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




                       FULL COMMITTEE HEARING ON
                      MEDICARE PHYSICIAN FEE CUTS:
                      CAN SMALL PRACTICES SURVIVE?

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

                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 8, 2008

                               __________

                          Serial Number 110-92

                               __________

         Printed for the use of the Committee on Small Business


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


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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                   DAVID DAVIS, Tennessee
YVETTE CLARKE, New York              MARY FALLIN, Oklahoma
BRAD ELLSWORTH, Indiana              VERN BUCHANAN, Florida
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
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

                                 ______

                         STANDING SUBCOMMITTEES

                    Subcommittee on Finance and Tax

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               VERN BUCHANAN, Florida, Ranking
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana              STEVE KING, Iowa
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania

                                 ______

               Subcommittee on Contracting and Technology

                      BRUCE BRALEY, IOWA, Chairman


HENRY CUELLAR, Texas                 DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania             TODD AKIN, Missouri
                                     MARY FALLIN, Oklahoma

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

                                  (ii)














           Subcommittee on Regulations, Health Care and 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

                                 ______

            Subcommittee on Rural and Urban Entrepreneurship

                 HEATH SHULER, North Carolina, Chairman


RICK LARSEN, Washington              JEFF FORTENBERRY, Nebraska, 
MICHAEL MICHAUD, Maine               Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana              DAVID DAVIS, Tennessee
HANK JOHNSON, Georgia

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


CHARLIE GONZALEZ, Texas              MARY FALLIN, Oklahoma, Ranking
RAUL GRIJALVA, Arizona               LYNN WESTMORELAND, Georgia

                                 (iii)


























                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Chabot, Hon. Steve...............................................     2

                               WITNESSES


PANEL I:
Kuhn, Honorable Herb B., Deputy Administrator, Centers for 
  Medicare and Medicaid Services.................................     4

PANEL II:
Reimers, Ms. Mona, Director of Revenue Services of Orthopaedics 
  North East, President, Medical Group Management Association 
  Indiana Chapter, On behalf of the Medical Group Management 
  Association....................................................    19
DiAngelis, Mr. Tom, PT, President and Co-owner, Comprehensive 
  Physical Therapy Center, Inc., On Behalf of the American 
  Physical Therapy Association and its Private Practice Section..    21
Wilson, Dr. Cecil B., MD, Immediate Past Chair, Board of 
  Trustees, American Medical Association.........................    23
Dale, Dr. David C., President, American College of Physicians....    25
Mabry, Dr. Charles, MD, FACS, Board of Regents, American College 
  of Surgeons....................................................    27

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    40
Chabot, Hon. Steve...............................................    42
Altmire, Hon. Jason..............................................    43
Braley, Hon. Bruce...............................................    44
Kuhn, Honorable Herb B., Deputy Administrator, Centers for 
  Medicare and Medicaid Services.................................    46
Reimers, Ms. Mona, Director of Revenue Services of Orthopaedics 
  North East, President, Medical Group Management Association 
  Indiana Chapter, On behalf of the Medical Group Management 
  Association....................................................    57
DiAngelis, Mr. Tom, PT, President and Co-owner, Comprehensive 
  Physical Therapy Center, Inc., On Behalf of the American 
  Physical Therapy Association and its Private Practice Section..    62
Wilson, Dr. Cecil B., MD, Immediate Past Chair, Board of 
  Trustees, American Medical Association.........................    69
Dale, Dr. David C., President, American College of Physicians....    77
Mabry, Dr. Charles, MD, FACS, Board of Regents, American College 
  of Surgeons....................................................    88

Statements for the Record:
American Optometric Association..................................   102
American Academy of Family Physicians............................   104

                                  (v)












 
                   FULL COMMITTEE HEARING ON MEDICARE
                     PHYSICIAN FEE CUTS: CAN SMALL
                           PRACTICES SURVIVE?

                              ----------                              


                         Thursday, May 8, 2008

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
1539 Longworth House Office Building, Hon. Nydia Velazquez 
[chairwoman of the Committee] presiding.
    Present: Representatives Velazquez, Gonzalez, Grijalva, 
Ellsworth, Sestak, Chabot, Akin, Davis, Fallin, and Buchanan.

           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

    Chairwoman Velazquez. Good morning. I call this hearing to 
order on ``Medical Physician Fee Cuts: Can Small Practices 
Survive?'' Our health care system is facing many challenges 
today that are not only affecting patients but also medical 
providers. One of the greatest obstacles confronting small 
health care practices is the fiscal problem in the Medicare 
program.
    With the baby boomer generation entering retirement, 
Medicare spending will increase exponentially over the next ten 
years. Efforts are underway to ensure access to health care 
remains while also meeting the long-term financial issues 
facing the program.
    One of the top priorities in the upcoming months is 
addressing the scheduled cuts in physician fee payments. On 
July 1st, physician payments for Medicare services are 
scheduled to be reduced by 10.6 percent. Without option, these 
cuts will continue annually. And it is predicted that the total 
reduction will be about 41 percent by 2016.
    Practitioners have warned that cutting doctor payments will 
undermine the physician foundation of Medicare for current and 
future generations of seniors, creating unnecessary barriers to 
care for older Americans. An AMA survey found that 60 percent 
of doctors believe this year's cut alone will force them to 
limit the number of new Medicare patients they can treat.
    This hearing today will examine how any solution must 
account for small health care practices. In crafting a fix, the 
unique circumstances of small health care providers must not be 
ignored.
    It is clear that they could be the most severely affected. 
Doctors surveyed by the American College of Physicians said 
cuts will force them to postpone purchases for their practice 
and to reconsider plans to upgrade health information 
technology.
    Other providers went further, saying they will reduce their 
staff or get out of patient care altogether. Unfortunately, the 
administration has taken the position that the cuts are 
necessary, even if it could mean loss of access for our 
seniors.
    In finding a solution to this problem, CMS must be an 
active participant, which is why the Committee has invited CMS 
here today. The Committee looks forward to CMS' testimony on 
what they are doing to work with the physician community. It is 
critical they hear the concerns of medical professionals here 
today and across the country on the potential implementation of 
the cuts as well as ways to mitigate their impact.
    This includes reducing the paperwork burden and providing 
regulatory relief to help physicians reduce costs associated 
with operating a practice. With the cuts a little more than a 
month away, there are steps being taken to avoid this problem. 
The question simply becomes, how should it be done? And what 
does it mean for physicians?
    The Senate has outlined a plan that will delay the Medicare 
physician payment cuts for 18 months. I support their effort to 
address this problem in the near term, but I also believe we 
should be working to finding a more permanent fix to Medicare's 
physician fee cuts, one that reflects the cost increases 
inherent in practicing medicine and preserves access to 
coverage for seniors.
    Any fix needs to address the needs of small physician 
practices. A solution that doesn't meet this goal could mean 
that patients could face problems in accessing health care in 
the future.
    I hope that during today's hearing, our witnesses will shed 
light on the steps they believe should be taken. It is also my 
hope that the panelists will provide insight on the short, 
long-term impact the cuts could have on the provider community.
    In many ways, the physicians' community interests are 
aligned with those of the seniors that receive care. The 
Committee wishes to hear these concerns and how we can work 
together for a proper remedy.
    I look forward to today's testimony. And I thank all of the 
witnesses for their participation and now yield to Mr. Chabot 
for his opening statement.

                OPENING STATEMENT OF MR. CHABOT

    Mr. Chabot. Thank you, Madam Chair. And good morning to 
everyone. And thank you for holding this hearing on Medicare 
physician fee rates and cuts, et cetera.
    This Committee and our nation recognize that small medical 
practices are critical to the country's overall physical and 
mental health and, like all other small businesses, essential 
to our economic well-being. I would like to extend a special 
thanks to each of our witnesses who have taken the time to come 
here and who will be providing testimony here this morning.
    I especially want to welcome Dr. Charles Mabry, who is 
testifying on behalf of the American College of Surgeons. I am 
sure that we will find his testimony and all of the witnesses 
especially helpful. And I also want to especially thank Tom 
DiAngelis, who is from the greater Cincinnati area, who will 
also be testifying this morning.
    Data on medical practice size show that physicians and 
patients continue to prefer small practice settings. The small 
setting allows the physician to have control of medical 
decision-making and is most conducive to the relationship of 
trust and confidence between physician and patient.
    The practical preference of a small practice setting 
suggests that any Medicare physician fee system must be 
feasible and easily operable in a small practice setting. The 
managed care backlash is also driving the insurance industry 
toward traditional insurance principles that instruct insurers, 
like Medicare, to manage financial risk and allow providers to 
manage care.
    The insurers forays into disease management emphasize this 
change in behavior with only cautious and limited outreach to 
physicians. The current Medicare physician fee schedule is 
clearly flawed.
    Since its inception in 2002, the sustainable growth rate 
formula has required the government to reduce physician fees. 
Since 2003, Congress has passed and the President has signed 
laws that have prevented the reductions from actually taking 
place. The current system rewards the physician for seeing as 
many patients as possible and sometimes performing excessive 
services.
    An example of this practice is the use of a CAT scan 
sometimes, rather than an X-ray, for example. Several studies 
have confirmed that expensive or excessive services do not 
necessarily lead to better quality outcomes.
    As physicians, costs go up. And their Medicare 
reimbursements drop or are unrealistically low. They are 
engaged in a vicious cycle that forces them to see more and 
more patients to take in the same amount of money.
    Medicare pays its providers based on quantity without 
rewarding those providers who improve quality. In fact, 
Medicare pays more when poor care results sometimes in 
preventable services. This needs to be changed.
    Today access remains good for beneficiaries accessing 
current physicians and for those seeking new physicians. 
Continued efforts to monitor and protect Medicare beneficiary 
access are warranted. The Medicare physician fee schedule 
should be restructured to place a greater value on the quality 
of care and the efficient use of resources.
    Attention should also be given to improved health IT 
efforts. Making electronic Medicare records available to 
patients' physicians will cut down on unnecessary tests, help 
doctors provide better care, and offer economic benefits to 
taxpayers and the federal budget.
    We have an excellent panel of witnesses, as I mentioned 
before, here today. And I look forward to hearing their 
thoughts. I want to thank the Chair again for holding this 
important hearing. And I yield back the balance of my time.

    Chairwoman Velazquez. Thank you, Mr. Chabot.
    And now I welcome the honorable Herb Kuhn. Mr. Kuhn is the 
Deputy Administrator of the Centers for Medicare and Medicaid 
Services. Most recently, he served as the Director of the 
Center for Medicare Management. As CMM Director, Mr. Kuhn was 
responsible for the development of the regulations and 
reimbursement policies for Medicare, which covers 43 million 
elderly and disabled Americans.
    Welcome, sir.

