[Senate Hearing 113-273]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-273
 
                           ADVANCING REFORM: 
                      MEDICARE PHYSICIANS PAYMENTS 

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

                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 14, 2013

                               __________

                         U.S. GOVERNMENT PRINTING OFFICE 

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            Printed for the use of the Committee on Finance


                          COMMITTEE ON FINANCE

                     MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West         ORRIN G. HATCH, Utah
Virginia                             CHUCK GRASSLEY, Iowa
RON WYDEN, Oregon                    MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         PAT ROBERTS, Kansas
DEBBIE STABENOW, Michigan            MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington           JOHN CORNYN, Texas
BILL NELSON, Florida                 JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey          RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware           JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland         ROB PORTMAN, Ohio
SHERROD BROWN, Ohio                  PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado
ROBERT P. CASEY, Jr., Pennsylvania

                      Amber Cottle, Staff Director

               Chris Campbell, Republican Staff Director

                                  (ii)



                            C O N T E N T S

                               __________

                           OPENING STATEMENTS

                                                                   Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman, 
  Committee on Finance...........................................     1
Hatch, Hon. Orrin G., a U.S. Senator from Utah...................     3

                               WITNESSES

Miller, Mark E., Ph.D., Executive Director, Medicare Payment 
  Advisory Commission (MedPAC), Washington, DC...................     4
Steinwald, A. Bruce, MBA, president, Bruce Steinwald Consulting, 
  Washington, DC.................................................     6
Patel, Kavita K., M.D., M.S., fellow and managing director, the 
  Engelberg Center for Health Care Reform, the Brookings 
  Institution, Washington, DC....................................     7

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:
    Opening statement............................................     1
    Prepared statement...........................................    21
Hatch, Hon. Orrin G.:
    Opening statement............................................     3
    Prepared statement...........................................    23
Miller, Mark E., Ph.D.:
    Testimony....................................................     4
    Prepared statement with attachments..........................    25
Patel, Kavita K., M.D., M.S.:
    Testimony....................................................     7
    Prepared statement...........................................    64
Steinwald, A. Bruce, MBA:
    Testimony....................................................     6
    Prepared statement...........................................    79

                             Communications

AARP et al.......................................................    89
Genesis HealthCare, LLC..........................................    94
Mayo Clinic......................................................    99
Medicare Rights Center and Center for Medicare Advocacy, Inc.....   106

                                 (iii)


                           ADVANCING REFORM: 
                      MEDICARE PHYSICIANS PAYMENTS

                              ----------                              


                         TUESDAY, MAY 14, 2013

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10 a.m., 
in room SD-215, Dirksen Senate Office Building, Hon. Max Baucus 
(chairman of the committee) presiding.
    Present: Senators Cantwell, Cardin, Hatch, Crapo, and 
Isakson.
    Also present: Democratic Staff: Mac Campbell, General 
Counsel; David Schwartz, Chief Health Counsel; Karen Fisher, 
Professional Staff Member; and Peter Sokolove, Robert Wood 
Johnson Fellow. Republican Staff: Chris Campbell, Staff 
Director; Jay Khosla, Chief Health Counsel Policy Director; and 
Dan Todd, Health Policy Advisor.

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

    The Chairman. The committee will come to order.
    The best-selling business author Tom Peters once said, ``If 
a window of opportunity appears, do not pull down the shade.'' 
We should keep those words in mind today as we examine the 
method Medicare uses to determine physician payments, the 
Sustainable Growth Rate, otherwise known as the SGR.
    For the past 10 years, this flawed formula has dictated 
drastic reductions in Medicare payment rates. Next year, 
physicians will face a 25-percent cut under the SGR. This deep 
cut would mean many seniors would lose access to their doctor.
    Each year, Congress has intervened to prevent these cuts. 
But we need to get beyond this annual ``doc fix'' ritual. The 
year-in, year-out uncertainty is not fair to physicians. It is 
not fair to seniors.
    Since 2003, Congress has made 15 short-term fixes to the 
SGR at a cost of nearly $150 billion. In 2010 alone, we passed 
6 short-term fixes. It is time to break this cycle.
    Ninety-seven percent of Medicare beneficiaries see a 
physician at least once a year, and most beneficiaries with 
chronic conditions see their doctor at least monthly. We need 
to ensure that seniors can continue to see their doctors. We 
must permanently repeal this broken formula, and we need to do 
it this year.
    The most recent 10-year score for repealing the SGR is $138 
billion. While this is a large amount, it is more than $100 
billion less than the last year's score. This is a window of 
opportunity. We need to seize it.
    But we should not simply repeal the SGR. We must also 
change the underlying fee-for-service system that Medicare uses 
to pay physicians. Fee-for-service promotes volume over value. 
Physicians are rewarded for doing more tests and more 
procedures, even when unnecessary. It does not encourage 
physicians to coordinate patient care to save money and improve 
health outcomes.
    Last year this committee held three roundtable sessions on 
improving the system to reward physicians for providing high-
quality, high-value care. We heard from former CMS 
Administrators, private plans, and physician groups.
    This year we held two hearings in which we heard from CMS 
leaders about their efforts to develop new payment models. We 
heard that there is a better way of doing business. The 
Innovation Center told us there are promising payment systems 
that would hold physicians accountable for providing high-
quality, efficient care.
    These models include Accountable Care Organizations, 
payment bundles, medical homes, and there are certainly others. 
They incentivize physicians to coordinate patients' care. They 
focus on reducing emergency visits and hospitalizations. They 
have the potential to control spending for Medicare and 
beneficiaries alike. More important, they mean better care for 
patients.
    Physicians are eager to move to better systems. Jean 
Branscum from the Montana Medical Association recently wrote me 
about the uncertainty created by the current SGR policy. She 
said that ``Montana physicians want new payment models that 
improve health care and lower costs.'' She added, ``There's no 
time to waste.'' The continual uncertainty is driving 
physicians to limit the number of Medicare patients they see.
    Unfortunately, the new models the Innovation Center is 
developing are not ready to replace the fee-for-service system. 
CMS and the Innovation Center need to quickly finish new models 
so that Medicare rewards value instead of volume. In the 
meantime, we must improve the current system.
    We want to hear from doctors and other providers who see 
patients every day. They can help us identify ways to improve 
care and reduce unnecessary costs. We need the doctors on the 
front lines to step up with ideas.
    Last Friday, Senator Hatch and I sent a letter to health 
care providers. We asked for their advice on improving the 
current fee-for-service system. First, we need to make sure 
each service is valued appropriately. Second, we want ways to 
reduce unnecessary services, because Congress originally 
enacted the SGR to control spending, but it has not worked. The 
replacement clearly must do a better job of controlling costs. 
And finally, we need advice on how to help physicians 
transition to alternative payment models.
    Our letter asks for specific suggestions. I emphasize the 
word ``specific.'' Not abstractions, but ``specifics.'' We need 
concrete policies that can be implemented now to replace the 
SGR.
    I look to our panelists to help us identify them. We have 
an opportunity to repeal the SGR once and for all this year. 
Believe me, this committee would very much like to do that. We 
have been going around this merry-go-round too many times. I 
encourage us not to draw a shade on this window of opportunity.
    [The prepared statement of Chairman Baucus appears in the 
appendix.]
    The Chairman. Senator Hatch?

