[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
               HEARING ON MEDICARE'S REIMBURSEMENT CUTS: 
                      THE POTENTIAL IMPACT ON SOLO 
                     AND SMALL GROUP PRACTITIONERS 
                      AND THE BUSINESSES THEY RUN 

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

            SUBCOMMITTEE ON REGULATIONS, HEALTH CARE & TRADE
                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 8, 2007

                               __________

                          Serial Number 110-59

                               __________

         Printed for the use of the Committee on Small Business


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

39-380 PDF                 WASHINGTON DC:  2007
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


HEATH SHULER, North Carolina         STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas              ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington              SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona               TODD AKIN, Missouri
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas                 STEVE KING, Iowa
DAN LIPINSKI, Illinois               JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin                LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa                   DEAN HELLER, Nevada
YVETTE CLARKE, New York              DAVID DAVIS, Tennessee
BRAD ELLSWORTH, Indiana              MARY FALLIN, Oklahoma
HANK JOHNSON, Georgia                VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             JIM JORDAN, Ohio
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

               Kevin Fitzpatrick, Minority Staff Director

            SUBCOMMITTEE ON REGULATIONS, HEALTH CARE & TRADE

                   CHARLES GONZALEZ, Texas, Chairman


RICK LARSEN, Washington              LYNN WESTMORELAND, Georgia, 
DAN LIPINSKI, Illinois               Ranking
MELISSA BEAN, Illinois               BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin                STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma
                                     VERN BUCHANAN, Florida
                                     JIM JORDAN, Ohio

                                 ______


        .........................................................

                                  (ii)

  






















                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Gonzalez, Hon. Charles...........................................     1
Westmoreland, Hon. Lynn..........................................     2

                               WITNESSES


PANEL I:
Burgess, Hon. Michael, Member of Congress........................     4


PANEL II:
Fedderly, Dr. Brad, American Academy of Family Physicians........    12
Harris, Dr. Jeffrey P., MD, FACP, American College of Physicians.    14
Rother Allen, D.O., Dr. Melinda, American Osteopathic Association    16
Noller, MD, MS, Dr. Kenneth L., American College of Obstetricians 
  and Gynecologists..............................................    18
Whitlow O.D., Dr. John, American Optometric Association..........    20

                                APPENDIX


Prepared Statements:
Gonzalez, Hon. Charles...........................................    30
Westmoreland, Hon. Lynn..........................................    32
Altmire, Hon. Jason..............................................    33
Braley, Hon. Bruce...............................................    34
Burgess, Hon. Michael, Member of Congress........................    36
Fedderly, Dr. Brad, American Academy of Family Physicians........    40
Harris, Dr. Jeffrey P., MD, FACP, American College of Physicians.    49
Rother Allen, D.O., Dr. Melinda, American Osteopathic Association    58
Noller, MD, MS, Dr. Kenneth L., American College of Obstetricians 
  and Gynecologists..............................................    74
Whitlow O.D., Dr. John, American Optometric Association..........    79

                                 (iii)

  


                  HEARING ON MEDICARE'S REIMBURSEMENT
                   CUTS: THE POTENTIAL IMPACT ON SOLO
                     AND SMALL GROUP PRACTITIONERS
                      AND THE BUSINESSES THEY RUN

                              ----------                              


                       Thursday, November 8, 2007

                     U.S. House of Representatives,
                               Committee on Small Business,
           Subcommittee on Regulations, Health Care & Trade
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 11:26, a.m., in 
Room 2360, Rayburn House Office Building, Hon. Charlie 
Gonzalez[Chairman of the Subcommittee] Presiding.
    Present: Representatives Gonzalez, Westmoreland, Fallin, 
and Jordan.

             OPENING STATEMENT OF CHAIRMAN GONZALEZ

    ChairmanGonzalez. I now call this hearing to order on 
Medicare's Reimbursement Cuts: The Potential Impact on Solo 
Practitioners and the Businesses they Run. I have some 
preliminary remarks. It looks like we are going to have a vote 
in about 15 minutes. My apologies to the witnesses that we 
started late and we are going to continue being a little late. 
So we appreciate your patience, but your testimony is quite 
vital to the work that we are trying to do here. The practice 
of medicine is changing. With the rise in managed care, 
increased insurance consolidation, and growing paperwork, small 
health providers face many challenges. Complicating matters is 
that the physician graduate of today faces a much different 
business environment than in the past.
    Today's hearing will address one of the next great 
challenges that could affect the small medical practice. In 
2008, Medicare is scheduled to cut physician payment rates by 
10 percent. These reductions will continue annually, and it is 
predicted that the total cuts will be about 40 percent by 2016. 
That could have a devastating impact on the operation of small 
medical practices. The potential impact of these cuts must be 
considered in light of the fact that these medical practices 
function like any other small business, and face low profit 
margins.
    Physicians are responsible for expenses like rent, payroll, 
employee health insurance, and malpractice insurance. Beyond 
the Medicare cuts, these general business costs are expected to 
increase 20 percent in the next 9 years. Some may find the link 
between medicine and money objectionable, but the truth is that 
the current business model for the practice of medicine is not 
sustainable. At a time when more and more baby boomers are 
approaching the age of 65, some physicians have simply stopped 
accepting Medicare patients. Already, some practices lose money 
every time a Medicare patient is seen. The problem of access to 
care will only grow if the Medicare cuts are not stopped. Some 
seniors are already faced with calling 20 to 30 providers in 
the desperate hope that someone will accept Medicare.
    According to a recent survey by the American Medical 
Association, 60 percent reported that they would have to limit 
the number of new Medicare patients they treat due to next 
year's cuts. Half would reduce their staff. Fourteen percent 
would completely get out of patient care. That means these cuts 
in physician payments will affect everyone, not just Medicare 
patients. It is unlikely that the primary care shortage will 
improve in the near future, as Medicare reimbursement rates 
continue to be a primary driver of physician salaries. Medical 
students, already burdened with an average debt in excess of 
$100,000, are clearly gravitating towards specialties.
    According to the Center For Study and Health System Change, 
incomes of primary care physicians fared among the worst in 
keeping pace with inflation between the years of 1995 and 2003, 
while medical specialists fared the best. The report concludes 
that with, "the diverging income trends between these 
specialties and primary care," the result is likely to be an 
imbalance in the physician workforce, and perhaps a future 
shortage of primary care physicians.
    The facts are clear. Medicare reimbursement cuts are a 
barrier to the successful operation of solo and small group 
practices. For many small practices, Medicare is the single 
most important source of revenue, and is often used to extend 
or supplement charitable care to the uninsured and 
underinsured. Cutting Medicare's low reimbursement rates would 
result in many practitioners denying or limiting access to 
charitable care. Medicare is an important component in 
American's health care system. It provides source revenue for 
decisions to invest in capital projects like Health IT, 
computers, and to expand and offer necessary tests like 
mammography services and other preventative screenings. It also 
enables small practices, particularly in rural and underserved 
communities, to extend the scope of their charitable services.
    Without it, many of our Nation's most vulnerable 
populations would receive no care. The question is how can we 
reform the system to keep the small medical practice viable. 
There must be a careful consideration to how those rates are 
developed and their impact on small practices. The panel before 
us today knows firsthand these challenges. Unfortunately, they 
may be put in a situation where they must deny access to care 
in order to keep their businesses open and running. I would now 
yield to the ranking member, Congressman Westmoreland, for his 
opening statement.

             OPENING STATEMENT OF MR. WESTMORELAND

    Mr.Westmoreland. Thank you, Mr. Chairman, for that 
statement and for holding this hearing today. I would also like 
to thank all the witnesses for their participation. And I am 
sure today's testimony will prove to be very helpful in any 
decisions that we would make in trying to fix a problem. 
Medicare's Physician Payment Program is an issue of great 
concern, not only in my district, but all over the country.
    Mr. Chairman, I know that you and I agree that the 
Sustainable Growth Rate, the SGR, specifically is a system that 
needs to be examined carefully. And I hope the testimony today 
will give us some direction in how to do that. With an issue as 
complex as this, I think it is important to lay out all the 
facts. We know that the SGR system was designed to respond to 
concerns that the fee schedule would not adequately control 
overall increase in physicians' services. Also, we know that 
the SGR is a formula targeted for cumulative spending. 
Unfortunately, we also know that in the past few years, 
expenditures have been significantly above the formula's 
target, causing cuts to physician payments. Congress has 
attempted to treat the symptoms by placing legislative Band-
Aids on the problem and overriding the reductions.
    However, we have yet to fully treat the illness, and I 
believe that our work here today is a step towards that goal. 
It is important that we have an honest and frank discussion 
about the situation that we now face. There is a growing, and, 
in my opinion, real concern that physicians may be unable to 
absorb continued payment cuts. I know that the fallout of such 
a scenario is something that we all want to avoid. My wife had 
surgery, Mr. Chairman, Monday. And as I was talking to the 
surgeon, he said that his daughter had come to him and talked 
to him about going into the medical field. And he had to give 
her advice that she may want to reconsider what she was doing. 
I think that is a real shame to that profession. But I welcome 
these distinguished panels today and thank you for your 
willingness to have this hearing and their willingness to 
testify.
    ChairmanGonzalez. And I thank the ranking member. The first 
witness--and first of all, of course, the first witness knows 
the rules, but for the benefit of the witnesses that will be 
following Dr. Burgess, you will be given 5 minutes within which 
to present your testimony. You have submitted a written 
statement that will become part of the record. We will refer to 
it, as well as staff, as resource. And then, of course, you may 
be able to follow up on that which you didn't think you could 
cover in your 5 minutes in the question and answer period. And 
I think we are going to have plenty of time. And again, I seek 
your indulgence and your patience, because I think we will have 
a vote in a few minutes.
    Panel one consists of one witness. But I am proud to 
introduce our first witness, the Honorable Michael Burgess from 
Texas. Congressman Burgess was elected to Congress in 2002 to 
represent the 26th Congressional District from the great State 
of Texas. Before heading to Congress, Congressman Burgess 
practiced as an OB-GYN for more than 21 years, delivering 3,000 
babies. 1,501 of those babies turned out to be Democrats. I 
added that. That is not true. He is the founder--
    Mr.Burgess. They are still young.
    ChairmanGonzalez. --of Obstetrics and Gynecological 
Associates of Lewisville. Our colleague--and I want to tell our 
audience, because I was sharing this with Lynn, I saw Michael 
on the floor as we were voting, and I said get ready for a real 
grilling, Mr. Witness. He said get ready for my answers. So my 
pleasure to introduce Congressman Michael Burgess.


