[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


 
                   MEDICARE POST-ACUTE CARE DELIVERY AND 
                            OPTIONS TO IMPROVE IT

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 16, 2015

                               __________

                           Serial No. 114-31
                           
                           
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           


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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                     Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota
                         
                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
BRETT GUTHRIE, Kentucky              GENE GREEN, Texas
  Vice Chairman                        Ranking Member
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois               LOIS CAPPS, California
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
CATHY McMORRIS RODGERS, Washington   JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILLY LONG, Missouri                 JOSEPH P. KENNEDY, III, 
RENEE L. ELLMERS, North Carolina         Massachusetts
LARRY BUCSHON, Indiana               TONY CARDENAS, California
SUSAN W. BROOKS, Indiana             FRANK PALLONE, Jr., New Jersey (ex 
CHRIS COLLINS, New York                  officio)
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     2
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     3
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     6
    Prepared statement...........................................
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................    97

                               Witnesses

Mark E. Miller, Executive Director, Medicare Payment Advisory 
  Commission.....................................................     7
    Prepared statement...........................................     9
Steven Landers, MPH, President and CEO, Visiting Nurse 
  Association Health Group.......................................    44
    Prepared statement...........................................    46
Dr. Samuel Hammerman, Chief Medical Officer, LTACH Hospital 
  Division, Select Medical Corporation...........................    57
    Prepared statement...........................................    59
Melissa Morley, Ph.D., Program Manager, Health Care Financing and 
  Payment, RTI International.....................................    63
    Prepared statement...........................................    65
Mr. Leonard Russ, Principle Partner, Bayberry Health Care, 
  Chairman of American Health Care Association...................    73
    Prepared statement...........................................    75

                           Submitted Material

Pitts documents
    Statement of the Coalition to Preserve Rehabilitation........    99
    Statement of the Orthotic and Prosthetic Alliance............   108
    Statement of the National Association for Home Care and 
      Hospice....................................................   119
    Statement of the Premiere Healthcare Alliance................   124
    Statement of the American Hospital Association...............   129
    Statement of the American Medical Rehabilitation Providers 
      Association................................................   134
    Statement of National Long-Term Hospitals....................   144
    Statement of National Association of Chain Drugstores........   149


      MEDICARE POST-ACUTE CARE DELIVERY AND OPTIONS TO IMPROVE IT

                              ----------                              


                        THURSDAY, APRIL 16, 2015

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:15 a.m., in 
room 2322, Rayburn House Office Building, Hon. Joseph R. Pitts 
(chairman of the subcommittee) presiding.
    Present: Representatives Pitts, Guthrie, Shimkus, Murphy, 
Burgess, Lance, Griffith, Bilirakis, Long, Ellmers, Bucshon, 
Brooks, Collins, Upton (ex officio), Green, Engel, Capps, 
Butterfield, Castor, Sarbanes, Matsui, Schrader, Kennedy, 
Cardenas, and Pallone (ex officio).
    Also Present: Representative McKinley
    Staff Present: Leighton Brown, Press Assistant; Noelle 
Clemente, Press Secretary; Robert Horne, Professional Staff 
Member, Health; Michelle Rosenberg, GAO Detailee, Health; Chris 
Sarley, Policy Coordinator, Environment & Economy; Adrianna 
Simonelli, Legislative Clerk; Heidi Stirrup, Health Policy 
Coordinator; John Stone, Counsel, Health; Josh Trent, 
Professional Staff Member, Health; Traci Vitek, HHS Detailee, 
Health; Ziky Ababiya, Minority Policy Analyst; Jen Berenholz, 
Minority Chief Clerk; Christine Brennan, Minority Press 
Secretary; Jeff Carroll, Minority Staff Director; Tiffany 
Guarascio, Minority Deputy Staff Director and Chief Health 
Advisor; and Arielle Woronoff, Minority Health Counsel.

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

    Mr. Pitts. The subcommittee will come to order. The chair 
will recognize himself for an opening statement.
    Over the past several years, this committee has focused on 
understanding and responding to the need to modernize 
Medicare's financing and payment structures. Today's hearing 
will give members and stakeholders an opportunity to examine 
the current state of post-acute care, PAC, for Medicare 
beneficiaries and discuss ways it can be improved.
    Post-acute care is care that is provided to individuals who 
need additional help recuperating from an acute illness or 
serious medical procedure usually after discharge from hospital 
care. Post-acute care providers such as skilled nursing 
facilities, SNFs, inpatient rehabilitation facilities, IRFs, 
long-term care hospitals, home health agencies, and hospices 
are reimbursed by Medicare with different payment systems, 
which were originally designed to focus on a phase of a 
patient's illness in a specific site of service. As a result, 
payments across post-acute care settings may differ 
considerably even though the clinical characteristics of the 
patient and the services delivered may be very similar.
    According to the Medicare Payment Advisory Commission, 
MedPAC, Medicare's payments to PAC providers totaled $59 
billion in the year 2013. For patients who are hospitalized for 
exacerbations of chronic conditions, such as congestive heart 
failure, Medicare spends nearly as much on post-acute care and 
readmissions in the first 30 days after a patient is discharged 
as it does for the initial hospital admission. Medicare 
payments for post-acute care have grown faster than most other 
categories of spending. For example, total Medicare spending 
for patients hospitalized with myocardial infarction, 
congestive heart failure, or hip fracture grew by 1.5 to 2 
percent each year between 1994 and 2009, while spending on 
post-acute care for those patients grew by 4 \1/2\ to 8 \1/2\ 
percent per year.
    There are many opportunities for the Medicare program to 
save taxpayer dollars and improve seniors' quality of care 
through better management of post-acute care. One way is to 
make sure patients are treated in the most cost effective 
clinically appropriate setting. The current model has 
significant reimbursement disparities for treating the same 
condition. For example, for patients hospitalized with 
congestive heart failure in 2008, Medicare paid about $2,500 in 
the 30 days after discharge for each patient who received home 
health care as compared with $10,700 for those admitted to a 
SNF and $15,000 for those cared for in a rehabilitation 
hospital.
    Our colleague, Representative Dave McKinley, has had a long 
interest in this subject and has sponsored legislation, along 
with Representatives Tom Price, John McNerney and Anna Eshoo to 
provide bundled payments for post-acute care services under 
Medicare. His bill is H.R. 1458, the quote, ``Bundling and 
Coordinating Post-Acute Care Act of 2015'' and is also known as 
BACPAC Act of 2015. This bill is designed to foster the 
delivery of high-quality, post-acute care services in the most 
cost effective manner while preserving the ability of patients, 
with guidance from their physician, to select their preferred 
provider of post-acute care services. This is the type of 
legislation that has the potential to promote healthy 
competition among PAC providers on the basis of quality, cost, 
accountability, and customer service while advancing innovation 
in care coordination, medication management, and 
hospitalization avoidance.
    I am pleased the committee is examining post-acute care 
issues. Proposals such as BACPAC have potential to reward 
quality, achieve savings, and strengthen the sustainability of 
the Medicare program.
    I look forward to hearing from our witnesses today, and I 
yield back.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    The Subcommittee will come to order.
    The Chairman will recognize himself for an opening 
statement.
    Over the past several years this committee has focused on 
understanding and responding to the need to modernize 
Medicare's financing and payment structures. Today's hearing 
will give Members and stakeholders an opportunity to examine 
the current state of post-acute care (PAC) for Medicare 
beneficiaries and discuss ways it can be improved.
    Post-acute care is care that is provided to individuals who 
need additional help recuperating from an acute illness or 
serious medical procedure, usually after discharge from 
hospital care.
    Post-acute care providers--such as skilled nursing 
facilities (SNFs), inpatient rehabilitation facilities (IRFs), 
long-term care hospitals (LTCHs), home health agencies (HHAs), 
and hospices--are reimbursed by Medicare with different payment 
systems which were originally designed to focus on a phase of a 
patient's illness in a specific site of service. As a result, 
payments across post-acute care settings may differ 
considerably even though the clinical characteristics of the 
patient and the services delivered may be very similar.
    According to the Medicare Payment Advisory Commission 
(MedPAC), Medicare's payments to PAC providers totaled $59 
billion in 2013 1A\1\. For patients who are hospitalized for 
exacerbations of chronic conditions, such as congestive heart 
failure, Medicare spends nearly as much on post-acute care and 
readmissions in the first 30 days after a patient is 
discharged, as it does for the initial hospital admission. 
Medicare payments for post-acute care have grown faster than 
most other categories of spending.
---------------------------------------------------------------------------
    \1\ 1Ahttp://www.medpac.gov/documents/reports/chapter-7-medicare's-
post-acute-care-trends-and-ways-to-rationalize-payments-(march-2015-
report).pdf?sfvrsn=0
---------------------------------------------------------------------------
    For example, total Medicare spending for patients 
hospitalized with myocardial infarction, congestive heart 
failure, or hip fracture grew by 1.5 to 2.0% each year between 
1994 and 2009, while spending on post-acute care for those 
patients grew by 4.5 to 8.5% per year 1A\2\.
---------------------------------------------------------------------------
    \2\ 1Ahttp://www.nejm.org/doi/full/10.1056/NEJMp1315607
---------------------------------------------------------------------------
    There are many opportunities for the Medicare program to 
save taxpayers' dollars and improve seniors' quality of care 
through better management of post-acute care. One way is to 
make sure patients are treated in the most cost-effective, 
clinically appropriate setting.
    The current model has significant reimbursement disparities 
for treating the same condition. For example, for patients 
hospitalized with congestive heart failure in 2008, Medicare 
paid about $2,500 in the 30 days after discharge for each 
patient who received home health care, as compared with $10,700 
for those admitted to a SNF, and $15,000 for those cared for in 
a rehabilitation hospital.
    Our colleague, Rep. Dave McKinley, has had a long interest 
in this subject and has sponsored legislation along with Reps. 
Tom Price and John McNerney to provide bundled payments for 
post-acute care services under Medicare. His bill is H.R. 1458, 
the ``Bundling and Coordinating Post-Acute Care Act of 2015,'' 
and is also known as ``BACPAC'' Act of 2015.
    This bill is designed to foster the delivery of high-
quality post-acute care services in the most cost-effective 
manner, while preserving the ability of patients, with guidance 
from their physician, to select their preferred provider of 
post-acute care services. This is the type of legislation that 
has the potential to promote healthy competition among PAC 
providers on the basis of quality, cost, accountability and 
customer service while advancing innovation in care 
coordination, medication management, and hospitalization 
avoidance.
    I am glad the committee is examining post-acute care 
issues. Proposals such as BACPAC have potential to reward 
quality, achieve savings, and strengthen the sustainability of 
the Medicare program.
    I look forward to hearing from our witnesses today and 
yield the balance of my time to ------------------------------
-- (or to any Republican Member seeking time).
    Thank you.