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

    Senator Hatch. Well, thank you, Mr. Chairman. I appreciate 
you holding today's hearing on this important issue, Medicare 
physician payments.
    Last year this committee held a productive series of 
roundtable discussions with key stakeholders on this very 
topic, which helped to set the stage for us to move forward 
with reform. The chairman and I agree that we must find a 
better way to pay physicians in Medicare. The SGR system--as we 
all know--is fundamentally flawed and must be repealed. We are 
committed to working together to try to do just that.
    As it stands, unless Congress intervenes, Medicare 
physician payments will be reduced by 25 percent in 2014 due to 
the SGR formula. And, with such large cuts, physicians will 
quickly be unable to offer care to millions of seniors on 
Medicare. Our seniors deserve better than to have government 
inaction threaten the availability of their care.
    Due to the recent slowdown in overall health expenditures, 
the current cost of permanently repealing the SGR is down 
sharply from a previous Congressional Budget Office estimate of 
$245 billion to now less than $150 billion. However, we know 
from previous years that the CBO score has a tendency to 
fluctuate.
    I believe we currently have a good window of opportunity 
before us. But we need to act very soon. We must provide a 
stable foundation for paying our physicians, now and in the 
future. If we fail to act, we will run the risk of causing a 
physician shortage in the Medicare program that will have a 
broad impact for beneficiaries.
    This past Friday, the chairman and I sent a letter to 
members of the health care provider community appealing to them 
for their input on how to improve the current system and how we 
can help physicians transition to new payment models. This 
builds on the discussions we started last year.
    As we await responses from the provider community, we have 
the privilege today to hear from our panel of expert witnesses 
and get their thoughts on the matter. This issue is well-
covered terrain. We know this is not an easy task, but 
physicians and patients deserve better.
    We must find a more stable foundation to pay physicians 
treating Medicare patients. I believe if we identify the 
appropriate policy solutions, we can finally find a path to 
repeal the SGR, and that is my goal. I think it is the goal of 
the chairman as well. We work together on these matters. I want 
to personally compliment the chairman for his concerns in this 
area and for the work that he has done.
    Thank you for convening today's hearing, and I look forward 
to what the witnesses have to say. Now, I have to apologize 
because I am in the middle of that immigration markup, and 
there is not much I can do but be there, since a number of the 
amendments are mine. You will have to forgive me. But I am very 
interested in your testimony, very interested in what you have 
to say.
    I hope we can come up with the solutions to this problem, 
and I will do everything in my power to support the chairman in 
his desire to do so. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator. I know you are very 
concerned about the SGR and very much want to find a 
replacement just as much as the rest of us. Thank you very much 
for your help. I appreciate it very much.
    [The prepared statement of Senator Hatch appears in the 
appendix.]
    The Chairman. Now I would like to welcome our panel. Our 
first witness is Mark Miller, Executive Director of the 
Medicare Payment Advisory Commission, otherwise known as 
MedPAC. Thank you, Dr. Miller, for being here. This committee 
relies on MedPAC very frequently and appreciates your work.
    In addition, we have Bruce Steinwald, president of Bruce 
Steinwald Consulting and a former Director of Health Care of 
the Government Accountability Office. GAO is also very 
important to this committee.
    And finally, Dr. Kavita Patel is a fellow and managing 
director at the Engelberg Center for Health Care Reform at the 
Brookings Institution.
    Did I pronounce your name correctly?
    Dr. Patel. Yes.
    The Chairman. Good. Thank you, everyone. Your statements 
will be included automatically. You will have 5 minutes each, 
so let her rip.
    We will start with you, Dr. Miller.

