[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:]

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    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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