    [House Hearing, 113 Congress]
    [From the U.S. Government Publishing Office]

                      REFORMING SGR: PRIORITIZING QUALITY IN A
                       MODERNIZED PHYSICIAN PAYMENT SYSTEM
    =======================================================================

                                    HEARING

                                   BEFORE THE

                             SUBCOMMITTEE ON HEALTH

                                     OF THE

                            COMMITTEE ON ENERGY AND
                                   COMMERCE
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  JUNE 5, 2013

                                   __________

                               Serial No. 113-50

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce
                            energycommerce.house.gov
                                  __________

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                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman
    RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
    JOE BARTON, Texas                      Ranking Member
      Chairman Emeritus                  JOHN D. DINGELL, Michigan
    ED WHITFIELD, Kentucky                 Chairman Emeritus
    JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
    JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
    GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
    LEE TERRY, Nebraska                  ANNA G. ESHOO, California
    MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
    TIM MURPHY, Pennsylvania             GENE GREEN, Texas
    MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
    MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
      Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
    PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
    STEVE SCALISE, Louisiana             JIM MATHESON, Utah
    ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
    CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
    GREGG HARPER, Mississippi            DORIS O. MATSUI, California
    LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin
    BILL CASSIDY, Louisiana                  Islands
    BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
    PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
    DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
    CORY GARDNER, Colorado               BRUCE L. BRALEY, Iowa
    MIKE POMPEO, Kansas                  PETER WELCH, Vermont
    ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
    H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
    GUS M. BILIRAKIS, Florida
    BILL JOHNSON, Missouri
    BILLY LONG, Missouri
    RENEE L. ELLMERS, North Carolina
                             Subcommittee on Health

                         JOSEPH R. PITTS, Pennsylvania
                                     Chairman
    MICHAEL C. BURGESS, Texas            FRANK PALLONE, Jr., New Jersey
      Vice Chairman                        Ranking Member
    ED WHITFIELD, Kentucky               JOHN D. DINGELL, Michigan
    JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
    MIKE ROGERS, Michigan                LOIS CAPPS, California
    TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
    MARSHA BLACKBURN, Tennessee          JIM MATHESON, Utah
    PHIL GINGREY, Georgia                GENE GREEN, Texas
    CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
    LEONARD LANCE, New Jersey            JOHN BARROW, Georgia
    BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin
    BRETT GUTHRIE, Kentucky                  Islands
    H. MORGAN GRIFFITH, Virginia         KATHY CASTOR, Florida
    GUS M. BILIRAKIS, Florida            JOHN P. SARBANES, Maryland
    RENEE L. ELLMERS, North Carolina     HENRY A. WAXMAN, California (ex
    JOE BARTON, Texas                        officio)
    FRED UPTON, Michigan (ex officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Joseph R. Pitts, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................     1
        Prepared statement...........................................    28
    Hon. Donna M. Christensen, A Representative in Congress from the
      Virgin Islands, opening statement..............................    29
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, opening statement....................................    30
        Prepared statement...........................................    31
    Hon. Ralph M. Hall, a Representative in Congress from the State
      of Texas, prepared statement...................................   129
    Hon. Henry A. Waxman, a Representative in Congress from the State
      of California, prepared statement..............................   129
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, prepared statement........................   130

                                   Witnesses

    Cheryl L. Damberg, Ph.D., Senior Policy Researcher, Professor,
      Pardee Rand Graduate School....................................    33
        Prepared statement...........................................    36
        Answers to submitted questions...............................   140
    William Kramer, Executive Director for National Health Policy,
      Pacific Business Group on Health...............................    54
        Prepared statement...........................................    56
        Answers to submitted questions...............................   156
    Jeffrey B. Rich, M.D., Immediate Past President of the Society of
      Thoracic Surgeons, Director at Large, Virginia Cardiac Surgery
      Quality Initiative.............................................    69
        Prepared statement...........................................    71
        Answers to submitted questions...............................   162
    Thomas J. Foels, M.D., M.M.M., Executive Vice President, Chief
      Medical Officer, Independent Health............................    82
        Prepared statement...........................................    85
        Answers to submitted questions...............................   232

                               Submitted Material

    Discussion draft.................................................     3
    Statement of National Senior Citizens Law Center, submitted by
      Mrs. Christensen...............................................   131
    Statement of Alliance of Specialty Medicine, submitted by Mrs.
      Christensen....................................................   137

     REFORMING SGR: PRIORITIZING QUALITY IN A MODERNIZED PHYSICIAN PAYMENT
                                     SYSTEM

                                  ----------

                            WEDNESDAY, JUNE 5, 2013

                      House of Representatives,
                                Subcommittee on Health,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:00 a.m., in
    room 2123, Rayburn House Office Building, Hon. Joseph R. Pitts
    (chairman of the subcommittee) presiding.
        Present: Representatives Pitts, Burgess, Shimkus, Rogers,
    Murphy, Blackburn, Gingrey, Lance, Cassidy, Guthrie, Griffith,
    Bilirakis, Ellmers, Barton, Upton (ex officio), Dingell, Capps,
    Schakowsky, Green, Barrow, Christensen, Castor, Sarbanes, and
    Waxman (ex officio).
        Staff Present: Clay Alspach, Chief Counsel, Health; Gary
    Andres, Staff Director; Mike Bloomquist, General Counsel; Sean
    Bonyun, Communications Director; Matt Bravo, Professional Staff
    Member; Steve Ferrara, Health Fellow; Julie Goon, Health Policy
    Advisor; Sydne Harwick, Legislative Clerk; Sean Hayes, Counsel,
    O&I; Robert Horne, Professional Staff Member, Health; Katie
    Novaria, Professional Staff Member, Health; Andrew Powaleny,
    Deputy Press Secretary; Krista Rosenthall, Counsel to Chairman
    Emeritus; Chris Sarley, Policy Coordinator, Environment &
    Economy; Heidi Stirrup, Health Policy Coordinator; Lyn Walker,
    Coordinator, Admin/Human Resources; Alli Corr, Minority Policy
    Analyst; Amy Hall, Minority Senior Professional Staff Member;
    Elizabeth Letter, Minority Assistant Press Secretary; and Karen
    Lightfoot, Minority Communications Director and Senior Policy
    Advisor.

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

        Mr. Pitts. The subcommittee will come to order. The chair
    will recognize himself for an opening statement.
        On February 7th and April 3rd, 2013, the Energy and
    Commerce and Ways and Means Committee Republicans released a
    three-phased outline for permanently repealing the Sustainable
    Growth Rate, the SGR, and moving toward a Medicare
    reimbursement system that rewards quality over volume.
    Stakeholder feedback followed each release and has been
    integral to the development of this policy, culminating in the
    draft legislative framework released on May 28th.
        [The discussion draft follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

         Mr. Pitts. This discussion draft took into account the
    conversations and work of the Energy and Commerce majority and
    minority staffs, as well as the long collaborative relationship
    we have had with the Ways and Means Committee.
        It was also not a complete reform proposal. Rather, it was
    designed to be a partial release that allows for input from
    stakeholders and members of this committee. Again, we are
    seeking substantive feedback on ways to complete this draft,
    and I would encourage all interested parties to submit their
    comments to the committee by June 10th.
        The committee has sought to accomplish SGR reform through
    an open and transparent process with consideration given to all
    relevant stakeholders. To briefly summarize the draft
    legislation, Phase I repeals the SGR formula and provides a
    period of payment stability. During this time, providers will
    work with the Secretary to identify quality goals and methods
    of measurement. Phase II will build upon the work of Phase I,
    tying quality measurement to fee-for-service payment. Provider
    input will be essential to defining quality medicine during
    Phases I and II. Any time throughout Phase I and II providers
    may voluntarily opt out of fee for service by participating in
    an alternate payment model.
        These models will be flexible. Some exist today, such as
    medical homes, while new and innovative models may also be
    created and adopted. Some specifics, such as the duration of
    payment stability, or the methods of assessing providers on
    quality measures, have intentionally been left open in our
    discussion draft. We look forward to input on these and other
    topics from today's witnesses and the stakeholder community at
    large with the goal of achieving meaningful Medicare payment
    reform and designing the best possible system for patients and
    providers alike.
        From the beginning of this process, there has been one
    clear goal: to remove the annual threat of looming provider
    cuts by permanently repealing the flawed SGR and replacing it
    with a system that incentivizes quality care, not simply volume
    of services. If we are to succeed in getting reform to the
    President's desk during this Congress, reform must be
    bipartisan and bicameral. It must also be fully offset and
    fiscally responsible. However, we are not making the mistake
    that has sidelined SGR in years past by having the pay-for
    discussion before we know what we are paying for.
        The commitment to exploring bipartisan reform from Mr.
    Pallone, Mr. Waxman, leaves me hopeful that bipartisan reform
    is indeed possible. In addition, our longstanding and
    continuing relationship with Chairmen Camp and Brady from the
    Ways and Means Committee underscores the commitment that the
    House has to reforming SGR this Congress. I look forward to
    working with all parties in the coming weeks and months with
    the goal of getting SGR reform to the President's desk. And I
    look forward to hearing the views and opinions of our witnesses
    today, and I would like to thank each of them for appearing
    before this subcommittee.
        Thank you. And I yield the balance of my time to the vice
    chair, Dr. Burgess.
        [The prepared statement of Mr. Pitts follows:]

                   Prepared statement of Hon. Joseph R. Pitts

        The Subcommittee will come to order.
        The Chair will recognize himself for an opening statement.
        On February 7 and April 3, 2013, the Energy and Commerce
    and Ways and Means Committee Republicans released three-phase
    outlines for permanently repealing the Sustainable Growth Rate
    (SGR) and moving toward a Medicare reimbursement system that
    rewards quality over volume. Stakeholder feedback followed each
    release and has been integral to the development of this
    policy, culminating in the draft legislative framework released
    on May 28th.
        This discussion draft took into account the conversations
    and work of the Energy and Commerce majority and minority
    staffs, as well as the long collaborative relationship we have
    had with the Ways and Means Committee.
        It is also not a complete reform proposal. Rather, it was
    designed to be a partial release that allows for input from
    stakeholders and members of this committee.
        Again, we are seeking substantive feedback on ways to
    complete this draft, and I would encourage all interested
    parties to submit their comments to the Committee by June 10th.
        The Committee has sought to accomplish SGR reform through
    an open and transparent process, with consideration given to
    all relevant stakeholders.
        To briefly summarize the draft legislation, Phase 1 repeals
    the SGR formula and provides a period of payment stability.
        During this time, providers will work with the Secretary to
    identify quality goals and methods of measurement.
        Phase 2 will build upon the work of Phase 1, tying quality
    measurement to fee for service payment. Provider input will be
    essential to defining quality medicine during Phases 1 and 2.
        Any time throughout Phases 1 and 2, providers may
    voluntarily opt-out of fee-for-service by participating in an
    alternate payment model. These models will be flexible. Some
    exist today, such as medical homes; while new and innovative
    models may also be created and adopted.
        Some specifics, such as the duration of payment stability
    or the methods of assessing providers on quality measures have
    intentionally been left open in our discussion draft. We look
    forward to input on these and other topics from today's
    witnesses and the stakeholder community at large, with the goal
    of achieving meaningful Medicare payment reform and designing
    the best possible system for patients and providers alike .
        From the beginning of this process, there has been one
    clear goal: to remove the annual threat of looming provider
    cuts by permanently repealing the flawed SGR and replacing it
    with a system that incentivizes quality care, not simply volume
    of services. If we are to succeed in getting reform to the
    President's desk during this Congress, reform must be
    bipartisan and bicameral. It must also be fully offset and
    fiscally responsible. However, we are not making the mistake
    that has sidelined SGR in years past by having the pay-for
    discussion before we know what we are paying for.
        The commitment to exploring bipartisan reform from Mr.
    Pallone and Mr. Waxman leaves me hopeful that bipartisan reform
    is indeed possible. In addition, our long standing and
    continuing relationship with Chairmen Camp and Brady from the
    Ways and Means committee underscores the commitment that the
    House has to reforming SGR this Congress. I look forward to
    working with all parties in the coming weeks and months with a
    goal of getting SGR reform to the President's desk.
        I look forward to hearing the views and opinions of our
    witnesses today, and I would like to thank each of them for
    appearing before the Subcommittee.
        Thank you, and I yield the balance of my time to Rep. ----
    --------------------------------.

        Mr. Burgess. Thank you, Mr. Chairman.
        This hearing is all about momentum. For 10 years I have
    been here in this committee. On both sides of the dais we have
    all agreed that the SGR needs to go, and then we get to hear
    from some really smart people from Washington think tanks to
    tell us what the brave new world should look like, and then
    nothing happens. And we all pat ourselves on the back because
    we agree that the Sustainable Growth Rate makes some
    unrealistic assumptions about spending inefficiency, but really
    doesn't move the needle.
        Now, this morning, in spite of what you read in the
    newspapers, today is different. It is different in two
    respects. First, last week the committee released the first
    draft of legislative language to eliminate the SGR and move
    Medicare to a program that more aligns with the private sector
    in both model development and linking payment to quality. The
    draft continued the trend of soliciting more provider feedback
    than at any point in history, and I pledge to all Medicare
    providers that your feedback, if provided to the committee,
    accompanied by helpful guidance, will be given the full
    attention of the committee, and we will work with you.
        Yes, this is a first draft, a very rough first draft.
    Nothing is sacrosanct except the original paragraph which
    repeals the Sustainable Growth Rate formula. We have got to
    catch Medicare up with what is happening in the real world. We
    have to allow every practice modality that is out there to
    flourish. Yes, that includes fee for service. But we have got
    to catch up with what is happening in the real world, and that
    is what this morning's hearing is all about.
        I thank the chairman for calling the hearing, and I will
    yield back the balance of my time.
        Mr. Pitts. The chair thanks the gentleman.
        And now turns to the gentlelady from the Virgin Islands,
    Dr. Christensen, who is filling in for the ranking member
    today. Recognized for 5 minutes.

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

        Mrs. Christensen. Thank you, Mr. Chairman, and I want to
    thank you and Ranking Member Pallone, who had to return home
    for the funeral of our beloved Senator Lautenberg, for holding
    this hearing today. We have come together many times to discuss
    this issue, and I hope that today's discussion finally puts us
    on a path to real and broadly implementable solutions that
    focus on quality, improved patient outcomes, fairer provider
    reimbursement, efficiency, and lower cost.
        Replacement of Medicare's SGR payment system is something
    that we all agree needs to happen. And I think we also all
    agree that the healthcare delivery system itself is
    dysfunctional. It, too, needs to be fixed, and several
    provisions in the Affordable Care Act--to pilot new payment
    models and models of care, to innovate and to help guide the
    best treatments--can both improve care, help us to reform and
    replace the current payment system, and lower costs.
        As a family physician, the concept of medical home is not a
    foreign one to me. And as a community health doctor in the
    public sphere in a small community I know the value of teamwork
    to patient outcome, as well as satisfaction. But because the
    system was not set up to support a team approach, it added time
    and efforts that could have better been spent caring for more
    patients, enhancing our knowledge, or quality time with our
    family.
        We are fortunate that some healthcare providers and systems
    have begun to do the reforms we are attempting to create
    nationally through the Affordable Care Act and that they can
    share their journeys' successes and recommendations, based on
    experience with us today, and I want to thank the panelists for
    being here, and I look forward to their testimonies.
        As we highlighted in our last hearing on this issue,
    innovation is key to improving healthcare delivery and payment
    system. However, moving forward it is important for us to
    encourage innovation while also ensuring that the benefits of
    innovation reach all communities. Historically, innovation in
    health care has improved outcomes for those who are insured or
    are more affluent much faster than for those who are low income
    or uninsured, exacerbating existing health disparities.
        It is also important that the efforts to reform and replace
    the SGR take into account those providers who currently work in
    communities and treat patients who have long been underserved
    by the health system. These patients are adversely affected by
    many social determinants of health, have less reliable access
    to quality care, and ultimately suffer poorer health outcomes
    as a result. I look forward to hearing how pay for performance
    and value or outcome-based reimbursement can address this
    particular concern.
        Today, we have a lot to focus on, as the background memo
    for this hearing indicates. My colleagues on the other side of
    the aisle have released two sets of draft frameworks, together
    with their colleagues on Ways and Means. They have also
    released draft legislative language, and this hearing is
    intended to get feedback on the legislative language released
    and, more importantly, to help inform our Members on the
    committee process moving forward. And there are some gaps that
    this hearing I think can probably help to fill.
        I also look forward to working with my colleagues on this
    and the Ways and Means Committee, and other colleagues, as well
    as the provider and patient advocacy organizations, to continue
    the efforts of our panelists and others and those of the
    Affordable Care Act for reform. Our Medicare patients need and
    deserve it.
        Is there anyone who would like the balance of my time? And
    if not, Mr. Chairman, I will yield back.
        Mr. Pitts. The chair thanks the gentlelady.
        Now recognize the chair of the full committee, Mr. Upton, 5
    minutes for opening statement.

       OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MICHIGAN

        Mr. Upton. Thank you, Mr. Chairman.
        You know, today we are building upon the significant
    progress that the committee has made during the past couple
    years and take a very important step in permanently repealing
    the flawed Sustainable Growth Rate, otherwise known as SGR or
    the doc fix. The legislative framework that we released last
    week, the review of which is the purpose of our hearing today,
    includes invaluable feedback from so many stakeholders.
        However, this legislative framework is not etched in stone.
    And rather, it is an opportunity for the committee to continue
    working closely with Members and stakeholders towards a
    permanent repeal of SGR. It also doesn't contain a pay-for, as
    we intend to avoid the error made in years past of discussing
    how to pay for reform before the policy is actually developed.
    But make no mistake, SGR reform will be offset with a real and
    responsibly paid-for item when it comes to the floor of the
    House for a vote.
        When Chairman Camp and I began the push towards reform
    earlier this year and in the last Congress, it was with common
    purpose and mutual support. Our friendship and working
    relationship have never been stronger. Both committees, working
    closely together and with careful attention to public input,
    have been able to transform the initial February outline that
    we jointly released into a solid policy framework. There
    remains much more work to be done for sure, including the hope
    for bipartisanship, but we would not be where we are today
    without our good friends on the Ways and Means Committee, and
    that collaborative effort will continue.
        Over the past several weeks Energy and Commerce Republicans
    and Democrats have labored hand-in-hand to explore whether
    bipartisan reform might be possible. And while the release last
    week was done without their names attached, the language it
    contained did reflect our talks and collaborative efforts with
    committee Democrats. I want to particularly thank Mr. Waxman
    and Pallone for their leadership and continued interest in
    exploring SGR reform.
        And while we stand today at a point far beyond any reform
    efforts of the past, much work still remains. SGR is one of the
    most complex issues confronting the Congress and, not
    surprisingly, difficult policy questions remain to be answered.
    Today's testimony will help answer some of those questions.
        The committee has been dedicated to making reform a
    transparent process. Such transparency has already given this
    committee insightful recommendations from multiple stakeholders
    that culminated in the legislative release last week. We look
    forward to continuing that process in the weeks to come.
        So SGR reform is vital to ensuring economic stability for
    physicians, access to care for seniors, securing the future of
    the Medicare system. I want to conclude by sharing my sincere
    optimism that, in fact, we will achieve a bipartisan bill, one
    that represents the work of both sides of the aisle, and in the
    end the best chance for SGR reform to work its way to the
    President's desk is through that bipartisanship.
        So let's not be satisfied with the unprecedented progress
    that we have already made. Let's continue working until we have
    solved the problem for not only our physicians, but certainly
    for our seniors.
        And I yield the balance of my time to Dr. Cassidy.
        [The prepared statement of Mr. Upton follows:]

                     Prepared statement of Hon. Fred Upton

        Today we build upon the significant progress this committee
    has made during the past couple years and take an important
    step in permanently repealing the flawed Sustainable Growth
    Rate, otherwise known as SGR.
        The legislative framework we released last week, the review
    of which is the purpose of our hearing today, includes
    invaluable feedback from many stakeholders. However, this
    legislative framework is not etched in stone. Rather, it is an
    opportunity for this committee to continue working closely with
    members and stakeholders and toward a permanent repeal of SGR.
        It also does not contain ``pay-fors'' as we intend to avoid
    the error--made in years past--of discussing how to pay for
    reform before the policy is developed. But make no mistake, SGR
    reform will be offset with a real and responsible pay-for when
    it comes to the floor of the House of Representatives for a
    vote.
        When Chairman Camp and I began the push toward reform
    earlier this year, it was with a common purpose and mutual
    support. Our friendship and working relationship have never
    been stronger. Both committees, working closely together and
    with careful attention to public input, have been able to
    transform the initial February outline we jointly released into
    a solid policy framework. There remains much more work to be
    done, including the hope for bipartisanship, but we would not
    be where we are today without our great friends on the Ways and
    Means Committee. That collaborative effort continues.
        Over the past several weeks, Energy and Commerce
    Republicans and Democrats have labored, hand-in-hand, to
    explore whether bipartisan reform might be possible. While the
    release last week was done without their name attached, the
    language it contained did reflect our talks and collaborative
    efforts with committee Democrats. I would like to thank Ranking
    Members Waxman and Pallone for their leadership and continued
    interest in exploring SGR reform.
        While we stand today at a point far beyond any reform
    efforts of the past, much work remains to be done. SGR is one
    of the most complex issues confronting the Congress, and not
    surprisingly, difficult policy questions remain to be answered.
    Today's testimony will help answer some of those questions.
        The committee has been dedicated to making reform a
    transparent process. Such transparency has already given this
    committee insightful recommendations from multiple stakeholders
    that culminated in the legislative release last week. We look
    forward to continuing that process in the weeks to come.
        SGR reform is vital to ensuring economic stability for
    physicians, access to care for seniors, and securing the future
    of the Medicare system. I would like to conclude by sharing my
    sincere optimism that we will achieve a bipartisan bill, one
    that represents the work of Republicans and Democrats. In the
    end, the best chance for SGR reform to work its way to the
    President's desk is bipartisanship. Let's not be satisfied with
    the unprecedented progress that we have made--let's continue
    working until we have finally solved this problem for our
    doctors and our seniors.
        Thank you, and I yield the balance of my time to Rep. ----
    --------------------------------.

        Mr. Cassidy. Thank you Mr. Chairman.
        The recent CBO projection reducing the cost of repealing
    the SGR to $138 billion gives us an opportunity to reform this
    flawed payment formula. We should see this and provide reform
    that puts us on a financially sustainable path, incentivizing
    quality health care to individuals and certainly to physicians.
    I think we all agree on that.
        In this process we must be careful to not sacrifice the
    independence and autonomy of the independent physician
    practice, and as a doc I am very sensitive to that. Mr.
    Chairman, I have working on a proposal that would ensure the
    independent physician and the small group is protected. I will
    be discussing it during my questions, and hope we can work
    together as we move forward with reform.
        In addition, I would like to commend the chairman for
    including a process for alternative payment models in the
    committee discussion draft. I understand that this is an issue
    the chairman wishes to further develop. I fully support this
    approach, and, again, I look forward to working with the
    committee to develop it further.
        I yield back to Mr. Upton or to Dr. Gingrey.
        Mr. Gingrey. Dr. Cassidy, thank you for yielding.
        Mr. Chairman, as a physician, I am pleased and excited that
    we are at this moment today. We are addressing the flawed SGR
    system, seeking to give doctors more certainty over
    reimbursement. By using specialty societies and other
    professional groups to create quality measures that will be
    used to promote best practices, we will see better patient
    outcomes and a more efficient--a much more efficient payment
    system.
        I do have a concern that the quality measures associated
    with payment reform may lead to unwarranted court claims.
    Government payment reform should not have any effect on a
    doctor's liability. During debate, then Chairman Waxman
    submitted comments for the record which stated that it was not
    the intent of the President's healthcare bill to, quote,
    ``create any new actions or claims based on the issuance or
    implementation of any guideline or other standard of care,''
    end quote. Nor is it to supercede, modify, or impair any State
    medical liability law governing legal standards or procedures
    used in their medical malpractice cases.
        Mr. Chairman, there is bipartisan agreement that the intent
    of our Federal healthcare laws is to promote quality, not to
    create new avenues for medical malpractice claims. I look
    forward to working with the subcommittee to address this
    potential loophole as we work toward physician payment reform.
        Thank you for your indulgence, and I yield back.
        Mr. Pitts. The chair thanks the gentleman.
        That concludes the opening statements. We have one panel
    today. I will introduce our panel at this time.
        First of all, Dr. Cheryl Damberg, senior policy researcher
    and professor of the Pardee RAND Graduate School. Secondly, Mr.
    William Kramer, executive director for national health policy,
    Pacific Business Group on Health. Thirdly, Dr. Jeffrey Rich,
    immediate past president of the Society of Thoracic Surgeons,
    director at large, Virginia Cardiac Surgery Quality Initiative.
    And finally, Dr. Thomas Foels, executive vice president and
    chief medical officer, Independent Health.
        Thank you all for coming. You will each have 5 minutes to
    summarize your testimony. Your written testimony will be placed
    in the record.
        Dr. Damberg, you are recognized for 5 minutes for your
    opening statement.

       STATEMENTS OF DR. CHERYL L. DAMBERG, PH.D., SENIOR POLICY
      RESEARCHER, PROFESSOR, PARDEE RAND GRADUATE SCHOOL; WILLIAM
    KRAMER, EXECUTIVE DIRECTOR FOR NATIONAL HEALTH POLICY, PACIFIC
    BUSINESS GROUP ON HEALTH; JEFFREY B. RICH, M.D., IMMEDIATE PAST
      PRESIDENT OF THE SOCIETY OF THORACIC SURGEONS, DIRECTOR AT
    LARGE, VIRGINIA CARDIAC SURGERY QUALITY INITIATIVE; AND THOMAS
    J. FOELS, M.D., M.M.M., EXECUTIVE VICE PRESIDENT, CHIEF MEDICAL
                      OFFICER, INDEPENDENT HEALTH

                     STATEMENT OF CHERYL L. DAMBERG

        Ms. Damberg. Thank you for inviting me here today. As the
    committee considers ways to revise the physician fee schedule
    so that payment policy supports the delivery of high quality,
    resource-conscious health care, there are important design
    features related to structuring performance-based incentive
    programs that I want to call to your attention. Thoughtful
    incentive design can ease the transition process for both
    physicians in the Medicare program and enhance the likelihood
    of program success. Due to limited time I will touch on only a
    few of the important design issues. More details can be found
    in my written testimony.
        First, encourage improvement among all physicians by using
    a continuous payment incentive approach. A continuous incentive
    approach pays physicians additional incentive payments for each
    increment of improvement they achieve. A continuous approach
    avoids the cliff effects that are common in incentive
    structures that tie payments to a single all-or-nothing cut
    point, setting up a large number of providers who will receive
    nothing despite making actual improvements and investments to
    improve. Paying more per increment of improvement at the
    beginning and the middle part of the continuum than toward the
    top strengthens incentives to physicians at the lower end who
    are making investments to improve.
        Second, use fixed performance thresholds to make it clear
    in advance to physicians what level of performance is required
    to achieve an incentive. Over the last decade many performance-
    based incentive programs used tournament-style relative
    thresholds that create a competition among providers. Relative
    thresholds create a great deal of uncertainty and can lessen
    the response to the incentive, particularly for those physician
    who are a distance from the anticipated threshold. Instead,
    physicians should compete against a fixed national benchmark
    where all who improve and hit the designated targets win.
    Avoiding competition between physicians for a limited number of
    winning positions will help to foster sharing of best practices
    among physicians.
        Third, make payments meaningful to generate the desired
    response. The experiments of the last decade in pay for
    performance generally found weak results in part because
    incentive payments were relatively small, on the order of 1
    percent. Physician leaders indicate that incentives of 5 to 10
    percent are required to be meaningful. In the beginning, while
    physicians are learning how to participate, incentives could be
    relatively modest. However, over time, and in the near term,
    rather than the long term, the size of the incentives should be
    increased.
        Begin the transition now for primary care by leveraging
    measures used in Medicare Advantage and other private payer
    programs. Much work has gone on over the past decade to advance
    the development of performance measures, particularly for care
    delivered by primary care physicians. These measures have been
    widely deployed by private payers, Medicaid agencies, and
    Medicare in the context of performance measurement,
    accountability, and incentives, both in managed care and fee
    for service. The committee and Congress need to understand that
    a majority of primary care physicians in the United States have
    already been exposed to these programs. And they could start by
    working with the Medicare Advantage star rating program and in
    the process align measurement activities already targeting
    ambulatory providers.
        Fifth, for many clinical subspecialties measures are
    completely lacking or few are available that could be readily
    deployed. As such, concerted effort and Federal investment is
    needed to develop and bring measures to market. CMS should
    identify and focus development efforts on 10 to 12 clinical
    subspecialty areas that contribute to a significant portion of
    Medicare spending and utilization, and they should work with
    measure development experts and clinical specialties to
    identify performance gaps and develop those measures.
        Sixth, allow physicians to opt out if they can demonstrate
    that they have moved to other value-based purchasing models
    that incentivize cost and quality. Some providers have already
    started to migrate toward alternative payment models such as
    ACOs, bundled payments, and medical homes. To the extent that
    these models contain performance-based incentives for cost and
    quality they should be considered acceptable opt-out
    arrangements. For physicians who do not participate in new
    payment models, they should minimally demonstrate that they are
    able to perform parallel functions to deliver high-quality,
    efficient care.
        Seventh, rather than simply imposing this change on
    physicians, Medicare should work in partnership with physicians
    to support their improvement. Creating an environment where
    physicians can succeed should include such things as building
    support structures with local community partners to work on
    improvement and redesign, facilitating sharing of best
    practices and learning networks, providing meaningful, timely
    data feedback, and continuing to advance the health IT
    infrastructure.
        In summary, the ability to move successfully forward with
    new performance-based payment models is predicated on having a
    robust set of measures, a good incentive design, and a support
    structure that can help physicians participate and succeed in
    the program. Thank you for the opportunity to appear here
    today, and I would be happy to take your questions.
        Mr. Pitts. The chair thanks the gentlelady.
        [The prepared statement of Ms. Damberg follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Pitts. And now recognize Mr. Kramer for 5 minutes for
    an opening statement.