    Mr. Pitts. And at this time, I recognize the ranking member 
of the subcommittee, Mr. Green, 5 minutes for opening 
statement.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman.
    Millions of Medicare beneficiaries require continued care 
in post-acute settings after hospitalization. In 2013, 42 
percent of Medicare beneficiaries discharged from the hospital 
went to post-acute care settings. Medicare spent $59 billion on 
these services that year. Medicare pays each type of PAC 
facility at a different rate. These different rates are created 
under the notion that sicker patients will require more costly 
care in specialized facilities, which seems normal.
    However, advancements in the practice of medicine as well 
and thoughtful analysis by MedPAC and other independent 
researchers call into question the wisdom of such 
differentiated payment rates. MedPAC has long noted that 
shortcomings in Medicare's fee-for-service payments for post-
acute care. Just last month, MedPAC reiterated that payments 
for post-acute care are too generous and significant 
shortcomings in the current structure exists. There is broad 
consensus on the need for improved quality measures across the 
post-acute care setting and a need for a more coordinated 
approach to care.
    Unfortunately, our current system is characterized by 
silos. Patient-centered coordinated care is not encouraged by 
the incentive structure. Yet, while there is agreement on the 
need to improve the way post-acute care is delivered and 
reimbursed, significant challenges have hindered meaningful 
reform. This includes a lack of uniform definitions, 
standardized assessment information across care settings, and 
substantial geographic variation. Progress has been made to 
address these challenges, including changes passed in the law 
as part of the Affordable Care Act, the IMPACT Act, and most 
recently H.R. 2, the Medicare Access and CHIP Reauthorization 
Act. The Affordable Care Act included improvements in the post-
care system, acute care system. As a result, Medicare is 
currently piloting delivery reforms.
    The Centers on Medicare and Medicaid Services is in the 
process of testing the concept of bundled payments for post-
acute care. Bundled payments encourage accountability for cost 
and quality by incentivizing only clinically necessary care and 
enhanced coordination. This has the potential to encourage more 
efficient delivery, break down those silos, and facilitate care 
coordination.
    The ACA also required home health prospective payment 
system to be rebased to reflect more accurate factors, such as 
the average cost of providing care and the mix of intensity of 
services. Rebasing is currently being phased in and scheduled 
to be fully implemented by 2017. These important steps will 
help move us to an improved post-acute care system for 
beneficiaries and taxpayers.
    Last Congress, the Improved Medicare Post-Acute Care 
Transformation or IMPACT Act was signed into law. This 
legislation reflected bipartisan, bicameral, stakeholder 
agreement that meaningful reform must be based on standardized 
post-acute assessment data, also provider settings.
    The collection of common post-acute patient assessment data 
is to determine the right setting for patients who will 
facilitate discussions on how to reform and improve care for 
beneficiaries and the Medicare system as large. Without 
standardized patient assessment data, reforms to base post-
acute care reimbursements on patient characteristics rather 
than on service in setting specific payment rates will be 
obstructed. There is a widespread agreement that new payment 
and delivery sent models are necessary to improve our 
healthcare system and achieve better patient outcomes, 
population health, and lower per capita cost.
    As providers and CMS are in the process of testing new 
models, there is still much work to do. This work is ongoing 
and now is the time to dedicate resources toward building the 
knowledge base to help our understanding and inform 
decisionmaking. There are many potential policies available to 
pursue and using the lessons learned from recent efforts is an 
important step. This must be done before considering large-
scale adoption of reform. Simply bundling payments in advance 
of this work would be premature.
    The Bundling and Coordination Post-Acute Act, BACPAC, takes 
a different approach from what MedPAC has considered. 
Commenting on any specific approach would preempt the results 
of pilots and preclude CMS from utilizing the lessons learned 
from IMPACT Act and pilot programs to create more effective 
bundle models.
    I look forward to hearing our witnesses today and further 
debate on our post-acute care reform. And I yield back my time.
    Mr. Pitts. The chair thanks the gentleman.
    Now recognize the vice chairman of the subcommittee, the 
gentleman from Kentucky, Mr. Guthrie for 5 minutes for an 
opening statement.
    Mr. Guthrie. Thank you, Mr. Chairman. I would like to yield 
my time to our colleague on the full committee, Mr. McKinley 
from West Virginia.
    Mr. Pitts. The gentleman is recognized.
    Ms. McKinley. Well, thank you. Thank you, Congressman. And 
thank you, Chairman, for the opportunity to address the group 
today.
    This legislative hearing on post-acute care and especially 
on H.R. 1458, this Bundling and Post-Acute Care Act. As many of 
you may be aware, the President has already put post-acute care 
bundling in his budget, and we passed it, and the House has 
already included in our House version of what is in the 
conference right now is a concept of this. So it is very 
important that we--it is not a new concept. It is one that we 
have been working together on this framework for now 3 years, 
both with all the stakeholders. We have been working with the 
committee staff and they have been incredibly supportive in 
trying to put together something that answers this need. But 
for 3 years been trying to put this--because this is going to 
improve care for seniors and is going to help Medicare in the 
long run with it.
    It develops a model for post-acute care services which will 
increase efficiency, encourage more choice and personalized 
care for patients, and offer some significant savings to the 
program in the process. There have been some people have argued 
that it might cost money. To the contrary. The CBO has already 
issued a finding that it could save between $20 and $25 
billion, with a B, for Medicare if this program were put 
through. Not through cuts, but through creating efficiency in 
the post-acute care system. A bill that innovates, improves 
efficiency, protects Medicare and has a pay for of $20 to $25 
billion, I think it deserves meaningful consideration.
    And I really applaud the committee and the chairman all for 
giving it consideration here today. And I yield back the 
balance of my time.
    Mr. Pitts. Thank you.
    Mr. Guthrie. Thank you, Mr. Chairman. I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    Now recognize the ranking member of the full committee, Mr. 
Pallone, 5 minutes for opening statement.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman, for calling today's 
hearing on post-acute care delivery, and I want to thank all of 
our witnesses for coming to testify, but especially welcome Dr. 
Steven Landers from New Jersey who is the president and CEO of 
the Visiting Nurse Association Health Group.
    The Affordable Care Act has put Medicare on a path towards 
post-acute reform. However, there is still much more that needs 
to be done. Our committee clearly has a role to play in 
advancing positive beneficiary-focused reforms related to post-
acute care for Medicare beneficiaries. We have a Medicare 
system right now with misaligned incentives, inaccurately 
priced payments, and little information on the quality or 
outcomes of beneficiaries served by post-acute providers like 
skilled nursing facilities, home health agencies, long-term 
care hospitals, or inpatient rehab facilities.
    In 2013, Medicare spent about $59 billion on post-acute 
care providers, and I believe that there are viable payment 
solutions in this sector that are more sensible than increasing 
costs for beneficiaries of average incomes of only $22,500. 
What we know is that the quality outcomes and costs of post-
acute care has a lot of variation around the country. And as a 
result of the ACA, Medicare is currently testing a number of 
payment system reforms that help improve care and outcomes in 
this area. Meanwhile, the need for post-acute care is not well-
defined. Research has shown the similarity of patients treated 
in different post-acute care settings. A patient being 
rehabilitated from a stroke or hip replacement can be treated 
in a skilled nursing facility or an inpatient rehab facility, 
but in the latter Medicare pays 40 to 50 percent higher than it 
pays the skilled nursing facility for the same services.
    And we do not have any common and comparable data across 
PAC providers to determine which patients fare best in which 
settings or even what appropriate levels of care are for 
patients of various acuity. That is why last year Congress 
passed the bipartisan IMPACT Act which, for the first time, 
requires providers to report standardized assessment data 
across the various post-acute care settings. While there are 
many interesting policy ideas in this arena, we need to learn 
from the ACA efforts underway and the data being collected as a 
result of the IMPACT Act and provide enough time to ensure the 
models work in a way that doesn't compromise access to high-
quality services for our beneficiaries.
    Data collected by the IMPACT Act, coupled with MedPAC's 
recommendations that Congress could do better or could better 
align post-acute care incentives to better utilize Medicare 
dollars, should be a useful guide for our efforts. And once we 
have improved information on post-acute care, I look forward to 
working with my colleagues on the committee to find policy 
solutions to ensure that Medicare continues to provide quality 
and effective health care to our seniors.
    I yield back, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman as always.
    Any written statements of the members' opening statements 
will be made part of the record. That concludes our opening 
statements.
    I have a UC request. I would like to submit the following 
documents for the record. First, testimony from the Coalition 
to Preserve Rehabilitation and Orthotic and Prosthetic 
Alliance, and statements from the National Association For Home 
Care and Hospice, the Premiere Healthcare Alliance, the 
American Hospital Association, the American Medical 
Rehabilitation Providers Association, National Long-Term 
Hospitals, and the National Association of Chain Drugstores.
    Mr. Green. No objection.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Pitts. We have two panels today before us. On our first 
panel we have Dr. Mark Miller, executive director of the 
Medicare Payment Advisory Commission. Thank you very much, Dr. 
Miller, for coming today. Your written testimony will be made 
part of the record. You will have 5 minutes to summarize. And, 
at this time, you are recognized for 5 minutes for your opening 
statement.

