[Senate Hearing 112-777]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 112-777
 
                        ROUNDTABLE DISCUSSION ON

                   MEDICARE PHYSICIAN PAYMENT POLICY:

                    LESSONS FROM THE PRIVATE SECTOR
=======================================================================



                                HEARING

                               before the

                          COMMITTEE ON FINANCE

                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 14, 2012

                               __________

                                     
                                     

            Printed for the use of the Committee on Finance




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                          COMMITTEE ON FINANCE

                     MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West         ORRIN G. HATCH, Utah
Virginia                             CHUCK GRASSLEY, Iowa
KENT CONRAD, North Dakota            OLYMPIA J. SNOWE, Maine
JEFF BINGAMAN, New Mexico            JON KYL, Arizona
JOHN F. KERRY, Massachusetts         MIKE CRAPO, Idaho
RON WYDEN, Oregon                    PAT ROBERTS, Kansas
CHARLES E. SCHUMER, New York         MICHAEL B. ENZI, Wyoming
DEBBIE STABENOW, Michigan            JOHN CORNYN, Texas
MARIA CANTWELL, Washington           TOM COBURN, Oklahoma
BILL NELSON, Florida                 JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey          RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware
BENJAMIN L. CARDIN, Maryland

                    Russell Sullivan, Staff Director

               Chris Campbell, Republican Staff Director

                                  (ii)



                            C O N T E N T S

                               __________

                           OPENING STATEMENTS

                                                                   Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman, 
  Committee on Finance...........................................     1
Hatch, Hon. Orrin G., a U.S. Senator from Utah...................     2

                               WITNESSES

Safran, Dr. Dana, senior vice president, Blue Cross Blue Shield 
  of Massachusetts, Boston, MA...................................     3
Edwards, Peter, president of provider development, Humana, 
  Louisville, KY.................................................     4
Reisman, Dr. Lonny, senior vice president and chief medical 
  officer, Aetna, Hartford, CT...................................     5
Burrell, Chet, president and chief executive officer, CareFirst 
  BlueCross BlueShield, Washington, DC...........................     6
Cardoza, Darryl, president and chief executive officer, Hill 
  Physicians Medical Group, San Francisco, CA....................     8

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:
    Opening statement............................................     1
    Prepared statement...........................................    35
Burrell, Chet:
    Testimony....................................................     6
    Prepared statement...........................................    36
Cardoza, Darryl:
    Testimony....................................................     8
    Prepared statement...........................................    42
Edwards, Peter:
    Testimony....................................................     4
    Prepared statement...........................................    48
Hatch, Hon. Orrin G.:
    Opening statement............................................     2
    Prepared statement...........................................    57
Reisman, Dr. Lonny:
    Testimony....................................................     5
    Prepared statement...........................................    58
Safran, Dr. Dana:
    Testimony....................................................     3
    Prepared statement...........................................    63

                             Communication

Center for Fiscal Equity.........................................    71

                                 (iii)


                        ROUNDTABLE DISCUSSION ON

                   MEDICARE PHYSICIAN PAYMENT POLICY:

                    LESSONS FROM THE PRIVATE SECTOR

                              ----------                              


                        THURSDAY, JUNE 14, 2012

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:08 
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max 
Baucus (chairman of the committee) presiding.
    Present: Senators Wyden, Cardin, Hatch, Grassley, Kyl, and 
Thune.
    Also present: Democratic Staff: Russ Sullivan, Staff 
Director; David Schwartz, Chief Health Counsel; Karen Fisher, 
Professional Staff Member; and David Sklar, Fellow. Republican 
Staff: Chris Campbell, Staff Director; and Dan Todd, Health 
Policy Advisor.

   OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM 
            MONTANA, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. Thomas Edison once said, ``To have a great 
idea, have a lot of them.''
    Today, we hold our second roundtable on Medicare physician 
payments. The payment system Medicare currently uses is broken. 
There are a lot of ideas about how to fix it, and today we want 
to hear them.
    We know the sustainable growth rate, or SGR, must be 
repealed. It causes uncertainty. It causes seniors to fear 
losing access to their doctors. It threatens physicians with 
increasing payment cuts year after year.
    We need to take a look at the underlying fee-for-service 
system that Medicare uses to pay physicians. Fee-for-service 
rewards physicians who do more tests and more procedures, even 
if those services are unnecessary. It does not encourage 
physicians to coordinate patient care to save money and improve 
results.
    We need an efficient system that rewards physicians for 
providing high-quality, high-value care. Today, we will hear 
from five organizations that have developed innovative 
physician payment systems in the private insurance market. 
These organizations are changing how they pay physicians to 
create incentives that will improve patient care. They are 
rewarding the physicians who keep patients healthy and cut down 
on emergency room visits and hospital readmissions.
    These results not only save money, they mean better care 
for patients. We want to learn how these ideas also can be 
applied to the Medicare program. Medicare needs solutions that 
will work in a range of settings--in cities, rural areas, large 
doctor groups, solo practitioners, specialists, and primary 
care providers. What works in California may not always work in 
Montana.
    Fortunately, our panelists can describe ideas that have 
worked in many different regions of the country, and we look 
forward to candid, direct suggestions from them as to how to 
solve this problem.
    Thank you.
    [The prepared statement of Chairman Baucus appears in the 
appendix.]
    The Chairman. Senator Hatch?

           OPENING STATEMENT OF HON. ORRIN G. HATCH, 
                    A U.S. SENATOR FROM UTAH

    Senator Hatch. Thank you, Mr. Chairman. I want to thank you 
for convening today's roundtable as we continue discussing 
options to improve the way we pay physicians and improve 
quality in Medicare. It is critical that we speak to folks in 
the private sector who are successfully lowering costs while 
providing better care and outcome for patients.
    The chairman and I agree that we must find a better way to 
pay physicians in Medicare. We must repeal the flawed SGR 
system--in my opinion, an albatross around the Congress's neck 
that must be addressed at the end of every year. This is not an 
easy task, but our physicians and patients deserve better. We 
must establish a more stable foundation to pay our physicians 
who treat Medicare patients.
    As we all know, our current fee-for-service system provides 
little financial incentive to manage care properly. Instead, 
the current incentive is to increase the volume of services. 
Over the years, we have learned that more care does not 
necessarily mean better care or better outcomes.
    Today, we have the opportunity to hear from some of the top 
performers in the private sector. These industry leaders are 
making real advancements in care delivery and physician 
payment. They are showing that you can improve quality and 
lower costs in a collaborative way that does not alienate the 
physician community.
    Chairman Baucus, I just want to thank you again for 
scheduling this series of roundtables. I hope today's provides 
us with another opportunity to learn about the best practices 
that are occurring in the private sector.
    And I do look forward to hearing from our witnesses, 
hearing about their efforts, and thinking about how to relate 
their experiences to Medicare.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    [The prepared statement of Senator Hatch appears in the 
appendix.]
    The Chairman. I am now pleased to welcome our panelists. 
Today, we will hear from Dr. Dana Safran, senior vice 
president, Blue Cross Blue Shield of Massachusetts. Next is Mr. 
Peter Edwards, president of provider development, Humana. Dr. 
Lonny Reisman is senior vice president and chief medical 
officer at Aetna. Mr. Chet Burrell is president and chief 
executive officer of CareFirst BlueCross BlueShield of 
Maryland. And our last witness is Mr. Darryl Cardoza, chief 
executive officer, Hill Physician Medical Group in northern 
California.
    Dr. Safran, why don't you begin? You know our usual custom 
here. Statements are automatically included in the record, and 
I ask each of you to summarize your statements and tell it like 
it is.

STATEMENT OF DR. DANA SAFRAN, SENIOR VICE PRESIDENT, BLUE CROSS 
            BLUE SHIELD OF MASSACHUSETTS, BOSTON, MA

    Dr. Safran. Thank you, Chairman Baucus, Ranking Member 
Hatch, and members of the committee. I am Dana Gelb Safran, 
senior vice president for performance measurement and 
improvement at Blue Cross Blue Shield of Massachusetts.
    As this committee considers the important issue of 
physician payment and, specifically, the SGR, I appreciate the 
opportunity to discuss the payment reform model that Blue Cross 
Blue Shield of Massachusetts has been implementing since 2009.
    The model known as the Alternative Quality Contact, or AQC, 
employs a population-based global budget, together with 
substantial financial incentives on a broad set of quality and 
outcome measures.
    Rates of inflation on budgets are negotiated up front for 
the 5-year contract period, thereby creating much-needed 
predictability in medical spending growth. Budget and quality 
targets are designed to accomplish our twin goals of 
significantly improving health care quality while, at the same 
time, significantly slowing spending growth.
    The AQC is now our predominant payment model, in place with 
nearly 80 percent of providers State-wide. These organizations 
vary enormously in size, scope, composition, and geography, 
most of them comprised of many small and solo practices united 
through a common leadership.
    With 2 complete years of data, the AQC is on track to cut 
spending trends in half over a 5-year period. A formal 
evaluation led by Harvard Medical School economist Dr. Michael 
Chernew found that, even in year 1, AQC providers slowed 
spending growth by 2 percent, while simultaneously improving 
quality. These savings and quality improvements deepened in 
year 2.
    Providers are achieving savings both through the use of 
lower-cost care settings and, importantly, through significant 
changes in utilization. In 2010 alone, AQC providers saved more 
than $10 million by reducing avoidable hospital admissions, 
readmissions, emergency room use, and high-tech imaging.
    With respect to quality, each and every AQC organization 
has made significant improvements across a broad set of quality 
and health outcome measures. To accomplish these results, AQC 
organizations are innovating in ways that are truly sowing the 
seeds of sustainability. They are investing in new 
infrastructure and information systems, deploying new staffing 
models, and implementing new approaches to patient engagement.
    These early findings offer evidence that a payment model 
that creates provider accountability for medical spending, 
quality, and outcomes is a powerful vehicle for realizing the 
goal of a high-
performance health care system with a sustainable rate of 
spending growth.
    On behalf of Andrew Dreyfus, president and CEO of Blue 
Cross Blue Shield of Massachusetts, and our leadership team, we 
look forward to working with you as you address these important 
issues.
    And I thank you for the opportunity to be here today.
    The Chairman. Thank you, Dr. Safran, very much.
    [The prepared statement of Dr. Safran appears in the 
appendix.]
    The Chairman. Mr. Edwards?

