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

      H.R. 4700, THE TRANSPARENCY IN ALL HEALTH CARE PRICING ACT OF 2010;
     H.R. 2249, THE HEALTH CARE PRICE TRANSPARENCY PROMOTION ACT OF 2009;
                 AND H.R. 4803, THE PATIENTS' RIGHT TO KNOW ACT

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

                                    HEARING

                                   BEFORE THE

                             SUBCOMMITTEE ON HEALTH

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  MAY 6, 2010

                                   __________

                               Serial No. 111-119

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

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                        COMMITTEE ON ENERGY AND COMMERCE

                     HENRY A. WAXMAN, California, Chairman
    JOHN D. DINGELL, Michigan            JOE BARTON, Texas
      Chairman Emeritus                    Ranking Member
    EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
    RICK BOUCHER, Virginia               FRED UPTON, Michigan
    FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
    BART GORDON, Tennessee               NATHAN DEAL, Georgia
    BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
    ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
    BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
    ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
    GENE GREEN, Texas                    STEVE BUYER, Indiana
    DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
      Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
    LOIS CAPPS, California               MARY BONO MACK, California
    MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
    JANE HARMAN, California              LEE TERRY, Nebraska
    TOM ALLEN, Maine                     MIKE ROGERS, Michigan
    JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
    CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
    JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
    TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
    MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
    ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
    JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
    G.K. BUTTERFIELD, North Carolina
    CHARLIE MELANCON, Louisiana
    JOHN BARROW, Georgia
    BARON P. HILL, Indiana
    DORIS O. MATSUI, California
    DONNA M. CHRISTENSEN, Virgin
        Islands
    KATHY CASTOR, Florida
    JOHN P. SARBANES, Maryland
    CHRISTOPHER S. MURPHY, Connecticut
    ZACHARY T. SPACE, Ohio
    JERRY McNERNEY, California
    BETTY SUTTON, Ohio
    BRUCE L. BRALEY, Iowa
    PETER WELCH, Vermont
                             Subcommittee on Health

                    FRANK PALLONE, Jr., New Jersey, Chairman
    JOHN D. DINGELL, Michigan            NATHAN DEAL, Georgia,
    BART GORDON, Tennessee                   Ranking Member
    ANNA G. ESHOO, California            RALPH M. HALL, Texas
    ELIOT L. ENGEL, New York             BARBARA CUBIN, Wyoming
    GENE GREEN, Texas                    JOHN B. SHADEGG, Arizona
    DIANA DeGETTE, Colorado              STEVE BUYER, Indiana
    LOIS CAPPS, California               JOSEPH R. PITTS, Pennsylvania
    JANICE D. SCHAKOWSKY, Illinois       MARY BONO MACK, California
    TAMMY BALDWIN, Wisconsin             MIKE FERGUSON, New Jersey
    MIKE ROSS, Arkansas                  MIKE ROGERS, Michigan
    ANTHONY D. WEINER, New York          SUE WILKINS MYRICK, North Carolina
    JIM MATHESON, Utah                   JOHN SULLIVAN, Oklahoma
    JANE HARMAN, California              TIM MURPHY, Pennsylvania
    CHARLES A. GONZALEZ, Texas           MICHAEL C. BURGESS, Texas
    JOHN BARROW, Georgia
    DONNA M. CHRISTENSEN, Virgin
        Islands
    KATHY CASTOR, Florida
    JOHN P. SARBANES, Maryland
    CHRISTOPHER S. MURPHY, Connecticut
    ZACHARY T. SPACE, Ohio
    BETTY SUTTON, Ohio
    BRUCE L. BRALEY, Iowa

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, opening statement.........................     1
    Hon. John Shimkus, a Representative in Congress from the State of
      Illinois, opening statement....................................     3
    Hon. Gene Green, a Representative in Congress from the State of
      Texas, opening statement.......................................     8
    Hon. Joe Barton, a Representative in Congress from the State of
      Texas, opening statement.......................................     9
    Hon. Tammy Baldwin, a Representative in Congress from the State
      of Wisconsin, opening statement................................    10
    Hon. Joseph R. Pitts, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................    11
    Hon. John Sullivan, a Representative in Congress from the State
      of Oklahoma, opening statement.................................    12
    Hon. Bruce L. Braley, a Representative in Congress from the State
      of Iowa, opening statement.....................................    13
    Hon. Michael C. Burgess, a Representative in Congress from the
      State of Texas, opening statement..............................    13
    Hon. Kathy Castor, a Representative in Congress from the State of
      Florida, opening statement.....................................    19
    Hon. Phil Gingrey, a Representative in Congress from the State of
      Georgia, opening statement.....................................    20
    Hon. Donna M. Christensen, a Representative in Congress from the
      Virgin Islands, opening statement..............................    21
    Hon. Tim Murphy, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................    21
    Hon. Betty Sutton, a Representative in Congress from the State of
      Ohio, opening statement........................................    23
    Hon. Robert E. Latta, a Representative in Congress from the State
      of Ohio, prepared statement....................................   106

                                   Witnesses

    Steve Kagen, Member of Congress..................................    23
        Prepared statement...........................................    27
    Steven J. Summer, President and Chief Executive Officer, Colorado
      Hospital Association, on Behalf of the American Hospital
      Association....................................................    31
        Prepared statement...........................................    34
    Regina Herzlinger, Ph.D., Professor of Business Administration,
      Harvard Business School........................................    40
        Prepared statement...........................................    42
    Michael Cowie, Partner, Howrey, LLP..............................    66
        Prepared statement...........................................    68
    Walter Rugland, Chairman of the Board, ThedaCare, Inc............    73
        Prepared statement...........................................    75
    Terry Gardiner, National Policy Director, Small Business Majority    80
        Prepared statement...........................................    82
    Christopher Holden, President and Chief Executive Officer, AmSurg    84
        Prepared statement...........................................    86

                               Submitted Material

    Statement of Hon. Daniel Lipinski, a Representative in Congress
      from the State of Illinois.....................................     5
    Statement of Michael C. Burgess, a Representative in Congress
      from the State of Texas........................................    16
    Letter of May 29, 2009, from the American Hospital Association to
      Mr. Burgess....................................................   105
    Statement of Financial Healthcare Systems........................   108

      H.R. 4700, THE TRANSPARENCY IN ALL HEALTH CARE PRICING ACT OF 2010;
     H.R. 2249, THE HEALTH CARE PRICE TRANSPARENCY PROMOTION ACT OF 2009;
                 AND H.R. 4803, THE PATIENTS' RIGHT TO KNOW ACT

                                  ----------

                             THURSDAY, MAY 6, 2010

                      House of Representatives,
                                Subcommittee on Health,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The Subcommittee met, pursuant to call, at 10:05 a.m., in
    Room 2123 of the Rayburn House Office Building, Hon. Frank
    Pallone, Jr. [Chairman of the Subcommittee] presiding.
        Members present: Representatives Pallone, Green, Baldwin,
    Barrow, Christensen, Castor, Sutton, Braley, Waxman (ex
    officio), Shimkus, Buyer, Pitts, Sullivan, Murphy of
    Pennsylvania, Burgess, Gingrey and Barton (ex officio).
        Staff present: Purvee Kempf, Counsel; Robert Clark, Policy
    Advisor; Alvin Banks, Special Assistant; Allison Corr, Special
    Assistant; Mitchell Smiley, Special Assistant; David Cavicke,
    Minority Chief of Staff; Brandon Clark, Minority Professional
    Staff Member, Health; Marie Fishpaw, Minority Counsel, Health;
    Peter Kielty, Minority Senior Legislative Analyst; Ryan Long,
    Minority Chief Counsel, Health; Cedric James, Minority Staff
    Assistant; and Kathryn Wheelbarger, Minority Deputy Chief of
    Staff.

    OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
                IN CONGRESS FROM THE STATE OF NEW JERSEY

        Mr. Pallone. This meeting of the Health Subcommittee is
    called to order.
        Today we are having a legislative hearing on three bills:
    H.R. 4700, the Transparency in All Health Pricing Act of 2010,
    H.R. 2249, the Health Care Price Transparency Promotion Act of
    2009, and H.R. 2803, the Patients' Right to Know Act, and I
    start by recognizing myself for an opening statement.
        These three different bills all having to do with improving
    price transparency in health care are very important in my
    opinion, and I did want to say that they are in some cases
    introduced by members of the subcommittee, in other cases by
    other members, but I wanted to point out that H.R. 4700 is
    introduced by my good friend from Wisconsin, Representative
    Steve Kagen, who we are going to hear from shortly. H.R. 2249
    is introduced by two of our subcommittee members,
    Representative Michael Burgess and Gene Green, bipartisan. And
    H.R. 4803 is introduced by our full committee's ranking member,
    Mr. Barton, as well as Mr. Burgess, Mr. Green and Mr. Stupak,
    again a bipartisan initiative.
        Without a doubt, our Nation's health care system is
    complicated and it can be overwhelming to patients at times,
    especially when they are unable to make informed decisions.
    Someone once said to me that understanding health care is like
    trying to put together a 1,000-piece jigsaw puzzle of a snowy
    scene in the dark, and the bills we are hearing about today are
    trying to shine some light on this confusing picture and to
    help patients and their providers make better decisions. And so
    I want to commend the sponsors for their efforts to increase
    transparency and improve public access to information in the
    health care sector. I believe this is a worthy goal, and if
    done correctly has the potential to lead to a more efficient
    health care system.
        Providing the right information at the right time and the
    right setting has tremendous power. It can provide equity in
    our health care system, something that I know Mr. Kagen cares
    deeply about and talks about with great passion, not only today
    but many times on the floor. It can arm patients and providers
    with the information they need to be make better decisions that
    will improve quality and achieve better health outcomes.
        While I think transparency is generally a good thing, as do
    many of my colleagues, experts have cautioned us to proceed
    carefully. They have told us that transparency has its
    limitations, primarily because health care markets do not
    function the same way other markets do. They tell us that
    purchasing medical treatment is not like going out and buying a
    new TV or a new car. The most costly health care services are
    often provided in emergency situations or when a patient is
    unable to make decisions about his or her treatment. And most
    of our health care dollars are spent on the chronically ill or
    towards the end of a patient's life. These types of
    circumstances can limit the ability of transparency to empower
    patients, lower costs and improve efficiency.
        Even in instances where a patient may have the luxury to
    comparison shop, there are other barriers that they could face.
    Patients' choices are often limited by the type of insurance
    plan they have and its requirements. For example, a patient may
    be able to search for a clinic or hospital that has earned high
    marks for providing quality care at a lower cost but it might
    be outside of the plan's preferred provider network.
    Furthermore, while improving price transparency could help
    patients make more-informed decisions, experts also tell us
    that patients trust their doctors and the treatment that they
    recommend, and patients may not want to go against their
    doctor's decision in order to find the lowest price.
        So the concern, I guess, is about unintended consequences
    of too much transparency. The Congressional Budget Office has
    opined on this issue. They have said that the markets for some
    health care services are highly concentrated so increasing
    transparency in such markets could lead to higher rather than
    lower prices because higher prices are easier to maintain when
    the prices charged by each provider involved can be observed by
    all of the others, and the CBO points to the pharmaceutical
    marketplace as a key example of where this kind of scenario
    might play itself out.
        So as we talk about improving price transparency, I think
    it makes sense to be cognizant of these concerns. Also, I think
    it is important to note, as many of our witnesses do in their
    testimony, that more transparency is just one component of a
    larger strategy designed to improve our health care system.
    Arming patients with the right information is tremendously
    important but making sure that patients are able to access the
    care they need is of equal if not more importance, and the
    health reform law that was just enacted will go a long way to
    make sure that people will have quality and affordable health
    care coverage and can access the care that they need.
        I also wanted to mention about health information
    technology because it can play a significant role at building a
    more efficient health care system and it goes hand in hand with
    the calls for greater transparency. HIT can improve the flow of
    information between patients and providers. While too few
    physicians and hospitals use HIT or electronic medical records
    today, the American Recovery and Reinvestment Act makes a
    significant investment in encouraging our Nation's physicians
    and hospitals to modernize their systems and share information.
        So again, I want to thank all the members who have
    introduced bills on this issue. I think improving transparency
    can be a powerful tool that can dramatically improve our health
    care system and empower patients and their doctors. We just
    have to make sure it is done correctly, and I am looking
    forward to the testimony.
        I will now recognize our ranking member, Mr. Shimkus, and
    then we will go through the remaining opening statements. Thank
    you.

      OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Shimkus. Thank you, Chairman Pallone, for holding this
    hearing on an important consumer right-to-know issue in the
    health care delivery system.
        Whether taking the kids for their annual checkup or getting
    an MRI, the true cost of health care services is nearly
    impossible to come by for the average every day consumer. I
    challenge anyone here today to make calls and shop around for
    the best price the next time they need to see a doctor. See
    what it would cost if you paid cash. You will hear silence on
    the other end of the line. The reality is, most of the time
    this information and pricing are not made available to patients
    seeking care, and patients rarely ever find out the true cost
    of services. Without this information, we take the power away
    from consumers and prevent a market-based health care system
    from functioning. Transparency will drive costs down, determine
    quality and help consumers decide the best value at a price
    they are willing to pay.
        The bills before the committee today are all steps in the
    direction of empowering the consumer with information. I look
    forward to hearing the perception of our witnesses on the issue
    of transparency. I particularly want to thank our colleague,
    Representative Steve Kagen, for taking time out of his day to
    testify. I appreciate the bills cosponsored by colleagues on
    this committee.
        I also want to mention my colleague, the Democrat from
    Illinois, Mr. Lipinski, who has worked years on bringing
    transparency issues to the forefront. While it is disappointing
    his legislation, H.R. 2566, isn't before the committee for
    consideration today, I would ask unanimous consent to submit
    for the record a statement from Congressman Lipinski on his
    bill.
        [The prepared statement of Mr. Lipinski follows:]

        [GRAPHIC] [TIFF OMITTED] T6574A.001

        [GRAPHIC] [TIFF OMITTED] T6574A.002

        Mr. Pallone. Without objection, so ordered.
        Mr. Shimkus. Thank you, Mr. Chairman.
        But our transparency discussion in this committee shouldn't
    be confined to pricing health care. Another week and another
    missed opportunity to hold a hearing to bring about
    transparency on issues we already know exist in the new health
    reform law. As Chairman Waxman said just last week, we can walk
    and chew gum at the same time. We have done a lot of walking
    since the health reform became law; time to start chewing.
        And yet again, we have even more new questions to add to
    the list of reasons why we must hold hearings on this new
    health reform law. Is the recent CRS memo correct that Congress
    could be fined up to $50 million annually by its own health
    care law if low-paid aides apply for government subsides to
    help pay for their health care costs? Will State and local
    governments be subject to fines as well? Is it even
    constitutional for government to pay fines to the government?
    Why do three-quarters of CFOs recently surveyed believe that
    health reform law will be bad for America and bad for their
    companies? Why do those same CFOs expect their costs to
    increase more than 8 percent over the next 12 months as a
    direct result of this health reform law? How is this bending
    the cost curve down as promised by the President and the
    majority? And for the workers of these companies, 60 percent of
    CFOs said they will increase copays. Forty-eight percent
    believe they will have to reduce the quality of health care
    packages they offer employees. Forty-six percent say they will
    have to reduce overall employee benefits. For all those
    employees, can we explain how the prospects of paying more and
    getting less fall under the promise of if you like what you
    have, you can keep it?
        The committee was quick to want to act when companies when
    John Deere, Cat and AT&T announced their financial obligations,
    which is worth noting was required of them by law. Given this
    survey, we will act quickly to bring in company CFOs to explain
    how this law will affect their business and employees, and what
    about Secretary Sebelius's comments this week that we must
    address the shortage of primary care physicians? How does the
    Administration intend on doing so? Do we face similar problems
    in specialty care?
        Last week, Ranking Member Barton and all Republicans on the
    committee sent a letter to the majority requesting a hearing on
    the CMS chief actuary's cost estimate. This request so far has
    been ignored. We should not only have CMS but we should also
    call upon Secretary Sebelius to testify on this and other
    issues we already know need to be reformed in this new health
    reform law.
        Mr. Chairman, the questions continue and the concerns are
    mounting. The majority continues to ignore all of these
    concerns, and I would again plead with the chairman to stop
    ignoring the issues at hand and let the subcommittee do its job
    and hold hearings on the health reform law or explain to the
    American people why we are not, and I yield back my time.
        Mr. Pallone. Thank you.
        The gentleman from Texas, Mr. Green, is recognized for an
    opening statement.

       OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF TEXAS

        Mr. Green. Mr. Chairman, I want to thank you for holding
    the hearing today on the price transparency in our health care
    system. I have been working on this issue with our colleague
    from Texas, Dr. Burgess, for several Congresses, and most
    recently the Ranking Member Barton and Chairman Stupak.
        Dr. Burgess and I introduced H.R. 2249, the Health Care
    Price Transparency Promotion Act of 2009, for several years.
    This legislation has been endorsed by the American Hospital
    Association. H.R. 2249 builds on the existing 41 State price
    transparency systems and requires States on the condition of
    receiving Medicaid funds to disclose information on certain
    hospital inpatient and outpatient charges and make this
    information available for the public. Under this legislation,
    all types of hospitals would be required to submit the
    information. It further requires insurers to provide
    information upon request and estimate out-of-pocket costs for
    certain health care services within 18 months of the enactment
    of the Agency for Health Care Research and Quality, would
    provide recommendations on the types of health care pricing
    information consumers find most useful to making health care
    decisions.
        Dr. Burgess and I intended to offer this amendment during
    the markup to H.R. 3200, America's Affordable Health Care for
    Choices Act, but there was overwhelming bipartisan interest in
    the issue. During the markup, Chairman Stupak and I worked
    across the aisle with Ranking Member Barton and Dr. Burgess and
    offered a compromise amendment that was adopted by this
    committee on a vote of 51 to zero, and let me remind you, that
    was on the health care bill.
        The original provisions were included in H.R. 3962, the
    Affordable Health Care for America Act, as passed by the House
    in section 1783. For several months, Ranking Member Barton and
    Chairman Stupak, Dr. Burgess and I worked to introduce H.R.
    4803, the Patients' Right to Know Act, which was modeled after
    the original Barton-Green-Burgess-Stupak amendment and has been
    endorsed by the Ambulatory Surgery Center Advocacy Committee.
        The Patients' Right to Know Act establishes requirements on
    health benefit plans to provide specific information to current
    and potential enrollees. Covered health benefit plans are
    defined as plans that are offered by health insurance
    companies, Medicare, Medicaid, CHIP and the FEBP. The specified
    information to be disclosed about the plans includes covered
    items and services and lists of limitations, restrictions,
    details about the claims appeals process and out-of-pocket cost
    sharing. This legislation also builds on the original Burgess-
    Green bill by requiring State Medicaid programs to administer a
    price and quality transparency program.
        H.R. 4803 also requires that no later than 2 years after
    enactment, States establish and maintain laws that require
    disclosure to the public and the Secretary of Health and Human
    Services of information on prices for and quality of certain
    services at hospitals and ambulatory centers. Although price
    transparency provisions were included in H.R. 3590, mostly in
    sections 1002 and 1003, these provisions are primarily focused
    on insurance plans and the State exchanges through regulations
    issued by HHS. I believe this hearing today will allow us to
    look at several issues we must tackle including whether price
    transparency programs should be State based or housed at HHS
    and the type of information that would be useful to consumers
    to help lower health care costs. These are topics we must
    address before we can enact meaningful price transparency
    legislation and I hope our witnesses before us today will be
    able to provide us with that insight.
        And like my colleagues, Mr. Chairman, I would like to
    welcome our colleague from northeast Wisconsin because he
    didn't wear his cheesehead today but I know he has one, and I
    want to thank him for appearing.
        Mr. Pallone. Thank you, Mr. Green.
        Our ranking member, the gentleman from Texas, Mr. Barton.

       OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF TEXAS

        Mr. Barton. Thank you, Mr. Chairman. Thank you,
    Congressman, for participating in this hearing.
        I basically want to echo most of what, if not all of what,
    Congressman Green just said. His chronology of the efforts that
    have been made by himself and Mr. Stupak and Dr. Burgess and
    myself on this issue are right on the point. As he pointed out,
    in my opinion one of the few bright spots in the health care
    bill that the House passed was the amendment that he and I and
    Mr. Stupak and Dr. Burgess offered that was accepted, as he
    said, 51 to nothing. Unfortunately, that was stripped out or it
    wasn't included in the bill that came over from the other body.
    There are some patient transparency provisions in the current
    health care law but they primarily apply to individuals who
    purchase individual coverage. That is a start but that is by no
    means adequate in my opinion.
        So it is helpful to have this hearing on H.R. 4803, H.R.
    4700, H.R. 2249. If you believe the market-based system is the
    best approach for health care in America, you should be strong
    supporters of one or all of these bills. You have to provide
    consumers with transparency with not only pricing information,
    in my opinion, but also quality information, availability of
    care information. That just simply doesn't happen under the
    current system, Mr. Chairman. Health care is one of the few
    things in America that you basically take it on faith where to
    go to the hospital, which doctor to request services for and
    how those services are going to be provided. We don't even buy
    used cars like we buy health care in America. So this is a good
    start, Mr. Chairman.
        I do want to echo what Ranking Member Shimkus also said. We
    are apparently not going to be doing a lot on the House Floor
    this summer. It would be good to go through and try to digest
    the health care bill that is now the law of the land. Opinion
    polls generally tend to indicate about a two to one opposition
    to it. Those of you that are supporters of it, you ought to be
    able to hold a series of hearings to prove what a good thing it
    is, and those of us that are skeptics of it will participate in
    a good-faith fashion and ask questions and point out areas that
    we think might be improved.
        This particular issue you are hearing about today is a good
    first step. I would hope that one of these bills or some
    combination of these bills could actually be marked up this
    summer and moved. That would be a good first step, good-faith
    effort that we are going to try to correct the flaws in the
    current health care law.
        And with that, Mr. Chairman, again, I sincerely thank you
    for this hearing, and I look forward to working with you, Mr.
    Waxman, Mr. Stupak, Mr. Green, Dr. Burgess, Dr. Gingrey and
    others to move this particular issue forward. Thank you.
        Mr. Pallone. Thank you, Mr. Barton.
        Next is our chairman, the gentleman from California, Mr.
    Waxman.
        Mr. Waxman. Thank you very much, Mr. Chairman. I am pleased
    that this hearing is well received on a bipartisan basis. I
    think we all want to see greater transparency in the health
    care system so that we can see that the consumer is well served
    by having all the information that will help them make
    decisions. I don't think this issue is the first step. The
    first step we took when we passed the national health insurance
    because the first step is to make sure that people have access
    to care, to insurance, and with that, we hope there will be a
    competitive marketplace through the exchanges and we hope
    through greater transparency that marketplace will work.
        I want to commend Congressman Kagen for his leadership in
    this issue. It is an important one, and I am pleased, Mr.
    Chairman, you are holding this hearing so we can look at it in
    more depth.
        Mr. Pallone. Thank you, Chairman Waxman.
        The gentleman from Indiana, Mr. Buyer, reserves his time.
        The gentlewoman from Wisconsin, Ms. Baldwin.
        Ms. Baldwin. Thank you, Mr. Chairman. I appreciate the fact
    that you are holding today's hearing.
        Before I begin, I would like to ask unanimous consent to
    submit for the record testimony of the Wisconsin Hospital
    Association.
        [The information was unavailable at the time of printing.]
        Mr. Pallone. Without objection, so ordered.

     OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF WISCONSIN

        Ms. Baldwin. Thank you.
        I would like to give a warm welcome to two individuals from
    Wisconsin. One is the Hon. Dr. Steve Kagen. Welcome to the
    Energy and Commerce Committee. And the other is Walt Rugland of
    ThedaCare, a leading health care system providing excellence
    and value to folks in the northern part of the state of
    Wisconsin.
        In light of the strong Badger contingency here today, I
    would like to share with the committee some stories about
    Wisconsin. Our State is home to a vibrant set of activities
    related to transparency in health care. In part because of our
    efforts to share quality measures between institutions, the
    Agency for Health Care Research and Quality in its national
    health care quality report once again named Wisconsin a leader
    in aggregate measures of quality at the top of the ranking of
    overall performance. In March, our governor, Jim Doyle, signed
    the health care transparency bill into law. That means that
    starting in 2011 health care providers will be required to
    disclose the costs of the 75 most common inpatient procedures
    and 25 most common outpatient procedures so that consumers can
    make apples-to-apples comparisons on prices. The Wisconsin
    Hospital Association already has in place a voluntary Web site
    known as Price Point which uses data from hospital systems to
    compare the cost of various procedures. Through that site, some
    hospital systems already provide patients with cost estimates
    before their procedures. And yet much work remains to be done.
        ThedaCare is a founding member of the Wisconsin
    Collaborative for Health Care Quality, a voluntary group of
    health care organizations which has served as a leader in
    improving the quality and cost effectiveness of health care for
    the people of Wisconsin. This group is expanding their existing
    reporting to include measures of specialty care and episode-
    based resource use, and in an effort to make this information
    more salient for the layperson, the group is planning to launch
    a consumer-friendly Web site later this year. The site will be
    a destination and a source of information on both quality and
    price. I am proud of my State for its accomplishments and what
    lies ahead.
        And again, thank you, Mr. Chairman, for calling this
    hearing. I look forward to learning more about the various
    pieces of legislation from our witnesses today. Thank you, Mr.
    Chairman.
        Mr. Pallone. Thank you.
        The gentleman from Pennsylvania, Mr. Pitts.

    OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN
             CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

        Mr. Pitts. Thank you, Mr. Chairman.
        The health care sector is unlike any other part of our
    economy. Nowhere else do we consume a good or service without
    knowing the cost upfront. Nowhere else are we OK with one
    person paying one price for a good or service and the next
    person paying a different, sometimes wildly different price for
    that same good or service. When I am in the supermarket, I can
    comparison shop among different brands. I know what a loaf of
    bread will cost me before I reach the register and I know that
    the person in line behind me will pay the same amount for that
    same loaf of bread. Because of the information on the
    supermarket shelves and on the products themselves, we can
    comparison shop based on my criteria including quality and
    cost. This leads to competition and competition leads to lower
    prices and better quality.
        That is not so in the health sector. Patients don't know
    what their care and treatment will cost and providers don't
    know how much insurance will reimburse them for those things,
    and I can't make an educated decision on whether to go to
    hospital A or hospital B for a routine test, a test that one
    hospital can be dramatically more expensive or dramatically
    cheaper than at the other hospital but I don't know that. In no
    other situation would I as a consumer tolerate this lack of
    transparency and basic information. Health care is complex but
    giving consumers the tools they need to make intelligent
    choices makes it a little less complicated. As a result, we can
    expect better care and greater efficiency at lower cost.
        The bills before us all today all seek to provide that
    transparency in different ways, and I am proud to be a
    cosponsor of H.R. 4803, the Patients' Right to Know Act, which
    is based on an amendment that was unanimously approved during
    committee markup of the health care reform legislation last
    year. This bill will require health plans, public and private,
    to provide enrollees with specific information including what
    the plan does and does not cover, any limitations or
    restrictions on coverage, how to appeal a coverage decision,
    all cost-sharing requirements, the number of participating
    providers, what the plan spends on administrative cost, how the
    plan combats waste, fraud and abuse, and other information.
    Health plans would also have to provide the total of all out-
    of-pocket costs for a particular service provided by a specific
    provider along with quality data. Armed with this information,
    we can all make better choices for ourselves and our families.
    Transparency is vitally needed in health care, and I hope this
    is not the last time our subcommittee deals with this issue,
    and Mr. Chairman and Mr. Waxman, we still hope that you will
    have the CMS chief actuary, Mr. Foster, to a hearing of our
    committee or subcommittee on the cost estimates of the health
    care law.
        Thank you, and I yield back.
        Mr. Pallone. Thank you, Mr. Pitts.
        The gentleman from Georgia, Mr. Barrow, will waive an
    opening.
        Next is the gentleman from Oklahoma, Mr. Sullivan.