 STATEMENT OF THE HON. MICHAEL C. BURGESS, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr.Burgess. Thank you, Chairman, and Ranking Member 
Westmoreland, for giving me the opportunity, extending me the 
courtesy of allowing me to talk about this on this morning. As 
you know, from knowing me for the past 5 years, I will talk 
about this issue literally at the drop of a hat anywhere at any 
time. So I am happy to be here talking to your Subcommittee and 
taking some time to highlight this so that the decision-makers 
can get a greater understanding of a very serious issue that 
faces medicine. Most of us, unless we are in our first term, we 
have been through a couple of these in the past. And when I say 
these, I mean, what happens between Thanksgiving and New Year's 
Eve, when we deal with the proposed physician payment cuts that 
have now been set by the Centers for Medicaid and Medicare 
Services on November 1st.
    And I believe they were assessed this time at a 10.1 
percent cut this year unless Congress acts. Every year that I 
have been in Congress, Congress has acted before that final 
date except for 2005, when doctors were delivered an at that 
time I think it was a 5 to 6 percent reduction, and my fax went 
wild over New Year's weekend, with doctors all over the country 
saying, okay, you have done it now, let me show you the letter 
that I am sending out to my patients. They were leaving the 
practice of Medicare in droves.
    I can promise you if it was that bad at 5 percent, it is 
going to be even worse at 6 percent. It is not that my fax 
machine can't handle it, but I worry if the practice of 
medicine can. We usually act in Congress, but when we act, we 
not only are not fixing the underlying problem, but we are 
making the ultimate fix of the underlying problem that much 
worse. And it is for that reason I am really ambivalent about 
what happens this year, whether it is a 1-year or 2-year fix. 
And we hear both being talked about over at Senate Finance. I 
haven't heard much talked about on this side of the Capitol. 
But whatever we do, whether it is a 1-year or 2-year fix, we 
are just delaying the pain and we are making the ultimate 
solution that much harder.
    When I first thought about running for Congress in December 
of 2001, the first Medicare cut came to the house of medicine 
in this country at a time the budget was in surplus. And quite 
frankly, many of us at the AMA House of Delegates that year 
just frankly could not understand why it was necessary to do 
that. And we were told don't worry, Congress will fix the 
problem.
    Indeed, they did not in 2001, so the year 2002, my last 
year of active practice, Medicare reimbursement declined 5.4 
percent. As a consequence, most of the doctors who practice my 
specialty in my part of the county discontinued taking Medicare 
from their practices. I continued because my mother told me I 
had to. But as a consequence, when I left to Congress it was 
quite a vacuum that was left behind for that patient 
population.
    Now, in the last Congress, in the 109th Congress, I 
introduced a bill, 5866, and perhaps relatively naively said 
let us just repeal the SGR formula, find a way to pay for it, 
we are people of good will, we can figure this out at the 
Committee level, and no one has to actually have the individual 
target on their back, but I was wrong. Even failing to 
delineate payfors, I did attract a lot of negative energy with 
the introduction of that bill. But the reality was we need to 
do something. Now no sooner was the ink dry on the fix that we 
did at the end of last year, on the tax extender bill, than I 
knew we had to work on this. Mr. Chairman, we have really got 
to approach this from a short-term, a mid-term, and a long-term 
strategy.
    And that is really what has been lacking, and in all 
candor, when my party was in charge the first two terms that I 
was here, but it still seems to be lacking today. We need that 
short-term, mid-term, and long-term strategy to deal with this. 
So in 2006, December of 2006, we tried to reframe the problem 
that would dispose of the Sustainable Growth Rate formula and 
replace it with the Medicare Economic Index, but I also 
proposed that we do that over a transition period that would 
take some time to do that. We had a lot of discussions, and I 
am grateful to the input from the American Medical Association, 
the American College of Surgeons, American Osteopathic 
Association, my colleagues, the American College of OB-GYN, 
that laid out some principles that would lay the foundation for 
legislation that eventually came to be known as 2585. It was 
introduced earlier this year.
    I believe that these principles are transformational in 
nature, and will help this House avoid solutions that are 
merely transactional or cosmetic and make the problem worse. 
Number one, the SGR formula, Sustainable Growth Rate, it is 
insufficient to meet the cost of physicians or even a 
methodology that allows the physician to plan for the future. 
So it must be repealed. Medicare reimbursement must fairly 
compensate physicians to provide the services.
    Any new Medicare payment system must be able to adjust for 
growth in service, but agile enough to determine what 
constitutes appropriate growth in service volume. Any future 
cost containment device must be delinked to trends in the 
economy, unlike the SGR. Quality reporting should encompass a 
variety of options, and should be voluntary. Implementation of 
health information technology should be rewarded, but also 
should remain voluntary. The solution is actually extremely 
simple. It is so simple we forget about it sometimes. The 
solution is stop the cuts, repeal the formula. And that is the 
concept on which I based the legislation that I introduced, 
2585, in this Congress. It eliminates the SGR formula in 2 
years' time. What happens to the doctors in 2008 and 2009? Is 
the SGR formula in fact going to result in these 10 percent 
cuts? You can actually readjust the baseline, reset the 
baseline. And that was done in the legislation that I 
introduced. And it scored from the CBO as about just bit little 
less than an MEI update for 2008, and a little under that for 
2009, but still positive updates, and nowhere near the 10 
percent cut that has been proposed for this year. And then in 
2010, the formula is repealed outright. I would love to go into 
Part A to take the money to just pay for the repeal of the SGR, 
but I am not allowed to do that.
    So all of the savings that we are achieving in Medicare 
currently, and we are achieving some savings in Medicare. 
Remember the Trustees report that came out in June of this year 
said the bad news is Medicare is going broke, but the good news 
is it is going to go broke a year later than we told you last 
year.
    So that year of savings, if you will, although it is 
savings that accrues to Part A, because now Part A trust fund 
is not going to be into bankruptcy until a year later than we 
told you last year, but really that savings occurred in Part B. 
But Part B still got charged for that money. Why not give that 
money or sequester that money or hold that money for Part B and 
then let us pay for the repeal of the SGR with that money that 
we have held, the lock box from 2000 that no one is using 
anymore.
    Let us bring that lock box out and put those savings in the 
lock box--I don't think Al Gore needs it anymore--and we will 
hold this money to repeal the SGR formula. Now we really do 
have to be careful with some of the things we do because we all 
know we have a problem with disparities in this country. And we 
don't want to make the issue of disparities worse by creating 
new problems with the SGR formula.
    Let me just wrap up with this: During his last days on 
Capitol Hill, Alan Greenspan was doing a couple victory laps 
around the Capitol, came to talk to a group of us one morning. 
And the question inevitably came up after his talk, well, Mr. 
Greenspan, what are we going to do about Medicare? What are we 
going to do this unfunded liability? And he thought for a 
minute and he said it is going to be very hard, but I think 
when the time comes Congress will make the correct decisions 
about what to do to keep Medicare solvent. And then he stopped 
for a minute, he thought, and he said what concerns me more is 
are you going to have anyone there to deliver the services when 
you require them? And that hit me like a ton of bricks.
    So that is why I have focused on this issue for the last 2 
years, and why it is my overarching consideration for if I get 
nothing else done in Congress, if I can get this system 
changed, it is incumbent upon me to do that. Finding a solution 
is going to be the key to the problem that we face with 
physician workforce issues in this country. And we are coming 
up on some serious ones.
    I had two companion pieces of legislation that I won't go 
into today, but they dealt with the student contemplating a 
career in health care and they dealt with the individual who is 
in residency programs today. Everything for me comes down to 
this when I think about health care policy in this Congress. 
What is the fundamental unit of production of the American 
medical machine? If the American medical machine was cranking 
out a widget, what would that widget look like? It would look 
like the doctor-patient interaction in the treatment room.
    Anything that we do that delivers value to that doctor-
patient interaction in the treatment room is something I will 
look at and something that bears giving a careful assessment 
to. Anything that detracts from value is really not something 
that I am interested in pursuing. Well, you cannot, I will 
submit you cannot deliver value to the doctor-patient 
interaction in the treatment room if you have no doctor there 
in the first place. So this becomes central to again, to 
everything that I do as I spend my time here in Congress. The 
fact is no doctor can continue to practice with what we are 
asking them to do. I ran a medical practice. Yes, it is a small 
business. What is the biggest cost when you are in a small 
business? It is the cost of capital. Usually that is for hiring 
a new doctor or buying a piece of equipment. We can't plan 
because we don't know what Congress is going to do to us in the 
future.
    If we come up with a formula for getting rid of the 10 
percent cut this year the price tag of the $268 billion to 
repeal SGR over 10 years time next year becomes over $300 
billion. Every year we delay we make it worse. If we had taken 
this approach, short-term, mid-term, long-term when I first 
arrived here and we did the first omnibus in 2003.
    The fact is we would be pretty much past this problem now 
and we could all argue about something else. And wouldn't we be 
happy doing that? I know I have gone a little bit long, and I 
thank you for your indulgence, and I will yield back my time.
    [The prepared statement of Mr. Burgess may be found in the 
Appendix on page 36.]

