[Senate Hearing 115-871]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-871

                      REDUCING HEALTH CARE COSTS:
                        IMPROVING AFFORDABILITY
                           THROUGH INNOVATION

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

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                                   ON

      EXAMINING REDUCING HEALTH CARE COSTS, FOCUSING ON IMPROVING 
                    AFFORDABILITY THROUGH INNOVATION
                               __________

                           NOVEMBER 28, 2018
                               __________

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                                Pensions
                                
                                
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                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
48-440 PDF                WASHINGTON : 2022           
         
         
         
         COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                  LAMAR ALEXANDER, Tennessee, Chairman
MICHAEL B. ENZI, Wyoming	PATTY MURRAY, Washington
RICHARD BURR, North Carolina	BERNARD SANDERS (I), Vermont
JOHNNY ISAKSON, Georgia		ROBERT P. CASEY, JR., Pennsylvania
RAND PAUL, Kentucky		MICHAEL F. BENNET, Colorado
SUSAN M. COLLINS, Maine		TAMMY BALDWIN, Wisconsin
BILL CASSIDY, M.D., Louisiana	CHRISTOPHER S. MURPHY, Connecticut
TODD YOUNG, Indiana		ELIZABETH WARREN, Massachusetts
ORRIN G. HATCH, Utah		TIM KAINE, Virginia
PAT ROBERTS, Kansas		MAGGIE HASSAN, New Hampshire
LISA MURKOWSKI, Alaska		TINA SMITH, Minnesota
TIM SCOTT, South Carolina	DOUG JONES, Alabama

                                     
                                                                         
               David P. Cleary, Republican Staff Director
         Lindsey Ward Seidman, Republican Deputy Staff Director
                 Evan Schatz, Democratic Staff Director
             John Righter, Democratic Deputy Staff Director
                            
                            
                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                      WEDNESDAY, NOVEMBER 28, 2018

                                                                   Page

                           Committee Members

Alexander, Hon. Lamar, Chairman, Committee on Health, Education, 
  Labor, and Pensions, Opening statement.........................     1
Murray, Hon. Patty, Ranking Member, a U.S. Senator from the State 
  of Washington, Opening statement...............................     3

                               Witnesses

Gross, Lee S., M.D., President, Docs 4 Patient Care Foundation 
  and Founder, Epiphany Health Direct Primary Care, North Port, 
  FL.............................................................     7
    Prepared statement...........................................     8
    Summary statement............................................    16
DeMars, Cheryl, President and Chief Executive Officer, The 
  Alliance, Madison, WI..........................................    17
    Prepared statement...........................................    18
    Summary statement............................................    24
Constantine, Dow, Executive of King County, Seattle, WA..........    25
    Prepared statement...........................................    27
    Summary statement............................................    34
Perlin, Jonathan B., M.D., Ph.D., M.S.H.A., M.A.C.P., President, 
  Clinical Services and Chief Medical Officer, HCA Healthcare, 
  Nashville, TN..................................................    34
    Prepared statement...........................................    36
    Summary statement............................................    38

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.
Cassidy, Hon. Bill:
    Written statement of Ochsner Health System, submitted for the 
      Record.....................................................    46
    Letter of support from The American Academy of Family 
      Practitioners, submitted for the Record....................    58

 
                      REDUCING HEALTH CARE COSTS:
                        IMPROVING AFFORDABILITY
                          THROUGH INNOVATION

                              ----------                              


                      Wednesday, November 28, 2018

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:30 a.m. in Room 
SD-430, Dirksen Senate Office Building, Hon. Lamar Alexander, 
Chairman of the Committee, presiding.
    Present: Senators Alexander [presiding], Cassidy, Young, 
Murkowski, Murray, Casey, Bennet, Baldwin, Hassan, and Smith.

                 OPENING STATEMENT OF SENATOR ALEXANDER

    The Chairman. The Senate Committee on Health, Education, 
Labor, and Pensions will please come to order. Senator Murray 
and I will each have an opening statement, then I will 
introduce the witnesses. Then we will hear from the witnesses 
and Senators, and we will have 5 minutes to ask questions.
    Senator Murray has asked me to go ahead and begin, because 
she has a conflict and will be here in about 15 minutes. I will 
ask her to preside for about 10 minutes at 10:00 a.m. when I 
have to leave to go introduce a judge before the Judiciary 
Committee.
    I mentioned to the witnesses a little earlier that we 
greatly appreciate their coming. We sometimes find we do as 
much good by putting the spotlight on issues as we do by 
passing laws, and this is an example of putting the spotlight.
    International Paper, a 120-year-old company headquartered 
in Memphis, has, since 2004, used a variety of tools to manage 
the cost of healthcare for their 33,000 employees. One tool 
International Paper uses is encouraging employees to use, at no 
cost, Best Doctors, an independent company that International 
Paper works with.
    For example, when an International Paper employee's doctor 
recommends a hip replacement, the employee can call and ask for 
a second opinion from Best Doctors. Best Doctors reaches out to 
get the necessary medical records from the employee's doctor, 
sends the records to medical professionals who review the case, 
and then either reaffirm the hip replacement or recommend a 
different course of treatment, such as physical therapy.
    The use of this voluntary program saved International Paper 
over a half million dollars in 2017 by preventing unnecessary 
treatment.
    In June, this Committee launched a series of hearings on 
the rising cost of healthcare, an issue that is at the front of 
Americans' mind. According to a Gallup Poll released days 
before the mid-term elections, 80 percent of registered voters 
rated healthcare as extremely or very important to their vote, 
a higher percentage than any other issue polled, including the 
economy, immigration, and taxes.
    At our first four hearings last year, we looked first at 
how much healthcare costs in America. Second, how to reduce 
what we spend on unnecessary healthcare tests, services, 
procedures, and prescription drugs, and how to increase 
preventive care. Third, how to reduce administrative burdens 
imposed by the Federal Government. And fourth, how to make 
information on the cost and quality of care more easily 
available.
    We heard some startling testimonies from people who are 
supposed to know what they are talking about. For example, one 
witness, Mr. James, from the Academy of Medicine, estimated 
that as much as half of the money we spend on healthcare is 
unnecessary. And fraud, waste, and abuse, which we often talk 
about, is only a part of that. Most of the other witnesses that 
day agreed with him.
    Secretary Azar has been passionate about giving patients 
more information on their care, as a way to reduce healthcare 
costs. For example, the Centers for Medicare and Medicaid 
Services is beginning to require hospitals to post the amount 
it charges, or they charge, for services online and to keep 
that information up to date.
    While there may be a role for Government to play, at 
today's hearing, our fifth in this series of hearings, we will 
examine ways private companies, doctors, and states are taking 
innovative steps to disrupt the healthcare system and reduce 
healthcare costs.
    Employers are the largest purchasers of health insurance in 
the country. One hundred eighty-one million Americans, or 
nearly 60 percent of the insured population, get their 
insurance on the job.
    We heard at a previous hearing how employers have 
incredible purchasing power when buying healthcare for their 
employees and are motivated more than ever to take advantage of 
that purchasing power. One way employers do that is through 
wellness programs, which encourage employees to lead healthy 
lives.
    There is a consensus, and we have heard it in the testimony 
here, that wellness--lifestyle changes, such as eating 
healthier and quitting smoking--can prevent serious illness and 
reduce healthcare costs. And it is hard to think of a better 
way to make a bigger impact on the health of millions of 
Americans than to connect that consensus about wellness to the 
health insurance that 181 million people get on the job.
    Another way to reduce the cost of healthcare is to give 
employees access to additional resources, such as what 
International Paper is doing with the Best Doctors program. And 
a third way is for employers to band together, like our witness 
The Alliance, a regional organization of employers that is 
cultivating traditional insurance to negotiate better deals on 
laboratory testing, such as CT scans, MRIs, surgeries, 
including knee and hip replacements, and other healthcare for 
employees.
    These are a few examples of employers harnessing their 
power to affect how much they and their employees pay for 
healthcare. Private healthcare companies also have the ability 
to reduce healthcare costs. For example, HCA Healthcare, 
another witness here today, has 178 hospitals and 119 
freestanding surgery centers located in 20 U.S. States and the 
United Kingdom. HCA has implemented new techniques to reduce 
the spread of MRSA, a drug-resistant bacterial infection in 
intensive care units. These new techniques have reduced cases 
of MRSA by 37 percent in HCA hospitals and have been so 
effective that the World Health Organization and the Centers 
for Disease Control and Prevention have added them to best 
practices.
    According the HCA, this reduction in MRSA saves $170,000 
for every 1,000 patients. These savings are shared among 
hospital insurers and patients. Dr. Perlin, our witness from 
HCA Healthcare, has been on the frontlines of this and other 
innovations, showing what a smart doctor can do when given the 
resources to impact an entire system, such as one as large as 
HCA.
    Today, we will hear more stories like these about how the 
private sector is working to address America's high healthcare 
costs and hearing what Washington needs to do to get out of the 
way of private sector innovation. Going forward, I plan to take 
what we have learned from our hearings and ask leading 
healthcare policy experts, including economists, doctors, 
nurses, patients, hospital administrators, state regulators, 
legislators, governors, employers, insurers, and healthcare 
innovators, for specific ideas on how the Federal Government 
can reduce the cost of healthcare.
    Senator Murray.
    [Laughter.]
    The Chairman. Your timing is always excellent.