STATEMENT OF PETER EDWARDS, PRESIDENT OF PROVIDER DEVELOPMENT, 
                     HUMANA, LOUISVILLE, KY

    Mr. Edwards. Mr. Chairman, thank you. Thank you for the 
opportunity to share learnings from our 25-year experience in 
partnering with physicians on a variety of innovative, value-
based models that reward efficiency and effectiveness across a 
continuum of product lines.
    I am Peter Edwards, president of provider development, 
responsible for Humana's partnerships with physicians and 
related 
performance-based model plans.
    Relevant to today's discussion, Humana is one of the 
Nation's largest Medicare private plan contractors, with 2.2 
million members. Additionally, we own 300 medical centers, run 
over 250 worksite medical facilities, and contract with nearly 
320,000 physicians.
    By year's end, about 1.8 million of our Medicare Advantage 
members will get care from physicians in Humana's network 
arrangements that include one of our various payment models, 
and we expect 80 percent of our network primary care physicians 
will be in rewards programs.
    While my detailed written statement is on record, here are 
a few highlights. We believe delivery system transformation is 
predicated on creating physician payment models that recognize 
the variability in physician practices and engage physicians 
based on factors like practice resources, geography, and 
patient panels.
    Beginning in Florida in the mid-1980s, we introduced basic 
capitation payment models. Then we moved to global risk 
arrangements across all of our Medicare benefits, then added 
combined risk arrangements--shared risk for Part A and full 
risk for Part B and D--and, ultimately, we introduced fee-for-
service rewards programs in 2010 in areas where the primary 
payment model was fee-for-service.
    Our rewards program has four variations tailored for 
differing practice structures. There are opportunities to 
increase payment on a graduated basis as program complexity 
increases. Payment beginning with fee-for-service with an 
annual bonus rises to quarterly based bonuses, then peer 
coordination fees plus a bonus, and, finally, shared savings 
and capitation.
    We provide real-time data and detailed reporting of 
patient-
centered costs and quality information to physicians. In some 
cases, such as in rural areas where primary care access is 
limited, we have added nurse practitioners to assist practices.
    As we developed our rewards program, we engaged directly 
with the leading primary care physician societies, and today we 
continue to solicit their suggestions and recommendations.
    During the first 9 months of 2011, our rewards program 
resulted in improved health outcomes, including an over 50-
percent increase in the number of participating physician 
practices meeting and/or exceeding patient care measures.
    One of the lessons we have learned is that, without 
incentives, costs run 5 to 20 percent higher. Any proposal to 
modify Medicare payment policy should be sufficiently flexible 
to allow for practice variations. A single, uniform, well-
established performance measurement strategy is critical across 
all public and private programs. And, lastly, real-time data is 
a critical component of any payment policy initiative.
    As we continue to develop innovative payment models, our 
focus will be on models that reduce fragmentation, improve 
communication, reduce unnecessary costs, and ensure that 
patients receive the right care at the right time, in the right 
setting, from the right level care practitioner.
    Thank you, again.
    The Chairman. Thank you, Mr. Edwards, very much.
    [The prepared statement of Mr. Edwards appears in the 
appendix.]
    The Chairman. Dr. Reisman?

STATEMENT OF DR. LONNY REISMAN, SENIOR VICE PRESIDENT AND CHIEF 
              MEDICAL OFFICER, AETNA, HARTFORD, CT

    Dr. Reisman. Good morning. Thank you for inviting me to 
testify today. My name is Lonny Reisman. I am the chief medical 
officer for Aetna.
    Aetna views provider collaboration as key to transforming 
patient care and building a more effective health care system. 
Since 2005, Aetna has invested more than $2 billion to acquire 
or build a variety of capabilities to support and enable 
provider collaboration models.
    We recognize that there is no single model or solution to 
meet the needs of every health system and patient across the 
country. We need our provider partners at the current state of 
readiness, with a shared goal of moving toward a more effective 
and patient-focused health care delivery model.
    Our partnerships are designed to support all patient 
populations, qualified providers, and insurance payers, and are 
not limited to Medicare or Aetna members.
    We believe successful provider collaborations incentivize 
quality improvement, give actionable patient information, and 
use low-cost technology solutions that create interoperability 
between providers, patients, and health systems.
    Our provider collaborations provide a model for health care 
delivery and payment that ties provider reimbursements to 
improved population health and reductions in the total cost of 
care.
    Our Medicare Advantage care management models provide 
health information technology and nurse case managers embedded 
within participating provider groups. For example, by 
collaborating with Aetna, InterMed's independent physician 
association, Nova
Health in Portland, ME averaged 45 percent fewer acute admits, 
50 percent fewer acute days, and 56 percent fewer admissions in 
2011 compared to State-wide unmanaged risk-adjusted Medicare 
populations.
    New research on medical advances is published frequently. 
ActiveHealth Management has a large team of board-certified 
physicians, pharmacists, and registered nurses that applies 
research from the most reputable sources to develop and 
maintain our clinical decision support tool. We alert 
physicians to errors or omissions in care and opportunities to 
improve health, resulting in better quality and reduced medical 
costs.
    In a randomized clinical trial, ActiveHealth Management's 
technology was found to lower average charges by 6 percent 
compared to a control group in 1 year.
    Regarding fragmentation of care delivery, people with 
chronic conditions, such as diabetes and/or high blood 
pressure, often receive care from many different providers. For 
these high-risk patients, it is especially important that 
physicians are able to effectively coordinate care and 
information.
    Aetna's Medicity technology lays the foundation to securely 
exchange patient health information. Medicity accomplishes this 
regardless of which electronic medical record is being used.
    Michigan Health Connect, MHC, engaged Medicity to help them 
tackle the referral process, which was a significant pain point 
for physicians, involving filling out and faxing forms, as well 
as numerous phone calls between providers.
    Within 120 days, MHC rolled out the iNexx e-referrals 
application to 100 practices, including 21 specialties, and is 
adding practices to the e-referral network at a rate of nine 
practices per week. These practices are now able to replace the 
multiple phone calls and fax exchanges with secure electronic 
team networks that enable e-referrals.
    We share the committee's goal to transform the health care 
delivery system and believe Medicare can benefit from our 
innovative care solutions.
    Aetna has achieved positive results through our provider 
collaborations. We are making it easier to pull meaningful 
health care information out of silos and act upon it more 
quickly to improve patient care. We believe that these models 
can be applied more broadly to improve population health and 
create a sustainable care delivery system.
    Thank you.
    The Chairman. Thank you, Doctor, very much.
    [The prepared statement of Dr. Reisman appears in the 
appendix.]
    The Chairman. Mr. Burrell?

   STATEMENT OF CHET BURRELL, PRESIDENT AND CHIEF EXECUTIVE 
    OFFICER, CAREFIRST BLUECROSS BLUESHIELD, WASHINGTON, DC

    Mr. Burrell. Thank you, Mr. Chairman, Ranking Member Hatch, 
and other members of the committee. I am Chet Burrell. I am the 
CEO of CareFirst BlueCross BlueShield. We cover the area of 
northern Virginia, DC, and all of Maryland. We also are the 
major carrier for the Federal Employee Program, covering some 
620,000 FEP members here in the Capitol area.
    Several years ago, we started our own patient-centered 
medical home program, and the way we approached it was, we 
asked primary care physicians in this area who are in active 
practice, of which there are about 4,000, to form small, what 
we call medical care panels, teams typically of eight to ten 
primaries as a team. This includes solo practitioners who are 
in rural areas, who themselves form teams with others in those 
rural areas. These are self-chosen teams.
    There are 300 such panels in this region now. There are 1 
million CareFirst members being served by these panels. What we 
do is a blended capitation fee-for-service system. And I would 
say that the most important thing we have learned is how 
important payment reform is.
    But this model, I think, is distinct in the sense that it 
offers the benefits of global capitation. We establish global 
expected cost of care for each panel's population of patients. 
Each panel serves about 3,000 members of ours.
    Three thousand members could be expected to run up $12 
million a year in health care costs for something like 50,000 
service encounters. What we do is, we project what that cost 
would be, and then we ask them to better that; and, if they 
can, we share the savings. We pay them during the course of the 
year on a fee-for-service basis, because we can get the data 
better that way, and we can track the services better that way. 
And if, at the end of the year, they have bettered the expected 
cost of care on a global basis, we share the savings with them. 
This can often provide major incentives, bonuses, if you will, 
to these physicians.
    We also have extensive quality measures during the course 
of the year to see to it that there is not a gain by under-
serving the population of patients in the panel. We have 1 year 
of full operating experience under this, through which nearly 
$3 billion worth of claims flowed, and here is what we found in 
the first year: that about 60 percent of the panels, of the 300 
panels, actually beat the targets, and they beat them, on 
average, by 4 percent, and that is a big number.
    And, of the panels that did not, the 40 percent that did 
not, they exceeded it by 4 percent. And so there was an 8-
percent spread. And what has happened as a consequence of that 
is that the ones that won have become more interested in what 
they can do better, and the ones that did not now want to find 
out what they can do. And so it has established a great deal of 
interest in the physician community. Over 80 percent of all of 
the primaries in this area are in the program.
    So in essence, that is the way we have approached it. We 
are looking to get Medicare into the program through a waiver 
from CMS to bring Medicare fee-for-service patients into the 
same design, same incentives, same structure.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Mr. Burrell. That was 
very interesting.
    [The prepared statement of Mr. Burrell appears in the 
appendix.]
    The Chairman. Mr. Cardoza?

  STATEMENT OF DARRYL CARDOZA, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, HILL PHYSICIANS MEDICAL GROUP, SAN FRANCISCO, CA