    STATEMENT OF MARK E. MILLER, Ph.D., EXECUTIVE DIRECTOR, 
 MEDICARE PAYMENT ADVISORY COMMISSION (MedPAC), WASHINGTON, DC

    Dr. Miller. Chairman Baucus, Ranking Member Hatch, and 
distinguished committee members, I am Mark Miller, the 
Executive Director of the Medicare Payment Advisory Commission. 
I would like to thank you for inviting us to testify.
    Before I get to the SGR, I think it is important to say 
that the Commission believes that Medicare's payment and 
delivery systems need to change. They need to move away from 
volume-driven systems to systems that focus on quality, 
coordination, and accountability.
    The goal of any SGR reform should not be to protect a 
fragmented fee-for-service payment system. Regarding the SGR 
and looking back at history, physicians controlled both the 
price paid by Medicare through their charges as well as the 
services that were provided to beneficiaries. This naturally 
led to escalating physician payments, and it also led to large 
payment inequities between services and, ultimately, between 
specialties.
    In the early 1990s, a fee schedule was put in place in part 
to correct those payment inequities, and also policies like the 
SGR were put in place to control volume. The Commission has 
recommended in the past and again more recently to repeal the 
SGR. The Commission believes the policy is flawed. It does not 
create incentives for physicians to cooperate and to avoid 
unnecessary volume.
    It is unfair to any physician who practices judiciously. It 
rewards physicians who are able to generate volume. 
Additionally, it has perpetuated the inequity between payments 
for procedural services on the one hand and cognitive and 
primary care services on the other.
    The Congress has chosen to override the legislative 
reductions for years. That, coupled with continued service 
volume growth, has led to an annual process of trying to avoid 
large fee reductions at the end of the year. This problem 
creates barriers to move forward in a more thoughtful way. It 
creates anxiety in the provider community, and it creates 
administrative anomalies for CMS and the providers of care.
    Furthermore, while the Commission's annual beneficiary 
survey continues to show strong access for Medicare 
beneficiaries, the Commission is concerned that that picture 
could change--particularly for primary care--if steps are not 
taken to repeal the SGR. And the time to repeal it is now.
    As you have noted yourself, the cost of the repeal has been 
revised downward from $300 billion to about $140 billion. But 
history is cautionary here. This is because service volume has 
slowed down, but trends in service volume are volatile, and, if 
they reaccelerate, the cost of repealing the SGR would go up 
again.
    With respect to the SGR, MedPAC has recommended the 
following. First, repeal the SGR and replace it with a set of 
legislative updates for the next 10 years. Now let me add 
quickly here, that MedPAC would continue to do its job and 
report annually to the Congress on the impact of those changes 
and would recommend changes if access were to be threatened 
under those new updates.
    Second, rebalance the fee schedule, again, to bring more 
equity between primary care services and procedural services. 
The Commission believes that to move towards a reformed 
delivery system, we need primary care physicians and other 
professionals to provide primary care. The fee schedule sends 
clear signals dissuading medical students from pursuing primary 
care as a career.
    Rebalancing the fee schedule has two steps. The first is a 
new approach to collecting data in order to reevaluate the 
relative values under the fee schedule and to specifically 
identify overpriced services. The second step, bluntly, is to 
reduce the payment rates for procedural services relative to 
primary care.
    You should note that this last point also reduces the 
overall cost of repeal. I should also note with both of those, 
the legislated updates and even with the reduction for 
procedural services, there would be a 72-percent increase in 
physician spending over the next 10 years. So this is not a 
reduction in spending.
    The Commission also recommends that there be incentives, 
and includes incentives for physicians to move away from fee-
for-service and to either organize or join risk-based 
Accountable Care Organizations. As I have noted, fee-for-
service focuses on generating volume. But, perhaps even more 
importantly, fee-for-service contributes to a lack of 
coordination and to a lack of accountability. It is the hope of 
the Commission that risk-based Accountable Care Organizations 
could be a platform for accountability and also a better 
platform for measuring quality.
    In closing, I would also like to remind the committee that, 
through our ongoing work, the Commission has provided the 
Congress with a list of Medicare savings that could be used to 
offset the cost of the SGR if the Congress were to choose to do 
that. With that, I will stop and look forward to your 
questions. Thank you.
    [The prepared statement of Dr. Miller appears in the 
appendix.]
    The Chairman. Thank you, Doctor.
    Mr. Steinwald?

    STATEMENT OF A. BRUCE STEINWALD, MBA, PRESIDENT, BRUCE 
              STEINWALD CONSULTING, WASHINGTON, DC

    Mr. Steinwald. Mr. Chairman, members of the committee, 
thank you for having me here today. As you pointed out, Mr. 
Chairman, it has been a tough 11 years of dealing with the SGR 
and the Medicare fee schedule. But, the circumstances might be 
right to do away with the SGR and to reform the fee schedule. I 
say this in part because of the widespread acceptance of the 
need to replace volume incentives with value incentives in the 
fee schedule.
    For decades, there has been a reluctance to accept cost as 
a legitimate concern in coverage and payment policy. And now 
the policy world seems to recognize that open-ended fee-for-
service reimbursement is a major impediment to achieving value 
objectives. I also perceive--I could be wrong about this--a 
shift in the nature of the involvement of the medical 
profession in reforming Medicare physician payment. For years, 
the stance of the profession seemed to be, repeal SGR and then 
we will talk about reform. Now it seems to me that the medical 
profession recognizes that reform needs to be a part of the 
same conversation.
    Third, we have a growing capability in this country to make 
data-driven decisions on coverage and payment in Medicare. As a 
society, we have made a huge investment in improving the 
empirical base of the decisions we make in health care 
delivery. Medicare coverage and payment policy may need to be 
adjusted to take full advantage of this growing capability.
    Fourth, activity on the reform front: there has never been 
a shortage of reform proposals, but this appears to be an 
especially fertile period of experimentation in the health care 
delivery system, with much of it, but not all, financed through 
Federal research dollars. The SGR ``doc fix'' problem has 
become so prominent that it is included in Simpson-Bowles and 
all major budget reform proposals. So, if the Congress is able 
to achieve a grand bargain, it would certainly include the SGR 
fix.
    And finally, as you mentioned, there is the lower CBO 
score. The cost of repealing SGR appears to be on sale at least 
for a period of time. It is hard to say how long it will be, as 
Mark pointed out. But the lower score makes repeal more 
attractive, or at least less unattractive, from a Federal 
budget perspective.
    So what would a post-SGR world look like? Let me say three 
things about that. The movement toward a growing global payment 
system should be encouraged, but needs to be developed 
naturally for both beneficiaries and physicians. We have 
several integrated delivery systems that exist in all parts of 
the U.S., serving urban, suburban, and rural populations. At 
the same time, we have Accountable Care Organizations and other 
hybrid forms of healthcare delivery and financing growing.
    A reformed delivery and financing system that focuses on 
population, health, and value in service delivery should be 
attractive to both beneficiaries and providers alike. Second, 
the Medicare fee schedule, along with Medicare coverage policy, 
should be fine-tuned to reward value and discourage unnecessary 
utilization.
    With the blunt instrument of SGR out of the way, Medicare 
could have greater opportunity to use its extensive data to 
make distinctions between high-value and low-value care. Some 
of these opportunities can be accomplished under current law, 
and some will require new legislation.
    And finally, policymakers should never underestimate the 
power of fee-for-service incentives to generate more volume and 
more spending. Because spending increases in health care have 
been at low levels for the past few years, it is tempting to 
conclude that the pressure is off to limit spending. But I 
remind you that this was the situation that occurred during the 
1990s when the SGR was created, and it would be unfortunate if 
SGR were eliminated during a similar low-spending period only 
to have physician spending ramp up again in the absence of 
effective controls.
    So, in conclusion, I believe that the post-SGR world should 
be one of decreasing reliance on fee-for-service payment, but 
with effective controls in place that reward value and not 
volume in the Medicare fee schedule. The fee schedule is likely 
to be with us for some time. It can and should be improved. 
Those improvements in the fee schedule and the controls that I 
mentioned may encourage some physicians to seek alternative 
delivery settings, thereby providing a boost to the reform 
movement.
    That concludes my statement. I look forward to your 
questions.
    [The prepared statement of Mr. Steinwald appears in the 
appendix.]
    The Chairman. Thank you, Mr. Steinwald.
    Dr. Patel, you are next.