     OPENING STATEMENT OF HON. JOHN SULLIVAN, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF OKLAHOMA

        Mr. Sullivan. Thank you, Chairman Pallone, and thank you
    for calling this legislative hearing to examine several pieces
    of legislation, legislation seeking to improve transparency of
    health care pricing in the marketplace.
        While these bills are important, I would like to remind the
    chairman that there is a pending request from Ranking Member
    Barton before Chairman Waxman requesting a hearing on the new
    health care law from the CMS chief actuary. Last week, I along
    with my colleagues on this committee, sent a letter to Chairman
    Waxman requesting a hearing from the CMS chief actuary to
    testify about his recent report on future effects of the new
    health care law. This new report confirms what many of us have
    been saying all along: The cost of this new law far exceeds the
    numbers they used to sell it to the American people. Simply
    put, Obamacare will drastically raise health care premiums for
    families and small businesses across the country and it
    confirms that the new health care law clearly puts our Nation
    on a path to bankruptcy, limits health care options for seniors
    and increases the price families and small businesses have to
    pay for health care they receive. This is exactly why I voted
    against it.
        I encourage Chairman Waxman and the Obama Administration to
    agree to this commonsense hearing request to allow the CMS
    chief actuary to testify on these recent reports and future
    effects of the new health care law. I yield back the balance of
    my time.
        Mr. Pallone. Thank you, Mr. Sullivan.
        The gentleman from Iowa, Mr. Braley.

    OPENING STATEMENT OF HON. BRUCE L. BRALEY, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF IOWA

        Mr. Braley. Thank you, Mr. Chairman, for holding this
    important hearing. I would like to welcome my colleague, Dr.
    Kagen, to the hearing.
        I think Dr. Kagen's presence along with our colleagues, Dr.
    Burgess and Dr. Gingrey, highlights why this hearing on
    transparency is so important. When they graduated from medical
    school, the relationship between a doctor and a patient was
    dramatically different than it is today simply because of
    something called the Internet. When they graduated and
    completed their residencies, they had patients coming into
    their office talking to them about the administration of
    certain medical procedures and what was in their best interest
    and rarely did a patient come in having done 5 days of research
    on complex medical terminology and procedures before they went
    to meet with their doctor. So those who say that transparency
    in pricing is not an important component of health care
    delivery in the future don't appreciate that critical
    distinction.
        Medical consumers are much more sophisticated. That can be
    a dangerous thing, as every doctor would tell you, but it is a
    reality, and if they are demanding more information to be part
    of their treatment choices, they also are entitled to better
    information and information in language they can understand
    when it comes to pricing, and one of the witnesses who is here
    testifying on behalf of the American Hospital Association hits
    this on the head in the fourth recommendation where he writes
    in his written statement, ``We all need to agree on consumer-
    friendly pricing language, common terms, definitions and
    explanations to help consumers better understand the
    information provided.''
        That is why I have been such a forceful advocate for plain
    language in all government agency communications because we do
    a very poor job of communicating with taxpayers and the
    American public on critical issues that are affecting their
    lives in language they can understand, and that is why I fought
    to get plain-language requirements in the health care bill we
    just passed. That is why we need to continue focusing on that
    when we discuss transparency because giving consumers
    information means nothing if it is in a language that is too
    complex or arcane for them to understand, and that is why I am
    very, very proud of the work that has been done in these bills
    and I look forward to the testimony of our witnesses as we work
    together to provide a much more efficient health care delivery
    system that engages patients in their care decisions, and I
    yield back.
        Mr. Pallone. Thank you.
        Next is the gentleman from Texas, Mr. Burgess.

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

        Mr. Burgess. Thank you, Mr. Chairman, and I appreciate also
    that we are having this important legislative hearing. I
    welcome you, Dr. Kagen, our colleague. Welcome to Dr.
    Herzlinger, who is no stranger to this committee and we are
    glad you are back.
        The fact that we have advanced to the point that we are
    looking at specific bills and that we already have a consensus
    from both sides of the dais that we need to do more in the
    realm of health care transparency is important. A patient
    should be able to know what they are paying and how much they
    will pay out of pocket, and on this, really there is no
    disagreement.
        Mr. Chairman, I have been working on this issue ever since
    I was summoned into the office of former Speaker Danny Hastert
    and he charged me with developing legislation on the issue
    because of, then, our mutual support for the growing health
    savings account market, and in fact, I went back into the
    archives and dug up an op-ed from May of 2005 that I wrote, but
    nevertheless, in it I quoted Professor Uwe Reinhardt and in
    quoting Professor Reinhardt to move from the present chaotic
    pricing system toward a more streamlined system could support
    genuinely consumer-directed health care will be an awesome
    challenge, yet without major changes in the present chaos,
    forcing sick and anxious people to shop around blindfolded for
    cost-effective care mocks the very idea of consumer-directed
    care.
        Mr. Chairman, here is the simple truth. We can't expect
    patients to be good consumers if they can't know the cost of
    the services from which they are choosing, and it is important
    again to stress, this has always been a bipartisan effort and I
    certainly appreciate the efforts of Representative Green in
    working on this issue over the years. We could start by looking
    at transparency provisions within the health reform bill, and I
    think we can agree as we are holding this hearing that those
    provisions while present are not substantial enough. I believe
    that everyone should have access to reliable information.
        The Patients' Right to Know Act, the result of countless
    hours of staff negotiation between Mr. Barton, Mr. Green, Mr.
    Stupak, is a comprehensive measure that provides specific
    information to patients in regard to hospitals, ambulatory
    surgery centers and health plans. While some of the provisions
    of this measure were adopted under the reform bill, I think it
    once again speaks to the unanimous support of increased
    transparency on this committee that we were able to add a
    similar provision that passed unanimously to H.R. 3200 when it
    was presented in committee.
        I do want to spend a moment on H.R. 2249, the Health Care
    Price Transparency Promotion Act of 2009, which was the result
    of work on this issue with Mr. Green and has been largely
    incorporated into H.R. 4803. When I engaged in this issue, I
    realized that many States had already enacted some and others
    needed to be pushed along the way and others needed to improve
    what they were doing. That is why this bill sets a reasonable
    federal floor but defers to the States to figure out what works
    best for them, and I am pleased that I had the support of the
    American Hospital Association on this effort, and I would ask
    unanimous consent to insert their recommendation letter into
    the record.
        [The information appears at the conclusion of the hearing.]
        Mr. Pallone. Without objection, so ordered.
        Mr. Burgess. With all the talk of transparency in this
    Administration, this committee ought to pay not just lip
    service with this hearing but promptly move legislation that
    will help make the information on health care cost, price and
    quality more transparent and thereby empowering the consumer.
        I thank the chairman for the consideration. I will yield
    back the balance of my time.
        [The prepared statement of Mr. Burgess follows:]

        [GRAPHIC] [TIFF OMITTED] T6574A.003

        [GRAPHIC] [TIFF OMITTED] T6574A.004

        [GRAPHIC] [TIFF OMITTED] T6574A.005

        Mr. Pallone. Thank you, Mr. Burgess.
        Next is the gentlewoman from Florida, Ms. Castor.

      OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF FLORIDA

        Ms. Castor. Thank you, Chairman Pallone, for convening this
    very important hearing. It is very important to consumers and
    families. We need all the help we can get to unravel this great
    mystery in health care costs and charges.
        Health care costs and charges and bills are so confusing
    and so unclear that if you are a large business and you have
    the wherewithal to have a self-funded insurance plan, you are
    hiring consultants to go out and decipher what charges really
    cost and negotiate those costs with the providers.
    Unfortunately, the average American family, they simply don't
    have the benefit of being able to hire a consultant to help
    sort it out for them and hire and negotiate charges. Sometimes
    there is no rhyme or reason to what consumers pay for their
    health care. Ten different providers in one area may charge 10
    different amounts for the same services but who can really find
    that out anyway, and it is not married to any quality measures,
    like it should be.
        So it is important that we work to find a solid method to
    empower consumers to take control of what they pay for their
    health care by providing them with real numbers about what
    health services truly cost. Consumers and families should
    understand the what and the why for their health care bills and
    be able to determine when they are being charged too much or
    more than the actual cost of services. A truly transparent
    health care system should also offer a full understanding to
    patients and families about the cost of care with adequate time
    in advance for patients and health plan enrollees to assess
    their options and make decisions on what is in their best
    interest. Families should not be put in a position where they
    have received a service and are later stuck paying a bill that
    is unaffordable, too high, simply because they were not
    provided with clear cost options in advance. Slapping consumers
    with huge bills as they leave the doctor's office or hospital
    or any health care provider after procedures should not happen.
    Most patients pay what they are told to pay because they need
    the care. They are not equipped with the needed tools to make
    certain choices and most of the time those tools simply aren't
    available.
        So let us work together and let us find a way to unravel
    this great mystery surrounding health care costs and charges
    for consumers and families. I think we will get there because
    we have the benefit of great leadership from Dr. Kagen, my good
    friend from Wisconsin, Congressman Gene Green from Texas and
    other colleagues on this committee. So I am hopeful that it is
    going to take a lot of work and we are all in this together.
        Thank you, Mr. Chairman.
        Mr. Pallone. Thank you.
        The gentleman from Georgia, Mr. Gingrey.

      OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF GEORGIA

        Mr. Gingrey. Mr. Chairman, medical care in this country
    often falls into two categories. First, emergent care, those
    medical incidents arising out of emergency does not provide
    much opportunity or incentive for a patient to act as a
    traditional consumer. Patients with catastrophic conditions or
    events do not have an opportunity to shop around for medical
    services as the severity of the issue prevents that. Every
    patient is susceptible to these types of incidents for which
    health insurance is a great investment and one that should be
    available to all Americans.
        Non-emergent care really is what we are talking about here.
    Non-emergent care, on the other hand, does allow opportunities
    and time for patients to act as traditional consumers in a
    manner that positively impacts the quality and of course the
    cost of a patient's health care. In non-emergency settings,
    patients should have the ability to be customers and to shop
    for health care services that they want and need just as they
    would any other consumer product. This level of interaction
    between patients and providers where the patient can access
    information on available treatments and discuss them with their
    medical provider can in many instances create better outcomes,
    more-effective treatments, and yes, lower cost health care.
        So fostering this type of consumerism need not be a
    partisan issue. In fact, we have Democrat and Republican bills
    that we are going to discuss today. If given the right tools
    and information, patients can have the freedom to exercise
    choices within our health care system that do ensure quality,
    increased access and allow patients to spend health care
    dollars wisely, traits that can benefit their pocketbooks while
    containing national health care expenditures overall.
        Health savings accounts alone do not define consumerism.
    They are invaluable tools for patients but insurance products
    are merely a means to an end. It is the ability to shop
    supported by the necessary information to make informed choices
    that is the essence of consumerism and something that our
    health care system should continue to support, and I certainly
    do. However, the benefits of informed providers do not end with
    the shopping for health care services. Many studies support the
    fact that an informed patient is more likely to engage his or
    her provider and an engaged provider is better able to provide
    a quality diagnosis that results in fewer complications and a
    better outcome for their patients.
        With these thoughts in mind, I look forward to our
    witnesses today. I would like to personally welcome my friend
    and fellow physician, Member of Congress, Dr. Steve Kagen, on
    the first panel, Steve from the 8th district of Wisconsin.
    Steve, I look forward to your testimony as I do of the other
    witnesses. In the interest of full disclosure, I want to tell
    you that I am a cosponsor of the Barton bill, but I have looked
    very carefully at your bill. I am looking forward to your
    testimony. I think there are opportunities to work in a
    bipartisan way, and hopefully we can get to that point.
        Mr. Chairman, I yield back.
        Mr. Pallone. Thank you, Mr. Gingrey.
        Next is the gentlewoman from the Virgin Islands, Mrs.
    Christensen.

           OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A
           REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS

        Mrs. Christensen. Thank you, Mr. Chairman, and thank you
    for holding this hearing. I also want to thank Chairman Barton
    and our colleagues, Drs. Kagen and Burgess, for their
    legislative efforts to bolster transparency in the health care
    delivery system and all of the other witnesses today.
        It is undeniable that far greater transparency in the
    health care system could improve quality and save costs.
    Studies show that ensuring widespread access to reliable and
    valid data about the costs and quality differentials of the
    same services and treatments offered by different providers and
    entities would really inspire positive changes in those
    providers and entities that are lagging behind in quality or
    are charging more for services, and those changes are
    definitely needed.
        Of course, transparency would also arm consumers with the
    information necessary to make informed decisions, which would
    be extremely important to those more than 32 million Americans
    who will be leaving the ranks of the uninsured for the first
    time and for the first time be faced with those choices and
    options about their health care.
        In terms of health equity, I think that improving
    transparency could also play an important role in our ongoing
    efforts to achieve equality because it would afford better
    measures to monitor and reduce the costs and quality
    differentials that not only occur between providers and
    facilities but between consumers of different races and
    ethnicities and particularly geographic differences where we
    know in poor communities in those poor zip codes costs are
    different.
        It is clear to me that all of the stakeholders in the
    health care system pay a price for the current absence of
    transparency and so as a physician, as a health care consumer,
    as a member of this committee, I hope that we can work together
    building upon the Patient Protection and Affordability Care and
    Reconciliation Act to bring about meaningful transparency
    consistently across the entire health care system, and of
    course including in the territories in a manner that doesn't
    overburden providers and health care entities, especially those
    practicing in inner cities and rural communities.
        So I thank you. I welcome you, Dr. Kagen, and look forward
    to your testimony and the discussion this morning.
        Mr. Pallone. Thank you, Ms. Christensen--well, actually, we
    have all these doctors here today, Dr. Christensen, Dr.
    Burgess, Dr. Gingrey, Dr. Kagen, Dr. Murphy who is next.
        I recognize the gentleman from Pennsylvania, Mr. Murphy.

       OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
             CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

        Mr. Murphy of Pennsylvania. Thank you, Mr. Chairman.
        Good to see you today, Doctor.
        You know, I was recently shopping for a used car and I
    realized I could get a vehicle history report that told me
    about if the car has been in an accident, been stolen, had
    flood damage. I could find out if I am going to pay a fair
    price for it. I can go to Consumer Reports if I am buying a new
    car and get all kinds of information. That information is just
    a click away. I can readily get information on cost and quality
    so I can make value comparisons. But I can't do that with
    medicine. Oh, I could look up some reports on doctors, get
    information of where they went to medical school and other
    aspects about that, but when you try and track what you
    actually do with health care, it is a problem.
        Let us say a nerve in your neck has been pinched, so you
    call an urgent care center that says let us do an X-ray that
    costs $60 to $160. Later you find out well, that X-ray is not
    going to decide if you have got a slipped disc. So someone says
    get an MRI. So being price sensitive, you say let me shop
    around for the best possible price, but no nurse or doctor is
    going to tell you how much it is going to cost or where to get
    the best MRI procedure and one that is going to get you the
    right information and go on to the right doctors or if they
    have electronic medical records that can then pass that
    information on. What if we are talking about some more serious
    like triple bypass surgery? Chances are pretty good the patient
    is going to next to nothing about the doctor or the facility.
    You can find better reviews about a blender then you can about
    a bypass, and you are not even going to know if you are going
    to get an infection in that hospital.
        Many people have heard me say repeatedly that hospital-
    acquired infections cost $50 billion and 100,000 lives each
    year but even our recently passed trillion-dollar health care
    bill doesn't require hospitals to have a standard public
    reporting method where we can find out about infection rates in
    hospitals, even though States that have done that have seen
    with hospital awareness a great decline in their infection
    rates.
        You know, if we really do transparency, and I am all in
    favor of this and we need to have price and quality
    transparency, we would really be making some major changes in
    quality in health care in America. Perhaps for the first time
    we would be making the kind of changes that years and years ago
    people got from an informal method from the doctor in town but
    now the business has grown so big and costs have grown so much
    we just can't get that anymore. We absolutely have to have
    price transparency but let me add with that, price transparency
    means nothing without quality transparency, and we need to make
    sure those are joined together.
        So the next people go to Consumers Reports magazine or go
    online and compare all those little items they can get from the
    latest screwdriver to the latest larger purchase price item,
    hopefully some day we can look at that and say wouldn't it be
    great to get that kind of information that is going to save the
    lives of my family, myself and really work to drive down health
    care costs by driving up quality and price consciousness.
        With that in mind, I look forward to hearing some of the
    insights and testimony as you are before this panel of all
    these health care experts as well, and thank you, Mr. Chairman,
    for holding this hearing.
        Mr. Pallone. Thank you.
        Ms. Sutton, would you like to make an opening statement?
        Ms. Sutton. Thank you, Mr. Chairman. I would.
        Mr. Pallone. You are recognized for an opening statement.

      OPENING STATEMENT OF HON. BETTY SUTTON, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF OHIO

        Ms. Sutton. Thank you. I appreciate you holding this
    hearing today.
        Transparency is an issue that I care about deeply. In
    general, transparency is a critical factor in decision making.
    Knowing as much information as you can is important, whether
    you are deciding where to move or what car to buy. There is not
    an industry more opaque and less transparent than the health
    care industry. It is not transparent from a number of
    perspectives from the price of health insurance policies to the
    cost of procedures. Most doctors and hospitals are hard pressed
    to come up with an answer when patients ask how much something
    costs, and the people who have the hardest time in the system
    are the people who are their own advocates, patients, patients
    with no insurance or high-deductible health insurance plans and
    small businesses who are attempting to purchase health
    insurance for their employees.
        While transparency in health care pricing is an admirable
    goal, it is not the panacea to our health care problems because
    if you can't afford health insurance and health care, you can't
    afford it no matter how transparent the price might be, and
    unlike other markets, the health care market does not always
    respond to transparency. No one who is in a car accident is
    asking the ambulance driver what the cost of ER services is in
    one hospital as compared to another hospital, but there are
    some instances where the health care can respond to price
    transparency in determining which insurance company provides
    the most medical care per dollar spent or where a patient is
    looking for a health care provider for a non-emergency
    procedure like a colonoscopy.
        I look forward to hearing about what we can do to enhance
    the transparency provisions that are already in health care
    reform and to ensure that Americans are given every opportunity
    to have quality and affordable health care.
        I thank you, and I yield back the balance of my time.
        Mr. Pallone. Thank you.
        I believe that concludes our opening statements so we will
    now move to our first panel, our only witness, and that is the
    Hon. Steve Kagen, the gentleman from Wisconsin and the sponsor
    of H.R. 4700, the first bill on our agenda.
        I just want to thank him. He, as you know, is a physician.
    He has been very aggressive in pushing this transparency issue,
    both with me and other members, to his credit. We all think it
    is a very important issue but I think that without his pushing
    us, we wouldn't probably be here today. So thank you,
    Congressman Kagen, and you are recognized.

           STATEMENT OF HON. STEVE KAGEN, MEMBER OF CONGRESS

        Mr. Kagen. Thank you, Mr. Chairman. I couldn't agree with
    you more about your opening remarks about why we are here.
        Thank you for holding this meeting. Thank you to Ranking
    Member Shimkus and Chairman Emeritus Dingell, who could not be
    here this morning. Thank you to all members of this
    subcommittee for joining us in this very constructive
    conversation about transforming our health care system and
    creating a very competitive medical marketplace.
        I am Steve Kagen. I have lived in northeast Wisconsin for
    my entire life, and before becoming a Member of Congress I
    practiced in a privately owned and operated medical clinic
    throughout northeast Wisconsin. I have also served in VA
    hospitals for 3 decades, so I understand both a government-run
    situation and a private system.
        Today you are going to hear testimony from a number of
    expert witnesses on the importance of establishing a
    transparent medical marketplace to help to guarantee that the
    highest quality care becomes available to everyone at the
    lowest possible price. We are very fortunate in Wisconsin to be
    leaders in health care, making progress and guaranteeing that
    there is quality measurement, not just within the hospital
    institution itself but also on the Internet, as you will hear
    from the CEO of ThedaCare Center for Health Care Value, Walt
    Rugland.
        As every member of this subcommittee already knows, health
    care in America is upside down. When someone with no insurance
    gets sick and goes to the hospital, the hospital gives you the
    big bill, but if someone else goes to the hospital and has
    insurance, they get a discount. Health care is upside down.
    This takes place each and every day in my district and every
    district of the members of this committee and the members of
    everyone in the House.
        While the passage of our Nation's health care security law
    earlier this year will help to guarantee that no citizen will
    lose their home or go broke just because they become sick, it
    needs to take another step and to guarantee that everyone can
    see the price of everything they are buying at all times, most
    especially beforehand. Competition is a good thing. Indeed, it
    is an essential element of capitalism, and when there is a
    level playing field, competition will drive quality up and
    prices down.
        Everyone knows that the listed prices for medical services
    are meaningless for the real price is being hidden. Therefore,
    prices our constituents pay for insurance coverage, for
    prescription drugs and for hospital and doctor bills are
    ``whatever they can get.''
        Take, for example, the recent article that appeared in the
    L.A. Times on April 24, 2010, and you can see this slide before
    you. I will quote from that article. ``Tom Taylor learned a
    lesson about health care finances when he had both his knees
    replaced a couple months apart at separate hospitals in
    northern California. The tab for the first hospital was $95,000
    but the second cost $55,000. The same doctor performed
    identical surgeries on both knees, and Taylor says he can't
    detect any differences between the two.'' Quotes Mr. Taylor,
    ``Nobody knows what it costs. There is a complete lack of
    transparency in our health care system.''
        Well, here in my hand I have a prescription, and everybody
    understands today that if we all have the same prescription for
    the same medication and go to a pharmacy and stand in line, we
    may all pay different prices for the same prescription our
    doctor has ordered. This has got to come to an end. We have to
    have open disclosure of all prices all throughout health care.
        Now, some people will make the argument that average prices
    for medical products and services should be available publicly
    but who among us wants to receive average care and who among us
    wants to go to the store and get the average change when you
    pay for your restaurant bill?
        Some will argue that showing everyone all the prices is too
    complex and there are thousands of prices at any given
    hospital, but today's technology allows us all of us to go
    online on the Internet and search for items to purchase and
    find exactly what we want and buy it within milliseconds. Some
    will argue that a hospital cannot know in advance what to
    charge you for taking out your gallbladder. Well, you only have
    one gallbladder and there is only reason to take it out: it is
    bad. So how much does one bad gallbladder cost at everybody's
    hospital?
        If you want to do something really complicated, do what I
    did the other way. Go into Subway and order a sandwich. There
    are two to the 23rd power combinations of choices you have to
    make and then you get to the cash register, and what do they
    say? That is $5 for a footlong sandwich. If the owners of
    Subway can figure out how to lump things together and make a
    living, maybe we ought to have that same lumping idea in health
    care. In restaurants and in hospitals, lumping makes more sense
    than splitting.
        We have made great progress together this year and as I
    heard from all of you in your opening statements, you are in a
    very cooperative and bipartisan manner right now and I
    appreciate that. But we have to take the next step together.
        When enacted, The Transparency In All Health Care Pricing
    Act of 2010 will guarantee that any individual or business
    entity that offers health care products or services for sale to
    the public must at all times openly disclose all of their
    prices, including on the Internet, and doing so will help to
    establish a very competitive medical marketplace, allow
    families to find the essential information necessary to make
    their health care decisions based upon the quality, the price
    and the services being available, not only in their hometown
    area but across the Nation.
        We all believe in transparency and so does President Obama
    when he said, ``Transparency promotes accountability.'' Without
    transparency in all health care pricing, there will continue to
    be opportunities for fraud and market manipulation, much like
    occurred on Wall Street in the financial meltdown.
        We can fix our health care system and improve on what we
    already have done by working together, so let us create a
    competitive medical marketplace where all of the prices we pay
    are always openly disclosed, including on the Internet.
        Thank you, Mr. Chairman, for holding this important
    hearing, and I very much look forward to the testimony of Walt
    Rugland, who has not only devised a way of taking care of
    patients in a more economical fashion by lowering the overhead
    at his hospital but has also increased the quality with zero
    medication errors in an entire year. It is not a theoretical
    process; they have actually done it in Appleton, Wisconsin.
        I thank you and yield back the additional minute I took
    from you.
        [The prepared statement of Dr. Kagen follows:]

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        Mr. Pallone. Thank you, Congressman Kagen.
        You know, our policy is not to ask questions of Members.
    Even though we love you dearly, we are not going to ask you any
    questions. So thank you very much and thank you for also
    bringing some of the witnesses today and talking about the
    witnesses as well.
        So we are going to move to the second panel. Would the
    members of the second panel please come forward? We will put
    the names up so you know where to sit.
        Mr. Braley. Mr. Chairman?
        Mr. Pallone. Who seeks recognition? Oh, Mr. Braley, yes.
        Mr. Braley. I just want to point out there is another
    hearing going on downstairs and some of us will be moving in
    and out from time to time.
        Mr. Pallone. OK, sure. I sure also point out that Ms.
    Blackburn wanted to introduce Mr. Holden but she is back in
    Tennessee because of the floods, from what I understand, so
    that is why she is not able to be with us today.
        Thank you for being here. I want to welcome the panel. As
    you know, the process is that we hear 5-minute opening
    statements from each of you. I hope you can stick to that. And
    those statements will be made part of the hearing record and
    then each witness may in the discretion of the committee submit
    additional brief or pertinent statements in writing for
    inclusion in the record at a later time.
        So let introduce each of you from my left to right. First
    is Mr. Steven J. Summer, who is president and chief executive
    officer of the Colorado Hospital Association on behalf of the
    American Hospital Association. Second is Dr. Regina Herzlinger,
    who is professor of business administration at Harvard Business
    School. And then we have Mike Cowie, who is a partner in
    Howrey, LLP. And then I have Walter Rugland, who is the
    chairman of the board for ThedaCare, Incorporated, and Terry
    Gardiner, who is the national policy director for the Small
    Business Majority, and finally is Christopher Holden, who is
    president and chief executive officer of AmSurg.
        And we will start with Mr. Summer who is recognized, and
    move that over. You probably have to put it pretty close to you
    and turn the green button on. Otherwise we won't hear you.