    Mr. Cardoza. Chairman Baucus, Ranking Member Hatch, members 
of the Finance Committee, I appreciate your invitation to join 
you today and share the experience of Hill Physicians Medicare 
Group in managing our physician payment system. And thank you 
for holding this roundtable on what is a very important topic.
    Hill Physicians Medical Group has operated for more than 25 
years in northern California, serving people insured by 
commercial plans, the Medicare Advantage prescription drug 
program, and Medicaid. We now serve 300,000 people through our 
network of 3,500 physicians, most of whom are independent and 
self-employed in small practices ranging from one to several 
physicians. We are paid prospectively through capitation and 
compensate our physicians for their services to these patients 
through our own compensation plan.
    I have submitted to the committee written comments about 
our experience for your reference and consideration, and I 
appreciate your including my comments in the record for this 
roundtable. I will offer these brief opening thoughts.
    For 30 years, I have been boots-on-the-ground embedded with 
practicing physicians helping to organize them and develop 
tools and systems to build a value-oriented delivery system. 
There is remarkable consensus in what you have heard today and 
in your first roundtable.
    We get what we pay for. And with fee-for-service, we pay 
for volume. As a practical matter, it would be difficult to 
entirely abandon fee-for-service, but Hill Physicians would 
encourage payment strategies that move away from fee-for-
service to those that are population-based, enabling proactive 
approaches to care management and more intelligent resource 
allocation across the continuum of care.
    Hill Physicians has had success in compensating physicians 
to reflect performance-based incentives, capitated payments, 
and case rate payments. Hill Physicians has succeeded by 
prospectively defining desired outcomes, measuring and 
reporting on individual physician performance, achieving those 
outcomes, and supporting our physicians in their efforts to 
continuously improve their practice performance.
    Medicine is delivered today in increasingly sophisticated 
environments. An affordability crisis has long been 
anticipated, we thought, due to an aging population. While 
true, we did not anticipate the larger cause, which is the 
explosion of medical technology and know-how.
    Marcus Welby could not make it in medicine today. There 
were precious few tools in his medical bag. Today, he could not 
carry his tools in a wheelbarrow, and he would not be capable 
of using them all on his own. Yet, the reimbursement model used 
today was built when Dr. Welby was in his prime.
    We at Hill Physicians have worked for over 25 years to 
build a large, accountable organization of physicians, 
supported with information systems and care management programs 
designed to support our physicians to optimize value for our 
patients.
    How we pay our physicians is important, but no payment 
strategy alone will be enough to achieve the objectives we all 
share to optimize affordability and quality. Hill Physicians 
has been successful because of our consistent organizational 
engagement and support for our physician network for over 25 
years. The organizational framework for these collective 
efforts has been essential to our success, and I will encourage 
you to consider strategies that foster organization and system 
development for the physician sector.
    I hope that sharing our experiences will be helpful to your 
efforts, and I thank you for inviting me to join you today.
    The Chairman. Thank you very much.
    [The prepared statement of Mr. Cardoza appears in the 
appendix.]
    The Chairman. This is a bit different, how we are going to 
conduct this hearing today. It is not really a hearing. I like 
to call it kind of a roundtable; that is, everybody just 
participates informally. It is like around the kitchen table. 
If somebody wants to say something, say it. If someone says 
something that kind of makes sense, reward that person. If it 
does not make sense, speak up and say why, and so forth. That 
applies to both sides of the table, that is, with Senators, as 
well as for all of you.
    So feel free just to jump in, if you want to, and I say 
that to my colleagues too. Just jump in if you want to.
    I will just ask the first question, and then we will let it 
rip.
    I am very intrigued with what you are doing, Mr. Burrell, 
and I am wondering about your system. I guess you start out 
fee-for-service, and savings are then rebated back to the 
participants, and you set a target at the outset, as I 
understand it.
    Mr. Burrell. Yes.
    The Chairman. So one question I have is, how do you set 
that target? And then, what lessons does that have for the 
target that is in SGR, because, in each case, there is a 
target? One is statutory, and one is set by yourselves. And you 
said you asked for a waiver to apply your approach under the 
Medicare payment system.
    It would be helpful, to me anyway, if you could tell us the 
degree to which you think SGR can be modified to maybe follow 
some of your practices or what have you learned that could help 
us decide what we are going to do about SGR.
    Mr. Burrell. Well, let me start with a description of the 
way we do it, which is very similar to the way premiums are 
established. So, they will think of it this way. You have a 
particular panel, as I described, let us say, 10 doctors, 10 
primaries.
    The question is, how many patients do those primaries have? 
Who are the patients who are attributed to them, who actually 
go to them? And then the first question we ask is, once we know 
that, what are the claims experiences of those particular 
patients?
    It reflects their age, their sex, their illness or health, 
it reflects everything about the local aspects of health care, 
when health care is intrinsically local. And when I said it 
would be typically the case that 3,000 members would be in a 
panel of ours, they would be expected, just on historical 
experience, to have about $12 million a year today in health 
care expenditures.
    So we take that base, whatever it was, and----
    The Chairman. And that is the target?
    Mr. Burrell. No, that is the base. In this case, we use 
2010, an unmanaged base before the program started.
    We look at the illness burden of the population that is in 
that panel, and we take that into account and changes in that 
illness program, and then we apply what we call an overall 
medical trend factor, which reflects what we believe are the 
overall trends in health care in this region. We apply it to 
the base. And we then come out with the expected cost of care.
    What we are expecting is that, as panels perform and 
attempt to beat that number--when I said that 60 percent of the 
panels actually were 4 percent under that number, in this 
region, that number is between 7 and 7.5 percent. So to be 4 
percent under it, you are at 3.5 percent.
    And what we do is, we track that trend over time. We do 1 
full year of prospective trend going forward. Then, as the next 
year comes, it is 50/50 prospective of what actually happened. 
By the third year, it is two-thirds/one-third, one-third 
prospective, two-thirds retrospective.
    So, as the cost curve bends by action of the panels, we 
think it moderates the cost curve, and what happens is the 
panels have harder and harder targets to beat. But, by the time 
that occurs, they are more and more experienced in what it 
takes to beat them. And so much of the cost is driven by 
chronic disease that we believe that the essential thing that 
they must focus on is how to manage the chronic disease 
patient.
    That means they have the ability to identify them, set up a 
care plan for them, follow them through the community, watch 
for the breakdowns. So we assign a nurse to help them do that 
with each case, and we do not expect the primary to do it all 
by themselves.
    The Chairman. To what degree, though, could this approach 
be applied to Medicare?
    Mr. Burrell. The same exact approach could apply to 
Medicare. So you could say--this was for our under-65 
population--but you could, say, take Medicare members, 
beneficiaries in this region who are in those very same 
practices, and establish Medicare expected cost of care in a 
similar manner, Medicare fee levels.
    In other words, we establish a credit system. Expected cost 
of care is a credit to the panel. Debits are the fees 
themselves. And what we would say to the panel is, ``You manage 
the Medicare patients in the similar manner to the way you 
manage the CareFirst patients, and you look particularly for 
chronic disease, and Medicare is the chronic disease capital.''
    Senator Cardin. Mr. Chairman, what Mr. Burrell is doing at 
CareFirst is popularly received locally. So it has credibility 
to it. And I think one of the main features is that there is 
help given to the primary care provider through nurses to 
manage the more complicated and more costly patients, which I 
think gives confidence that this is not an effort to deny care 
to people in order to reach the target, but to manage the cost 
of high interventions in a more cost-effective way.
    This is the question I would have for you, Mr. Burrell, or 
anyone else on the panel. You mentioned that you do oversight 
to make sure that quality is maintained. But there is always a 
fear that the bonuses are based upon dollar amounts; so, 
therefore, are we just denying people needed care rather than 
providing the quality?
    How do you assure that the necessary care, in fact, is 
given?
    Mr. Burrell. We have five different ways, five different 
categories of quality measures that each physician in the panel 
is measured on, and the panel as a whole, relating to access, 
gaps in care, appropriateness of care, and we have one category 
we call engagement. And this is the degree to which the 
physician is actually engaged in the care of a chronic disease 
patient.
    Are they too busy? Do they take the call-backs? Will they 
deal with the nurse? Are they engaged? You cannot get an 
outcome incentive award in our design unless you have overall 
quality scores that indicate that you are providing quality 
services and you are engaged with the patients who need you the 
most.
    In an under-65 population, less than 10 percent of all of 
the patients consume 65 percent of the medical spending, and 
these are typically people with chronic disease or the 
exacerbation of chronic diseases. They need differential 
attention.
    So we ask the primary care physician to do that. If there 
is evidence that they are not doing that, they are disqualified 
from then forward.
    One further statement on this. It is meant to be a multi-
year award. So we look for consistency of performance over 
time, not a quick hit. And the reward goes up as the 
consistency occurs.
    So if Mary Smith, the patient, has multiple chronic 
diseases, take care of her over time. The only way you can win 
is to actually stabilize her, improve her outcomes--less 
breakdown, less readmission, ER visits, that kind of thing--and 
track that.
    Dr. Reisman. And I would suggest there are two elements to 
quality. One is a kind of retrospective analysis based on 
measures articulated in HEDIS or the National Quality Forum.
    But I think an important issue to raise is the fact that 
many of these practices do not have an intrinsic capacity to 
manage patients as well as they would like to. They do not have 
complete information. So, as patients see multiple doctors in a 
community, particularly those with chronic diseases or multiple 
chronic diseases, the information is not coordinated.
    We have played a role in actually not being removed 
relative to these practices and simply paying claims, but 
becoming an integral part of the actual delivery of care.
    So, to the extent that we can use our health information 
exchange capabilities to create an aggregate organized record 
for presentation to the physician or practitioners, that has 
been a huge help.
    The second issue relates to decision support. The good news 
about having complete data on a patient is you have complete 
data on the patient. The bad news is there is quite a bit of 
it. And, given the constraints of time, it would be hard to 
analyze all of that data on the patient and relate it to what 
has been, in fact, published in the literature or what 
represents the safest levels of care.
    So the ability to distill massive amounts of information 
using clinical decision support into actionable activities that 
can be pursued by the physician in concert with a team ends up 
being an important issue.
    And the third point I would mention--we could talk about it 
more as we go forward--is the role of the patient. For all the 
best intentions of doctors, patients are frequently not 
adherent with therapy.
    We have done a lot to, in fact, motivate and provide 
incentives for patients, but I would urge the committee to 
consider the role of the patient in all of this as we tackle 
the issues of total costs.
    Dr. Safran. I would like to add in, because your question 
is such an important one, that, as we move to models that 
create accountability for total medical spending, how do we 
ensure that quality does not get sacrificed along the way? And 
the approach that we have taken to that, which is proving to be 
very successful, is to pair those incentives for total medical 
spending with a very broad set of quality and outcome measures 
with known targets that represent a continuum from good to 
great care.