                      STATEMENT OF WILLIAM KRAMER

        Mr. Kramer. Thank you, and good morning. My name is Bill
    Kramer from the Pacific Business Group on Health. I would like
    to express our deep appreciation to Chairman Joe Pitts, Vice
    Chairman Dr. Michael Burgess, as well as to Ms. Donna
    Christensen on behalf of Ranking Member Minority Member Frank
    Pallone, for convening today's hearing. I want to applaud the
    committee for stepping up to the challenge of finding a
    solution to this very important issue.
        PBGH represents large employers who want to improve the
    quality and affordability of health care. PBGH consists of 60
    member companies with employees in all 50 States that provide
    healthcare coverage of up to 10 million Americans and their
    dependents. Our members include many large national employers,
    such as GE, Walmart, Boeing, Tesla, Disney, Intel, Chevron,
    Wells Fargo, and Safeway, as well as public sector employers.
        The basis for my testimony today is our members'
    significant experience in designing and implementing
    innovations in provider payment and care delivery. We believe
    the lessons learned in private sector purchasing can be applied
    to Medicare.
        There are three key points I want to make in today's
    testimony. First, businesses have a big stake in how Medicare
    works. Second, large employers want to see physician payment
    tied directly to the value of the services that are provided.
    And third, we need new and better performance measures to
    support a new physician payment system.
        First, why should businesses care about how Medicare works?
    For decades, large employers have been frustrated by the rising
    cost and inconsistent quality of health care. They know we need
    to change the way we pay providers. Large employers have
    supported innovative approaches to physician payment, such as
    the intensive outpatient care program piloted by Boeing and
    adopted by many other large employers.
        We know, however, that these innovations do not have the
    scale to drive system-wide change and improve health care
    across the Nation. We need America's largest healthcare
    purchaser, the Federal Government, to work in alignment with us
    and join our efforts and apply its purchasing strategies as
    purposefully as our businesses do.
        Second, large employers want to see physician payment tied
    directly to the value of services that are provided. We need to
    replace Medicare's current fee-for-service system over time
    with payment based on performance with a goal of achieving
    measurable improvements in quality and affordability. The new
    physician payment system should encourage individual as well as
    group accountability.
        Although team-based care is often very effective, in many
    situations patients are most concerned about the performance of
    individual physicians. I recently had surgery to repair a
    broken bone in my face, an injury resulting from an elbow to
    the eye during a pickup basketball game. While I was pleased to
    know that I would receive care within a large, high-quality
    healthcare system, what I really wanted to know was the track
    record of that surgeon. What was his success rate? How many
    infections or surgical complications did the patient have. By
    far the most important thing to me was that surgeon's
    performance record.
        Third, we need to develop more and better performance
    measures. Among the nearly 700 measures endorsed by the
    National Quality Forum, the large majority are clinical process
    or structural measures. While these can be valuable for quality
    improvement initiatives by physicians, they do not provide
    information about the things that patients and employers care
    most about. We strongly recommend that Congress provide support
    for the rapid development and use of better performance
    measures, including patient-reported outcomes, patient
    experience of care, care coordination, appropriateness of care,
    and total resource use. The selection of these measures should
    be based on input from physicians, but ultimately be determined
    by those who receive and pay for care.
        In summary, first, businesses have a big stake in how
    Medicare works and Medicare should adopt successful purchasing
    practices from the private sector. Second, large employers want
    to see physician payment directly tied to the value of services
    that are provided. PBGH and its member companies strongly
    support the replacement of the SGR as long as the new payment
    system results in significant improvements in healthcare
    quality and affordability.
        Third, Congress should invest in the development of new and
    better performance measures to undergird the new payment
    system. The selection of these measures must meet the needs of
    those who receive and pay for care--patients, employers, and
    taxpayers.
        Our Nation desperately needs to improve its healthcare
    system, and the SGR replacement is a rare opportunity to give
    it a shot in the arm. PBGH applauds the committee's efforts to
    get it right, and we offer our real world experience and
    expertise to you in advancing this important initiative. Thank
    you, and I am happy to answer any questions from the committee
    members.
        Mr. Pitts. Thank you.
        [The statement of Mr. Kramer follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Pitts. The chair thanks the gentleman, and now
    recognizes Dr. Rich 5 minutes for an opening statement.

                      STATEMENT OF JEFFREY B. RICH

        Dr. Rich. Thank you, and good morning. Chairman Pitts,
    Representative Christensen, and distinguished members of the
    committee. Thank you for the opportunity to present my
    testimony today on the behalf of the Society of Thoracic
    Surgeons.
        I come to you wearing many hats. As mentioned, I am the
    immediate past president of the Society of Thoracic Surgeons
    and an active participant in our national database, one of the
    longest running, most robust clinical outcome data registries
    in existence. More importantly, or as importantly, I am the
    former director for the Center for Medicare Management at CMS.
    In other words, I ran the Medicare fee-for-service system in
    the last years of the prior administration and was involved
    very much in value-based purchasing and also physician reform
    initiatives.
        I am a founder and director of the Virginia Cardiac Surgery
    Quality Initiative. I am now a practicing cardiac surgeon at
    Sentara Heart Hospital and president of the Mid-Atlantic
    Cardiothoracic Surgeons, so I have an active clinical practice
    and understanding of payment and payment reform.
        The Society of Thoracic Surgeons represents more than 6,000
    surgeons, researchers, and allied healthcare professionals who
    are dedicated to providing patient-centered high-quality care
    to patients with chest and cardiovascular diseases, including
    heart, lung, esophagus, transplantation, and critical care. The
    STS National Database was established in 1989 as an initiative
    for quality assessment, improvement in patient safety among
    cardiothoracic surgeons. The fundamental principle underlying
    the STS database initiative has been that engagement in the
    process of collecting information on every case, robust risk
    adjustment based on pooled national data, and feedback of this
    risk-adjusted data to the individual practice and institution
    will provide the most powerful mechanism to change and improve
    the practice of cardiothoracic surgery for the benefit of
    patients and the public. And I might add that the database will
    serve as a platform in all phases of reform, I, II, and III.
        The Virginia Cardiac Surgery Quality Initiative was founded
    in 1994 by myself and others with the expressed purpose of
    improving clinical quality across an entire State in cardiac
    surgical programs of all sizes through data sharing, outcomes
    analysis, and process improvements. All of the Virginia
    programs participate in the STS National Database and uniformly
    follow the definitions and measures in its landmark clinical
    registry.
        The database in our State has been unique in that it
    matches the patient clinical outcome data with each patient's
    discharge financial data from CMS on an ongoing basis. Each
    record includes clinical outcomes tied to the cost of each
    episode of care. In Virginia we have demonstrated that
    improving quality reduces costs. For example, using evidence-
    based guidelines, the Virginia Cardiac Surgery Quality
    Initiative has generated more than $43 million in savings over
    the last 2 years by reducing blood transfusions in the State.
    In addition we have reduced atrial fibrillation, a common heart
    arrhythmia after surgery, and saved another 20-plus million
    dollars over the last 5 to 7 years. So it has been an effective
    tool for us not only to improve quality, but to provide cost
    savings throughout the States.
        Since survival and resource utilization information is such
    an important part of the outcomes for cardiothoracic surgery
    quality improvement efforts, we urge that steps be taken to
    ensure these registries have access to administrative or
    financial data from CMS, and hopefully other payers, both for
    episodes of care and longitudinal follow-up, as well as
    outcomes data from the Social Security Administration or
    another accessible source. It is imperative that SGR reform
    legislation addresses this foundational issue and gives us a
    clinical financial tool to create improvement.
        STS wishes to commend the committee and your colleagues on
    the Ways and Means Committee for taking the first steps toward
    meaningful physician payment reform. STS has provided
    substantial comments on the concept document released by the
    committees on April 3rd that we submit here for the record.
    Today I would like to highlight a few of our conceptual
    comments for the committee related to that proposal in a
    discussion draft just released last week.
        STS is particularly grateful to this committee for your
    recognition of the utility of clinical registries in pursuit of
    a pay-for-quality physician payment system. To that end, we
    recognize that Congress faces a challenge in that many
    specialties do not yet have the ability to collect clinical
    data, develop risk-adjustive quality measures, and implement
    physician feedback and quality improvement programs.
        That said, we hope that implementation of a pay-for-quality
    program will not have to wait for all of medicine to be at the
    same place at the same time. We believe that early innovators
    who are able to enter into Phase II, or even Phase III, should
    be able to do so now, while others are trying to play a game of
    catchup, if you would. For that reason, we recommend that
    policymakers consider ways to reward providers for incremental
    steps towards these quality assessment and improvement goals,
    while allowing those medical professionals whose specialties
    that already have the requisite infrastructure in place to
    engage in this new system as soon as possible.
        We do believe that it is important to use the STS database
    for other uses--medical liability reform, public reporting. We
    believe that empowerment of patients with data is important and
    advancing medical technology.
        In conclusion, we wish to thank you for your time and
    understanding and listening to our plea for engaging with the
    rest of medicine in clinical data and outcomes assessment.
        Mr. Pitts. The chair thanks the gentleman.
        [The prepared statement of Dr. Rich follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Pitts. And now recognize Dr. Foels 5 minutes for an
    opening statement.