  STATEMENT OF HONORABLE HERB B. KUHN, DEPUTY ADMINISTRATOR, 
           CENTERS FOR MEDICARE AND MEDICAID SERVICES

    Mr. Kuhn. Thank you, Chairwoman Velazquez, Mr. Chabot, 
distinguished members of the Committee. Thank you for inviting 
me today to discuss Medicare physician payment.
    Continued improvement in quality and access of health care 
for Medicare beneficiaries and all Americans requires the 
active participation of physicians. And in order to ensure that 
participation, Medicare needs to appropriately compensate 
physicians for the services they provide to people with 
Medicare. But how we pay also matters.
    We need a payment system that will support high-quality 
care and avoid preventable costs to the program and to society. 
Simply adding expensive payment updates to the current system 
would be extremely expensive from a financing standpoint and 
would not promote better quality or more efficient care.
    The current system has the effect of directing more 
resources to care that is not of the highest quality, such as 
duplicative tests and services or hospital readmissions. And it 
doesn't do as good a job as possible in treating those with 
chronic conditions. That is why payment reform is also so 
critical for Medicare beneficiaries, who are impacted in 
several ways. Not only are they impacted by access issues, but 
they also are threatened by rapid growth and expenditures that 
could make services unaffordable.
    Growing physician costs directly impact Medicare 
beneficiaries through increased Part B premiums, coinsurance, 
and premiums for supplemental coverage. The current Medicare 
Part B premium stands at $96.40 per month.
    As MedPAC recently noted, over the 1999 through 2002 time 
period, the Part B premium grew by an average of 5.8 percent 
per year while cost of living increases for Social Security 
benefits averaged just 2.5 percent per year.
    Since 2002, the Part B premium has increased even faster, 
by 13.5 percent in 2004, 17.4 percent in 2005, 13.2 percent in 
2006, and 5.6 percent in 2007. Right now 29 percent of an 
individual's Social Security check is applied to paying 
Medicare premiums, coinsurance, and deductibles.
    The recent Medicare Trustees Report notes that the Medicare 
Part A trust fund will be insolvent by 2019. That is 11 years 
from now. That means if you are 54 years old today, the trust 
fund will be insolvent the day you are eligible for Medicare. 
For Medicare Part B, the Trustees Report noted an annual 
spending growth rate of 9.6 percent for the past 5 years per 
year.
    This kind of course in uncertainty for Medicare 
beneficiaries and physicians is why CMS has been working with 
Congress and the physician community over the past several 
years to provide a better way to pay physicians. Our work 
centers around new concepts in the area of value-based 
purchasing with a goal of transforming CMS from its current 
role of a passive payer of services into an active purchaser of 
high-quality, efficient care.
    Nobody disputes the fact that there are problems with the 
current statutory formula for calculating annual physician 
payment updates. To date, we have seen short-term fixes instead 
of a comprehensive strategy for long-term reform. The problem 
with this approach is that it runs up the tab and makes the 
next scheduled cut even larger.
    Case in point. As people have noted already, this July the 
law requires doctors' fees to be cut by 10.6 percent. 
Physicians face another five percent cut on January 1, 2009, 
and every year thereafter for the next decade.
    We at CMS are very concerned by this tremendous uncertainty 
and what this Band-Aid approach causes in terms of physician-
level participation in the program, particularly for the small 
practice, as the Chairwoman noted.
    In order to move forward with physician payment reform, we 
have embarked on the following initiatives. First, we are 
addressing the inappropriate payment rates for certain 
individual services in the physician setting. In 2006, we 
completed the third 5-year review of physician payments. This 
resulted in a major rebalancing that provides for higher 
payments to primary care physicians.
    Second, we are looking at creating larger bundles of 
payment for care across the entire episode of care. We and 
others believe this holds real promise for higher quality, 
particularly in the area of hospital readmissions and greater 
efficiencies.
    Third, we have a shared savings demonstration that rewards 
physician practices for achieving higher-quality outcomes and 
savings. The demonstration is already showing impressive 
results. And we soon will be launching new electronic health 
record and medical home demonstrations.
    Fourth, we are looking at better ways to measure physician 
resource use with actual reports being issued to physicians on 
how they compare with similar physicians in terms of their 
resource use.
    And, then, finally, we have the physician quality reporting 
initiative up and running. Physicians are beginning to report 
on evidence-based quality measures. And the first payments 
under this system will be made to physicians this summer. The 
program is an important building block towards a value-based 
system for physicians.
    To be sure, none of the steps that I and others will be 
presenting today represent the proverbial silver bullet 
everyone is looking for to address physician payment reform. If 
this were easy, it certainly would have been done long ago.
    While many of these issues are technically complex, they 
represent the best thinking we and others have at this time. 
And, importantly, there was a growing consensus among all 
stakeholders that this was the right direction for the Medicare 
program.
    So thank you again for the opportunity to testify on 
Medicare physician payments. CMS appreciates this Committee's 
review of this issue. And we look forward to continuing to work 
with you and Congress on this very important issue.
    [The prepared statement of Deputy Administrator Kuhn may be 
found in the Appendix on page 46.]
    Chairwoman Velazquez. Thank you, Mr. Kuhn. And the Chair 
recognizes Mr. Ellsworth.
    Mr. Ellsworth. Thank you, Madam Chair. Thank you, Mr. Kuhn.
    You pretty much answered my question there when you said I 
don't have the silver bullets in my last five bullet points. 
Maybe you can address if those aren't the silver bullets that 
are going to fix this system because I agree with the 
Chairwoman and Mr. Chabot that this is something that we keep 
Band-Aiding and Band-Aiding and Band-Aiding 6 months, 18 
months. It is not long enough. And it is not going to work. And 
our doctors and physician health care system needs it fixed. 
And we keep hearing that the next president.
    And I continue to say we can't afford to keep waiting for 
the next president to do something. You know, this is going to 
be a tough debate and a lot of tough questions we have to ask 
ourselves. It is going to hurt. And it is going to take all of 
the stakeholders to talk about this.
    Some of the things I heard from a medical professional last 
week. Sixty-two percent of all medical costs occurred in the 
last two weeks alike. If that is true, I would like to know 
that. And then that sparks a debate.
    Nobody really wants to talk about this, but how do we deal 
with end-of-life issues? And are we going to change things in 
that arena? That is going to take I think generations of this 
country in how we deal with that.
    We hear a lot about tort reform. I don't think you 
mentioned that in your statement. How much of it is really 
about liability and tort reform? Is that one of the silver 
bullets that needs to be added in there?
    And then comparing apples to apples, I don't know if I have 
a question, but if you could address any of these things that--
you know, who is giving what health care when I go in a 
standard of care? And I don't know what I am really asking, but 
we have got to start comparing apples to apples here.
    I look at maybe it is a tier system. We have got to be able 
to talk out loud without getting your head chopped off for 
bringing these issues up. But, you know, the one person's 
insurance policy or health care policy is the same as the next 
person's and a standard across systems but maybe in those first 
ones about end-of-life issues, tort reform, maybe that helps.
    Mr. Kuhn. A lot of good thoughts there. And I think you are 
kind of swirling around the area where all of us have been kind 
of grappling with on these issues because if you really look at 
the current physician system, an economist would say you get 
what you pay for.
    So nobody should be surprised that we have this great 
volume in this intensity of services for physician payment 
because when you really step back and look at it, it is a 
piecework system. You know, it is a fee schedule and we pay on 
7,000 different codes in the system. And what are all the 
economic incentives in a piecework system? It is to do more.
    And then you have this SGR cap on top of that, which 
basically penalizes all physicians equally. So if you are a 
physician that is practicing in an efficient way and someone 
else is practicing inefficiently, you get hit just as hard as 
the guy who is inefficient. So it is really kind of unfair in 
that regard as to how it looks forward.
    So a lot of things that we are doing on our demonstrations 
and some of the programs that we have already started to build, 
infrastructures start to get at that. One is dealing with this 
issue in terms of cost variation around the country. Folks up 
at Dartmouth, Elliott Fisher and Dr. Winberg, have done some 
wonderful work about looking at great variations around the 
country and a lot of it about end-of-life care.
    And we see sometimes a three- or four-fold difference in 
terms of spending in different parts of the country, as you 
indicated, with no material difference in terms of the outcome 
of care.
    So one of the things we are really working with--pretty 
collaboratively with the physician community--is really to 
measure because if you really don't measure, you can't really 
improve. And so we are looking at new measurement outcomes, new 
quality measures, efficiency measures, where we can start to 
measure this and where physicians can compare themselves one to 
another to see how they are performing to see if we can get rid 
of some of this variation out there.
    So there are a lot of different swirling activities out 
there, but I think you are asking the right questions. How do 
we fundamentally begin to look at what the gaps are in care, 
address those gaps, and improve? And part of that fundamental 
foundation of what we are doing is measurement so in the future 
we can start paying for outcomes, not just pay for services.
    Mr. Ellsworth. That is all I had, Madam Chair. Thank you.
    Chairwoman Velazquez. Thank you.
    Mr. Buchanan?
    Mr. Buchanan. Thank you, Madam Chair.
    I want to compliment my colleague from Indiana. I think he 
has got it right. This is a huge, serious problem. I am in a 
district, in a country, number one, as a member of Congress, 
with the most seniors, 65 and over, 176,000 according to 
groups. We have got the baby boomers this year first turning 
62, talk to doctors, head of our medical society, Dr. Patel.
    Since 1991, they have looked at continued cuts, but, yet, 
90 to 95, 85 percent of their practice is Medicare. Their 
expenses continue to go up in terms of taxes, insurance, 
MedMEL, and all of these other things. And I know at the end of 
the year, a lot of them felt they were going to go out of 
business if they had that cut.
    So when we are talking about these additional cuts that we 
are talking about--and I think there was some thought early on 
with Medicare that it would be 20 or 30 percent of your 
practice. But in areas like Florida and my area, I am sure 
different parts of the country, it has evolved, 85-90 percent 
of the government. They are basically working for the 
government.
    So the bottom line, I just don't see. They can't attract a 
new doctor to our area. I think they have had one in a 300,000-
population county, they were telling me, one medical society. 
They can't attract new physicians to even come to the area 
because it doesn't make any sense.
    So I guess I want to get back to the whole point of what 
are we going to do or what are the answers as you see it to 
these cuts. And I think, as my colleague from Indiana says, it 
is tough to deal with this, but we have really got to be 
truthful with the American people and put all of these things 
on the table across the board because, again, the first baby 
boomers are turning 62 and you have got 78 million to follow. 
We need to get real about that and right now.
    Mr. Kuhn. Those are very good points. And I think probably 
what you see in your district, as much or more than anybody 
else because of the numbers you laid out, is the fact that for 
the Medicare program to be successful, to really serve the 
seniors in this country, we need the active participation of 
physicians.
    It is interesting. There was a GAO report that came out 
last year that said basically 80 percent of all health care 
spending is driven by physicians because they are the ones that 
order tests. They are the ones that admit patients. They are 
the ones that discharge. So we have to have active 
participation by physicians to be part of this program.
    As you well-indicated, depending on the physicians' 
specialty, their part of the Medicare payer mix could be very 
low to very high, almost 100 percent of their business. But the 
way that we guarantee active participation by physicians is to 
have predictability and stability in the payment system. And we 
have neither right now. So I can understand that uncertainty 
that your physicians are feeling and others that are out there.
    And, quite frankly, these are professionals that ought to 
be treated better by all of us as we go forward. And so what we 
can do with this program to try to manage that to get better as 
we go forward is going to be absolutely key.
    One of the things that we are really trying to deal with 
with some of our other demonstrations here is really trying to 
look more thoughtfully in terms of the overall payment system 
in the Medicare program.
    You know, right now when you look at Medicare Part B, it is 
pretty much siloed. You know, physicians spend more to try to 
care for a patient more effectively. They see their payments 
cut as a result of the SGR because spending exceeds the target.
    But, yet, because they might be managing someone with 
diabetes much more effectively, they might spend a little bit 
more to manage it more effectively, but they save that trip to 
the emergency department. They save that hospitalization. The 
overall system costs come down as a result of that.
    How do they be accounted for that? How do we reward them 
for that? And we are looking at new ways to do that. I think 
that is a good effort for the future in where we need to be 
going with this program. And I think we are getting some good 
support by the physician community to help us think those 
issues through.
    Mr. Buchanan. I had one other quick question. I know we 
have got to go vote. But one of my doctors called me in 
reaching out to the community and said a lot of these young 