    ChairmanGonzalez. Thank you very much, Congressman Burgess. 
I am going to suggest--it is one vote. That is my 
understanding. It is one vote. Why don't we get over there, 
vote real quick, make sure we all get back at the same time. 
And then we will open it up and have some questions for you.
    Mr.Burgess. Very good.
    ChairmanGonzalez. And we will stand in recess until we get 
this vote out of the way. Again, to the other witnesses, thank 
you for your patience. We will be right back.
    [Recess.]
    ChairmanGonzalez. The Committee will reconvene. We were 
going to wait for Mr. Westmoreland, and he is on his way. 
However, I am going to go ahead and pose a question to Dr. 
Burgess, our first witness. And I will explain to the other 
members if they get here, of course, that we are going to limit 
ourselves to the five-minute rule.
    Dr. Burgess, I guess the question, and it is a mystifying 
formula for doctors, but even more so for Members of Congress. 
And I am just going to read from the memo that has been 
provided and prepared by our staff. And this is how confusing 
it can be to us.
    And I guess I want you to sort of explain it, but also the 
difference of what you are proposing and what you think might 
be the answer. What does the Sustainable Growth Rate mechanism 
do? The SGR system sets spending targets for physician services 
and adjusts payment rates as needed to bring spending back in 
line with those targets. Which kind of puts you on notice that 
we are probably going to have problems, right?
    The SGR target for total spending is based on spending in 
an initial or base year and the estimated growth in real per 
capita GDP each year and three other factors that affect 
overall spending on physician services: The changes and cost of 
inputs used to produce physician services such as measured by 
the Medicare Economic Index, the MEI, the number of Medicare 
beneficiaries in the traditional fee-for-service program, and 
expenditures that result from changes in laws or regulations. 
The spending target for physician payments is applied by 
incorporating it into the adjustment to the conversion factor 
that determines the payment amount per service.
    The conversion factor is determined annually by adjusting 
the previous year's conversion factor by the change in the MEI 
to account for the cost of inputs for physician services and 
adjusting this product on the basis of the relationship between 
the cumulative SGR target and Medicare physician spending. The 
conversion factor update is greater than the MEI when physician 
spending has been below the targets and is less than the MEI 
when the physician spending has been higher.
    Does that make sense to you? Do you understand it? And if 
you do, can you decipher it? But truly, the serious question is 
whether there a real life application of this to what the 
physician faces today in their practice?
    Mr.Burgess. You want the theory or the application?
    ChairmanGonzalez. I think application. The practical--you 
know, theory is good, but the practice is what counts.
    Mr.Burgess. From a perspective of a practicing physician, 
this formula is fantasy. It is fiction. It is made up.
    ChairmanGonzalez. Is your mike on?
    Mr.Burgess. From the standpoint of the practicing 
physician, the formula is fantasy, it is fiction, it is made 
up. We don't understand why how in reality the GDP in this 
country for the short time that I have been in Congress has 
actually done pretty well. Heaven help the doctors of the world 
if we had a couple quarters that we were in recession because 
it would have hurt worse. From the perspective of someone who 
spent now the last 5 years as sort of an amateur health policy 
person, yeah, I spent some time studying the formula and 
studying the various relationships.
    Some things make sense, some things don't. But you got down 
to it at the end of your discussion about the allocation based 
upon the conversion factor. And where we really get hurt is 
with what is called the conversion factor of the prior year 
times the conversion factor update. The update is then one plus 
the MEI over a hundred times one plus the UAF. The UAF is the 
bad actor here. The update adjustment factor makes actual 
expenditures and target expenditures equal, which I believe you 
alluded to in the first couple sentences of what you addressed. 
That is not based on reality. And Medicare has never, ever paid 
enough to equal what the commercial insurance will pay. They 
just never have.
    And I think--I can't speak to it, because I wasn't here, 
but I think the philosophy was that if a doctor takes Medicare 
we will pay them just enough so that they go broke slowly, and 
they are able to continue in their business for a number of 
years and provide care for our patients. But the reality is if 
you construct a practice that is primarily Medicare, even in 
the heady days of the late 1980s and early 1990s, you were 
still hard put upon to make that practice go, because nothing 
in what the economists who figure this stuff and figure out the 
numbers for relative work values, it is always figured on the 
cost of delivering care, and it never figures in an amount for 
what do you pay the physician at the end of the day? There is 
never an amount in there for the doctor actually making a 
salary. So even back in the old days, it was never a formula 
that was based on reality.
    And unfortunately over time, because of the influence of 
the what we call the update adjustment factor, we compound the 
problem over time such that this year we face a 10.1 percent 
cut if we legislatively don't do something. So we will do 
something. I will predict that we will do something. That 
something will be we spend $40 billion to prevent that 10 
percent cut. But now what happens when I say the cost of 
repealing the SGR, the CBO scores it at $260 billion over 10 
years time, since we added $40 billion to the price tag, the 
$40 billion doesn't come off the top of the SGR, it is added to 
the end of the out year.
    So the next 10-year moving budgetary window the cost is 
that much more. And again, as I said in my opening statement, I 
suspect it will be over $300 billion. And it becomes a hill too 
far. No one want to take it on. I am not supposed to say this, 
but in my mind the money has already been spent. You have 
already paid these fine doctors for the business that they 
conducted on your behalf.
    So the money has already been spent. We just haven't 
accounted for it on the books. So we just play this little 
shell game. And year over year, we kind of hold this money off 
the books because we are going to recoup it from the doctors by 
and by putting into play the SGR formula. But the reality is 
the money is not sitting there in the Federal Treasury waiting 
to go to the doctors. It went to the doctors. They provided the 
care. They paid their overhead. That money has been spent and 
is gone.
    That is why I would like for us to take the type of long-
term strategy that gets us past this point. Because eventually 
we will be in a hole so deep that we just simply can't do 
anything about it and we are locked in forever. These guys 
won't continue to practice. Younger guys will look at it and 
say, you know, and ladies, will look at it and say that I don't 
know that it is worth it going into medicine anymore. And we 
will irreparably harm the profession. And is that bad? I submit 
that it is, because we are on the cusp of a time when medicine 
is going to deliver in ways I didn't think possible when I 
started medical school. We are on the cusp of a 
transformational change in medicine the likes of which we have 
never seen.
    The era of personalized medicine, the value of cracking the 
genetic code and the work that has been done on the human 
genome. Look what happened last Monday Francis Collins got the 
Medal of Freedom by the President. That was a significant 
event. And the reason he got that medal was because of his work 
on breaking the genetic code and because of the promise that 
genetic medicine is going to play in the future, very 
personalized medicine. A year ago, when we were having our NIH 
reauthorization hearing, the doctor from Johns Hopkins, and 
right now I am blocking out his name, talked about the fact 
they have decoded the genetic sequence for the 20 genes 
involved in colon cancer. What a powerful tool to puts in the 
hands of researchers. We are probably just a few steps away 
from actually stopping that disease.
    ChairmanGonzalez. I have exceeded my 5 minutes, and I do 
need Lynn to--and I know that you are looking to the future, 
and I appreciate that. And the question is, you know, the 
Federal Government has basically invested in health care with 
the Medicare Act of 1965. And we have to figure out how we are 
going to deal with it. But I appreciate your response. And at 
this time I would recognize my colleague, the ranking member, 
Mr. Westmoreland.
    Mr.Westmoreland. Thank you, Mr. Chairman. And Congressman 
Burgess, I know that you talk about the fix, and the Band-Aids 
that have continually been put on. And I believe there are 
several bills that have been introduced that do a fix to the 
SGR, where yours does away with it in some gradual steps. Do 
you think that there is any way it can be fixed for a short-
term, or do you see the only real solution to this as just 
doing away with the SGR completely?
    Mr.Burgess. Well, I think I said that in my testimony. The 
ultimate solution is stop the cuts, repeal the SGR. And how we 
get to that point is really the rest of the argument. I have 
proposed a fix that is postponed. I did that because simply 
trying to repeal the SGR in one fell swoop didn't seem to gain 
a lot of traction. What does gain a lot of traction, and in 
fact, the doctors and their groups do a good job of educating 
members of Congress that we have got to do something.
    So we get to the end of the year and we play it out every 
year, just really predictable, sometime between Thanksgiving 
and New Year's Eve, we will have something delivered to us. I 
cannot believe going into an election year we are going to 
allow this to be an unresolved issue. No one wants that. This 
will be our last--you know, obviously 2008 is the election 
year, but this is our last chance to do something to protect 
the physician community in this country before the November '08 
elections, because anything that is done next year will 
obviously be done after election day. So this is our chance to 
show some resolve to our physician community, to our health 
care community. And I hope we take that up and do it.
    I am not saying we have got the perfect answer. But I think 
the problem has gotten so large that while it is still fixable 
it is going to take an approach where you divide it up and you 
get some now and you get some later. And quite honestly, that 
was the discomfiture. I know the American Medical Association, 
the American Academy of Family Practice, the American 
Association of Physicians had some difficulty with the concept 
that they were going to go back to their members and say, hey, 
we are supporting a plan that repeals the SGR, but it doesn't 
do it for a couple years. That is pretty untenable. You can 
imagine walking into the House of Delegates at the AMA and 
having to give that sort of report. That is why I tried to 
build in some protections for the doctors for the next 2 years. 
There is the mid-term strategy that we have to employ, because 
if we drive everyone out of medicine in the next 2 years, it 
doesn't matter that we have repealed the SGR.
    Mr.Westmoreland. Well, Congressman, let me ask you this. 
The SGR, when it was put in place, it was kind of destined to 
fail anyway, was it not, because it was not indexed for 
inflation? And anybody that doesn't believe that your cost is 
going to go up, you know, is not being very realistic. So was 
the SGR put in as--I hate to say this--but kind of some of the 
smoke and mirrors we have seen in this Congress as a payfor for 
the Medicare?
    Mr.Burgess. I don't know. I can't speak to it because I 
wasn't here. Obviously, I was on the receiving end, and it was 
a way to control growth. And the other term for controlling 
growth is a way to ration care. And we would ration it in the 
treatment room. That way people sitting on the Committee didn't 
have to ration the care, the people who administer over at CMS 
didn't have to ration the care, it would be the doctors who 
would ration the care because after all, in our American 
healthcare system--
    Mr.Westmoreland. Did the AMA not see this coming?
    Mr.Burgess. I don't think they have ever endorsed the SGR, 
not that I recall during my tenure with the AMA. But the 
reality was in the early years, right after the Balanced Budget 
Act was passed, and I don't want to put it all on the Balanced 
Budget Act because I don't remember the three letter acronyms, 
but there were precursors to the SGR that were essentially the 
same philosophical trajectory. And this is not a problem that 
is owned by one party or another. It is a problem that is owned 
by Congress in general.
    Mr.Westmoreland. I wasn't here either, but it seems to me 
like this was some kind of gimmick pay for that has had some 
unintended consequences when it comes to the health care for 
the people in this country.
    Mr.Burgess. If I may, it was a reaction to the reality that 
paying on a fee-for-service basis in Medicare, even though it 
was vastly less than what other fee-for-service payment models 
were, it was still Medicare was growing faster than anyone ever 
thought possible. And I mean we know that from looking at our 
history books. The number, who would have believed that we 
would be spending over $300 billion a year on Medicare.
    Mr.Westmoreland. I understand. But rather than cutting 
doctors' pay, you know, we have expanded so many of the 
services and really broadened those people that can get the 
service. To me that was, you know, not very well thought out.
    Mr.Burgess. It is a disconnect. And I have heard people 
suggest that maybe congressional pay ought to be run through 
the SGR formula, and then maybe that would improve our resolve 
for getting it done.
    Mr.Westmoreland. Thank you.
    ChairmanGonzalez. I will make sure I tell the other members 
of Congress, Michael, what you are proposing.
    Mr.Burgess. Take two of those and call me in the morning.
    ChairmanGonzalez. Thank you very much, Dr. Burgess, for 
your testimony.
    Mr.Burgess. Thank you.
    ChairmanGonzalez. We are going to set up for the next 
panel. And as we are sitting up I am going to remind the 
witnesses that they have 5 minutes. And I know that Dr. Burgess 
went over his 5 minutes, but that was some sort of a 
professional courtesy, I guess. And again, though, and the 
reason is I want to get your testimony in before we have the 
next round of votes and get a couple of questions in. And I 
would be very curious, and I am sure that Congressman 
Westmoreland may be curious as to how you view Dr. Burgess's 
testimony and his suggested solution.
    The other thing that I want to explain to the witnesses is 
that you are before the Small Business Committee of the U.S. 
House of Representatives. And you may wonder, you know, how do 
we play a role? Because we think of you, of course, as 
practitioners out there as small businesses. And so that our 
policies impact your ability to conduct business. But you are 
the last standing profession in the United States also. But you 
are still a business. The Chairwoman Nydia Velazquez meets 
every week with the Chairs--and please, if the witnesses will 
take their places at this time--Nydia Velazquez meets with the 
Chairs of all other committees once a week, and they have a 
discussion of shared concerns. That is why your appearance 
today is very important, because she will be discussing what 
transpires here today with the chairs of the Committees on Ways 
and Means and Energy and Commerce. And we all have a shared 
jurisdiction.
    So we will get our voice heard. And we are hoping that 
through us your voices will be heard. What I am going to do is 
introduce the witnesses as they testify. So it is my pleasure 
to welcome Dr. Brad Fedderly. Dr. Fedderly serves on the board 
of directors of the American Academy of Family Physicians, 
AAFP. AAFP is the national association representing family 
doctors, and one of the Nation's largest medical organizations, 
with more than 94,000 members throughout the United States. Dr. 
Fedderly practices with the Wheaton Franciscan Medical Group, a 
full service primary care large group practice in South 
Milwaukee, Wisconsin. He earned his medical degree from the 
University of Wisconsin, and completed his residency at the 
University of Massachusetts family practice residency in 
Worcester.


