    [House Hearing, 112 Congress]
    [From the U.S. Government Publishing Office]

             USING INNOVATION TO REFORM MEDICARE PHYSICIAN PAYMENT

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

                                    HEARING

                                   BEFORE THE

                             SUBCOMMITTEE ON HEALTH

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JULY 18, 2012

                                   __________

                               Serial No. 112-167

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov
    ?

                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman

    JOE BARTON, Texas                    HENRY A. WAXMAN, California
      Chairman Emeritus                    Ranking Member
    CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
    ED WHITFIELD, Kentucky                 Chairman Emeritus
    JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
    JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
    MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
    GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
    LEE TERRY, Nebraska                  ANNA G. ESHOO, California
    MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
    SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
      Vice Chairman                      DIANA DeGETTE, Colorado
    JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
    TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
    MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
    MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
    BRIAN P. BILBRAY, California         TAMMY BALDWIN, Wisconsin
    CHARLES F. BASS, New Hampshire       MIKE ROSS, Arkansas
    PHIL GINGREY, Georgia                JIM MATHESON, Utah
    STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
    ROBERT E. LATTA, Ohio                JOHN BARROW, Georgia
    CATHY McMORRIS RODGERS, Washington   DORIS O. MATSUI, California
    GREGG HARPER, Mississippi            DONNA M. CHRISTENSEN, Virgin
    LEONARD LANCE, New Jersey            Islands
    BILL CASSIDY, Louisiana              KATHY CASTOR, Florida
    BRETT GUTHRIE, Kentucky              JOHN P. SARBANES, Maryland
    PETE OLSON, Texas
    DAVID B. McKINLEY, West Virginia
    CORY GARDNER, Colorado
    MIKE POMPEO, Kansas
    ADAM KINZINGER, Illinois
    H. MORGAN GRIFFITH, Virginia

                                     7_____

                             Subcommittee on Health

                         JOSEPH R. PITTS, Pennsylvania
                                     Chairman
    MICHAEL C. BURGESS, Texas            FRANK PALLONE, Jr., New Jersey
      Vice Chairman                        Ranking Member
    ED WHITFIELD, Kentucky               JOHN D. DINGELL, Michigan
    JOHN SHIMKUS, Illinois               EDOLPHUS TOWNS, New York
    MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
    SUE WILKINS MYRICK, North Carolina   LOIS CAPPS, California
    TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
    MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
    PHIL GINGREY, Georgia                TAMMY BALDWIN, Wisconsin
    ROBERT E. LATTA, Ohio                MIKE ROSS, Arkansas
    CATHY McMORRIS RODGERS, Washington   JIM MATHESON, Utah
    LEONARD LANCE, New Jersey            HENRY A. WAXMAN, California (ex
    BILL CASSIDY, Louisiana                  officio)
    BRETT GUTHRIE, Kentucky
    JOE BARTON, Texas
    FRED UPTON, Michigan (ex officio)

                                      (ii)
                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Joseph R. Pitts, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................     1
        Prepared statement...........................................     3
    Hon. Michael C. Burgess, a Representative in Congress from the
      State of Texas, opening statement..............................     4
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, opening statement.........................     5
    Hon. Phil Gingrey, a Representative in Congress from the State of
      Georgia, opening statement.....................................     6
    Hon. Henry A. Waxman, a Representative in Congress from the State
      of California, opening statement...............................     7
    Hon. John D. Dingell, a Representative in Congress from the State
      of Michigan, opening statement.................................     8
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, prepared statement...................................   136

                                   Witnesses

    Scott P. Serota, President and Chief Executive Officer, Blue
      Cross and Blue Shield Association..............................     9
        Prepared statement...........................................    12
    Bruce Nash, Senior Vice President and Chief Medical Officer,
      Capital District Physicians' Health Plan.......................    36
        Prepared statement...........................................    38
    David L. Bronson, President, American College of Physicians......    42
        Prepared statement...........................................    45
    David B. Hoyt, Executive Director, American College of Surgeons..    72
        Prepared statement...........................................    74
    Kavita Patel, Fellow, Engelberg Center for Health Care Reform,
      The Brookings Institution......................................    87
        Prepared statement...........................................    89

                               Submitted Material

    Statement, dated July 18, 2012, of Garrison Bliss, President,
      Qliance Medical Group, submitted by Mr. Pitts..................   102
    Letters of March 30, 2011, from Ms. Sebelius to Mr. Pallone and
      Mr. Waxman, submitted by Mr. Pallone...........................   131

             USING INNOVATION TO REFORM MEDICARE PHYSICIAN PAYMENT

                                  ----------

                            WEDNESDAY, JULY 18, 2012

                      House of Representatives,
                                Subcommittee on Health,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:02 a.m., in
    room 2123 of the Rayburn House Office Building, Hon. Joe Pitts
    (chairman of the subcommittee) presiding.
        Members present: Representatives Pitts, Burgess, Shimkus,
    Rogers, Murphy, Blackburn, Gingrey, Latta, McMorris Rodgers,
    Lance, Cassidy, Guthrie, Pallone, Dingell, Towns, Engel,
    Schakowsky, Christensen, and Waxman (ex officio).
        Staff present: Julie Goon, Health Policy Advisor; Debbee
    Keller, Press Secretary; Ryan Long, Chief Counsel, Health;
    Katie Novaria, Legislative Clerk; John O'Shea, Professional
    Staff Member, Health; Andrew Powaleny, Deputy Press Secretary;
    Chris Sarley, Policy Coordinator, Environment and Economy;
    Heidi Stirrup, Health Policy Coordinator; Phil Barnett,
    Democratic Staff Director; Alli Corr, Democratic Policy
    Analyst; Amy Hall, Democratic Senior Professional Staff Member;
    Karen Lightfoot, Democratic Communications Director and Senior
    Policy Advisor; Karen Nelson, Democratic Deputy Committee Staff
    Director for Health; and Roger Sherman, Democratic Chief
    Counsel.
        Mr. Pitts. The subcommittee will come to order. Chair
    recognizes himself for an opening statement.

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

        There is no disagreement that the current Medicare
    physician reimbursement system, the Sustainable Growth Rate, or
    SGR, is broken. Time and again, Congress has had to override
    scheduled cuts in physician reimbursement to avert disaster,
    and we will have to do it again before the end of this year.
    Absent congressional actions, physicians will face a 27 percent
    cut starting January 1, 2013.
        There is also no disagreement that the SGR needs to be
    replaced with something that actually is sustainable, and
    reimburses for outcomes and quality instead of just volume of
    services.
        The focus of today's hearing is not the well-documented
    deficiencies of the current system, it is about the future.
    What should the new physician payment system look like, and
    what can we learn from the private sector's experience in this
    area that may serve as a roadmap for reform? What has been
    tried and failed, and what has worked?
        Our witnesses today are here to share with us the
    innovative payment systems and care delivery models they have
    experimented with, and their outcomes. I want to thank all of
    them for their testimony.
        So thank you. I yield the remainder of my time to the vice
    chairman of the subcommittee, Dr. Burgess.
        [The prepared statement of Mr. Pitts follows:]
        [GRAPHIC] [TIFF OMITTED] T7750.001

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

        Mr. Burgess. I thank the chairman for the recognition. It
    has been a very interesting congressional term. We are now 18
    months into it. I think this term I have seen more work done on
    this problem than I have at any other time that I have been in
    Congress, but we are still pretty far away from the goal that
    we expect to achieve. Everyone on both sides of the aisle
    accepts the premise of the SGR has got to go. The conversation
    about actual innovative replacements that providers in the
    future--and really, I do want to ensure, my vision is that
    people will have options, that they will not see a ``one size
    fits all'' that we think is best for their practice, but they
    will actually be able to choose the option that is best for
    their practice. But in the meantime, we have got to sketch out
    the means by which to ensure that Medicare beneficiaries can
    continue to see their physicians.
        We have been in the process of testing models for years.
    The witnesses at the table also have been in the process of
    developing models for some time, and we expect that they are
    going to have some interesting ideas to share with the
    committee, and look forward to that.
        But we have got a cut coming in just a few months, and a
    lot of uncertainty as we face elections, while we face
    expiration of existing tax policy, we have the payroll tax
    holiday ending, we face unemployment insurance needing to be
    extended, and oh yes, who can forget all the collegiality that
    existed in this body a year ago with the discussion of the debt
    limit? We are likely to face that again, but this time, without
    all of the good feeling that we all had last August.
        We could have taken this problem and moved it a little
    farther away from December, recognizing that December is going
    to be such an uncomfortable month for so many reasons. I had--
    many members of this committee had asked for a 2-year extension
    in December of last year. A 2-year extension passed without a
    lot of other things attached to it so that it would be sure to
    pass. In fact, we could probably do it on suspension on a
    Monday afternoon. But I didn't get that. We didn't get that.
    You didn't get that. And as a consequence, we got a 1-year
    extension or what ended up being a 1-year extension that
    expires in the middle of this fiscal holocaust at the end of
    the year.
        So all I would suggest is we know that we are not likely to
    end up doing something that will provide that long-term relief
    and long-term replacement for the Sustainable Growth Rate by
    December 31. I wish we could, but I have been here long enough
    to know that that is a goal that is going to be difficult to
    achieve. But what I would like to suggest is this month, before
    the August recess, the House of Representatives could pass yet
    an additional extension to give us that 2 years that we asked
    for in December of last year so that we have time to fully vet
    and evaluate the proposals that are before us. The committee
    staff has done a good job in developing some of these ideas. It
    is now up to us to take them to doctors across the country and
    get their feedback so we get the best possible policy. So I
    will be introducing that legislation later today or this week
    to extend the SGR for an additional year.
        Mr. Chairman, I thank you for the recognition. I will yield
    back to you the time.
        Mr. Pitts. The chair thanks the gentleman and now
    recognizes the ranking member of the subcommittee, Mr. Pallone,
    for 5 minutes for an opening statement.

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

        Mr. Pallone. Thank you, Mr. Chairman. Let me associate
    myself with the remarks of Dr. Burgess. Of course, I don't know
    how he is paying for the 2-year extension, so I won't associate
    myself with that until I see what the pay-for is. But I think
    that what he said overall is very true. I think we have to be
    very honest with the physician community. We all agree that the
    SGR needs to be replaced, but you know, the question is is
    there political will to do that, and whether or not it can be
    done effectively by the end of the year with all these other
    problems that need to be addressed out there? It is very
    questionable. I don't have any doubt that this committee and
    the members of this committee would like to accomplish that,
    but I don't know whether or not the House or the GOP
    leadership, you know, would be willing to put it on the agenda
    for a long-term fix.
        I want to, though, go beyond what Dr. Burgess said and say
    that I also think we have to be very careful that when we talk
    about pay-fors, because pay-fors, it is not only a question of
    the new formula, but also the pay-for. I think we have to be
    very careful. We need a pay-for that is big. I have always
    suggested the overseas contingency operation fund, or the PEACE
    dividend, as it is called, for the pay-for, because we need a
    large amount of money. I think that this idea of constantly
    picking at other providers, whether it is hospitals or nursing
    homes, home health care providers, is not the way. It bothers
    me many times when I hear other physicians say, ``Well, you
    know, we can take it from other parts of the health care
    system.'' I don't see that. And I would also warn my GOP
    colleagues that I certainly will not support, and I think it is
    useless politically, to try to take the money away from the
    Affordable Care Act. You know, I don't want to say for sure,
    but so many times the answer has been, ``Oh, you know, let us
    get rid of the prevention fund, let us get rid of the community
    health centers, let us get rid of, you know, the subsidies or
    the tax credits that would make premiums more affordable for
    certain incomes.'' That is not the answer. I think that the
    health care system is in crisis, and the other providers have
    the same problems. And so for us to suggest that we are going
    to, you know, go after the ACA or other providers I think is
    really a huge mistake.
        So the question remains, how do we fix it? I don't think
    there is a ``one size fits all'' approach. Any new payment
    system should rely on improved outcomes, quality, safety, and
    efficiency. In addition, while there must be fee-for-service
    within the future payment system, we must stop rewarding
    doctors for volumes of services. Primary care must be
    strengthened and given special consideration, and a new system
    must better encourage coordinated care while incentivizing
    prevention and wellness within the patient.
        Now, there a number of innovative programs that are
    currently underway across the country. We will hear today from
    two private payer plans that are learning and building on
    successes from such initiatives as pay-for-performance,
    patient-centered medical homes, bundle payments, and of course,
    arrangements with accountable care organizations. Many of these
    initiatives recognize the local needs of their marketplaces,
    which is something worthy of consideration moving forward.
    Local markets have different needs, and while one payment model
    may work in New Jersey, it doesn't necessarily work in Montana.
        While we are eager to hear from the private sector, we
    mustn't forget about the delivery system reforms already
    underway in the public sector. The Center for Medicare and
    Medicaid Innovation created by the Affordable Care Act gives
    CMS the ability to pursue many similar demonstration programs
    in both Medicare and Medicaid. Currently they are testing a few
    new models, including ACOs in the patient-centered medical
    homes. The ACA also strengthens incentives for reporting on
    quality measures for physicians. Meanwhile, in 2011, Medicare
    began paying a 10 percent incentive payment of primary care
    physicians for primary care services nationwide.
        So together, the public and private sectors can and should
    work together to get the health care system on a better path to
    sustainability. I look forward to hearing today about the
    exciting work being done in this field. I want to thank our
    witnesses. I want to especially note the American College of
    Surgeons who have taken a leading role on conceptualizing a new
    proposal to replace the SGR, which they are going to talk about
    today.
        And again, Mr. Chairman, I think this is a very important
    hearing. I appreciate your having it. This committee has worked
    effectively on dealing with the--with PDUFA and other things on
    a bipartisan basis. I think we can do the same here.
        I am sorry, I guess I am out of time.
        Mr. Pitts. The chair thanks the gentleman. I now recognize
    the gentleman from Georgia, Dr. Gingrey, for 5 minutes for
    opening statement.