   STATEMENT OF DR. KAVITA K. PATEL, M.D., M.S., FELLOW AND 
MANAGING DIRECTOR, THE ENGELBERG CENTER FOR HEALTH CARE REFORM, 
           THE BROOKINGS INSTITUTION, WASHINGTON, DC

    Dr. Patel. Chairman Baucus and members of the committee, 
thank you for this opportunity to highlight ways to advance 
physician payment reform in Medicare. My name is Kavita Patel, 
and I am honored to present some solutions from our work at the 
Engelberg Center for Health Care Reform at the Brookings 
Institution and our related Merkin Initiative on Clinical 
Leadership, as well as work that has been done on the National 
Commission on Physician Payment Reform, and, perhaps most 
importantly, from my experience as a practicing primary care 
physician.
    Eliminating the SGR has been widely discussed, as you 
mentioned, sir. I applaud the committee's leadership and their 
recent call for proposals from the physician community. The SGR 
must be eliminated, but we need a transition pathway, since, as 
many others have mentioned, our current fee-for-service system 
is the one we must transition from to some of these novel 
methods of payment that we have been discussing for a long 
time. Short-term strategies that will result in better care-
coordination between primary care physicians and specialists 
are the ultimate answer. But the question remains, how to get 
there.
    In our work at Brookings as well as a number of other 
places, we have conducted surveys, spent a lot of time with 
physicians in practice, and also looked at the economic 
incentives as well as the underpinnings of finance. One thing 
that has been clear in my work as a physician, as well as with 
numbers of health professionals whom we have spoken with, is 
that there are currently many initiatives that physicians 
participate in to promote higher value and quality.
    Just to name a few, there are meaningful use measures, the 
use of electronic health records, the Physician Quality 
Reporting System, value-based modifiers, and electronic 
prescribing, a number of which came from the work in this 
committee. All of these efforts combined, however, are simply 
not enough when you look at the aggregate amount of either 
bonuses or financial penalties that might be assigned to this.
    One straightforward mechanism in the short term to help 
physicians transition in the fee-for-service setting, would be 
to think about how to harmonize all of these programs, 
understand when the data is being submitted, and how physicians 
can use a larger payment from these pieces together to benefit 
in more of a care coordination payment manner in which they 
could work together and fulfill the requirements for each of 
the individual programs, but together form a better way of 
working between different silos which we currently do not have.
    Let me offer an illustrative example based on our work at 
Brookings as well as my own experience. In the case of 
meaningful use as well as PQRS, there are a number of ways 
physicians can submit measures, electronically as well as 
through participation in a registry. The payments for PQRS 
average about $1,000 for each provider per year. Imagine if 
that $1,000 combined with the upwards of $44,000 in incentives 
for electronic health records, could be used by a cardiologist 
in conjunction with a primary care physician to take better 
care of a population of patients like mine who have diabetes, 
heart failure, irregular heart rhythms, and a number of other 
problems for which the individual measures may not actually 
accurately capture the care provided to that patient.
    This is one manner in which current programs in our fee-
for-service system can be harmonized and actually benefit us to 
help physicians see a way to take on the clinical risks and the 
financial risks to move to longer-term payment models. Another 
step that would help in the short-term setting would also be to 
do what CMS has been doing in terms of looking through the 
evaluation and management coding to better understand the value 
of these services. Another example has been the recent work by 
Medicare to actually evaluate, at a higher payment rate, care 
coordination when patients are discharged from a hospital. 
These are important steps that certainly can be accelerated and 
highlighted by the important work of this committee.
    And then, in summary, some of the tools that are necessary 
to take current programs into a longer-term setting must be 
observed. We have already heard a little bit about analytic 
methods to help physicians understand how they are using and 
utilizing care, but what is missing right now is timely data.
    We hear that over and over again in our work with 
physicians, that they are hungry for actionable data that can 
change the point-of-service care. When I submit my measures for 
meaningful use or for my value-based modifier payments, those 
measures are not acted upon financially for another 2 years. 
Often this data lag really causes us to miss a window of 
opportunity to have meaningful action in the patient setting.
    Additional tools that CMS, as well as others, and 
particularly the professional societies, are well-capable of 
providing can be offered to help physicians understand how to 
move from current payment to future payment. This includes 
taking more financial risk--this is not something I was taught 
in medical school, but I am eager to learn--as well as taking 
on more clinical risk, which I think we have heard a lot about 
in the forms of Accountable Care Organizations.
    So, in summary, I do hope that this committee will consider 
that there is a pathway, starting now, from the repeal of the 
SGR to longer-term payment reforms. I thank you for this time 
and look forward to your questions.
    [The prepared statement of Dr. Patel appears in the 
appendix.]
    The Chairman. Thank you, everybody. Dr. Miller, you said 
something interesting: that even with these recommended 
changes, physician reimbursement will be about 72 percent 
higher than it is today. That is, I think, over 10 years, or 
maybe that is in the 10th year. Could you expand on that, 
please?
    Dr. Miller. Yes. What I was referring to is that the 
Commission's proposal is to set the physician fee schedules, 
fee schedule payments, through the 10-year window and eliminate 
the SGR as a mechanism for setting those. At the same time, in 
order to get some greater equity in the fee schedule, we would 
actually pull down the conversion factor or the payment rate 
for procedural services relative to primary care services.
    As you might imagine, the specialty societies would be 
upset with that kind of proposal. But what I was trying to 
point out is, because more patients will be coming into the 
system and because service volume continues to increase, 
aggregate payments to physicians would continue to increase 
over that 10-year period.
    So, when you look at even reducing the fee that you pay for 
procedural service, you should not assume that net payments go 
down, because still more services are being provided.
    The Chairman. Right, and I do not quite understand that, 
because you said that services are down a bit now and that 
explains a different estimate for----
    Dr. Miller. The score.
    The Chairman. The score is down. That is right.
    Dr. Miller. I did say that. The service volume has slowed 
down, but there is not zero growth in service volume.
    The Chairman. All right. Why will service volume increase, 
do you think, under this new regime?
    Dr. Miller. The trends in volume have always gone up. They 
have slowed down, but the baseline assumptions in all of our 
experiences are that service volume will continue to grow over 
time. Some of it will be driven by technology. Some of it will 
be driven by the clinical needs of the patients. But under a 
fee-for-service system, some of it will be driven by the 
incentives of the fee-for-service system.
    The Chairman. How do you address the concern that the 
specialists have, that their income, relative to primary care, 
might not be what they expect or hope it to be? Dr. Patel 
mentioned something interesting about learning to accept or 
deal with financial risks. It seems to me that there might be 
an opening there somehow for specialty physicians to realize 
that, hey, they have to be a part of the solution here, but in 
a way too that eases their concern over their income.
    Dr. Miller. I will try to do that, but you know I generally 
do not come to you with really popular ideas, Senator.
    The Chairman. No, but you are very perceptive.
    Dr. Miller. Well, thanks for that. There are two things 