 STATEMENT OF DR. MARK E. MILLER, EXECUTIVE DIRECTOR, MEDICARE 
                  PAYMENT ADVISORY COMMISSION

    Mr. Miller. Chairman Pitts----
    Mr. Pitts. Microphone. Yes. OK.
    Mr. Miller. Sorry about that.
    Chairman Pitts, Ranking Member Green, distinguished 
committee members, thank you for asking the Medicare Payment 
Advisory Commission to testify today. As you know, MedPAC was 
created by the Congress to advise it on Medicare, and today we 
were asked here to talk about our work on post-acute care.
    The commission's work in all instances is guided by three 
principles: How you assure that the beneficiary gets the access 
to high quality coordinated care, to protect the taxpayer 
dollar, and to pay plans and providers in a way to achieve 
those two goals. Post-acute care services are a vital part of 
the Medicare benefit. They provide rehabilitation and nursing 
services at critical points in a beneficiary's care. But I 
think we are all aware that there are problems, particularly in 
fee-for-service, that face the post-acute care.
    Our siloed payment systems encourage fragmented care by 
paying based on setting rather than based on the needs of the 
beneficiary. The nature of fee-for-service reimbursement 
itself, encourages service following in which, in some cases, 
may be unnecessary. We know that if Medicare payment rates are 
set too high or constructed inconsistently across setting, they 
can result in patient selection and patterns of care that focus 
on revenue rather than on patient need. And for post-acute 
care, the clinical guidelines themselves regarding when 
services are needed are poorly defined. And this isn't an 
accusation. This is what you get when you talk to clinicians 
and it makes it hard for both clinicians and policymakers in 
this area to make policy.
    So what is the commission's guidance? In the short run, the 
commission would set fee-for-service payment rates to reflect 
the efficient provider. For example, the commission's annual 
payment analysis has determined that payment rates for home 
health and skilled nursing facilities have been set too high 
for over a decade, and we have repeatedly recommended rebasing 
those rates downward to be more consistent with the cost of an 
efficient provider.
    A commission goal is to pay the same for similar patients 
regardless of setting of care. For example, the commission 
recommended that the secretary examine paying the same base 
rates in inpatient rehab facilities and skilled nursing 
facilities for a selected set of conditions where patients 
appear to be similar, in other words, to have a site neutral 
payment.
    The commission would reform payments to avoid patient 
selection strategies. We have recommended that CMS revise its 
home health and its skilled nursing facility payment systems to 
remove the strong incentive to take physical rehab patients and 
to avoid complex medical patients.
    The commission has recommended policies to moderate 
excessive services. For example, the most rapid growth in the 
home health sector is utilization unrelated to a 
hospitalization. The commission has recommended a modest 
copayment for those episodes that don't follow hospitalization, 
and we have published data showing that there are areas of the 
country with excessively high utilization of home health 
services and encourage the secretary to use their fraud and 
abuse authorities to examine those areas.
    The commission has also created policies that overlay fee-
for-service and try to encourage coordination. For example, we 
have recommended readmission penalties for hospitals, skilled 
nursing facilities, and home health agencies that exhibit 
excessive readmission patterns.
    We have also made longer run recommendations to create 
incentives to avoid unnecessary volume and to encourage 
collaboration across the various post-acute care providers, the 
commission has called on CMS to create and examine various 
bundling payment strategies to assess patient need, to track a 
patient's quality of care, and to eliminate the various payment 
systems for the post-acute care sector and instead have a 
single unified payment system. For many years, we called for a 
unified patient assessment instrument. Through the past efforts 
on the part of the CMS and as the result of the recent passage 
of the IMPACT Act, that work appears to be underway, but there 
is still a lot of work to be done here and all of us will need 
to be attentive to that process.
    Beyond traditional fee-for-service, a well-functioning 
managed care program and initiatives like accountable care 
organizations can also create incentives to avoid unnecessary 
volume and encourage coordination, and the Commission has 
provided a range of guidance in those areas as well.
    In closing, the Commission has consistently made unanimous 
policy recommendations to move away from a siloed payment and 
delivery system that undermines care coordination and instead 
move towards one that is focused on the beneficiary and on care 
coordination, but at a price the taxpayer can afford.
    I look forward to your questions.
    Mr. Pitts. The chair thanks the gentleman.
    [The prepared statement of Mr. Miller follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. I will begin the questioning. Recognize myself 5 
minutes for that purpose.
    Dr. Miller, there have been concerns raised from the home 
health industry that current legislative reductions in 
reimbursements threaten the ability of home health agencies to 
treat Medicare patients. In support of these arguments, they 
point to cost reports and other data that show profit margins 
that are either very low or, in some instances, negative. I 
think everyone wants to ensure the benefit and access to it 
remains strong.
    Have you or your staff looked into this issue? And, if so, 
what have you found and do you have any recommendations for 
this committee?
    Mr. Miller. We have looked into it and we have reported on 
it for many years. Just to be very clear, at the front end of 
this answer, for many years, we have documented very high 
profit margins on Medicare patients in home health, in the 12, 
13 percent range. And we stand by those numbers just to be very 
direct in responding to your question.
    We are the ones who made the recommendations to start to 
rebase the rates, and there is a rebasing provision in law. We 
believe that rebasing provision doesn't go far enough. So I 
want to be clear about that. And I can take that on in further 
questions.
    But then I think what may be--your question may be about 
and what other people see is numbers like 13 percent margins 
for Medicare, and then the home health folks will show you a 
margin that is 2 or 3 percent. And let me just talk you through 
that. One thing that you should keep in mind is is that the 
home health industry itself acknowledges that their margins on 
Medicare are as high as we say. If there are differences there, 
they are differences of a matter of a few points. So if you 
listen in on calls with their Wall Street investors and that 
type of thing, they acknowledge that the margins in Medicare 
are very high and that that is the place that, you know, a 
business model or a line of business that they want to attract.
    The lower profit margin that you see reported involves a 
few things. Number one, it can involve other lines of business. 
So if an organization owns a home health line of business but 
owns a different line of business, the margin will reflect 
that. It can reflect lower payment rates in Medicaid and 
private payers, which often do pay less than Medicare and so 
their margins will be lower there. It can also reflect costs 
that Medicare doesn't recognize as allowable, such as political 
contributions or taxes paid in localities. So I think some of 
the differences between those two numbers are those types of 
things.
    Mr. Pitts. As post-acute care providers look to innovate in 
their delivery model, I know that telemedicine is an issue many 
are focused on. In fact, it is a very important issue at our 
21st Century cures discussion. And a number of members are 
working in a bipartisan fashion to advance the use of these 
technologies in the Medicare program. However, I have heard 
concerns that if telemedicine is not done correctly, it could 
lead to higher expenditures under the program without a similar 
increase in quality or service. What are your thoughts on that?
    Mr. Miller. I believe our view on telemedicine is that it 
can be a useful tool that providers--and not just home health 
providers--can use in order to manage a patient's care and cut 
down on some of the overhead expense of a face-to-face type of 
visit.
    Our view here is that there is nothing in the payment 
scheme for Medicare that prevents a home health agency from 
using this service. And to the extent that the service makes 
good sense and helps them coordinate care and reduce their 
cost, they should be able to use that service.
    I have heard--and this might be part of your question--in 
other settings, people have been concerned that the use of 
telemedicine, depending on how it is paid for--and it really 
does matter how it is paid for--does make it easier to generate 
a visit or an encounter, if you will, and that unless it is 
monitored, can produce payments per click, if you will, that 
can result in higher cost. But depending on how it is paid in 
home health within an episode, I am not quite sure that that 
problem is present.
    Mr. Pitts. Well, Dr. Miller, I just wanted to personally 
thank you and your staff for the support you have given to this 
committee to its members on the issue of telemedicine. We would 
appreciate that continued support as we go forward. And I thank 
you.
    And I now recognize the ranking member of the subcommittee, 
Mr. Green, 5 minutes for questions.
    Mr. Green. Thank you, Mr. Chairman.
    Dr. Miller, I too--and we appreciate your thoughtful 
examination of the post-acute care payment reforms that MedPAC 
has done to date.
    From your testimony, it appears that the Commission has 
given some initial consideration of bundled payment design 
elements such as the scope of service covered, the time span of 
the care episode, and the ways to ensure quality. And there are 
tradeoffs between increasing opportunities for care 
coordination and requiring providers to accept greater risk 
beyond the care they furnish. As you noted, bundled payments 
can encourage accountability for cost and quality across the 
spectrum of care by incentivizing the provision of only 
clinically necessary and coordinated care.
    A recent legislative proposal of the Bundling Act, the 
BACPAC, seems to take a different approach than what MedPAC has 
considered. In fact, BACPAC bundle assumes a third-party 
entity, a coordinator, that would pay PAC providers. BACPAC 
would also bundle post-acute care services after a patient's 
discharge from an acute care hospital. Conversely, MedPAC has 
explored global payments that would cover initial 
hospitalization and potentially avoidable readmissions in PAC 
services within the 90 days. So you are going not only from the 
hospital, but also to the PAC issue.
    Could you discuss the pros and cons of the two different 
approaches, I guess?
    Mr. Miller. What I want to be clear in commenting on, 
MedPAC as an organization--and because we serve the various 
committees of Congress, I won't be making any comments pro or 
con on any piece of legislation.
    Mr. Green. OK.
    Mr. Miller. So my comments here will be about what we have 
done on bundling and what we think about bundling. Hopefully, 
none of this should be taken as either supporting or opposing a 
specific piece of legislation.
    Mr. Green. OK. Well, my next question, then, wouldn't a 
coordinator simply add another layer of payment to the policy?
    Mr. Miller. That would depend entirely on how the 
coordinator is defined. So if the coordinator is one of the 
providers within the PAC continuum, no. If it is another 
provider outside of that continuum, that is decidedly a 
different actor. Whether it adds cost or not depends on where 
the money comes to pay for that coordinator whether it is paid 
out of savings or whether it is paid out of new dollars.
    Mr. Green. Well, and that's the next question.
    But, should Congress limit the flexibility in designing 
what elements of care can be bundled?
    Mr. Miller. So, I think the way I would answer that is the 
Commission--just to be clear, the Commission has looked at a 
number of different ways of structuring bundle. So whether it 
is attached to acute care and post-acute care, whether it is a 
set payment that goes to a particular entity or whether, in 
fact, you sort of draw a circle or a boundary around an episode 
and then continue to pay on a fee for service, we have talked 
through those and we have talked through the pros and cons of 
all of those.
    There is, I think, a need to be thinking about these 
different issues, but I also think that there is a point at 
which there will probably be some action required by Congress 
in order to move the bundling concept along. I think that in 
the past, looking at different ways either through 
demonstrations in different models have not always produced 
crisp and timely results for people to act on.
    I do want to also say--well, I will stop there.
    Mr. Green. Well, you had mentioned a response to the 
chairman's questions about MedPAChas noted a number of times 
that post-acute care providers enjoy high margins and obviously 
investors notice that.
    Could you talk briefly about the margins that post-acute 
care providers receive for Medicare payments and what this 
tells about the Medicare's payment for these services and if 
you have recommendations on how Congress should address these 
high margins?
    Mr. Miller. So, and again I am just going to do this at a 
very kind of high-glide level. You are probably talking 
currently about margins that are in the, let's call it 12 
percent range for home health and skilled nursing facilities. 
Again, these are Medicare margins. You are probably in the 7 
range for inpatient rehab facilities, maybe the 5 to 6 range or 
6 range for long-term care hospitals. I am not sure I have that 
as wired in my head.
    The Commission's view on these--and so, for example, in our 
current--our most recent March 2015 report, we recommended no 
update for inpatient rehab facilities and long-term care 
hospitals, the argument being that they can cover any increase 
in their input costs with the current level of funding that 
they are getting. And then for home health and skilled nursing 
facilities, we have recommended actual reductions in the rate 
to bring them closer to the cost of an efficient provider.
    Mr. Green. OK. Thank you Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman.
    Now recognizes the vice chair of the subcommittee, Mr. 
Guthrie, 5 minutes for questions.
    Mr. Guthrie. Thank you, Mr. Chairman. And thank you, Dr. 
Miller, for being here.
    In your testimony, you mention that different post-acute 
care settings treat similar patients, but Medicare pays them 
different rates depending on the setting. Can you explain why 
this happens and how much authority CMS has to fix it compared 
with what is in the statute?
    Mr. Miller. Yes. I am probably going to be less helpful on 
the statute and what authority they have. That just may not be 
something I am as wired on.
    Mr. Guthrie. OK.
    Mr. Miller. And again, I want to point out here that some 
of this is--the program sets these payment systems up at 
different points in time. I think that a post-acute care 
environment is a difficult environment for clinicians to 
operate in. It is a complicated set of decisions that have to 
be made.
    But if somebody comes out for--let's say, out of the 
hospital for a given procedure, a hip replacement, let's say, 
depending on the circumstances of the patient, they could end 
up in an inpatient rehab facility. They could end up in a 
skilled nursing facility. They could end up in entirely a home 
health treatment plan. Medicare would pay differently in those 
different settings. And what we have begun to see--and we have 
seen this both on the acute care side, which we are not talking 
about today, and on the post-acute care side, places where we 
feel like we are beginning to identify overlaps of patients and 
we end up paying very differently for similar patients.
    Now, I want to express some caution here. In the post-acute 
care setting, we have entered this area and we have begun to 
talk about what we think are similar sets of patients based on 
our research between the inpatient rehab setting and the 
skilled nursing facility setting. But by no means are we making 
very broad blanket statements that you can just pay the same in 
all of those settings. And I also want to say to, at least, one 
opening statement, some of the information that we get out of 
the IMPACT Act and the more consistent assessment of patients 
across settings will help to understand that problem better.
    Mr. Guthrie. OK. And you also stated that the Commission 
has frequently observed that Medicare's payments for post-acute 
care are too high and its payment systems have shortcomings. 
Why do you believe the payments are too high and what are the 
system shortcomings?
    Mr. Miller. OK. Some of the--why are the payments too high? 
OK. Let me take that part. And then you said shortcoming.
    Mr. Guthrie. And shortcomings in this payment systems.
    Mr. Miller. OK. So why are they too high? I think a couple 
of things go on. And by the way, some of this is good. It is 
just not the payment system necessarily keeping up.
    So let's take home health, for example. So when the home 
health prospective payment system was created, there was this 
decision to create an episode, OK. So you had an episode of 
care. At that point in time, 31 visits on average were provided 
during that episode of time and a payment system was based on 
that.
    Over time, the the provision of health care in that episode 
has changed a lot. There is now about 21 visits provided. Now, 
in fairness, these visits are more skilled than the visits that 
used to be provided when there were 31. But even after you 
adjust for that, basically what it means is, is that the 
original base rate was set wrong. The industry responded, 
lowered the way that they were providing care and some of that 
margin was created. So, I think that is one of the issues.
    Some of the shortcomings, I think, was another part of your 
question.
    Mr. Guthrie. Yes. Right. On the payment systems.
    Mr. Miller. It is some of these things that we have already 
touched on here, the fact that you have such different payments 
in different settings and that clearly sets signals for 
providers who might say, well, there may be some advantage to 
go in one direction or another direction. I mean, those are 
some of the shortcomings.
    I also think that there is a difficulty in, at least, in 
some of the payment systems, a clear signal to provide 
additional services and there is not a really good way, at 
least presently, to have a handle to counteract----
    Mr. Guthrie. And I got real--just a couple of seconds.
    Mr. Miller. Sorry about that.
    Mr. Guthrie. But the Commission, in your statement, you 
said the Commission studied difference in outcomes in SNFs and 
IFR settings but couldn't compare risk adjusted across that. 
Was there a reason why you couldn't do the risk adjustment?
    Mr. Miller. OK. So, really quickly because I see we are out 
of time here. In thinking about trying to set a base payment 
that is equal between skilled nursing facility and SNFs, we 
looked at risk scores, we looked at complications in 
comorbidities, we looked at functional statuses as best as 
possible and zeroed in on a few conditions that we think are 
very similar in the two settings.
    One thing that is difficult--and this is why the IMPACT Act 
is so important--is what you really want in a perfect world is 
the same assessment applied to each patient so then you can 
truly across settings say, this patient is different than this 
patient and it is done on a common basis. That is not going on 
now.
    Mr. Guthrie. OK. Thank you. I yield back.
    Mr. Miller. Sorry about the time.
    Mr. Pitts. The chair thanks you. Gentlemen now recognizes 
the ranking member for the full subcommittee, Mr. Pallone, 5 
minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman. And I thank you for 
having this hearing because I think it is very important.
    But, Dr. Miller, I was very impressed with the statements 
you have made so far because you really have been kind of 
urging caution in terms of how we proceed. And you have also 
talked about getting more information from the IMPACT Act, 
which is what I would like to see before we move ahead with any 
particular legislation.
    I am just going to use an example with my dad. My dad is 
91. He has been in and out of hospitals many times and, I 
guess, my fear in hearing some of the statements that have been 
made about having a PAC coordinator who is somehow going to 
benefit, either he or those who he services are going to 
benefit from some sort of pay back if--depending on where the 
patient is placed and this idea of just a 4 percent cut 
overall. These things concern me a great deal.
    Let me just give you an example. Many times when my father 
has come out of the hospital, for whatever reason, we have to 
make a decision, I say ``we,'' I mean collectively my brother, 
my father, myself--about where to place him. And that may be 
that he goes home and he gets home health care, or he goes and 
gets home health care for a few weeks and then he goes to the 
outpatient rehab facility or he may go to a inpatient rehab 
hospital, or he may go to a nursing home. It has often been a 
combination of those things, depending on what he was in the 
hospital for and what we think as a family is the best way to 
deal with that post-acute care.
    And a lot of times, those are individual decisions because 
there is great variation. Sometimes we don't like the inpatient 
hospital because we don't think they do a good job or we don't 
like the nursing home that has been proposed because we think 
it is not a very good nursing home. And I would hate to think 
that those decisions would be made by some coordinator that I 
understand you would have input into. But I would be very 
concerned that those decisions are being made by some, you 
know, third party who has some sort of financial incentive to 
make that decision.
    So I just think that we have got to be extremely careful 
with these things because there is such great variation, not 
only in terms of nursing home versus home health or nursing 
home versus inpatient hospital, but the individual places. In 
my opinion, whether I think the nursing home or the inpatient 
rehab facility is better than one or the other has more to do 
with it than it does about whether I go to a nursing home, per 
se.
    So, let me just ask you some questions about IMPACT. Given 
that the Medicare program spent $59 billion on post-acute care 
in 2013, I am amazed we don't have better information about 
patient outcome service user quality of care, and it is my 
understanding that the IMPACT Act will address some of these 
information shortfalls. You want to comment a little more on 
that? Does IMPACT think the data gathered as a result of the 
IMPACT Act will be enough to move us forward? Does Congress 
need to do more to gather this information? And what is your 
general feeling about whether we should be getting more 
information before we make decisions about bundling or cutting 
Medicare payments?
    Mr. Miller. OK. You said a lot in there.
    Mr. Pallone. I know. I can spend the whole day on this 
because I deal with it every day. I am going to be dealing with 
it in an hour--as soon as I leave this hearing.
    Mr. Miller. I know. I have a father, I have an aunt that I 
am managing. I know exactly what you are up to.
    So, let me try and do this rationally. First of all--
because there are a couple of things I do want to comment on. 
First of all, the Commission for many years was calling for 
something like what happened in the IMPACT Act and moved to a 
common assessment instrument. And we do think that the common 
assessment instrument and what goes on in the IMPACT Act--
again, we haven't precisely seen what will come out of that. 
The legislation has set things in process and things will have 
to be defined in regulation. But we do think that it will do a 
lot of good in terms of having common domains, having common 
assessment scales and definitions and timeframes and the list 
could go on. I don't want to say it is perfect--we haven't seen 
exactly what will come out of it--and that there is nothing 
else that will be needed.
    But in this area--and this is a point that I would make--I 
think like many things in life and in Medicare, there is 
movement with caution, but movement. Because the other thing 
that I would just, by matter of degree say back, is if we wait 
for everything, you know, all the demonstrations to be 
finished, all the incentives to be produced in perfection, we 
won't move forward. And that has happened in the past. And I 
think the Commission believed there is some ability to move 
forward with caution.
    And here is the kinds of cautions I would say. Things like 
being sure that you have a transition built in so that the 
providers and the beneficiaries can respond. Be sure--and to 
some points that you were making about your own circumstances, 
that the person who--because one thing about a person who 
thinks about the entire episode, they can--if well motivated, 
can actually help the family make those decisions. Because I 
have stood in the hospital, too, had somebody say here is a 
list, make up your mind, what do you want to do? And you don't 
have a lot of sense of what to do.
    Mr. Guthrie [presiding]. Thank you, Doctor. This is all, I 
mean, very good. And I appreciate what you are doing, but we 
are going to try to get some questions in before votes.
    Mr. Miller. All right.
    Mr. Guthrie. So I appreciate that.
    Mr. Miller. Sorry I took so long.
    Mr. Guthrie. And you did--it is a great discussion.
    Mr. Shimkus from Illinois is recognized.
    Mr. Shimkus. Well, that is OK, because I am very curious 
about the response and some of my questions were involved with 
that. Because, I think, following up on Mr. Pallone's 
questions, sometimes, in essence--I don't know the right 
terminology--but an advocate or someone else who could give 
some advice on the options from a practical application. The 
challenge is you are given a list, pick one, and you don't have 
anybody to help you through that.
    So, I am on the flip side. I am not sure that it costs 
more. I think it may save more in time, effort, energy, and 
frustrations, with more information as someone who is doing 
that on a day--someone who is doing that on a day-to-day basis.
    I think the challenge of folks our age with older adults is 
that we don't have the experience, and then we get thrown into 
it based upon an event and we are still juggling our lives, 
too. So, do you want to--and you were going to answer and 
follow up on that so go ahead.
    Mr. Miller. So I don't want to cause a nuclear reaction 
here----
    Mr. Shimkus. Oh, this is the Energy and Commerce Committee. 
We like that.
