[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
87-885 PDF WASHINGTON : 2013
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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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