that I would say. The first thing to focus on--and I tried to 
make this clear in my 5 minutes, but it is a lot to try to get 
in in 5 minutes--is that compensation is very distorted in the 
payment system now. So for example, you have certain 
specialties. Given the services that they provide, they are 
reimbursed 2 and 3 times, both in aggregate and at an hourly 
basis, what a primary care physician gets reimbursed.
    So, I think the first point, in the Commission's view, is 
that there is an equity issue and that the specialists need to 
recognize that, given the greater circumstances that we are in, 
one being the desire to eliminate the SGR, because specialists 
do not like that either. Now, to your point of, could there be 
something to offer them? I think the Commission's view is, if 
you put pressure on fee-for-service, restraining fees, 
adjusting fees to get this greater equity, that is going to be 
an environment that specialists might want to move away from 
and, perhaps, to an Accountable Care Organization where they 
have the opportunity, if volume is controlled, to share in some 
of those savings.
    The Chairman. To anyone who wants to respond to this, the 
question is, how quickly and thoroughly can we move to this new 
regime, whatever it is? I am reminded of two rules I think are 
pretty important. The first is: do it now. And the second is: 
do it right the first time. But make sure we do it right. And 
do it right tends to mean you have to think it through and not 
be hasty. So how do we move as quickly as possible, yet lower 
the probability of significant mistakes either by pushing CMS 
or through legislative changes to move to this new regime?
    Dr. Patel mentioned some interim transition measures like 
coordinating all of the current measures to be undertaken, 
which makes some sense. Just generally, I know it is a broad 
question, but how do we move--what is the general approach we 
need to take here, whether it is accountable care, bundling, 
whatever it is that we move to?
    Mr. Steinwald. Well, I think the good news is that it is 
already happening. Partially with Federal support, but not 
entirely. When people say there are parts of the population 
that could never be served by these alternative delivery 
systems, I look around the country, and I see that there is no 
part of the country that is not served, at least, by some of 
these integrated delivery systems. Whether they are rural areas 
served by Intermountain Healthcare or intensely urban areas 
like Denver Health serves, these organizations exist and can 
serve all kinds of populations.
    The Chairman. But what do we do to speed it up in those 
other parts of the country?
    Mr. Steinwald. Well, I think one of the things Mark eluded 
to is, you want both beneficiaries and providers to be 
attracted to these changes. But part of the attraction is to 
not feel wedded to the system that they currently are familiar 
with. Therefore, that system needs to be modified so that in 
leaving that system, there has to be something to go to. And I 
agree that it has to be done organically, because we do not 
want to repeat the errors of the 1980s in the managed care 
movement. Attractive to go to, attractive to leave, I think is 
the combination.
    The Chairman. Thank you very much.
    Senator Cardin?
    Senator Cardin. Thank you, Mr. Chairman. Let me thank all 
of our witnesses. Dr. Miller, I want to go back to the 72-
percent projected increase if you were to do the updates over 
the next 10 years. How much of that is related to volume?
    Dr. Miller. I am going to say a third or a fourth of it.
    Senator Cardin. So you are projecting a slower growth rate 
in volume over the next decade than in the past decade?
    Dr. Miller. Just to be clear, I am not. But in the CBO 
base, yes.
    Senator Cardin. Because I am looking at the volume growth 
on physician services. It looks like it was around 35 percent 
over the last decade, at least for major procedures, evaluation 
and management, if I am looking at the chart from MedPAC 
correctly.
    Dr. Miller. From our testimony?
    Senator Cardin. Yes, Figure 2 is what I am looking at.
    Dr. Miller. I think I know the chart. Keep going.
    Senator Cardin. Procedures such as testing and imaging are 
going up at a much higher growth rate on volume comparatively.
    Dr. Miller. Right.
    Senator Cardin. I guess my question to you is, are you 
suggesting that you are going to lock in the adjustments over 
the next 10 years, trying to give a fairer reimbursement to 
primary care, versus the higher-cost specialties? Will you 
still be relying on the RUC? * Are you still going to be using 
the process in which you accept a significant amount of the 
information from the RUC, or not?
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    * The Relative Value Scale Update Committee.
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    Dr. Miller. All right. There are a couple pieces to this. 
The RUC would still be in place, and we would envision that CMS 
would continue to accept information from the RUC. But also, 
MedPAC made a set of recommendations on the HHS and the 
Secretary side of that calculus in order to bring more 
information and parity between CMS and the RUC--and the 
Secretary could use that information--and an advisory board 
that we suggested get constructed there, to drive the RUC's 
process in a more organized way so that they are not completely 
taking all advice that the RUC provides.
    Senator Cardin. It seems to me that what you are doing is 
dividing accountability and responsibility here with, perhaps, 
no one being ultimately held accountable. Would it not be 
better just to bring it all within CMS?
    Dr. Miller. The only thing I would say about that is that I 
do think you want input from the medical community. I just do 
not----
    Senator Cardin. Absolutely. I do not disagree with that, 
but who is responsible for the final rate setting?
    Dr. Miller. CMS.
    Senator Cardin. So, if they take a certain amount of 
information from the outside, they are basically using that to 
justify their decisions? And then that is not a very open 
process as to how those numbers are worked out. Then you are 
suggesting you are not satisfied with balance between primary 
and higher-cost specialties.
    I am not sure that what you are suggesting gives us an 
accountable system. Whom do we hold accountable?
    Dr. Miller. Well, I think what I am trying to do is get 
greater parity between CMS and the RUC so that CMS is not 
completely dependent on the advice that comes from the RUC and 
drives the RUC's activities.
    We believe these services are overpriced. As part of our 
proposal, we have a data collection process where the Secretary 
would say, I believe these are overpriced and I direct you, the 
RUC, to go back and give me different values. And, if you do 
not, then I am going to use this information to reset.
    So the two things are to get greater parity between CMS and 
the RUC, and then, through that process, we believe there will 
be greater parity in the payment system between the 
proceduralist and primary care.
    Senator Cardin. I understand that. Let me get to one more 
question for the panel.
    Dr. Miller. I am sorry.
    Senator Cardin. No. That was a good answer.
    One more question for the panel, and that is, we all agree 
we have to get rid of the SGR system, and, absolutely, the 
dollar offset today is much more friendly than it was 2 years 
ago. So the opportunity is now, as the chairman has said. And 
we should do it.
    We do not agree as to what we should replace it with. We 
have been looking at this now for a decade, and yet it is 
somewhat disappointing we are not further along as to how we 
can replace it with a payment system that rewards quality 
rather than quantity, that really manages the individual rather 
than rewards multiple visits from different specialists.
    Why are we not further along on this? How much longer is 
this going to take? Any one of you?
    Dr. Patel. It has taken a long time because I do think it 
has been difficult to actually say, let us change the system. 
And then, to assign some sort of responsibility is ultimately 
difficult, I think. As we all have responsibility to our 
patients, we have had a challenge in trying to say, well, 
change payment and then hold providers accountable in a certain 
way. I actually think some of the shorter-term steps that I 
discussed have been a huge milestone in helping us get there. I 
do believe that, with a decade of discussion, we are ready to 
do it now over a short time period.