    Mr. Miller. You are both right. OK. And I think the concern 
Mr. Pallone was mentioning is, is you don't want somebody 
making that decision too aggressively----
    Mr. Shimkus. Right.
    Mr. Miller [continuing]. For the wrong reasons to save 
money. But on the other hand, if you can structure the payment 
system in such a way and you have risk adjusted carefully for 
the differences in the patient, you have quality metrics so 
that if a person chooses to stint in order to save, then that 
is a problem. So you want this person who is giving the 
guidance to have motivation to make sure that the person gets 
the highest quality care and to avoid unnecessary services.
    I think both of you can be right on this matter, but you 
don't want to tip too far----
    Mr. Shimkus. No. And I understand that.
    Mr. Miller [continuing]. In one way or the other.
    Mr. Shimkus. And I appreciate that.
    The other part of the questions that we have had before is 
about necessary data, how long do you wait before you start 
moving forward. What data do you think is necessary and needed 
for additional reform before additional reforms are adopted? So 
what data is not out there that you think you need to have?
    Mr. Miller. Well, here is what I would say. First of all, 
again, I want to say that the Commission had lots of pushing 
for many years on what ultimately ended up in the IMPACT Act. 
We think it is a good start. And so a lot of that information 
should be helpful. And just because I am probably not loaded 
enough to give you what data we are missing, I would say this: 
The other thing we can be thinking about is there are sets of 
recommendations that we have made that we can do now, that 
don't involve bundling, which is not to disparage bundling at 
all. And you can think of less aggressive versions of bundling 
to start moving the providers in that direction.
    So think of the notion of saying I am going to define an 
episode of care. I am going to continue to pay on a fee-for-
service basis and there are various mechanisms you can put in 
place to be sure that you don't overpay, and then the providers 
are beginning to move to the bundle concept without actually 
having a hard, in-place, here-is-the-boundaries, here-is-the-
payment kind of bundle. And I would encourage that because that 
will produce information as well.
    Mr. Shimkus. So let me follow. I mean, you are right. It is 
like we choreographed this a little bit, which we did not----
    Mr. Miller. We did not.
    Mr. Shimkus [continuing]. For the record.
    Mr. Miller. I have never seen you before.
    Mr. Shimkus. But how should CMS or Congress, then, 
accomplish the recommendation of this? I mean, so you are 
saying we should, so how should we or CMS?
    Mr. Miller. Yes. So, I mean, the kinds of things, I think, 
the Commission would say is you should keep work going on 
looking at bundling and more of the structure types of 
approaches to bundling that, I think, some people are talking 
about, but at the same time also be thinking about mechanisms 
that begin to bring providers together. Some of them are more 
rudimentary, such as saying, if there is a lot of readmissions 
here across this set of providers, all of you are going to feel 
an effect. And so you are not saying you are in a bundle, you 
are not being paid by a single entity. But, if my actions 
result in a readmission, you and I are both going to feel it. 
Those types of things, and we have recommended on that front.
    And then the other thought that I am trying to get across--
but I am not sure I am doing it particularly well--is begin to 
say to that set of actors, I am now going to start looking--I 
am making this up--we are now going to look at what happens 
over 60 days in a totality type of way and if you, in terms of 
outcomes and payments, if you do well or do poorly, your 
payments will be affected that way. In a sense, it is like 
injecting the ACO or the Accountable Care Organization 
concept----
    Mr. Shimkus. Right. Right.
    Mr. Miller [continuing]. Into more of the episode concept, 
if you will.
    Sorry if I took too much time.
    Mr. Shimkus. No. Good.
    Mr. Guthrie. Thank you. The chair now recognizes Dr. 
Schrader from--or Dr. Schrader from Oregon for 5 minutes for 
questions.
    Mr. Schrader. Thank you, Mr. Chairman. Appreciate that. You 
know, I do some of this post-acute care myself, but I am a 
veterinarian. So it is a little easier to do that way.
    Along those lines, I guess, a question I have--looking at 
the IMPACT Act reviewing, I mean, that is a long-term project 
potentially and I am not sure we want to wait until 2024 
whenever all that is done.
    Is there some earlier date by which the committee or 
Congress should be informed by some of the information we are 
gleaning that you think would give us an opportunity to move 
forward in a very thoughtful way on this bundle payments thing?
    Mr. Miller. Yes. Unfortunately, we have a couple of 
mandated reports as a result of the IMPACT Act, and one of them 
is on a very short timeframe, and so hopefully we can give you 
some sense there, out of that report.
    Mr. Schrader. And what is that timeframe again?
    Mr. Miller. Next summer, I am disappointed to say.
    Mr. Schrader. Next summer. OK. OK. And then you have been 
talking about margins quite a bit. How are you calculating 
those margins? In other words, if I go to my skilled nursing 
facility or rehab group, are they going to agree with your 
assessment of the margins out there?
    Mr. Miller. No, they are not----
    Mr. Schrader. And why would that be?
    Mr. Miller [continuing]. To answer your direct question.
    I'm sorry. I shouldn't be facetious. I don't think our 
margins are mysterious at all. They come out of the Medicare 
cost reports that your skilled nursing facility or whomever 
else, home health agency, fills out. There are rules about what 
costs and how they are allocated, and then we calculate the 
cost and then we calculate the payments that a facility----
    Mr. Schrader. And how is theirs going to be different? You 
know, when they are calculating their margins, how are they 
going to be different than what the model you are using?
    Mr. Miller. Well, what home health and the skilled--well, 
what the skilled nursing facility argument goes like this. This 
is the most common argument, OK. We recognize that Medicare 
margins are in the range that MedPAC says, 11 or 12 percent, 
but Medicaid and the private sector are paying us less. We are 
not earning as much money there. Our margins are much lower 
and, I think, the total margin is something like in a 2 percent 
range there. And then they say, you should pay more because you 
are basically cross-subsidizing these other payers.
    The Commission's position on that is you are the Congress 
of the United States, you control the pursestrings, you can 
decide how dollars are allocated, but you should be clearly 
conscious that what you are doing is saying, this Medicare 
dollar is now subsiding dollars in the States or in the private 
sector and we think that that is, you know, at least a big 
question that should be faced head on.
    Mr. Schrader. All right. In the ACA, there were some 
demonstration projects on bundled payments and that it 
included, not just acute care, but some of the skilled nursing. 
You indicated, I think, that that was kind of a token. What are 
we learning from that, if anything, and if----
    Mr. Miller. Right.
    Mr. Schrader [continuing]. It is not giving us the 
information we want, what should we be asking to get from what 
we are doing hopefully in the near future?
    Mr. Miller. Yes. And the second part of your question--or 
this question I probably want to think about a little bit more. 
But what I guess I am concerned about--and you did pick up on 
this. So, for example, in the bundling demonstration, there 
were many thousands of actors who said, ``I am interested in 
understanding my experience in bundling.'' And then it comes to 
the second phase that says and ``How many of you would be 
willing to take risk?'' And that drops immediately to the 
hundreds, OK, or even the 100.
    Then it says, ``Which of the conditions are you willing to 
be at risk for?'' And that comes to two or three. And so, in a 
sense, you had, ``I am really interested in looking at this.'' 
How much risk would you be willing to take risk and then for 
what? And then you are down to relatively small numbers. And my 
concern--and I think the Commission's concern--is this process 
isn't going to produce a very clear set of models and a clear 
set of generalities to say, OK, here is the direction to go.
    And I think what the Commission needs to do is, given that 
environment, try and bring the committees of jurisdiction some 
structure in order to say what do you do if that information 
doesn't arrive in a very crisp and clear way.
    Mr. Schrader. Real quick. And you may not be able to answer 
it in time. But it seems like with the Accountable Care 
Organizations or, in my state, the Coordinated Care 
Organizations, they are willing to take a lot of risk. Can't 
they deal with the bundled payments also for post-acute care as 
well as acute care? Do we need another organization or outfit 
to do this?
    Mr. Miller. This is a really good question. And part of the 
reason the Commission on the bundling front--I am going to 
answer this in the time. Well, apparently not.
    But either way, this is a really good question because the 
Commission has two different views on this. Some people say--
and not just the Commission--why not move to more of a 
population-based model, like an Accountable Care Organization, 
and then maybe the episodes continue as a payment mechanism in 
those, but maybe they are superseded by the fact that you 
actually have a population model management.
    Mr. Schrader. Yes. OK. Thank you.
    And I yield back.
    Mr. Guthrie. Thank you. Gentleman yields back.
    The chair recognizes Dr. Murphy from Pennsylvania for 5 
minutes.
    Mr. Murphy. Thank you. Welcome, Dr. Miller. It is good to 
have you here.
    What MedPAC has looked at and what we are talking about 
here are patients with a similar clinical condition receiving 
similar treatments from different providers at different 
locations for different costs. Am I correct?
    OK. So has MedPAC ever looked at the issue of patients in a 
different way, the same clinical conditions, receiving the same 
treatment from the same provider at the same location for 
different costs?
    If you would like to--I can give you a little more detail. 
Would you like some more details first?
    Mr. Miller. Yes. I am definitely trying to hear you.
    Mr. Murphy. OK. I put anecdotally about cases where a 
patient received, for example, chemotherapy from a physician 
that was billed as a physician-based practice.
    Mr. Miller. OK.
    Mr. Murphy. And then that same patient was seen by the same 
doctor, for the same treatment, at the same location and was 
billed as hospital outpatient treatment at an incredible markup 
price after that office became part of a larger healthcare 
system. Are you familiar with that?
    Mr. Miller. Oh, yes.
    Mr. Murphy. How widespread is this practice?
    Mr. Miller. OK. We have looked at this. I can't give you 
just a flat out number, here is how widespread this is. 
However, we have looked at specific sets of services, not the 
one you have raised, but specific sets of services and seen the 
shift in billing basically from the physician office stream to 
the outpatient stream and it is as you describe. I am going to 
the same physician office I went to, I am seeing the same set 
of physicians, I am getting the same service and now the bill 
is being run through a different payment system, the outpatient 
hospital payment system, because the hospital has acquired the 
practice and the markups can be very--or the payment increases 
can be very high and, of course, the beneficiary's copayment 
goes up commensurately with that.
    Mr. Murphy. Precisely.
    Mr. Miller. We made two recommendations in this area on 
sets of services that we identified, and they met certain 
criteria which I won't take you through because of time and all 
of that. Because, again, we wanted to be careful that we didn't 
undercut the hospital's mission, but at the same time this 
particular phenomenon, we felt, was not good for the taxpayer, 
not good for the beneficiary particularly when we are talking 
about the same service, same provider.
    Mr. Murphy. Sure. So we have heard examples, for example, 
where someone was getting oncology treatment, chemotherapy, 
that, in one instance, may cost $10,000. When the hospital 
acquires the practice, it is billed at $30,000.
    Mr. Miller. I am--yes.
    Mr. Murphy. We have heard similar things for a 
dermatological procedure, et cetera. And then a person's copay 
may have a several thousand dollar difference as well. So it 
currently is legal. Am I correct?
    Mr. Miller. Yes.
    Mr. Murphy. Is it ethical?
    Mr. Miller. The Commission has raised great concerns with 
this practice.
    Mr. Murphy. Do you wonder if it is ethical?
    Mr. Miller. Say it again.
    Mr. Murphy. Is it ethical that someone has found this 
loophole and is----
    Mr. Miller. I will speak only for myself, not the 17 
commissioners, OK. No. I see this as a problem.
    Mr. Murphy. Thank you.
    So, previous MedPAC analysis has shown that hospital-based 
reimbursements is much higher, as we said, and paying the 
doctor more than a nonhospital affiliated facility.
    Mr. Miller. I'm sorry. Would you----
    Mr. Murphy. Sure. I have a cold, and so it is hard for me 
to----
    Mr. Miller. I apologize.
    Mr. Murphy. That is OK. I am sick. But what am I going to 
do? See a doctor?
    Mr. Miller. And I am a little nervous.
    Mr. Murphy. Anyways.
    So I am paying the doctor more and charging a senior more 
for same service at a nonhospital affiliated facility. Can you 
comment on what degree a similar dynamic is differentiated 
payments? You may be operating in the post-acute space and its 
relationship to costs for seniors and potential consolidation 
of treatment facilities similar to those we have seen in the 
cancer setting.
    Mr. Miller. I now do understand what you are saying, and 
often the beneficiary difference in the post-acute care setting 
is not as extreme as you see in the acute care setting. So in 
the acute care setting when somebody--and this is why, when you 
asked your very pointed question, I see problems here. The 
beneficiary is paying 20 percent of whatever happens, as a 
general rule.
    In the post-acute care setting, it is a little bit murkier. 
So let's take--and actually it may not be as much of an issue 
for the beneficiary. Let's take the inpatient rehab facility 
and the skilled nursing facility. The beneficiaries generally 
retire their in patient admission deductible and they go to 
these facilities. Unless they stay for long periods of times, 
they don't necessarily have a copayment that goes along with 
it. So the circumstances are actually just a little bit more--a 
little less--they are not as consistent as you see on the acute 
care side.
    Mr. Murphy. OK. Thank you. I know I am out of time, but I 
just hope we continue to work with you to get more information 
on that process I spoke about, what those net costs may be 
costing Medicare as well as seniors with copays. I am sure as 
you go through this--and Mr. Chairman, I hope we can get that 
information and report that back.
    Mr. Guthrie [presiding]. Thank you. The gentleman's time is 
expired. We are really pushing votes. Let me recognize the 
gentlelady from California, Ms. Matsui.
    Ms. Matsui. Thank you, Mr. Chairman. And Dr. Miller, thank 
you very much for your testimony. This is somewhat similar but 
not really talking about hospitals here to Dr. Murphy's 
questions.
    Under the current Medicare payment systems, there are no 
financial incentives for hospitals to refer patients to the 
most efficient or effective setting so that patients receive 
the most optimal but lowest cost care. Whether a patient goes 
to a home health agency or a skilled nursing facility, for 
example, seems to depend more on the availability of the post-
acute care settings and their local market, patient and family 
preferences or financial relationships between providers.
    Now, putting aside what Dr. Murphy was concerned about, and 
I think we all should be concerned about that, but if we 
proactively look at this, since patients and also, too, the 
hospitals have a role in this because they don't want the 
readmittance either, so look at that, too, but since patients 
often access post-acute care after a stay in the hospital, how 
can we best harness the hospitals to help ensure patients 
receive care in the right setting after a hospital stay?
    Mr. Miller. OK. I think there is a couple of things to say 
here. Number 1, there is, I think, one of the reasons the 
Commission said there should be--and part of the problem of 
making a bad referral is, is that the patient had some 
complication or bed sore or something and bounces back.
    Ms. Matsui. Right.
    Mr. Miller. And so one of the reasons that the Commission, 
I think, took this position of the hospital, the skilled 
nursing facility, and the home health should all feel a 
readmissions penalty if a readmission occurs, is to try and 
build in--the hospital needs to be conscious of it but also the 
hospital's partners----
    Ms. Matsui. Partners.
    Mr. Miller [continuing]. Or implicit partners should be 
conscious as well to try and militate against that.
    A second thing that goes on is there is something called 
the Medicare spending payment per beneficiary. This is a very 
arcane thing, but it is buried deep in the value-based 
performance metrics that hospitals are judged by, and so to the 
extent that that has some impact on their payment, they are 
paying attention to the 30 days that followed the discharge. 
But there again, if you are a hospital, you sort of say, you 
are holding me responsible, but there is all these other 
actors, how do we bring them into it.
    And that is what gets us to some of the things that we are 
discussing today, whether you start thinking about payments 
affects that cut across like what I will call loose bundles or 
hard bundles, depending on what kind of model we are talking 
about, and then of course the level above that is if there is 
an accountable care organization that the hospital is a part 
of----
    Ms. Matsui. Right.
    Mr. Miller [continuing]. Then obviously it has those 
incentives kind of built into that.
    Ms. Matsui. So we are taking those steps now to have the 
responsibility sort of be more than implicit in a sense.
    Mr. Miller. I think there are still steps to be taken, but 
absolutely. So, for example, the Congress has implemented 
readmission penalties for hospitals and skilled nursing 
facilities but not home health.
    Ms. Matsui. Exactly.
    Mr. Miller. My understanding is home health and the skilled 
nursing facility, or associations and environments agree that 
there should be readmission penalties. The details----
    Ms. Matsui. The devil is in the detail.
    Mr. Miller [continuing]. We probably disagree on but that 
would be usual.
    And then there are--I also want you to know this. And 
actually the whole committee to know this. There are 
discussions in the Commission. These are very--it is public. It 
is in the transcript, but we haven't jelled on it of, should 
there be some greater steering on the part of the hospital if 
the provider is being steered to have high quality rankings, 
that type.
    Ms. Matsui. That is what I was----
    Mr. Miller. I kind of thought you were going there.
    Ms. Matsui. Yes, going toward. I have quickly, another 
question. What about those beneficiaries that access post-acute 
care without a hospital stay?
    Mr. Miller. There is something of a different ballgame 
there.
    Ms. Matsui. Yes.
    Mr. Miller. The community admits are sometime--the words 
there. There is something of a different ballgame there in the 
sense of that beneficiary, it's potentially more difficult for 
the program to figure out whether we have a needed service 
there because the person doing the admitting--I don't want to 
overstate this, but the person doing the admitting in some 
instances is the person who is going to benefit from the 
admission in terms of the provider.
    Now, you can be referred by community physicians, of 
course, but there are also decisions made by the particular 
provider to take a person in to continue to add episodes of 
care, for example, in a home health setting.
    Ms. Matsui. OK.
    Mr. Miller. And so I think some of the things we might need 
to think about there is whether the beneficiary bears some 
small portion of the cost so that the decision is not just 
completely open-ended to the beneficiary.
    Ms. Matsui. Sure.
    Mr. Miller. And whether there needs to be some ability to 
look at prior authorization, that type of thing.
    Ms. Matsui. OK. Well, thank you very much, Dr. Miller. My 
time is up. Thank you.
    Mr. Guthrie. Thank you. The gentlelady yields. Be advised 
we are in votes now, so we will probably be able to get to one 
more 5-minute set of questions. Then we will reconvene 
following votes, probably about 12:15 we walk off the floor.
    Mr. Griffith, from Virginia.
    Mr. Griffith. Thanks. And I will try to be brief.
    And I am going to go off on a little bit of a tangent. When 
I was in the Virginia State legislature and then subsequent to 
that, North Carolina, adopted zoning requirements that would 
allow med cottages to be placed in somebody's back yard if a 
member of their family had medical needs that required two or 
more procedures a day. And the estimates were that this would 
save a lot of money. Of course, it is not paid for by the 
Federal Government at this time.
    And I would just ask that you all look into it because the 
concept is, is that you would build a hospital room in a mobile 
facility--basically the mobile home manufacturers love the bill 
for that reason because they would get this, but it would allow 
somebody like myself, if I were to suddenly have a major 
problem to stay in with my loved ones. And we had testimony in 
Virginia at the time that there was a young man who was 8 or 9 
years old who was dying and his parents wanted to be with him, 
but they couldn't get a medically appropriate place for him in 
his rural community, and so the parents had to both quit their 
jobs and spend the last few months with him in a hospital room 
in Charlottesville, Virginia.
    I think this is a concept that both saves money and is 
compassionate. It helps patients stay with their loved ones if 
they can, not necessarily in the hospital, but where they can 
have some treatment brought to the home where that is possible, 
in lieu of having a nursing home bed perhaps, but with the 
number of nursing home folks shouldn't be too opposed to it, 
and weren't at the time, because they see the market expanding 
so much that this niche would be there.
    Just ask you to think about it. I think it is something for 
the future, and I would appreciate it if you all would take a 
look at this concept and be happy to give you any information 
that you need.
    Mr. Miller. OK. I appreciate that.
    Mr. Griffith. And with that, Mr. Chairman, and many 
questions already having been asked and answered, I yield back.
    Mr. Guthrie. Thank you. Yield back. And since you yield 
back some time, I am going to recognize the gentlelady from 
Florida, Ms. Castor.
    Ms. Castor. Thank you, Mr. Chairman.
    Dr. Miller, whenever we are talking about payment reform, I 
am always concerned that we are appropriately accounting for 
the complexities and differences among patients. I believe that 
if we move forward to reform in the post-acute care setting, we 
should be looking to make sure that we appropriately adjust 
provider payments to reflect beneficiary risk. Every--and 
personal conditions, and it kind of follows on what Mr. Guthrie 
was asking about.
    Could you give us a--quickly, a little greater detail, do 
you believe a risk adjustment is an appropriate issue to focus 
on and what steps do we need to take, for example, in 
developing a bundled payment that would appropriately account 
for differences in beneficiaries?
    Mr. Miller. I do think it is an incredibly important point. 
I think--and regardless of what kind of payment system we are 
talking about, you need to get the risk--you need to get risk 
adjustment straight so that providers don't have an incentive 
to avoid the most complex patients. And a lot of our work has 
been focused on that in different settings of trying to adjust 
the risk and the payment systems to fix those very kinds of 
problems. And so you do need it.
    I think again, the data that will come through the IMPACT 
Act will help, but we are not completely without abilities to 
do that now. And one--I want to say one other thing before I 
say that. The other thing you want to do to help mitigate risk 
is have quality metrics so that if you really don't treat a 
patient well, the signal comes back through your payment, and 
then also you can do it through insurance functions, things 
like this.
    It is an episode payment, but if you have an outlier, then 
there will be a payment that comes in behind that. So that the 
person realizes a patient is going south or potentially could 
go south, they aren't completely exposed to that. And that also 
helps them make more willing to take the complicated patient.
    So I think, in answering your question, risk, absolutely 
important, don't forget, and I know you haven't, but quality 
feeds into that, and then an insurance structure in addition to 
that like an outlier payment all helps try and mitigate the 
concern which I think is you don't want them avoiding the most 
complicated patients. And I think there are bundles of 
mechanisms you can kind of think about. Anyway, I will stop.
    Ms. Castor. Thank you.
    Mr. Guthrie. Thank you. The gentlelady yields back. And I 
believe we concluded the questions for the first panel, but the 
committee will recess, and once we recess, we will reconvene 
following the last vote, and we will commence with the second 
panel at that--we will begin with the second panel at that 
time. The committee is in recess until call of the chair after 
the final vote.
    [Recess.]
    Mr. Pitts [presiding]. Ladies and gentlemen, if you will 
take your seats, we will get started. Thank you very much for 
your patience with the vote, and then before that, I had to 
duck out for the signing, the enrollment ceremony for the SGR 
which is a nice little celebration.
    So, we are back now with the second panel, and I will 
introduce them in the order that they speak. Dr. Steven 
Landers, president and CEO of the Visiting Nurse Association 
Health Group, Dr. Samuel Hammerman, chief medical officer of 
the LTACH Hospital Division at Select Medical Corporation, Dr. 
Melissa Morley, program manager of health care financing and 
payment at FTI International, and Mr. Leonard Russ, principal 
partner at Bayberry Health Care and chairman of the American 
Health Care Association.
    Thank you each for coming. Your written testimony will be 
made part of the record. You will each be given 5 minutes to 
summarize your testimony.
    And we will begin with you, Dr. Landers. You are recognized 
for 5 minutes for your opening statement.

