provider administrative data rather than on consumer and 
patient knowledge, competencies and decisionmaking arising from 
better information and a partnering patient-physician 
relationship.
    Defining generic and disease-specific qualities associated 
with effective and efficient medical services, and creating 
standardized patient surveys would be of great value in 
increasing the engagement of patients and improving the 
marketplace of patient-relevant information for provider 
choice.
    Providing cost data will become progressively more 
granular, and transparent pricing by plans, providers, and 
facilities will increase. The release of fee schedules for 
selected Medicare services and the institution of transparency 
requirements for Federal health and benefits programs will 
impact both the direction and pace of cost transparency.
    Consumer-driven care will accelerate clinical and business 
practice innovation. The provider community is showing evidence 
of welcoming such innovation, and in some instances is calling 
for wholesale reform of delivery and financing models.
    Translating and publicizing the health and cost advantages 
of patient-centric innovations will accelerate their adoption.
    Consumers and patients will increasingly understand the 
quality and safety value of health information technology. 
Deployment of information technology could become a key 
provider, market differentiator, and quality cost metric. 
Acceleration of national technology standards for information 
and interoperability is urgently needed to promote widespread 
dissemination and decreased price.
    As consumer information on quality and cost of services 
becomes more transparent, cost shifting, inexplainable cost 
differentials, and inefficient clinical and business practices, 
will become more apparent. Health policy and societal 
questions, which have been known and discussed for years, will 
become much more visible to all stakeholders and hard decisions 
will likely have to be made about the appropriate role of the 
private market sector versus the government funded public 
sector in financing and delivering of health care.
    Thank you very much, and I look forward to your comments 
and questions in the follow up.
    [The prepared statement of Dr. Parkinson appears in the 
Submissions for the Record on page 62.]
    Chairman Bennett. Thank you, sir.
    Dr. Ginsburg.