    Senator Cardin. I would just make one last point, Mr. 
Chairman, if I might. It seems to me that if we fix SGR--which 
I am for--and we do not substitute a proposal that deals with 
the underlying problem, we are going to have a hard time later 
substituting in the payment structure, it seems to me, 
politically, if we put off doing it all at one time.
    Dr. Miller. The thing I would say is, I think two major 
stumbling blocks--not the only two, and I think Dr. Patel's 
points stand here--are (1), the price was huge before. And the 
Congress just had to grapple with that, and it was difficult. 
The second is, there is not the organizational structure out 
there that you can point to and say, if this organizational 
structure existed, you could take accountability for it.
    Our hope in pushing the providers towards risk-based 
Accountable Care Organizations is that that structure begins to 
exist, and--I know I am out of time--it is starting to. There 
are 250 of them now. Four percent of the population is in them. 
They are starting to arise. I am not saying they are the 
answer, but something is starting to rise out there.
    Senator Cardin. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    I might say, I do not totally agree with you, Dr. Miller. 
That is because it is just too big a slug of money. And the 
second thing is, there is no organization. But I do feel we are 
starting to make some headway here, and I really appreciate 
that. Because for years and years and years, I have told 
physician groups, come up with a solution. Come up with a 
solution. You do not like it, well, come up with an 
alternative. They never have.
    But now we are getting to the point where various groups 
are starting to realize that maybe we have to, and now is the 
time. And second, I might say, as far as I am concerned, I am 
going to encourage this movement while we have the opportunity, 
very strongly. Maybe with some carrots, and maybe with some 
sticks.
    Now is the time. I appreciate the movement that groups are 
undertaking, addressing your point. But I think now we have the 
responsibility to keep pushing even further. Addressing your 
other point, if we do not do it now, we are never going to do 
it. Thank you very much.
    Senator Crapo? I apologize that I have to leave, but 
Senator Cantwell will take over the hearing.
    Senator Crapo. Thank you, Mr. Chairman.
    Dr. Patel, in your testimony, one of the recommendations 
that you make is that higher payment for facility-based 
services that can be performed in a lower cost setting should 
be eliminated. Could you elaborate on that a little bit?
    Dr. Patel. Yes. Thank you, Senator, for pointing out one of 
our recommendations on physician payment overhaul. In truth, 
right now there has been, because of the formulas assigned for 
calculation of facility-based payments, a differential such 
that, for example, if a physician had performed an ultrasound 
of the heart in an outpatient stand-alone community-based 
office, they would receive a certain dollar amount, 
approximately $159 for that. In a hospital-based facility, for 
the exact same physician, the exact same service, no additional 
personnel, no trainees, residents, students, or fellows 
involved, same exact service, same patient, they can receive 
about 3 times that amount as a payment. That is just one 
example of some of the site service differential payments which 
we think are an opportunity for savings in the Medicare system.
    Senator Crapo. Do you think that this differential in 
payment that you have described is one of the driving factors 
behind what we are seeing now with so many hospitals purchasing 
physician practices?
    Dr. Patel. It is one of the main driving factors. And it is 
an area of concern that we have as, not just physicians, but in 
looking at financing of the Medicare system. We think it is 
sending the wrong message for the care for our patients. Now, 
that does not hold for training institutions and places that 
have additional factors, but that is not the case that we are 
discussing.
    Senator Crapo. Thank you. Mr. Steinwald, in your testimony, 
you indicate--as I think almost everyone has indicated--that 
policies need to be developed to encourage providers to elevate 
value as the chief objective in determining what services are 
performed. Could you just tell me what two or three of those 
policies you think are the most promising that we should be 
focusing on?
    Mr. Steinwald. Right. I will start by repeating what I said 
a moment ago, which is, never underestimate the power of fee-
for-service incentives to generate volumes. So, you are dealing 
with that underlying incentive. And while we are still using 
the fee schedule and still paying fee-for-service, we need to 
find countermeasures--if you want to call them that--to make 
sure that we are rewarding value instead of volume.
    So, such things as have been done in the private sector, 
like prior authorization for payment for expensive imaging 
technologies, using physician profiling, which Medicare has 
done, just to provide feedback, but perhaps you can put some 
teeth in them to make sure that the physicians who are 
overusing services are not rewarded for doing that. As long as 
we are going to rely somewhat on fee-for-service to pay for 
services to Medicare beneficiaries, we are going to have to 
deal with the volume incentive.
    I also think that we ought to coordinate payment policy 
with a coverage policy. There are two ways of dealing with a 
low-value service. One is to pay less for it. Another is to not 
cover it if there is a more high-value service that is a 
substitute. So that is another thing I think that needs to be 
considered: coverage policy in addition to payment.
    Senator Crapo. Thank you very much.
    And, Dr. Miller, you just mentioned the fact that you think 
one of the concerns or causes of our inability to get there in 
terms of finding the right alternatives has been the lack of 
the organizational structure that is necessary to help us 
transition to a new and more successful payment system. Could 
you describe the organizational structure that you are talking 
about there a little more specifically?
    Dr. Miller. Well, I think what the Commission is mostly 
focused on at the moment is the Accountable Care Organizations 
that were created by law, and also being run out of the 
Innovation Center, the Pioneer Accountable Care Organizations. 
I think the line of thinking is that--related to what Dr. Patel 
said--you can sort of lay out lots of different incentives for 
physicians to try to follow and rationalize, and I think she is 
right: currently there is an array of them.
    They probably have some effect, but they are also 
relatively confusing. Or, alternatively, say doctors could 
organize as a set of providers, accept some degree of risk, and 
then, as a group of physicians, decide what clinical evidence 
and pathways they are going to pursue. But the key thing is to 
come together as a group of providers, organize, and then 
accept, on a population basis, a risk-based payment, and then 
the Federal Government should, obviously, have some kind of 
quality measures to be sure that care is being provided. But 
those can be much more aggregated and 
population-based. So I think that is the line of thinking, and 
there is at least something of a structure there that is 
starting to emerge.
    I also want to say one thing quickly on the site-neutral 
point that you asked Dr. Patel. We also have a recommendation 
on that from a year or so ago, and we have some upcoming 
research on some other ideas along those lines that will come 
out in June, if you are interested in that.
    Senator Crapo. Thank you. I am interested. I look forward 
to that.
    Dr. Miller. Yes. Sorry to change topics there.
    Senator Crapo. No trouble.
    Senator Cantwell [presiding]. Thank you. Dr. Miller--well, 
actually for any of the panelists. I appreciate everyone's 
testimony this morning and certainly the focus on the ACO 
model, which is something big in the Pacific Northwest and has 
yielded some great efficiencies as they have tried to move 
towards that. And certainly we would like to leapfrog towards 
that as soon as possible.
    But we did write into the Affordable Care Act a value-based 
payment modifier that CMS is putting out preliminary rules on 
now that would be implemented fully by 2017 as a process for 
getting off of fee-for-service and focusing on outcome-based 
results. I did not see much of that in anybody's testimony.
    So I am just wondering what people are thinking about that, 
