[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




                       FULL COMMITTEE HEARING ON
                     THE PRESIDENT'S FY 2010 BUDGET
                         AND MEDICARE: HOW WILL
                      SMALL PROVIDERS BE IMPACTED?
=======================================================================

                                HEARING

                               before the


                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             MARCH 18, 2009

                               __________

                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


            Small Business Committee Document Number 111-011
Available via the GPO Website: http://www.access.gpo.gov/congress/house




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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman
                          DENNIS MOORE, Kansas
                      HEATH SHULER, North Carolina
                     KATHY DAHLKEMPER, Pennsylvania
                         KURT SCHRADER, Oregon
                        ANN KIRKPATRICK, Arizona
                          GLENN NYE, Virginia
                         MICHAEL MICHAUD, Maine
                         MELISSA BEAN, Illinois
                         DAN LIPINSKI, Illinois
                      JASON ALTMIRE, Pennsylvania
                        YVETTE CLARKE, New York
                        BRAD ELLSWORTH, Indiana
                        JOE SESTAK, Pennsylvania
                         BOBBY BRIGHT, Alabama
                        PARKER GRIFFITH, Alabama
                      DEBORAH HALVORSON, Illinois
                  SAM GRAVES, Missouri, Ranking Member
                      ROSCOE G. BARTLETT, Maryland
                         W. TODD AKIN, Missouri
                            STEVE KING, Iowa
                     LYNN A. WESTMORELAND, Georgia
                          LOUIE GOHMERT, Texas
                         MARY FALLIN, Oklahoma
                         VERN BUCHANAN, Florida
                      BLAINE LUETKEMEYER, Missouri
                         AARON SCHOCK, Illinois
                      GLENN THOMPSON, Pennsylvania
                         MIKE COFFMAN, Colorado
                  Michael Day, Majority Staff Director
                 Adam Minehardt, Deputy Staff Director
                      Tim Slattery, Chief Counsel
                  Karen Haas, Minority Staff Director

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

                                  (ii)








                         STANDING SUBCOMMITTEES

                                 ______

               Subcommittee on Contracting and Technology

                     GLENN NYE, Virginia, Chairman


YVETTE CLARKE, New York              AARON SCHOCK, Illinois, Ranking
BRAD ELLSWORTH, Indiana              ROSCOE BARTLETT, Maryland
KURT SCHRADER, Oregon                TODD AKIN, Missouri
DEBORAH HALVORSON, Illinois          MARY FALLIN, Oklahoma
MELISSA BEAN, Illinois               GLENN THOMPSON, Pennsylvania
JOE SESTAK, Pennsylvania
PARKER GRIFFITH, Alabama

                                 ______

                    Subcommittee on Finance and Tax

                    KURT SCHRADER, Oregon, Chairman


DENNIS MOORE, Kansas                 VERN BUCHANAN, Florida, Ranking
ANN KIRKPATRICK, Arizona             STEVE KING, Iowa
MELISSA BEAN, Illinois               TODD AKIN, Missouri
JOE SESTAK, Pennsylvania             BLAINE LUETKEMEYER, Missouri
DEBORAH HALVORSON, Illinois          MIKE COFFMAN, Colorado
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, Pennsylvania, Chairman


HEATH SHULER, North Carolina         MARY FALLIN, Oklahoma, Ranking
BRAD ELLSWORTH, Indiana              LOUIE GOHMERT, Texas
PARKER GRIFFITH, Alabama

                                 (iii)



               Subcommittee on Regulations and Healthcare

               KATHY DAHLKEMPER, Pennsylvania, Chairwoman


DAN LIPINSKI, Illinois               LYNN WESTMORELAND, Georgia, 
PARKER GRIFFITH, Alabama             Ranking
MELISSA BEAN, Illinois               STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             GLENN THOMPSON, Pennsylvania
BOBBY BRIGHT, Alabama                MIKE COFFMAN, Colorado

                                 ______

     Subcommittee on Rural Development, Entrepreneurship and Trade

                  HEATH SHULER, Pennsylvania, Chairman


MICHAEL MICHAUD, Maine               BLAINE LUETKEMEYER, Missouri, 
BOBBY BRIGHT, Alabama                Ranking
KATHY DAHLKEMPER, Pennsylvania       STEVE KING, Iowa
ANN KIRKPATRICK, Arizona             AARON SCHOCK, Illinois
YVETTE CLARKE, New York              GLENN THOMPSON, Pennsylvania

                                  (iv)









                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Graves, Hon. Sam.................................................     2

                               WITNESSES

Heyman, M.D., Joseph M., Chair, Board of Trustees, American 
  Medical Association, Amesbury, MA..............................     3
Harris, M.D., Jeffrey P., F.A.C.P., President, American College 
  Of Physicians, Millwood, VA....................................     5
Preskitt, M.D., John T., F.A.C.S., Board Of Regents, American 
  College of Surgeons, Baylor University Medical Center, Dallas, 
  TX.............................................................     7
Hannon, Edward J., President and CEO, The Mcdowell Hospital, 
  Marion, NC, on Behalf of The American Hospital Association.....     8
Moffit, Ph.D., Robert E., Director, Center for Health Policy 
  Studies, The Heritage Foundation...............................    10

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    32
Graves, Hon. Sam.................................................    34
Heyman, M.D., Joseph M., Chair, Board of Trustees, American 
  Medical Association, Amesbury, MA..............................    36
Harris, M.D., Jeffrey P., F.A.C.P., President, American College 
  Of Physicians, Millwood, VA....................................    42
Preskitt, M.D., John T., F.A.C.S., Board Of Regents, American 
  College of Surgeons, Baylor University Medical Center, Dallas, 
  TX.............................................................    53
Hannon, Edward J., President and CEO, The Mcdowell Hospital, 
  Marion, NC, on Behalf of The American Hospital Association.....    63
Moffit, Ph.D., Robert E., Director, Center for Health Policy 
  Studies, The Heritage Foundation...............................    70

                                  (v)



 
                       FULL COMMITTEE HEARING ON
                     THE PRESIDENT'S FY 2010 BUDGET
          AND MEDICARE: HOW WILL SMALL PROVIDERS BE IMPACTED?

                              ----------                              


                       Wednesday, March 18, 2009

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., in Room 
2360 Rayburn House Office Building, Hon. Nydia Velazquez 
[chairman of the Committee] presiding.
    Present: Representatives Velazquez, Shuler, Dahlkemper, 
Schrader, Kirkpatrick, Ellsworth, Sestak, Bright, Griffith, 
Halvorson, Graves, Westmoreland, Luetkemeyer, and Thompson.
    Chairwoman Velazquez. This hearing of the Small Business 
Committee is now called to order.
    In the last few years, this Committee has heard from 
countless entrepreneurs who say healthcare costs are crippling 
their businesses. For many small firms, rising premiums have 
become a barrier to growth and success. So it was not 
surprising when the President used his February speech on the 
budget to make the case for reform. As he later put it at the 
White House Healthcare forum, ``the greatest threat to our 
nation's balance sheet is the skyrocketing cost of 
healthcare.''
    As part of its budget for the coming year, the new 
Administration has made healthcare reform a top priority and 
with good reason. The current system is bankrupting businesses 
and costing our country $2.4 trillion a year. On a per capita 
basis, Americans spend 250 percent more than any other advanced 
nation. Clearly, the system is broken, and we cannot continue 
down this path.
    For decades, this country has been waiting for 
comprehensive healthcare reform. Now that it is finally 
becoming a reality, we are going to see some very real changes 
in the system, especially for small businesses. This afternoon, 
we will review many of those proposals, and hear from the 
individuals who will be handling them day in and day out. Their 
views will give us the insight we need to start determining 
next steps.
    Healthcare reform affects entrepreneurs on many levels. To 
begin, it helps ease the burden of rising insurance costs, 
which have jumped 129 percent in the last eight years. With 
premiums growing four times faster than wages, the need for 
change has never been greater.
    Small medical providers, who are the core of our healthcare 
system, will also have a critical role in reform efforts. Small 
businesses makeup nearly 70 percent of all healthcare practices 
and they recognize that the current system is simply not 
working. These are the entrepreneurs who will be implementing 
change, and they are the people spearheading the process.
    A key component of reform is an increased emphasis on 
efficiency. That includes streamlining the system and 
modernizing it through a greater use of Health IT. 
Additionally, it means cutting expenditures such as Medicare 
overpayments and hospital readmissions. As a result of these 
measures, Americans should see an estimated $316 billion in 
savings. Those savings will go a long way in ensuring that 
every American has access to quality, affordable coverage.
    The budget provides a clear outline for reform. However, 
President Obama has said he is not rigid in those plans, and 
welcomes innovative ideas from all around the country. After 
all, our healthcare system touches the lives of every single 
American. Rather than taking a one-size-fits-all approach, 
reform should account for a broad range of interests. This is 
particularly true when it comes to the unique needs of 
entrepreneurs.
    Like all other business owners, the providers here today 
are stakeholders in the movement towards greater healthcare 
coverage. They are also the men and women in the trenches, 
making sure that the system works for everyone. Their input 
will be an invaluable asset to the reform process, and I look 
forward to hearing their suggestions for next steps.
    I would like to thank today's witnesses in advance for 
their testimony. And I am glad you were able to take time out 
from running your businesses to discuss this important issue.
    With that, I would like to yield to Ranking Member Mr. 
Graves, for his opening statement.
    Mr. Graves. Thank you, Madam Chairwoman, thank you for 
holding this hearing on the changes to Medicare that are 
proposed in the President's budget. Thank you for delaying the 
hearing just slightly.
    I want to thank our witnesses for all being here. You all 
are very much experts in the area of healthcare reform and I 
know some of you have traveled a ways and I appreciate you 
being here.
    We are a nation that is certainly concerned about 
healthcare. Forty-five million Americans are with health 
insurance. For those who do have insurance, and can afford to 
pay the premiums, the costs are rising. And for small 
businesses, the problem is even more challenging: how to 
operate a small company in a worsening economy, while 
continuing to attract and retain the best employees, which 
means offering competitive salaries and benefits.
    Small businesses are committed to offering healthcare to 
their employees, but many are concerned about the proposals in 
the President's budget. The budget recommends spending $634 
billion over the next 10 years to create a reserve fund to help 
finance healthcare reform, although some estimate the cost of 
universal coverage and other reforms could actually $1.2 
trillion.
    That $634 billion reserve fund comes from several sources. 
First, it comes from raising taxes on individuals earning more 
than $200,000 a year and couples earning more than $250,000 a 
year; many of whom are small business owners, and who tend to 
return any profit back to their businesses. Second, it comes 
from cuts or changes to Medicare or Medicaid payments. But even 
the budget itself notes that the sum will be insufficient to 
accomplish healthcare reform and is a mere ``down payment.'' 
Exactly how much more will be needed, and the source of these 
additional funds is not disclosed.
    To its credit, President Obama's healthcare budget 
recognizes the significant problem with unsustainable growth 
and entitlement spending. However, the budget also includes an 
enormous expansion of costly entitlement programs. This is at a 
time when spending levels on our current entitlement programs, 
such as Medicare and Medicaid, are simply unsustainable.
    Small business issues--you know, the fact is, small 
business issues are non-partisan. We can all support 
strengthening America's small companies, which are the job 
creators of our economy. We can all support the goals of 
increasing access to affordable health insurance and increasing 
the quality of outcomes. We must also, however, ensure that 
America's small business owners have the tools they need to 
grow and lead our nation's economic recovery, and are not 
unfairly burdened with the additional taxes, mandates or 
regulations.
    Again, Madam Chair, I want to thank you for holding the 
hearing and I look forward to what the witnesses have to say 
and I appreciate you holding up just a little bit.
    Chairwoman Velazquez. Thank you, Mr. Graves. I welcome the 
first witness, Dr. Joseph Heyman. He is a Board-certified 
obstetrician/ gynecologist, practicing for over 30 years. He 
has a private practice in Amesbury, Massachusetts. Dr. Heyman 
has been a member of the American Medical Association Board of 
Trustees since 2002 and is currently serving as chair. The AMA 
represents the American medicine industry and serves as an 
advocate for the physician, the patient, and the profession.
    Welcome, sir. You have five minutes to make your statement.