                  OPENING STATEMENT OF SENATOR MURRAY

    Senator Murray. Mr. Chairman, I apologize. As you know, we 
had to move the hearing up. So I apologize for being a few 
minutes late. Jammed morning.
    Welcome to everyone. And thank you, Mr. Chairman. Thank you 
to all of our witnesses for joining us as we continue a series 
of hearings focused on high healthcare costs.
    There is really no question that this is an urgent problem. 
I have heard from families all over Washington State struggling 
to afford the care they need, and I know my colleagues have 
heard from families in their own states as well. And we all 
heard from voters across the Nation this month, as they soundly 
rejected the Republican approach of sabotage as healthcare 
policy.
    The will of the people could not be clearer. It seems they 
are very tired of President Trump's broken promises and 
backward steps and blatant gimmicks, and they are tired of the 
divisive repeal attempts, and they want real solutions to make 
sure quality healthcare is accessible and affordable.
    They want to know that breaking a bone is not going to 
break the bank. That a high fever will not come with a high 
cost. That filling a prescription will not mean emptying their 
savings account. And people want to know that when a loved one 
is fighting a life-or-death illness, they can focus on getting 
healthy, not getting out of debt.
    That is why they want Congress to come together in a 
bipartisan way and work together on plans to bring down 
healthcare costs. Today's hearing is a great opportunity to do 
that as we explore how innovation can help address this 
challenge.
    One part of the equation is innovation driven by employers. 
So I am really excited to hear from King County Executive Dow 
Constantine, who is with us from my home State of Washington, 
about how they have been tackling this. With 15,000 employees, 
King County is Washington State's 13th-largest employer. In 
order to help drive down healthcare costs, the county has 
partnered with their local healthcare system and other 
employers, developed a wellness initiative, and focused on 
shifting to value-based care purchasing, but the county is also 
taking unique and innovative steps to keep employees informed 
of these efforts and approach them as partners in making 
healthcare more affordable.
    Their success shows cost-saving innovation must be joined 
by education and engagement so people understand how they can 
benefit from new programs and initiatives. So I look forward to 
hearing from you, Executive Constantine, and thank you for 
being here.
    Another critical part of the equation is provider-driven 
innovation, which is why I am glad Dr. Perlin is here today to 
share his insights. Dr. Perlin has led projects to improve 
quality at the Veterans Health Administration and in the 
private sector. So I know he will also have valuable lessons to 
share today.
    As we focus on this topic, we should not forget that 
Congress created the Center for Medicare and Medicaid 
Innovation. It is a laboratory for trying out new ways to 
deliver healthcare to help public programs and the private 
sector innovate together.
    Now unfortunately, instead of supporting this lab of 
innovation, President Trump has been working to undermine it. 
He proposed rescinding part of its budget in his failed 
rescissions proposal, but luckily, as we know, Congress came 
together to reject that. Or when he delayed and even canceled 
sensible demonstration projects meant to encourage providers to 
keep costs down and deliver the best results for patients.
    Recently, he also warped the 1332 waivers. It is a tool 
Congress intended to help states innovate, so they encourage 
states to sabotage healthcare protections instead. It seems 
like the only innovative thing about President Trump's 
healthcare strategy has been as sabotage. He has, as we know, 
slashed investments, shortened enrollment windows, expanded 
junk plans, and undermined protections for people with 
preexisting conditions.
    When Congress, including many of us in this room here 
today, got close to passing a common sense solution to repair 
some of the damage and bring prices down, that was sabotaged as 
well.
    But Mr. Chairman, I am really hopeful that we can revive 
discussions in the new Congress and find a way past the 
ideological standoffs of the past. It is long past time this 
came to an end, and voters have made it clear that they agree.
    We saw in the mid-terms exactly what we saw before Trump 
Care went down in flames. People standing up. They make their 
voices heard. They send a strong message that the Republican 
strategy of standing aside and giving President Trump free rein 
to undermine healthcare is taking us in the wrong direction, 
which is why I am very glad we are sitting down here today to 
look for bipartisan solutions that will bring down costs for 
patients, families, businesses, and Government.
    I hope Republicans got the message, ready to turn over a 
new leaf with us and agree that repeal is off the table, and 
finally agree we should be holding President Trump accountable 
for sabotage and, importantly, working to repair it. And I do 
hope we can all get back to the negotiating table to hammer out 
a plan for problems we were sent here to solve. Democrats are 
here. We are ready.
    We have some promising ideas where we hope we can find some 
common ground. Ideas to repair the damage that has been done to 
drive up prices with sabotage. Ideas to address the surprise 
balance billing, so patients are not caught off guard by 
unexpected and unaffordable price tags for out-of-network care. 
Ideas to lower skyrocketing prescription drug costs, so 
families do not have to wonder whether they can afford the 
medicine they need. And ideas to give families facing a health 
scare, a bit more peace of mind by making sure that everyone in 
the country can afford to be healthy.
    I am looking forward to all of our witnesses' ideas on this 
today, and I am hopeful that we can join together, taking what 
we hear today and working to find common ground and pass common 
sense solutions.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murray.
    I look forward to working with Senator Murray, as this 
Committee often does, in a bipartisan way on big, complex 
issues, and we usually get results. And we can revisit the so-
called Alexander-Murray proposal, if you would like, but I 
would--without provoking a debate about it, I would say that we 
had an agreement that--last year that would have reduced rates 
in individual insurance by up to 40 percent over 3 years, 
according to the Oliver Wyman firm. And it included 3 years of 
re-insurance, 3 years of cost-sharing subsidies, and more 
flexibility for states without changing the essential health 
benefits.
    From my vantage point, the only reason it did not succeed 
was that Democrats would not vote for the Hyde Amendment to 
apply to it, regulating a compromise that affects how Federal 
funds are spent for abortion, even though they voted for it 100 
times in other parts of the same bill. So I regretted that did 
not work, and maybe we can find a way to make it work in the 
new session. We certainly will try on the issue of healthcare 
costs, which are the larger issue, because if we are spending--
as much as half of our funding of healthcare spending is 
unnecessary, why, we have a responsibility to do what we can 
about that.
    The first witness we will hear from is Dr. Lee Gross, who 
is president of Docs 4 Patient Care Foundation, a nonprofit of 
practicing physicians focused on advancing healthcare freedom 
and empowering patients.
    Additionally, Dr. Gross is the co-founder of Epiphany 
Health Direct Primary Care--Direct Primary Care Practice, 
offering preventive healthcare services through a low-cost 
membership program in North Port, Florida.
    Next, we will hear from Ms. Cheryl DeMars. And Senator 
Baldwin, would you like to introduce Ms. DeMars?
    Senator Baldwin. Mr. Chairman, I would. I am honored to 
introduce today Cheryl DeMars, president and CEO of The 
Alliance in Madison, Wisconsin.
    Cheryl joins us to share The Alliance's award-winning work, 
providing efficient and high-value care to its members as a 
nonprofit employer-owned cooperative.
    Cheryl DeMars has significant industry experience in cost 
and quality measurement, bundled payments, and transparency. 
She holds leadership positions in the Wisconsin Collaborative 
for Healthcare Quality, the University of Wisconsin Population 
Health Institute, and is the vice chair of the Wisconsin Health 
Information Organization.
    In 2009, Cheryl DeMars was appointed to Wisconsin's Wired 
for Health Board, which helped oversee the implementation of 
the HITECH Act and the successful launch of a statewide health 
information exchange.
    Cheryl, welcome to the HELP Committee, and thank you for 
joining us today to share The Alliance, the story of The 
Alliance and your expertise in this area.
    The Chairman. Senator Murray.
    Senator Murray. Well, thank you, Mr. Chairman.
    I am always glad to welcome my fellow Washingtonians, and I 
am particularly pleased to introduce our next witness, King 
County Executive Dow Constantine.
    In King County, Executive Constantine is responsible for 
over 15,000 employees who work to provide essential government 
services to over 2 million people, covering public 
transportation, waste water treatment, human services, public 
health, and a lot more.
    In addition to overseeing the state's largest county, 
Executive Constantine has also worked to overhaul how it 
provides healthcare for its employees. As a result of these 
innovative efforts, King County has saved $46 million, 
implemented a new wellness program, and been recognized with a 
Harvard Innovations in American Government Award.
    Executive Constantine, I am very glad you could join us 
here today. I know it is a long flight. So thank you for coming 
out here. Looking forward to your testimony.
    The Chairman. Thank you, Senator Murray.
    Finally, we will hear from Dr. Jonathan Perlin. He is 
president of Clinical Services and chief medical officer of 
Nashville-based HCA Healthcare, a healthcare service provider 
with 178 hospitals in 20 states and the United Kingdom. He is a 
member of the Medicare Payment Advisory Commission, the 
Congressional Budget Office Panel of Health Advisers, and the 
National Academy of Medicine.
    Prior to joining HCA, Dr. Perlin served as Under Secretary 
for Health in the U.S. Department of Veterans Affairs and 
currently serves as Chair of the Secretary of Veterans Affairs 
Special Medical Advisory Group.
    Welcome again to our witnesses. Dr. Gross, let us begin 
with you.

   STATEMENT OF LEE S. GROSS, M.D., PRESIDENT, PATIENT CARE 
 FOUNDATION AND FOUNDER, EPIPHANY HEALTH DIRECT PRIMARY CARE, 
                         NORTH PORT, FL

    Dr. Gross. Good morning. Thank you, Chairman Alexander, 
Ranking Member Murray, and distinguished Members of the 
Committee.
    I greatly appreciate you holding a series of hearings on a 
very important topic, which is actually reducing healthcare 
costs because that is really not a topic that we have been 
discussing--we have been discussing coverage, but the 
underlying problem of healthcare cost has been a true problem, 
and I am excited to actually share some of our experience.
    I am a practicing physician, family medicine in southwest 
Florida. I have been practicing since 2002. And starting in 
2009, it became obvious that things were really starting to 
sort of deteriorate in the private practice of medicine, and we 
had an actual epiphany, the name of our company is Epiphany 
Health. And the epiphany was, why are we using insurance to pay 
for primary care?
    Why are we inserting so many obstacles between a primary 
care doctor and the patient? Why are--you do not insure 
gasoline for your car. You do not insure the lightbulbs for 
your home. Yet we are using an insurance vehicle to insure the 
most basic aspects of medical care delivery, which is primary 
care services.
    If you are taking all of healthcare, you are going to put 
it in a box and you are going to call that box health 
insurance, and you have to charge one price for that entire 
box. And you are going to put affordable primary care, but very 
expensive end-of-life care, long hospitalization, rehab stay, 
so forth, that, actually when you bundle it together, blocks 
access to affordable primary care. But when you split out the 
primary care portion of it, it actually becomes quite 
affordable.
    We ended up doing in 2010 was creating a program which has 
since become known nationally as ``direct primary care.'' There 
are now 1,000 practices nationwide, but essentially, it is a 
membership-based primary care program.
    We charge $60 a month for adults, $25 a month for one 
child, and $10 a month for each additional child. And after 
that, we do not charge anything for services we provide in our 
office. No co-pays, no deductibles. We do not charge for any 
procedures we do. EKGs, cortisone injections, halter monitors, 
spirometry, that is all included at no additional cost.
    We are insurance-free practice. So our patients that have 
good insurance, bad insurance, no insurance are all treated 
absolutely equal. Past medical history, chronic medical 
conditions, we can manage the diabetes in our office, asthma, 
hypertension. I can remove minor skin cancers for no additional 
costs.
    Part of our program is we tried to figure out what a 
primary care doctor needs to do his or her job effectively 
outside of a traditional third-party payer system, and so we 
reached out to independent labs, independent imaging centers. 
It almost took like a Priceline.com approach and said, ``If you 
have a CAT scan machine that you own that is not running 24 
hours a day, and we sent a patient, as a cash-paying patient, 
what could sell that unused scan for?''
    We approached the labs and said, ``If you did not have to 
chase down insurance claims, if you did not have to worry about 
how the bill was coded, if you did not have to worry about what 
test was ordered and why it was ordered, if we collected the 
money up front and you send us one bill for all of our 
patients, what could you sell us the labs for?''
    What you find is that we actually end up purchasing our 
services wholesale. So we can get a CAT scan for $175. We can 
get an MRI for $225. Routine laboratory for monitoring a 
diabetic patient is about $40. And so, what we are seeing now 
is that patients are actually coming to our practice not only 
from all over the State of Florida, but they are coming to our 
practice from out of the State of Florida. They are coming 
across the country. We are even having patients coming to us 
from out of the country for affordable medical care.
    We have recently seen an inbound case of medical tourism 
into the United States, through our practice, for affordable 
surgical services because we have negotiated cash-bundled-price 
surgeries in an inpatient facility in a rural hospital in 
Florida.
    We are very happy that the Committee is interested in 
exploring direct primary care. Again, there are now about 1,000 
practices nationwide that are practicing in this model. This is 
a growing model. Most of that growth has occurred literally 
with the past few years.
    We believe that this is a way for most people to get access 
to the care that they need. And if surrounded by a catastrophic 
major medical plan, the combination of affordable access with 
no co-pays, no deductibles, for the routine care, for the 
routine chronic disease management, if you then bundle that 
with an affordable major medical wrap-around option for the 
unpredictable, let us make the predictable affordable for 
everybody. Let us make routine care affordable for everybody, 
regardless of insurance status. If we can provide that level of 
care to most people, then we can find ways to afford and pay 
for the unexpected.
    I am excited to share our experiences with you. We, again, 
have been doing this since 2010. I can tell you that our prices 
have not increased since we started our practice for anybody 
that joined. So we have not seen the cost inflation that you 
have seen in traditional insurance plans.
    The services that I have negotiated for labs, for imaging 
services, are almost exactly the same today as they were nearly 
10 years ago. We have not seen the skyrocketing cost of 
healthcare in our practice that you have seen in most other 
areas. And so, we are happy to work with you and see how we can 
expand this model.
    Thank you.
    [The prepared statement of Dr. Gross follows:]
                   prepared statement of lee s. gross
    Chairman Alexander, Ranking Member Murray, and distinguished 
Members of the HELP Committee, I am Dr. Lee Gross, and I am a full-time 
practicing family physician from Southwest Florida. I appreciate this 
opportunity to testify how an emerging primary care practice model can 
use free-market principles to help simplify health care delivery, 
reduce the cost of care, lower barriers to access, reduce physician 
burnout and restore the patient as the central focus of our health care 
system. Direct Primary Care (DPC) physicians are strongly committed to 
working to fix our broken health care system to reduce complexity, 
improve value and patient health, and improve health care access 
regardless of a patient's pre-existing conditions or socioeconomic 
status.
                          Personal Background
    I grew up in a rural community outside of Cleveland, Ohio. After 
college, I spent three years coordinating clinical trials for the 
Cleveland Clinic Foundation's cardiology program prior to attending 
medical school at Cleveland's Case Western Reserve University. Despite 
my extensive background in cardiology, the primary care field of family 
medicine that allowed me to care for the entire patient called to me 
during my training. I went on to complete a family medicine residency 
at University Hospitals of Cleveland, where I became a chief resident.

    At the time of completing my residency, the Cleveland health care 
market was undergoing a major transformation with nonprofits University 
Hospitals (UH) and Cleveland Clinic Foundation (CCF) both in frenzied 
growth modes, acquiring medical practices and expanding their footprint 
across the entire regional landscape including my rural hometown. A 
graduating physician that wanted to stay in the Cleveland market had 
essentially 3 options: work for CCF; work for UH; or don't work. Not 
interested in the large corporate model of health care delivery, I left 
Cleveland and relocated with my family to Southwest Florida, where I 
have remained in private practice since 2002.