physicians are coming out with hundreds of thousands of dollars 
of debt out of medical school. And then they are trying to pick 
up a practice and additional debt to set up an office. And, 
again, he said, how in the world do you expect anybody to go 
into this profession with the realities they are dealing with?
    So it is a follow-on question but somewhat maybe just what 
you covered. But I do want to--
    Mr. Kuhn. I think that is a good point and a real concern 
as well because what we really need right now in health care is 
more primary care physicians. And if they are looking at that 
kind of debt, they are probably going to choose specialties 
that are not primary care. And that is going to be a problem in 
terms of access in the future.
    So we have got to make sure our payment systems are fair, 
that they reward physicians across the board, and that we don't 
create incentives where people are abandoning primary care and 
moving into specialties, which I think could be one of the 
worst outcomes we could possibly see here.
    Mr. Buchanan. Thank you, Mr. Kuhn.
    Chairwoman Velazquez. Well, we have five votes. So the 
Committee will stand in recess. And we will resume right after 
the votes.
    [Recess.]
    Chairwoman Velazquez. The Committee is called to order. Mr. 
Kuhn, Congress is working on a physician fee fix that works for 
all health care providers. By what date does CMS need a 
Medicare bill signed into law to ensure physicians receive the 
proper payments on July 1st?
    Mr. Kuhn. In order for us to be able to work with our 
contractors to get all the programs put into place, probably 
mid-June would give us ample time and be ready to go on July 1 
for a seamless transition so there would be no interruption in 
payments.
    Chairwoman Velazquez. And can you talk to us about the 
steps CMS has taken to prepare for either a reduction or the 
possibility of a congressional change to the formula?
    Mr. Kuhn. We will certainly be working very closely with 
Congress to make sure that if there is a reduction, it is hard-
wired into the system now. And that would go forward. If there 
is a change by Congress, we would hopefully be able to 
anticipate that, again to make it as seamless a transition as 
possible. So, either way, we hope to be prepared and to 
implement the laws Congress determines for us to implement.
    Chairwoman Velazquez. The Medicare economic index is the 
government's measure of increases in physician practice costs. 
Most importantly, this index serves as CMS starting point for 
each year's physician payment update. Unfortunately, the way 
that MEI is calculated has not changed in nearly 35 years. Is 
there any reason why CMS hasn't attempted to reevaluate the MEI 
and bring it to the Twenty-First Century?
    Mr. Kuhn. That is a good question. And our Office of the 
Actuary and our head actuary, Rick Foster, has looked at the 
Medicare economic index, or the MEI, on a regular basis. And 
they believe that continues to be a good indicator for growth 
in this area at this time. If there is new information that 
they can be looking at and new information the physician 
community and others can bring forward--
    Chairwoman Velazquez. Who is that person?
    Mr. Kuhn. Rick Foster, our actuary.
    Chairwoman Velazquez. So Mr. Foster really believes that 
the way health care practices operate today is not different 
from how health care practices were operated 35 years ago?
    Mr. Kuhn. No. I don't think I would characterize it that 
way, Madam Chair. I think it is rather in terms of it is a 
reasonable proxy for determining the inflation increase.
    But I would absolutely agree with you that practices have 
changed over time. And, as a result of that, through the RBRVS 
system and through the American Medical Association's Relative 
Value Update Committee, also known as the RUC, in terms of 
trying to get the values between physician work, physician 
practice, expense, and ultimately malpractice, those are 
changed on a regular--
    Chairwoman Velazquez. Does the physician community agree 
with you on that assessment?
    Mr. Kuhn. On the MEI, perhaps maybe they do not.
    Chairwoman Velazquez. Why is that?
    Mr. Kuhn. They may think that there are other inputs that 
ought to be considered as part of the process.
    Chairwoman Velazquez. And CMS believed that there is no 
other input that should be considered.
    Mr. Kuhn. I don't believe that we have seen any evidence in 
terms of new survey information that would indicate that that 
would be changed at this time.
    Chairwoman Velazquez. So you are telling me that the way 
medicine is practiced today is not very different from how 
medicine was practiced 35 years ago and that the cost that a 
person, medical practitioner, incurs today in terms of new 
technology is not different and yet you want to link health 
care, quality health care, to new technology, IT, and so on, 
and so none of that is counted.
    Mr. Kuhn. Well, I think there are two parts to this puzzle. 
One is the MEI, which is the inflation update. The real work is 
done with the RBRVS system and the relative value updates that 
are valuated by the RUC, the Relative Value Update Committee of 
the American Medical Association. That is where the real 
activity is in terms of what payments are out there in terms of 
new technology, the work that physicians put in in terms of the 
services. Those are changed on a regular basis.
    And what we did, actually, in 2006, we did a 5-year review. 
The statute requires, of course, every 5 years to review the 
codes, to work with the AMA and other physician specialties to 
do that. Then they made a number of substantial changes to 
that. And we accepted all of those.
     So it is as accurate as we can possibly be for this time 
for the real activity for the payment schedule. In terms of the 
inflationary update, I think the factors that go into that 
continue to be consistent. But the rates that are paid are as 
accurate as they can possibly be.
    Chairwoman Velazquez. Well, I just can't buy that the 
Medicare economic index for the last 35 years has been 
unchanged. It doesn't make sense to me.
    Mr. Kuhn. If there is new information that our actuary 
ought to be looking at, we would be interested to see that.
    Chairwoman Velazquez. Mr. Kuhn, CMS has stated that 
Medicare spending on physician services is out of control, in 
part due to rapid utilization. However, the 2008 Medicare 
Trustees report indicates just the opposite. According to that 
report, the annual growth in the volume of Medicare physician 
services for 2005 and 2006 was just 3.6 percent, which is only 
about half the growth rate projected in their 2006 report.
    Is the administration's position on physician fee payments 
reflective of MedPAC's finding?
    Mr. Kuhn. What we saw between about 2002 to about 2005-
2006, is double digit increases in physician payment. And it 
has begun to level off--this last report--in terms of the 
volume of services that are out there. But it is still growing 
at rates that are much greater than other parts of the Medicare 
program and certainly growing at rates that are far higher than 
overall inflation. So it continues to be a cause of concern for 
us as well as MedPAC.
    Chairwoman Velazquez. Let me ask you again, sir. Is the 
administration's position on physician fee payments reflective 
of MedPAC's finding?
    Mr. Kuhn. Well, I guess I would need to know specifically 
what MedPAC's findings were on that. If you could restate that, 
then, please?
    Chairwoman Velazquez. I am sorry?
    Mr. Kuhn. What specifically were MedPAC's findings?
    Chairwoman Velazquez. Well, according to that report, the 
annual growth in the volume of Medicare physician services for 
2005 and 2006 was just 3.6 percent, which is only about half 
the growth rate projected in their 2006 report. So you are 
talking about, you know, this out of control. Yet, the MedPAC's 
finding doesn't reflect it.
    Mr. Kuhn. I would need to check with our actuary to see if 
the recent information in the trustee's report, the Medicare 
Trustees report, matches up with MedPAC's findings.
    Chairwoman Velazquez. So let me ask you this question. Is 
CMS winning to refine its position on the physician fee issue, 
if utilization drops?
    Mr. Kuhn. I would think that where we are right now in 
terms of trying to change the way we pay physicians is not the 
debate that is before us. I think the real issue before us is 
how we go about making those changes.
    I think everybody within organized medicine, certainly most 
in Congress, believe that it is time to have a change in the 
way we pay, to start paying for value, not volume of services. 
So even if we are seeing lower growth rates over the last 
couple of years, I don't think that should stop us or deter us 
from trying to find a better way to get better value and better 
quality in terms of our health care system.
    Chairwoman Velazquez. I don't think that anyone, no one 
here, is saying the opposite. The problem is when you say that 
we need to attract more primary doctors to serve the senior 
community that is growing and, as Mr. Buchanan pointed out to 
you, the problem is that incentives are not there for these 
people to come and serve those communities.
    And so you need to take into account the new economic 
reality of the new physicians and the type of incentives that 
you are providing to attract those physicians to enroll into 
the Medicare CMS services.
    Mr. Kuhn. I would agree with your statement there that we 
do need to make sure that this program, this particular 
physician fee schedule, continues to evolve. And I think it has 
over the last several years as we move forward.
    And particularly on the issue of primary care physicians, 
again, in 2006, when we did the 5-year review, the RUC came 
forward with extraordinary recommendations in order to change 
values for what we call E/M codes, evaluation of management 
codes, which are primarily the codes used by primary care 
physicians. It is the time that physicians spend with patients, 
mostly in primary care.
    Many of those codes went up 20-30 percent. We accepted all 
of those. And so we are working hand-in-glove with the 
physician community to try to make those changes and make them 
as accurately as we possibly can.
    Chairwoman Velazquez. Okay. I have another question, and I 
will come back on a second round.
    Mr. Kuhn. Thank you.
    Chairwoman Velazquez. Mr. Chabot?
    Mr. Chabot. Thank you, Madam Chair.
    I guess on behalf of the Committee, we want to I guess 
express our sympathies for both the witnesses and the audience 
for having to wait so long in between when we started and 
taking this up again.
    Obviously it was out of our control. We had votes on the 
floor. It is very common to get interrupted in Committee 
meetings with votes on the floor. Typically it is 45 minutes, 
maybe an hour, unfortunately. Two hours is what you all had to 
wait. The Chair and I obviously have no control over that, but 
I know how that can wreak havoc in your schedules for today and 
how long you think you might have to be here and that sort of 
thing. So our sympathies for you having to put up with that 
inconvenience.
    Speaking of convenience, Mr. Kuhn, relative to Congress and 
the way we have dealt with a reimbursement issue and the cost 
for reimbursing physicians over the year with respect to 
Medicare, how inconvenient is it and how detrimental to doctors 
and others who depend upon this and the patients as well when 
year after year we have a tendency and the cuts are out there 
reflected in either the President's budget or perhaps our 
budget but by the end of the year, the fix comes very late? And 
so people don't know what it is going to be. And for planning 
purposes and everything else, I am sure that there is some 
negative impact.
    Could you discuss that and what kind of problem that is?
    Mr. Kuhn. Sure. You are absolutely right, Congressman, that 
it probably is very disruptive for physicians because if they 
want to make plans in terms of their practice, whether it is to 
buy a new piece of equipment or invest in, say, an electronic 
health record or something like that, the fact that they don't 
have predictability and stability in their payment system to 
know how they would amortize that out over the years in the 
future does create real disruption that is out there.
    Also, I think it is disruptive in terms of Medicare 
beneficiaries to know whether a physician might take someone 
who now becomes age 65 and want to take on additional Medicare 
beneficiaries as patients or whether a physician may want to 
participate in the Medicare program that is out there.
    So I think for any business person in this country, 
regardless whether it is health care or anything else, they 
need predictability and stability. And under the current 
physician fee schedule and the payment system we have now, they 
are not getting that.
    Mr. Chabot. Right. And we have, unfortunately, seen that 
that, the fact that this delay that is in the system, occurs 
year after year. Whether it was in Republican control or 
Democratic control now, it seems to be not really a political 
thing. It is just the way it works up here in Congress or 
doesn't work. And I think, really, Congress needs to get its 
act together. So people can depend upon things to come and be 
able to plan in advance.
    What can we do about rewarding efficiency and, therefore, 
encouraging more of it?
    Mr. Kuhn. One of the best ways that we have really looked 
at is that we really need to measure in this area. And we 
really need to get this set of quality measures as well as 
resource use measures so that we can really kind of look at 
efficiency.
    If you look at the Medicare payment system now, at least 
for physicians, we pay on volume. We don't pay for value. And 
we don't really know what kind of outcomes that we are getting 
as a result of that. And that is why we see this great 
variation in terms of care across the country and in a lot of 
cases great inefficiency in the system that is out there.
    So I think one area is the development of measures. And the 
physician community, I think particularly led by the American 
Medical Association's consortium, is doing a very good job of 
developing new quality measures, thinking about efficiency 
measures as we go forward. But it is more than just measuring 
it. It is really, then, do you attach payment to it to really 
kind of drive the incentive as we go forward?
    I think that is the next hill we all have to cross, but I 
think we are doing a very good job of building the 
infrastructure to get the measures in place. The next question 
is, then, how do we deploy those measures? And, ultimately, do 
we make those publicly available? Because that is part of the 
accountability as well as transparency is part of this, too.
    Mr. Chabot. Thank you.
    What was the participation rate in the physician quality 
reporting initiative in 2007? And what percentage of 
participation was from office-based small practices; in other 
words, six physicians or less?
    Mr. Kuhn. That is a good question. Under PQRI, which began 
in July of '07, our current indication is about 16 to 17 
percent of physicians participated in that first 6-month launch 