              STATEMENT OF JOSEPH M. HEYMAN, M.D.

    Dr. Heyman. Thank you, Madam Chairwoman. My name is Joe 
Heyman and I am Chair of the Board of Trustees of the American 
Medical Association, also a gynecologist in solo practice in 
Amesbury, Massachusetts. The AMA thanks you, Chairwoman 
Velazquez and Ranking Member Graves, and members of the 
Committee for your leadership in holding this hearing.
    America's seniors, the physicians who care for them, many 
of whom, like me, are small business owners, and Congress, all 
face an annual Medicare problem. The current Medicare physician 
payment formula, known as the Sustainable Growth Rate, or SGR, 
ties physician payments to the GDP. Yet, while the economy is 
going down, the healthcare needs of seniors are going up. The 
SGR is not reality and has threatened steep cuts every year 
since 2002.
    Over the last six years, Congress and the physician 
community have had to scramble to achieve multiple eleventh 
hour interventions to ward off these cuts and preserve 
patients' access to care. And now, due to the SGR, a 21 percent 
cut is scheduled for January 1st, with cuts totalling 40 
percent projected in the coming decade. These cuts, if not 
stopped, will impair patient access. The vast majority of 
physician practices are small businesses and cannot absorb 
these steep losses. No small business could survive under a 
business model that dictates steep cuts year after year. A 
solution is needed now.
    The Administration's budget provides a big part of the 
solution. It assumes a new baseline in forecasting future 
spending on Medicare physician services. This is known as 
rebasing. And we strongly support it. With rebasing, the 
Administration uses a new baseline to reflect the realistic 
assumption that Congress will continue to preserve seniors' 
access to care by stopping future SGR cuts. After all, the 
primary purpose of the budget baseline is to provide 
policymakers with the clear forecast of projected spending and 
taxpayer obligations.
    In previous years, budget forecasts have inaccurately 
assumed that the projected 40 percent in physician cuts would 
occur. In reality, Congress has interceded six times since 2003 
to legislatively ignore the physician payment baseline and 
provide temporary payment increases.
    Rebasing is imperative for several reasons. It would pave 
the way for Congress to repeal the SGR. Congress could then 
establish a new Medicare physician payment system that allows 
annual updates that accurately reflect increases in medical 
practice costs with appropriate incentives for utilization, 
efficiency, and quality. This two-step process, that is, 
rebasing along with repeal of the SGR, will preserve access to 
high-quality, cost-effective healthcare for our senior and 
disabled patients.
    And since projected SGR cuts exacerbate on-going physician 
shortages, rebasing and repeal of the SGR will favorably affect 
the future supply of physicians. Further, adopting a new 
baseline and repealing the SGR means physicians and Congress 
can focus on other important reforms like health insurance for 
the uninsured, adoption of health information technology, and 
investment in quality improvement and prevention programs.
    Finally, a new baseline and positive physician updates 
would bolster our economy. It would help sustain the jobs of 
nearly three million employees and benefit millions of patients 
and physicians across the country. For example, if the 40 
percent cut takes effect, New York would lose $17 billion by 
2016 for the care of elderly and disabled patients. And 
Missouri would lose $4 billion. And every state represented on 
this Committee similarly would stand to lose billions. The 
stakes are too high to continue this cycle of eleventh-hour, 
temporary SGR fixes.
    We urge the Committee and Congress to support adoption of a 
new baseline in the Fiscal Year 2010 budget resolution and pave 
the way for a new Medicare physician payment system that best 
serves patients and employees across the country, as well as 
our entire healthcare system.
    Thank you very much for the opportunity to be here today.
    [The statement of Dr. Heyman is included in the appendix at 
page 36.]
    Chairwoman Velazquez. Thank you, Dr. Heyman.
    Our next witness is Dr. Jeffrey Harris. He has practiced 
Internal Medicine and Nephrology since 1977 and is currently a 
faculty member of the University of Virginia Medical School. He 
is representing American College of Physicians where he serves 
as President. The American College of Physicians is the largest 
medical specialty organization and the second largest physician 
group in the United States. Welcome.

               STATEMENT OF JEFFREY HARRIS, M.D.

    Dr. Harris. Thank you, Chairwoman Velazquez and Ranking 
Member Graves for allowing me to share the American College of 
Physicians views regarding the President's healthcare budget 
for Fiscal Year 2010.
    As mentioned, I'm Jeff Harris, President of the ACP. Until 
recently, I practiced in a rural community with a population of 
40,000. The office in which I practice focused on the delivery 
of primary care and Nephrology. I have practiced Internal 
Medicine for nearly 30 years. This year I have the good fortune 
of being President of the American College of Physicians, 
representing 126,000 Internal Medicine physicians and medical 
students. The ACP is the largest physician specialty 
organization in the United States.
    Smaller physician practices are an essential part of the 
system of care in the U.S. Congress has a historic opportunity 
to adopt a budget that will help physicians in small practices 
provide the best possible care to patients by (1) eliminating 
payment cuts from the Sustainable Growth Rate, known as SGR, 
and accounting for the true costs associated with providing 
updates that keep pace with the practice of medicine and its 
costs; secondly, increasing Medicare payments to primary care 
physicians to make them competitive with other specialties and 
career choices; and thirdly, funding programs to support and 
expand the patient-centered medical home.
    Over the past several years, one of the College's main 
priorities has been urging Congress to reform the SGR, 
Medicare's flawed physician payment formula. This formula has 
led to scheduled annual cuts in physician payments for each of 
the past seven years. This coming January, as Joe mentioned, 
physicians face a 21 percent Medicare payment decrease unless 
Congress intervenes to avert the cut.
    Since this is a hearing of the Committee on Small Business, 
the following analogy may help illustrate the problem. Imagine 
you work for a small business and imagine that your boss told 
you that your wages would be cut by 10 percent this year. 
Later, your boss announces that your company will not cut your 
wages, but that the only way the company can afford to stop the 
10 percent cut would be to pretend to reduce your wages by 20 
percent the following year. You were told not to worry though. 
They would just do the same thing the next year, prevent the 20 
percent cut by pretending that the costs will be cut of your 
wages by 40 percent the following year. You were told though 
that the company has no intention of ever allowing a 40 percent 
cut to happen. They just have to pretend they will do so so the 
accountants will allow them to stop the immediate pay cut. And 
on and on it would go.
    No small business would actually run its payroll budget 
this way. Yet, this is how Washington has handled costs 
associated with stopping the SGR, up until now that is. 
President Obama's budget is a marked departure from past 
practices because it acknowledges what we all know to be true 
which is that preventing pay cuts to doctors will require that 
the Medicare baseline spending be increased accordingly. Once 
the true costs are accounted for in the budget, Congress and 
the Administration would enact a long-term solution that will 
permanently eliminate the SGR as a factor in updating payments 
for physician services.
    Instead, payment updates should provide predictable 
increases based on the cost to practice of providing care to 
Medicare patients. This is especially important for physicians 
in smaller practices. Also, the primary care shortage is 
escalating at a time when the need for primary care physicians 
is greater than ever. Our aging population further increases 
the demand for general internists and family physicians.
    Congress should enact Medicare payment reforms so that the 
career choices of medical students and young physicians are 
largely unaffected by considerations of differences in earnings 
potentials.
    Currently, primary care physicians, on average, earn 55 
percent of what non-primary care specialists earn on average. 
Is it a wonder then why only two percent of fourth-year medical 
students plan to go into general Internal Medicine, one of the 
two specialties that adults depend upon for their primary care.
    The College believes that a reasonable goal would be to 
raise primary compensation to the 80th percentile of the 
compensation of other specialties. This will require that 
Medicare and other payors increase primary care reimbursement 
by seven to eight percent per year over the next five years. 
Such an investment in primary care will result in better health 
and lower cost of care. To illustrate, a recent study in the 
American Journal of Medicine found that a higher ratio of 
primary care physicians in areas was associated with fewer 
hospital admissions, emergency department visits, and 
surgeries. Congress should allow for some of the aggregate 
savings from reduced utilization associated with primary care 
to be used to fund payment increases for primary care.
    The patient-centered medical home enjoys support of a wide 
range of healthcare stakeholders. Policymakers view it as a 
promising reform model with Congress authorizing the Medicare 
medical home demonstration project through a 2006 law and 
supplementing it with a dedicated funding and increased ability 
for expansion through a 2008 law. The current Medicare medical 
home demonstration, which is limited to eight states, should be 
expanded to a national pilot with increased funding to allow 
for such expansion.
    ACP is grateful for the opportunity to share its views 
regarding the President's budget and looks forward to working 
with you to improve the quality and lower the cost of our 
healthcare system.
    Thank you.
    [The statement of Dr. Harris is included in the appendix at 
page 42.]
    Chairwoman Velazquez. Thank you, Dr. Harris.
    Our next witness is Dr. John T. Preskitt. He is a general 
surgeon in private practice at Baylor University Medical Center 
in Dallas, Texas. He also serves as head of surgical oncology 
in Simmons Cancer Center. Dr. Preskitt is a member of the 
American College of Surgeons and currently serves on the Board 
of Regents. With more than 74,000 members, ACP is the largest 
organization of surgeons in the world. Welcome.

              STATEMENT OF JOHN T. PRESKITT, M.D.