    Having a primary care career in private practice has been a matter 
of survival of the fittest. My solo practice rapidly grew and within a 
few years, I was ready to bring on a partner, Dr. William Crouch. My 
practice was an early adopter of electronic health records (EHR), 
starting in 2003, because it made sense and helped us improve 
efficiency and workflow. As the government got into EHR regulation and 
certification, Washington regulations were now the driver of the EHR 
development, not the user experience. Our once affordable and helpful 
technology platform rapidly became an extremely costly, clunky and 
inefficient billing tool--a required burden that no longer had the 
ability to capture the nuances of the patient encounter.

    As a Florida-based practice, we were very heavy in Medicare 
patients in our practice. Over the years, we seemed to play a 
continuous game of ``whack-a-mole'' with Medicare as CMS would change 
regulations that limited what services we could provide to our patients 
and cut off sources of practice revenue. Every time Congress used the 
phrase ``stamping out fraud and abuse'', came another several hundred 
pages of paperwork that we were required to complete and more staff 
were required to complete them.

    The SGR payment adjustments became a constant source of fear, as 
half of our accounts receivables would often be uncertain due to 
Washington brinksmanship. We were a small business that had no way to 
keep our fiscal house in order because we had less and less control 
over what we spent our money on and no idea what our projected payments 
might be from Medicare. The SGR ordeal forced us to open a personal 
line of credit to make sure we could meet payroll the next time 
Washington froze Medicare claims processing. With Medicare patients 
comprising more than half our patients at the time, we were eventually 
forced to make the difficult decision to stop accepting new Medicare 
patients into the practice to minimize our exposure to the uncertainty.

    Private practice consultants offered universal advice--see more 
patients. The 30-minute office visit for the complex patient became 15 
minutes, then 7 minutes. Twenty-five patient visits per day became the 
new normal. Providing care to our patients in the hospital was no 
longer financially viable, as we needed to be in the office seeing more 
and more patients.

    Through all of the complex regulatory changes in health care, two 
people have been forgotten--the patient and the doctor. We have created 
a ``system'' of primary care delivery that is so complex, it would make 
Rube Goldberg proud. We have become a reactive delivery care model of 
``sick care'' that only seems to work for the hospitals, pharmaceutical 
industry and 3rd party payers. It is driving even further consolidation 
by hospitals. It is reducing the physician workforce by forcing 
physicians to choose early retirement or leaving the profession 
entirely. It is leading to physician burnout and an epidemic of 
physician suicide.

    It is in this context that we had our ``epiphany'' in 2009.
                              Our Epiphany
    Epiphany is a strange name for a medical company, but my partner, 
Dr. Crouch, and I had an epiphany. We were in the rat race of 
independent practice primary care, where you are trying to funnel the 
patients through as fast as possible, keeping office visits to seven 
minutes, fighting with insurance companies to get procedures and 
medications approved. It ended up feeling like we were treating the 
chart and the computer and the insurance company but not providing good 
medical care. We decided there had to be a better way to do this.

    It was about that time when a patient made a staggering suggestion.

    He owned an air-conditioning business, and all 10 of his employees 
were patients of our primary care practice. And his insurance rates 
continued to climb sky high.

    He said, ``Why am I paying my insurance company to pay you? Why 
don't I just hire you directly to take care of my employees? I'll take 
out a catastrophic insurance policy on them and, even if they hit their 
deductible every year and I have to pay it, I'd still come out ahead 
and so would they.'' That was our epiphany, and the impetus for naming 
our practice Epiphany Health.

    Why are we insuring primary care?

    Why are we using an extremely expensive, extremely inefficient and 
incredibly impersonal insurance vehicle to finance the most basic 
aspect of health care delivery?

    Why are we inserting so many barriers, financial or otherwise, 
between the doctor and the patient?

    Our epiphany was that we are using health insurance wrong. We don't 
expect our homeowner's insurance to pay for blown light bulbs or 
routine maintenance. Imagine how complex and expensive it would be to 
purchase gasoline if we used our auto insurance to pay for fuel. This 
is what we expect from our health insurance, yet we are surprised that 
it is expensive, inefficient and impersonal. Our epiphany was that we 
should work towards making routine care affordable for everyone in a 
predictable, price transparent manner, without needing insurance. Let 
health insurance be true insurance--a hedge against an unexpected 
catastrophic loss. Out of that epiphany, we created what was to become 
one of the nation's pioneer Direct Primary Care (DPC) practices, 
Epiphany Health.
                              How It Works
    We ended up creating a membership based primary care program for 
our patients ages 5 and up. Instead of charging fee-for-service for 
things we do in our office, we charge a flat monthly membership fee, 
and then we don't charge for anything that we do. That fee is $60 per 
month for adults, $25 for one child and $10 for each additional child. 
A family of four pays just $155 per month. Beyond that, we don't charge 
for anything we do in the office. No copays. No deductibles. We don't 
bill anything to any insurance company. It includes all necessary in-
office testing and procedures such as EKG, holter monitors, strep 
testing, urine tests, blood thinner monitoring, minor surgical 
procedures, joint injections, abscess draining and more. The payment is 
made by automated electronic funds transfer, eliminating expensive 
labor-intensive invoicing and collections.

    It is like Netflix for health care. After you pay your membership, 
you don't have to pay for each episode of care. Patients consume what 
they need at no extra cost, including unlimited email, text, phone 
calls or technology visits. Our practice finances were stabilized by a 
steady revenue stream that no longer required converting every patient 
contact into an office visit in order to get paid.

    We determined what services outside our office a primary care 
doctor needed to do his or her job, without relying on a 3rd party to 
finance it. We needed access to affordable labs, imaging services, 
physical therapy, specialty care, pharmaceuticals, and durable medical 
supplies. Our office supplies were already relatively inexpensive. 
Mostly, in primary care we are just selling time. Managed correctly, 
that can be affordable.

    We reached out to other practitioners and almost took a 
Priceline.com approach. I said, ``If you have a CT scan machine, and 
it's not running all day long, and I could send a cash-paying patient 
to fill an open slot, payable at the time of service, what would you 
sell us your CT scan for?'' With the labs, I said, ``if we send you 500 
patients, instead of billing the patients individually or their 
insurance companies--where you'd have to track them down for their co-
payments or deductibles and wait 6 months to get paid--what if I 
collected from the patient when I gave them the order and you sent me 
one bill and I paid it, what could you sell me your services for?'' We 
ended up buying labs and imaging wholesale, and the prices we got were 
ridiculously low--pennies on the dollar. We had eliminated their 
largest expense--labor costs and time for the purpose of collecting 
money.

    As a result, Epiphany patients pay $175 for a CT scan. If that 
procedure were performed in an emergency room, it could be billed at 
$10,000. With Epiphany, an MRI costs $225. An x-ray costs $25. Physical 
therapy costs $35 per session, which is less than most people pay with 
commercial health insurance, where the co-pay is about $50. Routine 
bloodwork costs our patients $45. One of our first patients with 
rheumatoid arthritis was quoted $1,800 for blood work. Using our 
pricing, her blood tests were purchased for under $100. The savings 
from one blood test alone nearly paid for 2 = years of her membership 
in our program.

    As an example of the potential savings, I offer the following. In 
the figure below, I show the actual billed charges for a patient that 
went to the ER for abdominal pain. The total itemized bill came to just 
under $20,000. We have the ability to see patients urgently, because 
our schedules are not overly packed with patients. Actually, patients 
can often see us faster than they might be seen in the ER. Because we 
know the patients, we might eliminate the need for many of the ordered 
tests. Even so, we can also arrange for stat labs and imaging. Our 
actual cost for a patient without insurance for the exact same tests 
that the hospital billed $20,000 for is $301.29.

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    Of course, everyone knows that those services don't actually cost 
$20K, but most don't know that they can cost as little as $300. If the 
patient had no insurance or was with a self-funded health plan, they 
would have to negotiate the billed charges, maybe getting a 30--50 
percent reduction payable over many years. If the patient had 
insurance, there would be a network discount applied, maybe discounted 
to $5,000. Often that $5,000 would be out-of-pocket due to deductibles.

    What happens to that $15,000 ``savings'' for having insurance? In 
many cases, a percentage of that savings goes to the PPO for 
negotiating the discount. While one might think that a health plan is 
incentivized to find the best prices, they are often incentivized to 
find the highest charges with the biggest negotiated discount. In the 
end, it is the patient that bears the financial burden, especially 
those without insurance. In this example, the insured patient may pay 
$5,000 for $300 worth of medical care and pay a hefty insurance premium 
for that privilege. In either case, whether $5,000 or $20,000, the 
hospital is equally likely to not get paid and often both insured and 
uninsured patients declare bankruptcy. Timely and effective primary 
care access through DPC has great potential to reduce this financial 
impact.

    DPC doctors have the ability to manage a myriad of chronic medical 
conditions such as diabetes, hypertension, heart disease or asthma. As 
long as it can be done within our four walls, there's no additional 
charge. Everything outside of our office, we offer complete price 
transparency. Most people nowadays have high-deductible health plans, 
and we are asking them to be cost-conscious consumers while shopping in 
a supermarket that has no prices on it. We put prices on everything. We 
even have negotiated transparent bundled surgical prices for inpatient 
and outpatient surgeries in 2 local hospitals. As physicians, we take a 
Hippocratic Oath to do no harm. That oath should include doing no 
financial harm. This allows us to include cost and value in the 
conversation about the risks, benefits and alternatives of the 
patient's personal health care treatment approach.

    In the 3rd party payment system of high volume care, primary care 
physicians are relegated to data entry clerks and referral agents. In 
this context, we do not adequately use the physician's skills. In a DPC 
model, because we don't have to bring the patient in for everything, it 
frees up our office time for more complex cases. Instead of 7 minute 
visits, a doctor may have 30--60 minutes to manage a complex illness. 
That allows family physicians to use the full-scope of their 22,000 
hours of clinical training, rather than referring out patients simply 
due to lack of time. It also allows the practice to hire employees to 
provide patient care rather than paying employees to chase insurance 
requirements.

    Doing primary care better prevents unnecessary downstream 
utilization, unnecessary referrals, unneeded consultations / tests / 
hospitalization / procedures / surgeries. Not through rationing, but 
through better care delivery and dedicating the right amount of 
resources to the right patient as determined by the doctor and the 
patient--not an arbitrary third party. Unfortunately, commercial 3rd 
party payers are financially disincentivized from reducing downstream 
utilization and spending because their profits are tied by the Medical 
Loss Ratio (MLR) to a percentage of that spending. They must grow 
spending to grow profits.

    Although Epiphany's clients include small businesses, the patients 
who really benefit are those who slipped through the cracks of the 
Affordable Care Act. We are capturing those people who go to insurance 
exchanges, and they see the price tags and know they want it, but can't 
afford it, even if they may get penalized. We are even getting 
referrals from the Affordable Care Act navigators; they're sending 
patients in our direction. We often receive referrals of new patients 
from the charity clinics, health departments and emergency rooms. We 
have become the safety net's safety net for chronic disease management.

    Epiphany has remained one of the last independently owned and 
operated primary care practices in the region--one of the few that 
haven't been bought out by large corporations. Despite the 
``skyrocketing cost of health care'', our prices remain lower today 
than they were on the day we launched in 2010. Additionally, our 
negotiated prices for medical services outside our practice have 
largely remain unchanged over the same time period. In fact, many have 
come down through increased volume and competition.

    Patients without insurance sometimes drive hours to our practice. 
We see patients in our Southwest Florida practice from Miami, Orlando, 
and Naples. We have some that travel from out of state. They drive past 
nonprofit tertiary care facilities because they can afford what we are 
offering. One of our patients came to us from the Caribbean island of 
Antigua for treatment of thyroid cancer. Her thyroid surgery would have 
cost her $100,000 without insurance in the islands. We cured her once-
in-a-lifetime catastrophic event for just over $10,000, including 
surgery, staging, specialty consultation, imaging, medications and 6 
months of medical care.