     STATEMENTS OF STEVEN J. SUMMER, PRESIDENT AND CHIEF EXECUTIVE
       OFFICER, COLORADO HOSPITAL ASSOCIATION, ON BEHALF OF THE
       AMERICAN HOSPITAL ASSOCIATION; REGINA HERZLINGER, PH.D.,
    PROFESSOR OF BUSINESS ADMINISTRATION, HARVARD BUSINESS SCHOOL;
     MICHAEL COWIE, PARTNER, HOWREY, LLP; WALTER RUGLAND, CHAIRMAN
    OF THE BOARD, THEDACARE, INC.; TERRY GARDINER, NATIONAL POLICY
      DIRECTOR, SMALL BUSINESS MAJORITY; AND CHRISTOPHER HOLDEN,
             PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMSURG

                     STATEMENT OF STEVEN J. SUMMER

        Mr. Summer. Good morning, Mr. Chairman, and thank you and
    thank you to Ranking Member Shimkus. I am Steven Summer,
    president and CEO of the Colorado Hospital Association. I am
    here today on behalf of the American Hospital Association and
    its 5,000 member hospitals. We appreciate the opportunity to
    share with you and your colleagues information about the
    hospital field's efforts on price transparency.
        Patients and their families deserve information about the
    price of their hospital care, and the AHA and its members are
    committed to providing it. Sharing meaningful information,
    however, is challenging, as we have heard in the statements
    earlier, due to the unique nature of hospital care. An
    operation for one patient may be relatively simple, but for
    another, it could be more complicated, making it very difficult
    to provide meaningful information up front. Moreover, hospital
    prices do not often reflect important information from other
    key players such as physicians or how much of a care is paid
    for by the patient's insurance.
        With the passage of health reform hospitals will report
    annually and make public a list of hospital charges for items
    and services. Currently, CMS posts information on the Hospital
    Compare Web site on what Medicare pays for 35 common
    procedures. But more can and should be done to share health
    care information with the public, including, but not limited
    to, hospital pricing information.
        The path to price transparency has four parts. First, with
    respect to States, working with State hospital associations
    like the Colorado Hospital Association should expand existing
    efforts to make hospital charge information available to
    consumers. Forty-one States including Colorado already have
    mandatory or voluntary hospital price information reporting
    activities already in place. These efforts vary from making
    hospital charge masters available to the public to making
    public pricing information on frequent hospital services to
    making information available on all inpatient services.
        Health insurers should also make available in advance of
    medical visits information about enrollees' expected out-of-
    pocket costs. This information is generally provided by a
    patient's insurance company after care through what is known as
    an explanation of benefits, or an EOB. But consumers need
    insurers to provide real-time information through either the
    phone or through the web page that that is the EOB that they
    can get from their insurance company what the insurance company
    will pay and what their copayments will be.
        We also need more research to help us better understand
    what type of pricing consumers actually want and would find
    useful in their decision making. We all know the kinds of
    information consumers seek about quality of health care but we
    know less about what they might want about pricing information.
        For uninsured individuals, information is often provided
    directly by the hospital. The hospital in turn in those cases
    can determine if the patient qualifies for certain kinds of
    public insurance programs whether they would qualify for free
    or reduced care that is provided by the hospital or other forms
    of financial assistance which is available.
        As part of the health care reform bill, tax-exempt
    hospitals will be required to adopt and implement and widely
    publicize their financial assistance policies. This is
    consistent with previous policies adopted by the American
    Hospital Association and the Colorado Hospital Association.
        And lastly, we firmly agree that everyone needs to have
    access to consumer-friendly pricing language, common terms,
    definitions and explanations which will help consumers better
    understand pricing information. The need of our patients to
    understand the billing process is paramount.
        I would also like to tell you a little bit about what is
    going on in Colorado. We published starting over 20 years ago
    what we call the hospital charges and average length of stay
    report. This annual publication provides information that
    allows us to compare charges and lengths of stay on 35 of the
    most common medical treatments and surgical procedures provided
    in Colorado hospitals. The publication includes comparisons
    that take into account any complications the patients may have
    and the severity of their illness. It lasts average charge and
    the average length of stay and breaks that into four categories
    of severity. The report also presents statistically
    standardized ranges of high and low numbers of both charges and
    length of stay. When a patient is given a procedure in the
    hospital, there is a 95 percent probability that they will fall
    at the range within the information of the length of stay and
    the charges in this report. We make this report available on
    the Web and anybody can download it. We also provide it to
    libraries throughout the State of Colorado.
        In 2007, we took a step forward. With the health department
    we began to add a Web site that expands pricing information to
    allow patients and families to compare the quality and safety
    of their experiences in Colorado hospitals. The information
    shows the outcome of patient care presented for each hospital
    for the past 3 years. Hospitals are identified as being
    statistically better, the same or worse outcomes as compared to
    other hospitals in the State, and right now the Colorado
    legislature is considering what we call an all-payer bill,
    which will require health plans to provide more information to
    be collected by insurance companies.
        The American Hospital Association supports the Health Care
    Price Transparency Promotion Act introduced by Representatives
    Burgess and Green and we agree that consumers do need accurate
    information when making health care decisions. We appreciate
    the opportunity to be here today, Mr. Chairman, and the
    American Hospital Association stands ready to work with
    Congress to find innovative ways to build efforts occurring at
    the State level and share appropriate information with
    consumers. Thank you very much.
        [The prepared statement of Mr. Summer follows:]

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        Mr. Pallone. Thank you, Mr. Summer.
        Dr. Herzlinger.

                     STATEMENT OF REGINA HERZLINGER

        Ms. Herzlinger. Chairman Pallone, Ranking Member Shimkus,
    thank you so much for inviting me.
        Not so long ago, a similar group was testifying about
    transparency. People would not understand it, it would cause
    price collusion, what was available through State agencies was
    good enough. Who were the testifiers? They were businessmen in
    the midst of the Great Depression aiming to persuade the U.S.
    Congress not to enact the transparency legislation backed by
    the great President Franklin Delano Roosevelt when he created
    the SEC. Happily, the Congress ignored them. Extensive research
    demonstrates that financial transparency lowers the cost of
    capital because investors who were more certain about
    performance required lower returns and enabled the investors to
    reward productive, socially responsible firms more than others.
        We now stand at a similar moment. Transparency about the
    quality and cost of health insurance and medical care providers
    is essential not only for the 34 million who will newly shop
    for plans under the health reform legislation but for the rest
    of us too, essential but not available. Transparency could not
    only help people but could also control the health care costs
    which are now ruining a wonderful economy by revealing which
    insurance companies and policies provide the most medical care
    benefits and best outcomes per dollar, which ones offer the
    best doctors and hospitals and which ones hassle sick people
    the least. In health care, as elsewhere in the economy, the
    best providers are frequently the lower cost ones.
        Finally, if medical care providers were required to post
    their prices for the uninsured, competition would likely
    follow. Some medical bankruptcies, one-quarter of which are
    incurred by the uninsured, could be avoided if uninsured people
    could compare the prices and quality with their medical care.
    Yet despite health care transparency's many benefits, we have
    virtually none of it. Transparency sites maintained by State
    governments with the notable exception of Wisconsin and some
    other States and private firms contain sparse, frequently
    outdated information.
        Can transparency be obtained through voluntary efforts?
    Obviously not. Few health care participants have willingly
    offered disclosure. Instead, many stakeholders raise objections
    including the allegations that consumers lack interest, lack
    ability, that transparency's costs will exceed its benefits and
    that the measurement of quality is infeasible. But the
    Congressional Research Service has decided that the many
    benefits of transparency trumps its costs and although health
    care transparency measures are not as yet well developed, with
    time they will be.
        The problem is not that Americans aren't interested in
    health care transparency, they rated it as their number one
    health care reform they want from the government. Nor is it
    that they cannot wend their way through information. Google and
    Consumer Reports are there to help them through it. The problem
    is that Americans still lack the health care transparency they
    need. Passage of the legislation being discussed today will
    help ensure they get it. Thank you.
        [The prepared statement of Ms. Herzlinger follows:]

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        Mr. Pallone. Thank you, Dr. Herzlinger.
        Mr. Cowie.

                       STATEMENT OF MICHAEL COWIE

        Mr. Cowie. Thank you for the invitation. My name is Mike
    Cowie. I formerly served in leadership positions at the Federal
    Trade Commission. At the FTC, I supervised antitrust
    investigations in health care, so my testimony today is based
    on the perspective of antitrust.
        In antitrust investigations, a major objective of the FTC
    is to protect consumers from collusion where competitors
    increase and harmonize their pricing. FTC attorneys and
    economists follow guidelines to determine whether particular
    industries are susceptible to collusion. One of the key factors
    is whether pricing terms are available and known among
    competitors. Collusion among competitors to raise prices is
    more likely in industries where pricing terms are known.
        The FTC has opposed regulation requiring public posting of
    pricing terms, and this FTC price has cut across
    administrations. An example was a State law requiring liquor
    wholesalers to file price lists with the State beverage control
    agency. The FTC opposed that policy expressing concern that the
    availability of comprehensive price information tends to make
    it easier for industry members to coordinate pricing. That was
    in distilled spirits. The FTC has raised the same concerns in
    pharmaceutical pricing. The FTC staff has opposed State
    legislation requiring PBMs, or pharmacy benefit managers, to
    publish price discounts or price rebates received from
    manufacturers. The FTC warned that the public posting of
    precise details of rebates would make tacit collusion more
    feasible.
        The FTC has not stood alone on this policy. The Department
    of Justice and the CBO have opposed regulation requiring public
    filing or Internet posting of price terms. For example, the CBO
    opposed a proposed policy to force Medicare drug plans to post
    data on price rebates negotiated from manufacturers. Like the
    FTC, the CBO expressed concern that manufacturers would
    probably reduce their largest rebates.
        The views of the CBO, Justice Department and FTC are built
    on a wealth of empirical economic research. Economic studies
    have found that a mandatory publication of pricing terms often
    leads to higher prices for consumers. For example, in the 1980s
    the Federal Communication Commission required the long-distance
    phone carriers, companies like AT&T, Sprint and MCI, to file
    publicly the rates they charged businesses for long-distance
    phone services. Eventually economists and policymakers found
    that this led to higher prices and price stabilization.
        In coming years, more Americans will have health insurance
    coverage including prescription drug coverage. Few will be
    paying retail or list prices. The role of well-informed, large
    and sophisticated purchasers such as PBMs or health plans will
    grow. Key pricing terms will be the product of head-to-head
    negotiations between drug manufacturers and PBMs. These pricing
    terms should continue to be set through the negotiation process
    not through public or Internet postings.
        Of the pending bills, H.R. 4700 conflicts with established
    antitrust principles designed to prevent collusion. It would
    require pharmacies, pharmaceutical manufacturers, insurance
    entities and others to post all of their pricing terms on the
    Internet. This requirement of Internet price posting may
    contribute to price stabilization and price increases. Thank
    you.
        [The prepared statement of Mr. Cowie follows:]

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        Mr. Pallone. Thank you, Mr. Cowie.
        Mr. Rugland.

                      STATEMENT OF WALTER RUGLAND

        Mr. Rugland. Thank you, and good morning. My name is Walter
    Rugland and I am the non-executive volunteer chairman of
    ThedaCare, which is a four-hospital community-owned health
    system in Congressman Kagen and Petri's districts in Wisconsin.
    Prior to retirement, I served as executive vice president of
    Thrivent Financial for Lutherans. Before that I practiced
    nearly 25 years as a consulting actuary with Milliman. I bring
    that career expertise into play and my testimony here today.
        ThedaCare has long been a proponent of greater
    transparency. I like to call it meaningful patient-focused
    information, and that is on the cost and quality of health
    care. We were one of the first health care systems in Wisconsin
    to publish data regarding costs and quality more than 10 years
    ago, and while not perfect, it was the best publicly available
    data at that time. ThedaCare became the founding member of the
    Wisconsin Collaborative for Health Care Quality in 2003 and the
    Wisconsin Health Information Organization in 2006, and
    Representative Baldwin described some of the activity of those
    organizations.
        The commitment to transparency is driven by our strong
    belief that we must change to sustain our obligation of care
    for our community. We believe that change requires us to
    measure our performance in order to reduce our costs.
    Interestingly, when we thoughtfully changed to reduce our
    costs, our quality outcomes improved as well. Our commitment to
    tracking and reporting meaningful information meant people
    inside and outside our organization knew how well we were doing
    and where we needed improvement. In short, sharing the data
    held us accountable for our results.
        Six years ago at ThedaCare, we shifted to a mindset of
    improving something every day, somewhere, something every day.
    It became catching, and today our culture thrives on improving.
    Our focus centers on the patient outcome, not the system
    outcome. The goal of a sustainable health care operation must
    be to reduce patient costs over time and foster a healthy
    community.
        Some recent examples of what we have been able to
    accomplish--we developed a new model for our primary care
    clinics to complete the draw of blood, the diagnostics, the
    care planning within one visit. Patient dollar costs decreased
    and results improved. We used a similar approach to
    revolutionize our hospital design. Using a new model, we have
    eliminated errors during admission, medication reconciliation.
    We reduced our average length of hospital stay and reduced
    overall costs by more than $2,000 per case compared to our
    traditional inpatient units. These and other continuous
    improvement efforts have earned us national recognition and we
    believe our success demonstrates the benefits of meaningful
    transparency.
        In truth, exposure drives improvement, and in Wisconsin the
    exposure of cost and patient outcomes has played a key role in
    moving health care toward better patient value. It is one of
    the reasons that the Agency for Health Care Research and
    Quality now ranks us as number one, and next week Caroline
    Clancy from that agency will visit our State to see this
    firsthand.
        We believe health providers need to move toward
    transparency. We cannot continue to accept the myth that prices
    don't vary between providers, facilities or regions. Many who
    study health care costs report that costs are nearly 100
    percent redundant, and our experience shows that exposure
    drives efficiency and thoughtful cultural change that produces
    better outcomes.
        One of our challenges in creating meaningful information
    was the lack of common performance measures that would allow
    for comparison. Data must be patient centered and
    understandable in order to force providers to change and to
    better inform patients, and in Wisconsin we believe we have
    fixed that problem. Now it is time to address the same issues
    nationally. Without meaningful information, patients cannot
    make informed decisions. People make purchasing decisions for
    everything from banking to refrigerators based on cost and
    quality but that is not how it currently works in health care
    as we discussed today. They don't have access to useful and
    reliable information and we think that can be attained. If
    prospective patients knew how many medication errors a hospital
    made, for example, they might change where they go, and with
    meaningful information on health care cost and quality,
    patients would vote with their feet. Choosing providers that
    deliver the best value as insurance deductibles and coinsurance
    increase will be the case in the future. A patient's vote is
    more and more important.
        In Wisconsin, we report on a full range of costs of care.
    The most meaningful cost data is fully loaded or all in the
    cost of a procedure or health service. Wisconsin has provided
    this on a retrospective basis with aggregate results by
    provider, institution or group. Interestingly, when we match
    the cost to outcomes, we see that poor-quality care costs more
    than high-quality care. To break the cycle of waste and
    inefficiency, we must set the stage to provide meaningful
    information about a patient's expected costs.
        Our experience securing support for price and transparency
    legislation in Wisconsin underscores this is not a simple
    process. It is going to take a lot of work. We stand ready to
    serve and help in any way we can. Thank you.
        [The prepared statement of Mr. Rugland follows:]

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        Mr. Pallone. Thank you, Mr. Rugland.
        Mr. Gardiner.