    So for every measure--and there are 64 quality and outcome 
measures in our portfolio of measures that these organizations 
are accountable for. For every measure, there is a range of 
performance targets from good to great, with great being a 
number that tells us the best that can be achieved for a 
population of patients by an organization.
    And what we see these organizations doing is embracing 
those measures with the data that we provide to them and the 
substantial incentives that are on the table to do well with 
these measures and, systematically, over their 5-year contract 
period, moving quite aggressively to improve care for patients.
    And because the measures include not just clinical process, 
that is, following evidence-based care--that is important--but 
also measures of health outcomes and measures of patient care 
experiences, these practices have to engage their patients in a 
new way, because you cannot accept accountability for patient 
health outcomes without thinking about what happens to that 
patient when they are outside of your four walls living their 
life, working on issues of adhering to chronic disease and 
managing their health.
    So these practices are innovating new ways to actually 
understand individual patients, what their lifestyle is, what 
their constraints are around managing their condition. And what 
we have seen, even in the first 2 years of their performance, 
is, on the outcome measures, them moving to the highest level 
of performance that our data tell us is possible to achieve for 
a population. They are achieving very important advances in 
health outcomes, at the same time that they are managing 
overall medical spending.
    Mr. Edwards. And I would like to add to that. Our rewards 
program, it moves along a continuum. Starting with the fact 
that they are all based on HEDIS measures. So in order to 
receive----
    The Chairman. On what measures?
    Mr. Edwards. Health employer data information. Set 
measures. And you have to achieve six out of nine of the 
various ones, and they include cancer screening, glaucoma 
screening, body mass index. There are various ones. And when 
they hit six out of those nine, they receive a reward for that.
    And each of the programs will then layer on other factors 
on top of that, such as generic dispensing rates or readmission 
rates, improving readmission rates. And the payments for all of 
those move up as you move along the continuum of the reward 
program.
    And the reward program is important because it works in all 
areas, including rural areas. We have found that this reward 
program--just for instance, we have two practices in South 
Dakota this last year that are going to receive $102,000. These 
are PCP practices. We had four in Montana, with over $144,000 
coming to them; eight in Utah for over $492,000. And these are 
practices receiving rewards for quality outcomes for their 
patients.
    The Chairman. Senator Grassley wants to pipe in here.
    Senator Grassley. Yes. I want to bring up an issue that 
might be a little bit different.
    Mr. Edwards, you mentioned Humana uses different approaches 
to account for variation in practices, and I want to ask about 
delivery of health care in rural America, because that is, 
obviously, where Iowa fits.
    Could you expand on what Humana does differently in rural 
areas, what challenges you encountered, and what you have found 
to be successful?
    Mr. Edwards. Sure. A couple of things. Recently, we have 
partnered with a company called GenCare. These guys opened, so 
far, 13 clinic-based primary care centers that provide coverage 
to seniors and primarily low-income and under-serviced 
neighborhoods and rural areas. And this group will grow to add 
40 centers over the next few years.
    The second thing is, we have created in this reward program 
a program we call PODS, for Physician Organization Delivery 
System. And what we have done is, in rural areas, where you 
have a small patient panel and the administrative burden may be 
a little bit hard for them to want to adopt the reward 
programs, we put a team together, which includes a nurse 
practitioner, to go into the office and to help them understand 
the disease management programs and the things that can be done 
to help serve the rural population.
    Senator Grassley. You just brought up nurse practitioners--
and I know it was in your written testimony--and just now 
touched on it for the first time.
    Would there be supervision requirements in the case of 
nurse practitioners? And more importantly, I am interested in 
what type of response you have received from the physician 
community regarding the idea of using nurse practitioners.
    Mr. Edwards. We have had no issue, because they are coming 
in with--the key thing for the rural providers is they are 
absent actionable data, data that they can use to help them 
manage their patients.
    So the nurse practitioner comes in, in a soft way, with 
data and can show them what they can do to improve the health 
of the patients that they are seeing, and they have a team of 
other folks who go with them.
    They have the ability to contact a doctor and take a doctor 
with them, if they need to. But we have had no issue with the 
nurse practitioner walking in and sitting side-by-side with a 
physician.
    Dr. Reisman. May I comment on a couple of issues with 
regard to rural care? One is, as we think about reforming the 
payment mechanism, it actually behooves the physician to have 
the sort of support that a nurse practitioner can provide.
    So, in the non-fee-for-service environment, it actually 
ends up being more cost-efficient and perhaps more lucrative 
for the primary care physician. That is the experience we have 
had.
    The other challenge--we have not spoken much about 
electronic medical records--that I have heard of a couple of 
times is the availability of data. One of the challenges in a 
lot of these smaller practices in rural communities is the 
expense associated with implementing an electronic medical 
record.
    And in Michigan, as I mentioned in my testimony, for 
example, we have actually introduced the capability to build 
effectively a light sort of electronic medical record for free 
that meets meaningful use criteria and can participate in the 
exchange of data around certain patients.
    So in many ways, we are seeing the same level of 
sophistication with regard to availability of data, analysis of 
data, and the creation of activities that can be pursued by 
doctors or nurse practitioners, nutritionists, other members of 
the care team, effectively creating an environment that 
simulates what we have started to see in some of the major 
medical centers around the country.
    So we think there are very real possibilities leveraging 
technology and payment reform in order to bring some of these 
models to these other communities.
    The Chairman. But do we not have a long ways to go in 
health IT?
    Dr. Reisman. We have a long ways----
    The Chairman. I have asked an earlier panel to rank, on a 
scale of 1 to 10, how well we are doing, and they all said 
about a 2.
    Dr. Reisman. Well, let me be specific about--rather than 
ranking, let me tell you a couple of concerns I have. One is 
the notion that an electronic medical record is certainly 
appealing, but the reality is, for most doctors--think about 
your own experience--they know about you. They have a paper 
record, and the electronic medical record maybe advances their 
ability to access information about you, but does not probably 
help that much.
    The real issue is your doctors do not communicate with one 
another. I am presuming that you theoretically see multiple 
doctors. And what would frustrate me as a practitioner was not 
so much what I was doing for the patient, but what others were 
doing in terms of adding drugs or doing tests that I did not 
have access to.
    So one of the things I do not think we have focused on 
sufficiently with regard to health technology is the need for 
health information exchange so, in fact, I can be provided with 
information about you generated by others.
    The other notion which I think has gotten short shrift is 
this notion of clinical decision support. How do you convert 
massive amounts of information about you into specific 
activities that will correct problems relative to our level of 
compliance as a team, relative to the medical literature, that 
are safe and effective for you?
    The Chairman. I know Senator Hatch wants to speak. But is 
there some way to develop some incentives? There are some 
bright people figuring that out.
    Dr. Reisman. Well, there are a couple of things. One is--
there are two things. One is incentives for using electronic 
medical records, with a meaningful use of $44,000. But I would 
argue that a greater incentive would be the ability to assume 
risk and manage a community. So that, if I write a prescription 
for you, I have the capacity through this exchange to know 
whether or not you have actually filled that prescription or to 
the extent that you have gone to another doctor who did a drug 
test or a lab test that, in fact, represents a contraindication 
to the drug I prescribed to you.
    The Chairman. So how do we solve that one? I go to a doc, 
he gives me a prescription, and----
    Dr. Reisman. So there are two ways. One is by downloading 
the capabilities that I just described; they can e-prescribe so 
that information is available. And secondly, when you fill that 
prescription at the pharmacy through your pharmacy benefit 
manager, we can access the data to know that, in fact, you have 
filled that prescription.
    So there are two components. One is, I order the drug. The 
second is the degree to which you have complied.
    It is a huge issue. Patients frequently do not comply, and 
one of the things we have actually introduced and published 
recently in the New England Journal of Medicine is an 
experiment where, for patients after a heart attack, we gave 
away drugs associated with the management of heart attack for 
free.
    The good news was that it helped a bit. The bad news is 
that still fewer than 50 percent of the patients took their 
drugs. But we can access those data.
    The Chairman. I am sorry. I will stop. But I was talking to 
the head of Denver Health, and she was telling me that they had 
exactly that problem, and their heart mortality or morbidity, 
whatever it is, was not good.
    Dr. Reisman. Right.
    The Chairman. ``Are you taking the meds?'' they asked. 
``Oh, yeah, yeah, we're taking our meds.'' No, they were not. 
But they acquired or had a tie-in to a pharmacy. So they would 
check with the pharmacy--it was a local, in-house pharmacy, I 
think--and found out that they were not taking the meds. So 
they went back to the patient, ``No, you're not taking your 
meds, and make sure you take your meds.''
    But the point there is some kind of coordination where 
the----
    Dr. Reisman. That is exactly what I am suggesting, and I am 
suggesting that our scalable technologies can be introduced, in 
many cases, for free to address the issues that we are 
discussing.
    The Chairman. Sorry. Go ahead.
    Senator Hatch. How do you handle privacy?
    Dr. Reisman. It is a huge issue. So one issue is that, 
under HIPAA, some of this information applies regarding the 
operations of health plans.
    The most direct way to address privacy issues relates to 
getting permission directly from the member. And, in addition 
to the privacy issues and the agreement of the member, there 
are issues of security, which are just as daunting.
    Senator Hatch. I take it it is the same thing in relation 
to over-
prescribing by other doctors?
    Dr. Reisman. Yes. And one of the things we can do is 
ascertain that patients are, in fact, shopping--for example, I 
presume you are thinking about opioids like oxycontin. So we, 
in fact, can accumulate from a variety of electronic records or 
pharmacies that a particular patient is, in fact, accessing 
excessive amounts of drugs, which, obviously, can work to the 
detriment of that patient.
    That is the sort of information we could then communicate 
back to the treating physician as it relates to the specific 
patient to warn them about this patient's propensity to ask for 
narcotics.
    Senator Hatch. We have all said we want to work towards 
repeal of the SGR formula. However, a main problem we face is, 
what do we do then?
    It seems to me that your organizations, as you testified, 
have moved well beyond where Medicare fee-for-service is today.
    Now, what should we focus on as we are listing goals in the 
near term to improve payment within the fee-for-service system, 
and should we focus on quality measures or data reporting, 
bundled payments, or incentives? What can we do within our 
existing framework----
    The Chairman. We need an answer here.
    Senator Hatch [continuing]. That still moves us forward in 
the right direction?
    Dr. Safran. I will take the first shot at it.
    Senator Hatch. I have only given you about seven questions.
    Dr. Safran. So, one of the fundamental problems of the 
SGR--this may be obvious, but has not been stated here--is that 
it deals with individual actors, individual clinicians as 
actors, but the targets are set based on a whole population of 
physicians across the country whose behaviors it has no 
influence over. So the individual actor has no real incentive 
around efficiency, no real incentive around quality, no real 
ability to control anything.
    So what you have heard in common across all five of these 
testimonies is that organizations are dealing with payment in a 