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

        Mr. Gingrey. Mr. Chairman, I won't take the entire 5
    minutes, but thank you for recognizing me.
        The Sustainable Growth Rate we all know is broken and none
    of us support it, and it must, must go. Therefore, I look
    forward to the testimony of those here today, our witnesses, on
    what payment models might be used to replace SGR.
        I do want to mention one thing. House Republican physicians
    worked very closely with the House leadership last year to put
    forward a multi-year SGR patch. I think my colleague as I
    walked in, Dr. Burgess, was talking about that. It wasn't the
    full repeal that I wanted, but it ensured some level of
    stability for physicians and our patients. Ultimately we
    couldn't get the Senate on board and it failed, as you all
    know.
        Now we find ourselves facing SGR cuts again in January of
    what, 27.4 percent if something is not done. I urge this
    Congress to put partisan and election politics aside, and let
    us work together to get rid of SGR once and for all.
        I don't agree with my colleague from New Jersey, the
    ranking member of the Health Subcommittee, in regard to the
    pay-fors, and that--but I do agree with him that that is a huge
    problem, how we are going to pay for the cliff. The last figure
    I saw of that cliff to bring the baseline back down to zero was
    something of the magnitude of $300 billion, but that OCO money
    we talked about and that got kicked around by the Super
    Committee, overseas contingency operation, honestly from my
    perspective, it really looks like funny money, very much like
    funny money. You can't convince me that it isn't. I agree with
    Mr. Pallone and his concerns, of course, about goring--oxing
    the gore or goring the ox or whatever of other providers within
    the Medicare program. Every one of them are concerned about
    cutbacks and taking money out of--whether it is home health
    care or hospice or whatever. I agree with him on that point,
    but I am not for OCO money.
        I will just conclude by saying that myself and the GOP
    Doctors Caucus, my colleagues, 21 of us, will be working with
    leadership again in the House, and also with our Democratic
    colleagues, because there is no way to get this done in a one-
    party, Majority party effort. This has got to be done in a
    bipartisan way. And indeed, the House can't fix the problem
    alone. It has to be bicameral.
        So Mr. Chairman, thank you for calling the hearing together
    today. This hearing is hugely important. We can all work
    together--we have to to get this done, and I am looking forward
    to this expert panel of witnesses.
        I yield back, Mr. Chairman.
        Mr. Pitts. Is there anyone else seeking time on this side
    of the aisle?
        If not, the chair thanks the gentleman and recognizes the
    ranking member of the full committee, Mr. Waxman, for 5 minutes
    for opening statement.

    OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. Waxman. Thank you very much, Mr. Chairman. I would like
    to start by acknowledging and welcoming the bipartisan interest
    in transforming the Medicare physician payment system from one
    that focuses on rewarding volume to one that focuses on
    rewarding quality and outcomes.
        While Congress has yet to come to a bipartisan agreement on
    how to accomplish the shared goal of repealing and replacing
    the flawed Sustainable Growth Rate, SGR, mechanism, there seems
    to be bipartisan agreement that it should be done. We must find
    a way to end the unsustainable system of cuts that loom over
    our physicians every year. The uncertainty created by the
    current system serves no one well: the physicians who have no
    stability in payments, the beneficiaries who worry about access
    to their doctors, and even Congress. Even more encouraging is a
    bipartisan agreement that delivery system reforms, many of
    which were included in the Affordable Care Act, hold promise in
    a post-SGR world. We must work towards a new way of paying for
    care for both physicians and other providers that encourages
    integrated care, improving care for individuals, improving care
    for populations, and reducing costs.
        Right now, the way we pay for care doesn't always support
    these goals. The Affordable Care Act makes major strides to
    improve the way Medicare deals with physicians and other
    providers. Some of the new care models supported by the ACA
    include Accountable Care Organizations, bundled payments,
    medical homes, and initiatives that boost primary care and
    encourage paying for value and outcomes, not volume. As we will
    hear today, the private sector is exploring these avenues as
    well.
        I yearn for the day when the Republicans knew how to handle
    this problem. They simply extended the SGR payments and didn't
    pay for it. They didn't do a lot of things to pay for what they
    charged to the taxpayers of the United States towards the
    Medicare prescription drug benefit, SGR, didn't pay for it. Now
    they want to be sure that every way to pay for this is
    airtight. Well, it is a new day where Republicans are giving us
    their fiscal responsibility side of things. We need to work
    together. Our goal should be to enact a permanent repeal to the
    existing flawed physician payment system this year. Let us do
    it this year. We had chances to do it, as Mr. Burgess pointed
    out, but we couldn't get the Republican leadership, his
    Republican leadership, to go along with what he and we wanted.
    So it is time for the Republican leadership to recognize this
    is a problem that we ought to resolve, not just, well, I guess,
    not just kick it down the road, but I guess we would be
    satisfied just for that for a couple years.
        But we got to get on with the job of doing what is
    responsible. I want to yield the balance of my time to Mr.
    Dingell.

    OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MICHIGAN

        Mr. Dingell. Mr. Chairman, I thank the gentleman from
    California for his kindness to me. I have a splendid statement.
    I ask unanimous consent that the fullness of it be inserted in
    the record.
        Mr. Pitts. Without objection, so ordered.
        Mr. Dingell. I commend my colleagues on the Republican side
    for their desire to keep Medicare fiscally solvent to address
    the SGR problem, and to see to it that we fix the concerns of
    the medical profession in seeing to it that they are properly
    compensated. Their complaint is a real and a valid one, and it
    is a thing to which we should pay heed.
        As any good physician will tell you, we need to cure the
    underlying problem, not to just treat the symptoms, and the
    patchwork job that we have done in addressing these problems
    over the years has done nothing but to create a growing and
    painful problem, which gets worse and worse as time passes. So
    curing the matter for once and all with proper attention from
    this committee, as we have done in the past and in a bipartisan
    fashion, is the way out of this thicket.
        I commend my colleagues on both sides of this, and I look
    forward to working with them towards that very important end.
        Thank you, Mr. Chairman.
        Mr. Pitts. Chair thanks the gentleman, and now will
    introduce today's panel. First, Mr. Scott Serota is President
    and Chief Executive Officer of Blue Cross Blue Shield
    Association. Second, Dr. Bruce Nash is Senior Vice President
    and Chief Medical Officer of the Capital District Physicians'
    Health Plan. Thirdly, Dr. David Bronson is President of the
    American College of Physicians; then Dr. David Hoyt is the
    Executive Director of the American College of Surgeons; and
    finally, Dr. Kavita Patel is the Managing Director for Clinical
    Transformation and Delivery at the Engelberg Center for Health
    Care Reform at the Brookings Institution.
        Your written testimony will be made matter of the record.
    We ask that you summarize in 5 minutes. Mr. Serota, you are
    recognized for 5 minutes for your opening statement.

     STATEMENTS OF SCOTT P. SEROTA, PRESIDENT AND CHIEF EXECUTIVE
     OFFICER, BLUE CROSS AND BLUE SHIELD ASSOCIATION; BRUCE NASH,
       SENIOR VICE PRESIDENT AND CHIEF MEDICAL OFFICER, CAPITAL
    DISTRICT PHYSICIANS' HEALTH PLAN; DAVID L. BRONSON, PRESIDENT,
       AMERICAN COLLEGE OF PHYSICIANS; DAVID B. HOYT, EXECUTIVE
       DIRECTOR, AMERICAN COLLEGE OF SURGEONS; AND KAVITA PATEL,
    FELLOW, ENGELBERG CENTER FOR HEALTH CARE REFORM, THE BROOKINGS
                              INSTITUTION

                      STATEMENT OF SCOTT P. SEROTA

        Mr. Serota. Thank you, Mr. Chairman.
        Mr. Pitts. Poke that button there.
        Mr. Serota. Sorry about that. I will try again.
        Thank you, Chairman Pitts, Ranking Member Pallone, and
    members of the Health Subcommittee for inviting me here to
    testify today. I am Scott Serota, President and Chief Executive
    Officer of the Blue Cross Blue Shield Association, which
    represents 38 independent community-based Blue Cross Blue
    Shield companies that collectively provide health care coverage
    for 100 million Americans. I commend the subcommittee for
    convening today's hearing.
        Blue Plans are leading efforts in their communities to
    implement payment, benefit, and delivery system reforms that
    will improve quality and reign in costs. We believe that
    Medicare cannot only learn from, but also should align with
    these successful initiatives.
        Today, I would like to focus on three interrelated
    strategies. First, Blue Plans are changing payment incentives
    by putting place models that move away from fee-for-service and
    link reimbursement to quality and outcomes. The goal is to
    promote patient-centered care that pays for desired outcomes,
    rather than the number or intensity of service. These payment
    innovations include pay-for-performance initiatives, bundle
    payment arrangements in more than 32 States, arrangements with
    accountable care organizations in 29 States, and patient-
    centered medical homes, with Blue Plans collectively supporting
    the Nation's largest network of medical homes in 39 States.
    These models are driving substantial improvements in care
    quality, while taking avoidable costs out of the system. For
    example, CareFirst Blue Cross Blue Shield's Medical Home
    Initiative includes 3,600 primary care physicians and nurse
    practitioners caring for one million members. Preliminary 2011
    results indicate that 60 percent of the eligible primary care
    panels earned outcome incentive awards, which are based on a
    combination of savings achieved and quality points. Among these
    panels, costs were 4.2 percent less than expected. In
    Pennsylvania, Highmark Blue Cross Blue Shield's Quality Blue
    pay-for-performance program has prevented 42 wrong-side
    surgeries, reduced hospital-acquired infections, raised breast
    cancer screening rates nine points above the national average,
    all while saving $57 million over 4 years.
        Our second strategy is to partner with clinicians to give
    them individualized support to be successful under new payment
    and care delivery models. This includes sharing data about a
    patient's full continuum of care, helping improve the way care
    is delivered, enhancing care coordination, and providing
    powerful health IT capabilities.
        For example, a powerful way to improve the quality of care
    for beneficiaries with chronic illness is to enhance care
    coordination. Horizon Blue Cross Blue Shield of New Jersey has
    partnered with Duke and Rutgers Universities to train at least
    200 nurses as practiced-based population care coordinators in
    medical homes and other settings. This first of its kind nurse
    training curriculum recognizes the workforce enhancement
    necessary to enable a statewide expansion of medical homes.
        None of these innovations would succeed without our third
    strategy, engaging patients. This includes providing
    information on cost and quality to help patients make informed
    decisions about their care, tiered benefit designs that
    encourage patients to seek care from high quality providers,
    and tools for members to improve their health and wellness. For
    example, Blue Cross Blue Shield Association's national consumer
    cost tool lets members obtain information on estimated costs
    for more than 100 of the most commonly billed elective
    procedures for hospitals, ambulatory surgery centers, and
    freestanding radiology centers in nearly every U.S. zip code.
    In addition, Blue Plans are using health informatics from a
    database of claims data for more than 110 million individuals
    nationwide collected over a 7-year history. The analytics
    capability made possible by Blue Health Intelligence, or BHI,
    are resulting in healthier lives and more affordable access to
    safe and effective care. For example, BHI collaborated with
    Independence BlueCross in Pennsylvania to determine the best-
    performing facilities in bariatric surgery. Looking at 3 years
    of data, BHI analyzed potentially avoidable complications at
    214 facilities and identified Pennsylvania's Crozer-Chester
    Medical Center as having an extraordinarily low complication
    rate for bariatric surgery, just four-hundredths of a percent
    compared to the nationwide average of 6.7 percent. We
    designated Crozer as a best-in-class provider in this specialty
    under the Blue Distinction Initiative, which encourages
    patients to seek care from high-quality providers.
        Achieving a high-Squality, affordable care system will
    require a multi-faceted approach, using all the strategies that
    I have outlined. Sustaining and building on these successes
    will require a continuously evolving approach of fine-tuning
    strategies and implementing new ones. We believe a compelling
    opportunity exists to accelerate Medicare's adoption of these
    private sector initiatives. Payment approaches and technical
    assistance must be adapted to fit local delivery system
    conditions, which vary widely. This assumes patients can meet
    practices where they are, rather than attempting to overlay a
    one size fits all solution that may not be workable. The time
    is right to accelerate the pace of reform for Medicare, and we
    are pleased that Blue Plans are participating in pilots to test
    these approaches, and urge successful approaches be expanded
    rapidly beyond pilot markets.
        I appreciate the opportunity, Mr. Chairman. Thank you very
    much.
        [The prepared statement of Mr. Serota follows:]
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        Mr. Pitts. Chair thanks the gentleman. I now recognize Dr.
    Nash for 5 minutes for an opening statement.