 STATEMENT OF BRAD FEDDERLY, ON BEHALF OF THE AMERICAN ACADEMY 
                      OF FAMILY PHYSICIANS

    ChairmanGonzalez. At this time I welcome the testimony of 
Dr. Fedderly. You may proceed, sir.

    Dr.Fedderly. Chairman Gonzalez, Representative 
Westmoreland, and members of the Subcommittee, I am Dr. Brad 
Fedderly, as you just heard, a member of the board of directors 
of the AAFP. I am pleased to provide testimony on behalf of 
nearly 94,000 members who provide medical care for 50 million 
of your constituents. The Academy commends the Subcommittee for 
your consistent efforts to ease the burdens of small businesses 
in this country. Family physicians share the Subcommittee's 
concerns that the current payment system is inaccurate and 
outdated. Therefore, AAFP supports the restructuring of 
Medicare payments to reward care coordination and quality and 
to prevent expensive and duplicative tests and procedures. 
About 25 percent of all office visits in the United States are 
to family physicians, nearly half of whom work in small and 
medium-sized practices of five physicians or less, small 
business practices that operate with tight financial margins. 
Medicare beneficiaries comprise about a quarter of the typical 
family medicine practice. Therefore, an accurate and more 
contemporary Medicare physician payment method is key. AAFP 
appreciates past Congressional action that avoided a 5 percent 
payment reduction in the Medicare fee schedule for 2007. 
Nevertheless, reimbursement rates for physician services are 
lower today than they were in 2001. Moreover, if Congress does 
not act in the next 7 weeks, reimbursement for family 
physicians will decline 10.1 percent in 2008, and 5 percent 
more in 2009.
    In fact, scheduled cuts of nearly 40 percent over the next 
9 years will render the operation of small business medical 
practices unsustainable. From the outset, the Medicare program 
has based physician payment on a fee-for-service system. This 
system rewards individual providers for ordering more tests and 
performing more procedures. This system does not pay physicians 
to coordinate the patient's care generally, and has resulted in 
an expensive, fragmented Medicare program.
    AAFP recommends that Medicare incorporate a fee for 
physicians who coordinate the care of Medicare patients. This 
should be a blended model that combines fee-for-service with a 
monthly care coordination payment. Such compensation will go to 
the physician practice chosen by the patient. And any physician 
practice prepared to provide care coordination should be 
eligible to serve as a patient's personal medical home. 
Patients who select a personal medical home should be rewarded 
with reduced copays and reduced deductibles. This model has 
already been proven effective. North Carolina has employed the 
Medical Home model in its Medicaid program, and saved taxpayers 
more than $231 million in fiscal years 2005 and 2006.
    Effective care coordination requires affordable health 
information technology in the form of an electronic health 
record in the physician's office. Using HIT also reduces errors 
and allows for ongoing care assessment and quality improvement 
in the practice setting, two additional goals of the recent 
Institute of Medicine reports. But cost continues to be a 
significant barrier.
    AAFP joins the Institute of Medicine in encouraging Federal 
funding for physicians to install HIT systems, which according 
to HHS, will save billions. Funding must be directed to the 
systems that will provide the best return on investment. We, 
therefore, encourage Congress to consider funding in the form 
of grants or low interest loans for those small group and solo 
medical practices committed to integrating health information 
technology in their practice. In closing, AAFP urges Congress 
to modernize Medicare by embracing the patient-centered Medical 
Home model as an integral part of the program and to reform the 
payment system in the following three ways.
    First, enact a 2-year positive update to the payment rate 
and use the time to develop a replacement for the dysfunctional 
SGR formula. This new formula must consider and reflect the 
change in the costs for small business medical practices to 
provide care.
    Second, adopt the patient-centered medical home and give 
beneficiaries incentives to use this model with reduced copays 
and deductibles. The physician designated by the patient as the 
medical home shall receive a monthly payment for the non-face-
to-face services associated with care coordination.
    And third, provide health information technology grants and 
low interest loans to solo and small group medical practices 
that provide a patient-centered medical home to Medicare 
beneficiaries. AAFP commends the Subcommittee for its 
commitment to identify a more accurate and contemporary 
Medicare payment methodology for physician services, one that 
recognizes and fosters the important small business model used 
by thousands of family doctors across America. Thank you for 
the opportunity to speak today, and I look forward to your 
questions.
    ChairmanGonzalez. Thank you very much, Dr. Fedderly.
    [The prepared statement of Dr. Fedderly may be found in the 
Appendix on page 40.]

    ChairmanGonzalez. The next witness is Dr. Jeffrey P. 
Harris. Dr. Harris is the president-elect and former chair of 
the Board of Governors of the American College of Physicians' 
American Society of Internal Medicine. The ACP is the Nation's 
largest medical specialty society. Its membership comprises 
more than 115,000 internal medicine physicians and medical 
students. Dr. Harris has practiced internal medicine and 
nephrology in Winchester, Virginia, since 1977. He is a 
clinical associate professor at the University Virginia School 
of Medicine. Thank you very much, Dr. Harris, and you may 
proceed,