    Dr. Preskitt. Chairwoman Velazquez, Ranking Member Graves, 
and Members of the Committee, thank you for holding this very 
important hearing on Medicare policy proposals included in the 
President's budget and their impact on small businesses. We 
very much appreciate having our practices considered as small 
businesses which they certainly are.
    I'm John Preskitt. I'm a general surgeon. I've been in 
private practice at Baylor in Dallas since about 1981. I'm in a 
group of seven surgeons, five of whom work downtown. As stated 
before, we're very honored to represent the 74,000 members of 
the American College of Surgeons, the largest surgical 
organization in the world and to testify regarding the 
President's budget.
    There are five issues I'd like to briefly touch upon. 
Certainly, Medicare has been discussed and I won't repeat the 
very eloquent review of the SGR and its impact, but surgical 
practices do receive about 38 percent of their revenue from the 
Medicare system, which is a broken system as has been 
emphasized. I'm thankful for this Committee and the Congress 
for passing MIPPA 2008 which rolled back the proposed cut that 
would have occurred last July. And we very much appreciate the 
emphasis the President's budget has set on resetting the budget 
baseline for that SGR.
    Quality improvement is also an extremely important issue 
for the American College of Surgeons. And I will just say that 
Dr. Harris and I both refer to our organizations as the 
College, so I apologize, but it's easier than saying the whole 
thing. But we stand for patient safety, assuring high quality, 
effective care and providing healthcare value for our patients. 
The American College of Surgeons has established the National 
Surgical Quality Improvement Program with the acronym NSQIP 
which was developed from the very highly successful Veterans 
Affairs program. It provides statistically-valid, 30-day, risk-
adjusted outcomes. In the VA system, the NSQIP program allowed 
for a 27 percent reduction in 30-day mortalities by simply 
looking at these outcome measures.
    Currently, it is in use in 220 academic and community 
hospitals. The Joint Commission includes a merit badge next to 
the profile of all ACS NSQIP hospitals.
    Physician ownership in specialty hospitals and ambulatory 
surgery centers, though an area of legitimate concern raised by 
the actions of a few entities, has also in many cases, 
including my own State of Texas, complemented the community 
hospitals and these facilities have received very high quality 
scores in patient satisfaction. Nonetheless, the American 
College of Surgeons feels the owners of those facilities should 
function under the following principles: accept payment without 
regard to means of payment by the patient; select patients 
based on their actual expertise of the facility, and not extend 
care beyond that. All surgeons involved in such endeavors 
should continue to provide emergency coverage in their 
community hospitals. The issue of having an ER in a specialty 
hospital should remain a matter of state law and community 
need. And as important as the rest, physician investors should 
always disclose their financial interests to any and all 
patients.
    The supply of surgeons, especially general surgeons is 
diminishing. As we're getting older, some of us are getting 
much older, it's been documented in the text the College would 
propose the following measures and these are applicable to all 
medical specialties: Preserve Medicare funding for graduate 
medical education; eliminate residency funding caps; extend the 
funding through initial Board eligibility; include surgeons 
under Title 7 of the Health Profession Program, including the 
National Health Service; alleviate the burden of medical school 
debt through loan forgiveness programs that stipulate work in 
rural and undeserved areas; extend the medical student loan 
deferment to the full length of that training; and consider 
supporting the physician workforce and Graduate Medical 
Education Enhancement Act, H.R. 914, which Congressmen Burgess 
and Green have proposed to establish interest-free loan for 
programs in hospitals starting new residency training programs.
    In summary, the College greatly appreciates this 
opportunity to testify regarding the budget and its impact on 
the surgical practices and patients' access to surgical care.
    Thank you very much, Chairwoman.
    [The statement of Dr. Preskitt is included in the appendix 
at page 53.]
    Chairwoman Velazquez. Thank you, Dr. Preskitt. And now I 
recognize Mr. Shuler, for the purpose of introducing your next 
witness.
    Mr. Shuler. Thank you, Madam Chair. It's an honor and a 
privilege to introduce a constituent, Ed Hannon. He is the 
President and CEO of McDowell Hospital in Marion, North 
Carolina. He is here today on behalf of the American Hospital 
Association.
    In his role, he oversees a rural hospital, home health 
agency, rural health clinic, and physician services. He has 
over 20 years' experience in hospital and healthcare systems 
and outpatient services.
    Mr. Hannon, thank you so much for your participation in the 
hearing today.

                   STATEMENT OF EDWARD HANNON

    Mr. Hannon. Congressman, thank you. Madam Chairwoman, thank 
you, and I appreciate the opportunity to address you all today.
    I am Edward Hannon. I am the CEO of the McDowell Hospital 
in Marion, North Carolina and chairman of the American Hospital 
Association's Governing Council on Small or Rural Hospitals. 
It's a pleasure to be here today, to speak to you on behalf of 
the nearly 5,000 members of the American Hospital Association.
    McDowell Hospital is a 65-bed rural, not-for-profit 
hospital located in the foothills of the Blue Ridge Mountains 
of Western North Carolina. While the recession has touched us 
profoundly in our area of the country, we are steadfast in our 
commitment to reform healthcare, which should start with 
expanding coverage for all. And we commend President Obama for 
making healthcare reform a top priority.
    Hospitals have been early and ardent supporters of efforts 
to make healthcare more affordable. We have worked to increase 
the focus on wellness and prevention, better coordinating care, 
utilizing comparative effectiveness research, moving towards 
the adoption of information technology, creating alternative 
liability systems and reducing administrative costs.
    However, we urge Congress to carefully consider the impact 
that it will have on all hospitals, including the small and 
rural facilities.
    There are three main characteristics that differentiate the 
small and rural hospitals: our small size and volume, our 
geographic isolation, and the type of population that we serve. 
First, lower patient volumes in rural hospitals mean that our 
financial position is more volatile which complicates our 
abilities to position ourselves, develop accurate long-range 
financial plans and contingency plans. As a result, we're less 
able to weather the financial fluctuations, especially in 
today's economy.
    Next is geographic isolation. Rural communities across the 
country are self-contained and far from population centers and 
other healthcare facilities. In my case, the closest hospitals 
are more than 30 miles away to the west of us, across the 
mountains, and 25 miles to the east of us. Moreover, public 
transportation is practically non-existent. For many rural 
residents preventive, post-acute, and other services may be 
delayed or forgone, ultimately increasing the overall cost of 
care.
    Finally, America's rural areas tend to have higher 
proportions of Medicare patients. For example, Medicare 
accounted for 58 percent of the discharges from my hospital in 
2008. Any payment change to this program would therefore hit us 
especially hard. Our lower revenues and tight margins means 
we're less able to subsidize any losses.
    Now that you have a better picture of the challenges faced 
by small and rural hospitals, I'd like to outline how the 
President's proposed budget would affect U.S. The President's 
budget proposed reducing payments to hospitals where high 
numbers of patients are readmitted within 30 days. However, any 
policy that assumes that most hospital readmissions are 
preventable raises concerns. Determining preventable 
readmissions is complex because the causes behind each 
readmission are unique. Such a policy requires thorough 
analysis of both the patient's hospital experience and the care 
prescribed for that patient after they're discharged. Further, 
some readmissions are planned and appropriate patient care, 
such as for chemotherapy patients. Any provision that does not 
recognize these legitimate reasons for readmissions may become 
an obstacle to patient care and patient safety.
    The budget outline also proposes to bundle payments for 
hospitals and post-hospital acute care. While we welcome a 
careful and thoughtful approach to bundling, we first need to 
evaluate existing demonstration projects and gradually phase in 
implementation with appropriate tools and infrastructure for 
coordinating care and managing these risks. Some hospitals and 
healthcare systems already are organized in such ways that this 
would facilitate the bundling of payments, but many are not. 
Many of the bundling pilot projects focus on care that is not 
even commonly provided in rural hospitals such as coronary 
artery bypass graft surgery. A thorough understanding of the 
unique obstacles of rural health must be undertaken before any 
of these new programs are put into place.
    It is critical that we shape a fair payment bundling 
system.
    The President's budget also proposes linking a portion of 
the in-patient hospital payments to performance on specific 
quality measures. Providing incentives for quality is a 
laudable goal that we certainly support. The fact is hospitals 
more than any other provider type have a history of linking 
quality measurements and improvements to payments. However, we 
are concerned about this proposal because it cuts payments up 
front. We believe that overall savings can be reached by 
improving care that leads to fewer medical visits. The current 
pay-for-performance proposals use a standard set of measures 
which may involve procedures not performed commonly at small 
and rural hospitals. A way to address low volume situations 
must be included in any pay-for-performance proposal.
    Before I conclude, I do want to offer the AHA's full 
support for several provisions of the President's budget 
outline. The President proposes to permanently fix the Medicare 
physician fee schedule, and to invest $330 million to address 
the shortage of healthcare providers in medically-undeserved 
areas, which would enhance our ability to recruit and retain 
physicians. In addition, we strongly support the President's 
inclusion of a ban on physician self-referrals to hospitals in 
which they have ownership interest. We look forward to working 
with the Administration and Congress to achieve this goal.
    Let me end by saying that hospitals are more alike than we 
are different. Together we form America's healthcare safety net 
no matter the size of our staff, the size of our budgets or 
location. Our mission is always the same, to treat everyone the 
best of our ability each and every day. Thank you for your time 
today and I appreciate the opportunity to be here.
    [The statement of Mr. Hannon is included in the appendix at 
page 63.]
    Chairwoman Velazquez. Thank you, Mr. Hannon. Our next 
witness is Dr. Robert E. Moffit. He is the Director of the 
Heritage Foundation Center for Health Policy Studies. Dr. 
Moffit has been a veteran of Washington policymaking for more 
than 25 years. In the Foundation, he specializes in medical 
reform, health insurance and other health policy issues. The 
Heritage Foundation was founded in 1973. Welcome.

              STATEMENT OF ROBERT E. MOFFIT, Ph.D.

