[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:]
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    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:]
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    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:]
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    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:]
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    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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