                        STATEMENT OF BRUCE NASH

        Mr. Nash. Good morning. My name is Bruce Nash, and I am the
    Chief Medical Officer of Capital District Physicians' Health
    Plan, which is based in Albany, New York. CDPHP, as we are
    known, is a not-for-profit physician-sponsored network model
    plan with close to 400,000 members who live in the 24 counties
    in upstate New York. We are the capital district's largest
    provider of managed commercial Medicare and Medicaid products.
    I also serve as the Chairman of the Medical Directors' Council
    for the Alliance of Community Health Plans, or ACHP, whose
    members include 22 of the Nation's leading non-profit regional
    health plans, who share our commitment to the Triple Aim, a
    concept created by the Institute for Health Care Improvement,
    that is improving the patient's experience of care, improving
    the health of populations, and reducing the per-capita cost of
    care.
        CDPHP was founded by the physicians of the Albany County
    Medical Society 28 years ago, and to this day is governed by a
    board whose majority are practicing physicians who are elected
    by their peers. Our board chair is also required to be a
    practicing physician. As a consequence, we have enjoyed a close
    relationship with our provider community, enabling us to deploy
    market-leading initiatives that improve the care delivery for
    our members, despite not directly employing any of the
    clinicians. This has led to us being recognized as a top-ranked
    health plan in the State and the Nation for our member
    satisfaction and quality metrics.
        Four years ago, our board emerged from a strategic planning
    session with a directive for management to address the
    impending primary care crisis. It was noted that our local
    medical school was no longer graduating significant numbers of
    new physicians who were choosing primary care as a career.
    While the causes for this were multiple, we chose to focus on
    improving a primary care physicians' income potential. It was
    clear that for this to be accomplished it would have to be
    funded by changing the way physicians practice with more
    effective and efficient care as a result. This began the
    program that we later labeled our Enhanced Primary Care
    program, or EPC.
        We began with an initial pilot of three practices, and over
    a 2-year period of time were able to demonstrate an improvement
    in 14 of 18 specific quality metrics; a 15 percent reduction in
    hospital utilization; a 9 percent reduction in emergency
    department usage; a 7 percent reduction in the use of advanced
    imaging. All of this resulted in an $8-per-member-per-month
    savings in total health care costs.
        On the strength of these early data, CDPHP expanded its EPC
    program by establishing training programs for selected
    practices lasting 12 months and requiring significant
    commitment of time and effort from the practices as they
    learned the basics of Enhanced Primary Care. We currently have
    75 such practices, representing 384 providers and almost
    100,000 of our members. We are now launching our next cohort
    which will add an additional 70 practices.
        While much of what I have described is common to many
    successful patient-centered medical home initiatives
    nationally, we believe our unique contribution to this effort
    has been the creation and deployment of a novel reimbursement
    methodology. This model involves a risk-adjusted global payment
    for all services that the physician provides, in conjunction
    with a significant bonus based upon the elements of the Triple
    Aim, the patient's experience of care, the quality, and the
    cost efficiency. It creates an opportunity for a physician to
    enhance his or her reimbursement by an average of 40 percent.
        Our base payment is a unique global payment to the practice
    for each of their patients. This is driven by a severity factor
    that was developed for our use by the scientists associated
    with Verisk Health, Inc., a global analytics firm. This
    severity score predicts the amount a primary care physician
    should be paid for a specific patient based upon the diagnoses
    of that patient. This score is then multiplied by a conversion
    factor to determine the payment for that given patient based
    upon their plan type, that is, Commercial, Medicare, or
    Medicaid, and we pay this to the practice on a monthly basis.
        We still pay fee-for-service for a small subset of
    physician services, about 15 percent. These payments represent
    things that we would like to incent the primary care physicians
    to do in their office as opposed to referring to a specialist,
    such as minor skin biopsies, or for the acquisition cost of
    things like immunizations.
        The bonus or pay-for-performance aspect of the model is
    focused on the Triple Aim. We measure the satisfaction of the
    practice's patients to determine bonus eligibility for the
    practice. Currently we utilize HEDIS metrics to measure the
    quality of care delivery. A weighted average of 18 distinct
    metrics creates a quality score for the practice. Our
    efficiency metric is an output of our Impact Intelligence
    software, which accomplishes the required risk adjustment
    across the total cost of care. The annual bonus payment to a
    practice is determined in a manner that has been described as a
    ``tournament'' system, simply said, practices need to perform
    better than other practices in the network to achieve their
    optimal payout.
        Our initial data for the EPC program was based on a
    population of only 12,000 members. We are fortunate that the
    Commonwealth Fund has provided a grant to an external
    evaluator, Dr. David Bates of the Brigham and Women's Hospital,
    to evaluate our 2012 experience. These data will become
    available in the latter half of 2013.
        CDPHP has also been active in the development of
    alternative reimbursement models for certain specialist and
    hospital partners. While we have yet to develop the experience
    that we have with the EPC program, we firmly believe that all
    components of the delivery system need to engage with us in
    payment models that align financial incentives with the needs
    of our communities.
        Thank you for inviting me to be here today, and I look
    forward to your questions.
        [The prepared statement of Mr. Nash follows:]
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        Mr. Pitts. Chair thanks the gentleman, and now recognizes
    Dr. Bronson for 5 minutes for opening statement.

                     STATEMENT OF DAVID L. BRONSON

        Mr. Bronson. Good morning. I am David Bronson, President of
    the American College of Physicians, the Nation's largest
    medical specialty organization, representing 133,000 internal
    medicine specialists who care for patients in primary and
    comprehensive care settings, internal medicine subspecialists,
    and medical students who are considering a career in internal
    medicine. I reside near Cleveland, Ohio. I am Board-certified
    in internal medicine and practice at the Cleveland Clinic on
    the downtown campus. I am also President of Cleveland Clinic
    Regional Hospitals, and a Professor of Medicine at the
    Cleveland Clinic Lerner College of Medicine of Case Western
    Reserve University. Thank you very much for allowing us to
    share our perspective.
        This morning, instead of rehashing all of the reasons why
    the SGR must be repealed, I will focus on the innovative
    solutions being championed by ACP and others--others at the
    table, I might add--within the medical profession.
        First, ACP recommends that the patient-centered medical
    home model of care be supported for broad Medicare adoption.
    Patient-centered medical home is an approach to providing
    comprehensive primary care in a setting that focuses on the
    relationships between patients, their primary care physician,
    and other health care professionals. This care is characterized
    by the following features: a personal physician for each
    patient, physician-directed medical practice where the personal
    physician leads a team of individuals trained to provide
    comprehensive care, and a place where the treatment team can
    assist the patient in meeting their specific health care needs.
    The patient-centered medical home practices provide increased
    access to care to prevent avoidable emergency room and hospital
    use, processes to facilitate care coordination amongst all
    physicians, and address chronic illnesses present within the
    Medicare population, including patient self-management
    education. These, and other features of the medical home,
    contribute to the increasing quality of care and reducing
    avoidable costs to patients and health systems.
        Patient-centered medical homes use quality management tools
    such as registries and outcomes reporting to proactively manage
    the health care of a whole practice's population. There is an
    extensive and growing body of evidence on the medical home's
    effectiveness in improving outcomes and lowering costs. To cite
    just one example, in Genesee County, Michigan, the Genesee
    Health Plan in collaboration with local physicians and
    hospitals formed the Genesys HealthWorks. This model, which is
    built upon a strong, redesigned primary care infrastructure,
    has demonstrated both significant cost savings and improved
    quality.
        Many large insurers, including United Health, WellPoint,
    CareFirst, and Blue Cross Blue Shield affiliates, are in the
    process of scaling up their efforts in the medical home to
    thousands of primary care physician practices in tens of
    millions of ruralities across the country. In my practice at
    the Cleveland Clinic, all the primary care practice physicians
    taking care of adults are certified by the NCQA at the highest
    level as medical homes.
        In the public sector, CMS Innovations Center is in the
    process of enrolling practices in its Comprehensive Primary
    Care Initiative. Primary care practices enrolled in this
    initiative will receive new public and private funding for
    primary care not included--primary care functions not included
    in the fee-for-service payments and will have the opportunity
    to share net savings generated through the program. Fifty-four
    commercial and State insurers are joining with Medicare and
    support approximately 500 participating practices in seven
    markets.
        The bottom line is that the medical home is no longer just
    an interesting concept, but a reality for millions of Americans
    and thousands of practices. The commercial insurers are driving
    these innovations in many markets. This can also become a
    reality for Medicare patients.
        To accomplish this, Congress needs to accelerate Medicare's
    adoption of the medical home model by providing higher payments
    to physician practices that have achieved recognition by deemed
    private sector accreditation bodies consistent with the
    standards to be developed by the Secretary. In a subsequent
    stage, performance metrics could be added and incorporated into
    the Medicare payment policies.
        By supporting the PCMH, Medicare will accelerate the
    national adoption of this innovative approach to improving the
    health care system. The goal should be to promptly implement
    the payment policies to steadily grow physician and patient
    participation in medical homes over the next several years.
        Second, Congress should enact payment policies to
    accelerate the adoption of the related medical home
    neighborhood. This concept is essential to the ultimate success
    of the medical home. It recognizes that specialty and
    subspecialty practices and others that provide treatment to the
    patient be recognized and provided with incentives to work
    together in a collaborative manner. With the patient-centered
    home neighborhood program, primary care physicians and
    specialists work together to proactively reduce duplication,
    enhance quality, and reduce preventable hospitalizations.
        Specifically, ACP proposes that Congress help increase non-
    primary care specialists' participation in the medical home
    neighborhood project by offering higher payment levels for
    those services. In my practice, PCPs and cardiologists
    specializing in heart failure have developed coordinated early
    intervention programs that have improved quality and reduced
    preventable admissions, and saved health care dollars.
        Third, Congress should establish Medicare incentives to
    physicians to incorporate evidence-based guidelines in national
    specialty societies and to share decision-making with the
    patients. We think that is a vital step that is important to
    get there.
        And finally, ACP believes that additional steps should be
    taken now to help physicians to move toward models aligned with
    value for patients, as well as awarding those who have taken
    leadership and risk in participating in new models, like
    medical homes and ACOs. Even as new models are being more
    thoroughly developed and pilot tested, physicians could get
    higher updates for demonstrating they successfully participated
    in such programs.
        In conclusion, ACP believes that for the first time in many
    years, we can begin to see a vision for a better future where
    the SGR no longer endangers access to care, Medicare recognizes
    and supports the value of primary and coordinated care, and
    where every person who is enrolled in Medicare has access to a
    highly-functioning primary care practice through certified
    medical homes and other promising care coordination models. The
    current system disincents the use of modern practice approaches
    that are proven to improve quality, prevent hospitalization,
    and save lives.
        Thank you for your time, and I am pleased to answer
    questions.
        [The prepared statement of Mr. Bronson follows:]
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        Mr. Pitts. OK. Chair thanks the gentleman. Dr. Hoyt is
    recognized for 5 minutes.

                       STATEMENT OF DAVID B. HOYT

        Mr. Hoyt. Chairman Pitts, Ranking Member Pallone, and
    members of the committee, I wish to thank you for inviting the
    American College of Surgeons to discuss the role of quality and
    improving the Medicare physician payment system. My name is
    David Hoyt. I am a trauma surgeon and the Executive Director of
    the American College of Surgeons. The ACS appreciates your
    recognition that the current Medicare physician payment system
    and its sustainable growth rate formula are fundamentally
    flawed. We wish to be a partner in the effort to develop a
    long-term solution that improves the quality of care while
    helping to reduce costs. My comments today will focus on the
    College's efforts in the area of quality improvement and the
    use of an ACS program to propose a Medicare physician payment
    proposal called the Value Based Update, or VBU.
        Our belief is that any new payment system should be part of
    an evolutionary process that achieves the ultimate goals of
    increasing quality for the patient and reducing growth in
    health care spending. Over the past year, we have improved our
    quality improvement principles into the VBU, a Medicare
    physician payment reform proposal. Our proposal is predicated
    on Congress finally eliminating the current SGR formula and
    fully offsetting the cost of permanent repeal. I will caution
    you that this is still a draft proposal. We look forward to
    working with Congress and other stakeholders to continue to
    develop this option.
        In developing the VBU, we took the lessons learned in the
    American College of Surgeons National Surgical Quality
    Improvement Program, or NSQIP, and other quality improvement
    efforts and sought to expand them into the larger provider
    community. At the outset, we had a number of key concepts in
    mind. To be practical, we felt that the proposal must be
    patient-centered, politically viable, responsive to the
    changing needs of the health care system, and inspired by
    quality. Specifically, our proposal first compliments the
    quality-related payment incentives in current law and
    regulation, while making necessary adjustments in the current
    incentive programs to facilitate participation by specialists.
    Secondly, it incorporates the improvement of quality and the
    promotion of appropriate utilization of care into the annual
    payment updates. Third, it accounts for the varying
    contribution of different practices to the ability to improve
    care and reduce costs, and finally, it creates a mechanism to
    incentivize the provision of appropriate services that primary
    care can bring to the management of increasingly more complex
    medical populations.
        The VBU accomplishes these goals by allowing physicians who
    successfully participate in CMS quality programs to choose
    quality goals for the specific patients or conditions they
    treat. Rather than basing compensation on overall volume and
    spending targets, the VBU bases performance on carefully
    designed measures. The VBU is designed to break down the--of
    care among physicians and to begin to measure service lines of
    care.
        The central component of the VBU is the Clinical Affinity
    Group, or CAG. Each CAG will have its own patient-oriented,
    outcomes-based, risk-adjusted quality measures designed to
    foster continuous improvement and help lower costs. These
    measures will be crafted in close consultation with the
    relevant stakeholders, including the specialty societies, who
    in many cases are already developing measures and other quality
    programs on their own. Providers will select their Clinical
    Affinity Group, but will have to meet certain eligibility
    requirements, based on patients they see and conditions they
    treat. Physicians whose specialties would work in concert to
    meet specific quality measurement goals which have met would
    improve care and help drive down the cost of care. Physicians
    would be measured against benchmarks that both occur at a
    national and a regional level, allowing for continued
    innovation with medical communities. Finally, once implemented,
    physicians will have the opportunity to select their CAG on an
    annual basis. Goals can be adjusted regularly to ensure that
    the quality of care provided to the patient is continuously
    improving. Annual updates would then be predicated on this
    quality improvement. We believe this kind of a system will take
    5 to 7 years to fully implement.
        The College strongly believes that improving quality and
    safety offers the best chance for transforming our health care
    system. Cost reduction alone cannot be the primary driving
    force of change. Change must instead be driven by quality
    measurement. The ACS has a rich history in quality
    improvements, and we have distilled what we have learned into
    four basic principles: first, set appropriate standards;
    second, build the right infrastructure to deliver the care;
    third, use the right data to measure performance; and fourth,
    expose yourself to external verification through peer review.
        The ACS NSQIP program is built on these principles, and is
    the prime example of how properly structured quality
    improvement leads to cost savings. Participating hospitals have
    been seen to reduce expensive complications, and it is these
    same principles that we are, in this program, promoting for a
    Medicare physician payment system.
        Our next payment system should focus on individual patients
    and patient populations, and rely on physician leadership to
    achieve improved outcomes, quality, safety, efficiency,
    effectiveness, and patient involvement. Improving outcomes in
    care processes and slowing the growth of health care spending
    are, in fact, complementary objectives.
        Thank you again, Mr. Chairman, for the opportunity to
    participate in this hearing.
        [The prepared statement of Mr. Hoyt follows:]
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        Mr. Pitts. Chair thanks the gentleman, and now recognizes
    Dr. Patel for 5 minutes for opening statement.