    Dr. Moffit. Thank you. Thank you very much for the 
opportunity to talk with you today. It's an honor and a 
privilege to appear before the Committee. The views that I 
express today are entirely my own and should not be construed 
as representing the views of The Heritage Foundation or its 
officers or its Board of Trustees.
    President Barack Obama has outlined an ambitious and far-
reaching healthcare agenda, including major changes to the 
Medicare program. I would only observe at the outset that the 
decision to start with $634 billion worth of financing in a 
reserve fund without a clear understanding of what exactly it 
is that would be financed beforehand is at the very least an 
unusual approach. I would just make two observations in this 
connection. While the President may believe that there is 
enough of an agreement to jump start the process by putting the 
money upfront and hammering out the details later, it is a 
common experience in this area of public policy, in particular, 
that it is the details that drive broad policy agenda. It is 
not always the broad policy agenda that drives the details.
    Secondly, with funds already committed to the project, 
there is always the danger that existing stakeholders, the 
representatives of a very powerful class of special interests 
that dominate this sector of the economy, will view this entire 
effort as merely a way to expand existing public and private 
institutional arrangements with additional taxpayer dollars, 
rather than the process of securing a real structural change in 
the healthcare system, the creation of different ways of 
improving the financing and delivery of healthcare for the 300 
million Americans who are going to be the beneficiaries of 
reform.
    All together, the President is proposing a dozen Medicare-
related changes. In the limited time available to me, I would 
like to focus my remarks on just a few key Medicare-budget 
policy proposals. The President wants to change the Medicare 
Advantage system and this change will result in a substantial 
savings over the first ten years of this implementation. He 
wants to replace Medicare Advantage payment with a system of 
competitive bidding.
    Ladies and gentlemen, much would depend on exactly how this 
legislation is crafted, the details of the process, and what 
the Administration specifically means by competitive bidding. 
It is a phrase that can, in fact, have very different meanings. 
If the process is a way for the government to pick winners and 
losers among health plans, something akin, for example, to a 
Department of Defense procurement process, it would be 
incompatible with personal choice and market competition. It is 
well to recall that the provision of that opportunity, 
particularly for seniors in rural areas is one of the major 
reasons why Congress enacted the Medicare Advantage program in 
the first place. If, however, it is a way of establishing a 
much more rational benchmark for Medicare payment, and allowing 
persons to pick richer plans and pay for the extra benefits, if 
they wish to do so, or picking less expensive plans and keeping 
the savings of their choice, the President's proposal could be 
a significant improvement over the current system.
    The President would also make wealthy seniors pay higher 
premiums for prescription drugs. According to the press 
reports, the seniors enrolled in Medicare Part D would pay 
higher premiums just as seniors do in Medicare Part B. All 
together, certainly as an alternative to cutting provider 
reimbursements, income-relating medical subsidies is a sound 
alternative. The President's position makes a great deal of 
sense.
    The President is calling for a re-evaluation of the current 
provider payment system. That is welcome. He is promoting pay 
for performance in accordance with government guidelines, 
tougher enforcement for Medicare payments to doctors and other 
medical professionals to reduce waste, fraud, and abuse in the 
system. It should be noted that Medicare savings have 
previously been proposed as a way to finance comprehensive 
healthcare reform. President Clinton proposed that in 1993, 
promoting a shift of approximately $124 billion over six years 
to finance his healthcare reform.
    If the President's changes, however, simply results in 
additional reimbursement reductions at the end of the day, they 
would aggravate the current level of cost-shifting from federal 
entitlements to individuals and families in the private sector. 
Shifting tens of billions of dollars on to the private sector 
does not add one red cent to the value of healthcare in the 
United States.
    I am pleased to hear that there is renewed discussion of 
the current tax policy governing health insurance. This could 
open up a new opportunity to forge a bipartisan consensus in 
healthcare policy. Senator Max Baucus has proposed capping the 
current tax exclusion on health insurance, the benefits of 
health insurance, and creating an opportunity for tax credits 
or perhaps a voucher program for low-income people to get 
insurance. This could be the basis of a serious bipartisan 
cooperation on solving one of the greatest single problems 
facing the American people.
    Madam Chairwoman, I'm going to conclude my remarks, but 
I'll be very happy to answer any questions.
    [The statement of Dr. Moffit is included in the appendix at 
page 70.]
    Chairwoman Velazquez. Thank you, Dr. Moffit.