way that relates not to individuals, but to organizations, to 
organizations that have been willing to accept accountability 
for both total medical spending and for the quality and 
outcomes of patient care.
    And so one of the most important things, I think, that you 
can do, as you look to fix or replace SGR, is to move toward a 
model that does not deal with individual clinicians and does 
not set targets based on a population of other clinicians that 
they do not know and never will, but rather to have physicians 
identify who are the organizations they work with and to have 
those organizations accept accountability for total spending 
and for quality and outcome.
    And, of course, not every physician or every physician 
group or organization around the country is ready for that kind 
of accountability today. We only saw 32 pioneers sign up. Those 
organizations are ready for that. They are far along.
    What do we do with the others? I think we send a signal 
that that is where we are going and we take the initial step of 
having clinicians identify who is the other set of clinicians 
that they are going to share accountability with.
    And by starting with--what we have done in our case, 
outside of our AQC model, is, for our physician fee schedule, 
we have had for 4 years running zero-percent payment increases, 
zero percent, and the only way to earn additional revenue is 
through your performance on a defined set of quality and 
outcome measures.
    So, beginning a path and having every physician in the 
country understand that this is where you are going ultimately, 
but that the initial steps are defining who it is that you are 
going to share accountability with, and starting accountability 
with quality and moving toward accountability for quality on 
total medical expense----
    Mr. Cardoza. It is a terribly important point that I would 
emphasize as well. As long as we are dealing with the physician 
community at the granular level, the unorganized level, paying 
fee-for-service, we cannot get to where we need to get to.
    So what we would encourage you to do is develop policies to 
foster the organization of physicians coming together into 
groups, large and small, with all the metrics that we have 
talked about on performance so that they have a reason to go 
there.
    The other point that I would make is, the consistent theme 
in what you are hearing is the emphasis on primary care, 
because that is the gateway to the system. If we had a health 
care delivery system, we would have a robust primary care 
system. In fact, what we have instead is more of a medical 
rescue system, which is why it is dominated by hospitals and 
high-tech specialists.
    So the unfortunate underlying truth that we have not spoken 
to here is, if you want to manage a chronic care population, 
you need a robust primary care community, and it is going away.
    In California, the primary care community is withering and 
dying on the vine, while hospital edifices are being built with 
billions of dollars. We have to fundamentally address that 
issue or we will not be able to get to where we need to get to.
    Mr. Burrell. I would like to reinforce that, if I could.
    The Chairman. I would too.
    Mr. Burrell. We organized, as I said, small performance 
teams of primaries, over half of which were in solo practice or 
practices of less than three--not sophisticated practices. By 
giving them a total expected cost of care to beat and some 
structure, they actually pay attention to the quality and, most 
importantly, they pay attention to who are the chronic patients 
that run up costs--the 10 percent of the patients who run up 
two-thirds of the cost. Who are these patients and what do they 
need?
    And we have assigned nurses to them to follow them into the 
community. Where do you break down? At home. Where do you get 
depressed? At home. Where do you fail to comply with your meds? 
At home. And a lot of times, the primary does not have direct 
evidence of that.
    So we support them by providing home assessments of what is 
happening to these patients at home. Medications are critical. 
A lot of these patients are on 10 or more medications. Nobody 
ever reviews the full picture. Not only do they not comply, 
they have too many, and they have drugs that interact or make 
them unstable.
    So we try to get the primaries in small performance teams 
to understand who among their panel of patients is at highest 
risk, who among them has chronic disease, and are you paying 
attention to them out of the sight of your office. And we try 
to give them help in that regard with nursing support in the 
community and in the home. And, if Mary Smith is the chronic 
patient and breaks down, the doctor is informed immediately. If 
she is admitted, the doctor is informed immediately, and it all 
builds on primary care and provides strong financial rewards to 
them. We do not increase their fees. We have not increased 
their fees. We have increased the rewards to them if they get a 
better outcome for their population.
    Senator Hatch. Are doctors being educated at all on the 
people using dietary supplements as well? For instance, it is 
my understanding that if you are on, say, Crestor, then it 
would be very wise to take CoQ10, a dietary 
supplement, to make up for some of the deficits that do occur 
from Crestor. And this is an area that really is not very well-
defined right now.
    Mr. Burrell. It is not, and it should be.
    Senator Hatch. But you agree with me on that.
    Mr. Burrell. I totally agree with that. Here is what we----
    Senator Hatch. A lot of people do not know that. I mean, 
they will take Crestor and not realize that they may be putting 
themselves in--I don't mean to pick on Crestor, but I just use 
it as one example--they may be putting themselves in some sort 
of jeopardy if they do not balance it with, say, 
CoQ10, which is a dietary supplement.
    Mr. Burrell. Twenty-one percent of our medical spending is 
for prescription drugs; 24 percent of our medical spending is 
for inpatient hospitalization. So the drug part of the equation 
is dramatically increasing. A lot of primaries do not know what 
drugs their patients are on, and, if you ask the patient, they 
cannot reliably tell you.
    So what we do is create a drug profile of the patient, all 
the medications they are on. Sometimes you are on two generics 
and one branded at the same time, and you do not realize it 
because the names are different or a drug was prescribed by a 
specialist and another specialist, and, when you went into the 
hospital, by the hospital, and the primary did not even know 
you were on all these drugs.
    So one of the things we provide the primaries is a view of 
the total drug profile of the patient and say, ``Do you realize 
that this is what your patient is on?'' A lot of times, they do 
not, and then they start to act and say, ``I didn't realize 
that. I will try to revise that, and then we will educate the 
patient better.'' That stabilizes them more, and then you 
prevent the cycle of breakdown, admission, and readmission, and 
the ER visit. And that is where so much of the cost in the 
system is. I know that it is true in this region.
    Dr. Reisman. And, Senator, at the risk of being 
disagreeable, but this, after all, is our kitchen table, right?
    Senator Hatch. Sure. You can be disagreeable.
    Dr. Reisman. I think we need to spend a lot more time on 
appreciating----
    The Chairman. All families do not all agree on things.
    Dr. Reisman. There you go.
    Senator Hatch. Just be careful, that is all. [Laughter.]
    Dr. Reisman. Thank you. I will heed the warning. I have 
already changed my remark, in my mind. I think people are 
accessing alternative therapies. We are supporting a lot of 
alternative therapies and ways of supporting patients.
    But bear in mind that we do need to adhere to rigorous 
evidence-based clinical trials.
    Senator Hatch. Sure.
    Dr. Reisman. Just as an example of something that I think 
everybody accepted, vitamin D and calcium to prevent 
osteoporosis, recent literature--it was published this week--
suggests that a normal diet in the absence of supplements is 
probably more than adequate.
    So we need to be careful about what we, in fact, suggest 
and prescribe, particularly as we become more sophisticated 
with these decision support tools. We need to ensure that we 
are quite rigorous.
    On the SGR point, I just wanted to suggest that the real 
issue that we are grappling with is quality and total cost. And 
perhaps what we really need to do is understand that that is 
really the issue here, and we can back into issues like SGR. 
But considering SGR in isolation is not going to get us to the 
greater issue, which is actually transforming and reengineering 
and providing the right incentives for a new health care 
delivery system. We will just be doing the same thing over and 
over again if we do not address that.
    Mr. Edwards. And I would like to add to that just a couple 
suggestions. Make sure that you vary your programs to allow for 
practice variations. They are not all the same. So, whatever 
you do with the fee-for-service, you have to make sure you have 
different programs.
    And developing a hybrid program that maybe begins with fee-
for-service, so you are not having to change too much right out 
of the gate, and transitions to payments based on outcomes, are 
going to be a couple of quick hits for you, I think.
    Senator Thune. Mr. Chairman, I want to come back to the 
point that was discussed earlier with regard to electronic 
medical records. In some ways, Mr. Reisman, you have said that 
that is not the most important issue to focus on. I agree with 
that.
    But, Mr. Burrell, you were just talking about all the 
issues with regard to patients who have medications that 
perhaps are conflicting with what they need, and all that 
information is out there in the universe somewhere, which could 
be captured if everybody--if we had some sort of system--now, I 
agree with what Senator Hatch said about privacy. I think that 
is an important issue.
    But it just strikes me that so many of these issues of 
duplication and medical errors could be eliminated if we had a 
system where people's information, medical information, was 
available sort of irrespective of where they access the health 
care system.
    And it strikes me--because I was at the hearing the 
chairman referenced where we asked the panel about where we 
were on a scale of 1 to 10--and maybe that is not a good way to 
measure it--but everybody said in that 2 to 3 range. And the 
issue, I think, is these standards of interoperability, which 
we do not seem to have come up with a solution for yet.
    But it just strikes me that everybody talks about this 
issue in anecdotal form, about what it does to add costs in the 
health system, and it just seems like so much of this could be 
fixed.
    And I do not know, again, how we achieve that. I know that 
it was discussed a lot, has been discussed a lot in the past, 
but I am very unsatisfied, I guess, with any of the answers I 
have received from anybody whom we have talked to about the 
subject and the progress that we are making toward that. But 
that is one issue.
    The question I had with regard to--I think it was Dr. 
Safran. You had talked about the program that you have, 
Alternative Quality Contracts. And last year, in July, the New 
England Journal of Medicine had published an article that 
reviewed year 1 of that program, and it found that health 
spending decreases were largely associated with changes in 
referral patterns rather than with reduced utilization.
    And I guess I am wondering, one, if you agree with that 
assessment; and, if you do, what can we be doing to put 
downward pressure on utilization, because, to me, that is 
really the issue.
    Dr. Safran. Yes. It is a very important issue, and, yes, I 
do agree with those findings that in year 1 of these 5-year 
contracts, what most organizations reach for as the most easily 
achievable savings is savings that they can get through moving 
care to less expensive care settings. And they are doing that, 
I would say, in very smart ways that do not disrupt clinical 
relationships, partly because they have accountability for 
patient experience as well.
    And so they are doing things like moving care related to 
lab tests or imaging or basic procedures, where there are not 
established clinical relationships and where the patient is 
really happy to go wherever their clinician tells them as long 
as it is convenient. So there were significant savings to be 
realized through that, and many groups reached for those 
savings in year 1.
    The harder job is to change utilization, because to change 
utilization requires changing how physicians think and then 
changing how they behave. And what we have seen in year 2, and 
what we are seeing now in years 3 and 4, is that those 
utilization changes have really started to take hold.
    So they are putting in place the infrastructure, for 
example, to prevent avoidable admissions, avoidable use of the 
emergency department, by doing innovative things like having a 
nurse practitioner in the emergency room to catch the patient 
as they come through and triage and figure out, is this a 
patient who really needs emergency care or does this patient 
need urgent care, because, if they need urgent care, let us 
take care of them over here where we will not incur the expense 
of an emergency room visit.
    We will take care of the patient's needs. They will not 
wind up in a bed, because, when you have a hospital in 
isolation and an emergency room, sometimes you not only get 