   STATEMENT OF JEFFREY HARRIS, M.D., FACP, PRESIDENT-ELECT, 
                 AMERICAN COLLEGE OF PHYSICIANS

    Dr.Harris. Good morning, Mr. Chairman, and members of the 
Committee. As you have heard, I am Jeff Harris, president-elect 
of the American College of Physicians. I have been a general 
internist for 3 decades. As clinical associate professor of 
medicine at the University of Virginia School of Medicine, I 
have been involved a bit in community-based teaching for third 
year medical students. The College is the largest medical 
subspecialty society in the United States, representing 124,000 
internal medicine physicians and student members. Among our 
members involved with direct patient care after training, 
approximately 20 percent are in solo practice, and 
approximately 50 percent are in practices with five or fewer 
physicians. Until recently, I have practiced in a town in 
Virginia with a population, as you heard, of about 50,000.
    My practice focused on the delivery of primary care and 
nephrology. We routinely saw overhead expenses which exceeded 
60 percent. As a community small business, we discovered 
firsthand the financial struggles of an uncertain and low 
Medicare reimbursement and the effect it had on our practice. 
We greatly appreciate Subcommittee Chairman Gonzalez for his 
focus of the attention on the impact of the Medicare's flawed 
physician reimbursement formula and the effect it has on small 
and solo practitioners.
    These are the practices that are the least able to absorb 
the uncertainty of annual payment decreases and the below 
inflationary adjustments Congress has grown accustomed to 
making. The College offers three points for the Committee to 
consider. Number one, the College believes that the Medicare 
payment policies are fundamentally dysfunctional and do not 
serve the interests of Medicare patients. These policies have 
an especially negative impact on solo and small practices.
    In particular, Medicare payment policies discourage primary 
care physicians from organizing care processes to achieve 
optimal results for patients. Research shows that health care, 
managed and coordinated by a patient's personal physician, 
using a system of care centered on the patient's needs can 
achieve better outcomes for patients and potentially lower the 
cost by reducing complications and hospitalizations. The 
American College of Physicians, joined by the American Academy 
of Family Physicians, the American Osteopathic Physicians, and 
other physician groups have adopted the concept of care 
delivery called the patient-centered medical home.
    The second point we would make is that the dysfunctional 
Medicare payment policies have resulted in a dwindling 
workforce of primary care physicians at a time when the aging 
population is growing and more Americans are living with 
chronic diseases. As a community-based teacher for the 
University of Virginia, I have had the pleasure of teaching 
third-year medical students in our office setting. These 
youngsters are uniformly excited about the unique challenges 
and the opportunities of being a patient's primary care 
physician. But when it comes to choosing a career path, very 
few see a future in primary care.
    Now medical students are acutely aware that Medicare and 
other payers undervalue primary care and overvalue subspecialty 
medicine. With the national average student debt of $150,000, 
by the time they graduate from medical school, students feel 
that they have no choice but to go into more specialized fields 
and practices that are better remunerated. The precipitous 
decline in young people entering the fields of primary care is 
occurring at the same time we are witnessing the fact that only 
35 percent of the nation's internists, 35 percent of them are 
over the age of 50, with increasing numbers retiring from 
practice early due to frustration with practice difficulties 
like the SGR. Coincident with this declining number of 
internists, our country has an aging population, with a growing 
incidence of chronic disease, who will need more primary care 
physicians to take care of them.
    As you know, within 10 years, 150 million Americans will 
have one or more chronic diseases. And the population over the 
age of 85 between the years 2000 and 2010 will increase by 50 
percent. Our final point is that Congress must take immediate 
steps to avert the 10.1 percent reduction and work towards 
eliminating the SGR. It is essential that Congress act this 
year to avert more SGR cuts. But we urge Congress not to simply 
enact another temporary fix without moving in a direction of 
replacing the underlying formula. The so-called Sustainable 
Growth Rate is simply not sustainable. The College recognizes 
and appreciates that with the support of this Subcommittee the 
House passed legislation under the CHAMP Act to reverse this 
10.1 percent cut in Medicare payments scheduled to take place 
January the 1st, and proposed to replace it with a .5 percent 
increase in 2008 and 2009.
    Unfortunately, the future of the legislation remains 
uncertain. We request the House to work with your Senate 
colleagues to ensure that the following elements of the CHAMP 
Act are enacted into law and that these steps will lead to a 
total repeal of SGR, guarantee at least 2 years of positive 
updates, pay for the updates in a way that doesn't make the 
problem worse in the future, and implement expanded pilots of 
the medical home to facility physician-guided care 
coordination. In conclusion, the College commends Chairman 
Gonzalez and the members of this Committee for holding this 
important hearing to shine a spotlight on how the SGR is 
impacting solo and small physician practices. Medicare patients 
deserve the best possible medical care, but they also deserve a 
physician payment system that will help physicians deliver the 
best possible care. Thank you, and I look forward to answering 
your questions.
    [The prepared statement of Dr. Harris may be found in the 
Appendix on page 49.]

    ChairmanGonzalez. Thank you very much, Dr. Harris. At this 
time, for the purpose of the introduction of the next witness, 
the chair is going to recognize my colleague, Congresswoman 
Mary Fallin.
    Ms.Fallin. Thank you, Mr. Chairman. And it is a great 
pleasure to be here today to hear this important testimony. And 
let me just say thank you to all of our panelists who are 
providing good information for us to consider on this 
legislation. I had the opportunity this week to have what is 
called a tele-town hall meeting in my office and to be able to 
visit with constituents back in my district. And I was 
surprised to find that a large portion of my constituents in my 
district were complaining about the lack of access to doctors 
because of the Medicare reimbursement rate, and how they were 
having a hard time finding anyone to take care of them. Now you 
might expect that to happen in the rural areas, which I do have 
a couple rural counties in my district, but I was actually 
talking to constituents in the metropolitan area of Oklahoma 
City.
    So this is a very important topic I know not only for 
physicians and doctors and hospitals, but also for access to 
care and quality care for our constituents back in our 
district. And today I am very pleased to welcome one of our 
fellow Oklahomans, Dr. Melinda Allen. And she and I had the 
opportunity to visit earlier this morning about some of the 
things that she finds in her practices. She is a doctor in 
internal medicine, and she is also chief of staff of the Ponca 
City Hospital Medical Center, which has 140 beds in northern 
Oklahoma. She also serves as the medical director of the Ponca 
City Nursing Home, and so she coordinates and manages care for 
over 70 residents of the elderly. She also serves as a 
Qualified Veterans Physician, contracting with the Veterans 
Administration. So I think she has well-rounded experience not 
only with folks out in our community, but our seniors and our 
veterans. So Doctor, we appreciate you coming today, and I am 
looking forward to hearing your testimony. Welcome.


   STATEMENT OF MELINDA ROTHER ALLEN, D.O. ON BEHALF OF THE 
                AMERICAN OSTEOPATHIC ASSOCIATION

    Dr.Allen. Thank you, Congresswoman. I think my testimony 
today will reflect the feelings of Dr. Harris and Dr. Fedderly. 
Mr. Chairman, Ranking Member Westmoreland and members of the 
Subcommittee, my name is Melinda Allen. I am an osteopathic 
internal medicine physician in solo private practice in Ponca 
City, Oklahoma. I am honored to be here today on behalf of the 
American Osteopathic Association and the Nation's 61,000 
osteopathic physicians practicing in all specialties and 
subspecialties of medicine. The AOA and our members appreciate 
the efforts of this Committee to raise awareness regarding the 
devastating impact current Medicare reimbursement policies are 
having upon beneficiary access to care and on physician 
practices, especially those like mine.
    Nowhere do Medicare beneficiaries experience access issues 
more severely than in rural communities. These communities are 
often medically underserved, as Congresswoman Fallin had said, 
and are home to seniors who will enter my practice with 
multiple conditions due to lack of care. Sadly, many seniors in 
these areas find the physicians serving in these communities 
have no room in their practices for new Medicare patients. Upon 
graduation from medical school, there were multiple 
opportunities presented to me. Although taking a position with 
a hospital or in a private practice in a larger city would have 
allowed much more financial stability, I was determined to 
return to my roots in rural Oklahoma. A partner and I opened 
Internal Medicine Associates in Ponca City in June of 2002. We 
purchased a small building and renovated it for use as a 
medical practice. But despite our best efforts, my partner 
could not support his family, manage his medical school debt, 
and sustain his portion of the practice. Just 18 months after 
opening our practice, he filed for bankruptcy and left Ponca 
City, leaving me with a practice and a staff to support. In my 
first year of practice, Medicare physician payments were cut 
5.4 percent. While Congressional actions over the past 5 years 
to avert additional cuts are greatly appreciated, I operate 
today at approximately the same level of compensation I 
received when I opened my practice over 5 years ago. Unlike any 
other small business, I am forced to comply with regulations 
that limit my ability to recover overhead through fees. This is 
an impossible way to sustain any business. As a result, in 
2006, I reluctantly curtailed my participation in the Medicare 
program. But since that time I estimate that I turn away about 
six to eight Medicare beneficiaries every day that call my 
office looking for new physicians. However I do accept new 
Medicare payments through attrition, my patients are getting 
older, through hospital admissions, and nursing home 
admissions. I see approximately 5,000 patients, 25 percent of 
whom are enrolled in Medicare. However, Medicare beneficiary 
visits total over 40 percent of my daily routine. And I 
estimate that approximately 60 percent of my time is spent 
caring for these 25 percent Medicare patients that I have. This 
not only includes the individual visit for which I am 
compensated, but also many hours of follow-up and coordination, 
time for which physicians are not compensated.
    I am a small business owner. I own my own building and I 
employ a staff of six, one of whom really provides services 
specifically to my Medicare patients. I provide my employees 
with annual cost of living increases. My office is open for an 
estimated 235 days per year. This allows for a week of 
vacation, a week of continuing education, and 10 holidays. And 
if you notice, there are no sick days. I never get sick. We are 
not allowed to get sick. Generally, I average 22 to 25 patients 
per day during a 60-hour work week. My estimated practice costs 
in 2007 will be approximately $265,000. As evidenced by the 
chart in my written statement on page five and six, I have a 
flow chart of costs. If the scheduled Medicare payments cuts 
are realized, sustaining my practice, which is comprised of 
only 25 Medicare and 75 percent private insurance will be 
impossible. By 2015, I will be operating at a $65,000 annual 
loss. If I chose to see only Medicare patients over the next 5 
years, I would lose $122,000 annually. These numbers indicate 
the real impact that the Medicare physician payment cuts have 
on a small business owner. The modest increases in annual 
operational costs do not include major maintenance or repairs, 
hiring new staff, investing in health information technology, 
or any other challenges facing a solo practitioner. Without any 
real adjustment to the system, many physicians like myself that 
are called to serve in these rural communities will be unable 
to do so, compounding existing health disparities, and leading 
to a true access crisis for my patients. Any future Medicare 
physician payment formula should provide annual positive 
updates that reflect increases in practice costs for all 
physicians participating in the program. Additionally, those of 
us choosing to participate in pay-for-reporting programs, 
implement health information technology systems, or provide 
patient-centered care coordination services should receive 
bonus payments above the annual payment updates for their 
participation and investment. I would like to express my 
gratitude to the Committee for focusing its attention on this 
often overlooked segment of our nation's small business 
community. I implore you to take the appropriate steps to 
ensure that I can continue to serve my patients, and I look 
forward to answering any questions. Thank you.
    [The prepared statement of Dr. Allen may be found in the 
Appendix on page 58.]