or, as I said, we would certainly like to leapfrog into ACOs, 
but getting off of fee-for-service and focusing on better 
outcomes and rewarding people for better outcomes at lower, 
oftentimes, at lower rates, we think is where we need to be 
going in the short term.
    Dr. Miller. Right. And I think what I would say is that we 
understand--I think the Commission's view is that they 
understand the concept, the notion of trying to reward a 
provider for efficiency, for high-quality, low-resource use. I 
think some of the concern about that particular modifier is how 
accurately it can be put together for an individual provider.
    I am not really deep on this, but my sense is that in the 
first wave of implementation that went out on it, CMS was 
saying, for groups of physicians, that there was some concern 
about the stability of measurement. And one of the things about 
an organizational structure of some size is, you get a lot more 
stability when you look at quality and efficiency that way. So, 
one of the concerns with the modifiers is how stable it can be 
for any given provider.
    Dr. Patel. And I will just add that, for the beginning of 
the program, you have to have at least 100 eligible health 
professionals. So, to Dr. Miller's point, you need not only the 
size but, in terms of the measurement for 2015, they will be 
using performance year 2013. So we are still seeing this lag in 
getting physicians' information about what they could be doing 
at any real point in time. But we think it is an important step 
in the right direction to get you closer to taking on more of 
the risks.
    Senator Cantwell. Well, this was a part of the debate. I 
know because, obviously, it was my language, and this is a 
philosophy from the Northwest. I mean, sure we would like to 
get paid more. Sure they would, but we gave up on that a long 
time ago because we are more efficient and we have better 
outcomes.
    So now all we want is the rest of the Nation to move 
towards that same level of efficiency so we are not penalized, 
so that physicians do not go practice medicine somewhere else 
just so they can get paid more when we actually have better 
outcomes. So we knew that the individual physician--I mean, 
that was part of the debate among committee members too. They 
knew if you isolated it down to that level, it would be 
somewhat problematic.
    And we get that there may be regions or parts of the 
country that may be, you know, more uniquely challenged to face 
this. But we are talking about billions of dollars of savings 
here if you move off of fee-for-service. And, as I said, we 
would leapfrog right to ACOs because we are ready to go there, 
but I do not know that everybody else is. So we definitely 
believe that the index should be put in place. So, we will 
certainly be working with everyone to be more vocal about it, 
because we do think it is an important interim step.
    Dr. Miller, on the kind of efficiencies that you think we 
can get out of ACOs, do you think there is enough savings there 
to then take those savings and focus on graduate medical 
education so that we can prioritize the volume that we need for 
primary care physicians?
    Dr. Miller. I have not thought about the issue in that way, 
and I would be very hard-pressed to tell you what kinds of 
savings to expect out of it. What I can say is that the 
Commission put together a proposal. It is a few years back now. 
I am forgetting exactly when we put it out, but the notion on 
graduate medical education was to stop having this kind of 
blind focus on slots which are producing more of the same when 
all of us at the same time are saying, don't we need a 
differently organized delivery system?
    We had a set of recommendations that would use those 
resources differently and direct them to graduate programs that 
are more focused on systems, focused on primary care, focused 
on rural types of care, so that we would get better 
accountability out of the graduate medical education dollars 
that we are spending. Like I said, it has been a few years now. 
I am not quite on top of that. But I had not thought about it 
in the context of the ACO.
    Senator Cantwell. Given the demand that we are going to 
face, do we need to dramatically increase the number of GME 
slots for primary care?
    Dr. Miller. Our point has been 2-fold. One, be sure that 
the graduate medical education dollars that are being spent now 
are directed towards accountability and producing more of the 
types of professionals who operate in a system-based care. If 
you are going to add slots at that point, then think about 
which way you want those slots to go and what you want them to 
be devoted to.
    Our basic concern is that just adding slots gets you more 
of the same in the current system.
    Senator Cantwell. Thank you.
    Senator Isakson?
    Senator Isakson. Thank you, Madam Chairman. Dr. Patel, when 
you were answering Senator Crapo's question, it prompted me to 
follow up with a question to you. I represent a State that has 
10.5 million people. Five and a half million live in the 
metropolitan Atlanta area. The other 5 million live in the 
largest geographic expanse east of the Mississippi River in one 
State. So they are a long way from medical facilities.
    In fact, we have lost two rural hospitals in the last year 
in Georgia. It seems like many of the directives and 
regulations and rules drive people to more expensive care, like 
the imaging example on the heart that you gave as an example.
    As we try to clean up the SGR and make some reforms, should 
we look at Stark laws, antitrust laws, the Affordable Care Act, 
in many cases, which directs people to a more expensive 
reimbursement for a service than they might otherwise get?
    Dr. Patel. Thank you, Senator. I do think the issue of how 
we can make sure that patients who do not have access to or do 
not live within urban areas have ready access to high-value 
providers is a huge one. I think that--not being an attorney, 
in full disclosure, I will tell you--not looking at Stark laws 
or antitrust laws would be a mistake if what we are trying to 
do is also help providers, as I mentioned, take on more of that 
risk that we did not really go to medical school to do. But we 
understand we need to, to get away from our fee-for-service 
system.
    So I do think that there are aspects of the Affordable Care 
Act that actually strengthen the ability to go to high-value 
providers. What I think all three of us have tried to reiterate 
is that what we need to do now is deal with the underlying 
formulas and mechanisms for which we still pay in Medicare to 
really drive that forward.
    Senator Isakson. When you were commenting on reimbursement 
based on quality of care, in that discussion, you made 
reference to a care coordinator between primary care and 
specialties. Was that begging a reimbursement for that 
coordination, when you made that statement?
    Dr. Patel. Yes, Senator. Thank you for picking up on that. 
It is not asking for an additional reimbursement. I am arguing 
that we can take proportions of what we are already paying for 
now and move that to reimbursement that actually allows primary 
care doctors and specialists to talk to each other more 
effectively.
    Senator Isakson. And get a better outcome because of it.
    Dr. Patel. Correct. Thank you. Yes.
    Senator Isakson. Dr. Miller--this really is probably for 
any of you who want to answer, but I would particularly like to 
hear Dr. Miller's answer. We talk about a better-educated--I 
think I am a better patient and have better health when I am 
educated as to what is wrong with me and what I need to do to 
correct it, or how I need to interact as a patient with the 
medical system.
    As we have studied Medicare for years, and I have looked at 
it, I have been a big advocate of raising the visibility of 
durable power of attorneys, living wills, end-of-life 
directives, advance directives, things of that nature, both for 
the quality of care for the patient as well as the common sense 
it makes for a patient, when of sound mind and body, to say 
what their wishes would be if they were not of sound mind or 
body or if they were in an irreversible cessation of brain 
waves or something like that. Is there a way we could reimburse 
for counseling sought by the Medicare beneficiary on that? Is 
there some way we could improve that education in America today 
for the benefit of both the patient as well as the system?
    Dr. Miller. The only thing I can offer you on that is that 
we have a line of research going now on something called shared 