                       STATEMENT OF KAVITA PATEL

        Ms. Patel. Thank you, Chairman Pitts, Ranking Member
    Pallone, and members of the Health Subcommittee for inviting me
    to testify today on this important topic. My name is Kavita
    Patel, and I am a fellow at the Engelberg Center for Health
    Care Reform at the Brookings Institution, and a practicing
    primary care physician.
        Industries are often challenged with redefining what their
    business models are, and how they produce value. Health care is
    at this crossroad now. As a country, we are presented with an
    opportunity to make care and how we pay for it more rational,
    more productive, and better able to meet the needs of the
    American people. I would like to highlight the following key
    points, and then elaborate with a couple of clinical examples
    to illustrate a pathway forward in the near and short term,
    away from our current fee-for-service system.
        One thing that is very clear is that our current
    reimbursement system does not incentivize the type of clinical
    practice efficiency that promotes value in care. We have heard
    from my other panelists, and as all of you have testified
    yourselves, this is a fact.
        Number two, innovations in clinical practice must be paired
    with timely and usable data from CMS and other payers, robust
    quality metrics and transparent measurement that is consistent.
    The timeliness and transparency of this is essential. Receiving
    data a year or even 6 months after your clinical practices are
    going on is not going to help physicians and other clinicians
    change the way they deliver care in that moment, and this has
    been an often criticized setback from a multitude of payers.
        Third, over the next several years--not decades, not even
    more than 5 years--I would say over the next several years we
    must migrate towards a model that deals with coordination of
    care, as other panelists have outlined, but more importantly,
    sets a sight on translating that coordination of care into a
    larger, episodic or more globally-based payment model that
    takes into consideration the very flexibilities that we need
    for different types of clinical efficiencies. One size does not
    fit all, and we must therefore allow for flexibility in this
    transition. In this process, however, the importance of taking
    what we are currently doing right now and translating that into
    something that is more coordinated towards the path of
    flexibility is the way to move forward today from our current
    system.
        For example, the American Board of Internal Medicine
    Foundation has already called upon a number of specialties to
    say what are we doing right now that we do not need to be
    doing? This is something that the professional societies have
    corralled around to say, ``Here are the top five things we each
    know that we do not need to be doing.'' This is a perfect basis
    from which we can take current reimbursement and translate that
    by clinically evidence-informed models into a different form of
    payment towards that pathway for more coordinated care.
        I will offer you an example in cardiology, since that gives
    us a great way of identifying one, some that the professional
    societies have agreed to. For example, in cardiology, a
    universal recommendation was to not perform stress cardiac
    imaging or advanced noninvasive imaging in the initial
    evaluation of patients without cardiac symptoms unless high
    risk cardiac markers are present. Sounds very straightforward;
    however, this is a very costly expense to Medicare today. So
    translating some of these services that have been brought
    forward by physicians and other clinical leaders into a case-
    based payment could get us on a pathway away from what we
    currently do today. Two practices in very different parts of
    the country are already doing this in cardiology, and have
    found reductions in cardiac spending on the level of millions
    of dollars, but they can't get payers to take them up on it.
    They are simply proposing a novel way to translate how they
    deliver care to patients with chest pain and with congestive
    heart failure with communications between primary care
    physicians, cardiologists, hospilists, surgeons, and other
    specialists. A way to communicate through test messaging, e-
    mail, when we need to have a consult with a cardiologist,
    allowing for primary care physicians to be able to readily
    access that specialist and open an honest, timely delivery of
    data between physicians will allow for this type of care
    coordination that I described, all with the purpose of helping
    to teach clinicians how they can better reduce the numbers of
    services that they provide that they have acknowledged that do
    not provide value. That is one example in cardiology.
        The second example, a short one, in primary care and
    behavioral health. We have a critical shortage of psychiatrists
    and mental health professionals in this country, yet depression
    and other mental illnesses are an overwhelming problem in
    primary care. Translating some of what we currently do to allow
    for better collaboration between a telepsychiatrist, for
    example, who does not need to see a patient, and a primary care
    physician to offer advice for high risk management is exactly
    the type of payment model that can move us away from our fee-
    for-service system.
        I have many more examples with tangible savings that could
    be accomplished today; however, payers, including those that
    are public and private, need to be responsive to do this, and
    it can start with action by Congress.
        I hope that I have illustrated that not only does one size
    not fit all, but that there are absolutely elements of our
    current reimbursement system that we must retain in order to
    improve. And that instead when we give providers more
    flexibility, we can accomplish this in both the short term as
    well as deal with what we have started with the SGR.
        I thank you and welcome any questions.
        [The prepared statement of Ms. Patel follows:]
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        Mr. Pitts. The Chair thanks the gentlelady, and that
    concludes the opening statements.
        I have a unanimous consent request. The chair requests the
    following statement be introduced into the record. It is a
    statement by Garrison Bliss, M.D., President of Qliance Medical
    Group, Seattle, Washington. You have seen it. Without
    objection, it is so ordered.
        [The information follows:]
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        Mr. Pitts. I will now begin the questioning. I recognize
    myself 5 minutes for that purpose.
        Mr. Serota, relatively small number of patients, perhaps 10
    percent, especially those with chronic conditions and multiple
    co-morbidities may consume the majority of health care services
    and resources. It seems to make sense to target resources
    toward the care of those patients. How do you get physicians
    across specialties to do this?
        Mr. Serota. The idea of identifying those high risk
    patients or those high-utilizing patients with chronic
    conditions is the--essentially the essence of the health
    informatics that we use for clinical care. We work with
    providers to provide them a comprehensive look at their patient
    populations. All the care that they are receiving, we try to
    identify those patients which are consuming care, and then the
    genesis or the foundation in a patient-centered medical home is
    to get the primary care physician to manage all of those
    attributes, all of those providers that are participating in
    the care to ensure that there is a lack of duplication and
    better coordination of the care that those patients receive.
        Mr. Pitts. Dr. Nash, your model appears to be a form of
    capitation payment. In the 1990s, capitation arrangements fell
    into disfavor in many markets because of certain weaknesses.
    How does your model address those weaknesses?
        Mr. Nash. Yes, I stated among many physicians when you
    bring up the ``C'' word, capitation, there is a reaction, and a
    lot of that is from the experience of the '90s where many
    capitations were structured around actually putting physicians
    at risk for services that they didn't directly provide. So they
    weren't prepared to handle that financial risk, that is what an
    insurance company really needs to handle. So that is part one.
    The model we have is really only for the services the physician
    directly provides.
        The second major aspect, though, is capitations of those
    days were really just age/sex adjusted, so that I, as a family
    doc, you know, if I am in my office and I am paid on that model
    from the '90s, if I had a 40-year-old patient come in to see me
    from a plan being paid in that way, a 40-year-old male but I
    happen to get one with diabetes and asthma, I was not paid
    adequately for that because I was being paid on the average. So
    this specific model pays more for the sicker patient, so we pay
    significantly more for that patient so the doctor can spend
    more time with that patient.
        Mr. Pitts. Thank you. Dr. Bronson, we hear a lot about how
    primary care providers are undervalued in comparison to
    specialists. Most people agree that a robust primary care
    workforce is essential. However, according to the Association
    of American Medical Colleges Center for Workforce studies,
    there will be not only a shortage of about 45,000 primary care
    physicians; there will also be a shortage of 46,000 surgeons
    and medical specialists in the next decade. Yet, in a system
    with finite resources, how do you increase reimbursement for
    primary care without reducing reimbursement for specialists,
    and thereby jeopardizing access to specialty care?
        Mr. Bronson. Thank you, Mr. Chairman. We strongly believe
    that the patient-centered medical home concept and the value
    concepts provided here will provide additional funding through
    shared savings opportunities to support those initiatives.
        Mr. Pitts. OK. Dr. Hoyt, how are physicians assigned to the
    Clinical Affinity Groups you described? Do physicians self-
    assign, or are they assigned automatically based on the
    patients they treat?
        Mr. Hoyt. You know, we are still having a lot of discussion
    about that, but the general principle you ask about is a
    physician would self-select, and the success of that, we
    believe, will be in getting the types of groups that would be
    naturally incentivized to work together to lower costs and
    improve quality would be the premise of these groups.
        So you know, there is going to be potentially some conflict
    in that if you are talking about the management of, let us say,
    coronary syndromes, you are going to have specialists that
    right now are not necessarily incentivized to work together,
    but that is, in fact, the concept, that somebody could control
    what they selected to be a part of, whether it is a coronary
    group or a GI group or oncology group, based primarily on what
    they practice.
        Mr. Pitts. OK. And Dr. Patel, one major criticism of the
    ACO model is that it is overly prescriptive. It may work in one
    part of the country or for certain medical specialties, but not
    for everyone. Providers often complain that they need to make
    significant changes in their practices in order to comply with
    ACO requirements. How can Medicare incorporate innovative
    models that are more flexible, and therefore, less disruptive
    to existing practices?
        Ms. Patel. Thank you, Mr. Chairman. I think Medicare is
    doing just that with trying to introduce, in addition to the
    Accountable Care Organization model, other such models that
    incorporate other payers such as the Advanced Primary Care
    Initiative and others that are going on as we speak. I do think
    it is worth noting that the Accountable Care Organization
    movement has blossomed and we now have over 2.5 million
    Medicare lives in the currently funded Medicare shared savings
    programs and pioneer ACO programs. So adding that flexibility I
    know is critical to ensuring the retention of the clinical
    excellence in those beneficiaries.
        Mr. Pitts. My time is expired. Chair recognizes the ranking
    member for 5 minutes for questions.
        Mr. Pallone. Thank you, Mr. Chairman. I am trying to get in
    a bunch of questions here, so I am going to ask you to be
    brief, if you can. I am shortening my questions.
        Many members have supported using--this is for Dr. Bronson
    and Dr. Hoyt. Many members have supported using the OCO
    funding, the Overseas Contingency Operation funding, to offset
    the cost of repealing the SGR. There are even some Republicans
    who have supported it. So I wanted to ask you, would you
    support using the OCO funding as a way to pay for repealing
    SGR, and if not, do you have an alternative suggestion? Mr.
    Bronson first, I guess?
        Mr. Bronson. Thank you, sir.
        Mr. Pallone. Dr. Bronson.
        Mr. Bronson. We are supportive of using the OCO concept for
    providing this particular funding that is necessary for this
    program. I will add, we are not experts in funding and are open
    to other idea.
        Mr. Pallone. OK, thank you. Dr. Hoyt?
        Mr. Hoyt. Yes, we would support use of that for the offset.
        Mr. Pallone. Thank you both.
        Now Dr. Bronson, there is a consensus that many of the
    delivery reform models discussed today hold promise for
    Medicare, however, it takes time to disseminate those models
    nationwide. In the meantime, there is clear evidence that there
    is a problem with the incentives for primary care payment. Are
    there steps we can take now that will help boost primary care
    and better reward primary care practitioners?
        Mr. Bronson. We very much believe that this is--the first
    thing we need to do is really fix this SGR problem for all
    practices. Without doing that, we don't have the flexibility
    that we need to go forward and improve primary care as
    effectively as we could. Supporting the patient-centered
    medical home initiative is very important. My personal
    practice, more than half of my patients and internists are
    Medicare beneficiaries. It is hard to reorganize your practice
    into a--fully into a patient-centered medical home if you are
    not getting reimbursed effectively by your largest payer. We
    need to move fast on this issue.
        Mr. Pallone. Now the July 6 proposed rule issued by CMS
    creates a new code for care management post discharge. Do you
    believe that this new initiative is a good one, or is there
    anything else CMS can do to boost primary care?
        Mr. Bronson. Well absolutely it is a good one, and a
    necessary one, but it needs to be filtered in--more effort
    needs to be filtered into a comprehensive solution that changes
    the practice paradigm to manage populations and prevent
    unnecessary--I shouldn't say unnecessary, but preventable
    utilization.
        Mr. Pallone. OK. Now I am just going to ask a general
    question. I don't know what time is left here for anybody. We
    all talk about getting rid of the SGR, but we really mean
    simply eliminating the forma that provides a global cap on
    spending unrelated to physician performance or quality. The
    underlying fee schedule which payments are based off would
    likely still remain. You know, we have heard from witnesses at
    this hearing notice that at the heart of the fee schedule we
    have mis-valued codes and payment incentives that still aren't
    aligned to value, the right care at the right time, and of
    course, primary care remains undervalued. I would like to ask
    any witness, first, whether you support eliminating the SGR
    mechanism. I think the answer is yes, so let us just go to the
    second, whether you believe that if the SGR mechanism is
    eliminated, we will still need to retain the fee schedule, and
    assuming there is agreement to retain the fee schedule, what
    needs to be done to better align payment incentives there? So
    my question is about the fee schedule. I guess I will start
    with Mr. Serota and see how far we go with the time.
        Mr. Serota. Well I will try to be brief. I think that the
    most critical element is to link reimbursement with outcomes
    and quality, and to begin to reimburse providers based on the
    managing of populations, rather than the episodic care. We
    can't get there overnight, so I think the elements of a fee
    schedule will have to remain in place for some period of time
    as we transition to a differing--different type of payment
    model, so I don't think it can be eliminated immediately. But I
    do think we have to evolve away from a fee-for-service model at
    some point.
        Mr. Pallone. Dr. Nash?
        Mr. Nash. We have eliminated the fee schedule in the
    program that I am speaking about. You know, it has been well
    demonstrated that fee-for-service just promotes more care, but
    I think the main method I would give is it limits innovations.
    It is really only rewarding for that face-to-face between the
    doctor and a patient. It really doesn't reward for team-based
    care, it doesn't reward for telephone care, web based care, a
    whole variety. So if we want comprehensive care, we should pay
    comprehensively.