of the program. Some people have looked at that and said, 
``Boy, that is not a very high number,'' but a couple of 
observations about that are worth noting.
    One is, when it was authorized, it was only authorized for 
6 months. So if you are a physician and you are trying to 
decide whether to train staff how to operate in this new 
program or to make the investment, if it is only for 6 months, 
you might want to think twice about that. So I think 16 percent 
with that level of uncertainty was pretty good.
    The second thing is physicians, when it comes to these 
kinds of programs, sometimes are slow adopters to the program. 
We have the participating physician program. A physician would 
be either participating or nonparticipating in the Medicare 
program. And that has a differentiation in payment.
    When that first started, physician participation was about 
25 percent. And then over the next decade, it grew to about 95 
percent. So I think the early start of this program looks good.
    In terms of the breakdown of the smaller physician offices, 
I don't know if we have that number broken down that way. We 
have it more by specialties, whether it was ophthalmologist or 
others, but in terms of practice size, anecdotally the 
information I hear from our medical officers in CMS is that it 
looked like physicians across the spectrum, both small and 
large, participated.
    And that seems to make sense because when you look at 
physician practices overall, about 50 percent are physicians in 
practices of 2 or 3 or less. So I think we would have had good 
representation by smaller offices as a result.
    Mr. Chabot. Thank you.
    Madam Chair, I yield back.
    Chairwoman Velazquez. Mr. Gonzalez?
    Mr. Gonzalez. Thank you very much, Madam Chair. And 
welcome, Mr. Kuhn.
    First of all, thank you for your candid responses. Many 
times we will get witnesses, of course, and you are the 
messengers generally. And you know what we do to messengers. 
And so sometimes they are very careful in their responses.
    And even with Secretary Leavitt in another committee 
hearing with Energy and Commerce, I just could not get him to 
answer whether he thought the SGR was the way to go. And I even 
had that transcribed so I could read it to all of my physician 
groups back home. He gave me a very Alan Greenspan answer. And 
Alan Greenspan is infamous for actually remarking to a senator, 
``If you understood me, I must have misspoken.''
    [Laughter.]
    Mr. Gonzalez. But that is really what we have been 
receiving. And I know it is the tail end of the administration 
and Secretary Leavitt's tenure and such.
    Does anyone over in CMS or HHS believe that the SGR is an 
accurate means or manner in which to base reimbursement to 
physicians?
    Mr. Kuhn. I think that the consensus would be that it is a 
pretty blunt instrument and that it is time to move on to find 
a better way to pay physicians.
    Mr. Gonzalez. Okay. And as we speak, do you see that effort 
being undertaken, either by people over at HHS, CMS? I know we 
are trying to do certain things in Congress. I know Dr. Bird 
just has his bill out there.
    What do we have as we speak in a serious ongoing effort to 
find something in the way of a substitute?
    Mr. Kuhn. I think the real good news here is that over the 
last 2 or 3 years, there have been some great collaborations 
between CMS, the physician community, and I think Congress to a 
large extent, to really find a better way to pay physicians, to 
really think about paying for outcomes, to pay for quality, pay 
for better safety of care, instead of the volume of care that 
is out there right now.
    So in that regard, we have got some wonderful 
demonstrations underway that are showing some great promise. It 
is a chance for us to prove a concept through a demonstration. 
I think there is a lot of good work in terms of collaboration 
between us and the AMA Physician Consortium for development of 
measures so we can actually measure what is going on out there. 
It is working very well.
    And then, finally, some real good work with this PQRI 
program that Mr. Chabot mentioned in terms of really building 
the base to find a way for us to get that information from 
physicians so we can measure and know what the quality 
information is out there.
    So some good start. Do I wish we were further along than we 
are now? Absolutely. But I think we have got a pretty good 
stake in the ground to get us going.
    Mr. Gonzalez. And as we come into a new administration, we 
are hoping that we are going to be much more aggressive. And I 
do believe it really is imperative that Congress leads the way. 
I really believe that, regardless of who wins the election, who 
is going to be there. And hopefully we will have people that 
are going to be sensitive to it and such.
    I am going to read from the memorandum prepared by staff, 
``The law specifies a formula for the annual update to the 
physicians' fee schedule. Part of the update is based on 
whether spending in a prior year has exceeded or fallen below a 
spending target. It is calculated using the sustainable growth 
rate, SGR, a cumulative one for Medicare spending growth over 
time. If spending is in excess of the target, the update for a 
future year is reduced. The goal is to bring spending back in 
line.''
    I think that is the fundamental principle of the SGR. It is 
not reality-based. Whether it is Congress, whether it is the 
President, or whatever, we figure what we want to spend in a 
particular year. And then we make things fix.
    If we say we are only going to have $10 to reimburse 
physicians, even though the cost of providing the service is 
$15, we are still going to do $10. And we may torture different 
numbers and formulas, but I think that is why we are all in 
agreement.
    So then we come over to your testimony. And it says, ``But 
in every year since 2002, Congress has overridden the statutory 
cost growth control, the sustainable growth rate. The problem 
with this recent approach is that it runs up a tab that makes 
the next schedule cut even larger. And, you know, we have been 
addicted to that kind of behavior. And it is really bad. It is 
stopgap.
    But I guess the message really to CMS, to the physician 
community, and to Congress that, indeed, it is broken. It is 
not working. I have never had anyone really say that the SGR is 
the way to go.
    Now, Secretary Leavitt may have danced around it, but I 
think in the final analysis, he was talking about pay for 
performance and how we do that. We have heard from the 
governors of the States of Minnesota and Pennsylvania regarding 
their universal health coverage and how they pay for 
performance. But then that opens up another can of worms.
    So I hope before we go there, I am going to leave you with 
one last thought that I hope that you are very cognizant of and 
I think that you are. Everyone in the audience is. Whatever CMS 
says something is worth, that is adopted in the private sector. 
So everything that government does, then that basis is the 
predicate for what an insurance company is going to reimburse a 
physician.
    So if we have got problems with Medicare, can you imagine 
the spillover? And so now that is cumulative, but it presents 
great challenges. We want to work with you, but we want 
absolutely straight answers.
    If we are going to make this thing, it is going to be 
tortured logic to make it fit a budget, then we need to be 
saying that. And that is never going to work. I think that is 
going to be the biggest obstacle and challenge for all of us.
    Again, I appreciate what you do and, again, your candid 
remarks today. And I yield back, Madam Chair.
    Chairwoman Velazquez. Do you want to respond?
    Mr. Kuhn. Thank you, Madam Chair. Absolutely. I would just 
say that all of your points--I don't think I would necessarily 
disagree with many of your observations you made, Congressman. 
And, you know, if you really think about the Medicare program 
and the evolution it goes through, when it started in 1965 and 
then we paid physicians on this thing called customary 
prevailing and reasonable charges that were out there, after 
about a decade and a half, everybody realized that was very 
inflationary and very problematic.
    And so then came the RBRVS system, the current payment 
system that we have. That has been in place now 15, almost 20 
years. And I think it is time to change to something else. And 
the change that we are all talking about here is value-based 
purchasing and how we move in that direction.
    The good news continues to be that the collaboration 
between us and the physician community and the Congress and 
other stakeholders on this is there. And it is working, but it 
is slow work because you want to get it right as we go forward.
    But you are right. It needs to be done. It is work worth 
doing. But I think, above all else, I'll just leave you with 
this point, that in terms of getting answers from us at CMS, as 
we move forward in this direction, I think we have to have some 
guiding principles that drive us forward.
    One, I think we have to have investigative integrity in all 
that we do in driving forward on this change. I think second, 
and utmost, is that we have to have transparency in all that we 
do, not only with you all up here but with the physician 
communities and others, because this kind of change, I don't 
think you can order this kind of change on physicians and 
others. I think it has to be they have to believe in it, they 
have to help us develop it, and have to be incentivized to 
drive it forward. That is where I think that we will get the 
success as we go forward.
    Mr. Gonzalez. Thank you very much.
    Chairwoman Velazquez. Mr. Grijalva?
    Mr. Grijalva. Thank you very much, Madam Chair.
    And I want to say that the comments that my colleagues have 
made to you, sir, are very important comments. And we are 
talking about change. I really appreciated the last statement 
you made that as we go through this very laborious and 
difficult process, that there have to be guiding principles and 
practices. And I couldn't agree more about the transparency and 
the buy-in factor from the physician community.
    I represent a district in which I have under-served 
communities in the urban part, and I have big patches of rural 
communities that primarily rely on small practices for their 
health delivery system and for their Medicare services. And it 
is that access, particularly primary care for the elderly, that 
is getting more and more difficult in the rural areas of my 
district.
    I wanted to ask you a question. One of the things that I 
hear from those physicians in those small practices is the 
issue of--I want to say duplicity, but I don't think it is--
with Medicare Advantage, that there is no uniformity to the 
identification card. And what CMS has suggested to these 
physician practices is: why don't you call in to make that 
verification?
    It is disruptive to the practice. It is disruptive to the 
quality time that you need to spend with your patient. And my 
question to you would be; would CMS oppose congressional 
intervention, for lack of a better word, to require one 
standard of MA card for patient ID cards?
    Mr. Kuhn. We have, my understanding through our marketing 
guidelines, some pretty good standardization right now in terms 
of ID cards that are supposed to be provided to Medicare 
beneficiaries. Furthermore, the terms and conditions and other 
aspects of the Medicare Advantage product need to be posted 
publicly on Web sites for easy access by everyone.
    But I would like to go back and spend some more time with 
staff understanding the actual standardizations we have now and 
further needs that your constituents are talking about that. So 
I would kind of defer a final answer on that until I have some 
more information.
    Mr. Grijalva. That is fine.
    Mr. Kuhn. But it is something that we would be happy to go 
back and then come back and talk to you and your staff about.
    Mr. Grijalva. Thank you. Madam Chair, I yield back.
    Chairwoman Velazquez. Thank you.
    Mr. Kuhn, I am concerned that there is inadequate oversight 
of Medicare Advantage by the states or by CMS. One issue, in 
particular, that challenges health care providers is the ``all 
products'' clauses. These contract provisions require providers 
to accept all of a health plan's sponsor contracts. Though a 
number of states have worked to outlaw such provisions, 
Medicare Advantage plans are exempted.
    My question is, would CMS oppose congressional intervention 
to outlaw the use of all product clauses for Medicare Advantage 
products?
    Mr. Kuhn. I would think in terms of the--well, two aspects 
of that. One is, actually, this morning, we issued a new 
regulation to deal with marketing aspects of Medicare Advantage 
plans. And so many of the issues that have been raised in the 
past in terms of marketing, problems with brokers and agents, 
we think we are getting a pretty good handle on that. And we 
have got some new information out there.
    I think on the second issue that you raise here in terms of 
the deeming requirements and the operation of the MA plans, 
particularly the private fee-for-service plans, I would like to 
hear more information in terms of the problems that it is 
creating for individual providers because right now I think 
with, again, our marketing standards that we have now, with the 
terms and conditions that are posted that providers are able to 
access, I would like to know what other things that perhaps we 
could do administratively first before we turn to legislation.
    Chairwoman Velazquez. Sir, you will have an opportunity 
this afternoon because some of the witnesses that will be 
testifying will be discussing that very same issue. So, for the 
record, I would like to know if you have any staff that will 
remain in here.
    Mr. Kuhn. Of course, we will make someone available to 
participate in the rest of the hearing. Thank you for asking.
    Chairwoman Velazquez. Mr. Chabot, do you have another 
question?
    [No response.]
    Chairwoman Velazquez. Well, then the gentleman is excused. 
And I really thank you for being here this morning.
    Mr. Kuhn. Thank you all very much.
    Chairwoman Velazquez. And I will ask the second panel to 
please come forward and take your seats. Welcome, and I really 
appreciate your cooperation and understanding about the fact 
that we spent so much time this morning trying to have five to 
seven votes on the House floor. Sometimes we have members from 
both sides acting out.
    [Laughter.]
    Chairwoman Velazquez. And the whole thing--
    Mr. Chabot. Yes, more one side than the other.
    Chairwoman Velazquez. Yes, to my left. To my left.
    [Laughter.]
    Chairwoman Velazquez. Anyway, I know that some people are 
trying to take some flights later on this afternoon. So our 
first witness is Ms. Mona Reimers. Ms. Reimers is the Director 
of Revenue Services for Orthopaedics North East practice 
located in Fort Wayne, Indiana. She is President of the Indiana 
Medical Group Management Association and a member of the 
Medical Group Management Association. MGMA has more than 20,000 
members, who manage more than 13,500 organizations, in which 
almost 270,000 physicians practice.
    You are welcome. And you have five minutes to make your 
presentation.