                      STATEMENT OF THOMAS J. FOELS

        Dr. Foels. Good morning, Chairman Pitts, Ranking Member
    Pallone, and members of the Subcommittee on Health. On behalf
    of Independent Health----
        Mr. Pitts. Would you please turn the mike on? Thank you.
        Dr. Foels. Chairman Pitts, Ranking Member Pallone, and
    members of the Subcommittee on Health, on behalf of Independent
    Health I appreciate this opportunity to testify before you
    today. My name is Dr. Tom Foels. I am chief medical officer at
    Independent Health, which is a not-for-profit health insurer,
    serving over 400,000 members in Medicare, Medicaid, and
    commercial insurance in the Buffalo metropolitan area of
    Western New York.
        Independent Health is nationally recognized for its quality
    of services and customer satisfaction. We have consistently
    ranked among the top 10 percent of health plans nationally for
    quality based on the National Commission for Quality Insurance.
    Independent Health shares the belief that the replacement of
    the SGR with a viable Medicare physician payment policy is
    critical to ensure that the Medicare program will be available
    for generations to come. We believe that it is time to replace
    the fee-for-service system with a system that rewards quality
    outcomes and efficiency.
        Now, while I represent Independent Health, I am also here
    with the collaborative voice of my colleagues at the Alliance
    of Community Health Plans, a group of not-for-profit community-
    based plans dedicated to improving the health of its members,
    the health of the communities in which they live and work, as
    well as to ensuring affordability of coverage.
        And finally, I speak today as a primary care physician with
    over 30 years of clinical and administrative experience. For
    the past 17 years I have held various senior positions at
    Independent Health, the last four of which as chief medical
    officer. During that time, I have been deeply involved in our
    efforts to improve quality and affordability of health care for
    our community.
        My experiences as a physician have taught me that
    transformational change is difficult, regardless of its merits.
    I understand the skepticism and reluctance of some physicians
    because I have, at times, shared it as well. But I have also
    come to understand that important changes need to be made now
    that will benefit both physicians and patients and that the
    transition to a value-based payment system is both desirable
    and workable.
        Our upstate New York community, provider community, is
    typical of so many communities across the country with an
    abundance of independently practicing, non-aligned primary care
    and specialty care providers and hospitals. Recognizing the
    desire of physicians to retain their independence, Independent
    Health has designed its programs in a way that has led to a
    virtually integrated model of providers. Independent Health has
    helped pioneer efforts in quality improvement, primary care
    design, and implementation of alternative payment systems.
        Much of our success is based upon the deep trust and
    collaboration we have purposely fostered with our provider
    community throughout many years of working together. We believe
    there are valuable components of our quality, efficiency, and
    effectiveness programs that are potentially scaleable and
    transferrable to other communities beyond our own.
        Independent Health's approach toward developing improved
    systems of care are based upon several guiding principles, but
    most importantly they are based upon the assumption that
    primary care plays a pivotal and foundational role in the
    transformation to an improved system.
        Independent Health is very excited about a recent
    development of a new model of primary care and reimbursement
    which we call Primary Connections. In this program, primary
    care practices that are certified patient-centered medical
    homes are reimbursed not under fee for service, but a hybrid
    payment system that includes a prospective, population-based
    payment, a quality bonus, and a shared savings program that
    rewards providers for reducing the total cost of care.
        The collaborative also develops strong relationships
    between primary care providers and specialists who compete for
    primary care referrals based upon transparent data, profiling
    their quality, and cost efficiency.
        I would like to briefly share two stories from our Primary
    Connection model, one that represents the past and one that
    represents and illustrates the experience of a patient and
    physician under the Primary Connection model.
        Imagine the year 2010, a 70-year old man with a past
    history of diabetes, hypertension, and coronary disease
    contacts his primary doctor early one morning on a Monday
    complaining of chest pain while climbing stairs at home. He is
    seen in less than an hour by his primary, where an EKG shows
    suspicious findings. His doctor sends him to an emergency room
    where he is first seen by a triage nurse, then a physician
    assistant, then an ER physician. No provider examining him has
    access to his medical records. His EKG is repeated; blood work
    and diagnostic studies are performed. A decision is made to
    admit him overnight to monitor and observe his condition. He is
    discharged the following morning and given instructions to
    follow up with his primary. The primary does not receive a
    report from the hospital for at least 3 days. Costs would well
    exceeds $4,000. Care would be fragmented. Handoffs would be
    poorly coordinated. And the patient and family would be
    worried, anxious, and afraid.
        The year is now 2013. Under Primary Connections, its
    patient-centered care, its reimbursement system based on
    quality outcomes and cost effectiveness, another scenario
    unfolds. It is again 10:00 a.m. in the morning and the patient
    presents to the physician's office. Now unlike the previous
    scenario, the physician immediately contacts his preferred
    collaborating cardiologist and forwards the EKG to his review.
    This preferred cardiologist has demonstrated his efficiency,
    quality, and clinical outcomes and is chosen because of that
    and because the primary works under a reimbursement model that
    incents collaboration and new forms of patient management.
        After reviewing the studies the cardiologist makes
    accommodations for the patient to be seen. The same blood work
    and diagnostic testing that might otherwise have been performed
    in the ER is completed in the cardiologist's office. The
    patient and family are advised he is not having a heart attack.
    The cardiologist and primary speak by phone to coordinate care
    and follow-up. Later that afternoon, the primarycare
    coordinating nurse calls the patient at home to be certain he
    is well and asks if there are questions. Total cost of care,
    $1,200; care coordinated and efficient; communication immediate
    and complete; patient and family fully informed. Primary care
    physician is rewarded.
        In conclusion, I look forward to sharing with the
    subcommittee the journey Independent Health and its physician
    partners are now taking to arrive at this efficiency and
    effective system of care, as well as our longstanding
    successful programs to promote quality.
        Mr. Pitts. Chair thanks the gentleman.
        [The prepared statement of Dr. Foels follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Pitts. That concludes the opening statements. We will
    now go to questions from the members. I will begin the
    questioning and recognize myself for 5 minutes for that
    purpose.
        Dr. Damberg, the proposed SGR revision has an initial phase
    with a period of payment stability, while quality-measure
    development takes place concurrently. What is an appropriate
    period of payment stability, in your opinion, in order to
    develop and vet measures and build the necessary quality
    infrastructure?
        Ms. Damberg. As I noted in my testimony, there are an array
    of measures that already exist in primary care, and those are
    ready for market. So that transition could begin much faster
    than on the subspecialty side. As one of the other panelists
    indicated, some of the clinical subspecialties have taken
    significant steps to identify clinical process and outcome
    measures, and I think that those should be leveraged in the
    near term. And I think in the area where measures currently do
    not exist, and that space is pretty vast for the
    subspecialists, that process is probably going to take 3 years
    to bring measures to market.
        Mr. Pitts. Thank you.
        Dr. Rich, considering the different levels of provider
    readiness, how do we balance the need for a stable period
    enabling providers to build and test the necessary quality
    infrastructure while still incentivizing early innovators to
    move to Phase II with opportunities for quality-based payment
    updates?
        Dr. Rich. So I would agree that a 3-year period for the
    embryonic novice would be important because it takes that long
    to develop your measures, get them vetted through an
    organization that would approve them, and then actually to
    start collecting data and look at it and using them
    effectively.
        For those who, like us, who have measures already and we
    are using them already, I would suggest a tiered incentive
    program whereby the new payment reform would provide incentives
    to develop databases. If they only start out early with
    structural and process measures, and then develop outcome
    measures, that is fine. But those who have outcomes measures
    can start early with pay-for-performance pilots or pay-for-
    performance programs as we did in Virginia with WellPoint/
    Anthem, as well as in the public sector.
        Mr. Pitts. OK.
        Mr. Kramer, public feedback has reinforced the concept that
    it is essential for providers to receive performance feedback
    in order to make appropriate changes in practice improvements.
    To the survivor of the pickup basketball game, what does a
    meaningful, timely feedback process look like for providers,
    and what are adequate performance feedback intervals?
        Mr. Kramer. We strongly support the principle of providing
    feedback to physicians and other providers on the quality and
    affordability of the care that they provide. That should be an
    integral part of this redesigned payment system. And to the
    extent it is possible, we should move in the direction of
    having real-time feedback so that information that is embedded
    in electronic health records is accumulated and fed back to
    physicians on a regular basis.
        I worked for many years at Kaiser Permanente, one of the
    pioneers in the development of electronic health records. That
    kind of ongoing feedback to physicians was essential. I
    understand that many systems will take a while to get to that
    point, but that is what we should strive toward. In the
    interim, we should try to provide feedback as frequently as the
    information is meaningful in terms of volume of services that
    provides an adequate database for evaluation over quality.
        Mr. Pitts. Dr. Foels, you state in your testimony that one
    of the guiding principles of IHA are, quote, ``Substantive and
    sustainable improvement in quality and affordability of the
    American healthcare system will require movement away from
    traditional FFS reimbursement systems.'' Can you explain why in
    your opinion FFS Medicare undercuts quality and affordability
    in our healthcare system?
        Dr. Foels. Yes, thank you.
        Yes, we believe that fee-for-service reimbursement does
    little to reward quality or recognize efficiency. It varies
    among providers by great degrees. It also inhibits
    collaboration across provider communities. Ultimately, the care
    of a patient is that of a team. It is based on teamwork within
    a single practice, and it is dependent upon a team across
    multiple specialties.
        And fee for service as currently visioned and currently
    practiced does not promote any collaboration among providers,
    and hence we strongly believe that a new system of
    reimbursement that may involve some degree of hybridizing the
    best parts of multiple ways to reimburse may be much more
    effective.
        Mr. Pitts. The chair thanks the gentleman.
        Now recognize the gentlelady, Dr. Christensen, for 5
    minutes for questions.
        Mrs. Christensen. Thank you, Mr. Chairman.
        And thank you for your testimony.
        As an African-American physician who practiced for more
    than 20 years, I know that many racial and ethnic minority
    providers, providers in rural areas, as I once did, work in
    communities and treat patients who have long been underserved
    by the healthcare system and detrimentally affected by the
    social determinants of health that create, sustain, and even
    exacerbate the health disparities. As a direct consequence,
    some patients simply present with more challenges than others,
    and that needs to be taken into account as we develop these
    systems. And so as we seek to assess provider quality and
    efficiency in a reformed Medicare payment system, we will
    undoubtedly struggle with how to account for these gaps.
        So how should we be thinking about addressing these racial,
    ethnic, gender, and rural disparities as we move to incorporate
    quality performance measurement into a new Medicare physician
    payment system, and how can we assure that the Medicare payment
    reforms do not leave those providers who serve the Nation's
    most medically and financially needy in harm's way by ignoring
    the upstream variables that directly affect patient outcomes?
        So anyone can answer, but maybe I would begin with Dr.
    Damberg by asking her if her pay for improvement along the
    gradient begins to address that.
        Ms. Damberg. I think absolutely. And as I noted, the way in
    which you structure the translation from actual performance to
    the payment can be modulated along that performance curve, such
    that you more heavily incentivize folks who are at the lower
    end of performance, and generally those folks are struggling
    with some of the very issues you identify.
        So I think that the primary thing that you want to try to
    avoid happening is you are going to under-resource those
    providers. So allowing them to earn incentives for each
    increment of improvement I think will help mitigate that
    problem.
        The other thing that I think is really important is trying
    to align incentives across providers. And I think if you look
    at what is going on in ACOs that are really linking providers
    across the continuum of care, as well as with social service
    agencies in the community, because I think there is recognition
    that it is not just health care that influences whether
    somebody comes back into the system. And so, again, I think
    there is really sort of an elephant in the room around larger
    payment reform, not just working at the margins, which is what
    incentives overlaid on fee for service really look like.
        And so if you look at the Blue Cross Blue Shield of
    Massachusetts Alternative Quality Contract, where they have
    aligned incentives, it is a global payment, providers have
    worked very hard and have closed the disparities gap. So I
    think there are models out there that really have demonstrated
    that they can improve care for these disadvantaged patient
    populations.
        Mrs. Christensen. Dr. Rich? And I was going to ask the
    Thoracic Surgeons and maybe Independent Health, have they
    grappled with this and addressed it?
        Dr. Rich. And the STS has long recognized that there are
    disparities in care. In our database we collect data on Afro-
    Americans, Hispanics, as well as Asians. We look very carefully
    at disparities in care for women and for socioeconomic status.
    And my first answer or response is that we need to measure it
    and inform providers whether they are addressing these needs or
    not.
        I think to change it you could do what we did at CMS for
    hospitals and provide a disproportionate share payment, DSH
    payment, that allows providers to seek out the communities that
    need them the most, and to get an added incentive to their fee-
    for-service payment.
        Dr. Foels. And if I might add, and build off the two
    previous remarks, I, too, am very sensitive to the fact of the
    gap in disparities, which is not closing nearly as fast as
    anyone feels comfortable. And I concur with Dr. Damberg's
    comments that it is important to recognize that inner-city,
    urban, and rural providers have different starting points for
    their quality and they should not be punished for that. And
    there are scoring mechanisms and evaluation mechanisms,
    reporting mechanisms that would allow their incremental
    improvement and support.
        Mrs. Christensen. Thank you.
        My time is almost up so I will yield back.
        Mr. Pitts. Chair thanks the gentlelady.
        Recognize Dr. Burgess 5 minutes for questions.
        Mr. Burgess. Thank you, Mr. Chairman.
        Dr. Rich, thank you for being here. You are a practicing
    cardiothoracic surgeon, is that correct?
        Dr. Rich. Yes.
        Mr. Burgess. So when you drive to work in the morning, do
    you tell yourself, boy, I hope I am average today?
        Dr. Rich. No.
        Mr. Burgess. No, you go to work to do your best work every
    day.
        Dr. Rich. That is right.
        Mr. Burgess. This is why I have always had a little bit of
    trouble with the concept of pay for performance. We are goal-
    directed individuals as physicians. We always go to work to do
    our best job. We never go into a patient's room expecting to be
    slightly above average, or hopefully not below average. No, we
    go in to do our best work. So we all need to recognize we are
    dealing with a highly motivated population of providers, and
    somewhat at our peril if we damage that motivation that exists
    amongst the Nation's physicians. And that is why it is so
    important to get the SGR reform because it is damaging to the
    psyche of America's doctors.
        Now, I woke up this morning to the paper who said that they
    were very dismissive of the hearing we have today. The quote in
    the paper is that the draft that we have in front of us doesn't
    tackle some of the biggest outstanding issues, such as how to
    measure quality. So I really liked your comments. In your
    written testimony you said on behalf of the Society of Thoracic
    Surgeons, I would like to thank you for a very thoughtful
    proposal. And I agree with you. I think it is a thoughtful
    proposal. I think the committee and the committee staff have
    done a very good job of going to the provider community and
    soliciting their input as to what these performance metrics
    would be. Do you agree with that?
        Dr. Rich. Oh, absolutely. Having sat at CMS and seeing
    other thoughts and legislation coming out of here, I think this
    is probably the most thoughtful, well-rounded, and sought after
    for input proposals out there. I was really impressed at the
    questions and some of the principles that were out there
    regarding the SGR reform.
        Mr. Burgess. Can you say that again for the press? You were
    very impressed?
        Dr. Rich. I think they did a great job.
        Mr. Burgess. All right. Well, and let me just ask you, on
    the issue of CMS, you do reference in your testimony that it is
    so important that the registries have access to clinical data
    from CMS. CMS, as we learned over the past several weeks as
    they releasing some hospital data, I mean, they have got a lot
    of data, and it would really help you and your specialty in
    developing these performance metrics, it would really help you
    to have access to that data, is that not correct?
        Dr. Rich. Absolutely. We have access to data that is really
    financial data. There is a little bit of clinical data in the
    CMS database, but more financial. Now, when ICD-10 comes out
    there will be more clinical data. But bringing that financial
    data into the patient record and matching that with the
    clinical experience has been an enormously powerful tool for us
    in Virginia. We have been able to see how quality improvement
    reduces costs. We have been able to look at maintaining quality
    and reduce resource consumption and provide the same level or
    better levels of care.
        It is a very powerful tool to have, and access to it has
    been a little troubling recently. We are trying to do that on a
    national scale, the STS is, and we are having difficulty
    because we have to go every time and ask for a special
    exception.
        Mr. Burgess. So is that the bottleneck, the fact that you
    have to go every time and ask for the specific data?
        Dr. Rich. It is one of the bottlenecks.
        Mr. Burgess. Are there other bottlenecks that you could
    identify for the committee. Because we would like to help you,
    we would like to facilitate that exchange of data, because I
    believe you are on to something, and I think when you do have
    the data sometimes you will discover things that you weren't
    even thinking of as a way to embark on a cost-saving measure.
    So I want you to have the data and I want you to have access.
        Dr. Rich. No, I appreciate that. So another bottleneck has
    been getting the Social Security Death Index data. That has
    been shut down because of, I guess, legal issues. And so in the
    past we were always able to track our outcomes and look at
    those who have died and figure if we have done a good or a bad
    job, you know, if they have died 7 months later. So that is a
    bottleneck.
        Mr. Burgess. It is a clinically identifiable endpoint,
    correct?
        Dr. Rich. Usually. Sometimes people argue about it. But----
        Mr. Burgess. Just before my time expires, and I may ask you
    in writing to get back to us with some of those bottlenecks.
        But, Dr. Foels, I need to ask you, you spent some time
    discussing the fee-for-service aspect of the system and why you
    don't think that should endure. And yet, in your testimony, no
    singular payment system is sufficient to simultaneously promote
    quality, efficiency, and effectiveness. And I said in my
    opening statement, whatever we do here, it has to allow for the
    entire panoply of practice options that are out there, allow
    them to exist and to thrive and, in fact, flourish.
        So I would just tell you, I think the committee has done a
    good job as far as allowing a fee-for-service model to
    continue. As someone who has practiced OB-GYN, I mean, there is
    not a lot of Medicare practice in your average OB-GYN practice,
    but there is some and it is an important part. And if I have
    got to join an ACO or deal with bundled payments in order to
    continue to see those patients, I may well say enough is
    enough, and I am just going to exclude those patients from my
    practice. But if you allow me to have a fee-for-service model
    for compensation for those patients, I may be more apt to
    continue. And there are other examples I could give you, but in
    the interest of time, do you have a comment on that?
        Dr. Foels. Yes, you raise several points, one being that we
    may need to embrace a variable model for those individuals,
    those organizations, those physician communities that want to
    move quicker and faster toward development of virtual high-
    performing systems.
        You also pointed out the fact that the, in my opening
    comments, that there is no singular payment system that isn't
    without its benefits or its perversities, so trying to blend
    the best of all together is effective.
        One of the interesting footnotes in our experience is our
    application of the hybrid payment system to primary care
    physicians and its subsequent impact on specialty and hospitals
    that are still practicing under fee for service. And I would be
    welcome to describe that in further detail. But the takeaway
    message here is sometimes altering a payment system within one
    sector of the provider system can have effective and beneficial
    impacts on other sectors that remain under fee for service.
        Mr. Burgess. Thank you, Mr. Chairman. I will yield back.
        Mr. Pitts. The chair thanks the gentleman, and now
    recognizes the distinguished ranking member emeritus of the
    full committee, Mr. Dingell, for 5 minutes for questions.
        Mr. Dingell. Mr. Chairman, I thank you for your courtesy. I
    commend you for holding this hearing. It is a fine example of
    good bipartisan, bicameral progress. And it is my hope that it
    will lead to repealing the fatally Sustainable Growth Rate,
    SGR, and replacing it with a system that makes good sense for
    our healthcare system and for our physicians.
        We have broad agreement on the goals and now we must come
    together in a bipartisan manner to work hard and find out what
    is the proper solution for this problem.
        These questions are for all of our witnesses and will be
    both friendly and mostly yes, or no.
        First question. At the end of 2012, Congress passed
    legislation to prevent a 26.5 percent reduction in physician
    payment rates. This short-term fix was signed into law last
    year and cost about $25.2 billion. Is that correct? Yes or no?
        Dr. Rich. Yes.
        Mr. Dingell. Thank you. I was afraid I wasn't going to get
    a volunteer down there.
        This year, the Congressional Budget Office found the cost