that emergency room visit, but you then get an inpatient 
admission too.
    So they are putting infrastructure in place to make some 
significant changes in utilization that we see in years 2 and 
forward yielding even deeper savings than they got in year 1 
through those site-of-service moves.
    But we all have to realize that changing utilization is the 
much tougher task, because it does involve changing how 
physicians think and how they act.
    Mr. Edwards. I would like to go back to your data question, 
because I think I might make you feel a little bit better about 
it, because I think we are not a 2. I think we have come a long 
way, and, if I was to rank us, we would probably be a 6.
    The Chairman. Nationwide? I am talking about nationwide.
    Mr. Edwards. Yes.
    The Chairman. Six nationwide.
    Mr. Edwards. So here is what--we just purchased a company, 
Anvita, that has a rules engine, and we are able to run every 
one of our 2,200 Medicare members through that engine 
overnight, and it will deliver back to us actionable gaps in 
care, including issues with drugs not being filled or being 
filled and not refilled over a 30-day period.
    So the first time we ran it, it identified 355,000 
actionable gaps in care that we could then turn around and turn 
over to our teams. And, as a result of that, working with the 
physicians, 31 percent of the gaps were converted into actions 
to improve outcomes for the members.
    So this is a brand-new company that we just purchased, and 
we can run, like I said, full data through it overnight.
    Dr. Reisman. If I can answer that--a couple of things. One 
is, the sort of data that you are referring to, which we take 
advantage of as well, has been available in the managed care 
world for a long time. We can get drug data, we have claims 
information, we have information from laboratories.
    I think the point that you are raising relates to 
interoperability among electronic medical records, where the 
interest is in richer clinical data; what do the radiology 
tests show, what do the pathologies show, what do the physical 
exams show?
    And the way we have addressed that is through the 
acquisition of a company called Medicity, which actually does 
it through brute force. So, while we are waiting for standards 
of interoperability, I would refer you to the 850 hospitals and 
200,000 physicians who are linked to this system.
    A couple of specific examples. One is Carilion in Virginia, 
which is using this capability, and another is the Banner 
Health Care System based in Arizona, which is actually using it 
to support a Medicare pioneer ACO grant.
    So, despite the fact that they have multiple EMRs, the 
ability to couple the traditional data we have always had with 
interoperable data that we have now accessed through brute 
force could, in fact, provide a substrate of information that I 
think you were referring to.
    I would argue that that is not sufficient and you need 
capabilities, whether it is Anvita or ActiveHealth, to, in 
fact, convert that massive amount of information--after all, it 
is quite a bit, chiefly on complex patients--into activities.
    So, as you think about a patient who is on 10 drugs, by 
definition, they might have 10 different diseases, hundreds of 
different lab results, how can any physician--and this is where 
the insecurity came from that drove me as a practitioner to the 
creation of ActiveHealth. I could not keep up with the 
literature. I did not know what other physicians were doing. 
And the ability to, in fact, create this composite of data 
introduced this interrogation capability with clinical decision 
support. And then, in fact, to define discrete activities to 
pursue is really what we are trying to introduce around the 
country.
    Senator Wyden. Thank you, Mr. Chairman. And my apologies 
for being late. Too many hearings simultaneously. And I know 
this has been a very good panel.
    I want to start with a question that stems from what I have 
heard all of you say, not just today, but repeatedly: that you 
are payers. And when you come before the Congress and talk to 
us about issues, it almost always comes back to information, 
which really means data, and you need access to it; and 
particularly global data, because you can really only look at 
what is inside your system.
    And the fact is that, under Federal law, you cannot really 
get access to the data. Now, Senator Grassley and I want to 
change that. We have a bipartisan bill to open up the Medicare 
database so that it would be possible to look at, I think, what 
you call global information, be able to compare what you have 
in your system to others.
    Dr. Reisman and Mr. Cardoza, I think you, in particular--
and I think it is generally true of all five of you--are really 
sort of the point persons on this question.
    Dr. Reisman, would this be helpful to you, and how would 
you assess the need for this effort legislatively, to open up 
the Medicare database so that you really could get access to 
this kind of information and use it to drive improved quality 
and hold down costs?
    Dr. Reisman. I would suggest that there are two elements of 
this discussion of data. One is retrospective analysis of 
aggregate data to identify trends, to support comparative 
effectiveness research, to understand what really works best, 
and we think that is enormously important. In fact, we are 
working with the administration and Todd Park, the CTO office, 
in order to, in fact, take advantage of those data 
capabilities. And one of the capabilities that we bring to that 
is the ability to apply our analytics to ask some of these 
important questions.
    The other element--which is related, but I just want to 
define it as being separate--is the notion of availability of 
real-time data at the point of care to support the physician in 
regard to taking care of the patient who is sitting in front of 
him.
    So there should be, in fact, the record locator that would 
allow me to identify data about you, analyze those data, and 
make sure that what I am doing for you is, again, consistent 
with the best clinical evidence and is not contraindicated 
relative to other activities that other doctors are pursuing 
with you.
    So I think there is the aggregate and there is the real-
time, but in any case, the availability of information that 
resides within the Medicare database would be enormously 
important, for a number of reasons.
    Mr. Cardoza. I would second that. I think what there is to 
be encouraged about on this topic is that we are talking about 
it. There is consensus that data matters, and sharing it among 
clinicians matters.
    It was not very long ago that you could not have that 
conversation. Physicians are fiercely protective of their 
medical records. And we have seen a sea change just in the last 
3 years in working with our physicians on this topic.
    They are coming to understand, as I said in my opening 
comments, medicine is really complicated now, and it takes a 
team. It is not an individual walking into his office in the 
morning and back out at night, and he is all by himself and he 
is taking care of the patient. Those days are past.
    So they know they need to interact with other physicians. 
They understand the importance of sharing data. And by law, 
patients have access to their records, and why would other 
physicians involved in the team care of that patient not have 
access to them as well?
    We are at the advent of this, but I think it is going to 
move fairly quickly.
    Senator Wyden. Why don't I bring the other three of our 
valuable witnesses into the second topic I wanted to ask, and, 
if any of you would like to elaborate on the question of the 
Medicare database, certainly we can do that either in writing 
or as you respond to this.
    But the second question I wanted to ask all of you is--
since you come from the private sector and you watch the 
Federal Government, and, obviously, the Federal Government, to 
all of you, sometimes looks like it is moving very slowly and 
is slow to change and slow to adapt and slow to evolve, and 
traditional Medicare, even as we talk today, is still in the 
sort of demonstration project kind of stage--what would be your 
recommendations for speeding all of this up? Particularly, you 
have the chairman and ranking minority member here. We are in a 
position to look at ways to speed up and accelerate these 
changes so they get out of the demonstration stage and can be 
sped up.
    So why don't we take our other three witnesses who did not 
get a crack at the first question and have them relay thier 
counsel on how to speed up changes and reforms.
    Dr. Safran, why don't you start?
    Dr. Safran. Sure. I would say that, over the last couple of 
years, what we have seen actually is quite impressive speed 
with respect to the uptake of the Accountable Care 
Organizations----
    Senator Wyden. Right.
    Dr. Safran [continuing]. And that I would leverage that, 
because, as we were talking about before, the key is going to 
be for Medicare to be able to move away from a model of payment 
that deals with individual actors yet holds them accountable 
for the behaviors of every other doctor across the country such 
that, if others are using too much, my rates are going to go 
down next year, to a model where I have a group of peers that I 
have accepted accountability with and we are working together 
to manage total medical expenses, quality, and outcomes.
    So the fact that you have stood up 32 pioneer ACOs in such 
a short period of time and that the Medicare Shared Savings 
program is getting underway, I think sort of sets out the 
beginning of a continuum that, to me, actually reminds me very 
much of the way that we waded into the AQC model that I talked 
about today.
    When we launched the AQC in 2009, we hoped that, by the end 
of that year or possibly the following year, we might have 10 
or 15 percent of our network accepting that broad 
accountability for total medical expenses, quality, and 
outcomes.
    By the end of year 1, we had a quarter of our network 
contracted that way, and, at this point in time, we have close 
to 80 percent of our network across the State contracted in 
that way.
    Why did it happen? Why did we have that fast uptake? I 
think there are lessons to be learned for the Federal 
Government, and a big part of it was that it was voluntary to 
begin. We were not forcing anybody in. We said, ``If you 
believe this is a better way, and you can see that you can earn 
well under this model by making care better and by contributing 
to affordability over the long term, then come on into this 
contract.''
    And then what I think led to the rapid acceleration was a 
couple of things. One, organizations started to see that the 
initial pioneers--no pun intended--in our AQC model were 
succeeding both at improving quality and at managing their 
budgets.
    Second, they saw that the fee-for-service system was 
starting to look pretty unattractive. It was starting to look 
like low or no payment increases, no real opportunities to 
advance, and that created some acceleration.
    They started to understand the kind of support they were 
getting from us as a payer--and I think the Federal Government 
will have to work out similar models--to help them as they 
transitioned from a volume-based system to a value-based 
system.
    Senator Wyden. Take that last point, because I think that's 
the ballgame.
    Dr. Safran. Yes.
    Senator Wyden. I think that is the ballgame. And that, of 
course, is what we started essentially almost 3 decades ago in 
our part of the world, whether it is Group Health up in Seattle 
or Providence or other kinds of plans in our area.
    What could the Federal Government do to accelerate that 
transition beyond fee-for-service?
    Dr. Safran. Well, I think there it goes back to your 
earlier question about the datasets, because from Washington, 
DC or Baltimore, it will be hard to partner with the provider 
organizations that have the courage to sign up for these new 
models in the ways that we have seen have been critical to 
their success in our market.
    But imagine that if those who sign up for it are able to 
partner with their private payers, who are also paying them in 
that model, and if those private payers and the providers who 
come into it have all the data to work with, if we could be 
doing the same rich analytics for the providers in our market 
that are AQC organizations and also Medicare pioneers, this 
would be enormous assistance to them.
    If we could then take those analytics and help them with 
the performance improvement guidance that we give them on the 
commercial side, give them that same guidance on the Medicare 
side, I think you would start to see more rapid uptake across 
the country, because fear is one of the rate limiters right 
now.
    I think folks think, I would not know the first thing about 
how to transition from a system that pays me for every unit I 
produce to a system that is now going to ask me to have 
accountability for overall spending and quality. So you have to 
help them.
    Senator Wyden. Mr. Chairman, when a witness says that they 
support the efforts along the lines of what Senator Grassley 
and I are talking about to expand access to this Medicare data, 
and they want to promote a transition beyond fee-for-service, I 
usually think I ought to quit while I am ahead. [Laughter.]
    The Chairman. You are doing just great.
    Senator Wyden. I thank you for the time.
    The Chairman. To follow up on your first point, there has 
been--and you mentioned it, Mr. Cardoza--earlier physician 