        Mr. Pallone. Dr. Bronson, you may be the last one because
    we are running out of time.
        Mr. Bronson. I couldn't agree more with Dr. Nash. We have
    important shortages in several specialties, primary care,
    general surgery. Adjustment of fee schedule can help, but you
    know--in a proactive way, but we need to go to a more
    comprehensive solution in the long run.
        Mr. Pallone. Dr. Hoyt?
        Mr. Hoyt. Well, we actually anticipate the need for this in
    our proposal by anticipating the need to adjust primary care.
    But to your question, in the future do we need a way to
    relatively value services, I think we still do because
    background, education, training, commitment to various kinds of
    efforts is going to lead to a different valuation of some
    services, and I think the--our proposal would be to have
    physicians still be in charge of doing that. I realize that
    that seems self-interested, but we feel that, as evidenced
    through committees like the RUC that that is really what the
    RUC has been able to do. Maybe not always correctly in some
    people's minds, but it is really intended to try and foster
    that debate amongst physicians what the relative value of a
    particular service is.
        Mr. Pallone. Thank you.
        Mr. Pitts. Chair thanks the gentleman and now recognizes
    Dr. Burgess, 5 minutes for questions.
        Mr. Burgess. Dr. Patel, you got left off that last
    sequence. Would you care to respond to the ranking member's
    question?
        Ms. Patel. Thank you. I would agree, briefly, that we
    should definitely improve on the fee-for-service elements, and
    there will be a need, as I mentioned, to retain elements such
    that when we move towards these more flexible payment models,
    we can incentivize the right behavior. And I do think it is
    about helping to recalculate what the relative value of those
    payments are, to make them more accurate for what we actually
    want to achieve, which we don't have right now.
        Mr. Burgess. And that is why I wanted you to give that
    answer, so I am grateful that you did.
        Moving to a model where fee-for-service no longer exists
    is, in some ways, problematic because it is the world that many
    of us--I practiced medicine for 25 years. It is the world that
    many of us grew up in. We understand it, we can converse easily
    about that world.
        At the same time, if there is--and I will be honest with
    you, there are places in Texas where I don't honestly see how
    you do a bundled payment or a value-based purchasing or an ACO
    model in Muleshoe, Texas, where you got one guy. I mean, I
    don't know how you do that. That person has to have a fee-for-
    service environment, at least in my limited view of the world.
    They have to have a fee-for-service environment, and if all of
    our effort with SGR reform is to move away from fee-for-
    service, what do you do with the patients who are seeing the
    doc in Muleshoe, Texas?
        Ms. Patel. Thank you for that question, Mr. Vice Chair. I
    couldn't agree with you more. I am from Texas myself, and
    understand exactly the kinds of practices that you are speaking
    of, and I can tell you that that is why the element that really
    helps to link a way forward is retaining some of our current
    system that can help to--allow physicians to continue practices
    such as you pointed out, but also, I would say to you that that
    physician and those of us who practice in more isolated
    settings, or even smaller settings in a city, what we are all
    looking for is a way to coordinate our care better and to reach
    out, just like we did in medical school and in training, to
    other colleagues that we know can help us respond to our
    patient's needs.
        So I think a step towards something that is different than
    what we have now is to allow the solo practicing doctor to be
    able to engage in a model for some of their patients that have
    high risk cardiac conditions that need to go to San Antonio,
    and coordinate care better there and reward that behavior.
        Mr. Burgess. Right, and most--can we just stipulate for the
    record, since you are from Texas, that Muleshoe, Texas,
    actually exists? I didn't just make that up.
        Ms. Patel. I can--I will tell you where it is on a map
    even, yes.
        Mr. Burgess. But the--you know, when we talked about this,
    and we have talked about it at the committee level, you know,
    how do you go to a world beyond fee-for-service? It just seems
    to me we are going to have to--whatever we do with SGR, and I
    know there are people who say we need alternative payment
    models, we need a value-based system, we need an ACO model, we
    need a bundled payment model. But honestly, we have got to
    allow for the rich panoply of practices that are out there to
    continue to thrive, because after all, the name of the game is
    not just reworking a formula, the name of the game is seniors
    need access to care. And right now, that access is not being--
    is in jeopardy because of the actions taken by Congress that
    instituted this payment system, and then our last-minute
    rescues every year have been the--have put practices on kind of
    a tenuous financial footing if they have got to go to their
    banker for a short-term note at probably 9 to 12 percent
    interest to fund because their cash across the counter was
    reduced by 15 percent because Congress said oh, we will just
    hold your check at CMS until we get back from congressional
    recess. I mean, that sort of activity is just devastating to
    practices. So I want to see us figure that out.
        Now, you talked a little bit about not doing tests that are
    not necessary, and I agree with that, but at the same time, I
    think anyone who has been in clinical practice also recognizes
    that people don't often always function according to protocol,
    and I think one of the comments you made was in cardiology that
    there was no testing, no dynamic testing unless there were high
    risk markers present. Did I understand you correctly with that?
        Ms. Patel. Yes, that is correct. That is from the American
    College of Cardiology.
        Mr. Burgess. But we have all been in situations where we
    have that patient come in at the end of the day who describes
    an unnatural fatigue, and you say OK, look. It is the end of
    the day. I am tired, you are tired, we are all tired. Go on
    about your business. But we have all had the situation where we
    have referred that patient on for testing, and in fact, she has
    been quite ill with really minimal systems and had you not had
    that little spark of curiosity, you might not have referred for
    the testing. But now if you got someone looking over your
    shoulder saying look, you are a high utilizer for this type of
    testing and these indications are very soft, who is going to
    help us with the liability side of that question?
        Ms. Patel. So I will try to respond briefly.
        Mr. Burgess. No, you can use as much time as you want. The
    chairman is very tolerant. I know him well.
        Mr. Pitts. You may proceed.
        Ms. Patel. Thank you for that.
        So the first element is that this cannot be something where
    it is a dictum or a direction to providers that you may never--
    notice when the American College of Cardiology participated in
    identifying that very example around cardiac stress imaging, it
    wasn't--it is not a ``you must never do this,'' it was chosen
    as one of the conditions in which the profession can help to
    teach themselves and their own clinicians how to best deal with
    imaging issues when patients present, and that includes the
    ability to order that test when it is necessary, or you do have
    that spark of curiosity.
        So in the model that I am describing for payment that helps
    to also deal with some of the issues you bring up of liability
    or feeling the responsibility to order something or not order
    something, it would be to take that--we know that there is a
    proportion of payments that we are delivering in the fee-for-
    service system right now that are being used to deliver those
    services. Take a proportion of those payments and say to
    cardiologists, to internists, to family practice doctors in
    Texas and say you know what, we know that there are things that
    you don't like about the way you practice that are responsive
    to what you think might be issues around liability or things
    that might spark a curiosity, and you want the flexibility to
    deal with that. But what we will give you--we are not just
    going to give you free reign, you can't just do what you want.
    What we want for you to do is agree to be responsible by
    following what your own profession and your own colleagues have
    said are the best-informed evidence around an issue. Does that
    mean that it is 100 percent an absolute? No. Does that mean
    that we would need rich ability to measure what we are doing
    and learn from it? I think that is what is essential, and I
    think that is what physicians are craving. They want to know
    that they have some flexibility and autonomy to practice the
    way they want, but also to get the information that can help
    them be better. And that will help the very small businesses
    that are small practices to thrive in a newer business model
    and be more efficient.
        Mr. Pitts. Chair thanks the gentleman and now recognizes
    the ranking member of the full committee, Mr. Waxman, for 5
    minutes for questions.
        Mr. Waxman. Thank you, Mr. Chairman. I want to thank all
    the witnesses. This has been an excellent panel, and I think
    you have given us a lot to think about.
        We want a health care system that works. We want some
    innovation, experimentation, but no one size fits all, and we
    have got to be open to looking at what makes sense, given the
    circumstances. Of course, the main thing that makes sense at
    the moment is to deal with this SGR problem because it is--
    nothing else seems to work unless we take care of SGR. That is
    why it is so frustrating that we didn't use the OCO, which is
    just a bookkeeping thing, but the SGR is just a bookkeeping
    thing, and we are stuck. And we ought to solve those two
    issues, pay for it, get this thing resolved.
        Dr. Patel, I am not sure how closely you have been
    following what has been going on in the House of
    Representatives, but last week, the Republicans brought forward
    a bill to repeal the Affordable Care Act. Not only does the
    Affordable Care Act provide countless benefits for families,
    such as protections against pre-existing condition exclusions
    and lifetime caps on coverage, tax breaks of $4,000 a year per
    family for health care, improve free preventive care, lowered
    out of pocket costs for prescription drugs, but the Affordable
    Care Act also includes important provisions to drive delivery,
    reform, in fee-for-service Medicare. One part of the Affordable
    Care Act provides for Accountable Care Organizations within
    Medicare, or bundled payment programs in Medicare. The law even
    established the innovation center, which is taking
    unprecedented steps to help providers, payers, and patient
    groups develop and spread new and successful innovations,
    including through medical homes and multi-payer initiatives.
        Obviously, the Affordable Care Act is just one piece of
    improving quality and outcomes for Medicare, but I believe it
    is an important one. If the Republican plan to repeal the
    Affordable Care Act were to become law, what effect would that
    have on Medicare's work to improve quality and outcomes and
    realign payment incentives to focus on value? Do you believe
    that would be a setback?
        Ms. Patel. I do believe it would be setback to turn back
    all of the important work that has been done in the past 2
    years and beyond, even before the Affordable Care Act was
    passed, around savings and Medicare system, the Medicaid
    system, and then what is even more remarkable is that we can't
    turn back, even with the repeal, what has already taken place
    as a result of the important initiatives you mentioned, sir, in
    the private market.
        So now we have created a very complex web that is starting
    to produce some amazing results, as you have heard today. So a
    repeal and any setback would really undo valuable work and send
    a signal, I believe, to clinicians around the country who are
    looking for a way to move forward.
        Mr. Waxman. It certainly would send a signal to a lot of
    people who don't have health insurance that they are not going
    to have an opportunity to get health insurance because of the
    barriers that they have been unable to overcome prior to the
    Affordable Care Act being passed and being fully implemented.
        It occurs to me as I listen to the testimony that our
    health system has hundreds, if not thousands, of groups
    pursuing reform in some way. Each health plan, provider
    organization, even Medicare and Medicaid has a slightly
    different take on a medical home or an Accountable Care
    Organization, for example. I am wondering how we ensure that
    all of these efforts are complimentary, not contradictory?
        Dr. Patel, in your testimony you mentioned the need to
    identify mechanisms to further multi-payer efforts to transform
    the delivery system. I know that CMS is, as a result of the new
    authority in the Affordable Care Act, is working on some of
    these multi-payer initiatives. For example, the Comprehensive
    Primary Care Initiative is a collaborative effort between
    public and private payers and primary care practices to reward
    care management. The Multi-payer Advanced Primary Care
    Demonstration is developing State-led multi-payer
    collaborations with primary care practices to improve care. Dr.
    Patel, could you talk about why multi-payer initiatives are so
    important; what CMS, through the Affordable Care Act, is doing
    in this area, and what more can be done?
        Ms. Patel. Multi-payer initiatives are critical because it
    is very hard for clinicians to provide care for only one stream
    of patients, measure quality on those patients, and then have a
    completely different set of expectations, incentives, and
    reporting, which is what is going on right now. So some of the
    important initiatives that you just mentioned at the State
    level, in the primary care setting, and even the Accountable
    Care Organization model really send a strong signal to other
    payers, and that started with actions taken in Medicare by CMS
    as a result of the Affordable Care Act. So do believe that the
    continuing work of encouraging, but then also having a way to
    set forward the actual mechanism for other payers to be
    involved. And that means, as I said in my testimony, consistent
    quality measures. We can't have one set of quality measures
    that I report to for one payer, which is what I do in my
    practice now, and a completely different set of metrics for
    another. That is where the multi-payer efforts are huge and
    critical.
        Mr. Pitts. Chair thanks the gentleman. Now recognizes Dr.
    Cassidy, 5 minutes for questions.
        Mr. Cassidy. As an open question to follow up on Mr.
    Waxman's affection for the ACA, according to who you listen to,
    Medicare is going bankrupt in 5 to 12 years. I am sure he and
    his affection would love that ACA takes $500 billion in savings
    from Medicare and spends it elsewhere as opposed to shoring up
    the program. That is a feature that Republicans object to, and
    frankly, it is terrible for Medicare. But that is part of the
    ACA and I am sure he would not want that repealed either.
        That said, as a practicing physician myself, I have
    observed that only fiduciary linkage between patients and
    physicians seems to consistently lower costs. That is a little
    bit of a theme I have heard from you.
        Mr. Serota, I am curious, do you do MA plans, Medicare
    Advantage programs?
        Mr. Serota. We do have Medicare Advantage programs, yes.
        Mr. Cassidy. What is your--so you have got a very nice
    system where you are getting feedback--each of you described
    this, Dr. Nash, Dr. Patel--where you are giving feedback to the
    practicing physician, clearly, that costs money. What is the
    MLR, your medical loss ratio, of the MA plans that you have?
        Mr. Serota. It is widely variated based on the marketplace.
    I don't have a single----
        Mr. Cassidy. Is it over 15 percent?
        Mr. Serota. The medical loss ratio itself? The
    administrative expense piece of that?
        Mr. Cassidy. Yes.
        Mr. Serota. In some markets it may be.
        Mr. Cassidy. Now you are contracting with these physician
    groups. I am assuming they have their own MLR--and Dr. Nash,
    you can weigh in as well. Are you doing Medicare Advantage as
    well?
        Mr. Nash. Yes, we are.
        Mr. Cassidy. So can I ask what you are contracting with
    the--are you directly contracting with CMS or with the Medicare
    Advantage program?
        Mr. Nash. We--our Medicare Advantage program is directly
    through CMS.
        Mr. Cassidy. So you are an MA plan?
        Mr. Nash. Correct.
        Mr. Cassidy. So you get--what is your MLR?
        Mr. Nash. Well, the medical loss ratio is an amount of
    premium that is spent on medical care, so we are roughly about
    88 percent or something of that nature.