    of freezing physician payments for 10 years is $138 billion,
    more than $100 billion more than their previous projection. I
    believe this demonstrates the urgent need for the Congress to
    act.
        Now, again, to each witness, do you believe that Congress
    should repeal and replace the SGR this year?
        Ms. Damberg. Yes.
        Mr. Kramer. Yes.
        Dr. Rich. Yes.
        Mr. Dingell. Sir?
        Dr. Foels. Yes.
        Mr. Dingell. Sir?
        Dr. Foels. Yes, I think initiatives should begin.
        Mr. Dingell. Now, in your analysis, did this system improve
    quality outcomes, yes or no?
        Ms. Damberg. Could you clarify which system?
        Mr. Dingell. I am sorry?
        Ms. Damberg. Could you clarify which system you are
    referring to?
        Mr. Dingell. Well, I am sorry. We will just lay this one on
    Dr. Foels and make that easier.
        Dr. Foels, did the system improve quality outcomes, yes or
    no?
        Dr. Foels. I believe the existing fee-for-service system
    turns a blind eye to quality and efficiency.
        Mr. Dingell. OK. Now, your Independent Health system
    recently implemented a system that shifts away from the
    traditional fee-for-service reimbursement. That is correct,
    isn't it?
        Dr. Foels. That is correct.
        Mr. Dingell. And in your analysis, you found that this new
    system did improve outcomes, right?
        Dr. Foels. Yes, it did, medically.
        Mr. Dingell. All right. Now, do you believe that the
    reforms made by the Independent Health are a good example that
    the Congress should or could follow when reforming SGR, yes or
    no?
        Dr. Foels. Yes.
        Mr. Dingell. Now, there are many other private groups
    across the Nation that are experimenting with innovative
    payment models which promote quality care over quantity of care
    in an effort to make our healthcare system more efficient. I
    heard a great deal of comment relative to this point today. And
    it is my feeling we should use these efforts as building
    blocks. Congress must ensure any new physician payment model
    does not work counter to other successful innovations that are
    already in place.
        Now, these questions are for all witnesses. Ladies and
    gentlemen, do you believe the Congress should look at the
    innovations and changes being made in the private sector when
    considering reforms to SGR?
        Ms. Damberg. Yes.
        Mr. Kramer. Yes, absolutely.
        Dr. Rich. Sure, yes.
        Dr. Foels. Yes.
        Mr. Dingell. I am running out of time, so I am not going to
    ask you to do that at this time, but if you would submit for
    the record some suggestions of what you feel might be useful, I
    believe it would be valuable and helpful to the committee.
        Now, I guess I am going to conclude by pointing out that I
    think that this committee is on the right track. I am hopeful
    that it will continue to have an inclusive bipartisan process
    that will solve this problem which is making a huge mess for
    all of us, and I think that we can no longer kick the can down
    the road and that now is the time for the Congress to act.
        So, Mr. Chairman, I thank you for your work today and for
    your leadership, and I am hopeful that this will lead us
    towards a better conclusion to the situation we confront. And I
    yield back 27 seconds. Thank you.
        Mr. Pitts. The chair thanks the gentleman and now
    recognizes the chair emeritus of the full committee, Mr.
    Barton, for 5 minutes for questions.
        Mr. Barton. Thank you, Mr. Chairman. I want to commend you
    and the full committee chairman for starting this process. I
    think this is something that, given good will on both sides, we
    might actually could do, and if we are able to accomplish it,
    it will be a significant achievement of the committee. This is
    something that is long overdue. Go back to Chairman Dingell's
    chairmanship, my chairmanship, Mr. Waxman's chairmanship, we
    have fought with this and wrestled with it, and because of the
    expense and the way the Budget Act is, when we get down to the
    lick-log we have always had to back off. So I hope that this
    time your efforts and Mr. Upton's efforts with Mr. Waxman and
    others do bear fruit.
        I just have one general question to the panel. It is the
    issue of balanced billing. It is currently prohibited. I am a
    proponent of whatever system we move to, that it should be
    something to be allowed. It makes sense. It allows physicians,
    providers to bill for those services that are not reimbursable.
    And I would just like the panel's general position on whether
    we should include some provision for balanced billing.
        Dr. Rich. So I think balanced billing, it is a touchy
    topic. I think it should be discussed and it should be vetted
    through the provider community as well as your committees.
    There is a way to sort of balance bill already in the Medicare
    system, and that is just to be a nonparticipant, but there are
    caps on the amount that you can balance bill a patient. So it
    is not very much. It is 105 percent of Medicare. And it doesn't
    take many patients not to pay their bill before it doesn't
    work. So balanced billing has been something that people have
    talked about and there likely is value in having discussion and
    perhaps introducing it into the legislation.
        Ms. Damberg. While this is not my particular area of
    expertise, your comments, I think, highlight another deficit
    around aligning incentives across the healthcare system, and
    that is price transparency. So I think to the extent that you
    are considering any kind of balanced billing provision, I think
    that that has to go hand in hand with full disclosure of prices
    for patients, because I know on various occasions I have gone
    into the fee-for-service market where they no longer take
    health insurance, and when you ask physicians to tell you what
    the cost of the visit is going to be, they can't tell you that,
    and they often refuse to tell you that.
        Mr. Barton. Anybody else wish to comment?
        Dr. Foels. I would agree with the two previous statements.
    I think, to Dr. Damberg's point, the ability to capture
    balanced billing and include that in the efficiency profile of
    the physician for complete transparency would also have to be
    discussed.
        Mr. Barton. OK. I yield back, Mr. Chairman.
        Mr. Pitts. The chair thanks the gentleman.
        Now recognize the gentleman from Texas, Mr. Green, for 5
    minutes for questions.
        Mr. Green. Thank you, Mr. Chairman, for holding the
    hearing. And like all of us, for 16 years now, we have been
    trying to figure out what we are going to do with the SGR, and
    this is an important step in that effort. I thank our witnesses
    for being here.
        In the interest of transparency and opportunities for
    public stakeholder engagement are vital to quality measure
    development and approval process. Currently, mechanisms such as
    the National Quality Forum endorsement process that measures
    application partnership input and pre-rulemaking and rulemaking
    solicit and incorporate multistake stakeholder feedback can
    help. In addition, the Secretary of Health and Human Services
    is in charge of the National Quality Strategy, which it is a
    national overarching strategy to guide quality measurement
    activities and identify gaps in the current framework.
        First, Mr. Kramer, I would like to hear your thoughts on
    the current state of the quality measurement oversight in the
    Nation's quality agenda. Do you believe we are on track and
    what more can be done to drive the quality improvement and
    measurement?
        Mr. Kramer. Thank you for the question. I will speak on
    behalf of Pacific Business Group on Health, but I am also a
    member of the board of directors of the National Quality Forum
    as well as National Priorities Partnership that measures
    application partnership, but I will speak on behalf of PBGH.
        I think it is fair to say that the current process is to
    develop, endorse and prioritize and put into use performance
    measures, are not getting the results we want. I think this
    opinion is shared fairly broadly by purchasers, patients,
    providers, and health plans.
        That being said, there are some elements of the current
    structure and process that I think we can build upon. In
    particular, the National Quality Strategy, I think, represents
    a robust, well-vetted process to develop a clear set of
    priorities for the Nation. But we need to speed up the
    development of the process of developing and using measures at
    all steps of the pipeline.
        At the front end, measure development, Congress needs to
    invest in the development of patients-centered measures to
    complement the measures that are currently in use. These
    measures represent a public good of enormous value. For a very
    small investment, the payoff, in terms of improved health and
    health care, is enormous.
        The next step in the pipeline, measure endorsement, we need
    to streamline the process for reviewing proposed measures and
    getting input from all stakeholders. National Quality Forum has
    already begun to make improvements in the endorsement process
    through the work of all stakeholders. I hope we can build upon
    that.
        Mr. Green. With respect to reforming SGR, in all honesty,
    if we reform the SGR with the goal of making sure we are paying
    for, you know, quality and measurements, I think we will see
    that input. But with respect to reforming it, are there current
    mechanisms that are both substantive and nimble enough to meet
    the policy framework in the discussion draft of the
    legislation? Is this legislation something that makes that
    possible?
        Mr. Kramer. I think this legislation will be a significant
    stimulus to development of better measures. It needs to be, I
    would recommend strongly, that it be paired with investment in
    development of quality measures and a clear direction to CMS to
    ensure that the measure endorsement process is streamlined,
    efficient, and involves all stakeholders.
        Mr. Green. OK. I only have a minute.
        Mr. Kramer and Dr. Foels, should participation in clinical
    improvement activities be included as a component of
    performance-based payment? If so, how could this be structured
    to support and incentivize meaningful quality improvement in a
    way that is not otherwise captured?
        Dr. Foels. Well, I think that is probably one of the most
    critical areas to address when addressing this issue of quality
    measurement, is how will it be reported, how will it be
    actionable, and trying to look for the process by which systems
    of care can be reengineered to deliver that quality.
        To an earlier comment today, no physician goes in intending
    each morning to deny care to a particular percentage or to do
    less than what is absolutely best, but it is often a system of
    care that they provide in their office or among physicians that
    functions such that that is the byproduct. And so I think we
    need to continue to think about the ability to apply these
    measures on systems with deep collaboration, learning
    improvement, and share best practice across this.
        Mr. Green. I only have a couple of seconds, but I want to
    make sure that investing in health information technology,
    medical home certification and use of clinical decision support
    tools, that could be used as part of the performance-based
    payment, I would hope, because that seems like where we are
    going.
        Dr. Foels. Exactly to my point. Clinical decision support
    would be a new system of care delivery that would close those
    gaps.
        Mr. Green. Thank you, Mr. Chairman.
        Mr. Pitts. The chair thanks the gentleman.
        Now recognize gentleman from Illinois, Mr. Shimkus, 5
    minutes for questions.
        Mr. Shimkus. Thank you, Mr. Chairman.
        Real quickly, Mr. Kramer, I am interested in your opening
    statement, you talked about surgery and checking. Wouldn't it
    also have been nice to know, be able to search for fees? For
    fees or the cost. Or did you ever, after you went through the
    whole operation, did you know the total cost?
        Mr. Kramer. Absolutely. You raise an excellent point. I
    focused in my opening comments on the quality measures for the
    surgery I was undergoing, but an essential element for any
    patient is to also know the price. Building on Dr. Damberg's
    earlier comments about the importance of price transparency,
    this is one of the areas where consumers are looking for
    information and it is simply not available, whether in Medicare
    or in commercial insurance.
        Mr. Shimkus. And I was just going to say, because Dr.
    Damberg, Ph.D. Doctor, not to diminish, but you did mention
    transparent in the answer to one of the questions as being a
    pretty key component.
        Ms. Damberg. That is right. I do think that consumers very
    much want that information, particularly as, you know,
    insurance products change, and even in the Medicare program
    consumers face more and more out-of-pocket expenses. And, you
    know, having them be exposed to more cost-sharing helps align
    the incentives to the consumer about appropriate use of care,
    but again, that has to go hand in hand with transparency on
    prices so that they can make those.
        Mr. Shimkus. And I really buy that, especially in the
    preventive care model. If you can really use transparency and
    you are encouraging people in wellness, you know, however the
    transparent system is, and encouraging people for generics
    versus, you know, the name brand, I mean, there is a lot of
    things you can do. But if the consumer is not in the game
    because it is a healthcare debate, then you lose all that
    additional thought process.
        In rural America, there is access issues, and inner-city
    issues, as was highlighted earlier, where Americans will pay
    for quality, we know that, or assumed quality. There are, Dr.
    Burgess is gone, but there are cases of problems in the
    healthcare system with some providers who are not--I mean, in
    any organization there are some problem individuals who
    disparage and hurt the entire group. And my concern would be
    then erased because of available funding requirements having to
    have a lesser choice in quality is a concern. So there is a
    need to protect that both, I think, in inner-city regions and
    also the rural care. But I am very interested in this reform
    proposed, and we have section 2 and subsection (h), which talks
    about providers paid under alternative payment models.
        And so the question would be, I would like first to Dr.
    Foels, understanding the premise of the question, can you tell
    me how using alternative payment models can help fix this
    system and be beneficial?
        Dr. Foels. Yes. There are several ways. You know, our
    firsthand experience with our Primary Connection model is to
    retain fee for service where there is the potential for the
    underutilization of services. So fee-for-service reimbursement
    is very effective, for example, in encouraging preventative
    care visits, immunizations, and so forth.
        The perversity of fee for service is that it recognizes, by
    and large, only face-to-face encounters and only those that
    occur between a physician or midlevel practitioner, and it
    doesn't recognize all of the very effective and beneficial work
    that can be delivered by a care team of nurses. It does not
    recognize telephonic interaction. It does not recognize
    electronic interaction with patients, which can be very
    effective. So we developed a component of a prepaid allocation
    to the practices that was not visit dependent or necessarily
    provider dependent but was tightly adherent to outcomes.
        The third piece here, in savings, really gets back to that
    earlier issue of price transparency, so allowing a primary care
    physician to be rewarded for efforts with their collaborative
    team of specialists or hospitals to avoid redundancy of
    testing, to find those components of the system that operate
    the most efficiently and effectively, and to steer patients in
    those directions.
        Mr. Shimkus. And, Mr. Chairman, just follow up just on that
    answer.
        Shared savings, what do you mean by shared savings?
        Dr. Foels. Well, our model of shared savings for primary
    care is upside only, so it does not include any punitive
    downside, and it is measured on the total cost of care for the
    population, total population of patients assigned to that
    primary care group, and any incremental savings off a previous
    year's budget are shared proportionately back to them.
        So again they are rewarded for the hospitalization that
    could have otherwise been avoided, which is also a quality
    issue as well as a cost-effective issue regarding alternatives.
        Mr. Shimkus. OK. Thank you, Mr. Chairman.
        Mr. Pitts. The chair thanks the gentleman.
        And now recognize the gentlelady from Florida, Ms. Castor,
    5 minutes for questions.
        Ms. Castor. Well, thank you, Mr. Chairman. I really
    appreciate you calling this hearing today on this important
    topic.
        And I appreciate the witness testimony very much. You have
    made some very constructive recommendations. And I think the
    general parameters are clear. That is the easy part. We want to
    permanently replace the Medicare physician payment formula,
    this SGR that is very poor public policy, and replace it with a
    new payment model that improves the quality of care and lowers
    the cost of Medicare. And that is very easy to state, but it is
    much harder to get done.
        But I know that we can do this. Just look at the report
    from the Medicare trustees last week. The reforms that we
    adopted in the Affordable Care Act are helping to reduce the
    growth in spending in Medicare already. Health spending in
    Medicare is expected to grow at a slower rate now than the
    overall economy in the next several years. So that is good
    news, and it does give us an opportunity to take some of the
    more difficult steps in payment reform.
        But I have to say, I was very surprised in the Republican
    discussion draft, because I think we are so far beyond the
    discussion draft. It doesn't provide us with any real direction
    on payment reform, and I think that is unfortunate. Unless we
    change it substantially, the way it is crafted now, it will
    keep us wedded to the SGR and that poor public policy of
    temporary patches and outdated spending patterns.
        I think better model to look to is the bipartisan bill H.R.
    574 that I am a cosponsor of. It was drafted by Congresswoman
    Allyson Schwartz and Congressman Joe Heck. It is called the
    Medicare Physician Payment Innovation Act of 2013. It provides
    greater detail.
        And when you compare the two, if you look at the current
    discussion draft now, I don't like that it has upfront cuts to
    providers. It doesn't really provide any innovation in what we
    need to do. We should be incentivizing physicians to transform
    their practices and participate in these innovative payment
    models. And what this discussion draft does, it says you can
    opt in if you like. And that is why I think it is too
    squishy.To use a technical term, it is kind of wimpy. And we
    can do a lot better. We have the experts here that can help us
    get there.
        If you look at H.R. 574, it repeals the Sustainable Growth
    Rate permanently, stabilizes the current payment system, it
    institutes interim measures to ensure access to care
    coordination, it gives that important boost to primary care
    that I think everyone agrees on, we can build on the reforms in
    the Affordable Care Act. And then what it does, it says we are
    going to aggressively test the models and evaluate these
    payment models. It provides a very significant transition
    period, and as Dr. Rich recommended, the focus on best
    practices and the clinical registry.
        So I would recommend to my colleagues to put out a real
    discussion draft where we can start to get to the more
    difficult decisions. One of those, what a number of you have
    mentioned, some of the high cost areas. We know we need to
    boost primary care and align doctors and have them work
    together better, but there are some certain high cost areas.
    You said there are 10 to 12 we should focus on. And, Dr. Foels,
    you said it has been difficult in transition, but you have
    arrived at some interesting payment systems.
        Could you all highlight some of the specific areas, high
    cost, that are going to need greater transition periods or you
    think we should focus on that are crying out for reform?
        Ms. Damberg. I think you are asking a broader question than
    just around measurement. So when I was talking about the 10 to
    12, these are clinical specialties that if you look at sort of
    the majority of care that seniors need, it falls into areas
    such as cardiology, gastroenterology, endocrinology, neurology.
    And recognizing that, you know, we are in this sort of space
    where there is a vacuum of measures at the moment, and the
    realistic implementation of these programs, I think the idea
    should be to focus on where most of the action is in Medicare
    and focus the measure development work in that space in the
    near term.
        So that can be used in any payment model that exists in the
    Medicare program. And one of the comments that is in my longer
    testimony is that whatever happens in the context of the SGR
    reform should work to align with programs that exist throughout
    Medicare, including the incentive program for meaningful use of
    electronic health records. There is a significant amount of
    alignment and coordination that can happen there, both as
    physicians and the LNC work with her, electronic health record
    vendors to ensure that the EHRs have the functionalities to
    capture the data that clinicians need to manage care and to
    report out these measures and to build in those clinical
    decision support tools to help physicians manage to appropriate
    care. So those exist in any system and that is something we
    should be working for across the entire Medicare program.
        Mr. Pitts. Gentlelady's time has expired.
        The chair recognize the gentleman from Pennsylvania, Dr.
    Murphy, 5 minutes for questions.
        Mr. Murphy. Thank you, Mr. Chairman. I just want to make
    sure, and I am particularly focused on the two physicians who
    are here, this basically puts the onus on the academiesand
    colleges of medicine, various subspecialties, upon you to
    provide quality standards of best clinical practices. Is that
    the way you read this? OK.
        And also that the specialties then are to develop on the
    front end the standards of protocols for best practices and
    apply those. Is that the way you read this as well? I want to
    make sure I am understanding this the same as you.
        But I also understand that different specialties are
    farther advanced than others in terms of really establishing
    protocols. Am I correct on that? Dr. Rich, am I correct on
    that?
        Dr. Rich. Yes.
        Mr. Murphy. Now, would you see this, in terms of quality
    measures, that basically this is a payment model that is based
    upon that if you adhere to the standards and protocols
    established by the medical specialties, that would be
    considered a quality measure? In other words, if they said for
    this diagnostic workup or for this diagnosis, once these
    results are in, this treatment plan, this is the protocol you
    follow and that would be the standard by which payment would be
    attached.
        Is that your understanding, Mr. Rich?
        Dr. Rich. Yes.
        Mr. Murphy. Now, what happens if a provider feels the need
    to vary from that protocol? Does this bill adequately address
    that yet or do we need some more work in that area?
        Dr. Rich.
        Dr. Rich. So I think, yes. So we work as a specialty
    society to develop on an evidence basis guidelines, and we go
    out to our membership and say get with the guidelines and here
    are the guidelines for these, you know, procedures that you are
    doing. So you are absolutely right.
        The bill doesn't address discretion that physicians have in
    using technologies and drugs that are what we would call off-
    label use. And when I was at CMS, we discussed this at great
    length, even into the Secretary's office, and the message back
    to me was that we didn't want to interfere with the discretion
    of the physicians who are taking care of these patients to use
    a technology or drug within a certain patient. It can be
    abused. And so I don't think it goes far enough here in the
    legislation.
        Mr. Murphy. Well, let me ask you this, too, and Dr. Foels,
    as well as you can answer this. Then would it be--I mean, just
    other issues here--that, for example, if a person is board
    certified in a certain specialty, that they--perhaps one of the
    ways we could word this--is that person would be granted a
    little more latitude. So, for example, if you are recommending
    something as a thoracic surgeon, and someone else who is a
    practitioner, it is not within their area but they are
    following your protocol, that your recommendation, because you
    are board certified in the area, if you are varying from that
    protocol, might that be some other wording we could look at, or
    whatever that is. I am asking the both of you if you have any