resistance to access to Medicare data.
    I assume some physicians are proud of their billing 
practices. I am wondering whether their billing practices will 
be questioned. Maybe there are some medical liability issues 
there.
    And I am just wondering if you could help us figure out how 
to bridge that gap, because I do think it makes sense for that 
data to be available, but we should do it in a way that is 
sensitive to legitimate physician concerns.
    Mr. Cardoza. Well, it is a journey. In our setting, we have 
been doing this for 25 years, and our 3,000-plus physicians are 
in an accountable structure, and they know they are being 
watched.
    So in areas of the country where there is no transparency 
at all and they just walk into their silo in the morning and 
out at night, yes, there is going to be some trepidation, just 
that somebody else is going to be looking. But you have to go 
there.
    In response to the question of, how do we accelerate it, 
how do we get there: put the money where you want the systems 
to go, and they will go there.
    So payment reform has to precede delivery system reform. It 
has to enable delivery system reform. So the more we can create 
population-based reimbursement methodologies along the lines 
being espoused in Massachusetts, the faster we will get there.
    The Chairman. So do you suggest modified payment reform 
under Medicare?
    Mr. Cardoza. Yes.
    The Chairman. And what would it be?
    Mr. Cardoza. Well, you just went above my pay grade. 
[Laughter.] I am much more eloquent describing the problem. I 
do think the underlying principles, as we have all been talking 
about, are to put in place policies that give physicians reason 
to group up, to get connected to organizations so that they 
have--because I'm telling you, the physicians on their own 
cannot do this. It is not what they were trained to do. It is 
not what they signed up for.
    The expectations of them now are very different from what 
they thought they were signing up for. They are okay with it, 
they are willing to sign up for it because they understand it 
is the right way to go, but they just lack the skills and 
wherewithal to do it.
    So organizations like ours, the kinds of organizations in 
Massachusetts that have been described, are enabling structures 
for them to do what they would like to do, if they could. At 
the granular level, they have no chance.
    Dr. Reisman. Could I just suggest that we link the data 
question to some of the incentive questions? So if, in fact, we 
had access to these data and the purpose was to say, you are a 
bad guy and you are a good guy, obviously, physicians are 
concerned about it.
    But suppose we shifted the incentives, and we were talking 
about managing real populations, and we said, ``Gee, there's a 
population in an adjacent county where, in fact, the number of 
the coronary angiograms done is half as many as you do, and, by 
the way, the incidence of obstructive coronary disease is 3 
times higher, suggesting that you are doing angiograms on 
people who, in fact, do not need them.'' In fact, we could 
ascertain that as well.
    We could go to that community and say, ``Gee, we're 
actually changing the payment structure from fee-for-service, 
notwithstanding the SGR issues, to one where you, in fact, will 
receive the case rate or a global rate for your community, and, 
by the way, by looking at the CMS data, we, in fact, can assure 
you that by reducing utilization and being a little bit more 
thoughtful about your use of angiography--and we can name 25 
other tests, obviously, if we care to--you, in fact, could put 
yourself in a position where you could responsibly assume risk, 
financial risk, without compromising the care of your 
population.''
    So I think for a lot of these issues, we need to think 
about companion solutions and actually collect and combine some 
of the issues that we have been talking about.
    Mr. Cardoza. Do not underestimate the power of peer 
pressure. If we can profile these practices and create the data 
and make that data available to people--we had two large 
cardiology groups in adjacent counties, and the utilization 
practices in one of those counties was egregious.
    We went to those cardiologists, and we showed them their 
data compared to the next county, and, if we had just sent that 
out to them and not engaged them, they would have thought, 
``Well, I guess that means we're doing a better job.''
    So instead, we were able to engage them, hold their feet to 
the fire, and now, 2 years later, their utilization practices 
are exactly what the other county is. It was driving toward the 
mean.
    The Chairman. Is it working in McCollum, TX?
    Mr. Cardoza. I do not know.
    Dr. Reisman. But the incentives are not there.
    The Chairman. I am talking about peer pressure at least 
between----
    Dr. Reisman. Not at all.
    The Chairman [continuing]. Particularly El Paso and 
McCollum. I am referring to the Atul Gawande article that----
    Dr. Reisman. I know you are, yes.
    The Chairman [continuing]. Was written several years ago.
    Mr. Cardoza. Actually, my understanding is that there is 
some movement there since they have been exposed.
    Mr. Burrell. We are finding peer pressure, to the point--
among the 300 panels we formed, the small groupings of 
primaries, there is peer pressure within the panel, and then 
there is peer pressure across panels. How am I doing relative 
to others?
    You could have two physicians in a panel of 10 who are 
high, wide, and handsome, and the other eight have their 
incentives based on how the total panel does, and they start to 
police themselves.
    Mr. Cardoza. Doctors hate being an outlier. They just hate 
it.
    Mr. Burrell. They do.
    Dr. Reisman. But they also like making money. I would just 
suggest--we have peer pressure, plus financial incentives, and 
it did, in fact, create a synergistic relationship.
    Mr. Edwards. Any modification to the policy has to make 
sure it is flexible among practice variations, because 
variations exist today.
    The Chairman. What is the role of medical schools here?
    Dr. Reisman. I think there is a considerable role. Based on 
my experience recently, these issues are not being addressed 
particularly well. There is a little bit more of a focus on 
primary care. I think there is a need to further acknowledge 
the contribution that other types of practitioners can make. 
There is a lot of anxiety, of course, about conversation around 
primary care, but we are not doing nearly enough to, in fact, 
introduce these issues to the curriculum in medical school.
    Mr. Cardoza. Senator Baucus, I want to go back to a point I 
made earlier. We are not training physicians today to enter 
into a health care delivery system. We are training them to be 
medical rescuers. We are training high-tech, giving them lots 
of tools, and that is where the money is, and that is where the 
glamour is.
    It is a real problem. So medical schools are not doing what 
is needed today, but so is a lot of this system.
    I am not going to demonize them, but I think if we start 
setting this out there and challenging them, I think they can 
move in this direction. But they are not there now. They are 
training medical rescuers.
    The Chairman. You touched on this anyway, but it is a 
little tense between specialists and primary care docs. It is 
my understanding that a lot of the Medicare reimbursement 
weighting schedule is contracted out to AMA, and it is weighted 
toward specialists, with a disadvantage to the primary care 
physicians. I do not know if that description is accurate.
    But just your thoughts on how we can deal with this 
difference in reimbursement between specialists and primary 
care physicians. I do not want to take anything away from the 
specialists, but your point triggered my thought. We always 
train to the high glamour stuff and technology, and that is 
where the money is and so on and so forth, and it is probably a 
bit siloed as well. I do not know.
    But I am trying to figure out how we get a little more 
focus on primary care physicians here.
    Dr. Safran. I think the models that you have heard us 
discuss today, while we have not explicitly said it, each of 
them is primary care-centered. So I will speak for our model.
    The only requirement we have of an AQC organization from 
the perspective of what that organization has to look like is, 
it must have primary care at the center. Beyond that, if they 
want to have specialists in their contract, if they want a 
hospital as a partner in their contract, they may, but they do 
not have to. They still have to be accountable for that whole 
care across the continuum.
    Well that, coupled with the fact that the quality 
incentives are so largely primary care-based, has really 
changed the dynamic of power and resources within these 
organizations, because these organizations understand that they 
cannot succeed at managing total medical expense and improving 
quality and outcomes if they are not investing in primary care 
at the core.
    And so we are seeing them looking to hire more primary care 
clinicians, physicians, as well as nurse practitioners and 
medical assistants, investing in the infrastructure in primary 
care practices, rewarding those practices for the success that 
the organization is having at managing their budget and 
improving quality.
    And it has, interestingly, changed the dynamic with 
specialists in a very important way. Specialists are sitting 
forward saying a couple things. One is, gee, how can we be 
helpful in this new model? How can we be helpful at managing 
total medical expenses? And are there not any measures for us? 
Are there not any good quality measures for us? That is a 
welcome question, because the available measures that are 
nationally endorsed really are, at this point, very much 
primary care-focused.
    And being able to have accountability for quality of care 
in the specialty environment is very important.
    Mr. Edwards. I agree with Dr. Safran. I think the PCP is 
the quarterback and----
    The Chairman. Say again, Mr. Edwards.
    Mr. Edwards. The PCP is the quarterback of the team, and he 
needs to funnel the care to the efficient specialists that he 
has. The most efficient model we have is where the specialists 
are capitated and the PCP is driving the care to the most 
efficient specialist that he has in the network.
    Dr. Reisman. I think we need to, again, focus on this team-
based patient-focused orientation. So suppose I am a specialist 
doing bariatric surgery and Aetna offers a case rate.
    Now, you are the surgeon. Typically, you might ignore the 
role of the primary care physician with regard to the follow-up 
of that patient who had the bariatric surgery. But now, as the 
surgeon, I am at risk if that patient is readmitted with an 
infection, with metabolic problems, lack of adherence to the 
drugs, all of the things that we have been talking about.
    Suddenly that primary care physician is my best friend, to 
the extent that I do not want to have to see this patient 
again.
    So, again, as we realign incentives and create 
dependencies, if you will, for the specialists on the primary 
care physician, in much the same way as there is a dependency 
the other way when the primary care physician refers to the 
specialist, we, in fact, can, I think, restructure those 
relationships and restructure the reimbursements so the primary 
care physician is more generously reimbursed.
    The Chairman. We are going to--I am not going to ask you to 
do this. I think it is a bit much. But an earlier panel 
consisted of former CMS directors, and the subject was SGR. And 
at the end, I decided, why not? So I tasked them to come back 
to us with recommendations on how to reform the SGR.
    Those recommendations are due tomorrow. I am just trying to 
think. It is too bad we were not all together here to talk 
about this, but anyway----
    So what should we be looking for when they give their 
recommendations? What are some of the key points that you would 
think are most important in order to help us advance the ball 
here and to get a reform of SGR in a way that you think makes 
sense given your experience and how you compensate physicians 
looking forward toward a collaborative, patient-centered 
approach and delivery system reforms, not siloed, et cetera?
    What would it be? What should we be focusing on or looking 
at when we get those recommendations?
    Mr. Cardoza. Where is the value-based component to the 
compensation that goes to the physicians? If we are going to 
continue to just pay for fees for the services that they 
provide, then they are just going to keep providing services. 
So I would look for that as one thing, along with the other 
things that we have talked about.
    Mr. Burrell. I would echo that; it has to be a global 
measure of the outcome for a defined population of patients and 
a structure of accountability, principally through the primary 
care physicians.
    It is not the price movement that you are looking for. It 
is an overall cost of care, and the only way you can improve 
that is to have that accountability and the incentives to get 
better outcomes.
    The Chairman. How do you measure quality?
    Mr. Burrell. Largely on outcome.
    The Chairman. How do you measure outcome?
    Mr. Burrell. We look at it principally as reductions in the 
evidence of the fragmentation of the health care system, having 
fewer readmissions, fewer ER visits, fewer drug interactions. 
That is not the only way--gaps in care.
    But we are looking at outcome measures that show the 