        Mr. Cassidy. So your administrative cost is only 12
    percent?
        Mr. Nash. Correct.
        Mr. Cassidy. That is pretty good. Some other plans similar
    to yours seem to have higher than that. It has been instructed
    some of the physician groups contracting with the insurance
    companies, the insurance company keeps 12 but then the medical
    plan itself has an additional MLR. Mr. Serota is kind of
    nodding his head yes. It seems that in the aggregate, the MLR
    is greater than the 15 percent or 20 percent defined by the so-
    loved ACA.
        Now, if you didn't have the ability to do your data
    systems, would you be as effective in managing that care? Yes.
        Mr. Nash. Absolutely not. I mean, the data is essential for
    any of this.
        Mr. Cassidy. That wasn't a trick question. It seemed so
    self-evident. By the way, I admire the fact that you as
    practicing physicians understand there are some things fee-for-
    service works better for. Then again, as a practicing doc, I
    also see that, so let me just kind of compliment you on that
    model.
        Now, for all of you--Dr. Hoyt, it seems like yours is
    effectively a bundled payment system, correct? If somebody
    has--I have a pain in my neck and it is not from any of you, it
    is just from a bad neck, so if I am grimacing, that is the
    reason why. It seems like you are a bundled system. If somebody
    has colon cancer, they would come to you and contract, if you
    will, for the management of that care, is that correct?
        Mr. Hoyt. Well, in our system bundled payments could be
    accommodated, but the system is really about updates for the
    overall Medicare reimbursement on an annual basis. And it
    simply puts a group of physicians to quality of metrics around
    a specific disease target or something like that. It doesn't
    necessarily, per se, bundle the responsibility by, you know,
    that same group.
        Mr. Cassidy. Let me ask you, because really, this is about
    finding ways to save enough money and translate those savings
    into doing away with SGR forever, once and for all, and
    continuing to reward patients for appropriate payment, correct?
        Mr. Hoyt. Correct, and I think, you know, that is an
    assumption in our model that we have to prove. We are planning
    to do some modeling to actually see if it shakes out, but your
    comment that all of these attempts at cost savings is
    ultimately where the extra money comes from to pay for
    increased access or individual--more individualized care for
    high risk patients, et cetera, that has to be the assumption,
    that there are some ways that can be----
        Mr. Cassidy. Dr. Patel, I really liked your testimony. I
    like your written, and I like the way you delivered it. Let me
    just compliment you. But that said, everybody has talked about
    somewhat of a big government-type solution. You are going to
    need a lot of structure here. You are going to need this big,
    overarching overhead. And going back--I will go to Louisiana,
    FP and Pointe Coupee Parish, small place, overworked,
    underpaid, driven, wife is wondering why he is not home on
    time. And that is too common. Now what do you think about the
    direct medical care model? We have the written testimony from
    Qliance where you pay the doc $50 to $100 a month depending on
    the complexity and age of the patient, and she or he manages
    all the outpatient services, referring to the inpatient setting
    as separate. It is not totally capitated, but it allows a doc
    to manage the outpatient and then the inpatient then goes on
    another ticket. What are your feelings about that?
        Ms. Patel. I have had a chance to learn more about the
    Qliance model over a year ago, and have been very interested in
    exactly the way they are able to risk adjust and charge a
    sliding fee per month for beneficiaries and have amazing kind
    of access points for those beneficiaries to e-mail with their
    doctors, talk to them, and I think that that is a great model
    that would actually fit in nicely with helping to offer a
    flexibility for a primary care physician in Louisiana to do
    something exactly like that, and that would be a very rich way
    to ensure financial sustainability in their practice----
        Mr. Cassidy. Exactly.
        Ms. Patel [continuing]. All the while really creating
    models inside that practice that reward coordination. Let the
    doctors and the MAs and the nurses figure out what they need to
    do.
        Mr. Cassidy. Sounds good. My last thing, and I am out of
    time. Thank you, Mr. Chairman.
        Mr. Serota, for the record, I will ask you if you would
    give us your MLR for your various MA plans, and what you
    estimate that the MLR is of the group with whom you are
    contracting, because I think that would be very informative to
    us.
        Mr. Serota. We can get that information.
        Mr. Cassidy. Thank you.
        Mr. Pitts. Chair thanks the gentleman, now goes to--
    recognizes Mr. Dingell for 5 minutes for questions.
        Mr. Dingell. Mr. Chairman, I thank you. I commend you for
    this hearing. I commend the panel. This is one of the best
    presentations and one of the best hearings I have heard for a
    while. I also want to commend our panelists for their fine
    testimony.
        These questions will go to Dr. Patel. I want to thank you
    for being here today. Please answer the following questions yes
    or no. Is it fair to say from your testimony that fee-for-
    services models do not promote the highest quality and highest
    value health care? Yes or no.
        Ms. Patel. Yes.
        Mr. Dingell. Is it also fair to say that models such as the
    patient-centered medical home have the most promise to provide
    our citizens with the best and most affordable health care? Yes
    or no.
        Ms. Patel. Yes.
        Mr. Dingell. Is it possible that other benefits from these
    things could occur, such as a reduction in both cost and the
    rate of growth of cost?
        Ms. Patel. Yes.
        Mr. Dingell. Now Doctor, I believe that on March 23, 2010,
    the President signed the Affordable Care Act into law. I am
    sure you are aware that ACA provides a shared savings program
    through Accountable Care Organizations that serve 2.4 million
    Americans, is that right?
        Ms. Patel. Yes.
        Mr. Dingell. Now Doctor, ACA is legislation that includes
    the authority to embark on many innovative paths. I believe
    that is a desirable thing, is it not?
        Ms. Patel. Yes.
        Mr. Dingell. Now Doctor, are you aware that CMS programs
    such as innovation advisors, and innovation challenge grants
    that seek to promote groundbreaking work in health care, would
    you say that is useful? Yes or no.
        Ms. Patel. Yes.
        Mr. Dingell. By the way, Doctor, I am sorry to do this to
    you. You are a very good witness, but I have got a lot of
    questions and not much time.
        Ms. Patel. No problem.
        Mr. Dingell. Dr. Patel, it is clear from your testimony
    that you understand the importance of excellent primary care.
    This is an area of great shortage in this country, and
    potentially worse shortage, is it not?
        Ms. Patel. Yes.
        Mr. Dingell. Did you know that CMS has a comprehensive
    primary care initiative that encourages public/private
    collaboration on promoting primary care? Yes or no.
        Ms. Patel. Yes.
        Mr. Dingell. Dr. Patel, I think we both agree that CMS must
    do more to reform physician payment systems. Is that your view?
        Ms. Patel. Yes.
        Mr. Dingell. And I hope you also recognize that the
    Affordable Care Act is assisting CMS in beginning the important
    process towards these vital reforms. Do you agree with that
    statement?
        Ms. Patel. Yes, sir.
        Mr. Dingell. Doctor, do you want to make a comment as to
    how that particular process is working? This is not a yes or no
    question.
        Ms. Patel. Thank you. Yes, I am happy to just briefly tell
    you that I do know that CMS has been working, even with the
    most recently mentioned physician payment rule that was
    released last week, to add modifications that acknowledge some
    of the issues we discussed today around the relative value of
    some fee-for-service elements, as well as ways to better
    integrate quality with work that is already going on in
    clinical specialty societies and primary care.
        Mr. Dingell. Does that offer promise for the future in
    addressing these miserable problems we have----
        Ms. Patel. It does, sir.
        Mr. Dingell [continuing]. With regard to cost increases and
    things of that kind?
        Ms. Patel. It does, and it also offers insights into what
    we need to do more work in, even outside of the Medicare
    program.
        Mr. Dingell. Now how does--how is it that this program is
    going to benefit us in terms of addressing cost increases and
    the rate of increase of costs?
        Ms. Patel. It all has to do with making sure that what we
    are incentivizing, where we put the dollars, actually matches
    towards the value that has already been identified that we do
    not attain in this country. So it is really about taking
    resources that we know are not going towards valuable care, and
    redirecting those towards things that we know promote value.
    And those come from the very work that we are hearing about
    that are led by clinicians.
        Mr. Dingell. Now you just said something very important.
    How do we do that? What are the steps that we take to make that
    happen?
        Ms. Patel. The very short-term steps over the next 2 years,
    for example, transferring a proportion of what we do in fee-
    for-service payment right now into this coordinated care model
    that we are discussing. It is even beyond the patient-centered
    medical home. It could be a model that allows for an
    oncologist, for example, to better coordinate care for a
    colorectal cancer patient. And then from that point, what we
    can't do is leave it alone at that step. What we must do is
    transfer and think about how that money, those dollars and care
    coordination can not only be reinvested back into the system,
    but what savings we create from that can move towards either
    these larger kind of episode or bundled payments that we have
    discussed, or other mechanisms that other physicians have
    brought up today.
        Mr. Dingell. Do you believe that the medical profession
    will support that?
        Ms. Patel. I believe they will, and I believe they have
    already been putting these models forward, sir.
        Mr. Dingell. Thank you. Thank you, Mr. Chairman.
        Mr. Pitts. Chair thanks the gentleman and now recognizes
    the gentleman from Ohio, Mr. Latta, 5 minutes for questions.
        Mr. Latta. Thank you, Mr. Chairman, and thanks very much to
    our panel members for being with us today. It has been very
    enlightening.
        If I could start with Mr. Serota, if I could ask you--it is
    kind of interesting in your first page of your testimony, you
    state that U.S. health care spending exceeds $2.5 trillion
    annually, and studies estimate that 30 cents of every health
    care dollar goes to care that is ineffective or redundant, and
    those dollars are not being well spent.
        Let me ask you, why is that happening and where are those
    dollars going?
        Mr. Serota. Well, I think you have heard virtually everyone
    on the panel answer that question in a slightly different take,
    but the reality is that we are providing care, as Dr. Patel
    just said, that isn't valuable and we need to redirect that
    care to things that are going to provide better outcomes. Why
    is it happening? We have a system that incents volume and
    doesn't incent population management, quality, and outcome. So
    when you have a system that incents volume, you get volume.
    That is what is transpiring.
        Mr. Latta. Let me ask, does this include a lot of tests
    that don't need to be done because folks out there are fearful
    if they don't do the test that they will be held liable?
        Mr. Serota. Certainly.
        Mr. Latta. And what should we do about that?
        Mr. Serota. Well, I think we have to look at the health
    care system comprehensively, which would include looking at
    reforming the tort system as well.
        Mr. Latta. Dr. Nash, I saw you nodding your head.
        Mr. Nash. Yes, absolutely correct. I mean, if you speak to
    physicians, that is the first thing I put forward and was
    raised even in today's discussion. But the other side of the
    coin is really the patients and the patients demand for
    services because of their own anxieties and concerns, and both
    need to be dealt with.
        Mr. Latta. That is one of the things, you know, that we
    have been talking about around here and that we have to get
    done, because you can't really, you know, have meaningful
    health care reform if we don't do something about the tort
    system in this country and a lot of these junk lawsuits.
        Let me ask this question. This is to Dr. Bronson. I was
    just over at Cleveland Clinic on Monday for a meeting, and I am
    from northwest Ohio, but you know, we have been talking a lot
    about what is happening in the health care system here, but let
    me ask you this. We hear a lot about the physician's role in
    promoting high quality of care and avoiding unnecessary
    spending, and you know, really, what is the role of the patient
    now that we have to be looking at?
        Mr. Bronson. Well, the role of the patient is very
    important, and that is why we support initiatives to get
    patients more actively engaged in shared decision making in an
    effective manner, and that should be supported in practices. I
    would like to add to the comment on liability reform, that we
    are very strongly in support of a variety of steps for
    liability reform. You may recall that I came to your office and
    spoke to you about the--health courts is something that we
    should test nationally to see if having impartial judges
    involved in this type of process, instead of volatile juries
    could be a more effective manner in handling liability reform.
        Mr. Latta. As we look at that, how do we incentivize those
    patients to make sure that they can do more, and those people
    that are in the system, to make sure that, you know, they are
    not--we were talking about this the other day about, you know,
    20, 30, 40 years ago folks couldn't go to the emergency room as
    much, you know. Folks might have stayed home and taken care of
    things a little bit more. But how do we incentivize those
    people for making better health care decisions on their own?
        Mr. Bronson. Well, number one, we have to fix the access
    problem in primary care. My experience is patients really don't
    want to be sitting 3 to 4 hours in the emergency room waiting
    to be seen for an acute minor problem. They would really rather
    see their personal physician. Part of the concept of what we
    are getting at is rewarding efforts to enhance access to
    restructure practices to be more effective, to use extenders
    more efficiently in practices to get patients in. We believe
    that those types of steps will reduce unnecessary utilization,
    and hopefully avoid preventable omissions and expenses.
        Mr. Latta. OK. If I could, Dr. Nash, ask you this question.
    You know, if the SGR, let us just say, is reduced at the end of
    this year by 27-1/2 percent, how would that affect rural areas
    in this country, and would they suffer disproportionate hit
    more than an urban area? How would you see that?
        Mr. Nash. If it was not?
        Mr. Latta. Right, if it----
        Mr. Nash. If it remained enforced?
        Mr. Latta. Right.
        Mr. Nash. Yes, it would be devastating, you know. The
    access currently for Medicare patients across the country,
    particularly in rural areas, is threatened even on the current
    state, let alone if that was the outcome.
        Mr. Latta. Mr. Chairman, I yield back my time.
        Mr. Pitts. Chair thanks the gentleman and recognizes the
    gentleman from New York, Mr. Towns, 5 minutes for questions.
        Mr. Towns. Thank you very much, Mr. Chairman. Let me begin
    by first thanking you for having this hearing, and to thank
    these panelists for outstanding testimony. I think that as has
    been stated, this is a very serious issue and of course, I
    think that we need to spend as much time as we need to do in
    order to try and correct some of the problems that are going on
    as we look at access and of course, liability and all of these
    things I think are connected.
        So let me begin with you, Dr. Patel. If we shift away from
    the FFS payment system, what would that transition process look
    like? We have identified the resource base relative value
    scale, particularly the RVUs as a source of much trouble,
    direct and focused to volume instead of value. So are you
    proposing we do away with RVUs altogether, and how else can we
    quantify the value of physician services?
        Ms. Patel. I think it is important to preserve the notion
    of what a value unit is. I think it is what relative value
    units have been that have been the problem, so in a transition,
    I mentioned that even in a long-term vision we would need to
    keep some elements of our current reimbursement system because
    there are elements that work. But I do think that in order to
    improve the RVU process, as well as how we incentivize some of