STATEMENT OF MS. MONA REIMERS, DIRECTOR OF REVENUE SERVICES OF 
 ORTHOPAEDICS NORTH EAST, PRESIDENT, MEDICAL GROUP MANAGEMENT 
  ASSOCIATION INDIANA CHAPTER ON BEHALF OF THE MEDICAL GROUP 
                     MANAGEMENT ASSOCIATION

    Ms. Reimers. Madam Chair and members of the Committee, my 
name is Mona Reimers. And I am a practice administrator of a 
26-physician orthopaedic practice in Fort Wayne, Indiana. Our 
practice has 12 locations, which serves patients in 30 counties 
from 3 states.
    Medicare regulations significantly impact physician 
practices. And, as the President of the Indiana Medical Group 
Management Association, I wanted to express my concerns on 
behalf of my national association. Thank you for having me here 
today.
    I echo the concerns of my fellow panel members regarding 
the flawed sustainable growth rate formula. Stopping the 10.6 
percent physician payment cut scheduled to occur on July 1st 
should be a congressional priority. Our physicians are 
committed to our Medicare patients. We currently accept new 
Medicare patients; however, we are considering significantly 
trimming back our acceptance of Medicare Advantage patients.
    If the 10.6 percent cut were to take effect, we would be 
forced to consider another operational change, such as reducing 
the number of traditional Medicare patients we accept. Some of 
the practices in Indiana are already managing the demand of 
Medicare patients in their offices by keeping only a few 
appointments per day available to Medicare patients. Therefore, 
these double digit cuts clearly threaten high-quality care to 
Medicare beneficiaries.
    My local experience is reflected in recent MGMA national 
research for more than 1,100 group practices, representing 
nearly 29,000 physician respondents. As a result of the six-
month financial uncertainty, nearly 24 percent of practices 
have begun limiting new Medicare patients. And nearly 50 
percent indicated that an additional 10.6 percent cut will 
force them to stop accepting and/or limiting the number of 
Medicare beneficiaries their practices treat.
    MGMA research also showed that more than half of responding 
practices are reducing administrative and clinical staff. Two-
thirds described how information technology and clinical 
equipment investments are also sacrificed or postponed 
indefinitely. However, Medicare's challenges are not solely 
caused by the annual SGR struggle.
    For the past two and a half years, we have encountered 
continued and growing frustration associated with the Medicare 
Advantage program. In 2005, Medicare Advantage was 3.6 percent 
of my practice's Medicare charges and has grown to 24 percent 
in 2007. Our Medicare Advantage patients share our practice's 
frustrations. They don't know the rules.
    Practices like mine are bogged down trying to help patients 
understand their plans and navigate the many administrative 
complexities. My practice has been forced to hire two full-time 
staff just to deal with the avalanche of beneficiary questions 
and additional paperwork associated with Medicare Advantage, 
and even that is not enough.
    MGMA has fielded countless practice inquiries and concerns 
regarding Medicare Advantage and has, therefore, developed four 
simple requests that if enacted would greatly improve the 
operational aspects associated with Medicare Advantage as well 
as improve provider and patient understanding about the 
program.
    In recent MGMA research, over 56 percent of respondents 
said they could not accurately identify Medicare Advantage 
patients, with 90 percent of respondents indicating that 
patient insurance cards provided ineffective identification.
    Because patients do not know what coverage they have, I 
have had to direct my staff to contact Medicare or the Medicare 
Advantage plan each time the Medicare patient walks through the 
door. This administrative burden could be avoided with the 
standardization of Medicare Advantage ID cards.
    If standardized cards were issued, we could quickly 
identify the type of Medicare Advantage plan the patient is 
enrolled in and we could then know precisely where to bill the 
claim and what contact information to use for further follow-up 
information. These ID cards should be required to contain a 
toll-free number meant for providers to be able to get answers 
to questions and quickly check eligibility and/or claim status, 
just like traditional Medicare.
    Our second request is the elimination of deeming in 
Medicare Advantage. Doing so would allow practices a fair 
opportunity to review, negotiate, and understand contracts with 
plans. Deeming allows a Medicare Advantage plan to consider a 
physician as accepting their contract if the patient presents a 
Medicare Advantage card prior to service.
    Often we are essentially forced to sign the last page of a 
contract without knowing what the rest of the lengthy and non-
negotiable contract says. For example, every day we treat 
arthritic patients who are driven to their appointments by 
family members that took time off work.
    They present one of 100 nonstandardized identification 
cards upon arrival at the front desk. At that moment, we must 
decide whether we will treat this patient. It is cruel to delay 
or deny treatment because it is just impractical to review a 
contract while a patient is awaiting services. Yet, being 
denied the opportunity to review and negotiate the terms and 
conditions prior to rendering services is completely contrary 
to fair contracting principles.
    Our third request is the elimination of ``all products'' 
clauses in plan contracts. Most states already outlaw these 
clauses, in order to protect physician practices from accepting 
all patients in all variations of insurance products offered by 
a given insurer. For any contract to be binding, there must be 
a quid pro quo, meaning both parties have received something 
from the other. But this does not exist for Medicare Advantage 
plans and the physician if contracting by default occurs.
    Some states, like Indiana, have addressed this practice. 
The Medicare Advantage plans are exempt from these state laws. 
We urge Congress to prohibit the use of ``all products'' 
clauses in the Medicare Advantage program.
    Our final recommendation is that Congress apply and enforce 
the same timely payment provisions to all Medicare Advantage 
products that exist for traditional Medicare. Traditional 
Medicare does a great job paying promptly and accurately. But 
my office's accounts receivable for Medicare patients is 50 
percent higher than it was in 2005. This is primarily due to 
Medicare Advantage.
    We currently spend triple the workforce to collect what is 
due for Medicare Advantage payers than what we use to collect 
from traditional Medicare. In following up on unpaid claims 
with traditional insurance payers, we have avenues available to 
us such as the Department of Insurance and federal agencies for 
ERISA plans.
    With Medicare Advantage, there is no comparable resource. 
Our Region V office from CMS has heard plenty from us and has 
offered some help, but it has been ineffective in causing any 
root change to the behavior of the payers. Applying the 
traditional Medicare prompt payment law to Medicare Advantage 
plans would be both logical and fair. Addressing our 
recommendations would greatly improve the medical community's 
perception of and willingness to participate with Medicare 
Advantage plans; therefore, strengthening the program overall 
for beneficiaries as well.
    Thank you for this opportunity and I am happy to address 
your questions if you have any.
    [The prepared statement of Ms. Reimers may be found in the 
Appendix on page 57.]

    Chairwoman Velazquez. Thank you, Ms. Reimers.
    And now the Chair recognizes Mr. Chabot for the purpose of 
introducing our next witness.
    Mr. Chabot. Thank you very much, Madam Chair.
    I would like to introduce Tom DiAngelis, who is a fellow 
Buckeye. And not only is he that, but he is a fellow 
Cincinnatian. Although he doesn't live in my congressional 
district, he lives in Loveland, Ohio, which is actually in Jean 
Schmidt's district, he is close.
    Tom graduated with honors from Northeastern University in 
Boston, Massachusetts. He is President and co-owner of 
Comprehensive Physical Therapy Center, Inc., which is an 
outpatient physical therapy provider located in suburban 
Cincinnati.
    Tom also is currently Vice President of the American 
Physical Therapy Association, Private Practice Section. Tom has 
served as the Reimbursement Chairperson for the Ohio Chapter of 
the American Physical Therapy Association. He is a member of 
the Physical Therapy Advisory Committee to United Healthcare. 
And he is a representative for the American Physical Therapy 
Association before payment policy organizations and committees. 
And we welcome them here this morning.
    Thank you.

  STATEMENT OF MR. TOM DiANGELIS, PT, PRESIDENT AND CO-OWNER, 
 COMPREHENSIVE PHYSICAL THERAPY CENTER, INC. ON BEHALF OF THE 
AMERICAN PHYSICAL THERAPY ASSOCIATION AND ITS PRIVATE PRACTICE 
                            SECTION

    Mr. DiAngelis.Chairwoman Velazquez, Ranking Member Chabot, 
and members of the House Committee on Small Business, thank you 
for the opportunity to address the House Committee on Small 
Business and provide a small business owner and clinician's 
perspective on the pending cuts to payments under the Medicare 
physician fee schedule.
    I am Tom DiAngelis, a practicing physical therapist and co-
owner of a small physical therapist practice in the greater 
Cincinnati, Ohio area. We currently employ 24 individuals in 3 
clinics and serve approximately 180 patients per week with 
musculoskeletal impairments. Our goal is to return these 
individuals to the highest level of function and productivity 
in their homes and in their communities.
    Thriving in this payment environment is a challenge for 
small businesses in physical therapy. The physical therapist 
small business climate in Cincinnati has seen this firsthand. 
In the past 3 years, 14 clinics have closed their office doors 
due to the negative pressure on payment. My partner and I have 
personally reduced our salaries, eliminated our advertising 
budget, and seen significant increases in administrative and 
operating costs.
    Today I represent the American Physical Therapy Association 
and their Private Practice Section, which advances small 
business ownership among physical therapists. If Congress does 
not act by July 1st, 2008, payments under the Medicare 
physician fee schedule will be cut by 10.6 percent. This would 
begin a series of payment reductions under the fee schedule, 
leading to an overall reduction in payment to health care 
providers of 40 percent by 2016.
    APTA supports efforts to avoid the 10.6 percent cut in 
payments under the Medicare physician fee schedule and to 
replace the flawed sustainable growth rate formula with a more 
accurate indicator of health care inflation.
    Payment cuts under the Medicare physician fee schedule will 
have significant ramifications on the ability of physical 
therapists to serve individuals who have suffered from stroke, 
had joint replacements, or chronic diseases that impair their 
ability to move, walk, and perform their daily tasks.
    Physical therapy continues to be a critical need for 
Medicare beneficiaries. A recent Center for Medicare and 
Medicaid Services study indicated that 8.5 percent of Medicare 
beneficiaries utilize outpatient physical therapy services, 
resulting in 3.9 million patients in 2006.
    The demand for high-quality rehabilitation services by 
physical therapists will only increase as baby boomers age and 
people seek the services of physical therapists to keep active 
and productive.
    The impact of the pending cuts on physical therapists' 
small businesses can be summarized by three points. First, 
beginning July 1st, in addition to a 10.6 percent reduction in 
payment, physical therapists will also be subject to a $1,810 
per beneficiary per year therapy cap on outpatient services. 
This would limit patient access to needed physical therapy by 
not considering the patient's condition, the diagnosis, or 
other contributing factors. This represents, in essence, a cut 
upon a cut and would make the viability of physical therapists' 
small business a significant challenge.
    APTA recommends the passage of the Medicare Access to 
Rehabilitation Services Act, H.R. 748, legislation to repeal 
the therapy caps. Second, physical therapists in private 
practice have significant limitations on how patients may 
access their services and marketplace.
    Currently Medicare requires that the patient be under the 
care of a physician as a prerequisite for payment of therapy 
services. If the payment cuts go into effect and physicians 
stop taking Medicare patients, then access to physical therapy 
services will be impacted as a ripple effect.
    APTA advocates for the passage of the Medicare Patient 
Access to Physical Therapists Act, H.R. 1552, as a strategy to 
improve patient access to physical therapists.
    As physician practices struggle with the payment cut, the 
incentive to develop additional sources of revenue increases. 
This puts physical therapist small businesses at a competitive 
disadvantage since patients cannot directly choose their 
physical therapy provider and are often directed to clinics in 
which referral sources have financial interests. APTA advocates 
for stronger self-referral provisions in federal law to ensure 
the integrity of the health care delivery services.
    Third, physical therapists and small businesses are subject 
to burdensome administrative and regulatory requirements that 
add to the cost of providing health care. These administrative 
burdens complicate physical therapists' practice, direct the 
physical therapists away from patient care, and make it 
difficult to sustain physical therapists' small business over 
the long term.
    The compounding effect of payment cuts under the Medicare 
physician fee schedule along with limitations on patient 
access, a competitive marketplace, and regulatory burdens makes 
it difficult to sustain physical therapy small businesses. 
Congress must move beyond the issue of temporary payment 
reprieves and look at the health of the Medicare physician fee 
schedule for the long term. The health care delivery system 
needs physical therapist small businesses to meet patients' 
rehabilitation needs.
    In closing, I and the American Physical Therapy Association 
and their Private Practice Section want to thank the House 
Committee on Small Business and its leadership for holding this 
hearing. Thank you.
    [The prepared statement of Mr. DiAngelis may be found in 
the Appendix on page 62.]

    Chairwoman Velazquez. Thank you, Mr. DiAngelis.
    And it is my pleasure to introduce our next witness, Dr. 
Cecil B. Wilson. Dr. Wilson is the immediate past Chair of the 
Board of Trustees for the American Medical Association and has 
been on the Board of Delegates since 1992. The AMA is the 
largest medical association in the United States. Dr. Wilson 
has been in the private practice of internal medicine in 
central Florida for 30 years.
    Welcome.