    Dr. Harris, can you talk to us how will the practice of 
medicine be impacted if Congress fails to fix the Medicare 
physician payment system?
    Dr. Harris. If they fail to and continue simply doing 
what's been done, namely masking the problem, all we're doing 
is putting off the inevitable. I mean this year, as you 
mentioned, we anticipate a 20 percent cut if it is not 
resolved. That will be 40 percent the next year. If you carry 
that to its logical extension, if Congress continues simply to 
apply a patch, that means by 2012 all the medical practices in 
this country are to be cut by 160 percent. I mean that is 
obviously utterly absurd.
    So we, even today, if you were to cut it by 20 percent, I 
think you can say and this is not hyperbole, I don't thinkany 
primary care practice in this nation could survive a 20 percent 
cut in those revenues.
    Chairwoman Velazquez. Thank you. Dr. Heyman, the Medicare 
Advantage program costs the federal government about 14 percent 
more to provide benefits than traditional Medicare. The 
President believes the funding could be put to better use. Can 
you tell me where the medical community sits on this issue and 
I would like to hear from Dr. Harris and Dr. Preskitt and even 
Mr. Hannon.
    Dr. Heyman. Well, at the American Medical Association, our 
feeling is that these are enormous subsidies in payment to 
Medicare Advantage plans. We're not opposed to Medicare 
Advantage plans and we certainly are not opposed to people 
having the choice of regular Medicare or a Medicare Advantage 
plan. We just feel that if a Medicare Advantage plan was as 
efficient as Medicare is, then Medicare Advantage plans would 
be able to exist without those kinds of subsidies. And so we 
think an efficient Medicare Advantage plan is a wonderful idea. 
We just are opposed to giving them extra money to provide the 
same services.
    Chairwoman Velazquez. Dr. Harris?
    Dr. Harris. The American College of Physicians would echo 
that sentiment. Again, we're not opposed to Medicare Advantage, 
what we would like is the various Medicare options that 
patients have on a relatively level playing field.
    Dr. Preskitt. The American College of Surgeons also has no 
issue, per se, with Medicare Advantage plans. The intent from 
the outset was to use a business model for the insurance 
industry, as I understand it, to provide more efficient care 
for Medicare recipients. We can't demonstrate that that has 
necessarily occurred. The President's budget proposal talks 
about comparative effectiveness research and sets aside money 
to do this, to figure out what is a value-based purchasing. And 
hopefully, Medicare Advantage plans will be driven to 
demonstrate a value in this purchasing. I don't believe we're 
there yet. And I would have to agree with my colleagues.
    Chairwoman Velazquez. Mr. Hannon?
    Mr. Hannon. Madam Chairwoman, as small rural hospitals, we 
don't see the effects of the Medicare Advantage program in our 
communities as much as our urban counterparts do. As hospitals, 
it is not necessarily the program that's administered to us 
that makes a difference. It is where is the money being put to 
use? If it is, in fact, an efficient program, whether it's the 
Medicare Advantage program or any other one, our efforts are to 
ensure that patients get safe, appropriate care efficiently and 
that the money is going to help assume that the patient is 
getting the care and not to the insurance companies.
    Chairwoman Velazquez. Thank you. Dr. Harris, the ACP 
supports incentives for physicians who adopt HIT. However, 
there is concern of possible penalties for small and rural 
providers. Given the unique needs of these practices, how do 
you think we should address the issue of HIT?
    Dr. Harris. This is a major issue. I would just preface it 
by saying that 82 percent of all the office visits in the 
United States are to practices with five or fewer physicians. I 
mean these are huge issues for small businesses. And HIT, the 
cost of it, is just an enormously steep hill to climb. As most 
of you are aware, the cost currently for a physician to add 
this technology to his or her office is about $35,000 to 
$50,000 per doctor. And then after that, it's another $5,000 
per doctor per year to maintain the software. So obviously, 
with these groups of five or fewer, it's just a huge sum of 
money to try and find someone to loan you the money to go out 
and try and purchase the system which is so utterly essential 
if we're going to make the seamless connection which we believe 
ultimately will help reduce healthcare costs.
    Chairwoman Velazquez. Thank you. Mr. Graves?
    Mr. Graves. Thank you, Madam Chair. When it comes to the IT 
system, I'm very interested in this because I have a medical IT 
company in my District, but I'm very curious as to if we can 
afford this. And I'm worried about particularly, and Mr. 
Hannon, I'd be curious too, because I represent a very rural 
District with very rural hospitals. And they seem to be as 
worried as anybody as about how they're going to implement 
this.
    My question too is the point where all these systems are 
going to communicate with each other. I know there's different 
systems out there and being able to talk to one another is 
something that concerns me, but the bottom line is can we 
afford it right now? I mean we've got so many things on our 
plate with increasing healthcare costs and I'm just worried 
about that, where this thing is going. I'd like for you all to 
comment, but Mr. Hannon, I'd like to hear you first.
    Mr. Hannon. Thank you, Mr. Graves. Congressman, the 
hospitals believe that we are early adopters and seek new 
technology. And it is our belief that health information 
technology is important for us to the future. You have hit on 
the important points. How is it we're going to be able to 
afford it, especially in our small, rural hospitals, many of 
which are running at negative margins today. The money needs to 
come from somewhere upfront and our ability to fund those 
upfront costs is certainly concerning to the small and rural 
hospitals.
    We believe that long term, the best thing we can do is to 
bring technology in. And it is our belief that over time we 
will see some returns on that and we can lower the cost of 
healthcare for all Americans if we had technology. If we're 
able to share information with our physicians even between 
communities and with other hospitals so we're not duplicating 
tests, and we are seeing what prescriptions patients are on, we 
believe that we can improve the care of the patient, provide a 
safer environment for our patients, and assist our physicians 
in caring even faster for those patients.
    As we look at issues of how are we moving those patients 
from acute care facilities to post-acute care facilities, a 
part of what the President's budget proposes, that sharing of 
information is critical if we're going to reduce the cost of 
healthcare.
    Mr. Graves. Dr. Moffit. We can just go backwards.
    Dr. Moffit. Will health information technology save money? 
Will it be a way to significantly reduce healthcare costs? I 
don't think anybody really knows.
    Congress passed a health IT investment of about $20 billion 
in the stimulus bill. You didn't have many hearings; in fact, I 
don't recall any hearings on that proposal when it was passed. 
I know that within the medical profession, evidenced by columns 
by members of the medical profession in some prominent 
newspapers, including The Washington Post this week, that there 
is grave doubt about whether, in fact, health information 
technology will save money.
    One concern is that with the government superintending the 
development and the dissemination of healthcare, information 
technology, we may end up creating a regulatory straightjacket 
in this area which could undermine innovation in one of the 
areas of the economy where innovation is a daily occurrence.
    As I say, I think the jury is out on this.
    Mark Pauly, at the University of Pennsylvania, a top-ranked 
economist, has made the point on several occasions, and I think 
before Congress that the success of all this is kind of a 
"what-if" proposition; that is to say, what if you don't get 
the kind of cooperation from all of the members of the medical 
profession you need? Or the cooperation you need from different 
sectors of the healthcare industry to accomplish all of this? I 
mean there are a lot of factors here that go into whether or 
not this will actually bring about the kind of savings that 
many people hope will come about. I have no strong feelings on 
it. I think the jury is still out.
    Chairwoman Velazquez. Would the gentleman yield? Let me set 
the record straight. We not only conducted one, but several 
hearings, this Committee on HIT and the impact on solo 
practitioners and small business practitioners.
    Dr. Moffit. I was only--
    Chairwoman Velazquez. I would invite you to read the record 
because it could be very enlightening.
    Thank you for yielding.
    Mr. Graves. Dr. Preskitt.
    Dr. Preskitt. Thank you very much, Just to add to this, 
health information technology certainly is important and we 
appreciate the President considering it and elevating its 
importance into the record. I don't know that the issue is just 
the cost savings with health information technology, but it is 
also improvement of patient care and safety. The President 
pointed out in one of his statements about the senior citizen 
who must remember his or her history at every doctor's office 
he or she may attend.
    My father is 89, has Parkinson's. He's sharp, but he 
doesn't talk so fast. Things are going to be missed. If health 
information was part of the system where as Ranking Member 
Graves said, the interrelated pieces communicate, this should 
improve safety and secondarily the efficiencies. But I think 
improving patient care and making care that more efficient is 
as important as the money saved.
    Dr. Harris. Mr. Graves, increasing access to health 
information technology is absolutely essential. When 
Congresswoman Velazquez a moment ago talked about how much more 
expensive it is here than abroad, including in those numbers is 
the fact that we have the dubious distinction of having the 
highest administrative costs on a per capita basis of any of 
those industrialized countries. It's 7.3 percent of all the 
healthcare dollars go there. So health information technology 
becomes potentially a critical way to reduce those costs.
    Now more explicitly to your question about how do you pay 
for this, we believe that's what essential in paying for all of 
this is a dramatic expansion of the primary care base in this 
country. The data from the United States, from Barbara 
Starfield or Hopkins or the Dartmouth Atlas folks, are 
absolutely compelling. And the study that we did comparing us 
to 12 countries overseas and their healthcare systems is 
equally as compelling. As you expand the primary base, you see 
a reduction in costs as well as an increase in quality.
    I would just leave you with one study that I think reflects 
this and I might add parenthetically and I know it's in your 
data, we just published an annotated version of 100 studies in 
the United States which make this point. But the one that comes 
to mind is one that's often cited from The American Journal of 
Medicine, just a couple of months ago, a fellow named Kravitz 
was the lead author. And they concluded that if you had a 
community of 775,000 or three quarters of a million, and they 
had about 35 percent of the physicians there were primary care 
physicians, in the country now, it's about 30 percent. 
Overseas, it's 50 percent, the ones that do it so much less 
expensively and better. But if you could just increase this 
community from 35 percent of its workforce to 40 percent, what 
you saw was a reduction of about 1500 hospitalizations per year 
for a savings of $23 million per year. You saw 2500 fewer 
visits to the emergency room. You saw 1500 fewer surgeries, by 
simply increasing primary care 35 percent of your workforce to 
40 percent.
    We believe that expanding healthcare coverage in this 
country and expanding the base of primary care physicians are 
absolutely inseparable.
    Mr. Graves. And we'll come to that. I agree with that. I'm 
trying to figure out how to get--when it comes to IT, because 
I'm worried about these small hospitals and how we're going to 
get there. I think it's important, particularly in the rural 
areas to bring technology because it adds some resources that 
we don't necessarily have. I just don't know how we're going to 
get there and how we're going to pay for it in an environment 
where it's increasingly--the costs are going up all the time.
    Dr. Heyman?
    Dr. Heyman. I have some personal experience with this. I've 
had an EMR in my office and used no paper since 2001. The EMR 
that I purchased still is the same one. It's a lot more robust 
now than it was when I purchased it in 2001. But there's no 
question that in my practice it definitely saves money. It 
definitely makes me more efficient. It definitely prevents 
mistakes. And it's very, very effective.
    We kept hearing about how the federal government wanted to 
have more IT, but for the first time there's actually some 
money here and that's very important.
    The other thing I would say is that there are a lot of 
barriers to this. In my community, we're very fortunate because 
we had a grant where every physician in my community now 
actually over the last three years has actually been able to 
have their own EMR in their office and we're supposed to be 
starting a help information exchange. Now one of the barriers 
is that the standards are not there and we have six different 
EMR vendors in our community. The physicians are supporting 
this health information exchange. All of these are CCHIT-
certified vendors which means that they're supposed to be able 
to talk to each other and yet in each and every case, we have 
to come up with an interface of making them talk to each other 
and it's very expensive and we're not sure how we're going to 
be able to make that exist in the future.
    I would also point out to you that physicians are always 
the first people to accept new technology. They're the first 
people to use cell phones. They're the first people to use 
robotics in their practices. There are all kinds of 
technologies that physicians have used. There has to be a 
reason why physicians have not adopted this technology.
    And the last thing I would say is that when physicians are 
incorporating this into their practices we found in our 
community that in spite of the fact that it was free, they got 
the hardware and the software for nothing, it was still very 
costly for those who were changing work flows in their practice 
to be able to incorporate this stuff into their practice.
    So we definitely support the idea of increasing health 
information technology. We think it's inevitable in medicine, 
but there are barriers. We need those standards done by the end 
of this year and we think that it really will improve 
healthcare in this country if we do this.