    the fee-for-service services that we cover, in the short term,
    in the next year or two, we need to actually identify what it
    is that we are not deriving value from, and what that amount of
    dollars are in the Medicare system, and translate that to
    models that are not necessarily RVU driven. That doesn't mean
    that we are eliminating all the RVUs, but taking the proportion
    of RVUs that we know are really not providing that very term,
    relative value, and improving upon them to create incentives
    for care coordination.
        So taking what we have, not eliminating it totally, taking
    what we have that we know does not provide value and
    translating that into dollars and payments that do provide
    value, and improving--meanwhile, I think improving upon the RV
    system, which is what CMS is trying to do right now with the
    updates to payments in primary care, for example.
        Mr. Towns. All right, thank you very much.
        Dr. Hoyt, you mentioned the right infrastructure is
    absolutely--in order to provide high quality care. What do you
    really mean by that? Could you expound on that?
        Mr. Hoyt. Well, you know, I think when you describe
    standards for care, you are really describing outcome standards
    or you are addressing what the ultimate goal of treating a
    disease is. The infrastructure standards are really the details
    of the actual physical plan, the communications, the essential
    specialists that need to be part of decision making. When you
    are talking about complex disease, having consensus and then
    committing to the building of the infrastructure is really the
    second step in the quality process. So for instance, if you are
    going to develop a trauma center, which is my background, you
    have to commit to certain elements. If you are going to develop
    a cancer center, you have to commit to certain elements. And
    you have to do more than that; you have to actually commit to
    being externally peer-reviewed if you are really going to
    assure the public that what you say you are doing, you are
    actually doing.
        Mr. Towns. You know, the term here today that has been
    used, one size does not fit all, what do you really mean by
    that? I understand what you are saying, but what do you really
    mean when you say one size does not fit all?
        Mr. Hoyt. I don't believe that was my comment, but I will
    be glad to----
        Mr. Towns. Thank you, Dr. Patel.
        Ms. Patel. I do not think that the very situation that we
    got into with our current reimbursement system was an attempt
    over time to have a unifying kind of standard. Even though we
    talked about relative value unit, what we have ended up doing
    is really incentivizing volume. And to say that one size does
    not fit all, that is an acknowledgment that not every clinical
    practice, when you open the door to see the doctor, is going to
    look the same, nor should it look the same, and that is the
    kind of payment model that Medicare needs to reach, so that we
    are not actually just saying to doctors--which is what we are
    doing right now--we will pay you more if you do more. That is
    not a message we should send. And so one size fits all means
    that there are many different models, and we are already seeing
    some of these in practice, that can offer more value and save
    the system money overall.
        Mr. Towns. All right. Thank you very much, and I see my
    time is expired.
        Mr. Pitts. Chair thanks the gentleman, and now recognizes
    Dr. Gingrey for 5 minutes for questions.
        Mr. Gingrey. Mr. Chairman, thank you very much. I will
    first go to Dr. Bronson and Dr. Hoyt.
        Doctors, you were asked earlier in your testimony and the
    Q&A about the OCO money being used to eliminate the cliff in
    regard to the SGR problem and fixing--eliminating the SGR and,
    of course, paying the $300 billion to get the baseline back to
    zero. And OCO money, for those who might not know--I think
    everybody pretty much does--Overseas Contingency Operation,
    basically supplemental appropriations that are used on an
    annual basis to fund a war effort, not part of the standard
    appropriation procedure, emergency funding. So if you don't use
    that money, if you cut back on the war effort and you don't
    need it, how can you actually use it to pay for something else?
    And you said you would be in favor of using it to pay for
    something else. Do you want to confirm that that is your
    opinion on that, both of you, Dr. Bronson and Dr. Hoyt?
        Mr. Bronson. I will confirm that. Of course, it is a
    congressional decision, but yes, I would confirm that we
    support that.
        Mr. Gingrey. Dr. Bronson, do you feel the same way?
        Mr. Hoyt. Yes--Hoyt.
        Mr. Gingrey. Dr. Hoyt.
        Mr. Hoyt. Yes. Well, we understand the discussion of some
    disagreement of whether it is real money or not, or whether it
    can or cannot be used. We--if it is available and it exists, we
    would support using it.
        Mr. Gingrey. If funny money is going to be used, you want
    it to be used to kind of help your situation. I understand.
        Mr. Hoyt. If we could put it that way.
        Mr. Gingrey. Let me say this. I support SGR repeal, and I
    think all physicians do. I also understand that because of
    Obamacare, the Affordable Care Act, the threat to physicians is
    compounded by a second SGR known as IPAB. Except in this
    instance, physician reimbursements will now be used to control
    cost in all of Medicare, not just Part B. How important is IPAB
    repeal to physicians, and do you believe Congress and the
    President should support the repeal of IPAB, again, Dr. Bronson
    and Dr. Hoyt?
        Mr. Bronson. We support the concept of IPAB, but a
    significant change in IPAB. We think IPAB should be an advisory
    body to Congress who, with a straight up and down vote, could
    deal with their recommendations that Congress is accountable to
    the people and should have the opportunity to respond to their
    advice.
        Mr. Gingrey. Dr. Hoyt?
        Mr. Hoyt. We have not supported IPAB in principle because
    of the concern that there is not adequate oversight and
    participation of Congress, but also physicians.
        Mr. Gingrey. Would the two of you--thank you for your
    answer. Would the two of you submit that response to me in
    writing? I would appreciate that very much. Mr. Chairman, thank
    you.
        Let me go to Dr. Patel. Dr. Patel, I just want to clarify
    something that I heard from my colleagues, Mr. Dingell and Mr.
    Waxman. They made statements that Medicare innovation would go
    away if Obamacare was repealed. Maybe they have forgotten or
    aren't aware that CMS demonstration projects on payment models
    was begun back in 2005 under President Bush. In fact, the
    Institute of Medicine called for them back in 2001. Obamacare
    merely copied that idea and Republicans would continue
    reforming Medicare if Obamacare is repealed. Would you like to
    comment on that? Do you agree with me or disagree with me on
    that statement?
        Ms. Patel. I agree, sir, that the concept of innovation as
    it has been introduced in Medicare started before the
    Affordable Care Act, absolutely. Demonstrations--in fact, it is
    important demonstrations that occurred, the physician group
    practice demonstration and some other chronic disease
    demonstrations that have taught us what we need to do better,
    and also where we did not necessarily understand enough about
    cost savings and the system. So I agree, sir, that they did, in
    fact, begin before the Affordable Care Act, but I will tell you
    that I think would be important to keep and preserve absolutely
    are not just the Center for Medicare and Medicaid Innovation,
    which has a great deal of activity right now, but embedded into
    that language is also a number of authorities that allow the
    Secretary and the Centers for Medicare to rapidly scale those
    payments----
        Mr. Gingrey. Right, and my time is about to expire, but
    thank you very much for that response, because I agree with you
    that as we point out--and there are a number of things were
    mentioned that are popular in the Affordable Care Act. We
    always hear that keeping young people on their parent's health
    insurance policy until they are 26 years of age, even if they
    are not still in school, is probably a good thing. Eliminating
    lifetime and even, indeed, in many cases annual caps, making
    sure that children with preexisting conditions--I could go on
    and on. There are several things that just like this innovation
    that existed before Obamacare, PPACA was enacted, these other
    things that we all like in a bipartisan way could easily be
    reincorporated into a new plan.
        And with that, I see my time is expired, and I thank the
    chairman.
        Mr. Pitts. Chair thanks the gentleman, and now recognizes
    the gentleman, Mr. Engel, for 5 minutes for questions.
        Mr. Engel. Thank you very much, Mr. Chairman. I just have
    to comment that I have heard some of my colleagues on the other
    side talking about Medicare potentially going bankrupt. The
    Affordable Care Act extended the solvency of Medicare, and I
    just find it very strange that we fought two wars on the credit
    and we have had Bush tax cuts for the wealthy, Medicare Part D
    unpaid for. We had surplus Bill Clinton left office and we
    could have used that to shore up Medicare, so I think that when
    we kind of look at why we are in the trouble we are in, there
    is a lot of blame to go around on all sides.
        First of all, let me thank all of you for excellent
    testimony. Every one of you was really excellent testimony, and
    I think it is very, very important. This is an important
    subject to have so many questions, and I just have to kind of
    cut down.
        But let me just say, the SGR is obviously seriously flawed
    and needs to be permanently replaced. I really believe that
    physicians deserve to be fairly and appropriately compensated
    for the important work they do, and the SGR formula is failing
    our physicians. I think there is nothing wrong with physicians
    wanting to be adequately and fairly reimbursed. And that is why
    I want to say that the Affordable Care Act appropriated $10
    billion in funding for the Center for Medicare and Medicaid
    Innovation over 10 years. I think that is very, very important.
        I want to ask this question. Now, all of us recognize the
    current fee-for-service model has resulted in emphasis on
    procedures and quantity over quality of health care provided. I
    am introducing legislation--one field I am particularly
    interested in is palliative care, and it relies heavily on care
    coordination and communication with patients. I believe they
    are vital aspects to providing quality care, but ones that are
    not properly incentivized under the current fee-for-service
    system, and yet properly done, I think palliative care often
    saves money, extends life of patients, and gives them peace of
    mind.
        So let me ask Dr. Nash, Mr. Serota, and Dr. Patel, what
    role do you see for palliative care as the health care system
    undergoes extensive delivery system reforms, and how can we
    incentivize the integration of palliative care for
    professionals into coordinated care teams?
        Mr. Nash. Dr. Nash. I believe that--yes, palliative care is
    very important, and we have programs within our plan to work
    with our physician community and the community at large in
    regard to improving care at that phase of life. You know, it is
    difficult in a few minutes to talk about how that should be
    incorporated into payment models. I think it is a broader
    dialog in regard on a community level that many communities
    across the country have been successful with.
        Mr. Serota. This is an important issue for us, and we do
    have a number of plans that--programs in place to help members
    with advanced illness. As an example, our Anthem Blue Cross
    Blue Shield plan in Virginia has an integrated cancer care
    medical management model, which is, at its core, trying to
    provide improved access to palliative care. They--members who
    receive timely access to palliative care generally achieve a
    better quality of life during these end stage, lower cost
    related end of life treatment and acute hospitalizations. They
    employ skilled care management nurses, decision support tools,
    medical director support, and it is a comprehensive program. We
    also have a similar program in Pittsburgh with our Highmark
    plan that, in fact, provides coverage for consultative services
    to its members with palliative care professions to ensure that
    that care is appropriate. We think it is an essential element,
    and often overlooked, so we appreciate your attention to it.
        Mr. Engel. Thank you. Dr. Patel?
        Ms. Patel. So very briefly, the concept of a patient-
    centered medical oncology home is exactly alluding to the kinds
    of services you are referencing, specifically palliative care.
    Oncologists right now are caught up in the same quantity over
    quality system that we all have to be reimbursed in, and moving
    towards a coordination type fee, oncologists have already put
    forward ideas and are practicing palliative care referrals as
    well as palliative care medicine in the space of their cancer
    patients.
        Mr. Engel. Thank you. Let me get in one quick question. As
    part of the Affordable Care Act, Medicare started paying
    primary care physicians a 10 percent incentive payment, and it
    is my understanding that more than 156,000 primary care
    providers have benefitted from this. Now, I am curious to see
    what efforts are being taken in the private sector to
    incentivize physicians to practice in primary care. Perhaps Mr.
    Serota, Dr. Nash, can you elaborate on how your organizations
    are working to encourage physicians to go into primary care?
        Mr. Serota. Sure. We have done similar things. We have
    increased the rate we pay primary care physicians. An example
    in Philadelphia, our Independence Blue Cross plan doubled base
    reimbursement to primary care physicians, increased it--paid
    out nearly $37 million additional dollars in 2011. Anthem Blue
    Cross Blue Shield has announced a major investment in
    strengthening primary care, increasing revenue opportunities,
    bumped the fee schedule by 10 percent, including payments for
    non-visits, essentially care coordination, preparing care
    plans, managing patients with complex conditions, and also have
    shared savings models for quality improvement and reducing
    costs.
        So the whole concept is partnership with the primary care
    physicians to improve their access to additional funds,
    provided the outcomes and the improved safety is present for
    our members.
        Mr. Nash. Those physicians in our program who commit the
    time and energy to work over the period of time towards the
    principles of the patient-centered medical home, we put on a
    payment model as described which reimburses at a rate that is
    20 percent higher in this global model than they were receiving
    fee-for-service, and they get another opportunity for 20
    percent performance-based bonus, which you know, has attracted
    a lot of attention among the physician community.
        Mr. Engel. Thank you. Thank you, Mr. Chairman.
        Mr. Pitts. Chair thanks the gentleman. I now recognize the
    gentleman from Illinois, Mr. Shimkus, 5 minutes for questions.
        Mr. Shimkus. Thank you, Mr. Chairman, and I also want to
    applaud the panel for being here. I have been a member since
    January, '97 I got sworn in, voted for a balanced budget act,
    amendments, created the SGR. It has been a bane to my existence
    ever since. We did that to preserve and protect Medicare. That
    is why we did it. Every year, we have to deal with this, and
    for me, it will be 16 years now dealing with the SGR. Also,
    just I am glad--and Mr. Gingrey mentioned about the Overseas
    Contingency Operations. That is not going to happen. Don't plan
    on it. We are not going to use it to fix the SGR, so get that
    off the table. That is why this panel is important, because if
    we just use that, then we are in the same position. We haven't
    reformed, we haven't changed things, we haven't moved forward.
        I also want to address this. Medicare, by the actuary, says
    it is going to go broke 2024. It did get extended by the $500
    billion cuts in--from Obamacare, but the $500 billion also was
    supposed to go to help pay for the Affordable Care Act, the
    health care bill. We had Secretary Sebelius right in the other
    hearing room. She admitted they double counted, double counted
    $500 billion. Extend solvency of Medicare, pay for Obamacare.
    That is what we are living under. So those who extol the
    virtues of that, they are promoting the ability of double
    counting $500 billion.
        Now Dr. Patel, that is not good budgeting processes, is it?
    You wouldn't encourage using the same $500 billion to say you
    are preserving and extending Medicare when you are also using
    that same money to fund the expansion of health care?
        Ms. Patel. I would not encourage double counting.
        Mr. Shimkus. Thank you. I would agree.
        So let us first--and the other issue is we have always
    talked about tort reform. We always talk about insurance--