    suggestions, we would appreciate that.
        Dr. Foels. Well, to comment on the board certification.
    That has evolved significantly in the past decade. Most
    recertification in a medical specialty involves quality
    assessment improvement efforts within your practice, so I think
    board certification is much more of a tangible marker of
    quality and improvement.
        To your earlier comment about guideline, I would concur
    with Dr. Rich that there are very appropriate times where a
    guideline is not the path that should be taken with a
    particular patient. The frequency with which that occurs has
    potentially predictable ranges, and I think that the guideline
    adherence can be measured within certain degrees based on that.
        Mr. Murphy. Let me ask this, too. In terms of a payment
    model, I can understand how this could work if you have, for
    example, a hospital-based employee, where you have a large
    number of physicians and providers, a wide range of specialties
    practicing, because then the hospital could receive or the
    network could receive a global payment for that patient that
    covered life. If someone, however, is in a private practice,
    how do you work out the payment systems and still have enough
    incentive for people to work as integrated, coordinated care
    team. I am asking anybody on the panel because that is a key
    question.
        Dr. Rich. So you could do global payments. We did in
    Virginia, we did it in our hospital with independent practices.
    It is just an agreement, a transparent agreement that you can
    have, and we worked on that.
        Mr. Murphy. Who controls that payment then? I mean----
        Dr. Rich. So in Virginia, it was the hospital. The payment
    flowed down to the hospital and then they distributed it under
    agreement to the providers, and the providers were selected out
    depending on their quality and their reputation in the
    community.
        Mr. Murphy. I am a psychologist by training, and I am on
    some hospital staff, but if a physician refers to me from
    another hospital and I am not part of the hospital staff, how
    do they work out that payment system? And I know I am out of
    time, but that is something, I think, we really have to work
    out in terms of this, how we handle. And it does make reference
    to people who are nonphysician providers, but that is something
    we would appreciate your input on.
        Thank you for the time, Mr. Chairman.
        Mr. Pitts. The chair thanks the gentleman.
        Now goes to the gentlelady from California, Mrs. Capps, 5
    minutes for questions.
        Mrs. Capps. Thank you, Mr. Chairman.
        Thank you all for being here for this important discussion.
    I have long been a supporter of fixing the SGR and am happy we
    are continuing that conversation. Before I get to my questions,
    I just want to highlight, as we continue on this series of
    hearings addressing the SGR, I want to make sure we do not
    forget to address other items as well, like therapy caps that
    have historically moved alongside the yearly doc fix and share
    the common purpose of ensuring access to critical care for our
    Nation's seniors, and the opportunity to finally address the
    GPCI and other geographic payment inequalities that leave so
    many providers, especially those in my district, unfairly
    reimbursed and seniors with really fewer options.
        Now, switching gears, as we focus today on quality, I would
    like to take a broad look at our health system. There has been
    a lot of talk in here on this committee about the role of
    doctors in the healthcare system, very appropriate, but as I
    have said before, I truly believe if we are going to really
    move to a more comprehensive prevention-focused system of care,
    we need to look at the full picture of our healthcare system.
    This is especially critical when it comes to addressing
    quality.
        Most of the new delivery models like patient-centered
    medical homes and accountable care organizations emphasize
    team-based care, and they recognize the critical role and value
    of nonphysician providers. As such, I think it is important to
    acknowledge the role of other healthcare providers like nurses,
    nurse practitioners and physician's assistants in this
    conversation as well.
        So, Dr. Foels, you state in your testimony that management
    of preventive health and chronic disease is inherently team
    based, which I agree. Could you expand on how diverse providers
    could be incorporated into any reformed Medicare payment system
    and what are your thoughts about their role and how they might
    improve quality and value?
        Dr. Foels. Well, I can perhaps briefly reflect on my
    earlier comment on an existing fee-for-service reimbursement
    system, which does not really recognize team-based care to any
    great degree. A large portion of preventive care can be
    delivered by nurses or advanced practice nurses who can
    identify missed opportunities for preventive services, make
    those arrangements. This does not require the time of higher
    licensed individuals. One of our mantra is always practicing to
    the top of your license.
        Mrs. Capps. Right.
        Dr. Foels. And I think it is fairly true that nurses are
    inhibited today, in part by the payment system, from practicing
    to their full extent.
        Mrs. Capps. Thank you. I agree.
        And I want to return now to Cheryl Damberg. Under the
    proposed revision of SGR, which emphasizes best quality
    practices, nonphysician providers paid under the Medicare
    payment system are also expected to be rated on quality
    measures.
        In your testimony, Dr. Damberg, you highlighted how we must
    enlist providers as true partners in defining the measures for
    which they will be held accountable for as teams and providers.
    In your opinion, do nonphysician providers need unique
    measurement sets compared to physician providers, and what role
    do you believe they should play in defining these measures?
        Ms. Damberg. Well, let me start with the latter part of
    your question. Absolutely, they should be involved. And I think
    with all of the changes that going on in health care right now,
    practices are rethinking how they use people. But I want to
    note that what drives measurement is it is patient focused, so
    the patient's health needs determine what measure gets applied.
    And so if these other nonphysician providers are qualified to
    deliver that care that the patient needs, then those same
    measures would apply. So it is not clear to me that you would
    develop a set of measures that, say, apply to nurse
    practitioners, but rather the measures are developed around the
    patient and his or her needs.
        Mrs. Capps. I see. That is intriguing, and I guess I would
    have to say it is pretty novel. Do you see glitches in or
    challenges in going from the way we do it now to something like
    this?
        Ms. Damberg. I actually don't think it is inconsistent. If
    you look at the care that, you know, if you go to your
    physician practice site that you hope that they are delivering,
    you hope that that care is appropriate for you, given your
    gender, your age, and your health conditions, right? And the
    way in which measures are constructed, it really reflects that.
        So, you know, if you are a diabetic, they are looking to
    control your blood sugar and your lipid levels, as well as your
    blood pressure. So I think it is really an issue of, you know,
    getting the right measures that focus on the major clinical
    issues that face patients in our healthcare system.
        And then in the context of constructing those measures, you
    designate who are the appropriate specialties, and some of
    those may be nonphysicians, who should be held accountable for
    delivering that care.
        Mrs. Capps. I see some other people nodding. I know my time
    is up. Is there a general agreement with this? Yes?
        Mr. Kramer. I would just say that example of good team-
    based care, which involves nonphysicians as well as physicians,
    is the intensive outpatient care program piloted by Boeing and
    adopted by a number of other large employers for taking care of
    very sick people with multiple medical conditions. It has been
    very successful in involving all members of the team, working
    to the top of their license. It has been done in a more
    affordable way, getting better clinical outcomes, better
    patient experience, better provider experience, and lower costs
    overall. Be glad to share the additional information.
        Mrs. Capps. I would appreciate that if you include that in
    the record.
        Mr. Kramer. Yes, it is included in the supplemental
    materials we have submitted to the committee.
        Mrs. Capps. Excellent.
        Mr. Pitts. The gentlelady's time has expired.
        The chair now recognizes the gentleman, Mr. Guthrie, 5
    minutes for questions.
        Mr. Guthrie. Thank you, Mr. Chairman. Thanks for convening
    this. And I agree with our distinguished chairman emeritus, Mr.
    Dingell, working together bicameral, bipartisan, trying to
    solve an issue that whenever we get to the countdown of SGRs in
    the past, that is what I hear about when I go home, is from
    physicians and people in the medical field. And so it is
    important that we are doing this and doing it way early and
    getting ahead of it before we get to that point. So it shows
    that things are working, and hopefully we can work to get a
    solution. So I appreciate that very much.
        And to follow from my friend from California was talking
    about, just measurements and qualities, and, you know, a large
    number of the quality measures in use today were developed
    following scientific processes to ensure their continued
    importance, scientific acceptability, which is important,
    usability, feasibility for reporting. However, there are many
    more measures in widespread use that fail to meet or require
    additional resources to meet these criteria for national
    reporting.
        And Dr. Damberg, what process or processes could be enacted
    that would ensure quality measures or measurement sets are
    developed with high scientific rigor, maintain currency to the
    latest evidence-based clinical practices, and are relevant to
    new care delivery systems?
        Ms. Damberg. So if CMS were taking the lead on measure
    development, I think what they have to do is institute a
    process where they work with measure developers who understand
    the scientific requirements and steps in a measure development
    process, which includes reviewing the evidence, holding panels
    with clinical experts that can include physicians and
    nonphysicians, to ensure that the underlying science is right,
    and then working to develop a draft measure specification that
    you go out and test and validate.
        So they need to set up a rigorous transparent process to do
    this. And I think that it should involve clinical
    subspecialists and primary care physicians in identifying what
    those performance gaps are. And if you go out and you talk to
    physicians, they know where the gaps in care are, and so I
    think by linking the clinical specialists with the performance
    measure developers, I think you can have a robust development
    system that will create confidence in the system.
        Mr. Guthrie. Well, thanks. And I am also on the Telecom
    Subcommittee of this great committee, and we are dealing with
    trying to update things, and telecom is changing so fast, where
    there is a system that doesn't happen.
        So I guess also ask, in health care, my lifetime, they have
    gone from 6 weeks of recovery from gallbladder surgery to
    outpatient care. So just as those things, as we innovate and
    develop, the system has to be there and develop with that.
        Ms. Damberg. Yes, the system has to be nimble enough and
    there have to be resources available to allow for annual re-
    review of measures and updating as necessary and retiring as
    necessary.
        Mr. Guthrie. Well, thank you.
        And, Dr. Foels, how would these processes ensure that
    quality measures evolve with data accumulation and advancement
    in measure development science and appropriately account for
    the relative value of measures as they relate to other measures
    and use? I think I just used measures as every part of speech.
        Dr. Foels. Well, you know, I actually want to build off Dr.
    Damberg's comments in that regard and at the same time address
    the issues you have raised.
        So there are a couple of layers deeper that also have to be
    fully explored, examined and monitored, and one has to do with
    the methodology for attribution and accountability. I think the
    other take-forward lesson we have learned from our community is
    that, although various metrics are--certain of them are very
    attractive because of their ease of operational measurement,
    aren't terribly important because the community is already
    achieving reasonably high rates of success. And so prioritizing
    the measures to which are most important and impactful is also
    going to be, I think, a critical byproduct of whatever group is
    assigned this task.
        Mr. Guthrie. Well, it is amazing how innovative we are in
    medicine, you know, from cancer drugs to where it killed all
    cells to get the cancer cells to where they are trying to--in
    Louisville, University of Louisville, is a doctor there
    pioneering going to individual, where they actually get just
    the cancer cells, as you all know better than I. I just want to
    make sure that whatever system we have, innovation and
    processes that allow innovation and keep up as we change are in
    place. So I appreciate that very much, and I yield back 10
    seconds.
        Mr. Pitts. The chair thanks the gentleman.
        Now recognize the gentlelady from Illinois, Ms. Schakowsky,
    for 5 minutes for questions.
        Ms. Schakowsky. Thank you, Mr. Chairman.
        I have some questions for you, Dr. Damberg. Optometrists,
    podiatrists, optometrists, chiropractors have all been
    recognized by Congress within the definition of physician
    providers in the Medicare statute. Those medical providers
    follow the same rules and policies as other physician providers
    who deliver high quality services to the Medicare population.
        For example, these providers face the same threat of
    reimbursement cuts under the SGR as M.D.s or D.O.s. Using the
    same rules for all providers included within the physician
    definition allows Medicare patients the freedom to choose among
    licensed healthcare providers for covered services.
        I have concerns that the discussion draft actually would
    undermine a patient's access to the provider of their choice by
    allowing the Secretary to establish separate quality update
    incentive programs for optometrists, podiatrists, chiropractors
    than those established for M.D.s and D.O.s, and it seems to me
    this could result in providers who perform the same services
    being assessed by different quality standards and receiving
    different payment adjustments.
        So let me ask you if you think it is important for every
    physician provider treating the same problem to be measured
    using the same quality measurement system and eligible for the
    same quality update incentives?
        Ms. Damberg. I actually do. I think, again, per my earlier
    remarks, the clinical care that is delivered should be focused
    on the patient's needs, and whatever provider is addressing
    those needs should be held accountable. And I recognize that
    there are variations across health systems in how they deploy
    personnel. So I know firsthand, when I had my bunion surgery at
    Kaiser, I had a podiatrist who was involved in that. So, again,
    I think it is very important that the same set of measures
    apply as relevant.
        Ms. Schakowsky. So talking about the patient, by having
    different quality measures and incentives, do you think that
    that could affect their access to quality care and their
    choices?
        Ms. Damberg. Do I think it could affect Medicare
    beneficiaries?
        Ms. Schakowsky. Yes, different, if we had different quality
    measures, might it not affect them?
        Ms. Damberg. It is not clear to me that it would
    necessarily affect access to care. I mean, I think potentially
    the risk around access more generally in any incentive-based
    program comes when incentives get so large that they distort
    behavior, and particularly in the context of outcome measures
    you have not accounted for underlying patient factors that
    attribute to the outcome such that physicians or other types of
    practitioners may choose to avoid treating patients.
        Ms. Schakowsky. OK. And currently, don't optometrists,
    podiatrists, chiropractors follow the same criteria right now
    and successfully report the same quality measures as M.D.s and
    D.O.s?
        Ms. Damberg. In the measurement programs that I have been
    involved with, I have not seen evidence that they are reporting
    those measures. So I don't have any knowledge of that
    firsthand.
        Ms. Schakowsky. OK. Another quality initiative being
    implemented in Medicare is the electronic health record
    incentive program, which provides incentive payments, as you
    know, to physician providers as they adopt, implement, upgrade,
    demonstrate meaningful use of the her technology. Do you know
    if optometrists, podiatrists and chiropractors are included in
    this program?
        Ms. Damberg. I do not know that.
        Ms. Schakowsky. OK. And let me see if--I think these all
    deal with those. You may not know the answer to this. The
    answer is yes, actually. Like these quality initiatives, isn't
    it important for the quality update incentive program being
    proposed for Medicare to require all physician providers in the
    Medicare program, including those other providers I listed, to
    use the same standards and receive the same incentives for the
    same services? I think it is another way of asking the same
    question.
        Ms. Damberg. The answer should be yes, they should be held
    accountable to the same standards. I would be loathe to set up
    two different incentive systems. I just think the complexity of
    it and sort of the challenge is in sending very different
    signals. If anything, what we want to be doing is be creating
    greater alignment across physicians, other practitioners in the
    ambulatory care setting as well as aligning incentives across
    the system in which the patient travels. So aligning incentives
    between physicians and hospitals, that is so very critical. And
    again, the extent to which this bill can help push that ball
    down the field a bit more would be very helpful.
        Ms. Schakowsky. Mr. Chairman, I just want to say how much I
    appreciate the tone of this hearing and this discussion, and I
    hope we could have more like it. Thank you very much.
        Mr. Pitts. The chair thanks the gentlelady.
        Now recognize the gentleman from Virginia, Mr. Griffith, 5
    minutes for questions.
        Mr. Griffith. Thank you very much, Mr. Chairman.
        I appreciate all of you being here today, and I know there
    is some good questions that you already answered, and I am
    going to yield the rest of my time to Dr. Burgess for
    additional good questions.
        Mr. Burgess. And I thank the gentleman for yielding.
        Mr. Kramer, let me just ask you a question. In your
    testimony, you talked about incentives and providing--building
    incentives into the structure, but oftentimes, here in the
    people's House, we end up talking about making something
    punitive rather than providing an incentive. Can you speak to
    that and the differential between those two activities,
    building in an incentive versus building in a punitive
    activity?
        Mr. Kramer. I will offer my opinions on this, although
    maybe it is best answered by a psychologist. But I think that
    my experience and experience of our members at PBGH is that
    positive incentives for doing the right thing are very
    powerful. There are occasions, however, we want to put in place
    a mechanism to avoid bad things, and it may be that in some
    situations that some kind of penalty would be appropriate.
        For example, we want to avoid infections, you know, high
    rates of infection, we want to avoid high rates of mortality,
    we want to avoid high rates of unnecessary hospital
    readmissions. There may be some situations like that in which a
    penalty would be appropriate, but I think in most cases they
    can be restructured as a positive incentive. So the negative
    side of infections is infections are too high, therefore reward
    progress on reducing infections and frame it as a positive
    incentive, I think that could be most effective in moving us in
    a direction so that we get the results we want.
        Mr. Burgess. You know, my old epidemiology instructor from
    Southwestern Medical School used to tell me that in order to
    adequately measure something you had to eliminate fear, and the
    providers must not be in fear; otherwise, they are not going to
    be as forthcoming with you when they have problems. And that is
    one of the difficulties I see in constructing a system that is
    more punitive than one based on incentives. So I agree with
    you, and certainly the prescription drug or the providing for
    electronic e-prescribing, it wasn't part of the healthcare law,
    it was part of the stimulus bill, you are actually going to
    build some resentment toward e-prescribing because of the fact
    that it is a reimbursement reduction if that doesn't happen,
    rather than building in an incentive. And I hope we can be
    sensitive and careful about that as we construct this.
        Dr. Foels, I just want to continue our discussion on the
    fee-for-service aspect for a moment where we kind of got cut
    off by time, but I do feel so strongly that in our reform of
    the SGR, you have to allow the--I mean, a lot of physicians of
    my age group, fee for service is what we have always known. We
    are goal directed. It is an incentive to which we respond. And
    to just start out with the premise that we are going to
    eliminate all fee-for-service practice in many ways I fear will
    only harden those people who would be resistant to the new
    payment models. And I would just encourage us, as we think
    about this, there has to be a place for the fee-for-service
    physician in the new Medicare model, in the new SGR, whatever
    is the follow-on from the SGR. I always use the example of
    Muleshoe, Texas, literally a one-stoplight town with one GP,
    and it is hard for him to be an ACO. I mean, I guess he can
    call himself ACO, but it is hard for him to be an ACO because
    he is just a country doc working in a little town and he gets
    paid for his services.
        I think you have to allow him the ability to continue to
    practice. Do you disagree with that?
        Dr. Foels. I agree with your point. I think, again, there
    are systems of care that are all various levels of maturity and
    depths of integration across the country. Many of them will be
    willing to accept a more advanced payment system early on.
    Others----
        Mr. Burgess. And I agree with you, but it should be their
    choice. It should be their choice when they go into that
    system. And if the guy in Muleshoe can't do it, we can't
    exclude him because he is all they have got, correct?
        Dr. Foels. And to your earlier point, too, about the
    accommodation of physicians to a new system of payment, we have
    probably over a century of experience in the United States with
    a fee-for-service system, so it is something that everyone is
    extremely accustomed to and our systems of payment are all
    operationally designed around it. And we even found, in our own
    experience, despite our deep collaboration with our primary
    care community, that they were not immediately willing to
    transition to a new care model until we profiled them under how
    they would actually perform under that and we made the
    methodology completely transparent. But that took an additional
    year or two for them to be willfully accepting of the change.
        Mr. Burgess. So that is an educational endeavor.
        Thank you, Mr. Chairman.
        Mr. Pitts. The chair thanks the gentleman.
        Now recognize the gentlelady from North Carolina, Mrs.
    Ellmers, for 5 minutes for questions.
        Mrs. Ellmers. Thank you, Mr. Chairman. I appreciate so much
    the opportunity to be participating in this subcommittee
    hearing on SGR reform. I think that it is something that is
    vital to healthcare reform into the future.
        And I thank our panel for being here and giving your input
    as well. I certainly associate myself with many of your
    comments on best practices, Dr. Damberg, especially when we are
    talking about making improvements with science-based, real
    information that will actually improve our healthcare system.
        That brings me, Dr. Kramer, to one of the other discussions
    that was just taking place. We were talking about whether there
    is room or should there be room for penalties, essentially, I
    will call it that. And one of my big concerns is that many
    times physicians are placed in a position because there is a
    new best practice that is established, may or may not be
    science based, but Medicare will require that they adhere to
    that, and it may end up in a bad patient outcome, an increase
    in infection rate or something else.
        In your words, how would you address that? How can we avoid