    The majority of our patients do have insurance, and we encourage 
all of our patients to have coverage. However, most plans today have 
high deductibles to meet or large copays. While the ACA allows patients 
with pre-existing conditions to get coverage, our practice population 
is evidence that coverage is not health care. The high deductibles 
often keep patients from accessing the care they need to prevent those 
chronic conditions from becoming more severe out of fear for what it 
may cost them. Even a patient with a subsidized bronze plan may have a 
$7,000 out-of-pocket financial exposure. Those patients seek out our 
practice to care for their chronic medical conditions, because the cost 
is predictable and transparent. Complex problems are no longer needing 
to be cared for in a short office visit because of fear of another $50 
copay or the uncertainty of an unmet deductible. In fact, patients 
frequently pay much less for care outside our office using our 
negotiated prices than they would if they used their insurance. 
Patients commonly share that their responsibility for tests or surgery 
with insurance is twice the cost of our pricing without insurance.

    What are we insuring if using that insurance doubles the out-of-
pocket cost to the patient on top of the insurance premiums?

    According to the Milliman Medical Index, in 2018, the cost of 
health care for a typical American family of four covered by an average 
employer-sponsored preferred provider organization (PPO) plan is 
$28,166. Of that, the employee contribution is $12,378 per year, with 
$4,704 being for out-of-pocket costs paid when using health care 
services. Using these numbers, an employer sponsored PPO for a family 
of 4 will cost $281,660 over 10 years (see figure below). A membership 
in Epiphany Health Direct Primary Care plus an underwritten short-term 
limited duration plan would cost $39,960 over 10 years (assuming it 
were allowed to be renewed that long). The net difference is a $241,700 
10-year potential savings for one family. To put that potential savings 
into perspective, the average total household debt in the US is under 
$135,000 for all age brackets, including a home mortgage. The potential 
savings is also 10-times what the same family of 4 is likely to take 
home from the recently passed tax cuts.

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    If the family became extremely ill and hit their deductible and 
maximum out of pocket every year for 10-years, it would still cost less 
than the PPO plan. The difference being that the PPO is loaded with 
built-in pre-paid benefits and no potential savings for services that 
are not needed or wanted. It is for this reason why our patients 
continually ask us how they can get affordable major medical plans to 
wrap around DPC. Of course, it is the fear of the $20,000 ER bill above 
that drives people to pay for an insurance product that may otherwise 
make no financial sense. And that patient from Antigua--her once in a 
lifetime catastrophic thyroid cancer was cured for less than the cost 
of one year of premium payments.

    Using our program, we make routine and predictable care affordable. 
We also make unpredictable expenses affordable, even those once felt to 
be impossible to afford without insurance. We can't do anything for 
catastrophic illness, other than try to prevent it through good primary 
care and prevention. We are hopeful that Congress will pass legislation 
that will improve access to catastrophic only coverage. In the interim, 
we welcome the Administration's recent rule change expanding access to 
short-term medical plans. While far from perfect, they are an option 
that can bundle with a DPC membership to provide an affordable 
combination of access to routine care/chronic disease management plus 
coverage for catastrophic illness.
                          A National Movement
    As it turns out, many practices around the country were having a 
similar epiphany at the same time. There were likely under a dozen 
practices developing a similar approach, now collectively referred to 
as Direct Primary Care. Practices in the state of Washington, Nevada, 
Virginia, North Carolina, Kansas, Pennsylvania and others began popping 
up and making waves. Some did not survive, while others thrive. Where 
there were likely less than a dozen DPC practices in 2010, there are 
estimated to be nearly 1,000 true DPC practices today. Most of that 
growth has been in the last 4 years, with an 800 percent growth in the 
number of DPC practices since 2014. Many of these practices can be 
found by going to www.dpcfrontier.com/mapper. These practices are now 
serving patients of all socioeconomic groups in rural, urban, suburban 
and inner-city settings in nearly every state. Some practices even 
include prenatal care and baby delivery in the membership.

    DPC is frequently confused with ``concierge medicine'', which is 
often considered care for the affluent. DPC was born out of the 
concierge movement. While some may use the terms DPC and concierge 
interchangeably, DPC practices generally offer lower price points that 
most can afford. Much like airbags first appeared on luxury cars, they 
are now standard safety features on even the most affordable vehicles. 
The national average membership fee for a DPC practice is approximately 
$70. Concierge practices also often still bill 3rd parties on a fee-
for-service basis in addition to the membership fee, where a DPC 
practice usually does not charge extra beyond the membership.

    DPC is frequently accused of skimming the ``worried well'' and 
healthy from the system, while leaving the sick patients for insurers 
and the government to care for. As it turns out, DPC practices tend to 
attract the opposite. Patients that are healthy have little interest in 
paying a recurring monthly fee for a service that they will rarely use. 
DPC practices tend to attract those with chronic diseases that are 
finding it difficult to navigate within our broken health care system, 
often bringing with them problems that have been neglected for many 
years.

    Because of the efficiency of the DPC practice delivery model, it is 
no wonder that businesses are seeking to work with DPC practices to 
keep their employees healthy, especially those with self-funded health 
plans. As our ``epiphany'' employer realized, DPC is an affordable 
vehicle for small business owners to provide employee access to medical 
care, even if they cannot afford health insurance coverage.

    I presently serve as the President of Docs 4 Patient Care 
Foundation. D4PCF is a national leader in educating physicians on how 
to set up a DPC practice. Our grant-supported national conference 
curriculum has helped train hundreds of physicians from across the 
nation at little to no cost for the physician attendee. We maintain a 
large video library of free content for those interested in learning 
more at www.d4pcfoundation.org. Our third annual DPC Nuts and Bolts 
conference, November 1--3 in Orlando, is on track to attract well over 
300 attendees.

    DPC doctors are a special breed of small business owners with an 
entrepreneurial spirit and huge heart. Unlike most competitive 
businesses, DPC practices are always willing to step up and help each 
other and help others. This was true in the case of Hurricane relief, 
where DPC docs started an effort that sent tens of millions of dollars 
in private medical supply donations to doctors in need, delivering 
medical supplies and medicines to damaged clinics in Texas, Puerto Rico 
and elsewhere. It was also true when several DPC practices in the Mid-
Atlantic joined forces to pay off $1.4 million in patient accumulated 
medical debt.
                           Regulatory Relief
    There have been several hurdles along the way for the DPC movement. 
Some of those hurdles remain. Simply put, the best way for Congress to 
support the DPC movement in restoring the health care system is to let 
it happen and not try to force it or stop it. The movement is 
transforming the health care landscape in many good ways. It is a non-
partisan movement, supported by all but those that continue to do well 
in our current broken system.

    Some have argued that physicians that enter directly into a 
contract with a patient for a defined package of medical services 
should be regulated as risk bearing entities and treated as insurance 
companies. Twenty-five states have seen differently and passed 
legislation defining a direct contractual relationship between a doctor 
and a patient as being exempt from regulation as an insurance product. 
These relationships are already heavily regulated by state boards of 
medicine and also fall under the regulation of standard contract law. 
To date, no state has legislated a contrary position.

    While there is presently a pilot program for DPC currently under 
consideration by Center for Medicare and Medicaid Innovation (CMMI), 
many members of the DPC community have expressed concerns during the 
recent RFI. To be clear, many Medicare beneficiaries are already 
members in DPC practices and Medicare is enjoying those savings. 
However, in order for a doctor to legally contract with a Medicare 
patient outside of the traditional fee-for-service structure, the 
doctor must opt-out of Medicare entirely. That greatly limits 
moonlighting opportunities which can be critical to the success of a 
physician starting a practice in this model. The DPC movement would be 
helped tremendously if CMS and Congress were to adopt rules and 
regulations that allow doctors to develop DPC practices without having 
to opt out of Medicare.

    Many DPC practices dispense wholesale medications direct to their 
patients, resulting in tremendous savings and improved compliance. In 
the example provided below, courtesy of Plum Health DPC in Detroit, a 
patient could easily save hundreds of dollars every month just through 
direct dispensing of generic medications. These savings alone often 
easily cover the DPC membership cost. While most states allow direct 
dispensing of medications by physicians, some states restrict the 
practice. Congress could improve affordability and access to 
medications by structuring incentives for states to allow physician 
direct dispensing of wholesale medications.

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    Direct Primary Care was included in Sec 1301(a)(3) of the 
Affordable Care Act as an acceptable minimum essential coverage that 
can be sold on the Exchanges when paired with appropriate wrap-around 
coverage. In 2014, Ranking Member Murray and colleagues sought 
clarification in a letter to then IRS Commissioner Koskinen about use 
of HSA dollars to pay for DPC memberships in support of a pioneer DPC 
practice in Washington state. Commissioner Koskinen's response letter 
established the IRS position that DPC was a health plan, contradictory 
to the ACA rules, not only disqualifying use of HSA dollars to pay for 
DPC memberships, but disqualifying DPC member patients from 
contributing to their HSA whatsoever. This single obstacle has served 
to greatly slow the uptake of DPC, particularly among the majority of 
Americans with an employer sponsored health plan. As a result, DPC is 
the only physician service in the country that is ineligible to accept 
HSA dollars for payment.

    The U.S. House of Representatives recently passed H.R. 6199. 
Section 3 of that bill pertains to HSA use with DPC memberships. While 
we appreciate the importance of resolving this big issue, the language 
in the bill has some considerable flaws that make it less helpful, 
perhaps even harmful for the DPC movement at large. The original bill 
language introduced in Ways and Means contained a reference to a 
definition of primary care that was so narrow, likely less than one-
third of primary care practices would meet the definition. Most 
importantly, the language would have unintentionally prevented DPC 
practices from including routine services such as women's wellness care 
in their memberships. Fortunately, that restrictive language was 
removed before passage by the House. However, after passage, Treasury 
felt that the change was a drafting error and advised reinserting the 
troublesome primary care definition reference.

    Unfortunately, the bill fixes the wrong section of the Internal 
Revenue Code (IRC). The bill makes DPC an eligible health plan to use 
HSA dollars under IRC 223(d), instead of making it an eligible health 
care expense under IRC 213(d). By designating DPC as a health plan, it 
sets up conflict with the 25 states that have legislation declaring DPC 
is NOT a health plan. It also creates potential regulatory conflict in 
the remainder of states that do not have such legislative DPC 
clarification. It would be helpful if HR6199 or similar legislation was 
consistent with most opinion that DPC is not health insurance.

    Despite DPC being the shining beacon for price transparency in 
American health care, the bill imposes the first-ever legislative cap 
on physician charges and potentially blocks DPC practices from 
accepting HSA dollars if they dispense medications. While we greatly 
hope to see this bill move forward in the US Senate, I welcome the 
opportunity to work with lawmakers to help make it a better bill, 
resolving the issues stated above.
                               Conclusion
    Thank you for the opportunity to testify about the transformative 
potential of Direct Primary Care. This rapidly growing care delivery 
model has the ability to properly align the incentives of the doctor, 
patient and health care system in general. It eliminates third party 
intrusion into the private patient decisions and is a much needed 
change in providing critical access to all patients, regardless of 
insurance status or pre-existing conditions. I look forward to your 
questions and look forward to a continuing dialogue on regulatory and 
legislative changes to expand the positive impact and growth of Direct 
Primary Care.
                                 ______
                                 
                  [summary statement of lee s. gross]
    In his testimony, Dr. Lee Gross highlights the challenges with 
government regulations, Medicare and commercial insurances that are 
driving the consolidation of independent medical practices and 
interfering with the physicians' practice of medicine. Over-burdensome 
insurance requirements, government regulations and heavy-handed 
policies are driving up costs of medical care. They are contributing to 
physicians' burnout, early retirement, or leaving the practice of 
medicine entirely. The third-party payment system is driving a wedge 
between the doctor and the patient, driving up costs and creating a 
critical access to care issue in the US.

    After years in private practice in Florida, Dr. Gross and his 
colleagues had an ``epiphany'' about an affordable health care 
solution, free of insurance and government interference in the doctor-
patient relationship. They asked a simple question, ``Why are we using 
insurance to pay for primary care?'' In 2010, they launched Epiphany 
Health, a pioneer Direct Primary Care (DPC) practice. Now, a DPC 
revolution is sweeping across the nation, providing access to health 
care for those who have been neglected by the system for decades.

    The doctors contract directly with their patients for care, outside 
of the typical 3rd party payer arrangement, on a fixed monthly basis. 
This membership-based approach eliminates the need to use insurance to 
pay for primary care services. Adult Epiphany DPC memberships start at 
$60 per month and children cost as little as $10 per month. Beyond 
that, all necessary office visits, technology visits, in-office testing 
and procedures are included. There are no exclusions or increased 
prices based upon pre-existing conditions. The elimination of fee-for-
service in this model dispenses with copays or deductibles, and removes 
barriers to access.