   STATEMENTS OF DR. STEVEN LANDERS, MPH, PRESIDENT AND CEO, 
VISITING NURSE ASSOCIATION HEALTH GROUP; DR. SAMUEL HAMMERMAN, 
CHIEF MEDICAL OFFICER, LTACH HOSPITAL DIVISION, SELECT MEDICAL 
  CORPORATION; MELISSA MORLEY, PH.D., PROGRAM MANAGER, HEALTH 
CARE FINANCING AND PAYMENT, RTI INTERNATIONAL; AND MR. LEONARD 
  RUSS, PRINCIPLE PARTNER, BAYBERRY HEALTH CARE, CHAIRMAN OF 
                AMERICAN HEALTH CARE ASSOCIATION

                STATEMENT OF DR. STEVEN LANDERS

    Dr. Landers. Thank you, Chairman Pitts, Mr. Shrader. Thank 
you, Mr. McKinley for your leadership on this issue and honored 
to be here with my home State Representative Pallone.
    Today's hearing is timely and needed. Seniors are being 
discharged from America's hospitals and finding themselves 
often in a poorly coordinated and costly post-acute care 
continuum. Sometimes instead of order, there is disarray. 
Instead of teamwork and clear care paths across venues, there 
is fragmentation and confusion. Instead of efficiency, 
unnecessary costs are being borne by patients in the Medicare 
program.
    My organization, VNA Health Group, serves some of the 
oldest and frailest Medicare beneficiaries. As a result, we 
have seen firsthand how bewildering and burdensome the current 
situation can be for ailing seniors and their families. I think 
of an example, Patient Mrs. Smith, an 82-year-old woman with 
arthritis, congestive heart failure, and low vision, being 
discharged from a hospital where she had recently been treated 
for a broken hip caused by a fall. She has received some 
information but is still in pain and sleepy, and she and her 
family aren't sure of what to do. Her daughter, her main care 
giver, isn't sure who is going to be in charge after she is 
discharged and who to go to with questions.
    Mrs. Smith and people like her have some basic but 
important needs, including a comprehensive and holistic 
assessment of her post-hospital needs and circumstances, help 
accessing the care that she needs that is right for her 
condition, the support of a cadre of professionals like nurses 
and therapists and social workers and physicians, short-term 
assistance with activities of daily living and basic living 
nutrition. Her story is not atypical. People like her are being 
discharged from hospitals each day across our country. They are 
our parents, our grandparents, aunts and uncles, and soon they 
may be us.
    If Mrs. Smith and seniors like her receive the coordinated 
care that they need, they will recuperate more quickly at a 
lower cost with lower risk of rehospitalization, but too often 
this isn't the case, and people aren't getting this type of 
care. Older Americans like Mrs. Smith don't have what they need 
most, which is patient-centered care coordination. This means 
having a partner that is truly invested in helping them get 
better soon, a physician and nursing team by their side across 
care venues, integrated electronic information systems that 
will help avoid adverse events.
    We believe that patient-centered care coordination can be 
achieved through PAC bundling that adapts a successful DRG 
model and provides consistent coordination and navigation 
support to discharge beneficiaries and their families. It is 
for this reason that the Partnership for Home Health--for 
Quality Home Health is proud to support the BACPAC Act. The 
BACPAC model incorporates elements that we feel are important 
to patient-centered care coordination. A model on diagnostic 
related groups, which have been in use for over 30 years, 
creates condition related groups to align interests and improve 
outcomes, ensures patient choice, network adequacy, and the use 
of clinical and technological innovations to improve care. It 
uses powerful risk and saving incentives to prioritize high 
quality coordinated care, and it strengthens program integrity 
because no coordinator is going to want a bad or fraudulent 
actor to be in its network. It aligns with Congress' passage of 
the IMPACT Act, which created a unified PAC assessment tool and 
achieves significant savings without cutting any providers' 
rates or increase in costs for any seniors.
    There are many complex issues to be addressed, and as you 
do, please keep seniors like Mrs. Smith in mind so that 
Medicare post-acute care policy will not only be improved but 
work for the most vulnerable among us. Thank you.
    Mr. Pitts. The chair thanks the gentleman.
    [The statement of Mr. Landers follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
        
    Mr. Pitts. Dr. Hammerman, you are recognized for 5 minutes 
for your opening statement.