    that situation happening where a physician possibly may be
    penalized or cannot participate in an incentive program because
    there is some best practice that is put in place? How could we
    address that?
        Mr. Kramer. I would answer by saying that if we keep the
    focus on the patient, and the results, the outcome, the
    clinical outcomes to the patient and the patient's experience
    in those outcomes, that will address many of the underlying
    problems that currently exist. So, for example, rather than
    focussing on whether a clinical best practice was followed or a
    clinical guideline was followed, rigid adherence to that can
    sometimes lead to bad results, the inappropriate results.
        Mrs. Ellmers. Yes.
        Mr. Kramer. So rather than focussing on rigid adherence to
    the clinical practice guideline----
        Mrs. Ellmers. It should be patient centered. Patient
    outcome.
        Mr. Kramer. Patient centered. What happened to the patient?
    Was that best for the patient? Did it get the right results?
    That is what physicians are working toward, that is what drives
    them as individuals, and that is what we ought to be rewarding.
        Mrs. Ellmers. Thank you. I appreciate you saying that. That
    is my opinion as well.
        Dr. Damberg, in the draft of our legislation that is
    definitely ongoing, we are going to be taking in so much more
    feedback to make sure that what we put in place is an actual
    working model that will work in the real world and not just in
    theory. In your testimony, you talk about the collaboration
    between CMS and establishing a process where measures can be
    developed between clinical specialists and correcting that
    performance gap area. In your opinion, how important is this
    relationship between CMS and medical providers in maintaining
    that value-based performance?
        Ms. Damberg. So I think for this program to be successful
    CMS and the physicians have to work in a very close
    partnership, and that partnership starts with the measure
    development process, but it extends way beyond that to CMS
    trying to figure out how to support physicians regardless of
    what type of practice they are in, but I would say especially
    focused on the kinds of practice that Mr. Burgess was talking
    about, which are, you know, the smallish practices that may be
    miles away----
        Mrs. Ellmers. Right.
        Ms. Damberg [continuing]. From big centers where they can
    work with other partners to develop capacity. I think that
    there is a lot of work that needs to go on, on the ground, to
    develop capacity in practices so that they can achieve the
    results that we want them to. And there are various entities in
    communities across this country who are already working with
    providers.
        And I think that CMS should look to leverage those
    partnerships with community players, and I also think that CMS
    should look very carefully at private commercial health plans
    who are also investing substantial resources to work with
    community providers and build capacity. And I think if they
    could align the deployment of those improvement resources and
    work in partnership, that would be a huge help to providers.
    And I think there are lots of incentives in place for that to
    happen because many of the commercial health plans participate
    in Medicare Advantage and are at risk financially for a quality
    bonus payment themselves.
        Mrs. Ellmers. Thank you. I appreciate your comments.
        And I see that I have run out of time. Thank you, Mr.
    Chairman.
        Mr. Pitts. The chair thanks the gentlelady.
        Now recognize the gentleman from Florida, Mr. Bilirakis,
    for 5 minutes.
        Mr. Bilirakis. Thank you, Mr. Chairman, I appreciate it.
    And I thank the panel for their testimony. I have a couple of
    questions.
        Start with Dr. Damberg. You talk about a continuum of
    performance. Should we target a percentage for performance of
    quality measures? For example, should the average physicians
    meet 75 percent or 85 percent of performance measures? If the
    averages are above the targeted percentage, should we
    recalibrate the metrics every 5 years or so to adjust the
    metrics and increase the standard of care?
        Ms. Damberg. So you are talking about where to set these
    performance thresholds?
        Mr. Bilirakis. Sure.
        Ms. Damberg. Yes. So there are several different ways in
    which you can establish benchmarks. One is to use national
    performance benchmarks that are already in place. If you look
    at the National Committee for Quality Assurance, they have many
    benchmarks already for ambulatory care measures.
        But there are more sophisticated methods. I would call your
    attention to my testimony where I reference a report by a
    statistician named William Rogers and Dana Safran at Blue Cross
    Blue Shield of Massachusetts, and I am not going to go mathy on
    you, but they used the beta-binomial distribution to set this.
    And in essence, where they set the top threshold tends to
    remain very stable over time, and it sets up sort of the
    optimal performance that can be delivered safely. Because I
    know one of the previous questions was around, you know, are we
    going to not give physicians some flexibility around the care
    they provide? I don't think we personally want to drive
    everybody to 100 percent, because I think there are some
    reasons why patients should not get care.
        Mr. Bilirakis. All right, thank you very much.
        This is for the entire panel. Do you support quality
    measures tailored to specific diseases such as diabetes and
    Parkinson's? And if so, how do you develop quality measures for
    rare diseases? These are hard to diagnose diseases with small
    populations. If we do develop metrics for specific diseases or
    conditions, how do we responsibly develop measures for these
    conditions when research may be somewhat limited? Whoever would
    like to address it first.
        Mr. Kramer. We do need to develop better measures for
    disease conditions, both common conditions, unfortunately
    common conditions, such as diabetes, as well as rare
    conditions. I think a number of those measures already exist,
    or are in the process of being developed and through the
    endorsement process. I think the National Quality Forum has
    done a reasonably good job of bringing together clinicians,
    patients, patient-advocate groups, as well as other
    stakeholders to find the best measures, encourage measure
    developers to put those forward, and to build on what is
    already there so that those measures are in place and are
    available and the outcome results are available to clinicians
    for their clinical quality improvement efforts, to teams, who
    are often in a very good situation to manage the care for
    someone with chronic conditions, but also to patients so that
    they can identify the best providers and participate in their
    care.
        Mr. Bilirakis. Anyone else?
        Dr. Rich. Definitely should have measures for disease
    conditions. So when I was at CMS in 2008 we did an analysis of
    the three biggest cost buckets for Medicare populations, and
    depending on what decile of Medicare patient you were looking
    at, it was always congestive heart failure, coronary artery
    disease, and cancer. And you could reverse the order depending
    on how old the patient was. But that represented somewhere
    around 45 to 47 percent of the healthcare dollar that we spent
    at Medicare. And if you are going to create disease-specific
    measures you should start there, and I think that would be what
    Mrs. Castor would want to hear as well.
        I do think that there is a team approach to taking care of
    people with coronary artery disease. Myself, a cardiologist,
    PCP, all care for these patients, the same for heart failure,
    and creating a robust set of measures for a disease-specific
    entity like that across specialties and cross into primary
    care.
        Ms. Damberg. May I add one more point?
        Mr. Bilirakis. Yes, please.
        Ms. Damberg. I think that the other thing that I would keep
    in mind is, right now we have some one-off measures, so in the
    area of diabetes. I would encourage development of measures
    with an entire episode of care. So if you think of hip
    replacement surgery, you know, you may start in the ambulatory
    setting, you transition into the hospital and then you may end
    up in post-acute care. And so we need to look at this larger
    bundle of measures that hang together to cut across that
    continuum.
        Mr. Bilirakis. Anyone else, does anyone disagree with the
    disease-related measures, or specific measures?
        Dr. Foels. If I could just reiterate a point that was made
    earlier, that a particular quality measure does cross
    disciplines. It follows the patient. And we have had some
    recent experience with applying diabetic measures to
    cardiologists who are also caring for those patients, and we
    know diabetes is a strong risk factor for coronary disease.
        And it is important that the cardiologists are also a
    participant in improving diabetes care as well. It may not be
    an area to which they feel they should naturally be measured,
    but we feel as an integral part of an entire team that cares
    for that particular chronic condition, it would be appropriate
    to apply measures in that regard.
        Mr. Bilirakis. I have one more question, Mr. Chairman.
        Mr. Pitts. Go ahead.
        Mr. Bilirakis. Just briefly. What about patients? Should
    patients groups have a role or input into the process when
    determining these measures?
        Mr. Kramer. Absolutely, yes. Patients is why we are here.
    We are here to take care of people who are beneficiaries of
    Medicare. And more broadly, if it is done right for Medicare,
    can help our entire healthcare system. By keeping a patient
    focus, finding out what is important to them in terms of their
    outcomes, making sure we have measures of those outcomes, and
    then providing rewards to physicians and care teams to achieve
    those outcomes, that will do what is right for the patient. If
    it is done right for the patients, it will work for the rest of
    us.
        Mr. Bilirakis. Thank you, Mr. Chairman, I yield back.
        Mr. Pitts. The chair thanks the gentleman.
        Now recognize the gentleman from Louisiana, Dr. Cassidy, 5
    minutes for questions.
        Mr. Cassidy. Thank you, Mr. Chairman.
        First, Dr. Rich, I will just say that there is a T-surgeon,
    Gene Berry, that first acquainted me with your data set on
    quality. Very impressed with it. I just thought about it ever
    since. So let me compliment your society and my local doc who
    acquainted me with that.
        Mr. Kramer, I enjoyed your remarks. If you are the guy that
    broke your face playing basketball, I got to tell you, man,
    your hair is a little gray to be up there on the court. But
    that said, you know. Listen, we do have to be patient focused.
        Now, I will say that solutions in Washington tend to be
    big. Affordable care organizations are huge. And as a doc who
    is thinking that oftentimes you are going to have a four- or
    five-person practice in which, unless you figure out how to
    align the patient with the interest of that four- or five-
    person practice, you are not really going to serve those
    patients best.
        Then, Dr. Foels, I was impressed that your organization
    seems to have been somewhat entrepreneurial adapting. My
    thinking is that we need something, we call it in this
    legislation an alternative payment model, where you take that
    entrepreneurial group of docs, whoever they might be, and you
    allow them to come up with a different model that none of us
    have thought about, but in their circumstances works for their
    patients and for their practice better than anything else, and
    that CMS, frankly, would be required to approve unless they
    could show why they should not, as long as the folks doing the
    model were willing to take the risk. Any thoughts on that?
        Dr. Foels. Yes, I would concur. Our participation with
    other like plans, regional, not-for-profit insurers that also
    have deeply collaborative efforts with the community, are
    moving toward--and we do that work through the Alliance of
    Community Health Plans and share a lot of excellent work across
    disciplines. But what we have found, although we work toward a
    common goal, we have taken different approaches, and many of
    those approaches have all been equally successful.
        Mr. Cassidy. Yes.
        Dr. Foels. But there are significant and slight differences
    among them that we need to recognize are regional.
        Mr. Cassidy. I totally get that. If your final outcome is
    giving access to high-quality medicine at an affordable cost,
    there may be different goals depending upon the practice and
    upon the patients. So, one, compliments you all for doing so.
    And, two, I hope this legislation enshrines that.
        Dr. Damberg, one thing--I could have asked this of many of
    you--one thing that has been occurring to me though, I am liver
    doctor who takes of cirrhotics, I am always struck that primary
    care doesn't want to touch that cirrhotic once they have
    cirrhosis because it is such a fragile patient. So what do you
    think, I have tried to coin a phrase called, not primary care
    physician, but principal care physician. If you take someone
    like a nephrologist caring for the renal failure patient, she
    is really the principal care physician even though she is not,
    quote, the ``primary care physician.'' Cancer doctors. Patients
    with heart failure. And really trying to align a payment model
    to recognize that once someone has CHF no one touches that
    patient unless the cardiologist first blesses the touching.
    Does that make sense? I see Dr. Rich nodding his head.
        Do you all have any thoughts on this principal care
    concept? Dr. Damberg, I started it with you.
        Ms. Damberg. So let me ask you a question back.
        Mr. Cassidy. Yes.
        Ms. Damberg. Are you considering this person--hopefully
    this is not too much of a value-laden term--almost like a
    gatekeeper for that person's care in terms of coordinating the
    management?
        Mr. Cassidy. The principal care physician would then take
    on the responsibilities currently ascribed to the primary care.
    It just recognizes that if somebody has cirrhosis----
        Ms. Damberg. Something very complex.
        Mr. Cassidy [continuing]. They become the one who becomes
    the coordinator, they become the hub off which everyone else
    radiates.
        Ms. Damberg. Yes. No, I actually think there is potentially
    some value in that. I think we are looking to primary care, and
    particularly medical homes, to coordinate a lot of care, but
    there may be care that is sort of outside the purview of
    primary care where I think it could be useful to set up someone
    who would be----
        Mr. Cassidy. I think if you look at Medical Advantage's
    special needs programs, most of those folks are probably not
    managed by primary care in an urban setting. They are managed
    by some gal, some guy who happens to be a specialist in their
    condition.
        Mr. Kramer, from the business perspective any thoughts you
    have?
        Mr. Kramer. Yes, I think this makes sense. I think a term
    that we actually use, informally, is accountable care
    physician. I think it gets at the same thing. There is a
    physician that may be a specialist, may be a primary care
    physician, but for certain kinds of patients it would make
    sense for the specialist to be the accountable physician for
    the care that is delivered to that patient working with his or
    her team.
        Mr. Cassidy. So if there was a payment model in which--an
    alternative payment model in which a group of
    gastroenterologists would take on the risk bearing of a group
    of cirrhotics pre-transplant patients, they would then become
    the accountable physician, if you will, at risk, and then
    coordinating the care, being the primary care doc for a group
    of fragile patients. You all are nodding your head yes.
        Mr. Kramer. And rewarded for the quality and the total
    resources used on behalf of those patients.
        Mr. Cassidy. Yes. Well, thank you for your input.
        I yield back, Mr. Chairman.
        Mr. Pitts. The chair thanks the gentleman.
        Dr. Christensen has a unanimous consent request.
        Mrs. Christensen. Thank you, Mr. Chairman. Yes, I ask
    unanimous consent to insert into the hearing record a paper
    from the National Senior Citizens Law Center and a letter from
    AFSCME, both on balanced billing.
        Mr. Pitts. Without objection, so ordered.
        [The information appears at the conclusion of the record.]
        Mrs. Christensen. Thank you.
        Mr. Pitts. All right, that completes our first round. We
    will do one follow-up per side.
        Dr. Burgess, 5 minutes for follow-up.
        Mr. Burgess. Thank you, Mr. Chairman.
        Dr. Damberg, let me just ask you, can you discuss at all to
    the extent that providers are dealing with measure reporting,
    quality improvements, and financial arrangements to link
    quality payment, is this something that is ongoing that you
    have observed?
        Ms. Damberg. So, yes, indeed. I would say the majority of
    physicians, at least in primary care in this country, have
    ongoing measurement reporting of some sort and payment tied to
    performance. In the clinical specialty areas, it tends to be
    tied to, again, the set of measures that have been identified,
    whether that is care for diabetes or cardiac-type measures. In
    some cases those physicians' payments are also tied to
    performance currently.
        Mr. Burgess. Just specifically in the primary care world,
    so those measures have already been developed. Are we going
    to----
        Ms. Damberg. They have been developed. They are in
    widespread use. Many of the pay-for-performance programs in the
    private sector have actually been in operation since about
    2003. So it is a long period of time.
        Mr. Burgess. But do you think it is possibly to integrate
    them into whatever happens in the Medicare world?
        Ms. Damberg. Absolutely, and I think the CMS should be
    looking to align the measures. So the ambulatory physicians are
    already accountable through their health plans for the Medicare
    Advantage measures. Those measures represent a really strong
    starting point, and that you are basically not asking those
    physicians to do something different.
        Mr. Burgess. Why do you suspect that there has not been
    wider involvement of that or wider institutionalization of
    that?
        Ms. Damberg. Of the fee-for-service side of Medicare?
        Mr. Burgess. Well, on the Medicare Advantage side where it
    does seem like you have got happy providers, you have got happy
    patients, the cost is less. Why is there not wider adoption of
    that within the Medicare system itself? Because there does seem
    to be some resistance to the Medicare Advantage model.
        Ms. Damberg. Well, I think if you look at the physician
    value-based payment modifier program, that is essentially
    trying to move down that path with physicians across the board
    within Medicare. So even absent the SGR, that work is in
    process. And again, I think it is going to be the primary care
    physicians who are first out of the gate on that because of the
    existence of measures.
        Mr. Burgess. Yes, in many ways, if the SGR could not be
    reformed, if we didn't have the favorable CBO score winds at
    our back, it has always seemed to me that Medicare Advantage
    may offer a way forward on whatever happens with SGR down the
    road. Is that a fair observation?
        Ms. Damberg. I think possibly. I do think Medicare
    Advantage has been a leader, and it is not surprising because
    much of the measure, the performance measurement work that has
    gone on historically has been on the managed care side even in
    the commercial sector. But even private payers recognized they
    were not getting value out of the providers on the fee-for-
    service side, and so they shifted those programs into play in
    fee for service.
        Mr. Burgess. Very well. Let me just ask a question,
    generally, and anyone can feel free to answer or not. But
    should the quality improvements undertaken by a physician or a
    practice, should the quality improvements themselves be
    included as a component of whatever performance-based payment
    is adopted? If you have a doctor who realizes that at the start
    of the year they are not performing as well as they might, and
    improves their performance, can that be taken into account, the
    fact that they have improved their performance?
        Dr. Rich. Yes, absolutely, I think. And if you look at the
    hospital value-based purchasing program, it is written into
    that. So you can have targets, we can have absolute targets, or
    you can have a quality improvement incentive. So you can't take
    a low performer and expect them to get to 90th percentile in 1
    year, so you ought to be able to reward them to go from the
    10th to the 30th percentile as an incentive to keep trying.
        Mr. Burgess. And just as a practical matter, you think that
    is something that should be included in whatever follows on
    from SGR?
        Dr. Rich. Yes, absolutely.
        Mr. Burgess. Mr. Chairman, I shouldn't do this, but I
    actually want to recognize Dr. John O'Shea, who is here in the
    audience. He has had a big hand in helping us get to where we
    are today, and we were sorry to lose him, but at the same time,
    we are grateful to have had the association in the past couple
    of years where he has been so instrumental in getting this
    tough problem moved along. So I will yield back my time.
        Mr. Pitts. The chair completely agrees with that statement.
    Thank you very much.
        The chair recognizes Dr. Christensen for 5 minutes for a
    follow-up.
        Mrs. Christensen. Thank you, Mr. Chairman, and I don't
    think I will take all of 5 minutes. But this is a little bit of
    a different question. But we have not been able to fix
    malpractice, do malpractice reform. And I wonder if the
    panelists think that the reforms that we are talking about, and
    comparative effectiveness research and some of the other
    provisions could lower the risk of lawsuits and perhaps even
    the cost of liability insurance?
        Dr. Rich. I do. I think if you get providers to participate
    in clinical registries and quality improvement programs, I
    think that would be recognized, not only by insurance companies
    to lower your cost, but just in general I think it would help
    the healthcare system to reduce complications and reduce
    lawsuits.
        Mrs. Christensen. OK. Well, a lot of what we are talking
    about in terms of reform relies a lot on primary care
    physicians. Do you have any concerns that we are not producing
    enough family physicians, or primary care physicians, or do you
    think we are on target for where we need to be with primary
    care physicians? And if not, what do we do until we get there?
        Dr. Foels. If I may comment, I have very deep concerns
    about the adequacy of the primary care physician workforce.
    When, again, one steps back and thinks about a viable, vital
    primary care team, it takes the discussion to a little
    different level above and beyond recruiting interested
    residents in a primary care professional track. I think there
    is considerable work that has yet to be realized in making this
    an attractive specialty.
        I think the reengineering of primary care alone, and the
    ease of work through efficient systems of care that will
    evolve, which I hope will evolve over very short periods of
    time in primary care, will again make this a very attractive
    discipline. And to my early earlier comment, I think we are
    still underutilizing the valuable talents of nursing staff to
    provide care, and a reform payment system would be a valuable
    contribution toward moving in that direction of, again,
    designing a viable, vital primary care team.
        Mrs. Christensen. Thank you.
        Anyone else?
        Ms. Damberg. I also share that concern, and I think one of
    the issues that hasn't been addressed here, but I know is being
    talked about is reweighting the payments such that, you know,
    if we are going to talk about incentives, right now I think the
    incentives in the system in terms of the payment structure
    really go against going into primary care as a specialty. So I
    think we need to look at ways to correct some of those
    imbalances in payments.
        Mrs. Christensen. Thank you.
        Mr. Chairman, I don't have any other questions, so I will
    yield back my time.
        Mr. Pitts. All right. Chair thanks the gentlelady.
        That completes our questioning. I am sure some members will
    have additional questions. We will submit those to you in
    writing. We ask that you please respond promptly.
        And as I stated in the opening statement, we are seeking
    substantive feedback on ways to complete this legislative
    draft. I would encourage all interested parties to submit their
    comments to the committee by next week.
        I remind the members, they have 10 business days to submit
    questions for the record, so they should submit their questions
    by the close of business, Wednesday, June 19th.
        Without objection, the subcommittee is adjourned.
        [Whereupon, at 12:17 p.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