    Direct Primary Care practices are providing care to patients of 
every socioeconomic background without regard to pre-existing 
conditions. They serve rural, urban, suburban, inner-city and critical 
access patient populations. The removal of barriers to access allows 
more effective management of chronic conditions. DPC doctors are 
treating these conditions at a cost that most can afford. Untreated, it 
would otherwise result in more serious morbidity and an economic burden 
on both the patient and society. Bundled with a high-deductible health 
plan, DPC provides a combination of affordable care for the routine and 
coverage for the catastrophic.

    DPC doctors negotiate price transparent arrangements and make group 
purchases on behalf of their patients, passing through the savings 
without retail markup. This allows them to give patients wholesale 
buying power for labs, imaging, medications, surgical care and much 
more. Savings are frequently as much as 95 percent compared to standard 
charges.

    DPC doctors harness the power of complete price transparency to 
allow real time incorporation of cost into the conversation about 
treatment options. That allows doctors to add ``doing no financial 
harm'' to their Hippocratic Oath. This price transparency allows market 
forces to take hold in communities, causing local practices to compete 
on price and quality as perceived and determined by the person 
receiving and paying for those services--the patient. As a result, 
Epiphany Health has seen almost zero inflation in the cost of health 
care services since their 2010 inception.

    This testimony outlines examples of cost savings and how those can 
be extrapolated to the national health care economy. It offers 
suggestions for regulatory and legislative actions that could support 
the DPC movement, thereby increasing uptake and improved patient access 
to affordable medical care.
                                 ______
                                 
    The Chairman. Thank you, Dr. Gross.
    I am sure there will be lots of questions about that.
    Ms. DeMars, welcome.

   STATEMENT OF CHERYL DEMARS, PRESIDENT AND CHIEF EXECUTIVE 
               OFFICER, THE ALLIANCE, MADISON, WI

    Ms. DeMars. Thank you, Chairman Alexander, Ranking Member 
Murray, and Members of the Committee, for the opportunity to 
speak with you today.
    I would like to share three approaches that Alliance 
members are using to control healthcare costs. The first is 
pooling our purchasing power to contract directly with 
providers. The Alliance was founded for this purpose.
    We are not jumbo employers. Our average size is about 400 
employers, but together, we spend $787 million every year on 
healthcare. I have four of our members here with me today--
Wendy Culver from Mead & Hunt, Annette Mikula from Rock County, 
Brad Olm from Gordon Flesch, and Vikki Brueggeman from 
Zimbrick.
    We contract directly with hospitals and clinics, creating a 
network of providers that gives our employees access to the 
doctors and hospitals they want to see at rates that are 
competitive in our market. We negotiate terms that are 
important to us, such as the right to share prices with our 
employees and to protect them from balance billing.
    Our goal is to buy healthcare based on value, balancing 
quality and appropriateness with price. And since we know that 
no one health system is the best at everything, we include many 
providers to create competition on cost and quality.
    We work to build partnerships with the hospitals and 
clinicians in our communities because we know that improving 
healthcare value is a team sport. We each have a role to play 
to create a healthcare system that costs less, delivers better 
results and better health for people, and is more rewarding in 
a humane environment in which to both deliver and receive care.
    The second approach we employ is investing in high-value 
primary care. We know that primary care has the potential to 
make a significant positive impact on the health of our 
employees and on our total healthcare costs. Optimal high-value 
primary care delivers appropriate preventive care and helps 
people manage chronic conditions like diabetes when they occur. 
However, studies have shown that such evidenced-based care is 
only delivered about 55 percent of the time.
    To address this gap, some employers are establishing their 
own primary care clinics. These clinics provide convenient 
patient-centered care. One such example is Flambeau, Inc., in 
Baraboo, Wisconsin.
    Prior to opening their onsite clinic in 2012, Flambeau 
spent $7,900 per employee per year on healthcare and 
prescription costs. In 2017, 5 years later, after opening their 
onsite clinic, they spent $7,950, an increase of less than 0.5 
percent. What is more, Flambeau's onsite clinic has had a 
positive impact on employee health. The clinic staff have 
identified hundreds of undiagnosed conditions, performed 
hundreds of preventive exams on employees who would not 
normally get them, and increased medication adherence for 
chronic conditions by dispensing maintenance medications.
    The third approach is to move market share to high-value 
providers. One of the surest and fastest ways to improve the 
value of healthcare is simply to use providers who deliver good 
care at a lower price. That is why we developed the QualityPath 
program. QualityPath encourages employees to use high-value 
providers for shoppable procedures and tests like hip and knee 
replacements, CTs, and MRIs.
    Hospitals and doctors have to apply for the program and 
must prove the quality and appropriateness of their care based 
on national quality measures. They must also adopt practices 
that reduce unnecessary care and agree to a lower bundled price 
backed by a warranty. Employers encourage their employees to 
use these providers by reducing or eliminating their out-of-
pocket costs. Since its inception 3 years ago, QualityPath has 
saved more than $1.5 million for our members.
    We appreciate the opportunity to offer suggestions for 
Federal policy reforms, and my written testimony includes 
several suggestions that we believe would be beneficial.
    Briefly, these include requiring Medicare to do more to 
make meaningful cost and quality information more readily 
available and to persist in its value-based purchasing 
policies. We need CMS to keep their foot on the gas. Also 
consider changes to the rules for health savings accounts to 
allow them to be used with value-based benefit designs and free 
access to worksite clinics. Repealing the Cadillac Tax, which 
penalizes employers for taking some of the steps I have 
described here today. And finally, clarifying wellness rules, 
so employers know the parameters as they design new approaches 
to improve employee health.
    Thank you again for this opportunity, and I would be happy 
to respond to questions.
    [The prepared statement of Ms. DeMars follows:]
                  prepared statement of cheryl demars
    Thank you Chairman Alexander, Ranking Member Murray and 
distinguished Members of the Senate Health, Education, Labor and 
Pensions Committee for the opportunity to speak with you today.

    I am Cheryl DeMars, President and CEO of The Alliance. We are a 
not-for-profit health care purchasing cooperative owned by 240 self-
funded employers that provide health benefits to more than 85,000 
employees and their family members in Wisconsin, Illinois and Iowa. Our 
mission is to move health care forward by controlling costs, improving 
quality and engaging individuals in their health.

    We appreciate this Committee's recognition that the cost of health 
care is a critical issue for our country. This is certainly true for 
our member employers and their employees. And while I will share 
examples of some of the successful strategies we are using, I also want 
to emphasize that reining in health care costs requires different 
actions from all health care stakeholders. Health care providers, 
insurers, purchasers/employers, consumers/patients and the government 
must make changes to co-create the type of health care system that this 
country deserves; one that costs less, delivers better results and 
better health for people, and is a more rewarding and humane 
environment in which to both deliver and receive care.

    I would like to share three approaches we use to impact health care 
costs: (1) pooling our purchasing power to contract directly with 
providers, (2) investing in high value primary care and (3) moving 
market share to high value providers. Each of these strategies is 
enabled by having information with which to measure and compare cost 
and quality and then using that information to realign financial 
incentives to support required behavior change--topics this Committee 
has already heard about in previous hearings.
      Pooling Purchasing Power to Contract Directly with Providers
    The Alliance was founded for the purpose of uniting employers to 
contract directly with hospitals and doctors. We are not jumbo 
employers. We range in size from 60 to 8,700 employees, with an average 
of about 400 employees. But together we spend $780 million on health 
care every year.

    We contract directly with hospitals and clinics, creating a network 
of providers that gives our employees access to the doctors and 
hospitals they want to see at rates that are competitive in our market. 
We negotiate terms that are important to us, such as the right to share 
prices with our employees and to protect them from balance billing. We 
build partnerships with the hospitals and clinicians in our 
communities, because we know that improving health care value is a team 
sport.

    Our goal is to buy health care based on value -- balancing quality 
and appropriateness with cost. Since we know that no single delivery 
system is the best at everything, our network includes many delivery 
systems and an increasing number of unique and innovative providers 
that specialize in bundled, high value care, such as NOVO Health and 
Twin Cities Orthopedics. These ambulatory surgery centers have 
developed business relationships with all of the providers needed to 
deliver care for these procedures, eliminating the ``surprise billing'' 
that can occur when a component of care is delivered by an out-of-
network provider without the patient's knowledge.

    Direct contracting has its limitations, however. Employers need to 
acquire expertise in health care billing and reimbursement in order to 
negotiate effectively with providers. Even then, cost shifting is 
rampant. While the rates we have negotiated are competitive in our 
region, they are still many times the Medicare rate. And we are not 
closing the gap between the prices we pay and the cost of health care 
in other countries with whom our members compete in their core business 
operations. Just managing the rate of health care cost increases is not 
enough. We need to spend less.

    Consolidation among health care providers creates additional 
challenges. Health care systems that ostensibly become ``too big to 
exclude'' increase their bargaining power, which drives up the unit 
cost of health care, as many studies have shown. \1\ \2\ \3\ And as 
decision-making, governance and dollars shift to corporate health care 
headquarters located elsewhere, we see less awareness of and concern 
for the needs of local employers and communities.
---------------------------------------------------------------------------
    \1\  Zack Cooper, Stuart V. Craig, Martin Gaynor, John Van Reenen, 
``The Price Ain't Right? Hospital Prices and Health Spending on the 
Privately Insured.'' NBER Working Paper No. 21815. Issued in December 
2015, Revised in May 2018.http://www.nber.org/papers/w21815
    \2\  Chad Terhune, ``As Hospital Chains Grow, So Do Their Prices 
for Care,'' Kaiser Health News, June 13, 2016. https://khn.org/news/as-
hospital-chains-grow-so-do-their-prices-for-care/
    \3\  Brent Fulton, ``Health Care Market Concentration Trends in the 
United States: Evidence and Policy Responses.'' Health Affairs 36, no.9 
(2017):1530--1538. https://www.healthaffairs.org/doi/10.1377/
hlthaff.2017.0556
---------------------------------------------------------------------------
                  Investing in High Value Primary Care
    We believe in the potential for primary care to make a significant 
positive impact on the health of our employees and on our total health 
care costs. Optimal, high value primary care delivers appropriate 
preventive care, accurately diagnoses and efficiently treats acute 
conditions, and helps people manage chronic conditions such as 
diabetes, when they occur. Studies have shown that such evidence-based 
care is delivered only about 55 percent of the time. \4\
---------------------------------------------------------------------------
    \4\  Elizabeth A. McGlynn, ``The Quality of Health Care Delivered 
to Adults in the United States,'' New England Journal of Medicine, Vol. 
348, No. 26, (June 26, 2003). https://www.nejm.org/toc/nejm/348/
26?query=article--issue--link

    To address this gap, some employers are establishing their own 
primary care clinics. One such example is provided by Flambeau, Inc., 
in Baraboo, Wis. In 2012, the year before Flambeau opened their onsite 
clinic, they spent $7,901 per employee per year on medical care and 
prescriptions. In 2017, five years after establishing their onsite 
---------------------------------------------------------------------------
clinic, they spent $7,950, an increase of only 0.6 percent.

    In addition to stabilizing the cost of health care outside of the 
clinic, Flambeau's onsite clinic staff has identified hundreds of 
undiagnosed conditions, performed hundreds of preventive exams on 
employees who wouldn't normally get them and increased medication 
adherence for chronic conditions by dispensing maintenance medications, 
all of which improves health, increases productivity and decreases 
absenteeism. Two years ago, they added chiropractic care and low-cost 
massages, taking the employee appreciation of the onsite clinic to new 
heights.

    Colony Brands provides free onsite clinic services to employees and 
dependents covered by its self-funded health plan in Monroe, Wis., and 
Clinton, Iowa. Working in partnership with a local health system, 
Colony's onsite clinic focuses on prevention and health coaching based 
on the results of the annual health risk assessment. The clinics serve 
2,200 employees as well as 3,000 temporary employees. The Clinton 
clinic is staffed by a nurse practitioner and a certified medical 
assistant, while the Monroe location has two physician assistants, two 
certified medical assistants, an exercise counselor, a registered 
dietitian, and a pharmacotherapist who is available as needed. Patient 
satisfaction has remained at 99 percent or above throughout its six-
year history with total cost savings of $4,290,000. But what can't be 
measured is the long-term impact, in dollars and in lives, of Colony's 
focus on preventive services and disease management for conditions like 
diabetes and high blood pressure.