               STATEMENT OF DR. SAMUEL HAMMERMAN

    Dr. Hammerman. Good afternoon. Thank you, Chairman Pitts 
and Ranking Member Green for holding today's hearing on the 
future of American post-acute care. My name is Dr. Samuel 
Hammerman. I am the chief medical officer of Select Medical's 
long-term acute care hospital division. I oversee more than 100 
LTACH hospitals in 30 States.
    I will try to offer some insights today based on my 
experiences and based on the experiences of the company I am 
proud to serve as the chief medical officer for, Select 
Medical. Select Medical is based outside Harrisburg, 
Pennsylvania, and is one of the largest providers of post-acute 
care in the country. Besides the 100-plus LTACH hospitals, 
Select Medical also operates about 20 inpatient rehabilitation 
hospitals, and 1,000 outpatient therapy clinics. All together, 
Select Medical employs over 30,000 Americans in more than 30 
States.
    Let me begin by saying that Select Medical does not oppose 
a bundled post-acute payment system. With this in mind, my 
observations on our post-acute care systems are as follows. I 
want to stress that Congress has already enacted extensive 
legislation laying the foundation for bundled payments for 
post-acute services. Just last fall, Congress passed the IMPACT 
Act of 2014. This law will enable Congress to develop an 
informed and evidence-based post-acute bundling system. We were 
happy to support this bipartisan bicameral bill.
    The IMPACT Act will provide the Centers For Medicare and 
Medicaid Services and Congress with the necessary information, 
design a post-acute care payment system that stresses quality 
of care while maximizing efficiencies in the delivery of care. 
I salute Congress for moving to a new system while ensuring 
continued beneficiary access to the most appropriate setting of 
care.
    On a similar note, I would note that the Affordable Care 
Act of 2010 established a number of new programs. It has post-
acute bundling in hundreds of sites across the country. CMS is 
currently in the midst of numerous pilot programs testing 
numerous bundle payment concepts. In short, Congress and CMS 
have already largely commissioned a bundled future for post-
acute care.
    As a physician, I feel compelled to note that the current 
post-acute system still has many virtues. I would still make 
the case that the post-acute continuum of care represents a 
fairly logical and rational progression of care. Yes, we need 
to address the issue of readmissions, and yes, policymakers 
should always be concerned about whether care is appropriate 
and medically necessary.
    As a historical aside, I ask you to consider that only 
about 10 percent of Medicare spending is devoted to post-acute 
care, and please recall how the post-acute sector came into 
being in the first place. In 1983, the Medicare program adopted 
the first prospective payment system which greatly encouraged 
hospitals to discharge patients more quickly.
    Post-acute, as we know it today, only came into existence 
because of the incentives todischarge quickly from general 
hospitals. My advice to Congress is that you try to preserve a 
range of post-acute providers that offer a range of services 
from lower acuting nursing homes to higher acuity post-acute 
hospitals like rehabilitation hospitals and LTACH hospitals. 
All play a distinct role in meeting the needs of the American 
patient population.
    One public policy issue important to both taxpayers and 
post-acute providers is ensuring that patients are cared for in 
the most appropriate setting. We agree that patients who can be 
safely and effectively cared for in sometimes less costly 
facilities like nursing homes should not be treated and paid 
for in rehabilitation hospitals and LTACH hospitals.
    Little more than a year ago, Select Medical supported a new 
law passed by Congress designed to ensure that only appropriate 
patients are admitted to LTACH hospitals even though the law 
also significantly reduced Medicare reimbursement for these 
facilities. My larger point is that post-acute providers will 
continue to work with Congress to ensure that Medicare cost 
savings are achieved and beneficiary access to appropriate care 
is preserved.
    Finally, I was asked to comment specifically on Congressman 
McKinley's BACPAC bill. BACPAC has some positive attributes, 
but it does not address many core elements of a bundled payment 
system and leaves these to the HHS Secretary to develop. Given 
the BACPAC's gaps, details on payment rates, a payment process, 
provider network requirements, a patient assessment process, 
and quality standards, the BACPAC bill appears to leave a great 
deal of policy work to CMS. This results in unanswered 
questions about how BACPAC would actually work in the real 
world. More importantly, we have concerns about the BACPAC bill 
because we feel it would shortcut the comprehensive payment 
reform processes that Congress launched in 2010 under the ACA 
and built upon in 2014 with the IMPACT Act.
    Rather than supporting the IMPACT plan to first test 
bundling in the marketplace on a small scale, BACPAC would cut 
short this process. And given the complexity of the issues, 
this process is needed to develop a reliable and evidenced-
based bundled payment program for post-acute care. Thank you.
    Mr. Pitts. Thank you.
    [The statement of Mr. Hammerman follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]    
    
    Mr. Pitts. Dr. Morley, you are recognized for 5 minutes for 
opening statement.

               STATEMENT OF MELISSA MORLEY, PH.D

    Ms. Morley. Chairman Pitts, Ranking Member Green, and 
members of the subcommittee, thank you for the opportunity to 
speak with you today. Since 2007, I have worked on several 
projects with the assistant secretary for planning and 
evaluation and CMS looking at both the composition of PAC 
episodes and the potential to predict episode spending using 
patient assessment data. On the basis of my experience 
conducting research in this area, I will highlight several 
relevant findings and note data and analysis required to move 
this payment approach forward.
    The proportions of Medicare beneficiaries discharged to 
PAC, episode utilization and spending differs significantly 
across the United States because of varying practice patterns 
and availability of PAC providers. Differences in provider 
supply, particularly with regard to long-term care hospitals, 
LTACHs, and inpatient rehabilitation facilities are key drivers 
of differences in overall episode spending.
    Establishing an episode-based payment requires an 
understanding of service use and spending on average; however, 
this is challenging when considering high cost but low-
frequency services such as LTCH. For example, although only 2 
percent of beneficiaries discharged to PAC use LTCH services, 
the mean cost for those using LTCH is over $35,000. When this 
spending is averaged over all PAC users, the mean cost is less 
than $700. This demonstrates a challenge in establishing a 
payment rate that is sufficient to accommodate the range of PAC 
services.
    To build a payment system for PAC episodes that is risk 
adjusted based on patient characteristics, standardized patient 
assessment data are critical. However, standardized assessment 
data are not currently collected across PAC settings. As part 
of exploratory work with ASPE, we have examined the potential 
to develop risk adjustment models using items from the CARE 
data collected as part of the post-acute care payment reform 
demonstration.
    These efforts have demonstrated the potential to use CARE 
items as risk adjustors to predict episode spending. Results of 
this work also highlight important differences in the 
predictive power of the models, depending on the first site of 
PAC. This foundational work is valuable in demonstrating the 
potential to use CARE items in an episode-based payment system, 
but additional data are needed to test the models on larger 
samples and to examine any differences in significant risk 
adjustors across diagnosis groups.
    With the passage of the IMPACT Act, more data may become 
available over the next several years, although it is not clear 
at this time which items will be collected across PAC settings 
and whether the data that will be collected will be sufficient 
for the purposes of building an episode-based payment system.
    Addressing the complexities of an episode-based payment 
system will require additional analyses as well as 
consideration of the results of the evaluation of the CMS 
Bundled Payments for Care Improvement initiative. The BPCI 
initiative is currently testing whether a bundled payment can 
reduce cost while maintaining or improving quality of care for 
Medicare beneficiaries.
    The first evaluation report is an early assessment based on 
one quarter of data; however, results of analyses looking at 
cost shifting to the post-bundle period, beneficiary outcomes, 
using assessment data, and beneficiary experience using surveys 
are expected in future reports. Evaluation results comparing 
PAC service-only episodes with more integrated episodes that 
include both the acute hospitalization and PAC services will 
also provide valuable information on provider incentives across 
episode definitions.
    The foundation of an episode-based payment system is the 
diagnosis groups on which payments are made. Significant 
analyses and input from clinicians will be needed to develop 
the categories of diagnoses and to define unrelated 
readmissions. Analyses to develop payment adjustments for 
geography will be important to address differences in provider 
supply and in cost of care across geographic areas. 
Consideration of provider networks and resources to support 
beneficiary choice will also be important.
    Another consideration is related to the establishment of 
payments for services that continue past the end of an episode 
period. End-of-episode patient assessment data could not only 
support any post-episode service payment but also could be 
valuable information for ensuring quality of care. Episode-
based payments offer the opportunity to coordinate across 
settings to provide care more efficiently and with greater 
beneficiary focus. The results of the ongoing analyses in the 
BPCI evaluation as well as availability of national 
standardized patient assessment data will be very important to 
moving this payment design forward.
    Thank you for the opportunity to speak with you today.
    Mr. Pitts. Thank you very much for your testimony.
    [The statement of Ms. Morley follows:]
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    Mr. Pitts. Mr. Russ, you are recognized 5 minutes for your 
opening statement.