                      STATEMENT OF TERRY GARDINER

        Mr. Gardiner. Thank you, Mr. Chairman, and thank you for
    the invitation to be here. My name is Terry Gardiner. I am the
    national policy director for the Small Business Majority, which
    advocates on behalf of the interests of millions of small
    businesses in our country. My own personal background is, I
    have been a small businessman all my life both starting out as
    a self-employed commercial fisherman in Alaska and then a
    startup company and trying to provide insurance, and
    fortunately my company was able to grow so we had the
    beneficial experience of being self-insured, but I really
    sympathize with all those companies that never get that big,
    and I want to speak to why small business cares about this
    issue.
        First of all, there are 22 million self-employed
    entrepreneurs in this country. They are basically in the very
    same boat as individuals and consumers that we all talk about
    except that they actually have to go buy their insurance in the
    individual market and try to navigate and make all these
    decisions about whether it is buying their insurance policy or
    navigating for them and their family the health care system. So
    we need to remember, there are 22 million self-employed that
    these issues apply to.
        And then when we move up into the 6 million small
    businesses between one and 100 employees, the vast majority of
    them, 80 percent of them, have under 10 employees. You don't
    have an HR director or a CFO researching all these benefits,
    negotiating insurance, and at the same time when you are in a
    small business, your employees come to work. They are working,
    that is their job and they put everything into their job and
    they get their insurance through you. You are paying on average
    75 percent as employer, they are paying 25 percent, and they
    come to you for help trying to figure out what is going on, how
    does the system work, why wasn't this reimbursed, what should
    they do. They turn to you. A lot of these are family and
    friends. They are people you know. It is not like you are in a
    big organization where you don't know people and you don't know
    their problems. So this is all very real for the small business
    out there and we have got 43 million people working at those
    small businesses between one and 100 combined with the 22
    million self-employed, so this is a big problem.
        I think from a business owner's standpoint, I think my own
    in the seafood industry, it is hard to understand why this
    would be so burdensome. I think everybody would like to have a
    monopoly and that is great, but most people in business
    function in a competitive world. In the seafood world, we as
    processors would buy seafood from small business owners,
    fisherman, and that is a very transparent price. You can go on
    the Internet and find out what the fish are selling. A lot of
    the fish is sold on auction and some of it is not, it is by
    negotiation, but that information you could go on the Internet
    and find all over the world what fisherman are selling prices
    their fish as small business owners to processors. At the same
    time, there are wholesale auctions and there is pricing
    information about that, and the world doesn't come to an end,
    and if they need to, I guess there would be an antitrust
    investigation.
        But the world goes on, and in our own industry we would
    have to make reports on wholesale prices and all of this to
    government entities. You see this in agriculture. And it works
    fine. It creates a competitive dynamic market. Individually,
    people as business owners like to not have to do more reporting
    on pricing and all of that but it is not going to come to an
    end. It actually makes for a healthy market, and it is
    fundamentally, this is what health care is all about from a
    small business point of view. It is about the cost. That is
    what is killing small business, and we see the health insurance
    exchanges as a great reform going forward but we need to
    combine this with this transparency of pricing if we really
    want to have these exchanges the 50 States are going to set up.
    Combine these and you are really going to create a marketplace,
    and I think that is going to give all of these millions of
    small businesses an ability which maybe now some governments,
    some very large organizations can negotiate, they can research,
    they can get pricing information but the millions of small
    businesses and tens of millions of employees that work for them
    and count on them don't have these advantages, and this would
    help create a more equal playing field for the small
    businesses.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Gardiner follows:]

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        Mr. Pallone. Thank you, Mr. Gardiner.
        That bell indicates we have three votes but we are going to
    hear from Mr. Holden and then we will break for the votes and
    then we will come back and ask questions, so we are going to
    ask you to stay obviously. I mean, it could take about, I don't
    know, half an hour or even an hour for the three votes but we
    need to stay.
        Mr. Holden, you are next. Thank you.

                    STATEMENT OF CHRISTOPHER HOLDEN

        Mr. Holden. Thank you, Chairman Pallone, Ranking Member
    Shimkus and other members of the committee. I appreciate the
    opportunity to be with you here today. I am Chris Holden. I am
    the CEO of AmSurg, headquartered in Nashville, Tennessee.
    AmSurg is a corporate partner supporting 203 ambulatory surgery
    centers located in 33 States and the District of Columbia.
    AmSurg is a leading operator, distinguished as having the
    largest number of ACSs in the sector.
        Over 1.2 million procedures were performed in our centers
    last year. Approximately 10 to 15 percent of all colon cancer
    screening colonoscopies were performed in our centers as well
    as 3 to 5 percent of all cataract procedures performed in the
    United States last year.
        I am here today in my capacity as a board member of the ASC
    Advocacy Committee, which is the voice of the ASC sector
    representing the ASC Association, State associations and
    leading ASC operations. We are privileged to be asked to
    provide this testimony and appreciate the opportunity to engage
    in the process.
        I just want to begin by saying that ASCs have long
    recognized the gap in effective communication of transparency.
    As a group, we have supported H.R. 2049, the Ambulatory Access
    Act, which called for provisions very similar to those in H.R.
    4803. H.R. 2049 specifically called for apples-to-apples
    comparisons of ASCs and HO, or hospital outpatient, department
    quality and coinsurance information. We have encouraged CMS to
    introduce quality transparency requirements and we have
    educated our physicians about those same requirements. We have
    developed our own voluntary reporting system, and today 20
    percent of ASCs voluntarily report their data to the ASC
    quality collaborative using the six measures endorsed by the
    National Quality Forum, and that data is available online at
    ASCquality.org.
        Why do we support transparency? We believe that
    policymakers should be asking the question of why 50 to 60
    percent of procedures are performed in the most expensive
    setting today. If properly executed, we believe transparency
    will accelerate migration to high-quality, lower-priced
    modalities of care. If, for example, half of the Medicare cases
    currently performed in the hospital outpatient department
    setting migrated to ASCs, Medicare would save over $10 billion
    over 5 years. Why? Because Medicare pays 42 percent less when
    procedures in freestanding ASCs.
        We also believe transparency will tap low-hanging
    opportunities to improve our system. Using ASCs as an example,
    increased transparency will shine the light on the
    underutilized potential of lower priced, higher quality
    modalities of care.
        ASCs, for those of you who are not familiar, provide
    surgical and preventive surgical services with no overnight
    stay. The modality is only 40 years old and it has rapidly
    expanded over the last 25 years. The primary drivers have been
    the migration again from high cost to low cost and the
    increased use of preventative care services available through
    ASCs.
        By way of background, in the early 1980s less than 1
    percent of all surgeries were performed in ASCs. Today, 35 to
    40 percent and 25 million procedures are performed in
    freestanding ASCs. And you may also be interested to know that
    colon cancer mortality has declined over 40 percent since the
    mid-1980s directly correlated with proliferation of ASCs. With
    over 5,200 ASCs providing vital access to care across this
    Nation, ASCs are now an integral part of our health care
    system, and you should know that national providers like AmSurg
    are the exception and not the rule. The sector is relatively
    new and highly fragmented with 60 to 65 percent of ASCs
    classified as unaffiliated small businesses with no corporate
    or hospital partner, and today only 20 percent have some type
    of hospital partner.
        That said, other nations are still looking to our model and
    seeking operators like me to give them advice on how to
    possibly duplicate the ASC model in their countries as a means
    to expand access, improve quality and control costs.
        So where does transparency fit in? Despite the
    unprecedented migration and growth of the service, today over
    40 to 50 percent of all outpatient surgical procedures are done
    in more expensive modalities and there has been no appreciable
    change in outpatient surgery market share between hospitals and
    ASCs in the last 3 years. So why the slowing in migration? We
    believe lack of transparency is a contributing factor.
        As we move forward with transparency, we think we should
    highlight three things. Number one, that the out-of-pocket
    expense is considerably higher, especially for Medicare
    patients, treated in the hospital outpatient department setting
    versus the freestanding ASC. The difference can be one and a
    half to three times greater. A cataract procedure, for example,
    costs the patient $300 more out of pocket versus the two
    modalities. Secondly, the Medicare program itself pays 42
    percent more for the treatment of patients in the HOPD setting.
    And three, patients today, as has been mentioned over and over,
    have a difficult time making any judgment on what are the
    quality standards in one modality versus the next or from one
    center to the next.
        As part of our next steps as a group, the ASC Advocacy
    Committee is supporting the Patients' Right to Know Act, H.R.
    4803, and----
        Mr. Pallone. Mr. Holden, I don't know if you are almost
    done but--you are?
        Mr. Holden. I am.
        Mr. Pallone. Because you are almost a minute over.
        Mr. Holden. With that, I will just end and say thank you
    again for this opportunity. Thanks for the cue.
        [The prepared statement of Mr. Holden follows:]