decision-making, where information is brought to bear for the 
patient when they are facing particular decisions, and then 
that helps them go into the room with a physician, or whatever 
other health professional, and be more educated about their 
choices and what are the consequences of their choices. We are 
just now coming up to looking at it in the end-of-life 
environment. So I do not have much to offer you here, but that 
is kind of a path that we are looking at this year, a decision-
making path.
    Senator Isakson. Is there any other comment from the panel?
    Dr. Patel. I would just say, as a physician, I know that 
one of the areas in which all clinical providers have agreed is 
that we need to do a better job with understanding how to 
counsel and also receive information from patients about their 
preferences. There have been a number of attempts to do this in 
the Medicare program, and they have often been vilified and 
made out to be or misconstrued as something other than just 
sharing information.
    So, Senator, I think it would be a welcome attribute to 
clinical service if we provided for a very direct way to engage 
with patients on these issues.
    Senator Isakson. Yes, and if it is beneficiary- or patient-
directed, I think that makes an awful lot of difference in the 
politics. Mr. Steinwald?
    Mr. Steinwald. I agree with what she said. The evidence, I 
believe, shows especially when people have multiple chronic 
illnesses and are at end-of-life, once they are informed and 
are making the decisions themselves or their family's directed 
decision-makers are making them, they tend to choose less care 
and fewer resources and are more likely to sign up for hospice 
care as well.
    Senator Isakson. Thank you, Madam Chairman.
    Senator Cantwell. Thank you very much, and I am sure that 
my colleagues would love to see any recommendations that you 
are making in this area, moving forward or as soon as possible. 
Not seeing any of my other colleagues here, I am going to 
adjourn the hearing, but thank you so much for your testimony 
this morning. This is a critically important part of our 
delivery system reform, and becoming more efficient and using 
those dollars to drive better quality at lower costs is going 
to be critical to the entire country.
    So we look forward to receiving more input from all of you. 
We are adjourned.
    [Whereupon, at 11 a.m., the hearing was concluded.]



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