   STATEMENT OF PAUL GINSBURG, Ph.D., PRESIDENT, CENTER FOR 
         STUDYING HEALTH SYSTEM CHANGE, WASHINGTON, DC

    Dr. Ginsburg. Mr. Chairman, Representative Maloney, and 
Members of the Committee, thank you for the invitation to 
testify at this hearing.
    My organization, the Center for Studying Health System 
Change, is an independent, nonpartisan health policy research 
organization, funded principally by the Robert Wood Johnson 
Foundation, and affiliated with Mathematica Policy Research. 
Its mission is to provide policymakers with objective and 
timely research on developments in health care financing and 
delivery and their impacts on people.
    My statement makes four key points: First, engaging 
consumers to be more aware of cost and quality issues in health 
care has the potential to increase the value of health care. 
And by value, I mean a superior combination of cost and 
quality, not only for the individual patients who use this 
information, but for the U.S. population as a whole.
    I believe the greatest opportunities involve incentives for 
consumers to choose higher value providers, which in turn will 
motivate providers to increase value. Unfortunately, some are 
overselling the potential for progress in this area.
    As Representative Maloney pointed out, many services are 
too complex or urgent for effective shopping by consumers. 
Those patients responsible for the bulk of health care spending 
in any given year are often beyond the reach of patient 
financial incentives in typical consumer-driven benefit 
structures.
    Realizing the potential in this direction will require a 
long-term investment that collects and translates meaningful 
consumer price and quality information, and the development of 
innovative benefit structures that can improve on large 
deductibles.
    Even if the potential is reached, however, empowered 
consumers alone are not the hoped-for silver bullet to solve 
the health care cost crisis facing this country.
    I want to point out that health plans will play a key role 
in consumer shopping for price and quality. The health plan has 
long been a powerful asset for both enrollees and purchasers; 
they negotiate substantial discounts with providers, and as 
benefit structures change to put more emphasis on price and 
quality comparisons, insurers will compete on innovation and 
tools to increase plan value to consumers.
    Insurers basically have the potential to employ their 
formidable data and analysis resources to translate complex 
information on price and quality into something that's more 
usable by consumers. But without the support of insurers, there 
are practical limitations on the ability and willingness of 
consumers to become savvy health care shoppers.
    We've studied the consumer experience in self-pay markets, 
and find that the experience has been romanticized by some 
advocates of consumerism in health care. Of the markets we've 
looked at, price shopping exists only for Lasix services, and 
there's little information on quality in any of these markets 
other than word of mouth recommendations.
    Finally, I'd like to discuss the role of government. I 
believe the greatest opportunity for government in promoting 
consumer choice is in the areas of information on provider 
quality and the funding of research on medical effectiveness. I 
believe there's less potential in providing price information 
directly to consumers.
    I'm very optimistic about the potential of Medicare's 
voluntary program for hospital quality reporting to contribute 
valuable information for consumer choice, and to motivate 
hospitals to improve their quality.
    As Dr. Milstein has recommended, I believe that making 
Medicare Part B claims files available to insurers can 
substantially increase their ability to provide information and 
incentives to enrollees that favors physicians who are higher 
quality and more efficient.
    The Agency for Healthcare Research and Quality has 
developed an excellent reputation for funding effectiveness 
research, but funding for these activities has been extremely 
limited, especially in contrast with what the Federal 
Government currently spends on biomedical research overall.
    I look forward to answering your questions.
    [The prepared statement of Dr. Ginsburg appears in the 
Submissions for the Record on page 67.]
    Chairman Bennett. Thank you very much.
    Thank you all. I think we're going to have a worthwhile 
discussion here; and my pattern is to try to get you talking to 
each other, rather than individually talking to us, because I 
think we can have some good interaction here.
    I do have some questions, as I'm sure the other Members of 
the Committee will have other questions.
    Dr. Clancy, you emphasized price and quality. Dr. Ginsburg, 
you were a little less excited about the price thing, and the 
main benefit would come from understanding quality.
    Could you briefly either resolve that, or----
    Dr. Ginsburg. Well, sure. I think that price is equally 
important to quality. My point was that as far as what the 
government can do, I thought that the government has the 
potential to do more important things in the area of 
information on quality than it does in the area of information 
on price.
    I believe that insurers are in a very good position, with a 
lot of information on price, to really analyze that and 
translate it for their enrollees into simpler decisions.
    Chairman Bennett. OK. Yes, Dr. Clancy.
    Dr. Clancy. I would agree. Right now, though, if you think 
about it, almost all individuals who get health insurance 
through their employer, including the Federal Government, are 
facing increasing out-of-pocket costs. And those incentives are 
really clear.
    What to do with those incentives is far less clear. So for 
example, a vast majority of Americans now face tiered pharmacy 
benefit arrangements, and yet it's very difficult to find out 
information on when it's worth it to buy a brand name drug as 
opposed to using a generic. And of course the throw-away line 
is, ``Well, ask your doctor.''
    And the sad part of it is that we've begun to make some 
small dents in giving doctors the kind of information so that 
they could help patients with comparative choices, but we've 
got a long way to go.
    Chairman Bennett. Yes. Well, one underlying theme here is 
the complexity of these decisions, and so ask your doctor, ask 
your pharmacist, whatever; and the point was made by you, Dr. 
Ginsburg, that the most expensive people--there are a few 
people that take most of the money. We know that the 80/20 rule 
applies here; 80 percent of the money goes to 20 percent of the 
patients.
    My own experience, and it's entirely anecdotal, but I'd 
like to get your response to it, is that the use of this kind 
of information is generational. When I get told I have a 
problem, I go to a doctor. And if I want a second opinion, I go 
to a second doctor.
    We've recently had, within our family, a fairly serious 
medical situation arise for our daughter, who instantly went to 
the Internet. She wanted to get the information herself. And 
she was not nearly as willing to listen to a doctor. Now her 
doctor told her, ``Yes, you have this situation.'' First thing 
she did was go on the Internet and find out as much about it as 
possible.
    I have a daughter-in-law who, with one of our grandchildren 
was told, ``This child has this problem.'' The first thing she 
did was go to the Internet. The next thing she did was argue 
with the doctor, based on the information, and found another 
doctor who had a different point of view, and she very much 
took charge of this whole situation based on her inclination 
that there's information available to her.
    And frankly, in my generation, that simply would never have 
occurred to me. And when something came up with respect to my 
health, and I talked about it within the family, the kids all 
went on the Internet and they started giving me advice and 
counsel.
    Now I think we have a common theme here, in going back to 
Dr. Clancy. It would be very, very valuable if we had, quote, a 
``Consumer Reports'' close quote, for medical information, 
because I have now discovered, when I go on the Internet, I can 
get whatever I want, depending on my prejudice. I can get an 
Internet report that tells me that eating dark chocolate is 
going to be really good for me, and good for my health. And the 
Internet told me that taking 4,000 milligrams of Vitamin E 
would increase my chances of getting a heart attack, where Dr. 
Isold, the Capital physician, had prescribed 400--not 4,000, 
400.
    And I went back to Dr. Isold and he says, ``Yeah, that's 
the way medicine is. And we're now saying 200. But at the time 
that I told you 400, everybody was agreeing with 400, and now 
we're saying 200.''
    My colleague, Senator Hatch, says I should be taking 1,000, 
and I'm going to make that decision increasingly in this kind 
of world, whether the medical establishment wants me to or not.
    So we're talking about not only transparency and 
availability, but we're talking about ultimately the kind of 
thing that Dr. Milstein has put here, where you have some 
reliable measure, statistical.
    Now I want to know, if I'm Seattle, one of those dots on 
that chart is the doctor that I represent; I want to know where 
he is on the chart, or she. And I'm assuming the doctor wants 
to know. That the doctor will say, ``Oh, boy, I'm above the 
line, but I'm way over to the left. I don't want to change my 
quality, but I've got to figure out better ways to deal with 
the price.''
    And as you pointed out, the insurer wants to know. And the 
insurer then comes in and says, ``Here we are.'' I find it 
fascinating, Dr. Milstein, that your study was co-sponsored by 
Boeing the employer, and the union, both sides of the 
management-labor divide wanted to know this. Because the 
statistic that has come out that something from 30 to 40 
percent of our health care dollar is being wasted is a 
staggering wake-up call for all of us.
    If we as politicians could somehow take 30 percent out of 
the cost of Medicare, we would all be huge heroes, and we would 
solve the Nation's deficit problem overnight. We could build 
all the bridges to nowhere we wanted to build on the savings 
that would come out of that. And that's why I'm so fascinated 
by the information that you're giving us here, and I thank you 
all.
    Mrs. Maloney.
    Representative Maloney. Thank you, Mr. Chairman. I think 
your panelist really raised an important point, how the 
Internet has really changed how we view health care, and every 
consumer is on it, checking what their doctor has to say and 
comparing diagnosis and treatments with other doctors. I think 
it's a whole new phenomenon that is going to really change the 
way medicine takes place.
    I recall once a doctor told me I needed an operation, and I 
went on the Internet and read all this and determined I did not 
need it. So I think a lot of people--and then later, the entire 
medical establishment came and supported the decision that I 
had made in that particular case.
    So I think we're really in a changing way now, with the 
Internet there.
    Dr. Ginsburg, you testified earlier that one of your key 
messages is that giving consumers better information can 
provide benefits to the patients themselves, and certainly to 
the U.S. population as a whole; but that we shouldn't, to use 
your words, ``exaggerate the extent of the savings.''
    Can you elaborate on that point?
    Dr. Ginsburg. Yes. Well, even I can take off from Senator 
Bennett's discussion about, you know consumers are more 
involved in health care decisions, and it is a generational 
thing. It's not universal. You know, if you look at survey 
data, you still see lots of people not accessing health care 
information, but it's one thing to get involved in a decision 
about whether to have surgery, or whether to pursue the 
alternative treatments, but it's another to get involved in 
every detail.
    So that even if the consumer is more involved in that 
decision, let's say the consumer decides to do surgery, data 
like Dr. Milstein has presented shows that physicians vary 
greatly in the efficiency; and if his data were actually about 
a particular condition, a surgical treatment for a condition, I 
suspect that he could show that physicians vary greatly in the 
resources and the quality that they provide, when they're 
pursuing this outcome.
    So I've always thought that if we are going to engage 
consumers, that probably the most important decision on price 
and quality that consumers make is the decision about which 
provider to go with. Because even if they're making the choice 
about surgery versus something else, there are all these 
follow-through decisions which really are pretty much left to 
the physician. So that's critical.
    Representative Maloney. What if we moved more in the 
direction of consumer-driven health care with high deductible 
insurance policies and more responsibility placed on the 
consumer.
    What is the evidence that we could achieve significant cost 
savings by giving consumers incentives to be savvy health care 
shoppers?
    Again, Dr. Ginsburg, do you have any comment on that?
    Dr. Ginsburg. Yes. I think there are some studies coming 
out now on some of the early experiences with consumer-driven 
health care. Many of them are not strong methodologically, but 
I think it's clear that there are savings.
    And the issue is, if we generalize this to a broader 
population, how much are we going to get? And considering the 
fact that over a long period of time, spending per capita on 
health care rises at two and a half percentage points a year 
more rapidly than the growth of income or GDP per capita.
    You really wonder if small changes would be too much as far 
as addressing this long-term trend.
    Representative Maloney. And I'd like to ask each member of 
the panel the following question: To what extent are the 
benefits of the kinds of information tools you're talking about 
dependent on what kind of health care system we have? Are they 
as valuable within the existing system of health insurance as 
they would be if we moved to a system of much higher 
deductibles and made consumers more directly responsible for 
how much they spend on health care?
    Any comments from anyone?
    Dr. Milstein. I think the information availability that has 
been supported across-the-board by the panel would improve 
performance under any vision of the American health care 
system, whether it were continuation of what we have or 
movement to high deductible. I think giving the customer 
information on quality and what someone referred to as ``all-
in'' cost, not just what the doctor is charging, would 
favorably impact almost any vision of American health care or 
American health insurance.
    Representative Maloney. Well, that is a common theme of 
this hearing, that more information is a good thing. So my 
question is, who is opposed to the kinds of ideas we've heard 
today? Is it a matter of entrenched special interest? Or are 
there legitimate concerns that need to be taken into account in 
deciding what information should be released and in what form.
    Everyone agrees, on the panel, that more information is a 
good thing.
    Dr. Milstein. I can't speak for them, but I have a sense 
that providers are not too enthusiastic about having a lot of 
information on their performance very accessible to the public.
    And I think there's the overall issue of doing things that 
improve information on price and quality that are really 
useful, rather than just look useful. But then I suspect that 
if we're talking about major changes in information on 
providers, that they're not going to be that happy about it, 
and that's where the opposition might come from.
    Representative Maloney. So the opposition is that providers 
do not want to display what their fees are. Is that what it is, 
Dr. Milstein?
    Dr. Milstein. When I was clinically active, I would not 
have enthusiastically embraced any facet of my performance 
being publicly released. Whether it's my prices, the relative 
economy with which I use health insurance resources or my 
quality of care. If I felt it was coming my way, I would have 
insisted that it be postponed until it was better perfected, 
and as far forward in the future as possible.
    I don't think this attitude is unique among physicians. If 
you look at the revolution in restaurant hygiene in Los 
Angeles, when the Department of Health first proposed posting a 
gigantic A, B, or C on the front door of every restaurant in 
Los Angeles based on restaurant hygiene, the restaurant owners 
universally and strongly opposed it.
    But it had a very favorable impact on restaurant hygiene 
scores in Los Angeles. The car manufacturers, when J.D. Power 
first started out, were strongly opposed to their performance 
being systematically evaluated and publicly released.
    Representative Maloney. Well, you then raised the question 
of privacy. And maybe we need to pay more attention to that and 
talk more about it. For example, making information about 
patient outcomes more widely available. Obviously you've always 
heard the story, ``The operation was a great success, but the 
patient died.'' Making the outcomes more available to the 
public. Are there any comments on that and the privacy concerns 
involved?
    Dr. Clancy. This is a core part of the work, Representative 
Maloney, and we can do that without violating privacy; and are 
working very hard with the Department and also with research 
contractors who have access to very large databases and who 
have been doing this for a while, to make sure that this can be 
done in such a way that people's personal information is not 
betrayed.
    You asked a moment ago about more and more information work 
in our current health care system. I wanted to make two 
comments there. One is that if the picture that Dr. Milstein 
drew were suddenly available and you knew about physician price 
and quality, a real practical issue in today's health care 
system is: You need to know if they will take your insurance 
and if they had openings in their panel size, and so forth. 
Actually, that turns out to be a non-trivial kind of challenge.
    The other observation I would make is I don't think it's 
more and more information. It's information that's organized in 
a way that's useful and comprehensible, so that people can 
understand ``What this means for me.'' Then I think we'll see 
the value of that.
    Right now consumers in many, many plans have incentives to 
get better information. What they don't actually have is 
information that is lined up to help them make the right kinds 
of decisions, and I think we've got to get both of those 
together.
    And I don't think there's information on patient outcomes 
out there. There's some information on patient outcomes, from 
work that we support. We are now, thanks to the support from 
the Congress, actually putting out information on very common 
problems confronting the Medicare, Medicaid, and SCHIP 
populations. The first two reports are out, and they don't say 
you should do this or that; they say here's the best science we 
have, and we will update these reports as more science becomes 
available.
    So the first report was on what clinicians call GERD; 
that's gastroesophageal reflux disease; the rest of us would 
call heartburn. It focused on whether pills, and which kinds of 
pills, or surgery are better, and under what circumstances. The 
second report looked at the use of specific types of tests for 
women who've been found to have a suspicious growth on a 
mammogram; asking the question, could you avoid the need for a 
biopsy? The short answer today is No. But there will be more 
and more reports like this coming out over the coming year.
    Representative Maloney. But I mean in shopping patient 
outcomes, if you were looking for doctors who do, I don't know 
heart surgery.
    Dr. Clancy. Several states do this. And there's been much 
debate about. Is it done fairly? But there's been accumulated 
experience that makes this work.
    Some of the demonstrations that CMS is now sponsoring have 
shown that they can collect very good information on outcomes 
for patients with hip and knee replacements, very common 
procedures for the Medicare population. And other types of 
surgeries actually can be done. And I think consumers really 
would value this information.
    Representative Maloney. Thank you. My time is up.
    Chairman Bennett. Representative Sanchez. I hope you're 
over your jet lag.
    Representative Sanchez. Yes, of course, Mr. Chairman.
    Good morning, and I'm sorry that I arrived late. I had some 
other pending business in the House.
    Dr. Milstein--and I didn't get to hear all of your 
presentation, so I'm sorry about that. Dr. Milstein, when you 
said provider, and you were talking specifically about, I think 
the physician experience, would you also say that the 
proprietor might be a medical group or the hospital, or the 
pharmaceutical company trying to sell its drugs, or the health 
care plan that one is under?
    Dr. Milstein. Yes.
    Representative Sanchez. So do you think they all have an 
interest in not really disclosing what the price of their 
product is?
    Dr. Milstein. Yes, I think it's a universal human and 
organizational trait. If somebody were to ask me, ``Would I 
like my performance evaluation at work published on the 
Internet,'' I would say, no.'' It's universal and cuts across 
all those provider categories that you described.
    Representative Sanchez. I heard my colleagues talk about 
getting on the Internet or people getting on the Internet. A 
lot of people think that they get on the Internet and they do 
this, but we know from surveying and understanding people's 
time, that there's a lot of information out there, but the 
reality is not as many people really get on the Internet unless 
it's, maybe I'm going to die of cancer; if I got the notice 
today I was going to die of cancer, maybe I would get on the 
Internet and try to find out everything.
    But for a large part, we tend to really go with the flow 
and do what our health care plan tells us to do, or our doctor 
or second opinion, and that's probably as far as we go. So do 
you think that if we had something like a consumer report on 
the Internet that people would begin to use that for something 
other than ``my life is really at stake? ''
    Dr. Milstein. I think that, as expressed by some of the 
other panelists, some people would use it, and it would 
largely, but not be totally generationally-driven. That said, I 
don't think the Internet is only method by which we can avail 
consumers of performance information.
    Again, I think the Los Angeles restaurant example is a 
wonderful example.
    Representative Sanchez. So you think when I visit a 
hospital, I should see an A, B, or C on the door of the 
emergency room?
    Dr. Milstein. I personally would support it being not only 
on the door of the emergency room, but also on the front door 
of every department within the hospital, so that 
interdepartmental variation within a hospital would be known to 
any customer before, on nonemergency basis, they made a 
decision to be treated in that hospital department.
    Representative Sanchez. People have talked about using the 
Internet. You know, as a minority, and I represent a very 
diverse population, including one of the populations that deal 
almost exclusively in their own language, for example the 
Vietnamese community, which I represent the largest Vietnamese 
community outside of Vietnam in the world, for example. 
Especially in the older generation, very driven by their 
language.
    Lack of Internet availability, especially to lower income 
arenas, and lack of it in languages where--I mean, everything's 
complicated. I get confused looking at some of these things.
    If we were to look more at doing some sort of a rating 
system, would you say--how would you say that we could push it 
out to, in particular culturally and language different arenas 
and also low socioeconomic arenas. How would you say that we 
might be able to do that? Would you suggest that we would 
translate it into other languages in specific areas?
    And I'm asking everybody, I guess. Maybe we can start with 
Dr. Clancy and go down the list.
    And I say this because it's my personal opinion that very, 
very rich people probably do a lot of information gathering, 
and probably spend money--the price is really not an object for 
them, so they'll go to Switzerland if they think they can get 
the lifesaving treatment; and the very low end seem to have a 
lot of these major dollars that we're spending in our system. 
It's almost like the middle gets squeezed, and you don't access 
this much health care.
    Dr. Clancy. I wanted to comment on something Dr. Milstein 
just said to you and then get to the very, very important 
question you asked.
    Right now the information that is reported on quality of 
care at the level of hospitals and in some cases for physician 
groups, and so forth, is not all that useful for individual 
consumers. However, it has had a very important impact on the 
providers, and I don't think that we can overlook that.
    We still need to learn a lot about making it more useful to 
consumers to guide their choices.
    Representative Sanchez. On the providers in the sense that 
maybe a provider won't be able to get into certain hospitals 
because the hospitals can see what the providers are doing?
    Dr. Clancy. To be very specific, for the past several 
years, nursing homes are required to report publicly on 
performance, and the hospitals can volunteer. And if they don't 
volunteer, they don't get their payment update, so it turns out 
that they all volunteer.
    In our annual report on health care quality, we have seen 
much more significant improvements in quality in nursing home 
care and in hospital care than in many other aspects of health 
care. And there are a lot of studies that support that kind of 
observation as well.
    Representative Sanchez. When people are watching, we tend 
to be nicer.
    Dr. Clancy. Yes, right. The schools, name your domain.
    So Dr. Milstein's right, most providers don't line up for 
the opportunity, but it does actually have very positive 
impacts.
    Regarding the question about how to reach multiple 
populations, the overarching principle needs to be that good 
information, that will help you get better health and health 
care, has to be impossible to avoid. That will require 
translation; in some cases it's actually going to require a 
human interface to help people navigate.
    I think the longest standing experience in the Federal 
Government for treatment decisions is at the Cancer Institute. 
And they have a fabulous Web site for people who are very 
comfortable doing that. They also have humans that you can call 
and help you navigate, and many of the people that you 
referenced that we would expect to have difficulty also have 
children and grandchildren, as the Chairman referenced, who can 
sometimes play a very valuable role there.
    So when I speak to clinicians who practice in underserved 
settings, what they tell me is that drawing on family resources 
and so forth, they're starting to see that kind of divide 
narrow; which I think ultimately is a very good thing for 
health care.
    Representative Sanchez. Thank you.
    Dr. Milstein. Two comments. First, in most families and 
most social units, not everybody that even subscribes to 
Consumer Reports reads it. They often rely on one person who's 
the conscientious or more experienced one in the family who 
reads it and then describes it to everybody else. That's the 
way it is in my family.
    On your question about diverse populations, one of the 
examples I put forward in my testimony was the Culinary Workers 
Union Health Benefits fund in Las Vegas. I think that directly 
addresses the population group that you referenced. It is a 
population with average wages probably in the range of $10 an 
hour. More than half of the population does not speak English 
as a first language.
    And they were among the early heroes of the physician 
performance evaluation movement. They used measurements of 
physician performance to encourage their members to move to the 
better rated physicians. And as you can see in the materials 
that I provided, the percentage rise the fund's health 
insurance cost in the subsequent year was substantially less 
than any others in the Las Vegas area.
    What I didn't reference in my testimony, is that quality of 
care scores either improved or remained stable. So it was a 
very favorable outcome; in fact, an outcome so favorable that 
the Hotels and the Culinary Workers Union, savoring 
unexpectedly large savings that resulted, delivered a 
voluntary, out of contract, 55 cent per hour raise for the 
workers, in addition to a better return for hotel shareholders. 
It was a major victory for both management and labor.
    Dr. Parkinson. Ms. Sanchez, you hit the nail on the head. I 
look at behavior change, with proven behavior change models. 
And really, at the end of the day, we're talking about 
individual, family, community, employer and national behavior 
change if we're going to get this right. And just going to a 
better doctor ain't going to get it.
    I referenced the Ken Thorpe study in my paper; Ken Thorpe 
is an economist at Emory, who said that 62 percent of the 
entire rise in health care costs over the last 5 years are due 
to personal health behaviors that we have chosen to treat 
medically with the latest, greatest direct-to-consumer 
advertised drug or technology, in multiple languages, I'm sure.
    The thing that I like about the movement now is that 
information is just an enabler; it does not change behavior 
unless you have two other things present: First, incentives or 
``Why should I care?'' It's always been the employee's money; 
they just never saw it as such. It came out of their paycheck. 
And second, information makes the incentive of ``my own money'' 
actionable.
    There is a dissociation between the choices I make about my 
health risk factors; do I smoke, do I move, and do I eat right? 
And my awareness of the diseases those risk factors drive: 
cancer, diabetes, etc. For example, 9 out of 10 diabetics are 
lifestyle-related, they don't genetically have a bad pancreas.
    So we have got to get the incentives right at the macro 
level and build new infrastructure to support them. ``Cash and 
Counseling'' the Medicaid project is a wonderful demonstration. 
Medicaid disabled populations, given a choice using a 
culturally-sensitive counselor who helps explain to that 
Medicaid disabled person what their options are for service and 
equipment, for activities of daily living, actually make better 
choices for themselves than the usual government purchasing 
practice (standard Medicaid) at lower cost.
    Not everybody is going to go to the Web for information; 
it's just one source. You've got to have phone contacts. You 
probably have to do what was done in China; it's called the 
barefoot doctor. Who's the trusted agent in every community 
that's a health resource? How do we train those people to do 
better? What's the role of the health plan in the future to 
help partner with those people, to extend empowered consumerism 
and improved health behaviors without having to engage the 
medical system. So while we're very proud of our Web site, you 
really have to build whole new infrastructure linking 
information to people for assistance. And it's got to live in 
an incentivized environment. A lot of the good information that 
Dr. Clancy referenced has been around for quite a long time in 
health care. But it's not been acted upon, because we're 
missing the incentives and the infrastructure to make it 
understandable and actionable.
    We try to look at the whole system and say, across the 
continuum of care, from health promotion, risk reduction, acute 
care, chronic care, surgical decision support, inpatient 
hospital care, and then end of life care in hospice; do we 
provide the consumer-patient with the incentives, 
infrastructure, and information to make a better decision?
    And I think the good work that Carolyn Clancy's agency is 
doing is going to get much more sophisticated, so that that 
patient achieves better outcomes at lower costs.
    Anecdotes are powerful. An 85-year-old women sitting next 
to me at a Lumenos consumer dinner in Dallas asked, ``Are you 
Dr. Mike? Because I'm in a Lumenos plan.'' She said, ``I love 
your plan. All the information you've got about prices of 
drugs. But you know what I really want? I'd love to be able to 
talk to somebody like me who has a husband who just had that 
tube put in his heart.''
    I said, ``You mean a stent? '' She said, ``Yes. He was so 
depressed. He was so angry. He was on six medications. I was 
lost.'' Now that's a new value proposition for a health plan. 
Better engagement by patients and their families has been shown 
to drive down unnecessary worry, depression, utilization, and 
costs. So we have a huge opportunity here.
    Information is part of equation, but patient centricity, 
new infrastructure, new types of culture-sensitive health 
coaches are whole new things we've got to create. I think it's 
exciting, but we can do it.
    Dr. Ginsburg. I just have two quick points, and I think 
these are consistent with what some of the other panelists have 
said.
    I think a key thing is that many people need agents to help 
them sort through this information, rather than go and get the 
raw, original information. And whether it's a union, an 
employer or a health plan, there are agents to massage this 
data.
    Dr. Milstein's example in Las Vegas really shows how the 
union was a key player in massaging this data to communicate to 
the workers which are the high value physicians to go to.
    And the other point I want to make is that I think people, 
you don't need to get 100 percent of patients or the consumers 
using this information, making good decisions, to get some real 
movement on the part of the providers to improve their quality, 
to improve their value. You may only need 10 percent, and 
that's actually an optimistic thing that--you know, we tend to 
think about the gains that the individual gets by making this, 
going to this provider versus that provider, how much they 
save, whether the quality was better.
    But for society, I think the big potential is where the 
providers that aren't the best see that they're losing patients 
and see that in public domains their scores aren't as good as 
others, and they are motivated to improve what they do; and 
this really improves care for everybody.
    Representative Sanchez. May I ask one more question, Mr. 
Chairman?
    You know, when I did go on the net or when I've had friends 
go on the net, I mean, anybody can put anything on the net. And 
most people don't know what they're talking about, especially 
when it comes to medicine. Yet people read, you know they read 
and they see.
    So the worry is, how do you make sure people are looking at 
the right thing? And I also include in this, for example, these 
commercials by the drug companies, where they've got some drug 
they're promoting today, and the guy is flying over the wheat 
fields--I don't know what the drug does, but god, I want to get 
that. And I know that they must be going into the physician and 
saying, ``Well, I saw this thing and it's going to make me fly 
over the wheat fields.''
    Information is powerful, but it can also be very 
detrimental. So what are the safeguards we have to think about 
as we look at this information issue?
    Dr. Parkinson. If I may, this is one of my favorite topics. 
I oftentimes say I learn more about health care and the 
business of health care from Dorothy Hamill than I ever learned 
from medical school professors. Dorothy trained a whole 
generation of people to ask for a drug that by and large they 
probably didn't need; and now lo and behold we've got some 
safety issues.
    We built something called the Department of Defense 
Pharmacoeconomic Center that still lives in San Antonio, Texas 
to judge one drug against another, because we couldn't afford 
all the drugs that were coming out of the pipeline being 
advertised directly to consumers. And we concluded, back in '97 
or '98, I forget the year, that this drug, Vioxx, was not much 
better than Naprosyn.
    But as long as the decision to see a drug or not was 
imposed upon people, by saying ``You can't have it'' or 
``You've got to go through a rheumatology referral on a five-
tiered formulary to get it'' it was a seen as a takeaway or bad 
medicine.
    Rather, what if we provided access to the information, gave 
it to the consumer, to support evidence-based guidelines to the 
doctors, and said, ``Here's the information and full cost of 
your choice. Here are your options. Talk with your doctor. And 
oh, by the way, can we talk a little bit about weight loss, 
perhaps, a little bit more physical activity, which likely 
impact the need for drug as well?''
    So the role I think of all of us here is to appropriately 
counter-detail what I call the health care industry that 
creates and markets new technologies, with comparative, 
accurate value-added information.
    For example, the University of Oregon just compared the 
effectiveness and costs of drugs for 10 leading classes of 
pharmaceuticals. You can access that information through 
Consumer Reports.
    If we're going to ``ride the rails'' of consumerism, then 
we need health information technology standards and some 
trusted source of comparison out there. And right now you're 
paying for that; all the health plans do it themselves; they 
largely have some different methodologies. Often one hears 
complaints about a health plan saying, ``This is 
investigational'' based on their internal analysis. ``What do 
you mean it's investigational? It's licensed by the FDA,'' the 
consumer or physician complains.
    An authoritative, neutral analysis is needed to assert the 
consumer better. If I'm going to be the advocate of the 
consumer, and the employers who entrust me with their health, 
I've got to have good information to say, ``You know what? Ms. 
Sanchez deserves the best information to make an informed 
choice'' and in large part, it's not there today.
    Representative Sanchez. Dr. Clancy, you had a----
    Dr. Clancy. I think the information that you're talking 
about has to come from a trusted source. What's very 
interesting is that cancer patients, for example, learn to get 
very skeptical and good at evaluating whether what they're 
seeing on the Web or hearing about from others has a funny 
smell to it, and they know to ask the right questions. If it's 
coming from a dot-com they know that there might be a profit 
motive and all that kind of thing.
    But ultimately, we need a trusted source that lets people 
know that the information is based on science, or it's based on 
belief. The information can be all over the Web and in many 
other places but it must be very clear to either individuals or 
their agents, what this is based on, what's the source. And 
what is the potential conflict of interest.
    Representative Sanchez. Anybody else?
    OK, thank you, Mr. Chairman, for indulging me with the 
time.
    Chairman Bennett. Thank you very much.
    Thank you to the panel. I think it's been a very useful 
discussion, and we've gotten a lot of good information out of 
it.
    I just leave you with this one last thought. I was giving 
speeches when I was first elected to the Senate that were 
absolutely brilliant with respect to health care, and always 
well-received. And then a woman came up to me and said, ``I 
really enjoyed your speech, but of course you understand you 
don't have the slightest idea what you're talking about.''
    And I said, ``OK, help me understand.'' And I think this 
kind of runs through where you are. She said, ``The problem 
with the poor is not money. The problem with the poor is not 
access. The problem with the poor is that they can't navigate 
the system.''
    She said, ``You walk into the Salt Lake clinic and you know 
which desk to go to, which questions to ask, and which 
procedures to fill out.'' She said, ``I deal with the homeless, 
I deal with the poor. They walk into a medical facility of that 
kind and they're totally baffled. And they walk out.''
    And if you're going to make health care truly accessible to 
them, you have to have a navigator that will take them through 
and help them understand; and Dr. Parkinson, your navigator 
would talk to them about their lifestyle and their habits, and 
try to get them to do healthier things.
    Dr. Ginsburg, I think you're right, there is no silver 
bullet here. But the common theme that runs through her 
comments to me and your comments here today is: The more people 
know, the better off they're going to be. And the more they 
know, the more empowered they will be to take control of their 
own lives and their own health care situations.
    So it's been a very valuable panel, and I thank you all for 
your willingness to contribute to it.
    We'll now move to the second panel. The Committee will take 
a 3-minute recess as the second panel assembles itself.
    [Recess.]
    Chairman Bennett. The Committee will come to order. And we 
welcome the members of our second panel. Douglas Cave of Cave 
Consulting Group, I have him listed, I assume--he stepped out 
for a minute. Donald Kemper of Healthwise, and Walton Francis, 
a longtime primary author of CHECKBOOK's Guide to Health Plans 
for the Federal Employee.
    We appreciate your being here. Let me discuss--let's see. 
Mr. Francis, you've been a pioneer in looking at systematic 
comparison of health insurance plans, and we appreciate your 
being here. And Mr. Kemper, you're chairman and CEO of 
Healthwise, founding chair of the Center for Information 
Therapy, Board of Directors. And you've put forward the idea 
that offering every patient the right information prescription 
is part of the process of care. And we appreciate your 
pioneering effort there. Mr. Cave, President of Cave Consulting 
Group, you've worked with large employer group coalitions and 
health insurers to develop a consumer-driven health care model.
    So we appreciate the three of you, and we'll hear from you 
in that order, starting with Mr. Francis.