    Brakebush Brothers, Inc., Westfield, Wis., credits its onsite 
clinic for helping keep per-member costs for 2018 below its per-member 
costs for 2014, when the company began self-funding its health benefit 
plan. Employees can use the Brakebush Center for Health to access free 
primary and urgent medical care, have lab work done, fill common 
prescriptions, have physical therapy and rehabilitation, or get 
personal training, health coaching, hypnotism, chaplaincy care, or 
financial and legal services. This wide range of services responds to 
the full needs of an employee seeking health care. For example, an 
employee may schedule an appointment with a physical therapist to 
address knee pain. If the therapy resolves the issue, the physical 
therapist may refer the employee for personal training to build knee 
strength. But if therapy doesn't help, then the employee can be 
referred to a physician assistant, who may suggest the employee get a 
free MRI by using a provider who is part of Brakebush's Centers of 
Excellence. If the MRI indicates more care is needed, the employee can 
see the orthopedic surgeon who visits the Center for Health once a 
month. If the employee needs surgery, he or she will be referred to the 
Centers of Excellence program to get quality care and reduce out-of-
pocket costs. Following surgery, the employee would return to the 
Center for Health for rehabilitation care. If the employee is suffering 
emotionally from coping with pain and recovery, they might also be 
referred to a chaplain, health coach or hypnotist.

    Employer-based primary care clinics are also able to use data on 
cost and quality to refer patients to high value facilities and 
clinicians when appropriate. They are not obligated to refer only to a 
specific set of providers, as is typically the case for primary care 
clinicians who are employed by health systems.

    Because many of our employers are too small for a workplace clinic 
to be a viable option, we are pursuing ``shared-site'' clinics as a 
collaborative effort among employers who are in close proximity to one 
another.

    Finally, while onsite and shared-site clinics show promise to 
deliver better results at lower total cost, this ``parallel universe'' 
does little to improve the health care system in a community. For this 
reason, we are also developing new models to pay for primary care 
within the current system. Payments that are based on patient health 
status and the total cost of care, as opposed to traditional fee for 
service models, could be effective in building needed capabilities in 
primary care.
              Moving Market Share to High Value Providers
    One of the surest and fastest ways to improve the value of health 
care is to simply use providers who deliver good care at a lower cost. 
This strategy depends on the availability of information with which to 
compare cost and quality, which is often lacking. It also assumes that 
consumers will respond to information by choosing high value care. Our 
experience reinforces what published studies \5\ \6\ have shown: simply 
sharing information with consumers is insufficient to drive change.
---------------------------------------------------------------------------
    \5\  Sunita Desai, ``Offering A Price Transparency Tool Did Not 
Reduce Overall Spending Among California Public Employees And 
Retirees,'' Health Affairs 36, no. 8 (2017).https://doi.org/10.1377/
hlthaff.2016.1636
    \6\  Nicole Ketelaar, ``Public release of performance data in 
changing the behaviour of healthcare consumers, professionals, or 
organizations.'' Cochrane Database Syst. Rev., Nov. 9, 2011. https://
www.ncbi.nlm.nih.gov/pubmed/22071813
---------------------------------------------------------------------------
                              QualityPath
    The Alliance is overcoming these barriers through our QualityPath 
program. QualityPath encourages employees to use high value providers 
for ``shop-able'' surgeries and tests, like knee and hip replacements, 
CTs and MRIs. QualityPath is a voluntary program whose promise is 
better outcomes and lower costs for employees and employers and 
increased market share for providers.

    Hospitals and doctors that want to participate must share 
physician-specific outcomes on national quality measures, and must meet 
or exceed national standards. They must also adopt practices that 
reduce unnecessary care and agree to lower-priced bundled payments 
backed by a warranty on their care. Employers share their savings by 
providing incentives that lower or eliminate the out-of-pocket cost for 
employees when they choose a QualityPath provider for an eligible 
service.

    More than 50 employers who provide health benefits to 27,000 
employees and their family members are enrolled in QualityPath today. 
Since its inception three years ago, QualityPath has saved more than 
$1.5 million on total hip replacements and knee replacements in an 
inpatient setting, as well as outpatient CT and MRI scans. Employers 
save an average of $12,000 per surgery, while savings on scans average 
20 percent. We are in the process of expanding the program to add 
colonoscopies.

    As is our intent, QualityPath`s impact extends beyond the care 
received by members of The Alliance. To meet eligibility requirements 
for QualityPath, hospitals and physicians must demonstrate that their 
standard of care for all patients meets the requirements of the 
program. This includes patient-centered and cost-saving measures to 
ensure care is appropriate to begin with and ultimately what the 
patient wants, once informed of their choices.
                  Incentives to use low cost providers
    While information to assess and compare quality may be generally 
lacking, because our employer-driven contracting standards require 
transparency, Alliance members can know the cost. And it varies 
tremendously. For outpatient services such as imaging or laboratory 
services, contrary to Medicare, we routinely experience a five-fold to 
seven-fold variation in price for the same service among in-network 
providers and a three-fold to four-fold variation in price within 
metropolitan regions for the same service. For instance a simple MRI of 
the lower leg can cost anywhere from $950 to $4,750 within 25 miles of 
Madison.

    This wild variation is not unique to our market and our 
organization, but is observed across the U.S. and the commercial 
insurance marketplace. 1A\7\ Alliance members believe that directing 
care based on cost and quality is the gold standard. However, for care 
that is largely commodity-based, when quality information is not 
available or is withheld, it would be irresponsible to ignore 
differences in costs. We don't believe doing so serves consumers 
either, given that 40 percent of American households have $400 or less 
in cash on hand. 1A\8\
---------------------------------------------------------------------------
    \7\  Zack Cooper, Stuart V. Craig, Martin Gaynor, John Van Reenen, 
``The Price Ain't Right? Hospital Prices and Health Spending on the 
Privately Insured.'' NBER Working Paper No. 21815. Issued in December 
2015, Revised in May 2018.http://www.nber.org/papers/w21815.
    \8\  Report on the Economic Well-Being of U.S. Households in 2017, 
Board of Governors of the Federal Reserve System, May 2018, p. 2. 
https://www.federalreserve.gov/publications/files/2017-report-economic-
well-being-us--households-201805.pdf

    In these cases, some Alliance members are using plan design or 
other financial incentives to encourage the use of lower cost 
providers. For example, Colony Brands in Monroe, Wis., developed its 
Smart Choice program to offer financial incentives for employees to use 
freestanding MRI facilities, which offer savings of thousands of 
dollars on a single MRI scan when compared to a hospital setting. 
Employees get $250 for choosing to use a designated freestanding 
facility instead of a hospital for an MRI scan.
                   Recommended Federal Policy Reforms
    We appreciate the invitation to share our perspective on federal 
legislative and administrative policy reforms that would stimulate 
innovation with respect to employer sponsored health coverage, leading 
to lower health care costs and a healthier workforce and population. We 
concur with the recommendations shared with this Committee at its 
hearing on July 17, 2018, by Mr. David Lansky, President and CEO of The 
Pacific Business Group on Health. In addition, The Alliance has 
identified five priority policy areas for your consideration.

          1. Make timely information on health care cost and quality 
        more available so that employers and their employees can 
        understand and use the information.
          2. Repeal the Cadillac Tax.
          3. Enable employers to offer HSAs in addition to value-based 
        benefit design components, such as free access to onsite 
        clinics, and co-pay and deductible waivers for high value care.
          4. Clarify wellness rules.
          5. Maintain momentum of value-based payment policies.

    1. Make timely information on health care cost and quality more 
available.

    Employers, consumers and health care providers all need increased 
transparency of information on cost and quality. When information is 
more widely available, and easier to understand and use, it drives 
healthy competition as providers see how they compare to their peers or 
to national standards. It is fundamental to employer purchasing 
decisions that are based on value--quality, as well as cost. It enables 
employees to choose health care services, providers and settings that 
are safe, high quality and affordable for themselves and their 
families.

    While many self-funded employers can access information about the 
services their own employees receive, information to measure and 
compare all of the care that a particular hospital or physician 
provides is spotty, at best. Some states mandate health care data 
reporting by providers while others do not. Different reporting 
programs may use different measures or methodologies, making it 
difficult to compare one provider to another. Where voluntary reporting 
mechanisms exist, participation by providers is incomplete.

    In Wisconsin, we have experienced both the successes and 
limitations of voluntary, private-public transparency partnerships. The 
Wisconsin Collaborative for Healthcare Quality (WCHQ) is a provider-
led, multi-stakeholder measurement, public reporting and practice 
transformation initiative. WCHQ has been successful in measuring and 
reporting important measures of ambulatory care since its inception in 
2003. Not only does WCHQ provide an important source of publicly 
reported, comparable performance information, but public reporting has 
served as a catalyst to spur improvement as well. Yet more than 30 
percent of ambulatory care providers have chosen not to participate in 
WCHQ, making it difficult to get a comprehensive picture.

    Wisconsin also led the way in creating a voluntary all-payer claims 
data organization known as the Wisconsin Health Information 
Organization (WHIO). WHIO was founded in 2005 and today captures at 
least one claim on nearly 76 percent of the state's population. Through 
WHIO's data mart, we are able to see wide variation in health care 
performance and resource use that occurs even in a state that 
consistently ranks in the top five for overall health care quality. 
Yet, being a voluntary organization presents challenges as some payers 
refuse to participate and concerns over disclosing contracted amounts 
have thus far thwarted efforts to create a true measure of the total 
cost of care.

    Voluntary measurement and reporting initiatives such as these are 
an important start to providing the information needed to create better 
value health care. However, these Wisconsin-based resources do not shed 
light on the cost or quality of health care in Illinois or Iowa. Those 
states do not have similar initiatives in place. Having to take a 
state-by-state approach to transparency is cumbersome and unwieldy for 
employers. It can be confusing and frustrating for patients who live in 
and receive care in areas with less information available.

    We need a national framework that establishes at least some minimum 
threshold of information that is publicly available across all regions 
of the country. There are promising steps being made toward this end 
and we urge that these be strengthened and continued:

          The Medicare Qualified Entity Program has increased 
        access to Medicare data, but there are gaps, as not every state 
        has a Qualified Entity that is able to receive and share the 
        data.

          The recent CMS guidance to hospitals requiring that 
        they publish their standard charges online will stimulate 
        conversation; however, consumers need to know what their out of 
        pocket costs will be.

          The Patients Right to Know Drug Prices Act of 2018 
        that prohibits the ``gag clauses'' used in contracts to prevent 
        pharmacies from telling consumers if their prescription drugs 
        are cheaper if they pay out of pocket versus through their 
        insurance plans.

          Senator Cassidy's bipartisan Health Care Price 
        Transparency Initiative, which is working to incorporate real 
        world experience and evidence-based policies with the aim of 
        improving price transparency and lowering costs.

    2. Repeal the Cadillac Tax
    Employers are the largest sponsors of health care coverage for 
Americans. And the biggest threat to employer sponsored health 
insurance is the Cadillac Tax. Ironically, many of the steps employers 
are taking to reduce their health care costs, such as workplace clinics 
and wellness programs, will be penalized by the Cadillac Tax.

    While the recently approved delay of Cadillac Tax implementation is 
welcome, most businesses have a benefits-planning window of 18 to 24 
months. Without a full and permanent repeal of the tax, employers will 
be faced with taking steps now to manage this risk by reducing benefits 
or passing increases on to their employees.

    3. Enable employers to offer HSAs in addition to value-based 
benefit design components, such as free access to onsite clinics, and 
co-pay and deductible waivers for high value care.

    By incorporating Health Savings Accounts (HSAs) into benefit plan 
designs, employers encourage their employees to plan and save for their 
future health care needs. HSAs have become an important tool to promote 
employee engagement and health care consumerism.

    At the same time, the restrictions associated with HSAs 
inadvertently undermine some of the important innovations previously 
described. For instance, Alliance members with HSA plans are prohibited 
from waiving co-pays and deductibles for the QualityPath program. They 
also must charge the fair market value of services received in their 
workplace clinic, when they would prefer to make these services 
available to their employees at no cost. We ask that Congress direct 
the Department of Health and Human Services (DHHS) and the Internal 
Revenue Service (IRS) to explore increasing the caps on HSAs and 
expanding the flexibility of HSA dollars.