    Mr. Graves. I thank you all. And I think it will improve it 
too, but we still haven't figured out how to answer the 
question. The money is there, at least a little bit of it at 
the moment, but still how do we pay for it is the question that 
I have. If it's the result of savings, it would be good, but 
just encourage you all to think about that. We have to figure 
out how to pay for this.
    Thank you, Madam Chair.
    Chairwoman Velazquez. Ms. Kirkpatrick.
    Ms. Kirkpatrick. Thank you, Madam Chair and thank you to 
our panel. I represent a vast, sprawling District in Arizona 
that's very rural and for over 20 years of my private law 
practice I represented the regional hospital and many 
physicians' groups, including our emergency physician group, so 
I thank you for being here. Healthcare reform and provision in 
rural areas is very, very important to me.
    My first question is for Dr. Heyman and Dr. Preskitt 
regarding the SGR being tied to the GDP. And I'd like to know 
if there are other factors that you think would provide a more 
accurate baseline? So maybe we'll start with Dr. Preskitt and 
then go to Dr. Heyman.
    Dr. Preskitt. Well, I hope there are other factors that 
provide a more accurate baseline. My life, my expenses, my 
house payments, they don't follow the GDP. They seem to follow 
some other issue that might be related to consumer price index. 
I don't want to belittle the complexity of the math, but I just 
have to say there's one thing we've proven; tying payments to 
the SGR and how that relates to the GDP just isn't taking care 
of the process. It's not keeping up with any form of expense 
increase.
    What we pay our employees in these small businesses, 
there's no way a single parent could have a job and be employed 
in a practice that followed the variation in salary if it 
followed the SGR. I think establishing a fixed base as the 
President has recommended is the place to start, but of course, 
that still means we have to fix the formula. I'm not giving you 
a direct answer, but we know that the current system is so 
incredibly broken that it's harming people.
    Ms. Kirkpatrick. Dr. Heyman, thoughts about that?
    Dr. Heyman. Well, of course, there's the medical economic 
index which is an evaluation of the cost of providing care. 
That would certainly be a better index, if we're going to use 
indexing.
    Ms. Kirkpatrick. Who prepares that index?
    Dr. Heyman. Is that from the CMS or the--I believe it is, 
but I'm not positive.
    Ms. Kirkpatrick. I'm a new member, so please bear with me.
    Dr. Heyman. The other thing I was going to mention is that 
you know, if we rebase, we're really not changing anything as 
far as the amount of money that we spend. We're spending the 
same amount of money. The only difference is that we're being 
honest about how much money we're spending.
    The previous system of going to the end of the year and 
then having this dance that we did every year is actually 
gimmickry. It's trying to pretend that we're spending less 
money than we are. So at least let's have some transparency and 
rebase and predict the true cost of the medical care that we're 
providing to our seniors and disabled. That's where we need to 
start.
    I would also say that there are a lot of imaginative and 
innovative ways that people are discussing about physician 
payment, and we're not opposed to any of them. We're interested 
in trying to find the right solution and the right way to do it 
and we're hopeful that we'll be successful in that. But the 
first thing we have to do is rebase. That's absolute necessity 
because otherwise it looks expensive to change the SGR when in 
truth it doesn't cost any more than if we didn't rebase. It's 
the same price that we're all paying.
    Ms. Kirkpatrick. Thank you. One of the things that I've 
noticed over the years is the increasing complexity of the 
reimbursement process and since we're talking specifically 
today about Medicare, I'd like to hear from Dr. Harris and also 
you, Mr. Hannon, from your standpoint. If you think that 
reducing that complexity somehow streamlining the reimbursement 
process might actually help deliver better healthcare, and 
provide a better cost basis.
    Dr. Harris, we'll start with you.
    Dr. Harris. As you know, we favor eliminating the SGR, but 
we feel that certainly a need, Congresswoman Kirkpatrick, for 
payment reform. Now the model that is talked about most now is 
the patient-centered medical home. First, we would suggest that 
it be expanded from simply the eight states to convert it from 
a demonstration project to a pilot project. It will be much 
more meaningful data if it involves far more than the 400 
physicians that are anticipated to be involved. That's number 
one.
    Number two, that we need to explore other models. I mean no 
one knows the answer to your question how best to do this. But 
we need to get on with trying other ideas. So we would 
encourage this Committee. We would hope that you would 
encourage that HHS would have the authority to test other 
models so we could see which accomplishes what you're after.
    Lastly, to the issue of simplifying things, everyone would 
applaud that. I mean with hundreds of insurance companies, no 
two doing things similarly, it just takes enormous numbers of 
personnel just to keep this huge ship afloat. We believe that 
the patient-centered medical home though holds promise for 
simplifying that. And that if there is some component of 
reimbursements that's based upon bundling as in for a team-
based approach where physicians and for the payor they know 
that there is a bundled payment. They're not looking as much 
for cause for pre-certification or to justify because they 
don't really care. That would make it much easier.
    Ms. Kirkpatrick. I realize I've exceeded my time, Madam 
Chairwoman. I welcome your response in writing. I don't want to 
take any more of the Committee time, but thank you very, very 
much.
    Chairwoman Velazquez. Mr. Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Madam Chair. I think Dr. Moffit 
hit it a while ago when he said the devil is in the details. I 
think one of the things you're trying to do today is how a 
small provider is being impacted by what's going on and until 
we know a little more in detail about what's going on with the 
budget, we're kind of throwing darts with a blindfold on here, 
I think. It's difficult to get our hands around this issue.
    I certainly appreciate all of you being here today and 
giving us your concerns and your input because within the day 
we have the finest healthcare system in the world. We've got to 
find a way to keep it in place and be able to pay for it. 
That's our struggle.
    I just have one quick question. Just to follow up on Mr. 
Graves' initial question about the IT stuff. In talking with 
some of my doctors --and this is directed at Mr. Heyman here 
when he made the statement-- it saves money and it's easier to 
access and do things. The doctors in my District--I've got one 
large practice or a large group of them-- and they're telling 
me that most of them that do it have found it rather cumbersome 
from the standpoint of it takes time and the longer it takes to 
do this, the fewer patients they see; therefore, in essence, it 
doesn't necessarily save a lot of money from the position that 
obviously the fewer patients they see, the less money they 
make. So can you address that? Are they wrong or so we just got 
a learning curve here, we're not up to speed? What are your 
thoughts?
    Dr. Heyman. I think you just hit it on the head. It is a 
learning curve. There's no question about it. In my first two 
weeks of doing this, I was seeing one patient every hour just 
so that I could learn this system. There's no question that 
there's a learning curve. But after you're familiar with the 
software that you're using, and almost all of the really good 
software is the same way, once you're familiar with it it 
becomes very, very easy to just--it's like talking almost or 
typing. You just get used to it. But it takes a while. There's 
no question about it.
    And the other problem for a practice like you described, is 
that it isn't just in my case because I'm using it I have only 
a single employee, so I have only one person I have to teach. 
In the practice you're describing, they not only have to teach 
all of the physicians, and all of the ancillary people that are 
actually providing the care, but on top of that they have to 
teach everybody in their practice how to use this thing. And it 
slows everybody down. It's not just the provider, it slows 
everybody down when you first start using it.
    So I would agree with them.
    I'll tell you another barrier is that people know that 
eventually they're supposed to talk with each other, all these 
different software products. And a lot of people feel that 
they're not talking to each other now, so maybe it's a good 
idea to wait until they are talking to each other and that they 
know that they have the final version. I don't happen to agree 
with that, but I sure understand that. If it were me, today, 
and I were in that situation and I didn't know about the 
software, all of these major products will eventually talk to 
each other.
    But I would be holding back myself.
    Mr. Luetkemeyer. I think you've got another point that I 
was going to get to shortly also with regards to being able to 
integrate the different software programs because I know even 
within some of the hospitals that I've been talking to you have 
different areas of the hospital that can't even talk to each 
other because their software programs don't connect. That is a 
tremendous inefficiency within the hospital itself. So it's a 
huge barrier for care. It's a huge barrier for being able to do 
the kind of job that they're really supposed to be doing.
    I guess my comment would be, "how do we get past that?" I 
know with the advances in software, you're going to 
continually, in my business world back home, we have new 
software changes every three years. We just rotate one in and 
rotate the other one out after three years. I mean, if this is 
the case here, how do we keep up? You're talking about a long 
learning curve here. Are we going to be that inefficient from 
now on?
    Dr. Heyman. I believe that it will increase efficiency. I 
believe that any physician that does this, once they've been 
doing it for a while they would never go back to paper.
    Mr. Luetkemeyer. Dr. Preskitt, you've got your hand up 
there?
    Dr. Preskitt. Yes, thank you very much. I agree with Dr. 
Heyman. Just for disclosure, I don't have an electronic medical 
record. I am in a group that is looking at them for primary 
care. That may be why you sat me next to him, but health 
information technology is extremely important for surgical 
practices because we rely on hospitals and hospitals rely on 
us. Most of what we do is done in a hospital. And any health 
information technology I have in my office must speak to the 
hospital system, be able to relay information as well as 
radiology results and x-rays. So the interrelation not just 
between hospitals and small business practices, but between 
these practices and the hospital systems until it does that, it 
probably won't be worth the expenditure.
    Mr. Luetkemeyer. Thank you. Thank you, Madam Chair. I yield 
back the balance of my time.
    Chairwoman Velazquez. Mr. Sestak.
    Mr. Sestak. Thank you, Madam Chair. May I ask just a 
question of Dr. Moffit? You had, in your testimony, you had 
been open to the issue of I think pay-for-performance and 
hospital readmissions, the policies, how well it's done it 
seems to be what your question is.
    On the hospital readmission, in President Obama's budget 
there seems like there's both the carrot and the stick. It 
isn't just a stick and I'd appreciate it, sir, if you could 
comment upon this because your testimony indicated there was 
more of a stick there rather than any carrot.
    So how would you construct it to make sure, sir, if it was 
done well? He kind of bundles his payment with the 30-day 
afterwards with acute provider, so there's a little carrot 
there and a little stick with a little less payment if they 
have to come back. What would you do to make sure this works?
    Dr. Moffit. I'm not certain. I am not certain. I like--
    Mr. Sestak. You're not opposed to the idea. You're just not 
certain how to execute it?
    Dr. Moffit. No, as I said in my testimony, I think the 
objectives of this are very, very good.
    Mr. Sestak. Does a proposal of comparative research help in 
this area?
    Dr. Moffit. It might. Well, comparative effectiveness 
focuses primarily on medical treatments. The President is 
addressing what is probably one of the weakest links in the 
American healthcare system: the sickness or spells of illness 
that happen to the elderly where they end up in hospital 
intensive care units, usually for a week or two. They're there 
for a while. Oftentimes, there's a great deal of confusion. You 
have the young people coming to see their parent and they're 
trying to find out exactly what their medical situation is. 
They're there for a spell of time and then they're sent from 
the hospital emergency room or from the intensive care unit to 
some skilled nursing facility.
    Mr. Sestak. Right.
    Dr. Moffit. And they're there for a while, I'm afraid too 
often, there's a breakdown in the continuity of care. And 
they're there for a while and then they're sent back to the 
hospital. Clearly the President's objective here is exactly 
right.
    Mr. Sestak. He's got the right idea.
    Dr. Moffit. Yes.
    Mr. Sestak. It's not dissimilar to a Vet getting out of the 
Department of Defense and trying to find his way through the 
VA.
    Dr. Moffit. Right.
    Mr. Sestak. I'm quite taken, if I could, and ask you, sir, 
how might you do it. You were a little more concerned, I think, 
that you're going to get a little less cost if it comes back to 
you to pay. The reason I am is the question that's come up here 
several times is how do pay for all this?
    Dr. Moffit. Right.
    Mr. Sestak. And every research that I've done, the way we 
pay for this is efforts like yours, Doctor, the preventive care 
if you really do go to these patient-centered medical homes. If 
the savings that they can bode or the savings that we can get 
out of this pay-for-performance or how we do it, that in my 
mind is the real pay, almost simultaneously we need to do HIT 
and other things.
    Do you disagree with that approach?
    Dr. Moffit. No, no.
    Mr. Sestak. Sir, how would you do this?
    Dr. Moffit. I think there are two things here. Pay-for-
performance is a separate issue, I think, from the hospital 
admission issue. Physician pay-for-performance is a separate 
issue. But I like in principle the idea of "bundling the 
payment" to the hospital for spells of illness in certain 
cases. I think if we start paying for results that is where we 
ought to go.
    Mr. Sestak. I agree. I need to move over. Results in the 
terms--
    Dr. Moffit. Results in terms of outcomes.
    Mr. Sestak. Preventive care.
    Dr. Moffit. Not just preventive care. When we have people 