    ChairmanGonzalez. Thank you very much, Dr. Allen. Our next 
witness is Dr. Kenneth L. Noller. Dr. Noller is testifying here 
today on behalf the Alliance of Specialty Medicine as well as 
the American College of Obstetricians and Gynecologists. He is 
currently the president of the ACOG, which has over 49,000 
members, with its members representing over 90 percent of the 
United States' board-certified OB-GYNs. The Alliance of 
Specialty Medicine is a coalition of 11 national medical 
specialty societies, representing more than 200,000 physicians. 
Dr. Noller is chair of the OB-GYN department, and a professor 
in the Department of Family and Community Medicine at Tufts 
University in Boston, and the gynecologist and chief at Tufts 
New England Medical Center. Welcome Dr. Noller, and you may 
start your testimony.


STATEMENT OF KENNETH NOLLER, M.D., PRESIDENT, AMERICAN COLLEGE 
               OF OBSTETRICIANS AND GYNECOLOGISTS

    Dr.Noller. Thank you. Mr. Chairman and members of the 
Subcommittee, thank you for holding this hearing on the effect 
on solo and small practitioners of the 10.1 percent Medicare 
physician payment cut. It is important and appropriate that 
this Subcommittee consider the impact of the cut on these small 
businesses. ACOG and the Alliance appreciate the leadership of 
the House Ways and Means, and the Energy and Commerce 
Committees in addressing the physician payment cut in the CHAMP 
Act. We strongly support a 2-year reprieve from payment cuts, 
and look forward to a permanent solution to this crippling 
problem. We urge Senate action to end the uncertainty facing 
small medical practices. These practices remain the backbone of 
the U.S. health care system, but financial and regulatory 
burdens are making it hard for these practices to stay open. 
For example, OB-GYNs in solo practice fell from 34 percent in 
1991 to 23 percent today. Often this means that a small 
community lost its local doctor. Patients must now travel 
farther to see an OB-GYN, or they may receive no medical care 
at all. If Congress does not enact a long-term solution soon, 
physicians serving Medicare patients will see cuts year after 
year, eventually totaling 40 percent. No small business can 
remain solvent with such drastic reductions in its revenues, 
while at the same time office rent, salary increases, medical 
supplies, medical liability insurance costs all increase. 
Medicare cut payments in 2002, increased them less than 
inflation in 2003, 4 and 5, and froze payments in 2006 and 7. 
Is it any wonder that more and more physicians will no longer 
see Medicare patients? Under today's flawed formula that 
determines Medicare physician payments, the payments are tied 
to gross domestic product instead of the cost of providing 
medical care.
    Physicians are penalized for skyrocketing increases in the 
costs of in-office prescription drugs, and physicians are 
required to offer services that are beyond their control. These 
include such things as new benefits authorized by legislation, 
increased regulation, new technology, and growing patient 
demand. The bottom line is that Medicare cuts cause patient 
access problems and hurt patients throughout the health care 
system.
    Here are four examples: Elderly patients in fee-for-service 
Medicaid are the first to lose their doctors as physicians are 
forced to restrict the number of new beneficiaries they can 
see. Secondly, TRICARE, the health care system for our military 
families, uses the Medicare fee schedule, thus diminishing 
access for these families. Thirdly, many private insurers 
follow Medicare's lead, cutting or freezing physician payments. 
And lastly, as Medicare and private insurance payments decline, 
practices often have to make the hard choice to stop caring for 
patients of their lowest payer, Medicaid, creating access 
problems for those patients.
    Community clinics serving low-income patients have 
difficulty recruiting physicians, and have to cut back on care. 
These cuts will be felt by rural areas first. The loss of even 
one small practice in a rural area means that patients must 
travel further for routine care, and further still if they need 
specialty care. And recruiting physicians to rural areas has 
become very difficult, if not impossible. It is simply too 
risky for a young physician with 150 or $200,000 in debt to 
open a practice in these areas. Falling and unpredictable 
payment rates also make it very difficult for small practices 
to buy expensive new technology such as HIT, even though such 
systems can probably improve patient safety.
    Dr.Noller. A few of us entered medicine to become 
businessmen, we entered medicine to care for our patients, but 
no matter your business sense, it is clear the payment cuts of 
10 percent in 2008 and a total of 40 percent over the next 
decade will make it impossible for the private practice of 
medicine to survive.
    As advocates for patients and physicians, ACOG and the 
Alliance of Specialty Medicine applaud the House for acting to 
prevent these cuts. We call on the Senate to do the same and 
very much appreciate your leadership in continuing to highlight 
this critically important issue. I thank you.
    ChairmanGonzalez. Thank you very much, Doctor.
    [The prepared statement of Dr. Noller may be found in the 
Appendix on page 74.]

    ChairmanGonzalez. I am going to recognize the Ranking 
Member Mr. Westmoreland for the purpose of introducing the next 
witness.
    Mr.Westmoreland. Thank you, Mr. Chairman.
    Before I introduce Dr. Whitlow, I want to recognize Tom 
Spatonik from Georgia also who made the trip up here.
    Mr. Chairman, it is my pleasure to introduce my 
constituent, Dr. John Whitlow, who serves as president of the 
Georgia Optometric Association. Dr. Whitlow also practices at 
the West Georgia Vision Center, which he and his wife, Dr. 
Donna Whitlow, founded in 1993, a true small business, mom-and-
pop operation. An active member of his professional 
association, Dr. Whitlow has held several leadership positions 
with the Georgia Optometric Association.
    In the legislative arena he has worked to promote insurance 
for quality, and in 2001 received the GOA Legislative Service 
Award for his efforts. Dr. Whitlow has been a member of the 
Troup County Chamber of Commerce for 14 years. He has been an 
effective member of the LaGrange community.
    I thank Dr. Whitlow for his willingness to share his 
thoughts and look forward, as I am sure we all do, in hearing 
his testimony.

STATEMENT OF JOHN WHITLOW, ON BEHALF OF THE AMERICAN OPTOMETRIC 
                          ASSOCIATION

    Dr.Whitlow. Thank you. Good afternoon. Thank you, Ranking 
Member Westmoreland for those kind words.
    As he said, my name is John Whitlow, president of the 
Georgia Optometric Association and a doctor of optometry from 
LaGrange, Georgia.
    It is an honor to represent the American Optometric 
Association and its 34,000 doctors this afternoon. We 
appreciate the opportunity to provide the House Small Business 
Subcommittee on Regulations, Healthcare and Trade with our 
views and recommendations concerning the current state of 
Medicare payments to physicians, especially doctors of 
optometry and other health care providers.
    As a small business owner of a private optometric practice, 
and, again, as Ranking Member Westmoreland alluded to, truly a 
small business, most days I am the doctor there; a lot of days 
I am the office manager; then there are days where I am the 
plumber; then there are days that I am the electrician; and 
then there are days that I am even the dish washer. So it is a 
truly small, small practice.
    But it is my pleasure to testify before you today regarding 
the disheartening effect that Medicare reimbursement is having 
on efficient and high-quality health care, including the 
delivery of eye and vision care that I provide to over 1,200 
Medicare patients that I see personally.
    The SGR formula currently used to determine Medicare 
payments is producing dire results for all health care 
providers, especially those in the small and rural communities. 
As the primary eye care providers in over 6,500 communities 
across this Nation, my colleagues and I are very well aware of 
the many obstacles that health care providers face as they 
strive to provide care to an ever-increasing number of Medicare 
patients. Access to quality care is increasingly at risk 
because of the strains on the current system that threaten the 
ability of providers to deliver needed care.
    We are often the only eye care providers available in the 
rural communities and underserved areas and, like other 
providers, are struggling to serve America's children, 
America's seniors, and America's underserved while keeping pace 
with the standard of care and rising costs.
    When reimbursement rates are pegged at artificially low 
levels that do not reflect genuine practice costs, patient 
access suffers because clinicians will be financially unable to 
serve many patients.
    The impact of Medicare physician payment cuts affects the 
entire health care community, including the non-MD/DO 
community. PARCA, a coalition of organizations representing the 
interest of millions of patients and clinicians, applauds the 
efforts put forth by Members of Congress and the congressional 
staff as they work to address Medicare payment reform. PARCA 
supports congressional efforts to bring forward legislation 
that will provide multiyear positive updates to bring stability 
to the Medicare payment system.
    The American Optometric Association in concert with other 
health care provider organizations asserts that the SGR payment 
formula has produced disastrous results for both doctors and 
the patients. None of the factors in the SGR take into account 
Medicare spending due to technological advances or where 
utilization has increased because of new Medicare coverage 
policies and expanding preventive services.
    The AOA gratefully acknowledges the recent efforts by 
Congress to provide some temporary fixes; however, a permanent 
solution must be found and is needed to resolve a full-blown 
meltdown of the Medicare system that looms on the horizon. The 
AOA urges the Subcommittee and Congress to work with the CMS to 
avert future cuts by enacting a system that produces rational 
health care provider payments and accurately reflects increases 
in practice costs. The SGR should be repealed and replaced with 
a payment update system that reflects these increases in 
practice costs.
    Congress must at the very least first establish some sort 
of transition, some sort of pathway to allow us to have the 
complete elimination of the SGR; and second, to stabilize 
payments in the short term for a minimum of 2 years by 
providing positive baseline updates to all health care 
providers consistent with the Medicare Payment Advisory 
Commission's recommendation. A scheduled cut of 10 percent in 
2008 should be replaced with an increase of 1.7.
    As a small business owner of a private practice, I, along 
with the AOA, appreciate the opportunity to provide our views 
to the Subcommittee on these critical matters. We look forward 
to working with the Small Business Committee and Congress to 
pass immediate legislation that preserves access, averts the 
next 2 years of payment cuts, and provides a positive update 
that reflects optometric practice costs. Thank you.
    ChairmanGonzalez. Dr. Whitlow, thank you very much.
    [The prepared statement of Dr. Whitlow may be found in the 
Appendix on page 79.]