 STATEMENT OF DR. CECIL B. WILSON, M.D., IMMEDIATE PAST CHAIR, 
        BOARD OF TRUSTEES, AMERICAN MEDICAL ASSOCIATION

    Dr. Wilson. Thank you, Madam Chairwoman.
    My name is Cecil Wilson. I am the immediate past Chair of 
the Board of the American Medical Association Board of 
Trustees. I am also an internist in practice.
    The AMA would like to thank the Chairwoman Velazquez and 
Ranking Member Chabot and the members of the Committee for your 
leadership efforts to address the fatally flawed Medicare 
physician payment formula called the sustainable growth rate, 
the SGR.
    Due to fundamental defects of the SGR, a 10.6 percent cut 
in Medicare physician payment rates is scheduled for July 1. 
And on top of that, another cut of five percent is projected 
for January 1, 2009 and even more cuts through 2016, totaling 
40 percent, during a time that physician practice costs would 
increase merely 20 percent. And that's according to the 
government's own conservative estimates.
    Since 2002, the physician community has had to work with 
Congress each year to achieve eleventh hour interventions to 
ward off steep payment cuts and preserve patients' access to 
care.
    Moreover, Congress has used a financing mechanism in the 
last two legislative interventions that has resulted in deeper 
projected cuts for each subsequent year, making each year's 
legislative fix more costly than the previous one.
    We urge the Committee and Congress to take immediate action 
to advert the July 1 physician payment cut, replace it with 18 
months of positive updates, updates that do not increase the 
size or duration of cuts that must be fixed in future years. If 
Congress allows the projected cuts to go into effect, this 
could adversely affect millions of patients, physicians, and 
individuals employed by physicians' offices, and related 
businesses across the country.
    An 18-month fix would allow time to implement a new 
physician payment system that reflects increases in medical 
practice costs. This we think is especially important as the 
baby boomers begin enrolling in 2011.
    A stable system consistent with the goals of the Medicare 
program is needed to ensure the promise of high-quality health 
care to beneficiaries. The SGR undermines the Medicare program.
    First, patient access will be impaired if projected cuts go 
into effect. The vast majority of physician practices are small 
businesses. In fact, 50 percent of physician practices have 
less than five physicians. And they account for 80 percent of 
our patient visits. Physician practices as small businesses 
cannot absorb the steep losses projected under the SGR.
    No small business could survive under a business model that 
dictates steep cuts year after year. In fact, in an AMA survey, 
60 percent of responding physicians said they would have to 
limit the number of new Medicare patients they would treat if 
this year's pay cut is not stopped.
    And the SGR will exacerbate physician shortages. We are 
predicting a shortage of 85,000 physicians by year 2020 without 
any of these cuts. And we know that physician pay cuts would 
force many practicing physicians over the age of 55 to weigh 
early retirement, exacerbating the shortage. This will impact 
all beneficiaries of Medicare.
    In addition, the SGR is incompatible with physician 
adoption of health information technology and quality 
improvement initiatives. The reason is that quality 
initiatives, which rely on the use of health information 
technology, resulting in greater utilization of physician 
services, including aggressive strategies to manage diseases, 
to increase physician visits, imaging/lab tests, and drug 
therapies.
    This can reduce more expensive hospital admissions under 
Medicare Part A, but it increases spending under the SGR 
Medicare Part B, leading to additional payment cuts for 
physicians. And the payment cuts make it impossible for 
physicians to make the significant financial investment needed 
for health information technology. So the SGR has trapped 
physicians and policy-makers in a vicious cycle.
    So the AMA asks Congress to ensure that physicians also are 
treated like hospitals and other providers, whose payment 
updates keep pace with inflation. And we again urge Congress to 
take immediate action to avert the July 1 cut, replace it with 
18 months of positive physician payment updates, updates that 
reflect increases in medical practice costs. This will allow 
time to repeal the SGR.
    Thank you again for the opportunity to be here today.
    [The prepared statement of Dr. Wilson may be found in the 
Appendix on page 69.]

    Chairwoman Velazquez. Thank you, Dr. Wilson.
    Our next witness is Dr. David C. Dale. Dr. Dale is 
President of the American College of Physicians. He became a 
fellow at ACP in 1976 and was elected to the Board of Regents 
in 2001.
    ACP is the largest medical specialty organization and the 
second largest physician group in the United States. Members 
include 124,000 internal medicine physicians, related 
subspecialists, and students.
    Welcome.

 STATEMENT OF DR. DAVID DALE, M.D., FACP, PRESIDENT, AMERICAN 
                     COLLEGE OF PHYSICIANS

    Dr. Dale. Thank you. Thank you, Chairwoman Velazquez and 
Ranking Member Chabot, for allowing me to share my thoughts on 
this subject with you today.
    I am David Dale, President of the American College of 
Physicians, the ACP. And I am an internist, professor of 
medicine, and former dean of the School of Medicine in Seattle. 
Our school focuses on training primary care physicians for the 
Northwest, for Alaska, Montana, Idaho, Washington, and Wyoming.
    ACP is the largest medical specialty society, as mentioned. 
And about 20 percent of our ACP members are in solo practice. 
And, as mentioned with the AMA statistics, nearly half of our 
members are in practices of five physicians or fewer.
    During my year as President of ACP, I have met with many of 
our members as I have traveled the country. Many of them are in 
businesses which are at a breaking point, due in large part to 
the problems with the Medicare payment system, just not keeping 
pace with practice expenses.
    In fact, I have become extremely concerned about doctors 
across the country, particularly in smaller communities, where 
the departure of a single physician because the doctor moves to 
town, retires, or dies and has no replacement creates a major 
community problem. There is simply no elasticity in the system 
other than for small town folk to drive further. And, of 
course, the whole community suffers when this occurs.
    These practices are small businesses, where much of their 
revenue is tied directly to Medicare's flawed reimbursement 
rates and formulas under the sustainable growth rate formula. 
Application of this flawed system and its scheduled payment 
reductions over the last six years has created a genuine 
problem for physicians.
    Earlier this year the ACP surveyed its members to measure 
the impact of pending Medicare payment cuts on their practices 
and on their patients. Although not designed as a scientific 
sample, almost 2,000 internists responded and provided a 
firsthand account of the effects of these cuts.
    Thirty percent of our survey respondents noted that they 
have already taken steps in their practice to anticipate the 
scheduled Medicare payment cuts in July 1, 2008 and January 
1st, 2009, such as limiting the number of new Medicare patients 
that they will accept.
    Eighty-six percent of ACP respondents reported that they 
would be forced to make changes if Congress does not avert the 
ten percent cut scheduled for July. The most commonly mentioned 
matter is to reduce the number of Medicare patients they see.
    ACP members have expressed heartfelt concern for the impact 
of these changes on their patients. A Texas internist told us 
``The practice of medicine is a calling. And, as such, my 
colleagues and I have endured far more unfair revenue cuts than 
most businesses would endure.
    ``Yet, a medical practice is also a small business. We are 
now at the point where further cuts are not survivable. Just 
like any small business, our revenue has to exceed costs in 
order to survive. Despite everything that I have done to cut 
costs, the margin of profit is now thin and the proposed 
greater than ten percent cuts will put us out of business.
    ``The only option will be to downsize the practice and stop 
seeing Medicare patients. I would hate to do this, but it will 
be the only option I have if Congress does not reverse the 
proposed cuts.''
    As an educator, I have also encountered hundreds of young 
people, our students, who are excited about the challenges and 
opportunities of becoming a patient's personal physician. 
However, when it comes to choosing a career path, very few see 
a future in primary care and being this kind of a doctor.
    The numbers are startling. In 2006, only 26 percent of 
third year internal medicine residents planned to practice 
general internal medicine, down from 54 percent only 8 years 
earlier. Only 13 percent of first year internal medicine 
residents plan to go into primary care. The percentage of 
medicine school seniors choosing general internal medicine has 
dropped from 12 percent in 1999 to 4 percent in 2004.
    ACP's survey asks if Medicare payments are an important 
factor in medical students' selection of a specialty. Sixty-
three percent responded that this issue is extremely or very 
important.
    A resident at Case Western Reserve in Cleveland commented, 
``When I entered medical school, I had always planned to become 
a general internist in primary care. Seeing the current 
deteriorating funding environment has cemented in my mind not 
to go into primary care.''
    The ACP has conducted its survey in a number of other ways. 
And a key feature is the accelerated retirement of older 
physicians with a high percentage expressing an interest in 
retiring very soon, in fact, if the payment system isn't 
changed.
    The college is very interested in the patient-centered 
medical home concept, which holds great promise for choosing 
better outcomes for patients, potentially lowering costs and 
reducing complications and avoiding hospitalization. We also 
believe it will attract new physicians to general medicine and 
family medicine, the key specialties in deficit.
    We see an urgent need to address this problem for many 
reasons. And I am pleased that this Committee is interested in 
this problem and is addressing it today.
    Thank you.
    [The prepared statement of Dr. Dale may be found in the 
Appendix on page 77.]

    Chairwoman Velazquez. Thank you, Dr. Dale.
    Our next witness is Dr. Mabry. Dr. Charles Mabry is a 
general surgeon in private practice in Pine Bluff, Arkansas. In 
addition to being a general surgeon, Dr. Mabry serves on the 
Board of Regents of the American College of Surgeons. The 
American College of Surgeons currently has over 70,000 members, 
making it the largest organization of surgeons in the world.
    Welcome.

 STATEMENT OF DR. CHARLES MABRY, M.D., FACS, BOARD OF REGENTS, 
                  AMERICAN COLLEGE OF SURGEONS

    Dr. Mabry. Thank you, Madam Chairman and Ranking Member 
Chabot. I appreciate the opportunity to be here today. And I 
will simply echo the statements of the other presenters today 
that there is no question that the SGR is broken and we are in 
dire straits.
    We are really grateful to have this opportunity to present 
before you because I am an example of a small business person. 
I am a general surgeon. I live in a town of around 60,000. 
There are seven of us in town that take the general surgery 
call.
    It is important for the members to understand that we all 
are in our own businesses. We have to hire employees. We have 
to buy from other small businesses in our community. And so 
what happens to us affects all small businesses. And, vice 
versa, what affects small businesses in our community affects 
us.
    Now, it is interesting that the American College of 
Surgeons is composed of many different surgical specialties, 
but I am going to refine and constrain my comments to general 
surgery, which is about 40 percent of our membership.
    It turns out that of the general surgeons around, 70 
percent are in private practice. So it's a high percentage that 
are small business people. And of those, around 40 percent or 
so derive their income from Medicare. So Medicare is one of our 
larger payers. And, therefore, what happens to Medicare is 
very, very important.
    The average general surgeon has in a practice of around 4 
to 5 people around 15 employees. And they have a payroll of 
around $130,000. So it is like a regular business. And part of 
our concern is that we don't know when to depend upon the next 
pay cut. We can't make our budget. We can't project our 
expenses, not knowing what is going to happen with the SGR.
    Now, the other thing that sets surgeons apart from other 
physicians to some extent is the fact that we are paid on a 
global payment scale. We are paid a 90-day global payment for 
most of our major surgical procedures. Major surgical 
procedures really have not risen much in the last five to ten 
years. We are at about a three percent growth rate. But our 
payment is a lump sum payment for everything we deliver in 90 
days.
    Now, for many different reasons, payment being one of them, 
we are running out of general surgeons. And the general 
surgeon, as you very well may know, is the surgeon that is in 
charge in your hospital, your local hospital, for emergent 
surgery and trauma surgery.
    There are only 1,000 general surgeons that come out of 
residency every year. And of those general surgeons, only 
around 300 elect to go into true general surgery. Others 
subspecialize, go into laparoscopic surgery and other things. 
So the number of general surgeons available to be emergent 
surgeons and trauma surgeons is dropping dramatically.
    When you look at the big numbers, HRSA release a study in 
October of '06. There are only 21,000 active practicing general 
surgeons in America. Now, that is a small number. And when you 
put on top of that the drop in the number of surgeons we 
project, it is really going to become critical to the local 
hospitals for trauma care and emergent care.
    As small business people, though, however, the general 
surgeon has also an effect on the local hospital. As we heard, 
if a surgeon retires and a physician retires, often times we 
can't find replacements to fill the slot. For a general 
surgeon, if he or she retires, the hospital has roughly 18 
months--if that is the only general surgeon--to replace that 
surgeon or the hospital will have to dramatically reduce its 
services or have to close. So the loss of a general surgeon has 
an impact not just on the local physician practice but also on 
the small business practices that rely upon that hospital.
    We have seen a drop in our physicians that go into private 
office-based practice of about 18 percent in the last 5 years. 
So this is not just a hypothetical thing. We are actually 
seeing this drop in general surgery today.
    Well, I have gone on a long time about this. What evidence 
do we have that this is really occurring? There are two studies 
I have included in my written comments, and I will just 
highlight those. In North Carolina, from 1995 to 2005, 47 North 
Carolina counties experienced a decline in the number of 
general surgeons. And four completely lost all general surgery 
coverage.
    I was intrigued by that. So I looked at the data from 
Arkansas. Between 1997 and 2004, 12 Arkansas counties 
experienced this same decline. We have 21 counties that have no 
general surgeon. And of the seven counties that lost general 
surgeons, two hospitals closed. And five hospitals had to 
decrease their services dramatically. So this has an impact not 
just on the surgeons but on the community itself.
    Our proposal and one of the things that we are trying to 
discuss with others, the American Osteopathic Association and 
we have an alternative proposal for the SGR, which is broken. 
Our proposal is the service category growth rate. It is a 
proposal to divide physician services into six unique service 
categories, not by surgical or medical specialties but by the 
type of practice or service: preventative and primary care; 
other evaluation management services; major procedures, which 
involves what we as surgeons do; minor procedures; imaging 
services; and then diagnostic tests.
    We feel that this will allow Congress and the 
administration to better control the management of individual 
services--much like operating with a scalpel, instead of a 
broad ax. Right now, with the SGR, we just have a large ax to 
perform surgery with because one cut takes care of everyone. We 
propose having a much more refined solution.
    In conclusion, we propose that the current SGR itself needs 
to be fixed immediately. We agree with everyone here, and we 
would ask for also attention to some alternatives, such as a 
separate category growth rate.
    On behalf of the American College of Surgeons, I really 
appreciate your time and effort today. Thank you.
    [The prepared statement of Dr. Mabry may be found in the 
Appendix on page 88.]