in the emergency room, when we have people in the intensive 
care unit, we don't want them to be "frequent flyers" from the 
skilled nursing facilities back to the hospital.
    Mr. Sestak. I understand. If I could just move--and I know 
that you're a special case in the sense that your data is less 
and that, but how would you set this very important critical 
area up?
    Mr. Hannon. Certainly hospitals look forward to doing the 
bundling.
    Mr. Sestak. Less data because hospital--
    Mr. Hannon. Our concern is oftentimes as you look at the 
path of treatment for patients, especially in rural 
communities, it may start in a physician's office, come to a 
hospital for a part of the admission, and for diagnostic 
testing, and then get transferred to another facility to have 
some level of care performed and then the patient or their 
family requests that that patient be moved back to the rural 
community to be closer to home.
    And so as we bundle that, how are we going to come up with 
the proper way in which to make sure that all of the parties 
who are taking care of the patient are properly paid? In rural 
communities, more often have limited number of partners in 
which to pair with. For instance, in our community, there are 
only three home health agencies, only one of which takes 
Medicare patients today and only one of which has a physical 
therapist as a part of that home health agency.
    So as we bundle care, and that patient needs to go to home 
and that care is bundled under that payment, there may be some 
delay in getting care to that patient because of the limited 
resources in rural communities. And so that is the concern. 
It's not that we're opposed to it. It is that we want to make 
sure that it is done fairly and appropriately.
    Mr. Sestak. I've run over my time. Thank you.
    Chairwoman Velazquez. Mr. Thompson.
    Mr. Thompson. Thank you. Having just come out of rural 
health for the past 28 years and in the Fifth Congressional 
District of Pennsylvania which is the most rural District in 
Pennsylvania, we have lots of hospitals, small hospitals, some 
healthcare providers, rural access hospitals. This is a very 
important issue and certainly my public policy involvement came 
out of the fact that we have a healthcare system today that's 
built on regulations from 50 years ago, many of them, which is 
probably step one with healthcare reform, bringing the 
regulations into the 21st century.
    Mr. Hannon, first question, we're talking about the 
President's budget, Medicare impact and small providers. Many 
hospitals in my experience and some of you concur, and 
healthcare agencies rely on charitable contributions for 
investment and capital expenditures, new equipment, diagnostic 
equipment, sometimes treatment intervention equipment and 
that's driven through charitable contributions. And any 
thoughts on how the President's proposal to eliminate the 
charitable tax deduction for some taxpayers may impact that?
    Mr. Hannon. Thank you for the question. While I haven't 
studied that with the American Hospital Association, I am 
certainly very concerned about that. Having come out of 
Pennsylvania myself prior to going to North Carolina, a great 
deal of how we survive, how we grew, how we provided technology 
was through philanthropy. Even today as we look in North 
Carolina, for example, with the economic times that we are in, 
we've already been told by some of those philanthropic 
organizations that we're likely to have less opportunity and a 
greater competition for the few dollars that are going to be 
available to us. Their contributions are down in those agencies 
and therefore their ability to hand that money to hospitals is 
also down.
    We used to rely on it and I'm sure many of my colleagues 
across the country would agree that we can sustain our day-to-
day operations from the revenue that we get from patient care. 
The ability to expand, the ability to bring new technology, the 
ability to replace our aging plants is really done by those 
contributions.
    Mr. Thompson. Thank you. I want to take that tax proposal 
within the budget next step to kind of open this up to all 
those who are representing the physician providers just to see 
what do you see as the impact on small healthcare providers, 
specifically those physicians whose practices may be organized 
as LLCs or S Corporations with a proposed, the President's 
proposed tax increase rate for those who are in that $200,000 
or $250,000 and higher?
    Dr. Harris. I confess I don't know enough to answer your 
question about the tax code and so forth. I couldn't give you a 
meaningful answer.
    Mr. Thompson. Any thoughts? I certainly encourage you to go 
back and take a look at that in terms of those physicians that 
you have that are organized in those ways that they are going 
to be impacted pretty significantly, perhaps, by that.
    Next question, actually back to Mr. Hannon, I know one of 
the things in rural--it's good to hear you came from 
Pennsylvania. Sorry you left. In rural Pennsylvania, one of the 
issues that I hear all the time and I experienced myself had to 
do with the Medicare wage index and how that drives 
reimbursements. And in terms of the differences, how does the 
wage index in your opinion, the wage index payment system 
impact rural providers versus urban providers? Any opinion on 
that?
    Mr. Hannon. I do have an opinion on that. I have found that 
over the years, and most of my career has been in rural 
healthcare, that as the rural communities, especially those 
adjacent to more metropolitan areas are competing for that 
labor force, we're at a significant disadvantage. We can't 
compete with the wages of our urban counterparts. It is harder 
for us. We all compete for labor. There is a shortage of labor. 
There's no question about that, whether it be x-ray technicians 
or nurses or physicians. As we recruit, it is much harder for 
us with that wage index formula.
    Mr. Thompson. Okay, great. I have just a short time left, 
but I throw one question out that really I don't think has been 
addressed. The looming crisis in healthcare, as I see and 
experience is the lack of qualified physicians, nursing and 
allied health as a result of the baby boomer retirements, 
specifically, especially in rural America. Any thoughts what 
the impact of this will be, not just fiscally on our 
healthcare, but certainly from a workforce perspective on those 
that you may represent?
    Mr. Hannon. I'll be happy to start. We have 420 employees, 
311 full time employees. Seventy of my employees, 70 of the 400 
are over the age of 60 this year. We will have a significant 
problem trying to recruit technicians, especially, to that 
area. As we look at recruitment of physicians to our community 
we are finding that the group of physicians that we're able to 
recruit to our community are actually those who are nearing 
retirement, because those coming out of residency are not 
interested in coming to rural parts of the country.
    Dr. Preskitt. Thank you very much. There's no question, 
general surgical workforce is aging as all health professionals 
are. Twenty years ago, 39 percent of general surgeons were in 
the 50 to 62 year of age group. Now it's 50 percent. Now don't 
get me wrong. I think that's a very blessed age group to be in. 
Frankly, these surgeons and physicians are probably at their 
prime, but they are looking for that.
    We are finding that folks are retiring earlier. However, 
this recent economic change may change that. I think one of the 
key things is the assistance with graduate medical education. I 
had a young partner who moved to the suburbs. He had $150,000 
of medical school loans to pay back and that's about what a 
house would cost when you're starting out. When I graduated 
from medical school in '75, that's 1975--
    Chairwoman Velazquez. We have an opportunity with other 
members. You will have an opportunity to expand. Time is 
expired.
    Dr. Preskitt. Thank you very much.
    Chairwoman Velazquez. Mr. Ellsworth.
    Mr. Ellsworth. Thank you, Madam Chair. We could be holding 
these meetings every day until we fix this problem and the 
Committees definitely should.
    Dr. Moffit, I appreciate your comments. I don't disagree at 
all with you about naming the price first and in a former life, 
we built a building in my county. They put a $35 million price 
tag on it and you guess how much it cost? Right at $35 million. 
So I agree with you.
    Dr. Harris, what I heard you say in a more eloquent way is 
that for the first time in a long time, President Obama was 
being honest about what the cost is and that these things 
belong in the budget and no different than the war in Iraq and 
Afghanistan ought to be in the budget and people ought to know.
    I heard a Member say one time that sure, our budget is 
smoke and mirrors, but it's a hell of a lot more honest of 
smoke and mirrors than their side. That's not what the American 
people expect and it's not what they want us doing here.
    I think we can stipulate that this system needs an 
overhaul. I think everybody at the table has said that already. 
What I see in my short time here in Congress is the different 
groups come in and many of those at your table come into our 
offices and talk about what your particular organization or 
alliance needs for their portion. And what we're not getting is 
I'll get some groups come in, they'll beat up on the HMOs and 
the insurance companies. The insurance companies come in and 
beat up on the docs, the hospitals, doc-owned hospitals beat up 
on the hospital association and vice versa.
    We're going to have to throw everybody in the same room at 
the same time. We don't do this stuff for a living like you do. 
You know this stuff. We make the rules based on your 
suggestions, and all have very convincing arguments. I think we 
have to all get together.
    One, can we do this one spoke at a time, or is it going to 
have to be a comprehensive healthcare reform, everybody in the 
room, lock everybody in until we come out with a finished 
product? Or can we do it a spoke at a time so we don't keep 
kicking this can down the road and just take a yes or no if we 
can do that, because I have a couple of other questions.
    Can we do it comprehensive? Or is it going to be a spoke at 
a time? What do you see?
    Dr. Moffit. I don't think that you can pass a comprehensive 
bill. I don't think that Congress has the political machinery 
to do that, and maintain the kind of consensus you will need to 
make it work. I think this is one area where Americans, as I 
pointed out, have a broad agreement on the goals. I don't know 
of any person that I deal with in the healthcare policy 
community that thinks that all Americans should not have health 
insurance coverage. I don't know anybody who feels that way.
    I don't know anybody who thinks that we should not control 
costs in an efficient way or improve the value that we get from 
the dollars that we're spending on this $2.4 trillion system. 
But when you get into the details that is where the consensus 
breaks down. I'm not trying to rain on this parade. All I am 
saying is that this process, if it is really going to work, is 
going to have to be a process where we work together. It has to 
be bipartisan-a real bipartisan process- of coming to agreement 
on this. And we've got to focus in on those matters that we can 
all agree on.
    There are two areas where I don't think there is much 
debate. One is that low-income people who do not have access to 
health insurance, access to private health insurance, ought to 
get some direct assistance in getting it. That is one clear 
area where I think Republicans and Democrats agree. The other 
thing to remember is that the United States is a country of 300 
million people in very different states where the healthcare 
systems actually differ a great deal. The health insurance 
markets in Massachusetts and the health insurance markets in 
Utah are not the same. And we have to recognize therefore that 
we're dealing with a very diverse thing. It's not one single 
system. So we have to be careful. I think we have to move 
discretely, and we have to debate every provision. This is not 
to slow things up. It's just to make sure that we understand 
what we are doing because this is an area where the law of 
unintended consequences can go berserk.
    Mr. Ellsworth. Mr. Hannon?
    Mr. Hannon. Mr. Thompson, I would say the simple answer, 
yes, I agree with you that we do need to get together, and in 
fact, there is a group meeting together of all of the players 
here at the table and well beyond in an effort to bring health 
for life to this community. AHA is a member of that effort as 
are the other members who are here at this panel and many more 
who are coming together to fix this issue. We do believe in the 
healthcare reform and it's important.
    Mr. Ellsworth. Dr. Harris?
    Dr. Harris. Mr. Ellsworth, we need a major overhaul of the 
healthcare delivery system in this country and it will require 
all the stakeholders. The reality of it is everyone is going to 
have to give up something to make this system work.
    Mr. Ellsworth. Ten seconds? Thank you. Like you said, I 
think you're right, Dr. Moffit, we're going to have to compare 
apples to apples on these policies, what coverage people get 
and we have to look at end of life issues, what's the 
percentage, is it 68 percent, I've heard, in the last two weeks 
of life, nobody wants to talk about it, but you all may have a 
statistic that I haven't heard that 68 percent of healthcare 
cost is spent in the last two weeks of life. Is that accurate? 
Okay, okay. Thank you very much. I yield back, Madam Chair.
    Chairwoman Velazquez. Ms. Dahlkemper.
    Ms. Dahlkemper. Thank you, Madam Chair. I come out of a 
healthcare background. I was a dietician for 24 years, so this 
is always great for me to hear all of you out there that I have 
worked with so many of you over the years.
    I am also from Pennsylvania. I actually--my District 
borders Mr. Thompson's District and we have very similar issues 
when it comes to rural healthcare. Most of the hospitals in my 
District are really in much more rural areas and even the ones 
in the most urban area deal with the wage index. I'm like Mr. 
Ellsworth, being lobbied by every single group and the issues 
do differ, so I thank you, Mr. Ellsworth, for bringing up your 
point. I think it's a great point to make.
    As we go forward here, we've got to put everybody in the 
room and we've got to come to consensus and there's got to be 
give and take.
    I did have a question, Mr. Hannon, for you regarding the 
bundling issue and particularly small rural hospitals because 
as I've looked at this, I see this as such a challenge and I 
think maybe it's because of my current experience, my 80-year-
old parents and the issues they've had over the past few years. 
And just looking at this goal to reduce healthcare costs and 
when you are in a more rural area or an area even as I am in 
Pennsylvania where many people will go to Cleveland and 
Pittsburgh to have their other procedures done or continued 
healthcare done.
    What can you give me as specific examples of the types of 