    ChairmanGonzalez. It is the Chair's intention to get at 
least one round of questions. The Members will be restricted to 
5 minutes. Taking into account the Ranking Member's schedule 
this afternoon, because I am afraid we will go and vote, he may 
not be able to make it back or stay very long if we do, I am 
going to defer to the Ranking Member in allowing him to pose 
his questions at this time.
    Mr.Westmoreland. Thank you, Mr. Chairman.
    Dr. Harris, you mentioned the CHAMP Act and 5 percent 
increase in the reimbursement. That was just a temporary fix, 
though, correct? That did not deal with the real problem of the 
SGR.
    Dr.Harris. No. The CHAMP Act, as you know, is a new 
proposal. What we would much prefer is for the CHAMP Act to 
avert the cut and impose these positive updates, but even then 
that it is only for 2 years, and we are back to where we 
started.
    Mr.Westmoreland. It would be better in the long run to go 
ahead and let us get this thing worked out, and suffer whatever 
we are going to suffer now and fix it. It is like Dr. Burgess 
said, it will only continue to get more and more expensive the 
further down the road we get.
    Dr.Harris. It is. And it is hard to exaggerate the 
magnitude of the effect of this. It is devastating to small 
practices.
    If I just interject, I am absolutely persuaded that SGR was 
a major factor in something which I experienced last July. Our 
practice, 40 years old, imploded. It is over with. We had 
started--I was a nephrologist/internist with another internist, 
and we practiced for about three decades. Along the way we 
added another nephrologist, who eventually, a very bright guy, 
after about 18 years returned to teaching at Chapel Hill. We 
went on to add other young internists who were comfortable, but 
we began encountering these pressures where it was so difficult 
with a 60 percent overhead.
    We brought specialists, consultants in on two occasions who 
told us exactly the same thing: Our overhead was the best we 
could do. And our choices were simply leave the hospital 
earlier in the morning after rounds to get there, stay in the 
office longer, and make evening rounds later, or see more 
patients per unit time. And we did that as fast as we could, 
but it still didn't spare us.
    We finally added a young woman, a very bright young woman, 
from the University of Virginia who joined us. But most medical 
school classes now are 50 percent women and, like most young 
people, would like to also start their families. So this young 
woman knew that, and she knew it would mean working part time. 
But if you think it is difficult to practice under these 
circumstances full time, it is terribly difficult part time, 
and so we lost her. Virginia offered her a part-time job at an 
outpatient community.
    We have since then had a terrible time attracting new young 
internists now because they can go and become hospitalists, 
inpatient physicians. It pays 16 percent more. All of this 
effect makes it terribly difficult at a time when the Nation 
needs more primary care physicians. And the SGR bears a 
tremendous responsibility for this current situation.
    Mr.Westmoreland. Dr. Whitlow, following up on that, in your 
written testimony you indicate that access to care may be 
jeopardized by the current Medicare payments, that they don't 
meet the practice costs. Can you elaborate on that access 
problem we are going to inherit, and how far down the road do 
you see this getting to a critical stage if it is not already 
there?
    Dr.Whitlow. Well, in any private practice, especially when 
you start looking at being basically a primary care frontline 
physician, looking at new technology that is coming out, 
looking at when you have that technology, a lot of times 
needing to ask staff people to help you with that technology, 
looking on further down the road with electronic health records 
that is also looming there, all of these things start adding up 
into costs that somehow has to be absorbed into the practice. 
And with that comes your decision whether you can accept 
payment. When I say accept payment, as far as with an insurance 
company, and, of course, talking about Medicare, whether 
Medicare is paying us enough to accept that.
    But taking that even a step further, being on the front 
line, I may have a patient that I see because I am accepting 
the insurance, but I may need to refer that patient to a 
secondary or even a tertiary care doctor, and it is getting 
more difficult to find a doctor to refer the patient to.
    One of the examples that keeps running through my mind 
right at this moment, what is happening with Medicaid right now 
in the State of Georgia is basically, I think, a precursor to 
what I see that is happening with Medicare now. They have just 
constantly cut fees and produced more red tape for doctors to 
not only accept the patient, but then even filing the claims, 
more and more red tape so it gets more cumbersome.
    To make it short, these doctors are dropping out of the 
Medicare system. So I may have a patient that needs care, and 
it is getting extremely difficult to find the doctor to refer 
that patient to, and especially somebody that is fairly local, 
without a patient driving 50, 60, 70 miles to have to do that, 
because, again, when you start talking about Medicare, we are 
speaking mostly about the elderly patients of our Nation.
    Mr.Westmoreland. Yes, sir.
    Let me just ask, if I could, a quick question. I know Dr. 
Allen mentioned that she has limited her Medicare patients. In 
your practices, do you limit your Medicare patients, and if you 
do, what percentage would that be?
    Dr.Fedderly. I currently do not limit my Medicare patients 
in my practice.
    Dr.Harris. Since beginning this role with American College, 
I have slowed down appreciably in the last year, but my former 
partners, I believe they do limit it. I don't know the 
percentage.
    Dr.Noller. We do not limit it at this time.
    Dr.Whitlow. Not yet.
    Mr.Westmoreland. Okay. Thank you very much.
    ChairmanGonzalez. You noticed that the bells have gone, and 
we have another vote. We are within 5 minutes, but what I would 
like to do, because I am not real sure about other Members' 
schedules--m definitely coming back, so I will again ask for 
your patience and indulgence because I have some questions.
    Congresswoman Fallin, if you would like to pose your 
question, just if you have something that you feel we need to 
put out there? Even if we can't take the complete response, I 
want to give you that opportunity.
    Ms.Fallin. Thank you, Mr. Chairman.
    As I mentioned, I had the opportunity to visit with Dr. 
Allen beforehand, and one of the things I was concerned about 
that she expressed to me was the time with the rules, the 
regulations, the systems, the expenses that doctors have to buy 
to try to manage their practice, and their access to care, and 
their quality of care for their patients. But she told me that 
she receives about 60 phone calls by noon a day from various 
patients trying to just talk about an illness, or schedule an 
appointment, or calling in about a prescription, just the 
amount of time.
    We were talking about how if that was an attorney, that if 
she talked to them for 5 minutes, she would be paying probably 
150 or $200 an hour. But the doctors don't get paid for their 
phone call time.
    We talk about access to care and being able to see lower-
paid patients. It is hard for the doctors, it seems, to be able 
to make the income that they need to make while they are 
investing in the intellectual properties that they need to have 
for their practices. So we were visiting about a nationwide 
system to where they could share information about their 
patients and their records.
    So I guess my comments are I hope we can continue to work 
on this issue and see what we can do to help create better 
access to care.
    Dr.Allen. And as a comment, we have been looking at adding 
electronic medical records to systems to our office. There are 
400 systems out there. How do I know that the one that I pick 
will be the one that is chosen several years down?
    ChairmanGonzalez. Dr. Allen, we will be able to enlighten 
you on that, because we do have something. We will stand in 
recess so I make sure I don't have my colleagues missing votes, 
and I shall return. If they can make it back, they will be 
back, and we may be joined by other Members, but we definitely 
will resume. We stand in recess.
    [Recess.]
    ChairmanGonzalez. Thank you very much. We will reconvene 
the hearing. Obviously I want to get more than 5 minutes, so I 
appreciate it very much.
    First of all, I need to express the regrets of Congressman 
Westmoreland. He has to be at another hearing. The hearing that 
he will be attending deals with the drought, and I think, Dr. 
Whitlow, you know exactly the circumstances there and why he is 
needed at that hearing.
    I am going to start off with general observations. As 
Republicans, Democrats, we all try to come up with some answer 
to this. The bottom line will always be how we pay for it, and 
there will be a disagreement on how we pay for things. But I 
think everyone acknowledges a few things; maybe we can all 
agree on something. It will cost more in all probability, but 
if we do it right, we can save money down the road and make up 
for some of that cost, and I am going to touch on that. But it 
is interesting if we could agree on some things.
    I am going to request this, and I say this to all my 
doctors and to all the specialists in the group, and I see some 
of the representatives out there, is for the medical profession 
to try to get on the same page on the overall approach. Dr. 
Burgess's approach, obviously you wouldn't really have a 
replacement of the SGR for a period of 2 years. Well, believe 
it or not, I heard from a lot of doctors and a couple of 
associations that it was not sufficient or adequate. They 
wanted an immediate fix. So we need to make a determination, 
one, do we bridge or transition into it? Some of you have 
already indicated we probably should, and maybe have 2 years as 
we go into it with some predictability so that you know you 
will be reimbursed, and it keeps up with inflation and so on.
    The next thing I think we should all agree on is if we 
index reimbursement rates, they have to reflect the increased 
cost of providing the service, which SGR is pretty blind to. 
That is fundamental, so that is one thing.
    What we replace it with is probably more difficult, but I 
think we are getting into some areas where maybe we can reach 
greater agreement on this, too, and that is managing disease. I 
know that it has been approached, and I want to make sure that 
I get the exact description of it, and that is how you have a 
center of care or a health care home, more or less, which is 
very important, and which will be accommodated, and then we get 
into the next issue of health information technology.
    I will ask Dr. Fedderly and Dr. Harris, when you describe 
this to me, it sounds like managing disease, making sure you 
keep track of the patient and so on. So there's a lot of 
prevention. And if I had my notes a little more clearly, I 
could tell you exactly how each of you described it, but I 
think both of you may have used a centered or home, to that 
effect. Is that akin to what Secretary Leavitt has been talking 
about in the way of pay for performance? And how does it fit in 
to what has been proposed, this pay for performance?
    I will start with Dr. Fedderly.
    Dr.Fedderly. Thank you.
    It is part of that. Pay for performance is part of the 
patient-centered medical home, and the idea is that if the care 
is more efficient and better provided, and if people are kept 
healthier, then that is a better performance marker, so there 
is compensation in the form of better performance and for 
better quality of care provided to our patients.
    The patient-centered medical home idea is that a patient 
will have a central location or one place, first call shopping, 
if you will, to know where to go to deal with particular 
issues. So it is not only a preventive health care mechanism, 
but if a person feels ill, she or he knows where to go to 
obtain their medical care. And if the physicians in their 
medical home can't provide that care, then they certainly know 
where that care will be best obtained.
    ChairmanGonzalez. Dr. Harris?
    Dr.Harris. I think the key phrase is patient--
    ChairmanGonzalez. I am sorry, go ahead.