   STATEMENT OF WALTON J. FRANCIS, MA, MPA, MPP, AUTHOR AND 
           INDEPENDENT CONSULTANT, FAIRFAX, VIRGINIA

    Mr. Francis. Thank you very much, Mr. Chairman.
    I'm going to hit just a few highlights from my testimony, 
if I may, and try to relate them to some of the dialog that's 
already heard in this hearing, because some of the points are 
so important.
    First, it's essential to understand when we talk about 
customer information, it's not just that Joe Blow, a consumer, 
is going to use that information; it includes the ability of 
his friends, his family to use it; it includes the provider as 
a trusted intermediary to use it. When I'm thinking of getting 
a surgical procedure and I consult my primary care physician 
about where might I go, I want him to have a copy of that chart 
we've talked about so much, before he picks or suggests a 
couple of specialists----
    Chairman Bennett. With a name for every dot.
    Mr. Francis. Right. And of course we all benefit when the 
market has changed and quality is enhanced and prices reduced, 
we all get the benefit of competitive markets, even if we're 
not the most savvy shopper personally.
    So what's at stake here is huge. And it doesn't have to be 
something that we can predict with great precision as to how 
the information will turn out to be valuable to us all; it's 
just without it being available, it can't be valuable.
    Another general point. There are many barriers in the 
system, and I cover this by type of--I'm not going to go 
through all the types of consumer information; they're in my 
testimony. But there was some earlier discussion of providers 
resist providing information. Yes, they do. And they all have 
incentives not to have their performance known to others.
    But that doesn't mean we can't overcome those barriers, and 
there are a variety of ways to do it. And indeed, ultimately 
the role of government may be to play a part in that process. 
Though an awful lot of it does not require the government.
    When I started CHECKBOOK's Guide, the government had 
nothing to do with it. As a different example, I'm today 
involved in the Medicare Part D drug benefit in a variety of 
ways, one of which is, I was a minor contributor to and I'm a 
heavy user of the Plan Finder tool on the Web, that Medicare 
has provided that helps people pick the best deal drug plan.
    Millions of people have used this tool already. Millions of 
people who would have been hopelessly confused had they tried 
to do this by hand, have found themselves guided to the least 
costly health plans for their needs. You know, it's hard work 
to do something like that, but it can be done and we've got 
proven results from several insurance comparison systems.
    There is also an angle here: We have an immediate need by 
approximately 50 million Americans, not just the few million in 
high deductible health plans, but the 45 million uninsured who 
have faced the highest deductible of all, to get better price 
information. I take some mild disagreement with Dr. Ginsburg's 
earlier comments that price information alone or price 
information wasn't as high a priority, maybe, as the total 
value package. And I certainly endorse the package that gives 
information on outcomes as well as price and cost.
    But the reality is, people find it extremely difficult to 
shop, and there are lots of less costly providers out there and 
lots of less costly treatments.
    When I was preparing this testimony, I got one of the plan 
Web sites--and that's a huge breakthrough recently, the plans 
themselves sponsoring Web sites with consumer information, 
unfortunately for their members, not for those 50 million 
people I'm talking about. And for the first time in many years 
of seeking I was able to find out what having a baby costs in 
America. I assure you this information is not freely available 
today on the World Wide Web. If you Google search for maternity 
and cost, you will not find out what it costs to have a baby. 
But if you go to the Aetna Web site, if you're an Aetna member, 
you'll find that, on average, it costs $7700. That includes the 
price of the hospital, the obstetrician, the drugs and so on.
    That's important information. There's also some low-hanging 
fruit out there, and I'll conclude with this one example: 
Medicare pays virtually all health care providers in America. 
Now the Medicare rates are somewhat artificial in their methods 
of derivation, but the fact is they are used by health 
insurance companies and others in setting their rates; and 
furthermore, the fact that Doc Sawbones or Hospital X accepts 
the Medicare rate is potent information, if I'm a consumer.
    What we need to do is get the Medicare payment rate 
information, which is free and available, out there in consumer 
friendly forms so that people can actually go to Doc Sawbones 
and say, ``Well, if you're giving the rest of your consumers 
this cheap rate, why can't I get it?''
    This has been a particular issue in the area of hospital 
costs. There was a notorious case at Yale University Hospital 
in New Haven where poor persons were being charged triply or 
quadruply over what preferred provider consumers and clients 
were being charged. There is also the California hospital rate 
experience. The law in California that forces hospitals to 
publish their charges has been an eye opener in terms of the 
incredible disjuncture between what the privileged people, who 
are using preferred providers through health plan pay, and what 
the 45 or 50 million people who face really high deductibles 
have to pay.
    That concludes what I have to say. I'll be glad to answer 
any questions you have.
    [The prepared statement of Mr. Francis appears in the 
Submissions for the Recored on page 72.]
    Chairman Bennett. Thank you very much. I will say I do 
remember our first born child cost $500. It was very neatly 
divided; $250 for the hospital and $250 for the OB-GYN. Things 
have changed a little.
    Mr. Kemper.

     STATEMENT OF DONALD W. KEMPER, MPH, CHAIRMAN AND CEO, 
                 HEALTHWISE, INC., BOISE, IDAHO

    Mr. Kemper. I know. My first son was born in a military 
hospital and it cost us $16, but you get what you pay for.
    I'm pleased to be here, Mr. Chairman, Ms. Sanchez. My 
message is pretty simple; it's just that the greatest untapped 
resource in health care is the consumer, and that we have to 
find a better way to inform and engage people in their own 
care.
    The message is a little less on helping people become great 
shoppers as it is on helping people become great decisionmakers 
and great managers of their own care. It is aligned with what 
your daughter and daughter-in-law have done in their families, 
what you've done, and what Mrs. Maloney had done for her own 
surgical decision.
    More technology alone is not the answer; cost-shifting 
alone is not the answer. Greater transparency is not the 
complete answer. The answer really involves helping people do 
more for themselves. More to avoid illness in the first place, 
or to avoid medical errors. More to avoid unnecessary care, and 
more to ensure that they get the care that will really make a 
difference to them and their families.
    For 31 years, as CEO of Healthwise, I've relentlessly 
pursued ways to improve the consumer's role in health care. In 
the 1970s I helped to start the medical self-care movement in 
this country. In the 1980s, I was at the beginning of the 
national wellness movement. In the 1990s, I helped to make sure 
good consumer health information got put on the Internet.
    And today my organization, not-for-profit Healthwise, 
provides information for most of the major health Web sites on 
the net. We have about 70 million patient visits, if you will, 
per year to our information.
    Each of these efforts has made a difference, a big 
difference; but they've not been enough. The recommendation I'm 
making today I think is far better than all the rest. And, it 
is a simple message: Let's prescribe information to every 
patient. Prescribe information to every patient at every moment 
in care. Simple idea.
    Today, patients are left in the dark much of the time. Our 
doctors have neither the tools nor the time to help us learn 
what we can do for ourselves. Plus when we do get the 
information, we forget about half to four-fifths of it 
instantly, and what we remember by the time we get home is 
about half wrong.
    We need to find a better way to communicate with the 
patient. Mr. Chairman, imagine a world in which your doctor 
prescribed to you the information you needed to make decisions 
about health care. Imagine that the information about your care 
was considered to be an essential part of your care, and 
imagine that your doctor could prescribe decision aids and 
action plans that would actually help you improve your health.
    What you're imagining we call ``information therapy'' and 
this is how it works. It starts with information triggers 
already known about your diagnosis, or the treatments that 
you've received or the tests that have been ordered for you. 
These triggers can predict your moment in care--where you are 
in that diagnosis. When we know your moment in care, we can 
pretty well predict the questions you might have and the 
decisions you'll be facing.
    Then, it's a relatively simple process to prescribe 
information that will help you answer those questions and help 
support your decisions.
    Group Health Cooperative in Seattle is already today giving 
information therapy prescriptions to every patient. Kaiser, the 
VA, the DoD, all have information therapy initiatives started. 
Information therapy is coming, but an enlightened Federal 
policy could help get it here a lot faster. In my written 
testimony I've laid out 10 ways that Congress could accelerate 
this movement toward information prescriptions.
    In the time I have, I'd just like to focus on one area, and 
that is what we could do in Medicare. I think that we can start 
by making sure that Medicare.gov includes good consumer health 
information, so people can get it. Next I'd say that we have 
the information to prescribe to each Medicare patient a good 
prevention guide that is personalized to their comorbidities 
and to their sex, age, and interests.
    And then finally, for every Medicare member who is 
diagnosed with a chronic disease, we can prescribe a self-
management plan that can help improve their health.
    The consumer is the greatest untapped resource in health 
care, and information therapy is the way to tap it. Thank you.
    [The prepared statement of Mr. Kemper appears in the 
Submissions for the Record on page 81.]
    Chairman Bennett. Thank you very much.
    Dr. Cave.

   STATEMENT OF DOUGLAS G. CAVE, Ph.D., MPH, PRESIDENT, CAVE 
           CONSULTING GROUP, FOSTER CITY, CALIFORNIA

    Dr. Cave. CC Group is a company that's focused on improving 
efficiency and effectiveness in the health care system. We work 
with some of the largest health plans in the country, in the 
areas of consumer health care transparency, and pay for 
performance programs.
    Most health plans recognize the need to produce more 
detailed consumer health information. Today, many are in the 
process of developing a program that provides physician level 
efficiency and effectiveness information. The employer benefit 
consulting community and large employers have been very vocal 
to health plans about the urgent need to present this type of 
health information to consumers.
    Most health plans are attempting to meet this strong market 
demand, but each health plan is going about it in their own 
unique way. To date, the most commonly offered comparisons have 
been limited to unique procedures, diagnostic tests, and 
prescription drugs. With respect to these services, the 
information has been on a unit price basis, and that's 
important. We've been talking about price a lot.
    Where we believe we need to go is that the information 
needs to be presented on a longitudinal episode of care bases, 
where we're not only taking into account for medical condition 
treatment the price, but the volume and the intensity of 
service.
    There are several main reasons, though, why health plans 
have elected to start their consumerism efforts with only unit 
prices. One of these reasons is that health plans generally do 
not have enough claims experience data to measure enough 
network physicians to have an entirely successful physician 
performance program; and we heard this from the first panel as 
well.
    The question becomes, how do health plans obtain enough 
claims data to accurately and reliably rate the performance of 
most physicians. One answer is that CMS provide access to the 
full Medicare claims data base. Initial testing shows that CMS 
data bases, the full data bases, will be able to measure the 
performance of 80 percent of all practicing physicians in all 
geographic regions.
    This percent of physicians measured is more than enough to 
provide consumers with meaningful physician-level performance 
information. However, it is important to recognize that even in 
using the full CMS claims data bases, many of the measured 
physicians will have a low volume of assigned episodes of care. 
We have to keep in mind that there's the law of low episode 
numbers, because when we develop and implement methodologies to 
accurately measure physician performance, we have to do it 
accurately.
    There are several methodologies being used in the market 
that do provide accurate and reliable physician performance 
data. But, on the other hand, there are a good number of 
methodologies that are being employed, where you'll obtain a 
physician efficiency score, and you will obtain a physician 
effectiveness score; but the scores will not be accurate or 
reliable.
    I provide three examples in my written testimony of studies 
that illustrate the lack of agreement and reliability within 
and between these measurement systems.
    Let me close by pointing out that there is an important 
opportunity for Congress to assist in promoting consumer health 
information. Congress could assist health plans with obtaining 
access to the full CMS Medicare dataset, as long as the access 
continues to protect Medicare beneficiary privacy under HIPAA 
and the Privacy Act. Thank you.
    [The prepared statement of Dr. Cave appears in the 
Submissions for the Record on page 96.]
    Chairman Bennett. Thank you very much.
    I'm interested, Dr. Cave, in your emphasis on the number of 
procedures performed. At a previous hearing or examination of 
this kind of issue some years ago, I remember someone saying a 
heart bypass operation at a high volume facility like the Mayo 
Clinic or some equally well-known place where they do a lot of 
them costs $30,000. A similar operation at a rural hospital 
where they do very few of them costs $80,000. The $30,000 
operation is substantially better than the $80,000 operation.
    Now this is a fact of life in the manufacturing world. I've 
spent more of my life as a businessman in the manufacturing 
world. One of the rules of thumb is that every time you double 
your output, you lower your real cost by 20 percent, just on 
the experience. So the first car that they produce is $10 
million; the second one is $8 million. The fourth one is $4 
million and so on, and by the time they've produced 5 million 
Tauruses or whatever car it is we're talking about, they have 
seen their manufacturing costs come down 20 percent every time 
the number doubles.
    And I think what you're saying here is that a similar sort 
of effect occurs in medicine; the more they do it, the better 
they get, the more they learn. And the cost comes down.
    Now am I up in the night on this, or have I picked up on 
something that is genuine?
    Dr. Cave. I think that there's a lot of evidence that says 
volume is very associated with quality, particularly for higher 
cost procedures.
    Another key component part of that statement, or an 
ancillary component part, is that with the Medicare claims data 
can examine the practice patterns of 80 percent of all the 
physicians.
    Now in respect to higher-cost procedures, the prevalence 
rate tends to be low, and you need many episodes of care to 
examine appropriate practice patterns. Asthma is a good one, 
where you can have enough episodes to measure enough physicians 
to really rank their efficiency and effectiveness very well.
    Going back to your main point that volume is associated 
with quality, yes absolutely, volume generally is related to a 
reduction in cost and increased quality. That's been proven by 
some studies.
    Chairman Bennett. That implies a systemic change in that we 
ought to be moving toward high volume operations in particular 
procedures. In other words, here's a hospital which does 
nothing but heart transplants.
    Dr. Cave. That argument has been made, yes.
    Chairman Bennett. OK. Now we get resistance to it, and I 
don't want to get into that too much. But let's go down that 
line in terms of the subject of this hearing, which is consumer 
information.
    Do you anticipate a Web site or a 1-800 number or whatever 
that would tell people ``This particular facility has the 
highest volume of doing the procedure that you're looking at, 
and is probably worth the travel costs and the motel 
expenses''--we want to discuss the whole cost here, not just 
the unit cost, as you say--but you should consider, even if you 
live in rural Utah, that it's worth your money to travel to 
Minneapolis or wherever it might be, even including your travel 
costs and your motel room and all of the rest of it, because 
this is a high volume circumstance where the price will come 
down, the quality will go up, and this is customer information 
in a perfect world. Do you see that kind of thing happening?
    Dr. Cave. Yes, as a matter of fact today on the inpatient 
facility and outpatient facility side, there has been a strong 
emphasis by at least three organizations to publish that type 
of information, and the health plans actually will contract 
with those organizations to present that information on their 
Web site.
    And you can now find the volume of most procedures by 
hospital, because consumers are pretty savvy to that point 
already. It is available right now. That information you're 
talking about is out there, on the hospital side.
    It's the physician side we want to try to move toward also.
    Chairman Bennett. The physician side, OK.
    Mr. Francis, do you have those kinds of data in your guide?
    Mr. Francis. Mr. Chairman, I do something slightly 
differently, but in effect I'm doing that. What I do is show 
people--I'm rating insurance plans, and the primary function of 
an insurance plan is to pay your bills; and you want to 
minimize the cost of your out-of-pocket and your premium. And I 
rate health insurance plans against each other in terms of how 
hard they hit your wallet. That's exactly what I do.
    We also do have quality information about insurance plans, 
but there's sort of an inherited limited ability--if the 
insurance plan pays its claims on time, and that's kind of an 
awful lot--there's not a lot more to be said about that plan, 
usually; though there are other kinds of differences that 
matter, and we do have consumer satisfaction data, for example, 
and we use it. If I could just pick up on two points that have 
been made:
    First, there is a fair amount of institutional performance 
data out there for hospitals; CHECKBOOK, for example, publishes 
hospital death rates--the ultimate outcome measure, for all 
Medicare participating hospitals. And there are bits and 
pieces. You mentioned heart transplants; there's a Web site at 
HHS that actually rates every heart transplant center in 
America with quality adjustments; and yes, it often makes 
sense, in terms of lifesaving, not to use your next door 
transplant center.
    Chairman Bennett. I misspoke. If I said transplant, I meant 
bypass. You don't get a transplant for $30,000.
    Mr. Francis. No.
    Chairman Bennett. I meant bypass surgery.
    OK, go ahead.
    Mr. Francis. Several witnesses have mentioned the question 
of using Medicare data, the claims data; and they're absolutely 
right, that it's a gold mine of information. The problem that 
faces HHS right now is that under the privacy act, as it's been 
interpreted by one court, releasing data on the performance of 
individual physicians would violate their privacy, OK?
    It's not a patient privacy issue, it's a physician privacy 
issue. And it may take--I don't know where the lawyers at HHS 
are on this, I'm not one of the parties to that issue, but this 
may be an area where the Congress may have to help the 
Department do what I'm sure it would like to do.
    Chairman Bennett. Yes. We talked in the first panel, and 
you made reference to it, about people who are resisting. And 
we heard the story about the restaurants in Los Angeles and the 
A, B, C, and I think as soon as that went up, every restaurant 
became an A very quickly. Because who wants to eat in a 
restaurant where the sanitary condition is C? Whether they 
wanted to or not, they made the investment to bring themselves 
up to an A.
    You take me back to two experiences of my own business 
life. I was a Washington representative--fancy word for 
lobbyist--for a retailer back in the 1960s, and one of the main 
issues that was prominent among retailing--we were a dry goods 
retailer; I worked for J.C. Penney--so we just observed this. 
But one of the prominent issues among grocery retailers was 
labeling, nutritional labeling, and unit cost. And they fought 
it as hard as they could.
    And I would say to my fellow lobbyists in the quiet of our 
conversations, ``Why are you against this? This is good for the 
consumer, and ``Well, it's going to cost money and we're going 
to have to''--I said, ``Look, that's unsustainable as a public 
posture for you to say you don't want to tell your consumer how 
much sugar, how much protein, how much whatever is in this 
particular product. Or you don't want to tell them how much it 
costs per ounce, lest they would figure out that Brand A is 
cheaper than Brand B. You don't want to do this.''
    And they would look at me and say, ``You're right, we're 
very uncomfortable up there on the Hill, fighting against 
this.'' And now everybody does it, and somehow the grocery 
market world didn't come to an end when they started putting 
nutrition labels on food and unit costs on their various items. 
Their consumers got happier and their sales continued going on, 
and the costs were easily contained.
    And I think that's a demonstration of what could happen to 
providers if we say we're going to start putting names on those 
dots. Well, I don't want my name on a dot that's down in the 
Southwest quadrant, I'd better change my practice or whatever, 
so that pretty soon we're all where we ought to be.
    Representative Sanchez, do you have questions, comments for 
this panel?
    Representative Sanchez. No.
    Chairman Bennett. In the spirit of these hearings, do you 
have anything you want to say to each other? Again, I like to 
get the panels going back and forth, and we had some back and 
forth in the first panel. Do either of you, any of you, have a 
comment you'd like to make to the other in the testimony that's 
been presented here?
    Mr. Kemper. Yes, sir.
    Related to the issue of getting a quality score for your 
doctor, one of the facts of life is, not everybody can go to 
the best doctor. I think what Carolyn Clancy was saying is that 
the real benefit of these scoring systems is that it makes 
everybody want to move toward, at least to the center and maybe 
beyond. It's kind of Lake Woebegone, where we'd all be above 
average, if we could be.
    The issue though for the consumer is, that they can make 
their doctor a better doctor. Medical mistakes are going to 
happen, but they don't have to happen to you if you're really 
tuned in to what your care is about.
    One of the challenges is that most of us already have our 
doctors, and what we want to do is to work with that doctor so 
that we get the best possible care for the problems that we 
have. We can do that if we have the right information and if we 
develop that partnering relationship with the doctor. I think 
the doctors are ready for that.
    Chairman Bennett. Any other comment?
    Dr. Cave. Yes. I think there's really a two-pronged 
approach that's going on. First, the health plans aren't 
sitting back and letting medical consumerism drive their role, 
and giving up. They're actually in the process, many of them, 
of developing or have developed what are called high 
performance networks. It's those physicians that Dr. Milstein 
was talking about in the upper right hand quadrant.
    But these identified physicians are not all perfect there, 
either. And there's still the ability to improve the 
performance from the efficiency and effectiveness side; and 
that's where the health plans are really looking for the 
consumer to help out.
    It's not that they're depending on the consumer to do 100 
percent of the shopping themselves, the health plans are trying 
to continually improve their performance. But, there aren't 
enough physicians if health plans only contracted with the top 
10 percent for physicians.
    So even with tiered networks and high performance networks, 
where a high performance network is based on evaluating 
physicians price and the volume of services, and then also 
quality or effectiveness. Not all physicians are perfect. 
Medical consumerism will help to improve the performance.
    But we still need to have the consumer to drive that 
enhancement as well.
    Chairman Bennett. OK, thank you. You trigger another 
memory. At Intermountain Health Care, which is a major provider 
in my State, they were looking at the question of infection 
following operations. And at the time, the national standard--
we're talking about information here--was 2 percent. If you had 
less than 2 percent of operations that developed an infection 
after, you were acceptable as the national standard.
    And they decided to try to find out if they could do better 
than that. And so they tried a number of things; trial and 
error, back to the old days, foundation of medicine, ``Try this 
and see if they get cured.''
    And they discovered, if I have it right, if they gave the 
antibiotic used to prevent infection within a certain time 
period after the operation----
    Mr. Kemper. Before, I believe.
    Chairman Bennett. Before the operation, OK. Just by 
changing the timing, they dropped the infection rate at their 
hospitals to .02 percent, and then made that standard 
throughout their whole organization.
    Well, they were talking to me about that when we were 
having a discussion about health care. I as a consumer, if I 
now were to go to GW, or Georgetown, I want to know if they 
were following that particular protocol. Now undoubtedly they 
are; that got out in the world, you picked it up, you're saying 
they're not.
    Mr. Kemper. Increasingly they are, but your chances are 
still iffy.
    Chairman Bennett. OK. And this is one case where as a 
consumer, I could say, I could have an impact on what's going 
to happen.
    Mr. Kemper. Mr. Chairman, what I'd like to do is to 
prescribe information to everybody scheduled for surgery to 
know that, so they could talk with their doctor about it in 
advance of the surgery.
    Chairman Bennett. OK, that's where you're coming from, and 
I think that's a wise thing to say.
    Mr. Francis. If I may, Mr. Chairman, just to answer that, 
right now something like this is being done, though not 
anywhere near this personalized way, which in many cases may be 
far and away the most effective. I'm not denigrating that idea 
at all. But the pay-for-performance data on hospitals that Dr. 
Clancy mentioned earlier, that's posted on the CMS Web site, 
and is already influencing hospital behavior, happens to be 
largely composed of measures of things hospitals should do that 
they often don't do, like giving people an aspirin upon 
admission for a heart attack; and we're seeing already 
substantial changes in hospital behavior.
    As a prudent consumer, back to your point about that, I 
wouldn't go in a hospital without taking a look at that Web 
site first.
    Chairman Bennett. OK. Thank you very much. We appreciate 
your contributions. The Committee is adjourned.
    [Whereupon, at 11:45 a.m., Wednesday, May 10, 2006, the 
hearing was adjourned.]