                   STATEMENT OF LEONARD RUSS

    Mr. Russ. Well, thank you, Chairman Pitts, and thank you, 
Ranking Member Green, and members of the committee. I will be 
speaking somewhat extemporaneously and divert somewhat from my 
prepared remarks only because I think the testimony as written 
is in the record.
    I would like to say at the outset, I am Len Russ, I am 
current chairman of the American Health Care Association. We 
represent nearly 13,000 skilled nursing facilities around the 
country, serving more than 2 million Medicare beneficiaries 
each year for short-term stays.
    At the same time, our members are also hybrids. We also 
deal with the long-term population. We are also serving 
Medicaid patients, and I think, alluding to what was the 
earlier testimony today, that margin that we constantly focus 
on, we have to look at the real margins because we are taking 
care of a hybrid kind of population, all of which fall under 
the umbrella of our Nation's frail and elderly.
    We, as skilled nursing facilities under the Medicare 
system, are one of the remaining sectors that still are paid 
basically on a fee-for-service system. The fee-for-service 
model that we currently enjoy is the prospective payment 
system. The prospective payment system has been in existence 
now for the better part of more than a decade, and has been 
subject to many criticisms, tinkering by CMS, et cetera, for 
the fact that there has been concern that there was an over-
delivery of certain services at the expense of the under-
delivery of others.
    We at HCA champion the notion of healthcare reform. We 
believe in payment reform, and we have come up with a proposal 
ourselves to change payment reform for our sector as possibly a 
building block towards bundling. We do not believe that this 
current iteration of bundling is workable. We don't believe 
that the opening up of the conveners or third-party managers of 
a bundle will do anything to manage care but more likely just 
manage payment.
    And as we have heard throughout the day, we talked about 
the, you know, breaking down silos, I think we need to be very 
mindful that by simply breaking down a payment cycle doesn't 
necessarily break down the care delivery system. That 
coordination is not always in line with simply realigning the 
payment system.
    So having said that, we at HCA have come up with basically 
six principles by which we think any bundling proposal or 
largely any healthcare reform proposal needs to adhere to. The 
first is that with any post-acute care sector, the management 
of that bundle really should be left with the providers in the 
post-acute care space. So that hospitals, which the BACPAC bill 
would still allow to be the sort of care coordinator or third-
party conveners, which might siphon off precious dollars from 
the payment into their own pocket, so to speak, for allegedly 
managing the care, whereas they are just managing the dollars, 
is probably not productive.
    We also believe that smaller providers, and our 
organization represents very large corporations as well as 
regional companies, independent owners like myself do not have 
the economic muscle to be able to take on the kind of risk that 
would be required in order to become a care coordinator. So 
this is not going to present us with a level playing field.
    Secondly, we want to be sure that Medicare beneficiaries 
have provider choice, and we see that the possibility that 
these kinds of bundles could raise barriers rather than break 
down barriers to access care. I also, for example, have five-
star facilities, but I am not allowed to join certain networks 
in managed care right now because they don't necessarily need 
the access, and there are facilities that are perhaps one-star 
facilities who are in the network. So the notion that the 
quality facilities will rise to the top has so far not been 
borne out.
    So we are not able to possibly join some of the these 
networks and offer the members choice, and I think any 
qualified excellent quality provider should be able to have 
access. We want additional flexibility in rendering care, not 
with a relaxation of regulations but being less prescriptive 
with how many minutes of therapy we give, with the venue of the 
therapy, so that we are measured on quality and outcomes.
    AHCA has worked collaboratively with CMS and our partners 
on the Hill to make monumental strides in terms of improving 
quality over the last several years, both in terms of 
rehospitalization rates, in terms of reduction of antipsychotic 
medications, et cetera.
    Finally, I just want to say that in any bundled system, we 
need a virtual bundle, not an actual bundle. A virtual bundle 
is something where the providers, even if they are aligned in a 
cohesive spectrum of care, can bill Medicare directly as 
opposed to leaving it to one provider to hold the dollars and 
have the others go to that provider to get paid. It is not 
necessarily a reliable payment system and it is not necessarily 
something that can be held accountable in the very, very thin 
margins and the cash flow stresses in which we operate. So with 
that, I will----
    Mr. Pitts. The chair thanks the gentleman.
    [The statement of Mr. Russ follows:]
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    Mr. Pitts. I thank all the witnesses for your testimony. I 
will begin the questioning and recognize myself 5 minutes for 
that purpose.
    Dr. Morley, you state in your testimony that there are 
geographic differences in the number of beneficiaries 
discharged post-acute care. Is this exclusively a provider 
distribution issue or is it a result of regional variation in 
standards of care?
    Ms. Morley. I think it is both. Provider distribution is 
most clear, particularly using the example of the LTCHs or 
areas of the country without any access to LTCH providers, and 
that care is primarily delivered in acute care hospitals and 
skilled nursing facilities. However, there are also geographic 
differences in just patterns of care, so it is both factors 
that are contributing to the variation.
    Mr. Pitts. You state in your written testimony that, 
``additional standardized patient assessment data are needed to 
test risk-based models on larger samples.'' What type of 
additional data needs to be collected?
    Ms. Morley. So the work that we have been doing with ASPE 
over the last several years has been work based on the post-
acute care payment reform demonstration data where care data 
were collected on about 200 providers across the country 
between 2008 and 2010. That data has been very useful for 
developing the framework for a risk adjustor, but we have been 
unable to look at subpopulations of patient diagnoses and to 
get a broader national understanding of how these models might 
differ for patients across the country.
    Mr. Pitts. Dr. Hammerman, what can Congress do to ensure 
range of post-acute providers, as you state in your written 
testimony?
    Dr. Hammerman. I am sorry, could you repeat that question?
    Mr. Pitts. Yes, what can Congress do to ensure a range of 
post-acute care providers, as you state in your written 
testimony?
    Dr. Hammerman. So I believe that in a sense, being that the 
information is being provided via the IMPACT tool, i.e., 
functional assessments that will be looked at, in addition to 
the bundling projects that are under way, there will be data to 
be able to differentiate patients one from another, from the 
higher acuity patients that we currently manage in the long-
term acute care hospital setting, as well as inpatient 
rehabilitation setting, as well as the lower acuity patients 
that goes to a skilled setting or cared for in a home 
environment.
    Mr. Pitts. Dr. Landers, in what ways would condition-
related groups, or CRGs, align incentives for improved outcomes 
and reduce cost?
    Dr. Landers. The CRG model would create an incentive for 
the coordinators to look at care across the different venues of 
care that patients might be in, so that we can focus on having 
individuals in the most appropriate setting but also the most 
cost-effective setting, and that should both address quality 
and cost.
    Mr. Pitts. Mr. Russ, in your opinion, do you believe CMS' 
quality improvement star rating system for PAC providers has 
improved the quality of care in the PAC setting?
    Mr. Russ. Well, I wouldn't say that in and of itself it has 
improved the quality of care. I think it has made the spectrum 
of care providers more mindful of certain metrics to adhere to 
which we agree help measure quality. We think some of those 
metrics are flawed and not properly risk adjusted, but on the 
other hand, we are championing quality and working 
collaboratively with CMS on many of the components of the five-
star system and particularly with the component of five-star 
that deals specifically with the quality measures.
    So we believe that, even though the five-star system is not 
perfect and we probably could come up with a better system, we 
are not opposed to a system that ranks and measures quality. 
Indeed, we are championing such a system, and we think such a 
system also should be an integral part of any kind of post-
acute care bundling system that--the BACPAC bill, although it 
has some positive features such as the elimination of a 3-day 
hospital stay, is a bit short on ensuring quality and 
accountability across the spectrum, and I think pays more lip 
service to the notion of care coordination, and it seems to be 
more focused on payment coordination.
    Mr. Pitts. Quickly. What is the difference between your 
organization's quality initiative and CMS' quality improvement 
star rating system?
    Mr. Russ. Well, our quality initiative is basically focused 
in five main areas, which CMS is mindful of, we have been 
working collaboratively with. They have adopted several of our 
quality initiative metrics or variations thereof to include in 
the five-star system, but we are comprised mainly so far, and 
we are going into the second generation of that system, so far 
we are focused on rehospitalization, on the reduction of off-
label use of antipsychotic medication, on ensuring staff 
stability for the sake of continuity of care for the frail and 
elderly, and also focused on customer satisfaction.
    Mr. Pitts. Thank you. My time is concluded. The chair 
recognizes the ranking member Mr. Green, 5 minutes for 
questions.
    Mr. Green. Thank you, Mr. Chairman.
    Dr. Morley, from Dr. Miller in our first panel, we heard 
MedPAC's concerns with potential stinting of care under the 
bundle payment design. The BACPAC Act requires the secretary to 
ensure that the cost of the bundles do not exceed 96 percent of 
the PAC expenditures that would have been made. The bill also 
specifies that PAC providers would be paid an amount that is 
not less than the amount which they would otherwise be paid. In 
other words, the bundles have to reduce cost without cutting 
provider payments.
    It seems to me that savings can only be generated by 
reducing prices in volume. The legislation, however, does not 
allow for price reductions; therefore, savings that come from 
volume reduction are less care. My first question. Could you 
discuss the dangers of bundles incentivizing stinting of the 
care or what we might do with it or do about it?
    Ms. Morley. Yes. I think one of the most important 
considerations here is the risk for stinting and cost shifting. 
This is always a concern when setting a prospective payment. So 
to the extent possible, we want to protect against stinting and 
cost shifting with strong quality measures. In combination with 
a payment incentive under a bundled payment, quality measures 
can incentivize providers to deliver the most appropriate care 
and to achieve high quality beneficiary outcomes.
    Mr. Green. Can you speak about the potential effects of 
reducing the volume of services that beneficiaries receive?
    Ms. Morley. I think, again, back to the stinting and cost 
shifting. Without strong quality measures, there is an 
incentive to deliver fewer services in order to maximize the 
savings over the bundle for the entity holding the bundle, but 
I do think that with the quality measures in place, there can 
be--these incentives can be changed to protect beneficiaries.
    Mr. Green. OK. You also mention that--your testimony, a 
potential that services may be required outside the 90-day 
window established by the BACPAC. Does the BACPAC require PAC 
coordinators to pay for their services needed after the 90-day 
period? Since PAC coordinators are on the hook financially for 
only those services within that 90-day window, is it possible 
we may delay certain services until that window has been ended?
    Ms. Morley. To my knowledge, it seems that the PAC 
coordinators would not be responsible for services after the 
90-day period, but it is possible that there would be an 
incentive to delay services to that post 90-day window unless 
those quality measures were in place to incent providers 
otherwise. We know from earlier research that the majority of 
service used is generally complete by a 90-day period, but 
there is some service use that does continue after 90 days 
for--especially for medically complex patients, so if episodes 
end and services continue, information may be needed to set 
payments for those remaining services.
    Mr. Green. OK. The other concern about this is the 
financial incentive to stand on care and incent the least 
expensive setting. For example, under the BACPAC, the PAC 
coordinators would be able to keep mostof any savings they 
achieve. In other words, if a certain episode bundle is $1,000, 
the coordinator may spend only 600 on the beneficiary, so there 
is a $400 difference. Does this not make this profit contingent 
on meeting certain minimum quality thresholds?
    Ms. Morley. I think that the strong quality measures need 
to be put in place to reduce stay incentive for cost shifting, 
stinting and potentially adverse beneficiary outcomes. Some 
potential quality measures that could be considered would be 
related to functional outcomes, cognitive status outcomes, or 
other items related to stint integrity as examples.
    Mr. Green. I guess we need to have those quality controls 
there because a coordinator could profit from bundling those 
patients to the least expensive setting as opposed to more 
clinically appropriate, so there has to be some guidelines 
there.
    So Mr. Chairman, I yield back my time.
    Mr. Pitts. The chair thanks the gentleman. Now recognize 
the vice chair of the subcommittee, Mr. Guthrie, 5 minutes for 
questions.
    Mr. Guthrie. Thank you, Mr. Chairman. Thank you all for 
being here. Sorry we were disrupted in the middle, but we had 
to go vote.
    Dr. Morley, I want to ask you, do you think it is possible 
to establish episode-based programs while still including long-
term care hospitals in the equation?
    Ms. Morley. I do, but I think, as I state in my testimony, 
I think it is going to take a lot of research and understanding 
of patterns of care, so that there is an understanding that 
these services are not uniformly available across the country. 
There will need to be specific geographic market adjustments so 
that beneficiaries will have access to use the services that 
they need, but I think it is possible to, you know, to find a 
way to include all settings.
    Mr. Guthrie. Thank you. And also for you, Dr. Morley. What 
ideas do you have for reforming this space outside of bundled 
payments? Is that the only option or are there others?
    Ms. Morley. I think another option that has been discussed 
and discussed this morning, as you know, move to site neutral 
payments. That is a way to move beneficiaries to move providers 
to a space where they are thinking about what care is needed 
for this beneficiary, regardless of setting, and I think 
setting neutral payments is separate from bundling but is 
another approach.
    Mr. Guthrie. Thank you. And Dr. Hammerman, do you believe 
that bundled paymentsand other types of reforms with the same 
philosophy have the potential to reduce necessary care, and if 
so, what steps would you recommend policymakers to mitigate 
these concerns?
    Dr. Hammerman. Thank you. I think that, in general, the way 
that the long-term acute care hospital environment evaluates 
what is available from a bundling perspective, we need to 
strongly consider that the manifestation from the ICU patient 
population will continue to grow. The chronically, critically 
ill patient population will continue to grow, so any bundled 
strategy that takes effect will have to keep in mind that this 
patient population will be significant in both the near and 
long term.
    Recommendations are certainly in the realm of looking at 
these functional assessment tools and making certain that we 
keep in mind with this catastrophically ill patient population 
that the first venue is extraordinarily important to move 
forward because, as we know from the critical literature and as 
a practicing pulmonary critical care physician, that the return 
to an ICU from a post-acute setting can increase the mortality 
five- to tenfold, not just 5 to 10 percent. So I think any 
bundling strategy that we would look at in the future has to 
keep that in mind from a very strong clinical perspective.
    In our opinion, the clinician at the bedside working with 
the interdisciplinary team has ultimately the largest priority 
in terms of making certain that we put patients in the right 
venue at the right time for the right reason.
    Mr. Guthrie. OK. Well, thank you both for your answers, and 
thank the panel for their testimony, and I yield back my time.
    Mr. Pitts. The chair thanks the gentleman. Now recognize 
the gentlelady from California, Mrs. Capps, 5 minutes for 
questions.
    Mrs. Capps. Thank you very much. And thank you, Mr. 
Chairman, for holding this hearing, all of the witnesses for 
your testimony.
    I am pleased that we are here today to discuss post-acute 
care. I know how important this care is for patients who need 
continued medical attention. From long-term hospitals to home 
health providers, the various post-acute care providers all, 
each discipline offers essential healthcare services. I think 
we all agree that the way that post-acute care is delivered and 
paid for needs improvement.
    There are many elements that go into making a high quality 
cost-effective system, and as with any change to Medicare, we 
must carefully consider the impact a policy change will have on 
the quality of care and access to care for patients. We first 
must need to gain a better understanding about how to measure 
quality of care across the different post-acute care settings.
    Dr. Hammerman, in your testimony, you point out that the 
ACA put in place many important stepping stones for PAC, post-
acute care reform. Currently, Medicare is testing and advancing 
a number of payment system reforms for post-acute care, 
including bundled payments and value-based purchasing.
    So my first question to you, Dr. Hammerman, is to ask you 
to describe some of the bundling demonstrations that have been 
created under the ACA and what we are learning from them so 
far. That is just the first of a few questions I have.
    Dr. Hammerman. Certainly. I think I can speak in a very 
limited fashion in terms of from a long-term acute care 
hospital perspective, not overall in terms of a grander scheme 
of the BPCI projects. From that perspective, we have limited 
participation at this point from an LTACH perspective but more 
of a larger perspective from----
    Mrs. Capps. Excuse me, LTACH? Long-term care facility.
    Dr. Hammerman. I am sorry. Long-term acute care hospital 
standpoint.
    Mrs. Capps. Oh, got you.
    Dr. Hammerman. So we have some experience in that realm, 
and I am happy to get further data for you offline as well.
    Mrs. Capps. Awesome. As a nurse, I am always concerned 
about how policies that reform payments will affect the quality 
of care to patients, and demonstrations from the Affordable 
Care Act are going to be crucial to providing some of the 
information we need to measure quality across PAC providers, 
but more work is needed, and I look forward to any information 
you can supply.
    My second question has to do with data from the IMPACT Act. 
While I share the concern of my colleagues that we must address 
the current challenges with post-acute care payments, it is 
important to look at the facts and examine the strategy you 
have already made. When the IMPACT Act was passed in the last 
Congress with strong bipartisan support, we ensured that post-
acute care data could be standardized.
    This standardization allows for the comparison of patient 
assessment data across the various types of providers. Dr. 
Hammerman, in your testimony, you attested to the ability of 
this bill to help develop an informed and evidence-based post-
acute care bundling system.
    Do we have all the data yet that the IMPACT Act might 
provide? If not, what kind of information might we learn about 
measuring quality of care in PACs? And if this is something 
that you would rather refer to one of your colleagues there, 
that is fine with me, too.
    Dr. Hammerman. Certainly. I can do that. From speaking from 
the long-term acute care hospital perspective, that data will 
be and is valuable to the next steps in terms of a bundling 
strategy, but I am happy to ask one of our colleagues, perhaps 
Dr. Morley, to comment on the IMPACT Act, or Dr. Landers.
    Ms. Morley. I can comment really to the IMPACT Act data. It 
is my understanding that there will be a phase in related to 
the data collection and that some of the first sets of data for 
SNF, IRF, and LTCH will be available in 2018 and home health in 
2019. I think that one year of data would be ideal in order to 
be able to analyze and support the development of a payment 
system.
    Mrs. Capps. Did you want to add one----
    Dr. Landers. I would just like to disagree with the notion 
that we need more time and a lot more data to begin improving 
post-acute care. I think that there are a lot of people that 
are struggling right now with uncoordinated care and there are 
unnecessary costs, and also I want to point out that the 
Affordable Care Act and also the recent SGR fix, which 
incentivizes physicians to enter into alternative payment 
models, has greatly accelerated the adoption of what are called 
accountable care organizations or Medicare----
    Mrs. Capps. Right.
    Dr. Landers [continuing]. Savings programs. Across the 
country right now, as we speak, we are seeing consolidation of 
health systems, we are seeing people aligned along the strategy 
of these accountable care organizations, and within them, they 
are making some pretty aggressive changes to how post-acute 
care is delivered within those systems. And so some of the same 
things that people have raised concerns is would there be 
stinting I think it was called, and would there be 
inappropriate shifting, that is all happening without the 
thoughtful structure of something like the clinical related 
group that has been outlined in this law.
    So I think that a lot of the things that we are concerned 
about happening if we move too fast are actually happening in 
the context of the recent reforms, and this would actually add 
more protections.
    Mrs. Capps. And we need data about them, it seems. I have 
one more question. I don't know if there are other people 
waiting to speak.
    Mr. Pitts. We have one, but go ahead.
    Mrs. Capps. OK, if you don't mind, extend my time a little 
bit. But I think we are at a point where, then you are saying, 
if I may extrapolate from what you said, that we have enough 
data already, that we can begin organizing and making some 
changes based on that, not to denigrate from the fact that we 
probably need more data.
    But Mr. Russ, I had a question for you, because my biggest 
concern is that without the proper information, we risk setting 
up a new payment system that incentivize providers to cut 
corners on care. I think it is clear from today that more 
information is needed as we look at reforming post care, even 
though, as you say, we have a lot of data about things that are 
already working and could be.
    Mr. Russ. I would simply say that I agree with that 
premise. I think the initiative that is being taken is to be 
applauded on many fronts as far as trying to move the modeling 
forward to create economies of scale and to create efficiencies 
of care delivery. But I do think that we don't have enough data 
to go whole-heartedly into a particular system yet where we 
don't know what the unintended consequences may be.
    Mrs. Capps. Right.
    Mr. Russ. There are a lot of risks associated with it and 
we--at this vital time, this pivotal moment where we are moving 
away from fee for service and there is a consensus throughout 
post-acute care and through all the stakeholders and 
policymakers that we need to move to a better, more effective 
model, that we don't plunge into something that is not yet well 
tested and that does not have unintended consequences creating 
barriers to access of care and to providers participation.
    Mrs. Capps. Thank you. Thank you for allowing me to go 
further.
    Mr. Pitts. Sure. Thanks the gentlelady.
    And now, without objection, the chair recognizes the prime 
sponsor of the BACPAC legislation, Mr. McKinley, 5 minutes for 
questions.
    Ms. McKinley. Thank you, Mr. Chairman. And thank you to the 
panel.
    It was interesting how the first panel we had, they 
primarily were interested in cost. I saw a lot of questions had 
to do with cost, and the second panel you are more interested 
in--appropriately in quality of care and how that is going to 
be but----
    So, let me try to address some of the issues I heard in the 
first panel before we went to vote is about the cost. I just 
want to remind everyone that I know it differs from the 
quality, but they need to be reminded again. This is a paid-for 
program with $20 to $25 billion in savings to protect our 
Medicare system. We also know that there have been at least 
three test cases of using this, both in Fresno, California and 
the Midwest and New England that actually have tried this 
model. And in all cases, the savings have been anywhere from 10 
to 21 percent savings. So this thing does work on the cost side 
of it.
    And, Dr. Hammerman, you raise the issue of readmission. And 
having served on a hospital board for 28 years, I am very 
sensitive to that. And under this particular legislation, the 
cost coordinator is the one that is going to be responsible for 
that. So let's go back to what that--the definition for those. 
I am sure everyone has read the bill. But under the provision, 
it is for the patient with the guidance of their physician, the 
guidance of their physician, to select their preferred 
provider, this coordinator. And then under the definition of 
the coordinator, it could be a hospital.
    So when we talk about cost cutting here, we talk about 
cutting quality, you are challenging hospitals that they are 
not doing quality care because under the very bill, it says 
they can be the coordinator. It could be the PAC coordinator, 
insurer, or third-party administrator, or a combination of 
hospital and PAC. So there is a whole series all of which come 
down to the secretary will make the determination of how their 
qualifications are set so they could be selected to be able to 
provide the services. The bottom line is, we are trying to find 
ways to help people find through a coordinator to get the best 
care for them so that they don't get readmitted to the 
hospital.
    So, Dr. Landers, let's go back to your--it is essential, as 
we know, that any reform we undertake results in the 
improvement over the status quo of our rural communities. I 
come from a rural America, Wheeling, West Virginia. And in many 
areas all across this country, it is rural.
    So we are concerned, do you anticipate that rural patients 
will benefit from care coordination that is provided under this 
model; and that the coordinators, these ones that we have 
described, will have full rural coverage?
    Dr. Landers. I thank you for the question.
    I think that, in order to be competitive, the coordinators 
are going to have to have an adequate network and they are 
going to have to make sure that they have providers available 
for the provision of services to patients in rural communities. 
I also would add that because you have preserved the rate and 
benefit model within the bundles of the current system, things 
like this effort to improve the rural payment like in home 
health services in the recent law that those have been 
preserved, the additional 3 percent to account for their cost, 
I think that there are safeguards in place to protect rural 
patients, yes.
    Ms. McKinley. One of the things that we have talked often 
about, as the chairman has pointed out, I don't serve on this 
committee as--but I am keenly interested in a lot of these 
issues primarily because of the waste, fraud, and abuse that we 
hear often used here in Washington about Medicare.
    So we look at this thing. And do you think this BACPAC 
legislation will help weed out some of the bad actors that have 
perhaps been abusing this system by using a coordinator?
    Dr. Landers. Yes. I just can't imagine the coordinator 
model, where the incentives are aligned for them to shepherd 
cost effective and high quality care, that they would engage 
fraudulent providers. I think this could be one of the biggest 
fraud prevention measures ever undertaken.
    Ms. McKinley. Thank you. I wanted that to come out.
    And then, also, I just spoke on the floor before we came 
out with some of the other people that were in the committee 
earlier today, and we were talking about some of these issues. 
And one of the questions that was raised also in the first 
panel was, is this going to be a cost outside the system, and 
it is not. And I was explaining that. They hadn't had a chance 
to review the bill yet, and that was that this is built into 
the cost. So that we want to reinforce, this is not our 
projection, but this is from the CBO that says that, under this 
legislation, it scores between $10--or $20 and $25 billion and 
for--and it was added that we could very well be addressing 
some of the waste, fraud, and abuse in the system by virtue of 
this cleaning out the bad actors.
    So I appreciate your panel and the questions raised. I 
think there have been some very interesting points. It is a 
framework. It is going to keep moving. I hope that some of the 
issues that you have raised can be amended and corrected and 
added into this legislation. But we have to move forward. I 
don't think we want to be waiting for another 2 or 3 years 
before we move on this.
    So I thank you, Mr. Chairman, for having this hearing and I 
hope that we can proceed with this legislation. Thank you.
    Mr. Pitts. The chair thanks the gentleman.
    Now recognizes the gentleman from California, Mr. Cardenas, 
for 5 minutes for questions.
    Mr. Cardenas. Thank you very much, Mr. Chairman.
    Mr. Russ, you are the chair of the American Healthcare 
Association----
    Mr. Russ. Yes.
    Mr. Cardenas [continuing]. Otherwise known as AHCA. Your 
organization has developed a new payment concept for skilled 
nursing facilities to create your own bundle. Your payment 
proposal promotes patient-centered care and high quality 
facilities while saving the government money.
    Mr. Russ. Yes. If I could elaborate on that, even though 
that is not the focus of today's hearing, but I think it is 
part and parcel of the broader discussion about reform.
    We have come up--and we are in the process of finalizing 
with the help of the Moran Company--an episodic payment system 
for our sector. That would take us away from the current fee-
for-service prospective payment model. It would make our 
members assume greater risk for the particular care that they 
are given, but they would be getting what is essentially a flat 
payment to cover all of the services rendered under our roof in 
that post-acute care space in exchange for delivering quality 
outcomes. There would be penalties presumably associated with 
failure to deliver quality outcomes, and it would protect 
against what might be deemed the overdelivery of services now 
under the current fee-for-service system and yet prevent us 
from underdelivery of service which some people might argue 
could take place when a third party convenor or other entity is 
managing an across-the-spectrum bundle.
    So we think that this is a great step forward for our 
sector. We don't necessarily think it is the final chapter for 
our sector, but we think it is the best possible iteration of 
change that we could muster in a path toward possible broader 
spectrum post-acute care bundling. It could be a step in that 
direction, but we really believe it will hold us more 
accountable. And essential to the whole system is the 
measurement, empirical measurement, of quality.
    Mr. Cardenas. Thank you, Mr. Russ. You testified that your 
organization has six guiding principles that you use to 
evaluate PAC bundled payment models and that the BACPAC Act 
either doesn't meet those principles or is unclear. One of 
those principles is that the policy must preserve a patient's 
freedom of choice of provider.
    Can you speak a bit more about your specific concerns with 
the BACPAC Act and preserving freedom of provider choice?
    Mr. Russ. Yes. I think in the larger sense, I mean, when 
you have got networks that are being established, inevitably 
there are going to be certain providers, for whatever reason, 
whether they are judged on quality, whether they are judged on 
economic expediency, whether they are judged on their ability 
to provide lower cost to the care coordinator, we don't know 
what those incentives are going to be, but they are inherently 
exclusionary. They don't allow all willing, good quality, 
highly rated by CMS providers to participate.
    And while we may pay lip service to the notion that 
ultimately the patient will decide who the provider will be 
whom they are going to access services from, ultimately, the 
care coordinator is going to make that decision because they 
are coordinating the bundle. And so I don't necessarily see how 
this will enhance patient choice. I think it would probably 
reduce patient choice, and I think it would also reduce the 
ability of any willing good provider to participate in that 
particular bundle.
    Mr. Cardenas. So, is AHCA concerned that there is no 
mechanism for a beneficiary to seek PAC outside of their 
coordinator's network without switching to a new coordinator?
    Mr. Russ. Well, I think there are so many ambiguities in 
the bill as to how this would roll out. I think our overarching 
conclusion is that this doesn't seem to be practicable or 
implementable. And I think when you consider also the various 
demographic differences across the country--we have heard a lot 
about rural settings. There are urban settings. There are 
settings--each marketplace is driven differently by who happens 
to be the powerhouse in that marketplace, whether it is a 
hospital network, whether it is a home health agency, or 
whether it is a large string of skilled nursing facilities. You 
have got a very, very uneven playing field and a kind of 
nebulously conceived bundle payment package to overlay this is 
going to be very difficult, if not impossible to implement 
effectively and consistently across the country.
    Mr. Cardenas. Thank you, Mr. Russ.
    Yield back my time. Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman. That concludes 
the questions from members who are present. We will have 
follow-up questions. I know other members who couldn't make it 
back will have some questions. We will submit those to you in 
writing. We ask that you please respond promptly.
    And I remind members that they have 10 business days to 
submit questions for the record. Members should submit those 
questions by the close of business on Thursday, April 30th.
    Very good hearing. Thank you very much for the information. 
Very important. Without objection, subcommittee is adjourned.
    [Whereupon, at 1:07 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Fred Upton