challenges that you think that hospitals are going to face as 
we look forward to this? And it kind of goes back to, I guess, 
Mr. Sestak, and we have to have a model for this.
    Mr. Hannon. Right. I think some of the challenges that we 
will face is different in every community. The resources, in 
particular, in rural America are different from those in our 
urban areas. As I mentioned, we're blessed to we have three 
home health agencies in my community, but only one takes 
Medicare patients. So if we're going to be bundling and we're 
going to be looking for partners where we can come together to 
provide the most efficient, cost-effective care, how will we 
measure that? What are our choices?
    In our community, getting access to assisted living 
facilities is often the challenge. Patients in rural 
communities may complete their care in a hospital and we wait 
to find an available bed in a skilled nursing facility. That 
doesn't help us reduce the cost of healthcare in those areas. 
Those are some of the challenges that we have.
    So much of healthcare also involves mental health coverage. 
In rural communities, the limited number of mental health 
providers and the social workers, to assist the family with the 
challenges of taking care of especially an elderly person, a 
tremendous weight on the hospital. We are looked to as the 
source for that care when we ourselves don't have those 
resources.
    Ms. Dahlkemper. I guess I would like to hear from any of 
your physicians' organizations regarding the bundling issue and 
where you see the challenges in terms of your specific groups?
    Dr. Preskitt. Well, from a surgical standpoint, risk 
adjustment and looking at those models, the NSQIP program we 
have uses 30-day risk-adjusted mortality. I think there are 
three of you from Pennsylvania. I've not heard the Geisinger 
system mentioned, but they've proven that with a model 
population where it's homogeneous, that in fact, you can 
develop statistics and data and figure out what it costs to 
provide care within a system. The Geisinger system, as I 
understand, also utilizes the advanced medical home.
    I think done with proper data, bundling can occur that 
would involve surgical services within that 30-day period. 
Currently, we're personally bundled in a 90-day period for most 
of these cases.
    Ms. Dahlkemper. Dr. Harris?
    Dr. Harris. Yes. I noticed of bundling physician services 
with other physicians, with other hospitals, with hospitals, is 
among those options that we feel need to be studied more. And 
in truth, don't have enough data on to answer specifically how 
it would work.
    The one bundling though that we believe there are good data 
on is bundling of service in that patient-centered medical home 
because the current payment system which as you know is based 
largely on a fee-for-service type of thing, the only thing that 
that uniformly achieves is that people are rewarded for seeing 
more patients or doing more procedures. So bundling is the 
notion that obviously you would like to fund a team, including 
nurse practitioners, PAs, dieticians, I mean people to help you 
by taking a portion of the load. We believe that's a much more 
effective way to reform the healthcare system, the financing of 
it.
    Ms. Dahlkemper. Thank you. Dr. Heyman, did you have 
anything you wanted to--
    Dr. Heyman. Well, I would just say if by bundling you mean 
combining physicians and payments with hospital payments, I 
find a certain irony there because when you're talking about 
accountable healthcare organizations, that kind of thing, on 
the one hand we hear of this tremendous resistance to 
physician-owned hospitals and yet on the other hand we're 
proposing all kinds of ways to make physicians and hospitals 
work together and have the same incentives and it doesn't make 
any sense to me that the same people are talking about both 
things. It seems to me that this is a great argument for 
physician-owned hospitals.
    Ms. Dahlkemper. Thank you. My time is up.
    Chairwoman Velazquez. Mr. Griffith.
    Mr. Griffith. I thank the panel for being here and Dr. 
Harris, I think that with the shortness of time I think you've 
identified the problem, is the lack of primary care. I believe 
that we recognize that two percent of our classes are going 
into primary care and our primary care providers are aging and 
moving off the stage, so to speak.
    The obvious to me is that why aren't we using our nurse 
practitioners, our PAs, more aggressively and why aren't we 
empowering them and each state to be our primary care providers 
because if we started today it would be a decade or maybe more 
even if we could incentivize the primary care provider to go 
into primary care, so to speak, and if we could incentivize 
them to be distributed properly, it would be a long time 
coming.
    I believe that the American College and the AMA and the 
American College of Surgeons could go a long way as far as our 
healthcare problem is concerned, if we could identify the 
restrictions that are centuries old on what someone can do for 
a patient, whether it be order a mammogram or an x-ray or work 
up that patient. And the other thing that we're not saying is 
is that physicians are trained with an emergency room 
mentality. And we know that half of all of our deaths for the 
next century are going to be lifestyle-related deaths. And 
trained physicians are very poorly trained to take care of the 
young family, advise the mother on nutrition, walk through them 
a holistic type approach and I believe that that's where we're 
going to fall down as far as our obesity, diabetes, 
hypertension, neonatal care, and many of us from rural areas 
have seen this over and over and over again. And it appears 
that we're training these well-trained PAs, they're taking care 
of our men and women in Iraq right now. They're in every U.S. 
embassy, but yet we don't allow them to practice in the United 
States.
    Dr. Harris. Mr. Griffith, the American College of 
Physicians couldn't agree with you more that we need a team-
based approach to healthcare. And modeled again in the 
expansion of primary care with offices with a team of people 
including nurse practitioners and PAs.
    We met with many of the leaders of the nurse practitioner 
organizations just last July to talk about how we could work 
collaboratively to try to improve the quality of healthcare. We 
just published a paper that said that we believe in the CMS 
demonstration projects, that they should also consider looking 
at nurse practitioner led medical homes. As you know, that's 
controversial, but the reason we did that is it would be 
utterly pragmatic. I think I'm right about this. Twenty-eight, 
if I have the number right, of the states, plus the District of 
Columbia, allow nurse practitioners to practice without 
physician supervision. And of the remainder that require 
physician supervision, only one requires that the physician be 
on the premises. Thus, it makes sense to look at that model.
    Now the second part of your question about essentially 
scope of practice, that is defined by each state and it differs 
from state to state. We applaud the notion of people practicing 
within this scope of practice, but not exceeding it. We still 
believe that the best medical home is one headed by a 
physician, and particularly, particularly, with the chronically 
ill patients in this country. Twenty-three percent of every one 
on Medicare has five or more chronic illnesses. We believe they 
certainly fit into the scope of practice of a well-trained 
physician, primary care physician.
    Mr. Griffith. Well, I appreciate that and I would say to 
Dr. Moffit that in every physician's exam rooms is a 
plaintiff's attorney, so if you're wondering why those patients 
are readmitted from a nursing home or an intermediate care 
facility, it's because the family is there and the physician is 
there and he is basically saying to himself, I really don't 
have a choice. I know I shouldn't readmit, the patient is 
terminal, but there's the plaintiff's attorney lurking there 
somewhere. I think that is an issue that we haven't discussed, 
but has to be addressed.
    Dr. Moffit. There's a good case for medical malpractice 
reform.
    Chairwoman Velazquez. Time has expired. Ms. Clarke.
    Ms. Clarke. Thank you very much, Madam Chairwoman and 
Ranking Member Graves for holding this hearing today on a topic 
that is so critical to my District, and indeed, to our nation. 
As Congress works to finalize the FY 2010 budget, we must 
closely examine Medicare, Medicaid. The Obama Administration 
proposes changes to these programs that may impact small 
healthcare providers and the success of healthcare reform.
    Medicare/Medicaid are nationwide programs that provide 
healthcare coverage for over 43 million elderly and disabled 
Americans. These programs, particularly Medicaid, is vital to 
many low-income New Yorkers--I'm a New Yorker--who rely on this 
program for primary care. The examination of the President's 
budget proposal and how it may impact small healthcare 
providers is an imperative for the success of our emerging 
healthcare delivery system and the growth of its economic 
viability within our local communities.
    My first question is to Dr. Harris. You stated in your 
testimony that the Institute of Medicine reported that the 
additional primary care physicians are--that additional primary 
care physicians are now needed to meet the demand in currently 
undeserved areas. I just learned that in total over 1.9 million 
Medicare enrollees currently live in areas with inadequate 
access to primary care physicians including Flatbush, Brooklyn 
which is located in my District.
    As a matter of public policy, what do you think that 
Congress should consider to address the currently underlying 
shortage in available primary care resources and what could we 
do to attract these physicians to undeserved areas?
    Dr. Harris. Madam Clarke, as you suggest, there is a 
shortage now, even with 46 million uninsured people, we're 
16,000 short, according to the Institute of Medicine and the 
Health Affairs projects it's going to be a 40,000 shortage, 
that's even allowing for the nursing issue. So it is an 
enormous issue.
    I think two things come to mind. One, part of the patient-
centered medical home demonstration projects has to do with 
Medicaid. As I recall, there are 25 states in the United States 
which are now trying Medicaid demonstration projects to see if 
the patient-centered medical home concept can help reduce the 
cost and improve the quality for those who are on Medicaid in 
those 25 states.
    The second issue gets to your point of the distribution of 
physicians. A very difficult issue. I mean the practical one 
that one can do now, we understand that Congresswoman Allyson 
Schwartz, I believe, is introducing legislation that will 
propose loan forgiveness for kids of about $30,000, $35,000 a 
year to help overcome their debts from medical school in 
exchange for time that they will spend in undeserved areas.
    What the College would say and encourage you is when you're 
defining these undeserved areas, think about primary care in 
undeserved areas, not all physicians because that truly, as 
your District is where the need is so utterly acute.
    Ms. Clarke. Can you, Dr. Harris, can you determine how 
primary care physician availability may be affected by possible 
hospital closures? Do you know if most area hospitals can 
accommodate displaced ambulatory care resulting from a 
reduction in primary care?
    Dr. Harris. No, I mean you would have two dreadful things 
happening simultaneously. You would have a shortage of the 
primary care physicians who ostensibly could follow people in 
an outpatient setting and provide preventive care, their acute 
illnesses, their long-term chronic care.
    Then you would have the hospitals to which many of them now 
turn, absent primary care physician, particularly for the acute 
care. So it would simply compound the problem, but you know, at 
the risk of beating a dead horse, we believe therate limiting 
factor and if I can add, if I may, for the Committee just 
parenthetically, the American College of Physicians championing 
this notion of primary care is not as self-serving as it 
sounds. Half of our membership is subspecialists. This is a 
difficult message we have to convey to them. But we have tried 
to do it in an objective fashion and the data again, in this 
country and overseas, utterly compelling, that the best way to 
reduce costs and improve quality coast to coast is trying to 
get our 30 percent of that workforce up closer to the 50 
percent as all those other 12 countries have which have 
everything so much less expensively than we do and with better 
outcomes than we do.
    Ms. Clarke. Thank you very much, Madam Chair. Thank you to 
all of you for your testimony today. It's been quite compelling 
and I'm sure we'll be relying on your expertise going forward 
as we look at what we do with our healthcare system for the 
21st century. Thank you very much, gentlemen.
    Chairwoman Velazquez. Mr. Thompson, do you have any other 
questions?
    Mr. Thompson. First of all, I thank the Chairwoman for 
this. This is--more dialogues like this, the better. I want to 
thank my colleagues, Mr. Griffith, Ms. Clarke by following up 
on the workforce issues. This is about, a lot about access of 
healthcare. We're all concerned with access, affordability and 
quality. But we can't have access when we don't have qualified 
providers out there. So the fact that we've gone down that 
road, I appreciate your responses. If we don't have qualified 
providers, it doesn't matter what the reimbursement system is. 
It doesn't matter how we're structured and so the supply side 
of healthcare is something we need to attend to as well. So I 
just appreciate the panel's expertise and input this afternoon. 
Thank you.
    Chairwoman Velazquez. Thank you, Mr. Thompson. I want to 
take this opportunity to thank all of you for being here today, 
for being part of this discussion. I just want to make sure 
that small businesses are represented at the table because a 
lot of medical solo practitioners are small businesses and 
given the challenges that we face in terms of healthcare costs, 
our budget, the fact that 47 million are uninsured without any 
type of health coverage in the richest country in the world, 
inaction is not an option.
    I feel very optimistic that we're going to get it done, but 
we have got to do it right and that is why it's so important to 
continue this type of discussion until we have a bipartisan 
comprehensive legislation that truly addresses the most 
dramatic issue of the rights of healthcare costs and the fact 
that still so many do not have access to quality healthcare 
coverage, including our children. So with that, I thank you all 
and I ask unanimous consent that Members will have five days to 
submit a statement and supportive materials for the record. 
Without objection, so ordered. This hearing is now adjourned.
    [Whereupon, at 2:59 p.m., the hearing was adjourned.]

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