    Chairwoman Velazquez. Thank you, Dr. Mabry.
    Dr. Wilson, if I may, I would like to direct my first 
question to you. I was deeply dissatisfied with Mr. Kuhn's 
response concerning the Medicare economic index. Clearly the 
MEI does not reflect the current practice of medicine. What do 
you believe are the problems if there is any problem with MEI? 
And what alternative assumptions do you believe the MEI should 
include?
    Dr. Wilson. Well, thank you, Madam Chair.
    We do believe that the medical economic index does provide 
an inflation measurement of the inputs that are sort of the 
market best that is there.
    Our intention is the market best components, the inputs, 
are not the same as they were back in the 1970s, that staffing 
requirements, positions are much higher. So we believe that 
other inputs need to be added to that medical economic index, 
which would more accurately reflect practice as it is.
    In essence, the amount of contention for us is the 
productivity adjustment that is put in the medical economic 
index, which suggests that if you have an inflation-adjusted 
increase, then physicians and others will compensate for that 
by doing more procedures. And so you account for that by an 
adjustment.
    We believe that that is not the case. And we also believe 
that if that is going to be a part of it, it ought to be 
applied to everyone else. At this time, that inflation 
adjustment or that adjustment is only applied to physician 
practices and physician payments.
    So we believe that a comprehensive look at the MEI to see 
if there are some other things that need to be measured, in 
essence, makes a lot of sense.
    Chairwoman Velazquez. Thank you.
    Are those contained in the MedPAC findings?
    Dr. Wilson. I will confess, Madam Chair, I do not know 
that.
    Chairwoman Velazquez. Okay. Dr. Mabry, you spoke about that 
the American College of Surgeons has been working on an 
alternative mechanism for calculating Medicare updates. Can you 
talk to us a little bit more about how it differs from some of 
the approaches currently being considered?
    Dr. Mabry. Yes, ma'am. I will do my best. You know, it is a 
very technical issue. And I really would defer to more people 
expert than me. Basically, the concept would be that we would 
divide the large spectrum of services provided into discrete 
categories of services.
    In each one of those categories, Congress and the 
administration, would have the capacity to adjust the amount of 
money that is put in that bucket to spend in that given year. 
And if the need arises, for instance, for the patient-centered 
medical home or for more primary care payments, Congress would 
have that ability to do that.
    On the other hand, if there is an over-utilization of 
services and it was the wisdom that those payments should be 
reduced, then that would allow you a much finer tool to reduce 
those payments for over-utilization. And, therefore, it would 
be more successful, we think.
    Chairwoman Velazquez. Do any of the other witnesses have 
any opinion on the proposal made by the American College of 
Surgeons? Dr. Wilson?
    Dr. Wilson. Yes. Madam Chair, actually, MedPAC did at least 
look at some options related to what they would call many SGRs 
that might be based on specialty or service, as you just heard, 
from the surgeons or maybe even based on geography.
    I guess our concern at the AMA is that having had a global 
SGR, which clearly has not worked, has not been able to 
distinguish between good growth and bad growth, as you have 
heard, really is a meat ax, where a surgical scalpel is needed, 
we would have some concerns and think that to look at, in 
essence, having many SGRs, which one might characterize this 
as, would need careful study to be sure it didn't just compound 
the problem.
    We believe that the critical thing is to move away from 
this system, which says we are going to decide ahead of the 
year how many people are going to get sick. And if more people 
get sick that year, then we are going to dock the physician's 
pay. And we believe that in terms of the payment, we ought to 
be looking at the increased cost of providing care.
    And we also need to be looking at accountability and 
quality and performance and the kinds of things that you did 
hear Mr. Kuhn talk about and that the AMA has been working with 
CMS on.
    Chairwoman Velazquez. Thank you.
    Dr. Dale?
    Dr. Dale. Yes. It is an important issue. And I think we 
would be strongly in favor of careful study of proposals like 
this. We can see some pluses and minuses to it. Really, the 
bigger problem is since the beginning of Medicare, there have 
been lots of changes.
    And, in particular, the relationship between hospitals, 
doctors, and pharmaceuticals has changed enormously. And it 
would really be much more important to study the global costs 
of health and then the partitioning of the funds to pay for it.
    Chairwoman Velazquez. Thank you.
    Ms. Reimers, the pending Medicare physician cuts could 
affect the ability of practices to make needed capital 
purchases. This is officially true in the current economic 
environment, when it is even more difficult and costly to get a 
loan.
    In your opinion, will these cuts affect ability of 
practices to purchase needed health information technology and 
medical equipment?
    Ms. Reimers. Absolutely. And I believe that it already has. 
I mean, we really haven't had a raise in the last seven years. 
So imagine working for seven years without ever a pay increase 
but only your expenses going up. And so there is absolutely no 
reason to believe that they haven't already had an effect.
    There are many people who are still struggling to try to 
find creative ways to make purchases of this kind of equipment. 
So it is happening but just not at the rate that the nation 
would like to move to have integrated health information 
systems.
    Chairwoman Velazquez. Any other member of the panel would 
like to--
    Dr. Wilson. Well--
    Mr. DiAngelis. No, go ahead.
    Dr. Wilson. Okay. Well, thank you, Madam Chairwoman.
    I would just emphasize that I am in solo practice of 
general internal medicine. And 75 percent of my practice is 
Medicare. So it is actually a challenge for me to replace 
existing equipment in the office and with this uncertainty, 
much less to consider other newer things, which have benefits 
and are very positive and I would like to have, but it is just 
out of the realm of possibilities.
    Chairwoman Velazquez. Let me ask you. Some members of 
Congress has suggested paying higher reimbursement rates for 
practicing investing in health information technology. Do you 
think that the fee structure should be used as an incentive to 
encourage information technology adoption?
    Dr. Wilson. We believe that there need to be incentives. 
You know, one of the realities is at this point only 11 percent 
of the benefits of going to health information technology 
actually accrue to the provider. The other 79 percent go to 
payers and insurance companies and managed care companies.
    So we believe that assistance will be needed. And we are 
supporting things that Congress can do in terms of tax 
deductions and credits and loans and incentives. We are also 
asking Congress to consider looking at the anti-kickback laws 
and antitrust laws that might be able to be tweaked so that 
physicians can enter into relationships with hospitals and 
insurers to help finance this change.
    Chairwoman Velazquez. Thank you. Dr.--Mr. Chabot? Dr. 
Chabot.
    Mr. Chabot. Dr. Chabot. Yes. Thank you.
    [Laughter.]
    Mr. Chabot. Great. Ms. Reimers, if I could begin with you? 
I think you mentioned that 24 percent of your patients are 
Advantage. Is that correct?
    Ms. Reimers. Twenty-four percent of our Medicare patients 
are now Medicare Advantage.
    Mr. Chabot. Okay. And is the treatment that they receive 
any different from a person that's under regular Medicare 
versus a person that might have some sort of private health 
care versus is there anybody that still pays for it out of 
their own pocket in your practice or do they all have one of 
those coverages?
    Ms. Reimers. We do have an Amish community around us who 
pays cash. And so yes, we do have self-pay patients and a few 
uninsured.
    Mr. Chabot. So the question would be, how is the care?
    Ms. Reimers. In our mind, when they get back to see the 
doctor, there is no change. There is no directive to not see a 
patient in a certain manner or care for them in any way 
differently.
    Mr. Chabot. And as a business person, do you have any 
preference amongst the four different categories that we talked 
about?
    Ms. Reimers. Well, I certainly would like to see an insured 
patient who I know the rules, rather than an insured patient 
who I don't know the rules, because this patient may have to be 
directed to a particular hospital. This patient may have to 
have certain services done before they will be approved for 
surgery. So there could be a variety of reasons why I need to 
have information prior to.
    Currently the way our practice operates, the physician 
would probably know what kind of insurance the person has. So 
that he might, for instance, say, ``Well, I see that you have 
to be done at this particular hospital. So I go there on 
Wednesdays,'' that kind of thing. But other than that, we do 
not do anything differently.
    We have a few instances, too, where we have to get prior 
permission from a patient to do services on Medicare or 
Medicare Advantage patients. They have to sign a release, very 
rare but occasional. And so we have to be cognizant of that.
    Mr. Chabot. Thank you.
    Dr. Wilson, I think you had mentioned the eleventh hour 
intervention. And going back to the question that I had asked 
in the previous panel about how disruptive is it, how 
inconvenient is it that Congress doesn't act so we don't tell 
you ahead of time what the rules are going to be, when you are 
going to get the money, how much is it going to be? How 
disruptive is that when you are practicing medicine?
    Dr. Wilson. Well, first let me thank you for the question 
you asked because it was good to hear that CMS does think there 
is a time certain that they could make those changes. It was 
chilling, though, to realize that the cuts are already locked 
in the computer. So we hope something will happen in time for 
that to be changed.
    Clearly small businesses cannot plan for the future unless 
they have some way of estimating what their income is going to 
be. So your estimate of what the income is going to be, what is 
certain is that there could be a ten percent cut, you can't 
plan for that future. You are really planning for survival.
    So to think that one can add new technology in the way of 
health information technology or other medical technology which 
comes across the way, those uncertainties for any small 
business are exaggerated in physician practices.
    Mr. Chabot. Okay. Thank you.
    Dr. Mabry, you had mentioned that you are a small business 
and so you face the small challenges that other small 
businesses do, even outside the medical profession. Is it 
accurate that also in the other challenges that you face, they 
would include things like energy costs and how they have been 
going through the roof? And so you are paying those same costs 
as well.
    In fact, even in the products that you have to purchase, 
with diesel being as high as it is right now, the inflationary 
factors in all the things, if you buy a chair for your office, 
for example, so, in other words, even, say, the federal 
inheritance death tax, when one has to plan for the future, so 
you face all of those same problems that other businesses would 
face as well. Is that correct?
    Dr. Mabry. Yes, sir. I think all the practices have to bear 
the burden and the brunt of any inflationary increases from 
their suppliers. And this goes without saying.
    Another thing that we have not talked about today but that 
is certainly a very true phenomenon is the increase in health 
insurance premiums that small businesses have to shoulder. We 
are health care providers, but we have no control over the cost 
of health insurance, which is going up, and it is harder to 
get. So that is another inflationary cost.
    And, as Dr. Wilson pointed out, it's not just small things, 
such as tongue blades. In our practice, our endoscopes that we 
use to do screening colonoscopy for colon cancer, they are 
getting old. My partner and I were trying to decide when and if 
we can buy those or not. Well, we don't know. We don't know 
what the next six months are going to hold.
    So those sorts of things are real-life examples of how it 
is becoming more and more difficult to practice medicine. It is 
hard enough to practice medicine in surgery, but now we have to 
worry about the business aspects of it. And that just adds more 
to the problem.
    Mr. Chabot. Thank you.
    And then for all of the doctors, does it continue to be a 
problem or something that you have in your mind, the potential 
of having a lawsuit filed against you and the challenges that 
one faces, sometimes frivolous suits but, nonetheless, you 
still have to defend them? Is that still an issue that 
resonates that you think should be dealt with, either at the 
state level or at the federal level? I invite any of the 
doctors.
    Dr. Wilson. Well, it is a part of the real world, and it is 
never far from the surface. It is a fair observation to say 
that a lot of those premiums that have arisen have tapered in 
the last year. They have stopped rising as fast, but they are 
at unconscionable levels. So that if you are an ob/gyn in 
Miami, Florida and paying $247,000 a year, that is a constant 
financial reminder of those challenges.
    And then I think the thing that you alluded to--and that 
is, the apprehension about taking that trip, even if you are 
acquitted, if you are sued, taking that trip, and the hassles 
of that are what drives a lot of what we call euphemistically 
defensive medicine, which we know. And, actually, I guess the 
CBO offices indicated add to another $120 billion to the cost 
of health care in this country. So we are still very concerned.
    Chairwoman Velazquez. Would the gentleman yield?
    Mr. Chabot. I would be happy to yield.
    Chairwoman Velazquez. Doctor, is insurers' consolidation an 
issue that is in your mind?
    Dr. Wilson. Absolutely and not just in terms of liability 
but particularly in terms of health insurance.
    Chairwoman Velazquez. But it is not only tort reform and 
liability issues one of the biggest issues that you have to 
confront but also the insurer consolidation? So it has to be 
coupled with insurance reform?
    Dr. Wilson. Our plate is full.
    Chairwoman Velazquez. Yielding back.
    Mr. Chabot. Okay. Thank you.