                       Submissions for the Record

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    Mr. Chairman, thank you for inviting me to join you for this 
important hearing on ``Arming Health Care Consumers with Better 
Information and Incentives.'' Ensuring that consumers have the 
information and tools they need to make the health care choices that 
are right for them is a high priority of this Administration and, 
especially, of the Department of Health and Human Services (HHS). HHS 
is committed to ensuring that Americans can easily obtain 
understandable information about the quality and price of health care. 
To realize this vision, Secretary Leavitt has articulated four 
objectives: promote quality transparency, promote price transparency, 
facilitate the greater use of health information technology, and 
transform health care so its incentives support a consumer-oriented--or 
patient focused--health care system.
    The Agency for Healthcare Research and Quality (AHRQ), which I 
direct, is a science partner or the Centers for Medicare & Medicaid 
Services (CMS) and other HHS agencies to advance these objectives. As a 
science partner, our job is to assure that Department priorities are 
based on valid, unbiased, credible science. As consumers seek to play a 
more active role in decisions about their health and health care, there 
are multiple opportunities for providing them with customized, 
scientific information. My comments today will focus on consumer 
information intended to help consumers make market and treatment 
decisions.
        ahrq's experience working with consumers: three lessons
    I want to begin my testimony by emphasizing three lessons from our 
work with consumers. First, informed choice only occurs when consumers 
can assess the ``value'' of a health care good or service, and 
consumers can only assess value when they have both price and quality 
information. In fact, Secretary Leavitt has made Health Care Value 
Incentives a HHS Priority.
    He has stressed transparency for information on both quality and 
price because both are essential to good decisionmaking. I should also 
note that while this factual information informs consumer choice, only 
the consumer can make the most appropriate decisions after weighing 
this objective information against his or her preferences, tolerance 
for risk or uncertainty, unique circumstances, and assessment of 
acceptable tradeoffs.
    Second, transparency is critical for enhancing consumer choice and 
improving competitiveness. My agency's research on consumer choice 
demonstrates that where the message comes from makes a profound 
difference. The increased availability of information on health and 
health care means that consumers are increasingly skeptical of the 
impartiality of the information they receive. As my colleague CMS 
Administrator Mark McClellan has stated, such transparency is just as 
critical for physicians. Measurement is at the heart of public 
reporting and potential value-based purchasing initiatives, but 
physicians and other providers need to know that these measures are 
valid, appropriate, and widely accepted.
    Finally, we must not assume that we can approach consumer choice as 
a ``Field of Dreams.'' To paraphrase the movie's tagline, we cannot 
assume that by providing consumers with more information that they will 
necessarily use it. For many health care consumers, the problem is not 
a lack of information. It is, Mr. Chairman, as your hearing title 
suggests, a need for better information: information that is pulled 
together so that alternatives can be easily compared, easily 
understood, and easily acted upon. Unfortunately, it is not easy or 
simple to develop or present information in these ways. But I am 
delighted to report we are making progress.
              Providing Consumers with Better Information
    Mr. Chairman, my testimony is organized around the two broad types 
of decisions that consumers make. The first are marketplace decisions, 
in which consumers or purchasers need to select a health plan, a 
clinician, a hospital, or a long-term care facility. The second are 
decisions that patients and their caregivers must make among 
alternative treatments and the management of their conditions. It also 
includes the types of benefit design decisions that health plans and 
purchasers make so that their benefit packages support health care that 
works. For both types of consumer decisions, we need good evidence on 
what works and effective strategies to ensure that this information is 
available and that it can be used or implemented.

                         MARKETPLACE DECISIONS

    Some of the most basic and important marketplace decisions are: 
Which health plan that my employer offers is right for me? How do I 
know which primary care physicians, specialists, or health care 
facilities provide quality care? If my father needs a cardiac bypass 
procedure, how do I know which surgeon and which hospital are the best?
    For developing information for these types of decisions, the 
Consumer Reports approach to evaluating alternative goods or services 
is a helpful practical model. We take on faith with Consumer Reports 
what we are now struggling with in health care: that the measures 
address the most relevant factors, that the measures are applied fairly 
and consistently, and that the results are portrayed in ways that are 
valid and easily understood.
    Measuring the Right Things Well. Mr. Chairman, I will address 
public reporting and valuebased purchasing in a moment. But since 
neither can succeed unless we measure the right things well, I want to 
provide three examples of the types of measures that AHRQ develops and 
validates. AHRQ is a leader in this area. Many of the reporting and 
value-based purchasing experiments across the country are relying, at 
least in part, on our work.
    Over a decade ago, AHRQ responded to concerns that there was often 
a ``disconnect'' between the satisfaction surveys developed and 
released by health plans and the experience of enrollees. Our response 
was not to develop a government-administered survey but to create a 
tool that would ensure a valid assessment of enrollees' experience with 
their health plans and make it available for use by public and private 
sector plans and purchasers. By consumer experience of care, I mean 
such issues as whether patients received the right care, how quickly, 
were they treated with respect, whether their caregivers communicated 
with them in ways that they could understand, and whether they were 
invited to participate in decisionmaking regarding their care.
    AHRQ developed the Consumer Assessment of Health Providers and 
Systems--or CAHPS--survey, and it is now accepted as the industry 
standard. Today, over 123 million Americans, including Federal 
employees and military dependents, can use CAHPS data to make decisions 
about their health plans. Mr. Chairman, you and your staff have access 
to CAHPS data to make decisions about your Federal Employees Health 
Benefits Program coverage. AHRQ does not collect CAHPS data but 
provides technical assistance on how to communicate the findings.
    As the health plan survey evolved into the industry standard, CMS 
and others urged us to provide similar tools for the industry to use in 
other areas. We have now developed, tested, and validated survey 
instruments for assessing children with special health care needs, 
behavioral health, and learning more about why Medicare beneficiaries 
disenroll from managed care plans. Over the next 18 months we will 
complete development of survey instruments that will address additional 
settings, populations, and types of services. As with our prior work, 
these will not be AHRQ-conducted surveys; these survey instruments will 
be in the public domain for use by others. These include hospitals, 
Medicare prescription drug plans, in-center hemodialysis, clinicians 
and group practices, Preferred Provider Organizations, and recognizing 
that some nursing home residents are cognitively impaired, we are 
developing both a survey for residents and their families. CMS recently 
asked us to work with them on development of a survey for home health 
care services.
    To assist hospitals in their clinical quality improvement 
initiatives, AHRQ also developed four sets of Quality Indicators. 
Inpatient Quality Indicators examine mortality, utilization, and volume 
for leading conditions and procedures. Patient Safety Indicators 
identify post-operative complications and iatrogenic (physician-caused) 
harms. Pediatric Quality Indicators are focused on those 17 years old 
and younger. For systems, which include hospitals and primary care 
practices, Prevention Quality Indicators measure ambulatory care 
sensitive conditions, i.e., conditions for which a patient should 
rarely need to be admitted to the hospital if the primary care system 
is working properly. In the last 3 years we have seen an increasing 
trend by States and others to use the Quality Indicators for public 
reporting, and at least one CMS demonstration project is using them to 
test whether the quality of inpatient care for Medicare beneficiaries 
improves when financial incentives are provided.
    AHRQ has also launched an exciting project to develop and validate 
efficiency measures. Nearly every report promoting public reporting 
calls for the addition of efficiency measures, but there are few, if 
any, efficiency measures for which there is widespread support. This is 
a high priority for purchasers, but providers have expressed concerns. 
The provider community believes that efficiency measures should 
support, and not undermine, our shared goal of encouraging appropriate 
high quality care. AHRQ agrees. For example, primary care practices 
should have incentives to help those patients who have one or more 
chronic illnesses learn to effectively manage their condition(s) in an 
efficient manner, in order to avoid risks to patient health, and large 
costs from avoidable emergency room visits, hospitalizations, or 
complications. Appropriately constructed measures need to take such 
issues into account in determining efficiency.
    We already are consulting all of the interested parties and leading 
experts and reviewing existing knowledge regarding efficiency measures. 
We expect to complete development and evaluation of efficiency measures 
by the end of this year. This will be an important addition to public 
and private sector initiatives because it will enable them to do what 
they cannot do now: compare the efficiency of their practice or their 
facility with the competition.
    Public Reporting. A number of public reporting initiatives are 
drawing on our work. Of the States that have public reporting of health 
quality information, at least 8 States are using one or more sets of 
Quality Indicators that my agency developed. The states are: Colorado, 
Florida, Massachusetts, New York, Oregon, Texas, New York, and Utah.
    To provide actual examples of reports of quality information 
created by a number of organizations, AHRQ will soon make available on 
our Web site, www.TalkingQuality.gov, a Report Card Compendium, a 
directory of over 200 sources of comparative information on the quality 
of health plans and providers. This directory provides in a single 
location an easily searchable data base of report examples, which will 
allow report developers to explore and assess different approaches to 
formatting information, displaying data, and explaining why quality 
information is important to consumers and other purchasers. Since it 
also provides (with their permission) information on the organization 
and individuals who developed each report, the Compendium will allow 
users to locate and network with one another concerning new strategies 
and ideas for report development. This is critical because information 
relating to how these reports cards were developed, how they were 
disseminated and used, and how they were received is rarely published. 
The Report Card Compendium includes reports on health plans, hospitals, 
medical groups/clinics, individual physicians, managed behavioral 
health organizations, nursing homes, home health agencies, and dialysis 
facilities.
    I am delighted to report that the health care industry and health 
professional societies have stepped up to the plate to help develop 
public reporting initiatives. The Ambulatory Care Quality Alliance 
(AQA) is a consortium of private sector groups that I chair. Eighteen 
months ago, the American Academy of Family Physicians, the American 
College of Physicians, and America's Health Insurance Plans asked AHRQ 
to serve as a neutral convener for this collaborative effort to 
determine how to promote uniformity in quality measurement and 
reporting in outpatient settings across public and private payers. 
Substantial physician leadership in AQA now includes the American 
Medical Association and many major medical societies.
    In addition to enthusiasm for identifying common measures to 
promote uniformity and facilitate improvement efforts, physicians are 
interested in their validity and use. Specifically, physicians want 
assurances: that measures are based on the best science and will be 
updated as the science changes; that we will address unanticipated 
consequences such as reports that discourage physicians from seeing the 
most difficult patients; and that any incentives will be fair and 
equitable. Not surprisingly, physicians are more willing to trust 
measures that are developed by neutral scientific parties.
    AHRQ and CMS are also active participants and partners in the 
Hospital Quality Alliance, a public-private partnership that is 
committed to developing and making available standardized measures of 
hospital quality. Over the last 3 years, the Alliance has built a 
system of quality reporting for hospitals. The result is the HHS Web 
site, Hospital Compare (www.hospitalcompare.hhs.gov ), which provides 
easily accessible comparative quality information. We are very pleased 
that the Hospital Quality Alliance will use the Hospital CAHPS survey, 
which we have developed for CMS to provide information on consumers' 
experiences with their hospital care. The survey is now being field 
tested. We are especially pleased that the Alliance has publicly stated 
that HCAHPS, ``represents a quantum leap toward the goal of consumer-
directed health care decisionmaking.''
    Value-Based Purchasing. Value-based purchasing is the concept of 
rewarding providers based upon their quality and efficiency. There are, 
of course, financial incentives inherent in all payment systems, so the 
issue is not incentives versus no incentives. As Secretary Leavitt 
points out, the challenge is that existing incentives are often poorly 
aligned; all too often they do not support our goals of improving 
efficiency and promoting quality.
    AHRQ is working with CMS, the Blue Cross plans, the RWJ Rewarding 
Quality Initiative, and others to provide technical assistance and to 
assist in the evaluation of the value-based purchasing experiments now 
underway. Some of these experiments, such as the CMS Premier quality 
incentive demonstration, are using our Quality Indicators as part of 
their measure sets.
    As interest began to grow in value-based purchasing initiatives, 
AHRQ undertook a synthesis of the existing literature. While the 
evidence was not conclusive when we released our report last year, the 
gaps in evidence are beginning to fill in. The evidence shows that 
measurable improvements have been seen in large-scale tests that reward 
increased use of preventive screenings and other processes that improve 
quality and safety. We developed Pay for Performance: A Decision Guide 
for Purchasers to Consider, which we released last week. These efforts 
underscore the importance of understanding how value-based purchasing 
programs are designed, so that all participants understand the rules.