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        Mr. Pallone. I apologize.
        I think there is only 6 minutes left, so I think we are
    going to break here. I don't know, it could be half an hour, an
    hour probably at the most, so maybe the best thing is, if you
    want to get some lunch and come back, or I don't know if you
    have enough time. But we do want you to stay, obviously, and
    thank you all for your testimony and we will anticipate the
    questions. So the subcommittee is in recess.
        [Recess.]
        Mr. Pallone. The hearing is reconvened, and we left off by
    having all of our witnesses make their opening statements and
    now we will go to questions starting with myself. I will
    recognize myself for 5 minutes.
        And I wanted to start with Mr. Cowie because I noted with
    interest your comment that price transparency in certain
    instances could lead to higher, not lower, prices for services.
    Many of us have long supported price transparency in the belief
    that this transparency would move the market towards lower
    prices, for example, in the area of prescription drugs,
    advocating for disclosing not simply the average wholesale
    price or even the average manufacturing price but disclosing
    what the real price is for the product, net of discounts,
    rebates and other price concessions. So could you explain your
    comment on how in certain markets transparency could lead to a
    price increase as opposed to a price decrease and what specific
    factors in these markets could make that happen and what we
    could do about it all in a minute or less? Do the best you can.
        Mr. Cowie. Chairman, in your initial comments I think you
    made a reference to health care differing from TVs and car
    buying. Let me use the TV industry to illustrate the antitrust
    point. So big TV producers are Samsung, LG and Sony. They sell
    to big distributors. Those are folks like Walmart, Best Buy,
    Target, and us consumers looking for competitively priced TVs
    will comparison shop at Walmart, Best Buy, Target. We will use
    the Internet, and we want information and that is healthy. But
    if transparency is the goal, if that is the goal, then what you
    might recommend is Samsung, LG, Sony publicly disclose the
    pricing they have in details with the big distributions like
    Walmart, Best Buy and Target. Those details are subject of
    head-to-head negotiations between very large and sophisticated
    players, and in antitrust, we would rather have those types of
    deals remain private, and if we had Internet posting or public
    filing of those pricing terms, that would present a risk of
    collusion.
        Mr. Pallone. So I am not sure. I mean, I want to get a
    second question. You would advocate that we do that or not do
    that?
        Mr. Cowie. We would advocate that we not just woodenly
    require disclosure of all pricing terms. We can have--when we
    shop for TVs, we have transparency, we can compare Best Buy to
    Target, we can----
        Mr. Pallone. You mean the basic retail price?
        Mr. Cowie. Yes, but when we are talking about the price
    between the manufacturer and the distributor----
        Mr. Pallone. So you don't want that?
        Mr. Cowie. Correct.
        Mr. Pallone. But you would have--you think the retail
    pricing should be transparent but not the larger wholesale
    deals? That is what you are saying?
        Mr. Cowie. Yes.
        Mr. Pallone. Let me ask Mr. Summer a question. You actually
    commented on this but I wanted you to give us a little more
    information on how the health care reform legislation recently
    passed took steps towards greater transparency, and I am not
    suggesting that we don't need to do more. Otherwise we wouldn't
    be having this hearing today. But just give us what--talk to me
    about what steps the hospitals will be taking to implement the
    requirements under the health reform legislation that would
    make them more transparent and more meaningful to the public.
        Mr. Summer. Thank you, Mr. Chairman. I think what we would
    see happening under that bill is more comprehensive information
    available that is right now available in some States and not
    all States, much like I spoke about Colorado, and I think the
    bill will provide opportunities for patients and their families
    to get access to----
        Mr. Pallone. Well, let me--I know I keep cutting you off,
    but it requires uniform definitions, description of all covered
    items and services including exceptions, the cost-sharing for
    benefits, the out-of-pocket payment structure, a facts label
    that has common benefit scenarios allowing people to compare
    coverage and prices for a typical episode, requires charity
    hospitals to charge uninsured individuals no more than what is
    generally billed to insured patients for the same services. You
    don't have a lot of time obviously but just some idea how you
    are going to implement these things, if you could.
        Mr. Summer. Thank you, Mr. Chairman. I think that what we
    are looking for and what will come out of that is for this
    information to be available at the State level so that, as you
    mentioned in your remarks, it will provide some standardization
    of what that information is, some common definitions and then
    the information related to both the charges and the length of
    stay will then be available for consumers to look and check,
    also, I think the patient safety information, the quality
    information, and I think it is important to look at them
    differently because people can check out quality and patient
    safety information at any time but the pricing information is
    obviously related to the need for procedure and that will vary
    very much by the individual patient and the severity of their
    illness.
        Mr. Pallone. Are the hospitals going to have a problem
    doing this?
        Mr. Summer. No, sir. In fact, already in over 40 States in
    the country, it is available right now, and you heard two
    examples here, Wisconsin and Colorado.
        Mr. Pallone. So it is really more a question of uniformity
    than anything else at this point?
        Mr. Summer. Yes, sir, it is available and we see no problem
    with making it available and we think that would be a positive
    step towards transparency.
        Mr. Pallone. Thank you.
        Mr. Shimkus.
        Mr. Shimkus. Thank you, Mr. Chairman.
        Let me say for the record I think that the recently passed
    health care law is an unmitigated disaster, and we are going to
    go off the cliff.
        Let me move in a direction. Let us talk about transparency.
    Did you know that the transparency provisions only rely to
    those who purchase their health insurance through the new
    State-based exchanges? Did you know that, Mr. Summer, that the
    transparency provisions in the law only pertain to those who
    purchase their insurance in the new State-based exchanges?
        Mr. Summer. Yes, Congressman. Those apply to health plans.
    What I am talking about, what we are here----
        Mr. Shimkus. Yes, but the question was on the law. The law
    says transparency only for the new exchanges, that there will
    be transparency for. So that is not my main issue but I just
    want to counter what my colleague was talking about,
    transparency, that the transparency provisions, why we had this
    hearing is because we blew away transparency provisions. We
    didn't address transparency provisions in the law.
        Let me go to Mr. Gardiner real quick. I want to ask about
    in your Alaska fishing days. How many different businesses did
    you have an aggregate cost of over $600 per year with?
        Mr. Gardiner. Well, my last company grew from a startup
    over 23 years to $125 million in sales.
        Mr. Shimkus. So how many businesses--say when you first
    started, you know, if you just had a boat going out to fish,
    how many different, as a small business, self-employed, how
    many businesses would you deal with aggregate payments to of
    over $600?
        Mr. Gardiner. Well, the average commercial fisherman like I
    was would have one to six crewmen who legally are self-
    employed.
        Mr. Shimkus. What about gas? What about feeding?
        Mr. Gardiner. Yes, you would buy a lot of stuff, probably--
    --
        Mr. Shimkus. Food?
        Mr. Gardiner. --a third of your expenses, you buy
    groceries, fuel every week.
        Mr. Shimkus. Water, petroleum, a lot of different
    businesses that you would pay at least $600 to annually?
        Mr. Gardiner. That is correct.
        Mr. Shimkus. As a small businessman, if you had to file a
    1099 for each transaction, would you feel that that is an
    additional business obligation?
        Mr. Gardiner. Well, we do as fish processors, we had to
    file every time we purchased fish from a fisherman, you know,
    every----
        Mr. Shimkus. No, I am talking about for the food for your
    crewmen, for the gasoline you purchased, for the repair of your
    net.
        Mr. Gardiner. No, we didn't have to.
        Mr. Shimkus. But the point is, you will as a small
    businessman under this law, the health care law. If you have a
    contractual obligation of over $600, you have to file a 1099.
    That is why we are going to hire 15,000 more IRS agents.
        Mr. Summer, how many--in an individual hospital, how many
    individual contracts are payments out of over $600 does an
    average hospital have in the State of Colorado?
        Mr. Summer. Mr. Chairman, I have no idea. There probably
    are hundreds.
        Mr. Shimkus. Given the potential paperwork nightmare this
    provision could become, would you commit to surveying your
    members to determine this figure?
        Mr. Summer. We would certainly be willing to talk to you
    about that but, Mr. Chairman, also----
        Mr. Shimkus. I am just the ranking member.
        Mr. Summer. I am sorry, Mr. Ranking Member.
        Mr. Shimkus. This is the chairman.
        Mr. Summer. Congressman, thank you. The positive side for--
    --
        Mr. Shimkus. What I am asking is, I want--I would like for
    your help to determine all the individual contracts. Here is an
    example. If you cut grass in America and you are a kid and you
    have $600 of gas bills to a retail location, you are going to
    be required to provide that gas station a 1099 under this bill.
    Now, just multiply that by the size of the business, and that
    is why the projection is 15,000 more IRS employees.
        Let me move to Medicare and Medicaid real quick. You have
    heard us talk about the chief actuary of CMS and his
    projections that suggest that roughly 15 percent of Part A
    providers would become unprofitable. Do you have an
    identification? Do you, first of all, agree with that number,
    and which 15 percent of the hospitals of Colorado will
    basically close because of this new health care law?
        Mr. Summer. I have not, Congressman, read that report but I
    think----
        Mr. Shimkus. No, the CMS actuary did. The actuary for the
    Centers for Medicare and Medicaid Services, it is their
    projection based upon us taking $500 billion out of Medicare.
    Wouldn't that be in effect, affect the cost of reimbursement to
    the hospitals in Colorado?
        Mr. Summer. Congressman, we are so thrilled that there will
    be 32 million more people covered by that plan, that that is
    really the focus of our attention at the moment.
        Mr. Shimkus. So you are unconcerned about the $500 billion
    cut in Medicare or the trillion dollars additional in taxation?
        Mr. Summer. Congressman, I think the net gain from that
    legislation is very positive for Colorado.
        Mr. Shimkus. Well, you are speaking the policy line and I
    appreciate that, but I respectfully disagree.
        My time is expired, Mr. Chairman. Thank you.
        Mr. Pallone. Thank you, Mr. Shimkus. I have to admit that
    when you were asking Mr. Gardiner about fisheries in Alaska, I
    turned around and I thought I was back on my--before I chaired
    the Health Subcommittee, I was the ranking member on Fisheries,
    Wildlife and the Oceans, and I was wondering what was going on
    there for a minute.
        Mr. Braley.
        Mr. Braley. Thank you, Mr. Chairman, and with due respect
    to my colleague from Illinois, I would like to point out that
    section 2715 of the health care bill that he is referring to
    specifically applies not just to those plans that are part of
    the exchange but to all group health insurance plans which make
    up the vast majority of health care that is provided in this
    country and so the point I think was not accurate.
        I would like to start, Mr. Cowie, with you. I know that you
    spent a great deal of your life dealing with antitrust issues.
    In your statement, you talked about concerns about price fixing
    and collusion, which is always an issue in antitrust cases, but
    one of the things we know about this marketplace is that it
    differs from many other marketplaces that would be considered a
    free-market environment, which is not constrained by other
    external forces. We all know that the 800-pound gorilla in
    health care payment is Medicare, and we know that Medicare
    controls prices in every jurisdiction in this country because
    we see it from the hospitals and doctors that we represent. We
    also know that most private pay plans are driven from some
    derivative of the Medicare pricing formula from a baseline and
    then a multiplier. So I don't understand how giving consumers
    more information about the cost of health care in that
    environment is similar to giving people information about TVs
    and other consumer products that they are pricing. Can you
    explain that?
        Mr. Cowie. Congressman Braley, health care sectors is
    distinguishable because Medicare and Medicaid plays an
    important role but, you know, at the FTC, we wanted to make
    sure consumers got the benefit of vigorous price competition,
    so competition between drug manufacturers, competition between
    hospital systems, competition between large physician groups
    remains important in health care just like it does in other
    sectors. Where publication pricing can become problematic is if
    you are dealing with parts of the industry where commercial
    suppliers are negotiating with other large commercial
    suppliers. In many cities in this country, there are only two
    or three hospital systems and those two or three hospital
    systems are negotiating pricing with Blue Cross, with Aetna or
    CIGNA, and those are big boys negotiating hard, and in general
    in antitrust, our view is if, you know, you are playing poker,
    you shouldn't have to show your cards. You actually get better
    outcomes if they are negotiating head to head privately.
        Mr. Braley. Well, that may be true but I think you are
    focusing on primarily urban area if you are talking about the
    potential of three competitive systems within a marketplace
    because in rural parts of the country, you may be lucky to have
    one hospital in your community, and one of the other related
    problems we know, and this came out extensively during the
    health care debate was in many States like mine, 80 percent of
    the private coverage is written by one or two companies, and in
    that case you have an unnatural negotiating environment because
    you have got a dominant player that has much more leverage than
    the people they are negotiating with, and so, Mr. Summer, I
    would like you to comment on that because you represent a vast
    group of hospitals from large urban hospitals to hospitals that
    are in rural communities and may be dependent upon a lot of
    other facts that are affecting what type of services they can
    provide. Do you believe that more transparency in pricing is
    going to hurt the medical consumers in your State?
        Mr. Summer. No, Congressman, I think that the transparency
    that takes place at the State level where they provide the
    range of charges for certain diagnoses that are adjusted do
    help patients give them some indication of the ranges. However,
    the real issue is what health insurance plan they belong to,
    and like your question, the answer is, there are places where
    there are not choices of providers. That is where you need to
    go, and so it gives a range of what is available but there is
    really not a lot of choice on price.
        Mr. Braley. Mr. Rugland, I want to talk to you about your
    statement about the commitment to transparency that you talked
    about in your opening statement: ``Driven by our strong belief,
    we must change to sustain our obligation to care for the
    community.'' You talked about how quality improved as a related
    aspect of a commitment to pricing and to transparency in the
    way you price the services you provide and also emphasizing
    getting the most efficiency into the system. One of the things
    that was mentioned was a reference to taking $500 billion out
    of Medicare over the 10-year cost that CBO scored this bill and
    yet many health care economists estimate that each year there
    is somewhere between $500 and $700 billion of inefficient or
    wasted services within the health care delivery system. So I
    would like you to comment on how becoming more efficient and
    becoming more transparent promotes quality outcomes, promotes
    efficiency in the system and achieves the goal that we all are
    looking for.
        Mr. Rugland. Let me start out by saying it is our view
    there is a trillion dollars a year of waste within the medical
    system, the health care system. Fifty percent of the system is
    redundant and waste. When we started working on the issue of
    how will we sustain our health care in our community, which was
    about 7 years ago, I like to say it this way, we put a bet on
    the fact that the model was going to need to change. It would
    not sustain itself as it operated, that over time a patient
    would have more and more voice in what their health care
    decisions were, and in order for us to be positioned in order
    to deal with that, we had to do several things. One is there
    had to be more information available, meaningful information.
    The first step was to work with the hospitals in Wisconsin to
    gather data on cost and quality, and then we also had to go
    into our own system and change the way we did things so that we
    could redesign the process to remove the waste.
        Now, one of the things we found out was that as we
    understand and had transparency about price and quality, and
    some of that information is in my written testimony, and we
    posted it in the hospitals and in the clinics, we got better.
    We found out that people working in health care don't want to
    be at the bottom of the rank, they want to be good. They are
    committed passionately to what they are working on, and they
    want to be better, and their response to posting this data was
    that we got better. So as we moved to change our processes, our
    quality got better and that was what I was trying to get at in
    my testimony.
        Mr. Braley. Thank you, and I will yield back.
        Mr. Shimkus. Mr. Chairman, can I ask unanimous consent just
    for 1 minute to address this language of law that was raised
    by--to my friend from Iowa, the out-of-pocket cost transparency
    provision in section 101014 only applies to insurance purchased
    through the exchanges. Section 10104 amends section 1311E of
    the bill which is the exchange section, which is the exact
    important reason why the Green-Barton bill needs to be
    addressed because it will address transparency across the board
    to all insurers.
        Thank you. I yield back.
        Mr. Pallone. The gentleman from Pennsylvania, Mr. Pitts.
        Mr. Pitts. Thank you, Mr. Chairman.
        Mr. Summer, the health care law we just passed imposes a
    2.3 percent tax on medical devices when they are sold. Are
    hospital purchasers of medical devices?
        Mr. Summer. Yes, sir, they do.
        Mr. Pitts. Do you think it is likely or not likely at all
    that the medical-device manufacturers will pass the tax through
    to the purchaser of the product in the form of increased sales
    price?
        Mr. Summer. Congressman, we are hopeful that does not
    happen.
        Mr. Pitts. But you think it probably will?
        Mr. Summer. I can't comment on that.
        Mr. Pitts. You can't? OK. Well, would it be fair to say
    that the tax on medical devices will increase the cost of
