[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.
    [The information follows:]
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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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