                          TREATMENT DECISIONS

    Let me now turn to treatment decisions.
    Understanding What Works and For Whom. As I noted, one of AHRQ's 
basic activities is to understand what treatments and interventions 
work and do not work. There are three reasons why AHRQ's work is 
critical in assessing health care's state-of-the-art. First, with our 
increasing investment in basic and biomedical research, there has been 
an exponential increase in the number of scientific findings, and a 
similar increase in the proportion of clinical decisions where there 
are two or more treatment options. This makes it increasingly difficult 
for physicians to keep abreast of the literature and put the latest 
findings into perspective. Second, research shows that that there is a 
17-year time lag between discovery and when most Americans benefit from 
that discovery. AHRQ and other HHS agencies are committed to reducing 
that time lag. Finally, academia rewards original research, not 
synthesis of existing knowledge. So synthesis of our exploding 
knowledge base is the exception, rather than the rule.
    Section 1013 of the Medicare Modernization Act (MMA) significantly 
expanded AHRQ's ability to develop state-of-the-art evidence syntheses 
for the conditions and interventions of significance for Medicare, 
Medicaid, and State Children's Health Insurance Programs. To respond to 
the MMA mandate, we established the Effective Health Care Program to 
provide current, unbiased evidence about the comparative effectiveness 
of different health care interventions. Where the Effective Health Care 
Program breaks new ground is how we undertake these syntheses: the 
process is transparent, they will be routinely updated as warranted by 
new discoveries, and consumer-friendly versions will be produced of 
every finding.
    Our initial report compared the effectiveness of treatments for 
gastroesophageal reflux disease (GERD). This report is a good example 
of the opportunities for greater patient involvement in decisionmaking. 
The report found that patients who had surgery to treat GERD did so in 
the hope that they would no longer require ongoing medication. Yet 
despite the costs and risks, nearly two-thirds needed to continue 
taking medication. For patients receiving pharmaceutical therapy, there 
was a large difference in the cost, but not in the effectiveness, of 
the different classes of medications.
    This information is already being used by purchasers to improve the 
quality of their health benefit plans. For example, the National 
Business Group on Health, in its work supporting the National Committee 
on Evidence-Based Benefit Design, has summarized the information for 
purchasers and identified benefit design options for health benefits 
managers.
    Translating Knowledge Effectively. Communicating information to 
patients and consumers about medical decisionmaking can be daunting. 
The subject matter is often complex; statistical odds or risks of 
developing a disease or complication are extremely difficult to 
communicate; and the end result, all too often, is misunderstanding. It 
can often be difficult to reach consumers who are ``health illiterate'' 
or who have reached a saturation point with health care information.
    A member of our National Advisory Council, Judy Hibbard, a 
professor in the University of Oregon's Department of Planning, Public 
Policy, and Management, is an expert in the field of patient and 
consumer communication. We have relied on her insights in developing 
many of our products. She has identified three major factors that 
affect whether a consumer uses this type of information:
     Consumers need to understand the importance of the 
information to their lives. The information must be understandable, 
salient, and framed in ways that consumers can easily grasp.
     Consumers often need specific skills to understand and use 
the information. For example, health literacy and the ability to 
understand numerical information like the odds of developing a disease 
or complication are important.
     Finally, motivation of consumers to use the information is 
critical. In fact, a high level of motivation can compensate for a low 
level of these skills.
    We have come to appreciate that the task is not merely translating 
a document into a specific reading level. What is required is a better 
understanding of the audience for the information: what will make 
specific health messages meaningful to those who need to act upon them. 
We also need to make the action steps concrete.
    We are beginning to address these challenges. We are structuring 
the recommendations of the U.S. Preventive Services Task Force, which 
AHRQ sponsors, so they can be used digitally. By the end of the year, 
we will have a web-based interactive program where an individual can 
type in his or her age, sex, or other relevant information and 
understand more clearly what services the Task Force recommends they 
receive, and how often.
    Interestingly, the issue of clarifying action steps extends to 
clinicians. As decision support systems--whether in Personal Digital 
Assistants or desktop computers--become more pervasive, we are 
discovering that these programs do not easily accommodate findings that 
are framed in terms of factors that physicians need to consider. The 
information must be reformatted to provide specific action steps that 
match the demographics of the patient being treated.
    In the short term, we are restructuring our recent findings so that 
they can be more easily incorporated into decision support systems. In 
the long term, it is clearly more efficient to incorporate this focus 
into our work from the outset. So we have begun to change our process 
for developing evidence syntheses so that the results can readily be 
used by patients interactively on the Web or by caregivers in decision 
support systems. Our first prototype is an interactive data base of 
articles on the costs and benefits of health IT; we will now apply this 
approach to the work of the U.S. Preventive Services Task Force. Over 
the next 3 years, we expect this approach will become an integral part 
of all of our synthesis work. This should make an important 
contribution to reducing the 17-year time lag between discovery and 
widespread adoption.
    Patients with Chronic Illness. A substantial proportion of health 
care expenditures are focused on caring for individuals with multiple 
chronic illnesses. Judy Hibbard is also helping us to think through the 
challenge of motivating chronically ill patients to take an active role 
in the management of their care. While most health plans have developed 
or incorporated disease management strategies into their programs, this 
is only the first step in what is a much longer process. We sometimes 
forget the often overwhelming myriad of decisions and actions that a 
chronic care patient must take. Combined with the difficulties of 
navigating a highly complex delivery system, it is not surprising that 
few patients actually try. When you consider that fewer than 50 percent 
of patients actually quit smoking after a heart attack--an event that 
should motivate even the most intransigent smoker--it seems less 
surprising that it can be difficult to motivate chronic care patients 
to take an active role in managing their care and their lifestyle. AHRQ 
will increasingly focus attention on how we can effectively engage 
patients with chronic illnesses in their care.

                               CONCLUSION

    Mr. Chairman, in closing, I believe that we are making significant 
progress toward our shared goal of enhancing patient choice. The 
industry deserves great credit for creating the Hospital Quality 
Alliance and Ambulatory Care Quality Alliance to advance public 
reporting. Similarly, the leadership of Dr. Mark McClellan and his team 
at CMS has played a critical role in the progress we have made to date.
    As I noted during my opening remarks, we need to keep our eye on 
the ball: ensuring that all of us--as consumers and taxpayers--are 
getting real value for our health care dollars. Second, we need to 
recognize that all of these efforts succeed or fail based on the 
transparency of the process. The more transparent we make measuring the 
right thing well, the more likely that health care providers and 
consumers will accept the results. Third, we need to be realistic about 
the challenges of getting consumers to use this information in making 
health care decisions. This will not occur magically. We need to focus 
on how to best engage consumers more effectively in their health care 
decisions.
    My closing observation is that we must not overlook the significant 
response of the provider community to public reporting already. Health 
care systems are increasingly looking at how they can redesign their 
systems and processes for quality and value. We are supporting or 
providing technical assistance for a number of exciting projects 
intended to help build the evidence base for how systems can improve. 
For example, we are providing support to a public system's effort to 
apply the automotive concept of ``lean'' processes to health care, 
another project to more effectively measure waste, and a large 
collaborative effort to reduce avoidable injuries, in a first step 
toward developing ``fail safe'' hospitals. As we explore public 
reporting and value-based purchasing, interest in redesign for 
efficiency, quality, effectiveness, and safety will only increase.
    By serving as a ``science partner'' for these efforts, we will 
ensure that the lessons learned from these cutting edge initiatives 
will be rapidly shared throughout the health care industry. In fact, we 
will launch a web-based Innovations Clearinghouse later this year to 
serve as a platform for rapid dissemination. We also hope to make 
additional contributions through the types of system redesign projects 
I just mentioned, our continuing work in patient safety, and our 
support for the Administration's broader health IT agenda.
    Mr. Chairman, this concludes my prepared statement. I will be 
delighted to answer questions.
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 Prepared Statement of Michael D. Parkinson, M.D., MPH, Executive Vice 
    President and Chief Health and Medical Officer, Lumenos, Inc., 
                          Alexandria, Virginia

    Mr. Chairman and members of the Committee, thank you for the 
opportunity to testify today regarding health care information for 
consumers. My name is Michael D. Parkinson, and I am Executive Vice 
President and Chief Health and Medical Officer for Lumenos, a pioneer 
in consumer-driven health care and a subsidiary of WellPoint, the 
largest publicly traded commercial health benefits company in terms of 
membership in the United States. I have long been concerned about the 
health, productivity and economic impact of health care costs on 
employers and on our nation in general, and am honored to share my 
thoughts with the Committee today.

                              PERSPECTIVE

    My comments reflect my experience as a physician, former leader in 
the Air Force and Military Health System and as the head of our health 
improvement and clinical strategy at Lumenos. My clinical training and 
practice experience is in primary care and preventive medicine/public 
health. My comments are based on Lumenos experience with self-insured 
employers (generally 200 employees or more) and direct feedback from 
consumers and patients enrolled in either Health Reimbursement 
Arrangement (HRA) or Health Savings Account (HSA) plan designs.
    I believe, and an increasing body of evidence supports, that 
consumer-driven health care, both in its current form and as it rapidly 
evolves and grows, has great potential to improve the health of 
patients and consumers, the effectiveness of medical care and the 
efficiency of the health care system. However, better consumer 
engagement, more patient-centered care, greater ownership of resources 
expended on healthcare and improved quality/cost information will have 
predictable consequences on the health care system. These consequences 
and system deficiencies should be anticipated and addressed.

       ADDRESSING THE TRUE DRIVERS OF EXCESSIVE HEALTH CARE COSTS

    A properly designed consumer-driven health care program assists and 
supports the consumer/patient to understand and address the primary 
drivers of poor health and excessive medical costs, which are personal 
health behaviors and ineffective and inefficient health care. The 
flexibility of account-based benefit designs to promote, educate, 
incentivize and financially reward improved health behaviors, 
preventive care and evidence-based medical practices is unique. A 
recent study by leading health care economist Ken Thorpe concluded that 
63 percent of the rise in real U.S. per capita health spending is due 
to the increasing prevalence of health risk factors which are medically 
treated rather than prevented or improved through health promotion and 
disease prevention strategies.\1\
---------------------------------------------------------------------------
    \1\ KE Thorpe, ``The Rise in health care spending and what to do 
about it'' Health Affairs, Nov/Dec 2005.
---------------------------------------------------------------------------
    The inherent ``rollover'' of funds in account-based designs from 
year-to-year reinforces improved health behaviors, appropriate self-
care and better care management for chronic conditions. Prevention and 
evidence-based care particularly for those with chronic disease are 
clearly prioritized and financially rewarded. Both our HRA and HSA 
plans cover evidence-based preventive services at 100 percent without 
copays or deductibles. In addition, 60 percent of Lumenos employers 
cover tobacco cessation and 30 percent cover weight management as 
preventive care services at 100 percent.
    Consumer-driven models have the power to incent three major actions 
by all individuals and patients that improve health, medical care and 
outcomes. Specifically, each of us needs to understand our health 
status (our risk factors and current medical conditions), agree to 
participate in a program or activity (risk reduction program or 
``disease management'') if we have significant risk factors or chronic 
disease and understand and master our care, in partnership with our 
physician to optimize outcomes and care.
    At Lumenos, we created an integrated and incentivized health 
improvement strategy, targeted at major drivers of excessive health 
care costs, which meets the needs of the full range of health risk and 
users, with a particular emphasis on those with chronic disease and 
high utilization.

        INFORMATION, TOOLS AND SUPPORT SERVICES AVAILABLE TODAY

    Lumenos and its partners provide a comprehensive array of 
information, tools and personal support services for consumers to 
understand and better engage in their health and health care decisions. 
We have found that web-based information is an important enabler of 
better decisionmaking, but not the sole or most important factor in 
assisting consumers and patients. The organization, timing, linkage, 
ability to access at the point-of-decision and content delivery method 
are important as well.
    Communication is required to reinforce the use of the health, 
clinical, and quality and cost information. Ideally this communication 
would occur initially and repeatedly throughout the year using multiple 
modalities. In both formal surveys and in face-to-face focus groups 
with hundreds of Lumenos consumers, members are surprised and 
appreciative of the wealth of organized information and support 
available to them. We have found that consumers are seeking more 
accurate and actionable information over time. Of interest, the 
consensus answer to the open-ended question, ``What could Lumenos do 
better for you?'' is to create a means to connect with other patients 
with similar medical conditions or with consumers with shared health 
interests.
    In general, consumers and employers are highly satisfied with the 
current information, tools and support that Lumenos provides. Year-
over-year, both employers and consumers are seeking more specific and 
actionable information about the cost, quality (and necessity) of 
medical services. Communication and reinforcement of why information is 
important, how to access it, how to engage to better manage one's care 
(e.g., health coaching) and how to use it in concert with one's 
physician are likely more important than the availability, or in some 
cases, the specificity and accuracy of the data itself.

           HOW IT'S WORKING FOR EMPLOYERS AND HEALTH SYSTEMS

    In general, Lumenos' experience for both employers who adopt 
``account-based plans'' as a full replacement strategy and for those 
who offer them on an optional basis reflects the findings of the 
McKinsey study.\2\ Increases in preventive care, decreases in the cost 
of prescription drugs, and decreases in outpatient and ER visits lead 
to significant employer health care cost trend mitigation relative to 
other benefit designs. Particularly when accompanied by financial 
incentives, patients with chronic illness become engaged either through 
health risk assessments or direct self-referral to a health coach. 
Unlike the McKinsey study, which showed low satisfaction with the 
information and support provided to consumers, Lumenos has consistently 
experienced high satisfaction with both information/support/
communications and re-enrollment.
---------------------------------------------------------------------------
    \2\ McKinsey & Company, ``Consumer-directed health plan report--
early evidence is promising'' acessed at www.mckinsey.com/
clientservice/payorprovider/Health-Plan-Report.pdf. 2005
---------------------------------------------------------------------------
    One of my personal goals, and a major reason for the American 
Medical Association's support for Health Savings Accounts and consumer-
driven care in general, is to better support patient-physician 
relationships. Consumer-driven models have two inherent value 
propositions for providers: improved clinical care and outcomes through 
the better informed and engaged patients and reduced administrative 
burdens relative to ``traditional'' care.
    In addition to providing care, health systems and hospitals are 
also employers purchasing and providing health care services for their 
own employees. These employees often have among the highest risk-
adjusted health care costs of any industry. Lumenos has suggested, and 
some leading health systems who are now full replacement clients agree, 
that consumer-driven health care has great potential not only to 
appropriately mitigate excessive health care costs, but also to 
catalyze clinical and business practice innovation.
    Employers, as well as a growing number of health care systems, are 
adopting consumer-driven health plans on either an optional or full 
replacement basis. Health care cost mitigation, increases in preventive 
care and in engagement by those with chronic disease can be accompanied 
by high enrollee and employer satisfaction when information, tools and 
support are designed, implemented, communicated and reinforced.

      IMPROVING APPROPRIATE CONSUMER AND PHYSICIAN DECISION MAKING

    There is a growing awareness and tailoring of information, tools 
and support to address the preference and price sensitivities of 
medical care. If the health of individuals, the care of physicians and 
the performance of the health care system are to improve, then the 
behavior of each entity needs to be better understood and addressed 
using approaches which predispose, enable and reinforce desired 
outcomes. The creation of a ``health care marketplace'' with improved 
information on cost and quality will impact health care decisions and 
players differentially and will likely occur incrementally, which, in 
my opinion, is desirable. At Lumenos, we have deliberately built an 
incremental approach to quality and information collection and 
dissemination.
    A health care typology that has been useful in shaping our 
information and support strategy includes health risk factor 
identification, maintenance and reduction, clinical preventive 
services, acute/episodic care, chronic disease management, surgical 
decision support, emergency/catastrophic care and end of life needs. 
Similarly health care can be parsed by care that is proven clinically 
effective, care that is preference-sensitive and care that has shown to 
be ``supply sensitive'' (e.g., wide variations in practice typically 
associated with oversupply of providers or facilities relative to other 
geographic areas). Provider-specific issues that relate to care and 
business practices can also be evaluated and impacted through a 
consumer-driven ``prism'' as noted previously.
    Making the right thing to do clinically also be the easy thing to 
do will require realignment of thinking, infrastructure and incentives 
among the consumer/patient, provider and ``the system.'' Better 
information and tools for quality and costs should be informed by a 
more specific understanding of how patients use or could use such 
information and support across the spectrum of the different health 
care needs and in different geographic and economically over- or 
undersupplied provider markets.

WHAT'S MISSING: STANDARDIZED CONSUMER-FOCUSED TOOLS AND INFORMATION FOR 
                               ENGAGEMENT

    Patients with serious medical conditions or chronic illness want to 
know whether other patients with the same condition understand their 
disease, are able to improve the likelihood of a favorable outcome and 
are they treated humanely in the process. Currently available 
information is not adequate to answer this question. Furthermore, the 
medical literature supports that knowledge, outcomes and even more 
judicious use of resources are more likely to be acquired in the 
context of a healthy physician patient relationship with shared 
decisionmaking.
    New performance indicators of quality around consumer acquisition 
of competencies by physicians, medical groups or health systems could 
complement existing, administrative (claims-based) measures of quality 
and efficiency. For example, the disease specific, evidence-based 
guidelines developed by the Institute of Medicine would be useful for 
consumers if translated into language designed for lay people. What for 
example, does the newly diagnosed colon cancer patient need to know, do 
and act upon in concert with her physician? What knowledge, 
competencies and proposed actions are appropriate for a patient with 
diabetes in patient terms, which reflects the evidence-based guidelines 
promoted to patients and measured by accreditation and other quality 
efforts?
    A standardized, generic patient satisfaction questionnaire, or 
``ambulatory HCAPS'', that includes the major elements of an effective 
shared decisionmaking relationship (i.e., ``Does your physician offer 
and discuss options, share the pros and cons, consider your 
preferences, etc.'') would also be very useful to consumers. Aggregated 
standardized survey information on the physician's practice style would 
be most valuable to consumers to help them determine which provider or 
group is likely to improve their engagement, care skills and health 
outcomes.
    Quality efforts to date have concentrated on plan and provider 
measurements from administrative data rather than on consumer and 
patient knowledge, competencies and decisionmaking arising from 
information access and a partnering, shared-decision making patient-
physician relationship. Efforts to define both generic and 
diseasespecific qualities associated with high quality, high value and 
safe medical practices which can then result in standardized patient 
surveys could be of great value in increasing the effective engagement 
of patients, and over time, improving the ``marketplace'' of patient-
relevant quality information for provider choice.

        WHAT WE NEED TO DO BETTER: QUALITY AND COST INFORMATION

    Consumers spending ``their own money'' for healthcare are asking 
for more information, access and convenience. Providing estimated 
expenses for episodes of care will become progressively more granular 
and transparent pricing by providers and facilities will increase. 
Making sure that quality is measured consistently will be important in 
order for consumers to compare ``value'' as they do currently for 
prescription drugs. The anticipated Federal release of physician and 
hospital reimbursement for selected Medicare services and the 
requirement for transparency prices of a core set of services in order 
to bid on Federal employee health benefits programs will undoubtedly 
impact the direction and pace of the provider and payor's approach to 
cost transparency.
    A promising approach is the NCQA Physician Recognition program, 
which allows physicians to volunteer and be reviewed for compliance 
with evidence-based guidelines for diabetes and heart disease. 
Additional recognition is awarded for implementing an electronic 
medical record or system for tracking and improving evidence-based care 
and patient outcomes. Lumenos displays this information today to help 
inform patients about those physicians interested in and evaluated for 
these chronic conditions.