    Dr.Harris. The key phrase is "patient-centered." When you 
ask patients what they want, they obviously want access to a 
physician. Two, they would like someone who knows them well and 
longitudinally over a period of years, if not decades. And they 
want to be able to access them easily, perhaps by phone or e-
mail in addition to office visits. This patient-centered 
medical home is built around that.
    The notion is that the physician also accepts 
responsibility for helping patients navigate a very complex 
health care system, whether it is getting them to a 
subspecialist or helping them communicate between what happens 
in and out of hospitals or to and from nursing homes. It is all 
united by a health information technology so there is a smooth 
connection, and everyone knows what is going on in that 
patient's medical life, and it is done appropriately, but all 
while treating preventive care, acute and chronic care and end-
of-life care.
    We believe that there are a number of payment mechanisms 
that will make it happen, one of which is pay for performance. 
The college believes that paying for quality, tracking quality 
is a healthy thing to do, beginning with pay for reporting, but 
ultimately with pay for performance.
    We believe that there are three other pieces, though, that 
go with pay for performance. One is a fee for helping overcome 
this enormous cost of the health information technology, about 
30- to $50,000 per doctor. Two is a fee for coordinating the 
care, when you are managing all the people that it is going to 
take to make this work successfully. And lastly is the 
traditional fee-for-service system.
    ChairmanGonzalez. Doctor, to all of you in a minute I am 
going to ask you the question in your practice--and some of you 
may have responded already, but I want to take a roll on it--if 
you utilized health information technology. And I know 
electronic health records, on the Hill we call it HIT, and 
there are proposals out there. Obviously Dr. Gingrey and I have 
introduced a piece of legislation that would assist the 
physicians, and it will be the small practices by way of the 
tax treatment, of course, but that will not be enough, so we go 
into grants, but that would be limited. So we go into loans, 
which obviously would be subsidized, which would be of some 
assistance, but also has a Medicare payment aspect to it where 
you are rewarded, in essence, for it. So we will see where that 
goes. We are attempting to do that.
    My concern is, of course, it may be easier for larger 
entities to do this, such as the HMOs and so on. I am just real 
concerned about the small business application, and not to 
leave you out of that equation, because I think in the future 
it would put you at a real disadvantage.
    I will just go down the road and just ask do you utilize 
health information technology, electronic health records? Dr. 
Fedderly.
    Dr.Fedderly. Yes, we use electronic technology. And your 
comments are right on target in terms of the need for small 
businesses to be able to afford this, because it is fairly 
certain that large businesses can afford it and can have the 
staff and infrastructure to keep it up and running, but it is 
the small businesses that are going to have the greatest deal 
of difficulty handling this. So that would be a very good key 
to your suggestion.
    ChairmanGonzalez. Dr. Harris, do you utilize it?
    Dr.Harris. As I mentioned before, in the last year I have 
been involved with a college almost full time, but, yes, the 
individuals with whom I--they are subsequently involved in 
other practices, but they are all converting to an electronic 
medical record. It is terribly expensive and a steep learning 
curve.
    ChairmanGonzalez. Dr. Allen.
    Dr.Allen. Yes, I am familiar with them at the hospital. I 
use the CPR system that the Veterans Administration gives, but 
I do not have a system in place in my office for my patients, 
and the reason is simply because there are 400 systems out 
there. How do I know that the one that I pick won't be the DOS 
that is now outdated 5 years from now? How do I know that the 
system I pick will coordinate with my pharmacies and my 
hospital?
    It doesn't do any good for each one of us to have a 
different system that doesn't talk to each other. We definitely 
need some forward movement on this, especially from Congress, 
at helping us select a system, helping a system come to the 
forefront so that when we make that investment, that investment 
is sound and will be with us 10 or 20 years from now, and then 
my patients will also benefit from one system. Again, it 
doesn't help if the cardiologist across town does not 
coordinate with my system, or my pharmacy doesn't, or my 
hospital doesn't.
    ChairmanGonzalez. There is some good news. I believe it is 
good news.
    Dr. Noller.
    Dr.Noller. Yes. Our biggest concern is the same as Dr. 
Allen, is that the system that we have now are going to be not 
the one that is chosen nationally, not the one that is going to 
interface with others. In the city of Boston, there must be 100 
different systems, and when a patient moves from one doctor's 
office to another, that electronic record won't fit in that 
computer. So even if she takes the disk with her, it doesn't 
work in the other system. So coordination is a big one.
    ChairmanGonzalez. And Dr. Whitlow.
    Dr.Whitlow. We are presently looking at it. We do not use 
it now for some of the reasons that have been mentioned as far 
as waiting to see what is coming on the horizon as far as which 
one could we choose. The other has been the cost issue.
    The other issue is going back to the learning curve that 
Dr. Harris referred to. A lot of the practitioners that are on 
my level are saying that they have to decrease the number of 
patients that they are seeing per day in order to get the 
records entered properly; either that, or you are going to have 
to hire more staff. It is not only the start-up cost, but 
getting the whole process going.
    ChairmanGonzalez. The news is, of course, as we try to 
introduce a system where we assist you--and that is going to be 
the carrot, of course, because there will probably be a penalty 
if you don't down the road. I really believe that is going to 
happen. So I think the medical profession needs to be prepared. 
We owe you a responsibility, Dr. Allen and others, to make sure 
whatever you utilize will obviously not be outmoded or outdated 
and so on.
    So there will be conditions. There will be criteria. We 
have someone at HHS who is putting it all together, but 
definitely there will be a certification process, and so that 
we do have interoperability and so on. We will not leave you 
hanging out there with old systems, because it is going to cost 
the Federal Government money then.
    We are hoping that by assisting you, how does this all play 
in? Well, you know, we get back to the SGR, and it will be part 
of whatever we replace it with is going to have, in my opinion, 
HIT components. So we need to be ready for that, and with good 
reason. You need to survive in the modern world and the 
competition that awaits anybody who doesn't make that 
particular transition.
    The other thing that I wish the medical profession would 
just get out there and somehow help Congress with the news that 
we have to find streams of revenue to finance some of this.
    Dr. Harris, I think you probably mentioned the CHAMP Act 
more than anybody else, but, you know, we were paying for that 
out of the House with a decreasing payment to the Medicare 
Advantage. We just met a firestorm, decrease in payments on 
some imaging from the radiologists. And, of course, just tax on 
cigarettes, we are still running into problems with that. And 
that is all we are doing now is a reduced package financed by 
cigarette tax. But we have the administration that now is 
coming up and saying that is a tax increase, and we will not 
approve a tax increase. We could have a veto of the SCHIP bill, 
which no longer has the 10 percent reduction fix or any of 
that.
    But you really do have to let your Member of Congress know 
that you understand that it will not be free, and we have to 
pay for it somehow. All the choices are bad, but some are worse 
than others. And so the cigarette tax seemed like the least 
doing harm to the greatest number of American citizens and 
taxpayers. Of course, Medicare Advantage didn't appreciate it 
much, but I think there was some room for improvement on the 
payment that we made to them to deliver their particular 
service.
    The last question I will leave you with before we adjourn 
and conclude the hearing, we hear that doctors are taking fewer 
Medicare patients, some are not, but we have conflicting news 
or reports. On one hand, I know I have constituents who are 
saying they are making those 30 phone calls, trying to find 
someone to take them. That is the reality. And yet we have 
studies that show that accessibility by Medicare beneficiaries 
to physicians is not really being impacted, and that there is 
still sufficient, maybe even an increasing number of physicians 
available to Medicare recipients. So we are getting kind of 
cross messages. I am not sure. Maybe it depends where you live. 
If it is a metropolitan area or a rural area, it may be that 
takes care of some of the figures. But if you all have any 
opinions as to why we are getting conflicting messages on the 
availability of physicians.
    The last observation I have is, Dr. Allen, you pointed out 
something so important. You did reduce your patient load of 
Medicare beneficiaries. You still accepted those that come 
through your church or other referrals, but they still 
represented more than 40 percent of your practice, of your time 
that you spend, and that should be an easy conclusion to reach 
because it is an older population. But I don't think we really 
think of that. We may say, this is your percentage of Medicare 
patients, but it is an inordinate amount of time and service 
that you are providing them. So I thank you very much for 
bringing it up.
    The last question, though, is the conflicting messages that 
we are getting. Is there any explanation, in your opinion, 
whether we really are suffering a decrease in the number of 
doctors treating the Medicare patients? And we will just go in 
order.
    Dr.Fedderly. The reason you are getting a conflicting 
message is because it is by virtue of what we do as physicians. 
We have trouble saying no, and we--oftentimes by the time you 
are forced, like Dr. Allen is forced, to restrict her Medicare 
patient load, you are often far beyond the desperate measure.
    I think that the best description is that especially as 
primary care physicians, we feel like we are hamsters on the 
wheel, and we are making the wheel go faster and faster and 
faster to try to accommodate everybody. Where this system will 
break down is in the quality of care that is provided, so that 
if I see 25 patients in a day, but in turn I am accepting more 
Medicare patients, then I am going to try to squeeze in 30, 32, 
34 and think about how the individual Medicare beneficiaries 
then are going to get less of my face, less of my time, less of 
my ability to coordinate the multiple issues they have.
    Now, if I have more of my practice in healthy young people 
that don't require a lot of care and a lot of coordination, 
sometimes you can make that happen. But as the baby boomer 
population is aging and hitting Medicare age, there are more 
and more of them out there, and there is fewer and fewer 
doctors, yet there's not that many doctors who are willing to 
say no. We are just doing our best to try to make the wheel 
spin.
    ChairmanGonzalez. I always say you are the last standing 
profession in the United States.
    I am going to apologize to the remaining witness. That 
question is out there for your response. Julie Hart, to my 
left, is my medical issues individual, if you could provide her 
with that information as to the conflict. I think it is very 
important; quantity versus quality is so important. At this 
time, and again with my apologies, I cannot miss this vote.
    I ask unanimous consent that the members of the Committee 
have 5 legislative days to enter statements and supporting 
materials into the record, and, without objection, it is so 
ordered.
    ChairmanGonzalez. This hearing at this time is adjourned. 
Thank you very much.
    [Whereupon, at 1:40 p.m., the Subcommittee was adjourned.]

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