    And reclaiming my time, just one last question. Also, the 
marginal tax rates, income taxes, on everyone was reduced 
somewhat over the last few years. And capital gains taxes were 
reduced and those types of things. Those tax cuts were not 
permanent, unfortunately, because we didn't have the votes in 
the Senate to make them permanent. So they are going to go back 
up in a couple of years unless Congress does something to make 
those tax cuts permanent.
    Is that a concern to the members of the panel or do you 
want to have your taxes go up?
    [Laughter.]
    Chairwoman Velazquez. An easy one.
    Mr. Chabot. Anybody want to take? Mr. DiAngelis, since I 
hadn't talked to you?
    Mr. DiAngelis. The idea of taxes increasing I don't think 
excites anybody at the table. So it is a concern. You know, 
anything that is going to increase our expenses for the small 
physical therapist practice has the potential to be extremely 
detrimental because we are literally right now working in a 
survival mode.
    An example, Dr. Mabry just brought up that his health 
insurance goes up every year. I just got my renewal notice for 
our small company. And this year it goes up in June. And they 
are proposing a 49.5 percent increase in my premiums. I don't 
know how that is justified, but I know that it is something 
that we cannot afford.
    And so we are in a situation where we really live paycheck 
to paycheck in the small business. And so anything that is 
going to increase expenses anywhere we are not going to be able 
to make it, quite frankly.
    Chairwoman Velazquez. Okay. Thank you.
    Dr. Dale?
    Dr. Dale. I will comment because I think doctors are 
interested both in the cost and in the revenue side of 
government. I would say that doctors are good citizens. They 
pay their taxes. And they pay them as happily as anyone else. 
And I think that in terms of paying for Medicare, that we have 
been happy participants on both sides. And in talking to 
physicians, they appreciate the value of Medicare to the public 
but also to themselves.
    Mr. Chabot. Thank you very much. I thank the entire panel 
and yield back my time.
    Chairwoman Velazquez. Mr. Gonzalez?
    Mr. Gonzalez. Thank you very much, Madam Chair.
    And, again, thank you for your testimony today. And I also 
join my colleagues in expressing regrets that it has been such 
a delay. But it has just been a tough week.
    First and foremost, I think everyone agrees that the SGR 
is, in fact, broken, for whatever reason. Maybe it is not such 
a bad vehicle or manner in which to arrive, but obviously the 
elements, the factors, and everything else, maybe we're not 
getting the right information, one.
    Two, we are also working within fiscal constraints. We are 
going to make it work, whether we have the right information or 
not. And that is the scary thought.
    My question goes to your efforts of having your voices 
heard as we work through this problem. I do want to touch on--
and I am sure the Chairwoman and Ranking Member may have 
something to say--we don't know what is going to happen other 
than we are not going to let the ten percent cut go into 
effect. But is it going to be a six-month fix?
    This is an election year. You know, dump it on the new 
administration and see what happens. And every year we have 
been doing this since 2002. And, to be honest with you, in the 
final analysis, I think health care providers are just happy 
that the cuts weren't effectuated. But we still don't fix the 
underlying problem, which is never good. And we have gone over 
the consequences of that.
    You heard Mr. Kuhn say something to the effect that there 
is a collaboration with the medical community, ongoing. And 
that was his testimony. So my question all the way down the 
line because each of you represent an organization or an 
association, is your voice being heard? What form does it take? 
I am really starting to wonder.
    Whether it is the Texas Medical Association, my local 
medical society, the different specialist associations, I don't 
get the message that there is a huge collaborative going on.
    So, you know, I will start with the first witness. Is it 
Ms. Reimers?
    Ms. Reimers. I guess I will, first of all, say from an 
administrative standpoint, getting the job done, paying us when 
we send in the claim--you know, we submit a bill. They pay us. 
Traditional Medicare is doing a very good job, as opposed to a 
number of years ago where there were all kinds of 
administrative struggles and timeliness of payment was a severe 
issue.
    I do not feel that CMS has done enough to oversee Advantage 
payers' behavior after the claim is submitted. They are working 
pretty hard to try to straighten out beneficiary issues, but I 
do not feel that they have done much to support physicians.
    And, to that end, there is not, to my knowledge--and I have 
tried to ask a lot of people. There is no apparent method to 
review an unpaid claim or a claim that is not paid correctly. 
If the Advantage payer sends you a $10 check for something that 
should be $100, there is no mandated way that a deemed provider 
can make the Advantage payer review that claim and resubmit and 
possibly pay correctly. They sometimes will and sometimes 
won't.
    Mr. Gonzalez. Thank you.
    Ms. Reimers. So I would say CMS is doing a great job on 
traditional Medicare, maybe hasn't worked out the kinks on the 
Medicare Advantage.
    Mr. Gonzalez. Mr. DiAngelis?
    Mr. DiAngelis. On your specific question, if I understand 
you correctly, you know, is our voice being heard by CMS in 
this, I will defer some to our national organization, ask them 
to follow up with you since I am not on the inside day to day 
with the association.
    However, from the discussions that I have had, my 
understanding is there is dialogue there and fairly consistent 
dialogue. So I see that as a positive. However, I cannot state 
specifically how well the voice is being heard. But I will be 
happy to have somebody follow up with you on that.
    Mr. Gonzalez. Dr. Wilson?
    Dr. Wilson. Thank you, Congressman. It is a yes and no 
answer. And the first thing to do is to agree with Mr. Kuhn 
that in those areas related to quality and performance 
improvement, the whole area that the AMA has been involved with 
along with all of the specialty societies since 2000, the 
Physician Consortium for Performance Improvement, which has 
developed now in excess of 213 performance measures; that is, 
physicians deciding how physicians out to measure their work 
product, we are pleased that CMS is using, I think it is, like 
85 percent of the measures they are using and the physician 
quality reporting initiative are AMA Consortium performance 
measures.
    So we believe that is a positive. We are using real science 
the physicians have adopted. So we have been very pleased. We 
do believe that our voice is being heard.
    The other side of the coin does have to do with the issue 
we are talking about here today. And that is the SGR. We have 
felt for a long time that the administration had some options. 
And we suggested some along the way. They might have been more 
helpful in addressing the problem of the cuts. There may have 
been some wiggle room there.
    Now, their attorneys have suggested to them otherwise, but 
we believe that they have said--and I think you heard that, 
that it is at the Congress to do that. And so we don't think 
that that part of the concern has been heard well.
    Well, the other concern we have, of course, is the 
continued emphasis on volume, not always appreciating that that 
doesn't distinguish between good volume and bad volume.
    Mr. Gonzalez. Thank you.
    Dr. Dale?
    Dr. Dale. I guess I will make three brief points. One is 
the ACP has really been interested in the initiative, the 
patient-centered medical home, as a new framework for thinking 
about the organization of medical services, which, as I 
mentioned, may save costs, provide more patient satisfaction, 
and also make the field of being a generalist more attractive.
    We would like to urge Congress to enact legislation that 
would initiate a pilot testing of this idea. There is a limited 
demonstration project that has been funded but hasn't gotten 
started. I guess our basic feeling is it has been awfully slow 
in getting started.
    The other two things I would briefly mention are we have 
testified before before Congress about relative effectiveness 
of treatments and tests. And we think the government, CMS, 
should be investing more in looking at the relative value of 
things that we pay for. And, second, we have an initiative also 
to look at the cost-benefit of things we pay for. And we need 
to be both more imaginative and more critical and put more 
effort into really analyzing what we are doing.
    Mr. Gonzalez. Thank you.
    Dr. Mabry?
    Dr. Mabry. Thank you.
    I would echo what was said. The three things that I would 
like to talk about that the American College of Surgeons has 
been very engaged with and with the both the administration as 
well as the other societies has been in the search for quality. 
If you are going to give us a dollar to deliver care, then we 
owe it to you to show that we are delivering good care. And 
that is what all of us have said.
    The College has the National Surgical Quality Improvement 
Project, which actually measures surgical outcomes in 
hospitals. And that is a very important we think risk-justified 
program. And we are trying to spread that throughout the 
hospitals.
    The other is the Surgical Quality Alliance that comes up 
with new measures to measure the actual quality of surgery that 
is being delivered. Are you getting a good operation? Are your 
complication rates low? What are you doing to prevent problems? 
Those things are very important.
    I think the third thing in this, probably the most 
important as far as the dollar impact, is we would like to see 
the agency ask what I would call the tough questions. An 80-
year-old man who has pancreatic cancer, do they really need an 
aggressive chemotherapy when their life expectancy is short 
anyway? If they do need that, what sort of aggressive therapy 
do they need?
    The outcome effect of this is very critical. That is where 
we are going to tell the difference between money that is 
wasted and money that is well-invested in a patient.
    And those tough issues, those tough questions, that is what 
we need to be asking: How we are going to spend our money and 
can we spend it well?
    Mr. Gonzalez. And, real quick, just kind of a final 
thought. The Chairwoman will have these early breakfasts, like 
8:00 in the morning. And we have these roundtable discussions. 
And we have had them with, of course, health care providers. 
And it has been very interesting.
    And I think one of the most interesting aspects is that we 
have had individuals that are representative of either your 
associations, organizations at the table. And they have been 
able to identify specific individuals within the CMS who are 
very responsive.
    And I would say that you all need to start looking at that 
and saying, ``Okay. Who does listen to us?`` because this next 
administration is probably going to be looking for some 
guidance and from the different professional organizations as 
to who gets the promotion, who remains, and so on.
    We are going to have to have someone that is incredibly 
sensitive and is going to be listening to you. You have to be 
very organized, though, in your approach because bureaucracy 
has a way of just either waiting you out or wearing you out. 
And we have to fight that.
    I can assure you that we are very, very vested on the small 
business aspect. And most of the practitioners are small 
businessmen and women.
    Thank you very much.
    Chairwoman Velazquez. Mr. DiAngelis, I want to ask my last 
question to you. And maybe, Ms. Reimers, you might want to 
comment. Many health policy leaders are discussing ways to 
further integrate and promote efforts in information 
technology, quality improvement, and outcomes measurement in 
Medicare.
    What do you believe the challenges will be for small 
practices attempting to integrate this initiative into their 
practice?
    Mr. DiAngelis. I think the first challenge is any 
technological requirements that would require an investment up 
front. We would like to right now be moving towards electronic 
medical records and be able to capture some data that way, but, 
quite honestly, we just can't do that.
    The expense is too high. And with the uncertainty of where 
we are going, we are hesitant to take on any more debt load and 
move forward in that area. So I see that probably the biggest 
limitation for a practice like ours would be the up-front 
expense of what we would have to do there.
    I think that there might be some ways to capture certain 
data through billing mechanisms and things of things of that 
nature that we already do. And that is why I think getting 
everybody to the table and trying to figure out how we do that 
would be critical in sorting through that.
    Chairwoman Velazquez. Thank you.
    Ms. Reimers. I would initially say, first of all, the up-
front cost. But once you get past that, you do have with so 
many businesses involved, whether it be hospitals, doctors, 
physical therapists, audiologists--you know, the list goes on 
and on--you are going to have a great need to figure out which 
pieces of discrete data you are benchmarking and what makes 
good quality, especially with an elderly population who, by 
definition, are going to decline.

    So I would say that the process to measure is going to be a 
lengthy one. And maybe just picking certain measures, as in 
PQRI, is a good start, but I see that the definition of each 
discrete data field may have a lengthy two-page definition to 
it. So I think that defining each element you are trying to 
measure would be an issue.
    Chairwoman Velazquez. Thank you.
    Anyone else would like to comment?
    [No response.]
    Chairwoman Velazquez. Okay, Mr. Chabot. Well, again I want 
to thank all of you. You know, I participate every week with 
the Democratic leadership, regarding legislation that will be 
brought up to the floor. We will continue to monitor this issue 
as it moves from the Senate into the House. I will voice the 
concerns of the small business community when it comes to 
physician cuts formula. And we hopefully get a resolution soon, 
before the summer gets here.
    With that, I thank all of you for participating. And I ask 
unanimous consent that members will have five days to submit a 
statement and supporting materials for the record. Without 
objection, so ordered.
    This hearing is now adjourned.
    [Whereupon, at 2:05 p.m., the foregoing matter was 
concluded.]



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