         ACCELERATING INNOVATION IN CARE DELIVERY AND FINANCING

    Consumers, patients and health systems deploying consumer-driven 
care for their own employees and physicians are likely to embrace 
value-added innovations and avoid lower value services or practices. 
For example, group visits for chronic disease management, reimburseable 
e-visits for established patient-physician relationships, and behavior 
change and disease management programs have traditionally not been 
demanded by consumers/patients or built by physicians or health 
systems. Consumers paying ``with their own money'' and employers, 
trying to maximize the productivity of their work force, are more 
likely to see value in new ways to connect with providers and health 
information outside the too often ineffective, rushed, brief face-to-
face physician visit. The major health care systems that Lumenos serves 
are building these capabilities largely in response to the consumer-
driven market both internally, for their own employees, and externally, 
for the patients and employers they serve. Some hospitals are now 
providing enhanced information to inform patients about their actual 
out-of-pocket costs and/or total price of selected procedures and 
treatments (e.g., OB, outpatient surgery, gastroenterology services, 
rehab, etc.).
    Primary care providers, already concerned with declining 
reimbursements for primary care and chronic disease management, are now 
seeing the rapid expansion of acute care clinics in retail and drug 
stores with transparent, all-inclusive, reasonable pricing for acute or 
routine conditions. Chronic disease patients who are looking for 
consistent, compassionate, evidence-based service and expertise may be 
an important lever to help drive the reinvigoration of comprehensive, 
longitudinal primary care and the creation of an ``advanced medical 
home.'' \3\ Surgical hospitals and new centers or systems for 
specialized chronic disease management may also arise and be welcomed 
and sought by more engaged consumers.
---------------------------------------------------------------------------
    \3\ American College of Physicians Position Paper, ``Reform of the 
dysfunctional healthcare payment and delivery system.'' Accessed at 
http://www.acponline.org/college/pressroom/as06/dysfunctional-
payment.pdf. 2006.
---------------------------------------------------------------------------
    Consumer-driven care will likely accelerate clinical and business 
practice innovation as patients better understand their options and 
seek greater assistance, convenience and value for their time and 
money. The provider community is showing evidence of welcoming such 
innovation and, in some instances, is calling for wholesale reform of 
current clinical, delivery and financial models. Publicizing the value 
of these innovations and translating them into meaningful health and 
cost advantages will further accelerate their dissemination and 
adoption.

             ACCELERATION OF HEALTH INFORMATION TECHNOLOGY

    Consumers are generally not aware of the health or cost impact of 
seeing a physician or being admitted to a hospital or facility that 
does not deploy state-of-the-art health information technology. 
Consumer and patient focused messages need to be developed and 
disseminated to create market demand for the safer, more effective and 
efficient care that electronic/personal health and medical records, 
electronic prescribing and hospital physician order entry can provide. 
Creating a marketplace with accurate information about the health 
information technology status of providers is important and evolving. 
However, health information and interoperability standards are needed 
urgently to facilitate both rapid adoption and lower price points for 
providers, particularly those in smaller practices, to acquire needed 
technology.
    Consumers and patients will increasingly come to understand the 
safety, health and cost value of health information technology from 
their providers. This could become a key market differentiator and 
``quality/cost metric'' in the near term. Acceleration of technology 
standards for information and interoperability is critical and urgently 
needed to promote widespread dissemination and decrease price.

  MAJOR HEALTH CARE ISSUES TO BE ANTICIPATED AND POTENTIALLY ADDRESSED

    There are numerous major healthcare issues, needs and practices 
that will be highlighted and catalyzed by the growth of consumer-driven 
health plans, consumerism and greater transparency in cost and quality.
    (1) Need for improved, standardized assessment of therapies and 
technologies. Currently the military, VA, health plans, foundations and 
consumer groups all attempt to assess the health and economic marginal 
value of new treatments and procedures without any consistent 
methodology and with inefficient use of resources;
    (2) Malpractice reform to decrease unnecessary, defensive medical 
services;
    3) Shifted and hidden costs for graduate medical education. Who 
should pay for the education of a qualified health professional 
workforce?;
    (4) A discussion of an optimal mix of market-based versus public 
sector functions of health care; and
    (5) Statutory and regulatory reforms to foster an appropriate 
health care marketplace. Michael Porter's recent characterization of a 
health care marketplace and what would be needed to create one is a 
useful framework for what consumers, providers and payors all should 
consider, describe and work toward.\4\
---------------------------------------------------------------------------
    \4\ M Porter, ``Fixing competition in US health care,'' Harvard 
Business Review, June 2004.
---------------------------------------------------------------------------
    As consumer information on quality and costs of services becomes 
more transparent, cost-shifting, unexplainable cost differentials and 
inefficient clinical and business practices will become more apparent. 
Health policy and societal questions which have been known and 
discussed for years will become more visible to all stakeholders and 
hard decisions will likely have to be made about the appropriate role 
of the private, market sector and public sector in financing and 
delivering health care.

[GRAPHIC] [TIFF OMITTED] T9936.023

    Mr. Chairman, Mr. Vice Chairman and members of the Committee, thank 
you for the invitation to testify about the next generation of consumer 
health information tools. My name is Paul B. Ginsburg, and I am an 
economist and president of the Center for Studying Health System Change 
(HSC). HSC is an independent, nonpartisan health policy research 
organization funded principally by The Robert Wood Johnson Foundation 
and affiliated with Mathematica Policy Research.
    HSC's main research tool is the Community Tracking Study, which 
consists of national surveys of households and physicians in 60 
nationally representatives communities across the country and intensive 
site visits to 12 of these communities. We also monitor secondary data 
and general health system trends. Our goal is to provide Members of 
Congress and other policymakers with objective and timely research on 
developments in health care markets and their impacts on people. Our 
various research and communication activities may be found on our Web 
site at www.hschange.org.
    My testimony today will make three points:
     Engaging consumers to be more aware of cost and quality 
issues in health care has the potential to increase the value of health 
care not only for individual patients but also for the U.S. population 
as a whole. But some are overselling the magnitude of this potential. 
And achieving this potential will require investment in collecting and 
translating meaningful consumer price and quality information and 
encouraging innovative benefit structures. And even if this potential 
is reached, it will not be the hoped-for silver bullet that solves the 
health care cost crisis in this country.
     For most consumers who are insured, their health plan has 
long been their most powerful asset in shopping for lower prices, and 
insurers have the potential to become even more effective agents as 
they develop more sophisticated benefit structures and information 
tools to support consumers in choosing effective treatments from 
higher-quality, lowercost providers.
     There are practical limitations on the ability and 
willingness of consumers to become savvy health care shoppers. Markets 
for self-pay health services, such as LASIK, are often cited as a model 
for consumer engagement, but our research indicates that consumers' 
experiences with self-pay markets have been romanticized and do not 
offer much encouragement as a roadmap for effective health care 
shopping without either a large role for insurers or regulation.
    The current policy interest in price and quality transparency is 
essentially the second stage of the evolution of consumer-driven health 
care. The first stage was financial incentives for consumers in the 
form of greater cost sharing--high deductibles and coinsurance. Tax-
sheltered savings accounts--health savings accounts (HSAs) and health 
reimbursement arrangements (HRAs)--may be useful tools to make 
increased cost sharing more palatable to consumers, but they do not 
reinforce consumer incentives to economize on health care--they 
actually temper them.
    Now industry and policymakers are focusing on the tools needed by 
consumers to make informed decisions on reducing the costs of their 
care or ascertaining the quality of care. As insurers compete 
vigorously to sell consumer-driven products, they seek to differentiate 
their products on the basis of the tools offered to consumers to 
compare price and quality across providers. Policy makers are 
interested in exploring government's role in fostering greater 
costconsciousness and a more favorable environment for consumers to 
make informed choices about health care services.
    Traditionally, health insurance has either removed or sharply 
diluted consumer incentives to consider price in choosing a provider or 
treatment strategy. It is difficult for consumers to get price and 
quality information from providers--traditionally they have shown 
little interest in competing for patients on this basis. Likewise, 
there is little information available to help patients examine the 
effectiveness of treatment alternatives. Lack of quality information 
understandably makes consumers reluctant to choose a provider solely on 
the basis of a lower price. It is one thing to realize after the fact 
that you chose a poor-quality provider when price is not an issue but 
another to have that result from choosing on the basis of price. 
Similarly, lack of information on effectiveness of treatment 
alternatives makes consumers more reluctant to consider price in the 
choice of treatment. Consumer difficulties in weighing alternative 
treatment approaches reflects not only difficulties in accessing what 
is known about medical effectiveness but also a failure of government 
to make adequate investments in effectiveness research. Even with 
better information on price, quality and effectiveness of different 
treatments, there are strong indications that many consumers are unable 
and/or unwilling to seek health information from sources other than 
their physicians.\1\
---------------------------------------------------------------------------
    \1\ An HSC study documented how few consumers seek health 
information, especially those with low education levels. See Tu, Ha, 
and J. Lee Hargraves, Issue Brief No. 61, Seeking Health Care 
Information: Most Consumers Still on the Sidelines, Center for Studying 
Health System Change, Washington, DC (2003).
---------------------------------------------------------------------------
    Unfortunately, much of the recent policy discussion about price and 
quality transparency downplays the complexity of decisions about 
medical care and the dependence of consumers on physicians for guidance 
about what services are appropriate. It also ignores the role of 
managed care plans as agents for consumers (and purchasers of health 
insurance, such as employers) in shopping for lower prices.

                 POTENTIAL FOR EFFECTIVE PRICE SHOPPING

    If you define effective shopping as obtaining better value for 
money spent, then consumers do have the potential to be more effective 
shoppers for health care services. There are direct and indirect 
benefits of choosing providers that offer better value. The direct 
benefits are simply the cost savings, for example, of choosing the 
lower-cost of two providers of comparable quality.
    But the indirect benefits are potentially more important. If enough 
consumers become active in comparing price and quality, this will lead 
to market pressure on providers to improve their performance on both 
cost and quality dimensions. Providers that measure up poorly on the 
value dimension will lose market share and will be motivated to revamp 
their operations to remain viable. Our market economy offers many 
examples of competitors responding to loss of market share by making 
difficult changes and regaining their edge, and examples are starting 
to appear in health care as well. The gains from providers improving 
their operations will accrue broadly to the health care system.
    But we need to be realistic about the magnitudes of potential gains 
from more effective shopping by consumers. For one thing, a large 
portion of medical care may be beyond the reach of patient financial 
incentives. Most patients who are hospitalized will not be subject to 
the financial incentives of either a consumer-driven health plan or a 
more traditional plan with extensive patient cost sharing. They will 
have exceeded their annual deductible and often the maximum on out-of-
pocket spending. Recall that in any year, 10 percent of people account 
for 70 percent of health spending, and most of them will not be subject 
to financial incentives to economize.
    When services are covered by health insurance, the value of price 
information to consumers depends a great deal on the type of benefit 
structure. For example, if the consumer has to pay $15 for a physician 
visit or $100 per day in the hospital, then information on the price 
for these services is not relevant. If the consumer pays 20 percent of 
the bill, price information is more relevant, but still the consumer 
gets only 20 percent of any savings from using lower-priced providers. 
And the savings to the consumer end once limits on out-of-pocket 
spending are reached.
    In addition to those with the largest expenses not being subject to 
financial incentives, much care does not lend itself to effective 
shopping. Many patients' health care needs are too urgent to price shop 
or compare quality. Some illnesses are so complex that significant 
diagnostic resources are needed before determining treatment 
alternatives. By this time, the patient is unlikely to consider 
shopping for a different provider. We need to build on the fact that 
even under scenarios in which consumers play a much more active role in 
their care than is the norm today, that for those who are sickest, who 
account for the lion's share of health care spending, physicians will 
be playing a major role in directing their care. So choosing a 
physician--or a medical practice--may well be the most important 
consumer choice.
    The significant role that physicians play in patients' treatment 
choices means that advocates of consumerism should focus on the 
importance of choosing a physician before the onset of major medical 
problems. Some of these constraints could be addressed by consumers' 
committing themselves, either formally or informally, to providers. 
Many consumers have chosen a primary care physician as their initial 
point of contact for medical problems that may arise. Patients served 
by a multi-specialty group practice informally commit themselves to 
this group of specialists--and the hospitals that they practice in--as 
well. So shopping has been done in advance and can be applied to new 
medical problems that require urgent care. This is a key concept behind 
the high-performance networks that are being developed by some large 
insurers.
    When consumers choose treatment strategies, the absence of neutral 
financial incentives for providers is a serious problem. The most 
typical situation today is one where the provider gets paid on a fee-
for-service basis, so the incentive is to recommend more services, 
especially those that have higher unit profitability. Increasingly, 
physicians have an ownership interest in services, such as imaging, 
beyond their usual professional services, creating an additional 
conflict between physicians' interests and those of their patients.

                              INSURER ROLE

    Much of the policy discussion about price transparency has 
neglected the important role that insurers play as agents for consumers 
and purchasers of health insurance in obtaining favorable prices from 
providers. Even though managed care plans have lost clout in 
negotiating with providers in recent years, they still obtain sharply 
discounted prices from contracted providers. Indeed, in my own 
experience as a consumer, I often find that the discounts obtained for 
the preferred provider organization (PPO) network for routine 
physician, laboratory and imaging services are worth more to me than 
the payments by the insurer.
    Insurers are in a strong position to further support their 
enrollees who have significant financial incentives, especially those 
in consumer-driven products. Insurers have the ability to analyze 
complex data and present it to consumers in more understandable ways. 
For example, they can analyze data on costs and quality of care in a 
specialty and then offer their enrollees a simple incentive to choose 
providers in the high-performance network. Insurers also have the 
potential to innovate in benefit design to further support effective 
shopping by consumers, such as increasing cost sharing for services 
that are more discretionary and reducing cost sharing for services that 
research shows are highly effective.
    Insurers certainly are motivated to support effective price 
shopping by their enrollees. Employers who are moving cautiously to 
offer consumer-driven plans want to choose products that offer useful 
tools to inform enrollees about provider price and quality. When 
enrollees become more sensitive to price differences among providers, 
this increases health plan bargaining power with providers. Negotiating 
lower rates further improves a health plan's competitive position. One 
thing that insurers could do that they are not doing today is to assist 
enrollees in making choices between network providers and those outside 
of the network by providing data on likely out-of-pocket costs for 
using non-network providers.
    Some health plans are now experimenting with ways to communicate to 
their enrollees the fact that certain hospitals have particularly high 
or low negotiated fees, without violating their agreements to hospitals 
and their desire to maintain the confidentiality of their price 
negotiations.\2\ For example, Blue Cross of California, which tends to 
rely heavily on coinsurance in its benefit structures, has been posting 
ratings of the costliness of hospitals for PPO enrollees. It follows 
the approach of Zagat guides to restaurants, where ``$'' is assigned to 
the lowest cost hospitals and ``$$$$'' is assigned to the highest cost 
hospitals. This approach not only maintains the confidentiality of 
contracts with hospitals, but it also engages the formidable actuarial 
resources of the plan to simplify complex and voluminous hospital data 
for consumers. Humana Inc. has presented hospital price information to 
some of its Milwaukee enrollees that maintains confidentiality by using 
ranges and combining hospital costs with physician costs. I expect that 
insurers will come up with more innovative ways to present price 
information to enrollees.
---------------------------------------------------------------------------
    \2\ In testimony before the U.S. House of Representatives, 
Committee on Energy and Commerce, Subcommittee on Health, on March 15, 
2006, I explain how publication of price agreements between hospitals 
and insurers is likely to result in higher prices for hospital care. 
The testimony can be accessed at http://energycommerce.house.gov/108/
Hearings/03152006hearing1813/Ginsburg2770.htm.
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                            SELF-PAY MARKETS

    Many have pointed to markets for medical services that are not 
covered by insurance to show the potential of consumer price shopping. 
Since these services are not medically necessary--the basis for their 
not being covered by insurance--they should be prime candidates for 
more effective consumer price shopping. HSC has studied markets for 
LASIK, in-vitro fertilization (IVF), dental crowns and cosmetic surgery 
by interviewing providers, consultants and regulators in these fields. 
Our findings are not as encouraging as one hears from advocates of 
consumerism.
    LASIK has the greatest potential for effective price shopping 
because it is elective, non-urgent, and consumers can get somewhat 
useful price information over the telephone. Prices have indeed fallen 
over time. But consumer protection problems have tarnished this market, 
with both the Federal Trade Commission and some state attorneys general 
intervening to curb deceptive advertising and poorly communicated 
bundling practices. Many of us have seen LASIK advertisements for 
prices of $299 per eye, but in fact only a tiny proportion of consumers 
seeking the LASIK procedure meet the clinical qualifications for those 
prices. Indeed, only 3 percent of LASIK procedures cost less than 
$1,000 per eye, and the average price is about $2,000.
    For the other procedures that we studied, we found little evidence 
of consumer price shopping.
    For dental crowns and IVF services, many consumers are unwilling to 
shop because they perceive an urgent need for the procedure, and other 
consumers are discouraged from shopping by the time and expense of 
visiting multiple providers to get estimates. In cosmetic surgery, a 
limited amount of shopping does occur, facilitated by free screening 
exams offered by some surgeons. However, quality rather than price is 
the key concern to most consumers in this market; in the absence of 
reliable quality information, most consumers rely on word-of-mouth 
recommendation as a proxy for quality, instead of shopping on price.

                           ROLE OF GOVERNMENT

    Governments can support consumers in their efforts to shop more 
effectively for price and quality in health care by providing 
information on providers' prices and quality. The greatest 
opportunities may lie in the areas of information on provider quality 
and the funding of research on medical effectiveness.
    Medicare's voluntary program for hospital quality reporting has 
succeeded in obtaining participation by almost all hospitals and likely 
will grow in sophistication over time. HSC's recent community site 
visits found that quality reporting to Medicare and the Joint 
Commission on the Accreditation of Healthcare Organizations (JCAHO) 
have stimulated hospitals to place a much higher priority on quality 
improvement. Hospital respondents envision a day when consumers and 
insurers will use publicly reported information to choose hospitals or 
for payment. An untapped resource is the Medicare Part B claims files. 
The Business Roundtable recently called for making this data available 
to insurers--with protections for patient confidentiality. This would 
permit greater statistical power for insurer assessments of physician 
efficiency and quality and would support their role as agents for 
consumers.
    Most accept the Federal role in funding research on medical 
effectiveness as a classic ``public good'' activity. The Agency for 
Healthcare Research and Quality has developed an excellent reputation 
in carrying out this role. But the funding for these activities has 
been extremely limited, especially in contrast with what the Federal 
Government spends on biomedical research overall.
    I believe that government provision of price information to 
consumers has less potential. For those with health insurance, health 
plans are better positioned to tell people what they really want to 
know--patients' out-of-pocket costs for different services. Efforts by 
some states to provide hospital price information have been limited by 
the complexity of the information--the difficulty of translating it 
into what it will cost an individual for what they need. And few who 
are uninsured have the wherewithal to pay for a hospital stay, even if 
they choose a less expensive hospital.