                    Prepared statement of Hon. Ralph M. Hall

        Mr. Chairman, I would like to commend you for all the hard
    work that you have done, including the coordination with the
    Ways and Means Committee, to bring us to this point where we
    can have a meaningful hearing on the Sustainable Growth Rate
    issue. This is a complex issue, and the stakeholders are many,
    but it is an issue that we must resolve before the end of the
    year.
        As we move forward in this process, we are going to need to
    resolve not just the important details of the ``doc fix''
    issue, but also the need for spending offsets to assure that
    the legislation does not have a significant impact on our
    budget. In that regard, I would like to suggest one budget
    savings that might be included as an offset in this bill. It is
    the language of H.R.1076, which is legislation that I have
    introduced along with Mr. Olson and others. Our bill would
    assist political subdivision health care pools by giving
    employees in these pools the same premium tax credits and cost
    sharing assistance that will be available in the new health
    care exchanges. But the employees in these health care pools
    would only get the assistance on one condition--if they can
    show that doing so would save the federal government money.
        Most states have one or more of these health care pools. In
    Texas, we have one for small towns and one for county
    employees. In our case, the health care plans offered in these
    pools are expected to be less expensive that those that will be
    available in the exchanges. So keeping these employees where
    they are--in less expensive plans that provide the same quality
    of coverage--means that the value of the tax credit will be
    less, and the impact on the federal budget will be less.
        Mr. Brady, who Chairs the Ways and Means Health
    Subcommittee, has asked CBO for a score of this language. When
    we get that score and find out how much budget savings the
    language will generate, I hope we can consider including it in
    this bill as an offset.
        I look forward to working closely with the Chairman on this
    idea.
                                  ----------

                   Prepared statement of Hon. Henry A. Waxman

        I would like to thank the Chairman for holding this
    hearing. Today's discussion will focus on some of the critical
    questions the Committee must address as we look to finally
    solve the problem of the broken Medicare Sustainable Growth
    Rate formula which has been plaguing Medicare for too long.
        It's clear from this and others hearings we've held on the
    topic that there is broad consensus on the need to fix this
    problem, and even consensus on which direction we need to move
    and the broader policy goals that will get us there. The
    question is how to get there, and, like all things, the devil
    is in the details.
        The Affordable Care Act provided a good foundation and
    charted the right path forward. Through its support for new
    delivery and payment models like accountable care
    organizations, bundled payments, medical homes, and initiatives
    that boost primary care--it moves us in the direction of
    improved quality, efficiency, and value.
        I am pleased that the Chairman has reached out to us to try
    to move forward in a bipartisan fashion. Our discussions so far
    have been largely fruitful. The early-stage, draft legislative
    language released by the Chairmen adheres to these shared
    policy goals on which we've reached broad agreement.
        However, thoughtfully crafting legislative language that
    effectuates these goals is a challenge--one that we are
    doggedly attacking in collaboration. All policies have
    consequences, some are apparent and some are unforeseen (as
    we've painfully witnessed with SGR). And this is precisely why
    this hearing is important, but also why we need to continue to
    refine, vet and develop the concepts that will move us from a
    volume based system to a value based system of physician
    payments.
        With that in mind, there are three key challenges that I'm
    interested in hearing about today: (1) Recognizing that fee for
    service medicine will remain a part of our health system, how
    do we best deal with incentives that drive volume at the
    expense of value; (2) How do we get physicians to accelerate
    the move to new delivery system models that can improve care
    without compromising cost; and (3) How do we make sure we don't
    throw the baby out with the bathwater--for example, CMS has
    been working to build a solid array of quality measurement
    programs, and has been working to develop new models--we don't
    want to be starting from scratch.
        I am glad to see the Chairman continuing to move forward on
    this issue early in this Congress, and we look forward to
    continuing to refine these policies through a bi-partisan
    approach.
                                  ----------

                 Prepared statement of Hon. Frank Pallone, Jr.

        Thank you Chairman Pitts. I commend you for your continued
    commitment to addressing Medicare's flawed sustainable growth
    rate (SGR) payment model. Over the past few weeks, our staff
    have come together and had meaningful conversations on this
    topic. While I have not signed on to the discussion draft
    before us today, I can assure you that the Democratic staff are
    still working to find a permanent fix to the SGR, and look
    forward to continuing to work with the Republican staff to do
    so.
        As I have said before, fixing the SGR system is one of my
    top priorities. For too long, Congress has passed short-term
    fixes to override arbitrary cuts to physician payments
    generated by the SGR formula. It is not fair for physicians or
    their beneficiaries to continually be faced with uncertainty,
    and these short-term fixes are not financially sustainable. It
    is time for us to come together in a bipartisan manner to
    repeal and replace the SGR formula.
        We can all agree that the current SGR system is unstable,
    unreliable, and unfair. I also believe that, broadly, we all
    have the same goals for what an SGR fix will look like.
    However, getting these goals into legislative language is a
    complicated task. With so many moving parts, it is critical
    that we fully understand the consequences of each provision and
    gather views from all stakeholders. This is not a process that
    should be rushed. Let's work together to make sure we get this
    right.
        A new payment model should focus less on volume of services
    provided, and instead rely upon improved outcomes, quality,
    safety, and efficiency. By focusing on these goals, we can
    improve patient experience and reduce the growth in health care
    spending simultaneously. While there may still be a need for a
    fee-for-service option within the future payment system, a new
    system must better encourage coordinated care while
    incentivizing prevention and wellness within the patient.
        The Affordable Care Act established a number of new
    provider arrangements under Medicare, such as new Accountable
    Care Organizations (ACOs), which encourage cooperation and
    coordination among providers, hospitals, and suppliers, so that
    patients receive high-quality, efficient, and cost-effective
    care. As we work to replace the SGR, we should look to these
    programs as a starting point for developing a payment model
    that moves away from traditional fee-for-service and toward a
    system that focuses on quality and outcomes.
        I look forward to hearing from our witnesses today about
    their perspectives on the best way to prioritize quality and
    address the flawed SGR, and I look forward to continuing to
    work with my colleagues and all stakeholders to finally find a
    permanent fix.
        Thank you.
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