    4. Clarify Wellness Rules

    The Affordable Care Act changed ERISA rules to enable employers to 
incentivize employees to participate in voluntary ``health-contingent'' 
wellness programs. Employers were allowed to create incentives valued 
at ``up to 30 percent of the cost of the employee health coverage.'' 
Use of financial incentives has increased participation in programs and 
has helped employees make positive lifestyle changes. Janet Mezera 
cited the support she received from her Alliance-member employer, 
Miniature Precision Components in Walworth, Wis., as a key factor in 
changing her eating habits and making fitness part of her life. With 
help from Miniature Precision Components' wellness program as well as 
its onsite medical clinic, Ms. Mezera made changes that got her blood 
sugar under control, reduced her cholesterol levels and relieved her 
knee pain so she could stop using a handicapped parking space. Her 
transformation was recognized when she received the Wisconsin Wellness 
Council's 2016 Light of Wellness Award in the Healthy Behaviors 
Category. Miniature Precision Components' benefit plan includes a 
wellness incentive that rewards employees for healthy behaviors. The 
company offers wellness programs that are accessible to all employees 
regardless of location or working hours as well as onsite primary care 
clinics at five facilities.

    Unfortunately, last year a federal court struck down these EEOC 
rules, citing that 30 percent was too great an incentive to be 
considered voluntary. The court remanded the EEOC to rewrite wellness 
program rules to meet a voluntary threshold, but the court's order did 
not define ``voluntary''. Current EEOC rules will expire at the end of 
2018, yet to date, the EEOC has not issued new rules. Without clear 
guidance, employers risk running afoul of the EEOC. To avoid this risk, 
some employers are pulling back from the use of meaningful and 
effective incentives to encourage good health habits.

    We ask Congress to direct the EEOC to adopt new wellness program 
rules so that employers can move forward with programs that offer 
meaningful incentives to employees who proactively make healthy 
lifestyle decisions.

    5. Maintain momentum of value-based payment policies

    The most significant step Congress can take to drive better value 
health care is continued reform of its payment policies to create 
incentives for better care at lower cost. Because the federal 
government is the largest purchaser of health care, any efforts by DHHS 
and CMS to redesign how health care is paid for will influence a ``new 
normal'' for all consumers. Medicare accounts for 30 percent of 
hospital revenue in Wisconsin and 41 percent of revenue in Illinois. A 
change in Medicare payment policy gets immediate attention from the 
provider community and can crowd out payment and delivery reform 
efforts at the regional level. Therefore, it is important for CMS to 
consider how its payment policies will impact the cost and delivery of 
care for all patients, not just Medicare recipients.

    While CMS has continued with some payment innovations adopted by 
the prior administration, including the Bundled Payments for Care 
Improvement Advanced (BPCI Advanced) Initiative, in other cases the 
agency has slowed down payment reform initiatives, narrowed their scope 
and reduced their targets. \9\ Market-based health care transformation 
requires public-private sector alignment and persistent use of 
strategies that are showing promise.
---------------------------------------------------------------------------
    \9\  Cunningham, Paige Winfield, ``The Health 202: Trump 
administration pulls back from key Medicare goals.'' The Washington 
Post, Feb. 20, 2018. https://www.washingtonpost.com/news/powerpost/
paloma/the-health--202/2018/02/20/the-health-202-trump-administration-
pulls-back-from-key-medicare--goals/5a8737f430fb047655a067d4/
?noredirect=on&utm--term=.af6046f5927c

    We urge Congress and DHHS to stay the course and continue to pursue 
aggressive payment reforms even as providers and other health plan 
sponsors object and raise concerns. While these concerns should be 
considered and worked through, reducing cost in health care means 
reducing revenue for some in the health care system. Businesses, their 
employees and the government itself as a health care purchaser simply 
cannot continue to shoulder year after year health care cost increases 
that outpace inflation. Reforms are needed. They will not be easy, they 
will often be unpopular with health care providers, drug companies and 
---------------------------------------------------------------------------
some plan sponsors, but they are essential.

    Thank you for this opportunity to share the perspectives of our 
member companies with this Committee. I would be pleased to provide 
additional information on any of the points I have raised, and I look 
forward to sharing more about The Alliance's innovative work.
                                 ______
                                 
                  [summary statement of cheryl demars]
           Employer Innovations that Reduce Health Care Costs
    The Alliance is a not-for-profit health care purchasing cooperative 
owned by 240 self-funded employers that provide health benefits to more 
than 85,000 employees and their family members in Wisconsin, Illinois 
and Iowa. Member employers range in size from 60 to 8,700 employees, 
with an average of about 400 employees. The cost of health care is a 
critical issue for these employers and their employees.

    We are using three approaches to impact health care costs.

          1. Pooling our purchasing power to contract directly with 
        providers enables us to create a network of providers that 
        gives our employees access to the doctors and hospitals they 
        want to see at rates that are competitive in our market. Our 
        goal is to buy health care based on value--balancing quality 
        and appropriateness with cost. We build partnerships with the 
        hospitals and clinicians in our communities, because we know 
        that improving health care value is a team sport. Provider 
        consolidation is a threat to this strategy.

          2. Investing in high-value primary care--primary care has the 
        potential to improve health and lower costs, but our current 
        delivery system often falls short of this promise. To close 
        this gap, some employers are creating workplace-based primary 
        care clinics with great success. The Alliance is pursuing 
        ``shared-site'' clinics to help smaller employers enjoy these 
        same benefits. We are also developing new payment models to 
        encourage high-value primary care within the delivery system.

          3. Moving market share to high value providers improves value 
        by using providers who deliver good care at a lower cost. The 
        Alliance QualityPath program has used this strategy to save 
        more than $1.5 million in three years on total hip 
        replacements, knee replacements, and CT and MRI scans. 
        Hospitals and doctors apply for the program and must prove the 
        quality and appropriateness of their care on national quality 
        measures. They must also adopt practices that reduce 
        unnecessary care and agree to a lower bundled price backed by a 
        warranty. Employers encourage their employees to use these 
        providers by reducing or eliminating their out-of-pocket costs.

    To support these strategies and other employer efforts, The 
Alliance asks the Senate HELP Committee to consider five priority 
policy issues:

          1. Make timely information on health care cost and quality 
        more available so that employers and their employees can 
        understand and use the information.

          2. Repeal the Cadillac Tax.

          3. Enable employers to offer HSAs in addition to value-based 
        benefit design components, such as free access to onsite 
        clinics, and co-pay and deductible waivers for high value care.

          4. Clarify wellness rules.

          5. Maintain momentum of value-based payment policies.

    We urge Congress and the Department of Health and Human Services 
(DHHS) to continue to pursue aggressive reforms that make it easier for 
Alliance member employers, and their employees and families, to 
understand the full picture of health care cost and quality, provide 
high-value primary care in convenient settings and adopt value-based 
benefit designs and payment strategies.
                                 ______
                                 
    The Chairman. Thank you, Ms. DeMars.
    Mr. Constantine, welcome.

    STATEMENT OF DOW CONSTANTINE, EXECUTIVE OF KING COUNTY, 
                          SEATTLE, WA

    Mr. Constantine. Thank you, Chairman Alexander, Ranking 
Member Murray, Members of the Committee. Thank you for the 
opportunity to speak with you today.
    I am Dow Constantine. I am the elected executive of Martin 
Luther King County, which you would know better as the Greater 
Seattle Area. King County delivers vital regional services--
including housing, transit, criminal justice, public health--
for nearly 2.25 million people.
    King County reduced healthcare costs and also worked 
upstream to prevent those costs in the first place through our 
work as the public health provider and our early childhood 
initiative, which we dubbed ``Best Starts for Kids.''
    My written testimony provides more detail of our unique 
vantage point as both a purchaser of healthcare for our 15,000 
workers and their dependents and a provider of public health 
services.
    Our story illustrates that to succeed in moving forward 
with a more affordable, high-quality, and prevention-oriented 
health system, you need partnerships. Patients and providers. 
Management and employees. Employers and health plan 
administrators. And partnerships between the public health 
system and healthcare delivery systems.
    Managing the rising costs of employee healthcare is an 
ongoing challenge. Last year, King County spent over $235 
million on employee healthcare. In the early part of the 
century, as employers around the nation faced skyrocketing 
healthcare costs, King County responded with two key actions.
    First, we convened the region's purchasers' health plans 
and providers and jointly tackled cost and quality problems. We 
founded what is now known as the Washington Health Alliance, 
whose vital work to increase transparency this Committee heard 
about in a hearing, I believe, last month.
    Second, we approached our labor partners--and this was 
critical--the folks with whom we negotiate benefits, and 
together, we sat down and designed high-quality, lower-cost 
health plans with a local HMO that is about a third cheaper 
than our traditional plan. And we also put in place a wellness 
initiative, as Senator Murray mentioned. It was called Healthy 
Incentives, and participating employees received lower out-of-
cost--lower out-of-pocket costs.
    Over a 5-year period, we did save about $46 million, and 
our approach did earn us--and we are quite proud of this--a 
2013 Harvard Innovations in Government Award. That alone, 
though it hangs on my wall in my office even today, was not 
enough. So, by tracking data, we realized that most of the 
savings that we could yield from this first set of efforts had 
plateaued, and we wanted to do more. So we sharpened our focus 
on achieving value rather than volume and building off lessons 
from private sector leaders like Boeing.
    This year, we added a new value-based plan choice for 
employees, Accountable Health Networks. Enrollment in value-
based plans--that is the HMO that I described earlier and in 
our Accountable Health Networks--has grown from 21 percent of 
our employees in 2011 to 37 percent today, and we have a goal 
of reaching three quarters of our total employees being 
enrolled in those value-based plans within the next 5 years.
    Our new approach focuses on building an overall culture of 
health. Going beyond the typical calls to eat less and exercise 
more. Most important, we have taken a public health approach to 
employee healthcare by tailoring efforts to our diverse 
workforce.
    For example, nearly 5,000 transit employees work at King 
County. And as it turns out, compared to our other county 
workers, this group, our bus drivers, in large part, were much 
less likely to have had a recent dental checkup. Nearly one out 
of three had not visited a dentist in over a year.
    We worked with the transit union and with our dental 
carrier to design a 6-month pilot in which we are reducing cost 
sharing, going out to the bus bases where folks are working, 
offering scheduling help, and taking other steps to help our 
workers find a dentist that is right for them. This will help 
avoid not just cavities, but future costs for us and our 
employees.
    As we look ahead, I would like to highlight three areas 
where Congress' attention would help foster continued 
innovation to manage healthcare costs, very briefly.
    First, the Federal Government should continue to use its 
significant purchasing power to accelerate strategies that pay 
for value over volume and increase transparency and help all 
payers better align their efforts, focusing on the 
pharmaceutical industry in particular.
    Second, I urge you to increase investments in prevention, 
both public health and behavioral health. Ben Franklin was 
right when observed that an ounce of prevention represented the 
best value proposition.
    Finally, we ask that you work to protect the gains in 
coverage, care, and prevention of the ACA. Over time, access to 
a healthier workforce can help employers--big employers like 
King County and others across the region--better fulfill their 
missions and strengthen our competitive edge.
    I thank you so much for having this hearing today on this 
very serious topic, and I look forward to your questions.
    [The prepared statement of Mr. Constantine follows:]
                 prepared statement of dow constantine
    Chairman Alexander, Ranking Member Murray, and Members of the 
Committee, thank you for the opportunity to testify before you 
regarding innovation and the affordability of health care. It is an 
honor to be invited to participate in today's discussion.

    My name is Dow Constantine. I currently serve as the nonpartisan 
King County Executive in the state of Washington, an office I have held 
since November 2009. I previously served as a member of the state 
Legislature, and of the Metropolitan King County Council.

    King County is home to 2.2 million residents, and the County 
employs a workforce of approximately 15,000 employees to provide our 
region with such services as parks, public transit, corrections, courts 
and legal services, human services, elections, wastewater treatment, 
property tax services, records, and public health, among others. We are 
also the local government for our unincorporated communities, providing 
animal control, land use regulation, police protection, and roads 
services. Approximately 80 percent of our employees are represented by 
labor unions.
                   Commitment to a culture of health
    King County has long recognized that good health is a fundamental 
underpinning of our region's prosperity. We contribute to better 
community and individual health through many roles: we serve as the 
local public health jurisdiction, responsible for promoting and 
protecting the health of our residents; we lead the community mental 
health and substance abuse systems; and we address social determinants 
of health through our innovative work in such areas as housing, early 
childhood, transportation, economic development, and the promotion of 
equity and social justice. As the thirteenth largest employer in the 
state, King County's other key role in health is the support we provide 
to advance the physical, mental, social, and financial health of our 
workforce. We purchase health care services for employees and their 
families, foster a safe working environment, provide workplace health 
and wellness programs, take action to reduce harmful levels of work and 
life stress, and actively address racial, ethnic, and gender 
inequities.