                               CONCLUSION

    The need for consumers to compare prices and quality of providers 
and treatment alternatives is increasing and has the potential to 
improve the value equation in health care. But we need to be realistic 
about the magnitude of the potential for improvement from making 
consumers more effective shoppers for health care. Whatever the gains 
from increased shopping activity, rising health care costs will, 
nevertheless, price more consumers out of the market for health 
insurance and burden governments struggling to pay for health care from 
a revenue base that is not growing as fast as their financing 
commitment.
                               __________
    Prepared Statement of Walton Francis, MA, MPA, MPP, Author and 
                         Independent Consultant

            THE PRICE OF EVERYTHING AND THE VALUE OF NOTHING

    I am pleased to be able to provide this Committee with my diagnosis 
as to where we are and where we need to go in providing information on 
the price and value of health care to consumers. I think that improving 
``transparency'' (how about just plain ``access''?) to price and value 
information on health care is the most important budgetary and economic 
issue facing America. It is vital to Medicare reform, and to avoid the 
train wreck of impending insolvency of that program, but more broadly 
vital to reducing the unsustainable and crippling problem that rising 
health care costs impose on all Americans in all income classes, 
whether they pay by taxes, premiums, cost sharing, or going ``naked'' 
without insurance.
    During the many years that I have authored the annual CHECKBOOK's 
Guide to Health Plans for Federal Employees, I have watched in 
amazement the inability of either the market-driven Federal Employee 
Health Benefits Program (FEHBP) or the legislatively and 
bureaucratically micro-managed Medicare program to halt the seemingly 
inexorable rise in health care costs, year after year, at a rate higher 
than either inflation or per capita income. This doesn't mean that 
these programs are failures at cost control. Quite the contrary, they 
have in their quite different ways achieved cost containment results 
worth many billions of dollars annually. But what they are able to 
accomplish in the dysfunctional American healthcare ``market'' (sic) 
has been palliative, not curative.
    If there is one point on which virtually all health care economists 
agree it is that the fundamental cause of the rise and level of health 
care spending is the prevalence of health care insurance that is not 
pure insurance, but instead prepaid, first-dollar health care. Even 
with modest copayments, most health care for most Americans is 
virtually free. Some call the resulting waste ``moral hazard.'' Others 
simply call it the results of demand and supply curves intersecting 
where the price to the consumer is set by payers near zero. Whatever 
one terms it, the result is immense waste. Shifting some insurance 
policies to a consumer-driven model with high deductibles and hence 
restoring some semblance of fiscal discipline is an important reform. 
But it is less than half the needed reform. And the bigger half is 
simply better price and value information for consumers.
    Lady Windermere, in Oscar Wilde's play, said ``a cynic knows the 
price of everything and the value of nothing.'' Through no choice of 
their own, American consumers have been forced to become and remain 
something worse than cynics, allowed to know neither the price nor the 
value of health care. The essential problem is that without price and 
quality signals, or incentives to use them, consumers have no way to 
compare either treatments or providers and to impose market discipline 
to reward efficiency and drive down prices and costs.
    The presence of intermediary ``middleman'' insurance organizations 
both complicates and presents opportunities for reform. Those 
organizations have a strong incentive to control costs at least as well 
as their competitors, and they have price and outcome data. But they 
have to attract broad provider panels, and pay more, to compete in a 
world where customers do not directly obtain the savings from narrower 
provider panels and other economies. The 1990s rebellion over heavy-
handed ``gatekeeper'' HMO requirements, that reversed the trend to HMO 
insurance and led to the vast rise in PPO insurance, illustrates the 
potency of the problem. In the final analysis, insurers are in a market 
where deep pocket payers--employers and taxpayers--routinely pay the 
going rate, however high that is, to maintain the status quo. Something 
has to change.
    Meanwhile, there are roughly 45 million uninsured (most voluntarily 
so), and another 5 million or so who face significant cost sharing. In 
total some 50 million people have to cope with a market that provides 
virtually no functional price signals as to how to save money by 
choosing lower cost treatments or providers, and only weak quality 
signals.
    In assessing this data chasm, its possible bridging remedies, and 
their possible outcomes, it is useful to draw sharp distinctions among 
various categories of information. Consider a consumer with a diagnosis 
that will involve high costs, such as childbirth, breast cancer, severe 
carpal tunnel syndrome, or prostate cancer. Suppose this consumer has 
no health insurance but an option to join or change plans in open 
season. Such a consumer would need need six categories of consumer 
information. Together with his or her own preferences, such information 
would enable an informed choice among options. Far more importantly, if 
all consumers had such information this would drive the health care 
market over time to more effective and efficient outcomes. The six 
categories are:
    (1) Alternative courses of treatment,
    (2) Likely outcomes of those alternative treatments,
    (3) Monetary and other costs of such treatments on average,
    (4) Costs of using particular providers,
    (5) Quality and outcomes using particular providers, and
    (6) Estimates of which health insurance plan is the best buy, 
taking into account both premiums and out-of-pocket costs, for the next 
plan year.
    Today, I will cover briefly the current availability of consumer 
information on each of these topics, recent progress and efforts under 
way, problems and opportunities in filling gaps, and long run 
consequences of filling those gaps. I will try to illustrate some of my 
findings and conclusions with examples using the diseases or conditions 
mentioned above, and a few other situations.
    Current availability of Consumer Information. Consumer information 
across these six types today ranges from scarce to nonexistent to 
abundant but flawed.
    There are innumerable books, articles, and learned opinions on (1) 
alternative courses of treatment. For example, for a woman expecting no 
complications of maternity, using a midwife represents a huge saving 
compared to hospital delivery. There is abundant information on the 
very low risks of delivery, and a slim but not insubstantial body of 
literature on the slightly larger risks of using midwives. For a woman 
with breast cancer, there is abundant literature on the various 
mastectomy and lumpectomy alternatives, taking account of different 
stages of disease progression. For prostate cancer, there are four 
major treatment modalities, one of which is benign neglect (old age 
will usually kill the patient faster than this cancer). For carpal 
tunnel syndrome, there are several inexpensive treatment options with 
expensive surgery the only effective option in many severe cases.
    While medical science is constantly advancing, and there are huge 
gaps in information, to say nothing of diseases for which there are not 
yet any effective treatments (e.g., Alzheimer's disease), it is fair to 
say that consumers and their advisors (notably physicians) do not lack 
access to whatever information exists. One could fill libraries with 
medical advice literature, on or off the Internet, in books, articles, 
and snippets from disease-specific Web sites, and more.
    The Internet has greatly advanced low-cost access to this 
information by consumers, through sources such as Medline, trusted Web 
sites such as WebMD, and forums for patient groups.
    The Healthline Web site (www.healthline.com), of which you are 
hearing something today, is itself proof that treatment information is 
there--Healthline specializes in sifting through the vast Internet 
resources to find the best information. But even without the Internet, 
the information is available. Books and journals are available in 
public libraries and bookstores throughout America.
    Likewise, there is abundant information on (2) likely outcomes of 
alternative treatments. This information deals not only with 
straightforward measures such as survival rates, but also with 
qualitative outcomes important to patients. Many women (though a small 
minority) positively prefer the experience of childbirth at home with a 
midwife. Breast cancer alternatives differ hugely in preservation of 
women's perceived attractiveness and potential complications. Prostate 
cancer treatments differ in major ways not only as to prognosis but 
also as to such complications as incontinence and impotence.
    Access to treatment outcome information is almost as widely 
available at low cost as information on treatment options. There is far 
less outcome information, but consumers have access to whatever is 
known, in print or on the Web.
    There is also a recurring problem with respect to outcome 
information, a problem that grows progressively worse as we move from 
overall outcomes to provider specific outcomes. Data that are not risk-
adjusted or case-mix adjusted can be very misleading. Breast and 
prostate cancer outcomes depend on the stage of progression of the 
disease, the condition of the patient, and other variables. For 
example, in both of these cancers the age of the patient has a huge 
effect on whether or not drastic surgery is indicated.
    Information on the (3) average monetary costs of treating diseases 
or conditions is, in sharp contrast, almost nonexistent for consumers. 
I have repeatedly used Internet search engines to try to find, for 
example, the cost of an appendectomy or childbirth. Google and other 
search engines will find thousands of ``hits'' when terms such as 
``cost childbirth'' are entered, but the links found are invariably dry 
holes. A relative of mine recently had surgery for carpal tunnel 
syndrome. I ran a Google search on ``carpal tunnel surgery cost'' and 
obtained a half million hits. After skimming a few hundred of them I 
found none that provided any data whatsoever about price or cost, and 
gave up.
    A major development in the last several years has been the 
provision of treatment costs on the Web sites of some major insurance 
firms. These include Aetna and Tufts, for example. Consumer-driven 
health plans such as Lumenos (see www.lumenos.com for a useful 
demonstration) also provide such information, as you are hearing today. 
These information sources are tightly restricted to plan members, and 
hence unavailable to virtually all of the 50 million Americans who need 
such information for obvious financial reasons, and another 240 million 
insured Americans who might wish to impose lower costs on their fellow 
insureds, even though they save little or nothing. There are also some 
far small firms that are beginning to provide such data, though often 
restricted to enrollees (see, for example, www.healthia.com and 
www.healthmarkets.com).
    A recent Business Week article (February 20, 2006) praised Aetna 
for the best consumer information on its Web site of three major 
insurance firms compared. I haven't reviewed all of these or other 
sources, but I certainly agree that Aetna is developing a fine set of 
information for its enrollees. However, the reality is that the Aetna 
Web site only covers about 60 conditions, albeit with different levels 
of severity for most of them.
    Of the several conditions I have previously mentioned, the Aetna 
Web site divulges that the estimated cost of an uncomplicated 
pregnancy, with either vaginal or cesarean delivery, is approximately 
$7,700 ($3,600 for the hospital, $2,600 for the physician, $100 for 
prescription drugs, and $1,400 for tests.) You are reading this 
estimate today in a breakthrough public disclosure. Just try to find 
such an estimate in any other document. You can find many Web sites 
that sell maternity insurance, but none of them estimate the cost 
without insurance. In preparing this testimony I ran a Google search on 
``maternity cost'' that found almost 9 million hits and no discernable 
information on price or cost. Alas, Aetna provides no cost estimates 
for breast or prostate cancer (or for that matter, for any other 
cancer) or for appendectomy or carpal tunnel surgery, and no estimates 
for alternative treatment modalities, such as nurse midwives.
    In other words, even for Aetna enrollees, the information is 
profoundly limited. For the rest of us even this limited information is 
simply unavailable. And this is the state of the market! In sum, so far 
as I can determine consumers today cannot find reliable information on 
the costs of major medical conditions and their treatments from any 
publicly available free resource.
    Nor do consumers have ready access to information on the costs of 
most individual procedures. Aetna provides some such information to its 
enrollees, but only for about three dozen of them. These are among the 
most common (e.g., ``office consultation for moderate to severe 
problems'' with a specialist, or ``new patient office visit for 
moderate problems'' with a generalist), but there are approximately 
10,000 ambulatory procedures and the listed procedures are but a drop 
in that bucket. No surgical procedures are listed.
    Turning to (4) information on the costs of using particular 
providers, information is even sparser. Perhaps the greatest innovation 
of the Aetna information for its enrollees is the provider-specific 
charge information available on its Cincinnati Web site. Assuming, 
illustratively, that Aetna has thirty percent of the Cincinnati market, 
and that this market comprises one million individuals, approximately 
one tenth of 1 percent of Americans have access to information on 
provider-specific prices. Even adding in Tufts and Lumenos and a few 
other firms, as a practical matter information on the charges of 
specific providers is essentially unavailable to the public today. 
There are a few seeming exceptions, such as California hospital 
charges, but as a practical matter that information is unusable by 
consumers (see the Anderson testimony referenced below).
    Contrast this with the situation for medical procedures not 
ordinarily covered by insurance. Lasik is the fashionable example, but 
there are many others. See www.beyourbest.com for price quotes on 
breast augmentation ($3,000), liposuction ($2,000), and many other 
plastic surgery procedures at ``guaranteed lowest prices.'' Where 
consumers pay, price matters. Contrast medical procedures with other 
major purchases, such as automobiles or airline tickets or any of the 
thousands of goods sold on e-Bay or through department stores. Not only 
is price information routinely available, there are many services 
specializing in enabling consumers to quickly compare prices before 
making a choice (e.g., Orbitz and Travelocity, among many, many others 
for airline, hotel, and rental care prices). Imagine using Healthline 
not only to obtain treatment information, but also for price and cost 
information.
    This is not a trivial gap for the approximately 50 million American 
consumers who shop for health care with no insurance or with insurance 
gaps. As notoriously shown by the recent California requirement that 
hospitals make their charges available to consumers, charges to 
uninsured individuals are typically double, triple, or quadruple the 
charges to clients of major insurers (a description of the utter 
irrationality of hospital charges as they have developed over time, and 
a good deal of sensible advice on price transparency issues can be 
found in the testimony of Gerard Anderson of Johns Hopkins University 
before the House Energy and Commerce Committee in March of this year at 
http://energycommerce.house.gov/108/Hearings/03152006hearing1813/
Anderson2771.htm).
    The availability of information on the (5) outcomes of using 
particular providers is actually far greater. In one of its most 
important actions for consumers ever taken, the Centers for Medicare 
and Medicaid Services (then HCFA) made available about 20 years ago 
data on hospital mortality and adverse outcome rates for all Medicare-
participating hospitals (i.e., virtually all hospitals), both overall 
and for a dozen or so major types of procedures. Originally CMS 
published these data. In the last decade it has simply made them 
available as data files. At least two organizations, Washington 
Consumers CHECKBOOK and HealthGrades, continue to use those files to 
make risk-adjusted data available, for sale (e.g. Consumers' Guide by 
Hospitals, by the editors of Consumers' CHECKBOOK Magazine, 2002, also 
available online and updated at www.checkbook.org). While these data 
are not free, they are available to all American consumers.
    While the risk of an adverse outcome is certainly the single most 
important measure of hospital quality, there are many others. CHECKBOOK 
surveys physicians to see which hospitals they rate highly. In effect, 
experts are used to rate other experts.
    More recently, CMS has led a major reform effort to initiate the 
collection of data from Medicare-participating hospitals on a set of 
quality measures that focus on the most common hospital procedures, and 
those shown by research to be among those most prone to failure. For 
example, the failure to provide Aspirin to patients admitted with a 
heart attack is a major and not uncommon quality failure. As another 
example, this initiative also addresses one of the most vital steps 
owed to all patients: whether they are given discharge instructions 
when they leave the hospital. With collaborative partners, most notably 
the Hospital Quality Alliance and the Agency for Health Care Research 
and Quality (AHRQ), CMS now makes available a wide range of performance 
measures (see http://www.hospitalcompare.hhs.gov/). These measures are 
also used in ``Pay for Performance,'' a major initiative now set in 
statute that conditions up to 2 percent of a hospital's payment from 
Medicare on it performance on measures of quality in comparison to 
other hospitals. Expansion of Pay for Performance in traditional 
Medicare is arguably as, if not more, important to future restraint on 
the growth of health care spending than the addition of Medicare 
Advantage plans as alternatives to traditional Medicare.
    Early reports show that this collaborative but competitive system 
has had major effects in upgrading the quality of hospital performance. 
The consumer information is not just static, read by some consumers and 
ignored by most, but a spur to improved performance by hospitals that 
cannot afford, literally and figuratively, to be regarded as inferior.
    CMS also now publishes on the Web comparative data on the quality 
of performance of other providers, such as Nursing Homes and Home 
Health Agencies.
    There are more specialized efforts that indicate both the potential 
and the problems of developing outcome/quality measures for providers. 
For many years the United Network for Organ Sharing (UNOS) has devoted 
substantial resources to developing measures of patient and organ 
survival, by institution, that would not only allow consumers to 
compare outcomes and quality, but also provide them risk--or case mix--
adjusted data that would account for the differences among hospitals in 
the severity of patients that they serve. In the world of transplants, 
sufficient expertise and consensus has been developed to allow a robust 
system of comparing provider outcomes for each type of transplant 
(www.srtr.org). Any transplant candidate can compare the performance of 
every transplant center in the United States before deciding where to 
``list'' for a transplant.
    But there are few if any other complex medical procedures for which 
comparable data are publicly available today. One notable bright spot 
is the Pennsylvania Health Care Cost Containment Council, with quality 
information on a number of procedures including provider-specific data 
on coronary bypass surgery (http://www.phc4.org/default.htm).
    The big gap in quality-related outcome data has been in the 
performance of individual physicians and physician groups. While CMS 
and AHRQ are diligently working to develop outcome-related measures of 
ambulatory quality through the Ambulatory Care Quality Alliance (AQA) 
(see www.ahrq.gov/qual/aqastart.htm), the only widely available quality 
measures today use such crude measures as board certification or 
disciplinary actions, or what is arguably the best measure of all: 
ratings by other physicians. For example, CHECKBOOK publishes what is 
essentially a national system of physician ratings, by specialty, in 
Consumers' Guide to Top Doctors (2002, updated on the Web at 
www.checkbook.org). The Washingtonian magazine, and other publications, 
also use surveys to rate physicians in particular metropolitan areas.
    In summary, quantitative measurement of quality and outcomes for 
ambulatory care providers generally, and physicians in particular, 
remains a work in early stages of progress. Performance of several 
other major types of providers, such as hospitals, is further advanced. 
But progress is certain to be slow, expensive, and complex.
    I have for almost three decades provided consumer information on 
(6) comparing health plans, in my annual CHECKBOOK's Guide to Health 
Plans for Federal Employees. My Guide provides information to 
approximately 8 million Federal employees and retirees on which of the 
health plans they can join provide the best value. In essence, this is 
simply a matter of comparing the total costs of consumers of enrolling 
in plan A versus plan B, assuming that each plan pays the promised 
proportion of medical bills incurred. The Guide performs this 
calculation, and shows every year that family enrollees who select the 
best deals available can save (a) a thousand dollars a year or more by 
choosing an HMO, and which HMOs provide such savings and how much 
savings, or (b) a thousand dollars a year or more by choosing the lower 
cost PPO or FFS plans, and which ones provide these savings and how 
much. These dollar savings estimates take account of both premiums (a 
``for sure'' expense) and expected out-of-pocket costs at various 
spending levels.
    The Guide also rates plans on several quality measures. In the 
early years, I focused on ``quit rates'' as a measure of service. 
Office of Personnel Management data on disenrollment rates grew 