    private insurance being regulated by states. The federalism--we
    are back on the federalism bandwagon. I am glad. It helps us
    talk about this. Now we are talking about Medicare, but the
    tort reform savings, if--are significant, but we have got this
    State issue of tort law and federalism that I like to think--I
    know the Affordable Care Act did provide some money for states
    for pilot programs, which I applaud, and I hope that more
    states look at that.
        Where am I headed with all this? I am heading with this--I
    am glad to hear what we are doing. I don't hear much about the
    individual consumer. I hear about the primary practice
    physician, I hear about--I mean, the fact that we don't want to
    incentivize volume. We don't want overconsumption. We don't
    want one size doesn't fit all. Where is the consumer in this?
    Anyone?
        Mr. Bronson. The word patient-centered is in this effort,
    patient-centered medical home. Consumer is really dead set in
    the middle----
        Mr. Shimkus. Where? How?
        Mr. Bronson [continuing]. And it is key--how?
        Mr. Shimkus. Under a government-run program, what is the
    consumer--what skin do they have in the game financially?
        Mr. Bronson. Well, they have whatever co-pays and other
    things they have to----
        Mr. Shimkus. Significant co-pays really affect change?
        Mr. Bronson. I don't know. I honestly don't know.
        Mr. Shimkus. Anybody?
        Mr. Bronson. Well, I will take that back. I do know. I
    think we are seeing a decline in our business and our market
    because of very high deductible policies, and people are
    second-guessing questions about services and delaying services.
    Sometimes it is very effective and appropriate; sometimes it is
    dysfunctional. I think it needs to be looked at and organized
    in a way that you don't harm the health of the person, but you
    don't incent overutilization.
        Mr. Shimkus. Let me go to Mr. Serota.
        Mr. Serota. Congressman, you put a twist in the question
    when you said in a government-run program. I think that what we
    are doing in the Blues in our markets is a three-tiered
    strategy, and the third tier in that strategy is patient
    engagement. A critical element of success for us in the
    marketplace has been arming patients with information about
    costs, about quality, about which providers to select, and
    having them actively participate, and that includes actively
    participate economically, as well as with information.
        Mr. Shimkus. My time is expiring, and I appreciate that. I
    am just going to finish up with this observation. If we don't
    do that type of process--health care costs are going up for
    everybody, even the private sector. In corporate insurance,
    what are they doing? They are incentivizing their workforce
    through wellness programs, they are doing healthy living. They
    are really pushing people and they push it by what, a price
    signal. And if we don't do that in a government-run health care
    system and we always expect the Federal Government or CMS or
    some agency other than the Federal Government to do that for
    them, we are losing the opportunity to really reform our health
    care system.
        Thank you, Mr. Chairman. I yield back.
        Mr. Pitts. Chair thanks the gentleman. I now recognize the
    gentleman from Pennsylvania, Dr. Murphy, for 5 minutes for
    questions.
        Mr. Murphy. Good morning. This is of great concern to me of
    how we handle this. Look, we all get it. If all things being
    equal, if you pay someone by how many widgets they make versus
    giving them a flat salary, they will make more widgets. We
    understand that. The question comes of how we reform this, and
    we are throwing around a lot of phrases here, you know,
    quality, patient-centered, et cetera. I really want to get into
    some of the specifics.
        I think yesterday the U.S. News and World Report annual
    rating of hospitals came out. I don't know if any of you saw
    that, big thing about Johns Hopkins was bumped out by Mass
    General and who else in the top 10. Are you all aware of how
    those ratings are done? Am I correct they survey thousands of
    specialists and say who do you like best, right?
        Mr. Bronson. They use objective measures.
        Mr. Murphy. What are some of the objective measures that
    they use?
        Mr. Bronson. Some of the CMS measures.
        Mr. Murphy. Such as?
        Mr. Bronson. The core measures I believe are being used. I
    would like to confirm that, but there is a combination and it
    depends on the specialty.
        Mr. Murphy. Can you give me an example?
        Mr. Bronson. An example in psychiatry, for example, they
    use almost all reputation as an----
        Mr. Murphy. Exactly, exactly. So it is articles they
    publish, who knows who. I look upon it as voting for prom king
    and queen.
        Mr. Bronson. Right, right.
        Mr. Murphy. They do not--because you can't survey thousands
    of specialists around the country and ask them what hospital
    has the best outcome measures? Who has the fewest surgical
    complications? Who has the fewest nosocomial infections? Who
    has the fewest ventilator-assisted infections? Who has longer
    or shorter than expected risk adjustment stay in an ICU? Who
    has different rehospitalization rates? Yet am I correct in
    saying that those are the kinds of things we need to be
    measuring? OK.
        Now, I am wondering in that in terms of those--and if there
    are other ideas you have, too, how we change this system from
    what I refer to as the poke, prod, pinch, push, pull and
    prescribe payment system? That is what we get paid for as
    health care professionals. We want to pay for quality. In a
    very specific way, do we then attach dollar value to some of
    these things so if a hospital has a decline in the number of
    ICU days, a decline in the number of readmissions, decline in
    the number of nosocomial infections, how do we pay for that?
    Anybody? Dr. Nash?
        Mr. Nash. As mentioned earlier, we do have experience
    working with our hospital partners, and we are regional plan.
    But it is really a shared savings approach, not too dissimilar
    to what Medicare is looking at, and that is we identify
    opportunities where there is a chance to improve quality, and
    instead of just taking all of that savings and funneling it
    back into premium reductions, we are sharing some of that with
    the hospitals for the opportunity for them to transform their
    systems.
        Mr. Murphy. So I just want to make sure, because I am
    trying to understand this. I am not trying to put you on the
    spot. I have been working this since I wrote the patient bill
    of rights law in Pennsylvania where we are fighting managed
    care plans who would give a global payment to a practice or
    hospital and say you figure it out, and the scandals that came
    out of there were people were told you couldn't--you had to
    drive by this emergency room because you had to go to this one,
    because this is the one that is covered. Or you were not going
    to get covered for this, we are going to cover you for that.
    And my worry is that I want to make sure we don't get into
    those kinds of models where someone is just saying OK, well, we
    will save money today so we can get paid with this year's fund,
    and if the patient ends up with the problems next year that is
    OK, they are probably going to be with a different insurance
    company. How do we avoid that? Dr. Patel, you look like you
    are----
        Ms. Patel. Yes. I want to just say that the two things we
    do to avoid that, we shouldn't have something that is so
    absolute, like a reduction in ICU days or reduction in that
    unless we know that the second piece of information exists,
    which is that a reduction in ICU days is actually proven by
    evidence to have improved outcome in some way. So the scenario
    that you are describing, I think the way to instill-we have all
    talked in our societies and in our clinical professions about
    some of the metrics that we are coming up with, even as we
    speak, to ensure that those exact examples don't happen.
        Mr. Murphy. What you just said is absolutely golden, and
    something that this committee actually discussed when we read
    it was knocked out of the health care bill, and that was if we
    allow the societies, the colleges, the specialties in medicine
    that have their own protocols to determine things appropriate
    as opposed to an IPAB board, it is a big difference. An IPAB
    board takes an act of Congress to change what they are coming
    up with, but you are saying this is something that the various
    professional medical organizations themselves are constantly
    looking at?
        Ms. Patel. Yes.
        Mr. Murphy. Dr. Hoyt, you were going to say something on
    that?
        Mr. Hoyt. Well, yes. We have spent a lot of time thinking
    about this, and in our model, the updates would really require
    an annual rethinking of what the new target would be, realizing
    that as a group of physicians reach a target, that is no longer
    going to incentivize them to reduce costs, so you are going to
    have switch the target. But I think if the professional
    societies are charged with developing that, they are capable of
    it.
        Mr. Murphy. Anyone else want to comment on it?
        Mr. Serota. Yes, I guess I would just say that in our
    programs--we call it Blue Distinction--we used professional
    societies to determine the appropriate quality standards, and
    we do want to be careful to avoid substituting one piece work
    measure for another piece work measure. So if we are not paying
    for poking and prodding but we are paying for days reduction,
    we still are not getting at paying for outcomes, paying for
    better quality and better outcomes, which is where I think we
    ultimately have to get.
        Mr. Murphy. And I think this is one of those things we
    still have to figure out how to do this, because quality is a
    very nebulous term. But I still believe that empowering the
    professional colleges and societies and panels in medicine is
    more important than having an IPAB board by which, by law, has
    to be less than half physicians and medical people.
        I yield back. Thank you, Mr. Chairman.
        Mr. Pitts. Chair thanks the gentleman. That concludes the
    members of the subcommittee. We have Dr. Christensen who is
    here to ask questions. Dr. Christensen, you are recognized for
    5 minutes for questions.
        Ms. Christensen. Thank you, Mr. Chairman, and no question,
    the SGR has outlived its non-usefulness and we need a new
    methodology to fairly and adequately reimburse physicians and
    other providers for care. But just to get this off my chest,
    for the record, if the system had been set up to pay primary
    care physicians for what we have always done, provide patient-
    centered care, spend time with patients and their families, and
    provide comprehensive care, whether at home, in the hospital,
    or in the office, and to coordinate the care with specialists,
    we wouldn't be where we are today. The Affordable Care Act,
    though, has done much to lay the foundation to change this and
    add new models of care that are being tested that you have been
    discussing and enable us to once again practice the art of
    medicine and again, for the record, it has strengthened
    Medicaid, it has improved benefits, and it has actually
    lengthened the solvency, rather than hurt Medicare.
        But this hearing is a really good beginning to move us
    forward. I want to thank the chair and ranking member for
    holding it, and thank all of our panelists for their time,
    their work, and their thoughtful testimonies.
        I want to ask everyone this question. How did the
    approaches that you are recommending take into account
    physicians and other providers of color or who work in poor
    communities where services are very limited, and the patients
    are sicker with many co-morbidities, especially when we are
    focusing a lot on outcomes? How do we take into account where
    that patient started from, and when we are talking about
    evidence-based medicine when many people of color, and
    sometimes people with other co-morbidities are not in the
    clinical trials that produce that evidence?
        Mr. Serota. I guess what I would say is our philosophy is--
    I mean, the term that has been used up here is one size doesn't
    fit all. We really in the Blues believe you have to meet the
    physician's practices where they are, and you can't take a
    cookbook approach across the country and say it worked here,
    therefore it will work everywhere. You have to work with the
    local physician communities and the local provider communities
    and develop a program that starts from where they are and
    provides incentives, information, and data to help them move
    the needle forward so that from wherever they are starting
    from, you pay and you reimburse for improvements from where
    they are, not measures against some mythical standard that
    exists on a global basis.
        So we really believe that the closer you get to local
    management, the better the outcomes and the better results you
    are going to get from patient-centered medical homes. So that
    is the way we would deal with those issues in all cases.
        Ms. Christensen. Dr. Nash?
        Mr. Nash. Yes, CDPHP is our region's largest provider of
    managed Medicaid services, and we partner very closely with our
    federally qualified health centers and other private providers
    with large Medicaid populations. We support them not only by
    paying them more comprehensively, as I have been describing
    this morning, which allows them to sort of deploy those
    resources as they see fit for those patients, but we deploy our
    own resources and that is we created community health workers
    to work in the communities to go outreach the patients to bring
    them into the doctors who aren't being seen, as well as putting
    pharmacists and behavioral health workers in those practices.
        Ms. Christensen. Dr. Bronson, did you want to add?
        Mr. Bronson. Well, there is nothing more important that we
    learn how to reward practices for improving the health status
    of their patients, and you have to go to where they are at and
    understand the risk profile of that community, the risk profile
    of those specific patients, and have incentives that make sense
    for those communities. It is well-observed that certain
    demographic characteristics will not support--people with those
    characteristics will not achieve the same outcomes as others in
    certain areas, and that is very complex. Sometimes is it
    socioeconomics, sometimes it is other issues of disparity that
    we need to understand. So these have to be adjusted
    appropriately to support those practices. We shouldn't
    disadvantage those who are helping those in great need.
        Ms. Christensen. Thank you. Anyone else want to add?
        Mr. Hoyt. Yes, our past president, L.D. Britt, has made the
    comment that there is no quality without access. And I think
    that has led to us as an organization really trying to profile
    where we are deficient in some of those areas. One of them is
    in the--sort of the systemus of delivery of care is to assure
    that limited access populations, whether it is geographic or it
    is economic or color, et cetera, that those are overcome by
    getting adequate data. And so we are really making a concerted
    effort to make sure that the data we collect at a large
    hospital in a large city is the same as the data that we can
    collect in a smaller hospital or in a more remote or
    financially challenged area to try and identify those problems,
    and then start to create solutions for them.
        Ms. Patel. One additional thing that the Affordable Care
    Act included were provisions for coverage of costs associated
    with clinical trials, such that the very issue you describe
    with deep disparities in clinical trial enrollment, especially
    in cancer, can be dealt with, and that is very important.
        Ms. Christensen. I thank you for your answers, and thank
    you, Mr. Chairman, for giving me the time.
        Mr. Pitts. Chair thanks the gentlelady. That concludes all
    the questions from the members. Again, let me say this has been
    an excellent panel. Thank you for your testimony, your answers,
    and we will send you any further questions from the members----
        Mr. Pallone. Mr. Chairman?
        Mr. Pitts [continuing]. If you please respond.
        Mr. Pallone. Mr. Chairman, I just wanted to--I have heard a
    number of my colleagues mention this double counting issue, and
    I think it is a red herring, so I am asking to insert Secretary
    Sebelius's letter on the matter into the record. I would ask
    unanimous consent.
        Mr. Pitts. Without objection, so ordered.
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        Mr. Pitts. I remind members that they have 10 business days
    to submit questions for the record, and I ask the witnesses to
    respond to questions promptly. Members should submit their
    questions by the close of business on Wednesday, July 31.
    Without objection, the subcommittee is adjourned.
        [Whereupon, at 12:07 p.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]
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