patient has been stabilized or their risks mitigated.
    Dr. Reisman. I think you back out of things that are most 
fearful with regard to particular disease states. So the bad 
thing about being a diabetic is not your sugar, it is that you 
are going to have a heart attack or a stroke or end up in 
dialysis.
    So the outcome is not, did you test this or test that or 
get your sugar to this or that level? The outcome is, did 
people, in fact, end up having strokes, heart attacks, and end 
up in dialysis or blind or any of the other dreaded 
complications associated with diabetes?
    The Chairman. That depends on some kind of follow-up 
records.
    Dr. Reisman. Yes, which is a lot of what we are talking 
about. So you need this longitudinal record to see how things 
have turned out, related to some of the questions that Senator 
Wyden was asking before.
    With regard to the SGR question, I would hope that the 
answer would be more expansive than an immediate reaction to 
SGR in isolation. I would hope there would be companion 
solutions that are suggested, and that those companion 
solutions are, in their recommendations, a realistic assessment 
about whether or not many practices have the infrastructure, 
the technological capabilities, even the financial wherewithal 
to manage this new approach.
    The Chairman. Thank you.
    Mr. Edwards?
    Mr. Edwards. I would echo that, but add a couple things. 
For the physicians, I think we have to transfer or get a 
transition from the piecework system that they are in today to 
one that more appropriately rewards their ability to coordinate 
care and performance. To me, that is one of the biggest things 
we need to do with the system.
    The Chairman. Dr. Safran?
    Dr. Safran. I would look for five things. I would look for 
them to give you a model that moves from a focus on individual 
actors to a model that focuses on organizations.
    I would look to them to give you a model that moves from 
the focus on individual services and the fees for those 
services to the global view of total medical expenses and 
quality and outcomes for a population cared for by those 
organizations.
    I would look for them to have a model that involves data 
and ongoing support to those organizations as they venture into 
this new world of moving from volume to value.
    I would look for them to have a model that places 
substantial financial incentives on quality and outcomes, to 
act as the backstop against any incentive to stint on care that 
a global budget constraint might impose.
    And lastly, I would look for them to help with the further 
development of better and richer outcome measures. We have good 
outcome measures today, measures for making sure that the 
important chronic diseases are under good control and that we 
are avoiding complications for hospital care. Those are good 
outcome measures, but they are not good enough.
    And so we need further development of good outcome measures 
to sustain a model that rewards outcomes.
    The Chairman. Well, that is great. If they are watching, I 
bet they will ask for an extension to modify. [Laughter.]
    Senator Wyden. Thank you, Mr. Chairman. I thought the point 
you raised, Mr. Chairman, about primary care was particularly 
important.
    And we have Mr. Burrell here, and he has gotten into this 
primary care area, I think, in a very interesting way, 
particularly, bringing providers and patients together around 
prevention, and, to me, that is really the ballgame.
    We understand that most of the health care bill in this 
country goes for chronic disease, well over half of it, and we 
spend it picking up the damage caused by heart disease and 
stroke and cancer and diabetes. And you are trying to figure 
out a way to bring your providers and your patients together 
and reward the patients, and I think that is particularly good.
    Since you and I talked, Senator Portman and I got together 
with the Cleveland Clinic and Oregon Health Sciences University 
and have actually proposed for the first time financial rewards 
for senior citizens under Medicare to lower their blood 
pressure or their cholesterol and stop smoking or use body mass 
and the like.
    In the context of the chairman's question about primary 
care, tell us a little bit about what you are doing to bring 
together both your providers, your docs and others, and the 
patients to start having prevention and behavioral change--
empowering the patients--be part of your new approach.
    Mr. Burrell. Well, on the patient side, it starts with 
awareness of risk, which starts with a health risk appraisal, 
which we offer for free. Just a discovery of the risks you 
have, the awareness of the risks you have, has a big effect on 
behavior.
    We ask them to share it with their primary care doctor. And 
so we automatically transfer it with that consent to the 
primary. It has an effect on the primary's thinking sometimes.
    We start with financial incentives to the member just to 
participate, and then it moves to financial incentives for 
outcome. You see that you are overweight, you see that you have 
hypertension, you see the risks that you have. It is one thing 
to see it. It is another thing to actually act on it.
    We want to move to the day where stronger outcomes produce 
stronger financial rewards for the member. But if you are the 
only one who knows it, as a member, and your doctor does not, 
it does not do much good.
    So we give it to our small panels of primaries. It is seen 
by the panel; then we identify the patients at high risk as 
evidenced by health risk appraisals, and we target 
interventions together with those primaries for the patients at 
higher risk.
    So it is an incentive to the member to participate and be 
aware and to take action, and it is an incentive on the part of 
the primary because it is a global population-based incentive 
model. If they can get a better outcome, they have a financial 
reward--the member does and the physician does--and they are 
dovetailed together. And it is the working together that 
actually causes, we think, the best result.
    Dr. Reisman. Senator, just at the risk of being a wet 
blanket in this--and I completely agree with what you are 
discussing.
    The Chairman. I like you. You are going to bring up 
contrary points of view. That is good.
    Dr. Reisman. Thanks. So we--and I am not sure you were here 
when I mentioned this--collaborated with Niteesh Choudhry at 
Harvard, and we published a piece in the New England Journal of 
Medicine a couple of months ago where we gave patients who had 
experienced heart attacks their drugs for free.
    So they, in fact, did not have risk factors--they had 
already experienced the outcome. And, despite getting their 
drugs for free, zero co-pays, less than 50 percent of them were 
compliant.
    So there is the ability for the doctor to do the right 
thing. They had written prescriptions for all the right drugs. 
There is the ability to convey information about risk. But the 
reality of human behavior is that we need to grapple with some 
of the complexities associated with this. It is very 
discouraging, but we have a long way to go, and we need to 
understand how to get into the psyche of patients.
    Senator Wyden. There is no question that there are a 
variety of factors involved here. I think what really swung me 
to this was the work of Dr. Roizen, who is a prevention officer 
at the Cleveland Clinic. And the program that they have put 
together--which essentially is what Senator Portman and I 
modeled our approach with Medicare on--really does seem to be 
working, and I think they do try to spend the time, certainly, 
talking with patients, talking with families, incorporating in 
some of the judgments that you are talking about.
    But they are very clear--and Toby Cosgrove and others have 
had a long interest in prevention--they are very clear in their 
view that these financial rewards--and these are, of course, 
not enormous sums of money--but the idea of a few hundred 
dollars in conjunction with some of these other kinds of 
approaches has been successful.
    And since Chairman Baucus has given us a chance to kind of 
be around the kitchen table to kick these ideas around, 
hopefully we will be able to make more progress.
    Dr. Reisman. But it may be that our social networking and 
sense of community, which is something that we are pursuing----
    The Chairman. I would like you to focus a little more on 
patient responsibility.
    Dr. Reisman. Yes.
    Dr. Safran. Well, one of the things that----
    The Chairman. Patient responsibility. It is a big issue, 
huge. And your thoughts? How do we encourage it? You talk about 
probing the internal psyche of people. That is kind of scary.
    Dr. Reisman. And we have talked about----
    The Chairman. How do we get it so we encourage more 
responsibility?
    Dr. Reisman. Part of it might be some sort of social 
pressure or social awareness or gamification, taking advantage 
of new approaches in behavioral health and behavioral 
psychology and behavioral economics to induce the sort of 
behavior that we are interested in.
    But the simple-minded notion that I, as a doctor, tell you 
what you need to do and then go farther and say, you can do it 
for free, clearly is not enough, and that is really the point I 
wanted to make. And we need to invoke other considerations.
    The Chairman. I would agree with that.
    Mr. Burrell. And just to add one thought here, because I 
think it starts with incentives, but it cannot end with 
incentives.
    To go back to what I said earlier, we find that the 
breakdowns occur at home. You do not comply partly because you 
are depressed, partly because of the way you live your life, 
and so there is a psychosocial aspect to it.
    So we found that when incentives and awareness are combined 
with actual follow-on--not by the doctor who prescribes 
whatever the medication is, but often by a nurse following it 
up--the connection with the nurse has an effect on compliance.
    You cannot do this on every patient, but we are looking at 
the 5 to 10 percent of the patients who run up two-thirds of 
the cost, and you can do it for them. It is the combination of 
all of the above: the physician paying attention, the nurse 
following it up into the home where the breakdowns occur. It is 
so important to getting compliance. Compliance is very low.
    Mr. Cardoza. But you cannot do it in a straight fee-for-
service-based system. There is no money for that, because what 
you are describing is absolutely essential. It is expensive to 
create the structure for it.
    So unless you have that global money to deal with up 
front----
    Mr. Burrell. Correct.
    Mr. Cardoza [continuing]. It is very difficult to do in a 
fee-for-service.
    Mr. Burrell. Medicare does not cover it.
    Dr. Safran. Both that global money up front and an 
incentive that is based on the outcomes of care, because, up 
until this point of creating accountability for outcomes, 
adherence has been the great don't-ask-don't-tell phenomenon in 
health care.
    When doctors give a patient a prescription or advice, they 
just assume and hope that that advice gets followed. And, as 
Mr. Burrell just said, the financial barriers are only one 
piece of it. And starting to systematically address the 
barriers to adherence is part of what health care means, 
starting to address, did the patient understand, are there 
cognitive issues that are going to get in the way of adherence, 
are there motivational issues, are there practical issues in 
terms of their neighborhood and what they can do or their work 
life and what they are able to manage?
    The Chairman. Right.
    Dr. Safran. Addressing those has to become part of what 
health care means.
    Mr. Edwards. And that group we brought up earlier that 
serves the low-income and the under-served neighborhoods on 
patient responsibility, they go and pick up the patient and 
bring them in so they do not miss their appointments, so that 
they are always there when they need to be there. So that has 
been a big help.
    The Chairman. There are nine people who are working over 
here. It is called the Supreme Court. How is their decision 
going to affect all of this? What do you do?
    Mr. Cardoza. I have been asked that question a lot, and I 
do not profess to be an expert on it, but my comment has been, 
it will only affect pace, not direction, because we are all on 
a burning platform right now. We cannot stay where we are.
    I think the Affordable Care Act--I am not an expert in it--
I assume that it is flawed, but it is necessary. It gets us to 
the starting gate. And we are going to spend the rest of my 
career perfecting it, but we have to start down that road. We 
cannot stay on this platform. It is on fire.
    The Chairman. Other thoughts?
    Mr. Burrell. I would essentially agree with that. I think 
the changes that are underway are unstoppable, regardless of 
what the court decides.
    Dr. Reisman. The economic imperatives will remain 
regardless. We have been working on this, as I mentioned in my 
testimony, since 2005 at least. We will continue.
    The Chairman. Do you agree?
    Mr. Edwards. Yes. We have been through a lot of changes 
over time, and we are just looking for a more sustainable 
program.
    Dr. Safran. Absolutely. We cannot stop.
    The Chairman. Well, this has been a good session here. 
Thank you very, very, very much. You have given us a lot of 
very good ideas and, like most things, we just keep moving 
forward. Thanks a lot.
    The hearing is adjourned.
    [Whereupon, at 11:48 a.m., the hearing was concluded.]


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