    Modernizing and strengthening Medicare to improve care for 
seniors and help make it more sustainable over the long run 
remains a top priority for this committee. Today the Health 
Subcommittee will examine Medicare's payment policies for 
seniors utilizing post-acute care. Post-acute care--care that 
some of our most vulnerable seniors rely on, usually after 
discharge from a hospital stay--represents a fast-growing part 
of the Medicare benefit, having roughly doubled in cost over 
the last decade. With 10,000 Baby Boomers entering Medicare 
each day, it is essential that we understand how Medicare's 
current post-acute policies impact the quality of care seniors 
in Michigan and across the country receive.
    Post-acute care providers currently face significant 
disparities in the range of reimbursements they receive from 
the Medicare program. This is, in part, a legacy of past 
legislative efforts designed to target resources to specialized 
facilities which were intended to care for more complex 
patients in an intensive manner. However, in recent years, 
continued advancements in medical technology and clinical best 
practices have proven that there may be opportunities to make 
post-acute reimbursements more efficient, while better 
measuring and rewarding quality, incentivizing coordinated 
care, and improving seniors' care overall.
    Improving post-acute care services for seniors is an area 
that is ripe for bipartisan agreements. From the President's 
FY2016 Budget, to Republican proposals, to right here in our 
committee, there are a range of ideas on how to increase 
quality, improve seniors' care, and reduce costs in a targeted 
manner. I would like to thank Rep. McKinley from this committee 
in particular for his work on H.R. 1458, the ``Bundling and 
Coordinating Post-Acute Care Act of 2015'' (BACPAC). This 
bipartisan bill, cosponsored by Reps. Tom Price, Jerry 
McNerney, and Anna Eshoo outlines a way to provide bundled 
payments for post-acute care services under Medicare, while 
protecting seniors' choices and helping coordinate care.
    I look forward to continuing to work with my colleagues and 
the experts testifying today as we find bipartisan 
opportunities to improve health care for seniors. I especially 
want to thank Mark Miller, the director of MedPAC, and his 
staff for all their hard work. We continually turn to MedPAC 
for analysis and expertise, and we appreciate the resource he 
and his team are to the committee. I thank all of the witnesses 
for their important testimony.
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