increasingly unreliable over the years, and I had to abandon this 
measure (which, incidentally, required complex statistical adjustments 
using multivariate regression analysis.)
    In more recent years we have included customer survey data on 
satisfaction with plans. Unfortunately, such data as currently 
published suffer from two inherent defects: (1) only a relatively few 
plan enrollees face life- and wallet-threatening events, and hence the 
most severe cases get negligible weight in overall ratings that count 
all consumer equally, and (2) elderly enrollees on average rate health 
plans far more highly than younger enrollees. As a result of these 
defects, and the failure of national accrediting organizations to 
address them by appropriate statistical techniques, customer 
satisfaction data as published today are extremely weak as measures of 
plan quality.
    Another major approach to health plan comparison has been pioneered 
by CMS. For prescription drug expenses, which for most people are 
stable from year to year. CMS has developed a ``Plan finder'' tool (see 
plan comparison at www.Medicare.gov) that shows how much each 
participating Medicare prescription drug plan costs enrollees for the 
drugs they use today. Like the Guide, this tool takes into account both 
premium and out-of-pocket costs. Unlike the Guide, the approach is 
``current usage'' specific rather than actuarial. In essence, it 
assumes that drug costs will usually not change, while the Guide 
assumes that future hospital, medical, and drug costs are only 
partially predictable, and always subject to random events. Both 
approaches have substantial strengths, and both approaches have saved 
millions of enrollees a great deal of money by steering them to plans 
that are better buys.
    The CHECKBOOK Guide is available for a fee; the Medicare Plan 
finder at no charge. Historically, the Guide was sold in paperback to 
individual employees and retirees. However, at present the majority of 
Federal agencies provide ``free'' copies to all employees. 
Unfortunately, most agencies do not broadcast the availability of the 
Guide effectively, and lose the very substantial savings they could 
realize if a larger fraction of employees realized how much they could 
save and chose plans with lower employer as well as employee premiums.
    For both Medicare and the FEHBP, data are available showing that 
even with a minority of consumers using plan comparison information, 
consumer choices among plans to select better buys save billions of 
dollars to both enrollees and payers.
    Unfortunately, plan comparison tools such as these have only 
limited applicability. The vast majority of Americans do not have 
available a wide range of plans. Federal employees and retirees 
typically have about 15 or 20 plans to choose from. Medicare 
beneficiaries typically have about 40 or 50 plans to choose from. Most 
workers are provided at most two or three plans by their employers, 
such as one HMO, one PPO, and one fee-for-service plan. Since one of 
these three plan types is usually strongly preferred for reasons other 
than cost, the effective range of choice is usually one plan.
    As a result, until or unless most Americans are given a broader 
range of insurance plan choices, powerful plan comparison decision 
tools such as these are of limited help in improving the health care 
market.
    Problems and Opportunities in Filling Gaps. As the analysis above 
suggests, the availability of consumer information varies significantly 
by category.
    Arguably, the most important gaps to fill are (a) data on provider 
payments or prices by procedure or condition or both, (b) the same 
information on a provider specific basis, e.g. ``what this doctor would 
charge compared to that doctor,'' and (c) data on ambulatory care 
provider quality and effectiveness.
    Are the consumers there to use the information? Most consumers have 
no incentive to seek information on costs, and to reduce costs by 
shopping, in a world of first dollar coverage. Nonetheless, with 
approximately 50 million people having a vital interest in keeping 
their costs low, it is clear that there are plenty of willing consumers 
of price information, if there were not other barriers to its 
dissemination. All 290 million consumers have a substantial interest in 
quality and effectiveness information.
    ``Consumer-driven'' health care through high deductible plans and 
Health Savings Accounts adds to this potential demand, and brings a 
substantial number of higher utilizers (sicker and older) and well-
educated consumers to the missing market for price information. But 
growth in consumer-driven plan enrollment is neither necessary nor 
sufficient given the substantial numbers of consumers who need such 
information already. What is needed is rapid rather than glacial 
movements by the insurers, both public and private, who have the data 
on payments and outcomes.
    Overall payment and price data are simultaneously easy and 
difficult to provide. Every insurer in American knows what it pays each 
physician in its network. The data could be made available on the Web 
virtually overnight.
    However, what each insurer pays is a trade secret. If competitors 
learn the payment rates, they could offer slightly better rates to 
attract preferred providers, or bargain harder with providers, or both. 
Providers know what they charge patients (usually different rates 
depending on which insurer is involved). However, they have an equally 
grave problem. It is not in their interest to make it widely known that 
they have settled for price X from payer A and price Y from payer B. 
Payers can use this information to ratchet down rates. A major firm, 
Subimo, today makes a great deal of its revenues from the sale of price 
data to insurance companies and, to a far lesser degree, to consumers 
(www.subimo.com). While Subimo and others could prosper from a 
different business model (imagine free price information with revenue 
from advertisements paid by low cost providers), there may be legal and 
other impediments to such a transformation.
    The one player with no self-interest barrier to wider discloser of 
payment information is HHS. HHS provider payment systems are calculated 
using statutorily mandated formulas and procedures, and within 
specified geographic areas are ``one size fits all.'' However, HHS 
faces a potential barrier in disseminating physician (but not hospital) 
payment information by the contractual agreements, long since struck, 
that commit it to using proprietary medical procedure codes that have 
been copyrighted by the American Medical Association (AMA). The AMA 
position, enforced by a willingness to impose major legal costs by 
suing alleged violators, is that ``Common Procedural Treatment'' (CPT) 
codes can only be used with AMA permission. Such AMA permission is 
never given to anyone who would publish procedure prices for broad 
consumer use. This posture is largely rationalized by the traditional 
ethical strictures against price competition in medical care. Other 
motives can be inferred.
    In a case decided almost a decade ago, the AMA position was upheld 
against a private publisher by the Ninth Circuit Court of Appeals 
(Practice Management Information Corporation v. American Medical 
Association, 121 F.3d 516 as amended at 1333 F 3d 1140). The Supreme 
Court denied cert.
    HHS could practicably publish consumer-friendly versions of its 
physician, outpatient, and inpatient payment schedules. These schedules 
are currently online, but require fairly substantial computer expertise 
to download and translate into understandable units, such as ``What 
does it cost in dollars in my area and nearby?'' Therefore, as a 
practical matter they are currently unavailable to consumers. 
Unfortunately, it is possible that the physician procedures would have 
to be recoded and presented in terms of ICD-9 or ICD-10 codes 
(alternatives to CPT) to meet legal concerns. This in turn raises 
issues about which codes would be used in practice and hospital 
management and billing systems, and some very expensive changes. I 
think that these issues could probably be decoupled, and the public 
information provided without depending on future code system decisions, 
but the job may be harder than I predict. One option might be to 
publish information coded under all three systems simultaneously, which 
would work for most procedures, but would require a good deal of work.
    Procedure payment amounts are arguably not as useful as estimates 
of the costs of treating a disease or condition, but these serve 
different purposes. A consumer seeking to save money could seek a low 
cost obstetrician and low cost hospital as separate decisions, 
constrained only by physician privileges. Moreover, in the case of 
hospitals the CMS reimbursement system is primarily based on condition 
(``Diagnosis Related Group'') and hence avoids most of the problems 
posed by itemized charge systems. The bargaining mode for a woman 
seeking a good price for maternity care should be ``Let's start with 
the Medicare payment that you already accept.''
    Providing disease and condition-specific cost information taking 
into account all types of provider and service is harder, since it 
requires an additional step. However, it is possible to search any 
major public or private insurer's payment records to find one or 
several common clusters of services. Presumably, this is what Aetna did 
to create its estimate of maternity costs.
    In either case, what might otherwise be a gargantuan problem is 
greatly simplified by starting with relatively limited numbers of 
procedures and disease. The most common 100 physician, 100 outpatient, 
and 100 inpatient procedures, and the 100 most common diseases or 
conditions, would be a relatively easy starting point.
    This in essence is what Aetna, Lumenos, and some other insurers are 
doing. The problem is that they are providing the information only to 
their own customers, who represent only a small share of those facing 
strong incentives to use price information. By definition, none of the 
uninsured has access to information limited to those enrolled in a 
company's insurance plans.
    Provider-specific price, charge, or payment rates are arguably both 
the most needed and most difficult information to provide. However, 
they are quite likely to emerge over time as a by-product of shopper 
behavior using system-wide rates. Competition begets competition and 
there is no reason why we could not expect to see in the future 
advertisements such as ``Use Doctor A and Hospital B for your pregnancy 
and delivery and get the bargain rate of $6,300, 20 percent off and 
$1,400 less than the average cost of maternity care.''
    But we need not await that development. A consumer with access to 
Medicare payment rates, knowing that the great majority of providers 
accept these rates for Medicare patients, wields a potentially mighty 
club. ``Hospital B (or Doctor A), why shouldn't you give me the same 
deal you give most of your other patients? If you won't I can try one 
of your competitors.'' So far bargaining tactics have met with limited 
success, but consumer efforts have barely begun, and the Medicare 
payment rates are a vital tool for future bargaining.
    Meanwhile, Aetna, Tufts, and others are experimenting with 
providing provider-specific payment rates to their enrollees. Armed 
with three pieces of information--average rate for a procedure in the 
network, average rate outside the network, and the precise rate charged 
by Doctor A and Hospital B--enrollees are given the vital information 
they need to decide whether, and how hard, to shop further around.
    Data on provider quality and effectiveness is the most difficult 
challenge by far. Without these data consumers cannot complete the 
``value'' equation.
    HHS, primarily through AHRQ and CMS, is devoting immense 
intellectual capital with its alliance partners to creating such 
information. There are valuable systems already in place for some 
dimensions of hospital and nursing home quality. Other and more 
ambitious efforts are underway through the Hospital Quality Alliance 
and the Ambulatory Care Quality Alliance. I am sure that Dr. Carolyn 
Clancy is addressing those in her testimony today in great detail. Dr. 
Mark McClellan, the CMS Administrator, has testified several times on 
these issues before other Committees of the Congress.
    One of the biggest problems in developing such measures is that 
without case-mix adjustment they may often mislead. The best surgeon 
may take the hardest cases and wind up with success rates lower than 
those of the average surgeon. Statistical validity also requires a 
significant sample size (rarely fewer than 25 or more cases) and many 
procedures are not performed in high volume by most physicians. There 
are also substantial issues in developing actual quality measures, 
especially for procedures that do not usually lead to simple outcomes. 
For these and other reasons, efforts to create quality and 
effectiveness information that will be genuinely useful to consumers 
must be measured in years, and will indeed never be complete.
    Luckily, we already have a good deal of information on both 
ambulatory and inpatient quality. It resides in the heads of physicians 
and other health professionals, who observe their peers directly and 
through their informal information networks. It is made available to 
consumers through direct advice from their own physicians on questions 
such as ``Which specialists would you recommend as the next step for me 
to take, and how would you compare them?'' It is also available through 
publications such as CHECKBOOK's Consumers' Guide to Top Doctors, which 
surveys physicians themselves as to whom they would recommend most 
highly in other specialties.
    Health plans make decisions on which physicians and other providers 
to enlist as preferred providers, based on both willingness to accept 
the insurer's payment rates and appraisals of performance. These 
appraisals may be crude and simple, or may reflect statistical analysis 
of insurance records over time, but in either case serve as an 
important check to weed out poor performers. Thus, simply using 
preferred providers is an easy quality (as well as financial) rule for 
consumers. (Unfortunately, some of the very best physicians often opt 
out of such panels over payment levels--a problem that would lessen 
over time if plans would be more flexible in paying more for higher 
quality, which in turn requires new quality measures.)
    There also remains the possibility of using insurer data to provide 
more information. For example, simply knowing the volume of a certain 
procedure performed is often immensely valuable to the consumer because 
for a large number of procedures research has shown that high volume 
correlates strongly with quality. Such information is readily available 
in Medicare files. For many procedures (though a small proportion of 
the universe of procedures) the information could be reasonably used 
with minimal statistical refinement. According to recent press reports 
(Robert Pear, in the New York Times, April 10, 2006), employers are now 
pushing HHS to disclose these and other Medicare data on physician 
performance. Unfortunately, it appears that HHS feels constrained by a 
1979 court case that interpreted the Federal Privacy Act as preventing 
the release of records identifying individual physicians. However, that 
case dealt with an entirely different situation that could not arise 
under current Medicare payment procedures. It is also arguably 
irrelevant given that the Congress has since 1979 mandated a wide range 
of quality measurement and improvement efforts by CMS. CMS now has a 
legal duty to use information on provider quality, and without public 
access to that information, the performance of CMS itself cannot be 
evaluated. Under the Freedom of Information Act, an evaluative purpose 
arguably trumps the Privacy Act. Moreover, the 1979 decision was a 
District Court decision, never affirmed by higher courts. The outcome 
of further legal analysis, or court action, remains to be seen.
    Consequences of Filling These Gaps. Some analysts denigrate the 
value of making price, payment, and quality, information available to 
consumers. They argue, for example, that most medical care costs are 
spent on high-cost cases that are fully insured, and that as a result 
market forces will be greatly attenuated. These pessimists may be 
right. Even if they are right these reforms should be made, however, 
simply because some 50 million Americans will get substantial benefit.
    But the pessimists are most likely wrong. Market forces, if 
unleashed, will drive behaviors of consumers and providers, and 
insurers, in ways that we simply cannot predict. It is not just a 
matter of a minority of consumers haggling and bargaining with a 
minority of providers:
     Some providers may seek the opportunity of using market 
information to position themselves as cheaper and better (``I am Doc 
Sawbones and I score 99 percent on the official government quality 
measure and charge only three-fourths of the average payment rate.'').
     The invention of lower--rather than higher-cost technology 
may be spurred. Why pay for the $20,000 pacemaker from your health 
saving account or on your credit card when there is a $10,000 model 
available that has fewer features but is more reliable?
     New forms of low cost health care organization may arise 
(we may need to look no further than the health care centers that 
Walmart is installing).
     Medicare is already moving in a significant way to ``Pay 
for Performance'' for hospitals rather than ``one price fits all.'' 
This has revolutionary implications if it can be expanded to more 
Medicare payments, to other insurers, and to additional measures of 
hospital outcomes. Few conceivable payment systems are more lunatic 
than those so widely used today by Medicare, Medicaid, and most private 
insurers, that in effect pay more for less effective service.
     Quality and outcome measures are particularly important 
for insurance reform. Consumers can select providers based on 
reputation. Third party payers need more objective, measurable 
information.
     Consumer advice on dealing with health problems would be 
able to include comparative information integrated in ways that steer 
consumers to high value courses of treatment, and help them control 
costs.
     If price information becomes widely available as a point 
of comparison, providers may elect to bundle services at a discount.
     Providers may simply be forced, by the existence of lower 
cost competitors, to accept lower payments. We see this already in the 
growing numbers of American patients going to India or the Caribbean to 
obtain high quality care at a fraction of the price in the United 
States. What happens to overall spending when consumers see that high 
quality alternatives are available at half or less the going rate?
    All these potential effects loom larger because of the 
unsustainable growth rate of health care spending in America. We need 
not dwell on the impending Medicare insolvency data (estimated as 2018 
for the hospital trust fund in the just-released Trustees report) to 
consider that the average cost of a family health insurance policy 
providing first dollar coverage is today approaching $10,000, and that 
the average cost of a Medicare beneficiary for hospital care, medical 
care, and drugs already exceeds $10,000, and will within a few years 
exceed the cost of the average Social Security benefit.
    At the same time, the Dartmouth experts estimate that one-third of 
Medicare spending is wasted on unnecessary care (E.S. Fisher et al, 
``The Implications of Regional Variations in Medicare Spending,'' 
Annals of Internal Medicine, February 18 2003, http://www.annals.org/
cgi/content/full/138/4/273).
    We cannot predict how rapidly or how far direct market forces using 
price and quality information will operate to reduce the growth in 
health care costs or improve health outcomes. But we cannot afford not 
to try. The other alternatives such as direct rationing, triple-digit 
premium increases (in contrast to the double-digit increases we see 
today), or draconian tax increases, are unpalatable in the extreme.
    It certainly appears that the current Administration ``gets it.'' 
Drs. McClellan and Clancy have worked tirelessly and effectively for 
years on these issues. The White House has opined forcefully. HHS 
Secretary Leavitt recently assembled hundreds of executives of his 
Department to issue his top priorities for the next 3 years, and No. 1 
on the list was ``Health Care Value Incentives'' aimed at restraining 
the growth of health care costs ``because consumers [should] know the 
comparative costs and quality of their health care.'' However, I do not 
think that this is a partisan issue. In the usual disjuncture between 
public policy reforms and subsequent outcomes, it is likely that the 
next Administration, of whichever party, will not only endorse, but get 
much of the credit for the reforms begun in the first years of the 21st 
century.
    As a concluding comment, there are a number of bills pending in the 
Congress that deal with these issues in one fashion or another. Former 
Speaker Gingrich has mentioned the possibility of ``right to know'' 
legislation that would require doctors and hospitals to post prices. 
(For hospitals, that would stimulate immediate change because hospital 
charges generally bear little or no relation to either their costs or 
what insurers pay them.) Congressman Shadegg is sponsoring a bill that 
would enable health insurance to be sold across state lines, and make 
other reforms that would open up consumer-driven insurance to millions 
of consumers, including many of the currently uninsured who are 
prohibited by State law from buying the insurance plans available to 
most Americans. There is a companion Senate bill. And both the Ways and 
Means and Senate Finance Committees are considering pay for performance 
legislation. I have not studied these bills and have no specific 
recommendations on details of legislation at this time. However, in the 
light of the substantial legal difficulties that HHS faces in releasing 
payment and performance information in a form that would either be 
directly useful to consumers or be useful after analysis by expert 
researchers, I suggest that if any bill nears enactment it include 
provisions that will help in overcoming any legal barriers.

    Disclaimer: I have affiliations with three organizations mentioned 
in this testimony, Washington Consumers CHECKBOOK, the Centers for 
Medicare and Medicaid Services, and the United Network for Organ 
Sharing. Nothing in my testimony represents the views of any of these 
organizations, or relies in any way on information that these 
organizations do not provide to the public at large.

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