    procedures at your hospitals because the cost of medical
    devices used in those procedures is higher?
        Mr. Summer. Congressman, certainly all the components of a
    procedure including the medical devices are factored into the
    cost of what that procedure would cost.
        Mr. Pitts. OK. Dr. Herzlinger, what are the proper roles of
    the government and the private sector in ensuring Americans
    have access to the information they need to make good
    decisions? Is there any information that if released could lead
    to collusion and increased costs for consumers? Should the
    government insist on keeping that kind of information private
    or pursue other responses?
        Ms. Herzlinger. Well, the danger of collusion is of course
    great in oligopolistic industries. If there is free entry in
    the market, if Mr. Cowie and I colluded on price, then Mr.
    Summer, Mr. Rugland, Mr. Gardiner could all enter the market
    and cut our prices. So the only circumstance where we could
    collude effectively is if he and I are the only participants in
    the market. In most of the American economy, that is not so.
    Health care, for example, the health care delivery system is
    hugely fragmented and famous for its fragmentation. We have
    over 700,000 physicians, over 5,000 hospitals. The danger of
    collusion which may be there in the pharmaceutical industry
    where a pharmaceutical company may hold a patent and be a
    virtual monopoly is not so in the rest of the delivery system.
    And in the rare cases where there has been transparency of
    prices and quality, prices have improved and quality has gone
    up in health care like the rest of the economy.
        Mr. Pitts. What is the full range of information that
    Americans need to make good decisions about their health care?
        Ms. Herzlinger. They need to know the prices that they are
    going to pay, and the Indian hospitals, which are the hospitals
    in the country of India, are creating themselves to compete
    with the American hospital industry, they quote full prices. So
    if you were to go to India and say I needed open heart surgery,
    they wouldn't say to you, well, we can't give you a price. They
    would give you a price and they stick with that price. So
    clearly you need price information, but that is not enough. You
    need to know what the quality is as well, and when it comes to
    insurance, we also need to know how good is that insurer in
    dealing with people like me, do they hassle people like me or
    are they great to people to me, how great are they to the
    doctors that I deal with. That is the kind of information we
    need.
        Mr. Pitts. And is it preferable for the government to
    empower Americans with good information about the quality and
    cost of their health care or to task government bureaucrats
    with determining which procedures and treatments are cost
    effective and medically effective?
        Ms. Herzlinger. I think the models that we have in
    transparency elsewhere in the economy, for example, in the SEC.
    The SEC has the power to enforce transparency but it has ceded
    that power to professionals, in this case, the accounting
    profession who are not stakeholders and interested in
    preserving truth. It is solely interested in doing a good job
    of measurement. That is a very good model to follow.
        Mr. Pitts. Finally, Mr. Holden, I understand Medicare pays
    ambulatory surgery centers about 58 percent of the hospital
    outpatient rate and that beneficiaries can save even more with
    their copays. What are the current obstacles to informing
    patients and other consumers of these potential savings and how
    would the Patients' Right to Know Act create a more informed
    consumer?
        Mr. Holden. The biggest obstacle is lack of a forum, lack
    of a vehicle for the communication. Right now it relies on the
    communication between the patient and the physician as a
    general rule, and even among physicians those are facts not
    well known and not facts well known in almost any forum in the
    country.
        Mr. Pitts. My time is up. Thank you, Mr. Chairman.
        Mr. Pallone. Thank you.
        Mr. Green.
        Mr. Green. Thank you, Mr. Chairman, and again, I would like
    to thank our panel for their patience. Between votes and
    everything else, it is sometimes hard to actually get a full
    hearing in in a day, even with one panel.
        Mr. Summer, both Congressman Burgess and I are original
    cosponsors on the Health Care Price Transparency Act, H.R.
    4803. It is a State-based approach building on what we have.
    Could you discuss the different between a State-based price
    transparency system such as your system in Colorado and a
    system, say, we would house at the Health and Human Services
    here in Washington, or HHS?
        Mr. Summer. Thank you, Mr. Congressman.
        Congressman, all decisions for health care are local, and
    the experience has been that a system that is built locally at
    the State level, and there are plenty of models to look at, are
    much more useful and helpful to patients and their families. So
    we believe that the State-based system which allows the
    hospitals to put the information in and aggregate it as is
    being done in almost 41 States would provide the better
    information for the consumers.
        Mr. Green. H.R. 3590, the Patient Protection Act, created a
    system of State-based health insurance exchanges, and do you
    believe setting a federal floor on States that adhere to with
    regard to price transparency is a logical way to proceed with
    price transparency even though those exchanges will be State
    based?
        Mr. Summer. I am sorry. I couldn't understand the question,
    Congressman.
        Mr. Green. The bill created a system of State-based health
    insurance exchanges, and is it better, would it be better to
    have federal, for example, minimum standards which we are going
    to have for those exchanges anyway? That is what current law--
    but transferring that into transparency, should we have some
    type of minimum amount of transparency that all States would
    have using the best of the 31 States we have, for example?
        Mr. Summer. I think some federal guidelines, some uniform
    definitions would certainly help for the comparability of that
    information, yes.
        Mr. Green. Of course, I say that because just a few days
    ago the governor of Texas decided he wasn't going to
    participate, and I am ever so thankful that we put in there
    that we will have a State exchange in Texas but it will be
    without State participation because obviously our small
    businesses and folks need it.
        You referenced the need for a study of consumer-friendly
    pricing language or common terms or some sort of agreement
    among hospital providers on pricing language. Do you have any
    suggestions on the study or implementation using these common
    terms? It seems that universally common pricing language should
    be regulated or guidance should be issued by HHS so we would
    know across State lines whether it is a State exchange on the
    type of policy we are purchasing or the information that we are
    being provided, whether you are in Texas or Louisiana or New
    York.
        Mr. Summer. Congressman, I think very much to your point, I
    think there needs to be some comparability, some
    standardization because borders are very porous when it comes
    to purchasing health care and using health care facilities.
    There is a distinction in our mind with borders but that is not
    how people buy health care and so there would need to be that
    standardization or some comparability between the terms and the
    information.
        Mr. Green. Thank you.
        Mr. Holden, how would the quality reporting requirement in
    the Patients' Right to Know Act regarding apples-to-apples
    comparison of quality metrics across sites of care create more
    useful quality information for a patient considering an
    outpatient surgery at an ASC or a hospital, and does the ASC
    industry have--what are they doing now on quality reporting?
    Because I think we know hospitals are having to do it. Are the
    outpatient surgical centers also doing it?
        Mr. Holden. Yes, sir. As I mentioned, we are reporting
    voluntarily about 20 percent of centers in the United States
    through the ASC quality collaborative posted online at
    ASCquality.org. In addition, we formed the ASC quality
    collaborative to pursue this initiative on our own, assuming
    that there may not be a forum like we have here today to
    discuss it and take it to the next level, so it is something
    that we have been pushing internally. I think the first part of
    your question is, what would it take to----
        Mr. Green. To create these apples-to-apples comparisons,
    because consumers need both pricing information but they also
    need to know quality so they can make that informed decision.
        Mr. Holden. Obviously we need, as I think has been
    mentioned several times, the pricing information across
    modalities, and, you know, the NQF data is available today but
    we need to expand the data set. You would need to tailor it to
    a consumer-friendly, consumer-relevant set of metrics, like if
    you or I were sitting down trying to decide where do I get a
    cataract surgery, you would want to know--you wouldn't need
    that many data points much like, I think the example was given
    on the car. You know, if you had the various consumer reports
    and repair records and things like that, in a similar vein you
    could make those decisions pretty quickly.
        Mr. Green. Well, and I know most people and I know in my
    own family if their doctor recommends some type of surgery,
    they are going to particularly go where the doctor suggests,
    but I think we are going to empower a lot more consumers to say
    if I need a bypass, I can tell you there are lots of facilities
    in Houston, Texas, than can provide bypass surgery, and both
    having the quality and the information there, particularly if
    they are having to pay, you know, their 20 percent copay. We
    know seniors now are concerned because they have to come up
    with that Medi-gap or that 20 percent on Medicare. A lot of
    folks, though, below 65, you know, don't do that. So I think
    the information we would provide by this legislation would
    help.
        Mr. Holden. There is no forum today, there is no place to
    go for that information across the outpatient platform. The
    best we could think of was doing it amongst ourselves but for
    it to be correct it needs to compare across all modalities, and
    we don't have the power to make that happen.
        Mr. Green. Thank you, Mr. Chairman. I appreciate your
    patience.
        Mr. Pallone. Thank you.
        Mr. Burgess.
        Mr. Burgess. Thank you, Mr. Chairman. I have a particularly
    difficult task because I only have 5 minutes, and although we
    heard from Dr. Kagen on the first panel, there is no doctor on
    the second panel so I feel obligated to be that doctor on the
    second past, so I may ask myself a few questions and respond
    because I think the doctor's perspective is important to have
    before the committee.
        I just have to say one thing, too. Atul Gawande, who before
    he became famous for traveling to McAllen, Texas, also did some
    other travels, and I think it was 2004 wrote an article for the
    New Yorker called The Bell Curve, and I know I have heard Dr.
    Herzlinger speak of issues like this before, but to have the
    actual report card, if you will, on hospitals, on doctors so
    that consumers, patients can make the best choice if they are
    supposed to have a whatever, knee replacement, what have you,
    that they can then--you know, maybe they don't want necessarily
    the best price but they want to go to the place with the best
    results for knee surgery. Actually the article on the bell
    curve that Dr. Gawande wrote was on the treatment, the long-
    term treatment, the management of cystic fibrosis and how the
    very meticulous management of these patients could actually
    translate into years added on to the end-of-life expectancy. So
    it is a theoretic point but it also has some practical
    applications, and Mr. Summer and Dr. Herzlinger, I wonder if
    you could just comment on that because that seems to be the
    direction of what we are discussing today. What about the
    concept of having a report card for your hospitals and for
    physicians?
        Mr. Summer. Congressman, I will speak for the hospital side
    only, and I would say we could not agree with you more. In
    fact, that kind of information, we work with the State of
    Colorado and there are over three dozen quality measures
    available today on our web page that you can essentially slice
    and dice them any way to do any kind of comparisons among
    hospitals and procedures, so we fully support that. I think the
    basis for that is best done at the State level but that as you
    said in combination with the pricing information is important
    information and so we have moved forward and in collaboration
    with the State of Colorado to put that information and make it
    available today.
        Mr. Burgess. Thank you, and of course I know the
    physician's perspective and some pushback that would come from
    my community, but Dr. Herzlinger, let me even ask you from
    someone in the business world or perhaps even the patient's
    perspective, what about those type of models?
        Ms. Herzlinger. Well, clearly, patients love information.
    Consumers love information. That is what made Consumer Reports
    so powerful. It was a New York Times or Wall Street Journal
    article yesterday lauding Consumer Reports and other
    information intermediaries, people like JD Power, who is a real
    person, Bloomberg, those are people that take information that
    is provided by the government and they translate it and make it
    useful for consumers and they are well rewarded for their
    efforts. So consumers, when you look at surveys of what do they
    want in health care, one of the primary things they want from
    the government is they want transparency.
        I would like to comment on whether the transparency should
    be State based or federal based. There are many good reasons
    for doing it by State but the Dartmouth atlas shows tremendous
    variations in the quality of care across States and across
    institutions. It would make sense for somebody who lives in
    Wisconsin on the border of Michigan to be able to have
    information so that they could compare the quality of
    information of health care, not only within their own State but
    in the growing market.
        Mr. Burgess. And I don't mean to interrupt, but I can't
    help myself. I have got to ask Mr. Cowie some questions, and I
    found myself intensely agreeing, intensely disagreeing with you
    as you gave your testimony. In fact, it reminded me of why in
    my first term I submitted an amendment to defund the Federal
    Trade Commission in one of our appropriations bill because of
    what you were doing to physicians and their inability to
    compete with insurance companies because we were never allowed
    to negotiate but of course insurance companies could do so
    freely. They could collude freely on price, but if doctors,
    even if there was a hint or a whiff that we were talking to
    each other, we would be hauled up before your commission,
    eventually cleared but not before we spent $100,000 or $200,000
    which we couldn't afford.
        But on the issue of not having data up there because it
    could lead to an unfair advantage to a third-party payer, I
    actually do support that notion and I worry that if I put my
    price for delivering a baby up on the Internet that I will give
    CIGNA, that United and Blue Cross will quickly say, hey, look
    what this guy will do this for and they will be right back in
    with a new contract that reflects that lower level, but the
    real problem is not CIGNA and Blue Cross. The big problem is
    the Centers for Medicare and Medicare Services and the
    sustainable growth rate formula which every insurance company
    in the country almost pegs to the SGR, and as a consequence
    when we cut doctors' pay 5 percent, 6 percent, 21 percent,
    which we are threatening to do at the end of this month, every
    insurance company out there in the country is salivating and
    rubbing their hands together because now they are going to be
    able to offer new contracts based on that percentage of the SGR
    formula. So really, shouldn't the FTC go after CMS with all the
    vigor that it attacked physicians a few years ago? And I know I
    am out of time but I would like to hear a response.
        Mr. Cowie. Congressman, I would need to study that issue
    and get back to you to address it intelligently.
        Mr. Burgess. I will accept that deferral. It is--it does
    become--you know, this is a very, very complex problem. I
    didn't get to question the ambulatory surgery center but we
    have the whole issue of physician-owned hospitals which we have
    essentially outlawed in the health care bill and yet if you
    want the best bang for your buck, if I am uninsured and I need
    a moderate procedure done, I can get that procedure for one-
    tenth of the cost that I can get it in the hospital if I go to
    an ambulatory surgery center. The doctor's fee is likely to be
    the same in each facility because it doesn't matter to them.
    They are indifferent as to what facility they use, but the big
    cost driver is hospital versus the ambulatory surgery center.
    Not all facilities are equal, and unfortunately in the
    construct of this bill, we really didn't delve into why those
    differences exist and what we might do to mitigate them.
        And Mr. Gardiner, I appreciate your comments as well. You
    talked about having a federalized exchange so that there would
    be--you wouldn't be beholden to State issues. I just wonder why
    we weren't able to ever talk seriously about selling insurance
    across State lines because that too would make sense. Now we
    have the federal government doing it for us. We might have had
    the private sector competing for us. Now we have the federal
    government which competes with no one, and I submit my previous
    issue on the SGR, but now we have the federal government that
    competes with no one setting those prices across the country
    and we may have gotten the absolute worst of both worlds.
        I didn't get to talk about Medicaid, but I appreciate the
    extra time, Mr. Chairman. I will yield back.
        Mr. Pallone. Thank you.
        I had a unanimous consent request from Mr. Shimkus to enter
    into the record the statement of Tim Estes and Travis Gentry,
    cofounders of Financial Healthcare Systems.
        [The information appears at the conclusion of the hearing.]
        Mr. Pallone. Without objection, so ordered.
        Mr. Shimkus. Nothing, Mr. Chairman, except for instructions
    to the panelists that if we have follow-up questions----
        Mr. Pallone. Oh, yes. Let me mention that. I will remind
    the members that you may submit additional questions for the
    record to be answered by the witnesses, and those are submitted
    to the clerk normally within the next 10 days, so you may get
    additional written questions from us within 10 days. The clerk
    will notify you and obviously we would like you to answer as
    quickly as possible.
        Mr. Burgess. Mr. Chairman, I would ask unanimous consent
    that this op-ed that appeared in May of 2005 in the Washington
    Times that was well written and so well constructed and quoted
    Dr. Reinhardt, that that be inserted into the record.
        Mr. Shimkus. Reserving the right to object, Mr. Chairman.
        Mr. Pallone. Let us look at it. Oh, it is by you? Oh, OK.
        Without objection, so ordered.
        Let me thank all of you for being here today. This is a
    very important issue. As I said in the beginning, we did have a
    legislative hearing on all three bills today because we know it
    is important and there is certainly a possibility that we would
    move forward with legislation. We are not clear on that yet but
    obviously today helped us in that regard a great deal, so thank
    you very much really for your testimony, and without objection,
    the subcommittee hearing is adjourned.
        [Whereupon, at 1:00 p.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

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