    One of the greatest challenges we face as an employer is the high 
and rising cost of health care: we currently spend about $235 million 
per year. The high costs of health care not only take away from other 
investments we could make in our workforce in the form of wages and 
other benefits, it impedes our ability to invest in other regional 
priorities. Like most employers, King County continually seeks to 
balance the provision of a competitive benefits package to attract and 
retain employees, with the need to manage rising costs and get the most 
value from every tax dollar. These conditions have led us to become 
champions of Triple Aim \1\ approaches--both for our own employees and 
for the region as a whole--through which we strive to improve the 
patient experience of care, improve the health of the population, and 
reduce per capita health care costs.
---------------------------------------------------------------------------
    \1\  The IHI Triple Aim framework was developed by the Institute 
for Healthcare Improvement in Cambridge, Massachusetts (www.ihi.org).

    My testimony today shares highlights of how the County's innovative 
work and partnerships have evolved over the past 15 years and what we 
have learned, and calls attention to how Congress could best help us 
continue to innovate and be part of the solution to our national health 
care crisis.
                  Early innovations and their results
    In the early 2000s, health care costs were rising at three times 
the Consumer Price Index, threatening to double the cost of the 
County's self-insured medical plan in less than seven years. 
Recognizing the complexity of the problem, King County knew that it had 
little ability to influence the situation by itself. The County 
convened and founded the Puget Sound Health Alliance in 2004, a 
purchaser-led coalition which would go on to win national recognition 
for its work publicly rating the quality of regional health care 
providers, advocating for the alignment of payment systems that reward 
quality over volume, and increasing transparency. The Puget Sound 
Health Alliance later expanded its work statewide and is now known as 
the Washington Health Alliance.

    A second area of focus during this time was the work that occurred 
between King County and the labor unions that represent a majority of 
our workforce. The financial crisis we faced might have taken the 
expected adversarial route of ``who's going to get stuck with this 
bill''--but that was not the case. Instead, we saw it as a shared 
challenge, one that led us to roll up our sleeves, learn together, and 
design a set of strategies to curb costs without significant shifting 
of costs to employees or making substantial reductions in benefits. And 
in 2005, King County reached a historic agreement with labor unions to 
overhaul the medical plan design. Instead of charging premiums, the 
County offered lower out-of-pocket expenses for employees' 
participation in wellness activities under a program known as Healthy 
Incentives. Participants received a substantial reduction in out-of-
pocket expenses for taking a health risk assessment and even lower for 
participating in an action plan targeting behavior-related health 
risks. The incentive was never tied to outcomes, only to participation.

    In addition, the County built cost differentials into the benefit 
plan designs to motivate employees to choose higher quality healthcare. 
Member out-of-pocket expenses were set considerably lower for the Group 
Health Cooperative HMO plan (now Kaiser Permanente) than for the 
Preferred Provider Organization (PPO) plan. As a result, membership in 
the HMO grew by more than 8 percentage points. Group Health's care 
system not only cost less, it had the highest quality ratings in public 
reports from the Puget Sound Health Alliance measuring area providers' 
adherence to evidence-based medical practices.

    Taken together, these changes led to an estimated $46 million in 
avoided costs from 2007 to 2011.

          $6.5 million from employees electing to shift to 
        higher quality, lower cost health care plan

          $14.6 million from improved health (projected savings 
        from employees' healthier lifestyles, include a reduction in 
        smoking rate from 11 percent to 6 percent, and significant 
        weight loss) \2\
---------------------------------------------------------------------------
    \2\  Scoggins, JF, Sakumoto, KN, Schaefer, KS, Bascom, BB, 
Robinson, DJ, Whalen, CL. Short-term and Long-term Weight Management 
Results of a Large Employer-sponsored Wellness Program. JOEM. 2011, 
53(11) 1215--1220

          $24.7 million from benefit plan design changes 
        (increased employee cost sharing in the PPO plan, and lower 
---------------------------------------------------------------------------
        utilization of services that accompanied that)

    In 2013, King County received an Innovations in American Government 
award for Healthy Incentives from Harvard University's Kennedy School 
of Government.
      Expansion of value-based purchasing in employee health care
    Through the federal Centers for Medicare and Medicaid Innovation 
(CMMI), Washington State was granted a State Innovation Model Award in 
2015 to help accelerate health transformation, including payment and 
delivery system reform. Under the Healthier Washington initiative, 
their work involves testing several payment redesign strategies, 
including offering an accountable care health plan for the state's 
public employees. Early on, they shared their lessons and tools openly 
with King County, encouraging us and other purchasers, both public and 
private, to adopt a similar value-based payment model.

    King County took up this call to action, a natural next step that 
built upon our previous efforts. While enrollment in the high value 
Kaiser Permanente HMO plan was remaining steady at 30 percent over the 
years, we needed new tools that would better engage members of the PPO 
plan. With labor partners, we articulated a vision for what we hoped to 
achieve through adding accountable health networks, and learned the 
details of how our dollars would play a role in rewarding these 
integrated care systems for meeting certain quality, patient 
experience, and financial targets. Accountable Health Networks had 
become available as a product through our PPO third-party 
administrator, Regence BlueShield, and we rolled it out to employees in 
2018. To encourage employees to consider the Accountable Health 
Networks, we invested heavily in communications to explain the new 
option and help them understand all their choices. As an incentive to 
consider the new plan, a portion of the deductible was waived for the 
first year.

    Enrollment into the Accountable Health Networks exceeded our 
expectations, with 7 percent of employees electing it in 2018--about 
1,800 covered lives. This brings to 37 percent the employees now 
enrolled in a value-based plan (that is, either Kaiser Permanente or 
the Accountable Health Network), and we have a target for 2019 to move 
this to 44 percent.

    The Accountable Health Network is lower cost both for the County 
and for our employees compared to the traditional PPO. Over a two-year 
period, a 10 percent enrollment shift into the accountable health plan 
is expected to yield about a half million dollars in savings. Most 
important, we are contributing to the needed infrastructure and 
clinical process changes that will help provider systems reach their 
goals to deliver more efficient, effective, and prevention-oriented 
care over time.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Looking ahead, our long-range goal is for 80 percent of our health 
care payments to be linked to quality and value within the next five 
years. Strategies we intend to explore in the years ahead include 
incorporating the use of Centers of Excellence and bundled payments, 
increasing the availability and use of telehealth services, and 
focusing more on intensively on driving improved access to and the 
quality of mental health services. Network and plan design strategies 
that will help reduce the use of unnecessary and low-value care are 
other key areas of interest, especially in light of recent information 
regarding the extent of waste here in Washington. \3\
---------------------------------------------------------------------------
    \3\  First Do No Harm: Calculating Health Care Waste in Washington 
State. Washington Health Alliance. February 
2018.www.wacommunitycheckup.org
---------------------------------------------------------------------------
   Modernizing the workplace health promotion and well-being strategy
    Over 2017--2018, we also evolved the Healthy Incentives program, 
removing the 10-year-old incentive structure that linked participation 
to one's out-of-pocket costs in their health plan. Our commitment to 
continuous improvement led us to recognize that the approach was no 
longer producing optimal value either in terms of avoided costs, or for 
our employees in terms of supporting their overall well-being. We were 
increasingly mindful that a segment of our employees--especially those 
in lower socioeconomic groups--were facing barriers to participation 
and thus paying more for their health care than other employees.

    We are now shifting to a more inclusive approach to how we invest 
in our employees, widening our lens to embrace the important ways that 
our larger practices as an organization--such as how work is organized, 
our leave policies, support for financial literacy, our equity and 
social justice efforts--contribute to a culture that affects health and 
well-being. Emerging work from the Robert Wood Johnson Foundation and 
Global Reporting Initiative has begun to more clearly document the 
positive, proven health and business outcomes associated with specific 
business practices, and the value of building a culture of health for 
business. \4\
---------------------------------------------------------------------------
    \4\  A Culture of Health for Business Stakeholder Consultation 
Draft. August 2018. Accessed 9-9-2018. www.globalreporting.org/
cultureofhealthforbusiness

    As we modernize our approach to workplace health programs and 
policies, we are also taking a lesson from the public health playbook. 
While the King County region on average enjoys good health, there are 
significant differences by place, race, and income. In King County, 
life expectancy varies greatly by neighborhood, with gaps of more than 
10 years between neighborhoods with the highest and lowest life 
expectancies. \5\ An understanding of the extent of these disparities 
led public health partners to foster a much more tailored approach to 
working with communities to support them in their health improvement 
goals.
---------------------------------------------------------------------------
    \5\  King County Community Health Needs Assessment 2018/2019. 
Retrieved 9-9-2018 from Public Health--Seattle & King County, Community 
Health Indicators. www.kingcounty.gov/health/indicators

    Similarly, we find that health concerns and opportunities vary 
greatly across subgroups of our employees. In a recent study regarding 
the health of low socioeconomic status employees, researchers found 
that many employers are reluctant to discuss anything related to 
employee socioeconomic status, income, or education, including how 
employees in different job roles might experience different barriers. 
They noted that ``at a time when companies are investing increasing 
amounts in workplace health promotion, company reluctance to consider 
differences between groups of employees is counterproductive for their 
efforts to improve employee health.'' \6\
---------------------------------------------------------------------------
    \6\  Parrish, Amanda T., MA; Hammerback, Kristen, MA; Hannon, Peggy 
A., PhD, MPH; Mason, Caitlin, PhD; Wilkie, Michelle N., BA; Harris, 
Jeffrey R., MD, MPH, MBA. Supporting the Health of Low Socioeconomic 
Status Employees: Qualitative Perspectives From Employees and Large 
Companies. Journal of Occupational and Environmental Medicine: July 
2018--Volume 60, p. 577-583.

    King County, by contrast, is leaning in to better understand and 
respond to these differences. An example of one way we're being more 
responsive to the diversity of our workforce is the creation of a 
workplace health improvement fund to which employee teams may apply for 
modest funds for projects to strengthen health, safety, and well-being 
in their worksites. One of the hallmarks of successful workplace health 
promotion is the extent to which employees are involved in its 
development, and have a stake in its design and direction. \7\ Another 
example is the work underway with our transit employees. We realized 
that, compared to other County workers, this group was much less likely 
to have had a recent dental check-up--nearly 1 out of 3 had not visited 
a dentist in the past year--a situation which can lead to more costly 
problems down the road. So we worked with the transit union ATU 587 and 
our dental carrier, Delta Dental, to co-design a six-month pilot in 
which we are reducing cost sharing, offering scheduling help at bus 
bases, and taking other steps to help workers find a dentist that's 
right for them. See Attachment A for an example of a poster we posted 
at bus bases.
---------------------------------------------------------------------------
    \7\  Workplace Health Model, Centers for Disease Control and 
Prevention, U.S. Department of Health and Human Services. Accessed 9-9-
2018 https://www.cdc.gov/workplacehealthpromotion

    Finally, we are taking steps to increase the extent to which our 
employees are active participants in their own care and able to 
understand how health coverage works. We want our employees to be 
better shoppers of health care, to establish a primary care provider 
relationship, to feel confident in talking with their care team, to be 
an active participant in decisions that affect them, and to avoid low 
---------------------------------------------------------------------------
value and unnecessary care.

    In the near term, we anticipate returns on this investment will 
manifest as more engaged employees, reduced stress, greater 
productivity and retention, and more regular engagement in preventive 
and primary care services. Will it impact health care costs and 
outcomes? Taking the long view, we would expect that this more 
comprehensive, tailored, and upstream focus will, over time, yield 
benefits in health improvement and contribute to a reduction in health 
care cost growth in concert with larger community efforts to improve 
health.
Driving greater value in the care for low-income residents and those in 
                          the Medicaid program
    In addition to reforming how we pay for employee health services, 
King County is also driving pay-for-value innovations in systems of 
care that serve low-income and vulnerable residents of King County.

    For example, King County is an active partner with the state of 
Washington in the Medicaid Transformation project, a five-year 
agreement between the state and federal government under a Section 1115 
waiver through which the state will receive up to $1.5 billion to 
restructure, improve, and enhance the Medicaid program. Early on, King 
County convened local stakeholders and helped lay what is now a strong, 
collaborative foundation for Medicaid Transformation to occur in our 
region, through the HealthierHere regional partnership.

    With local tax revenues, too, we are challenging ourselves to move 
to new value-based payment models. One such recent innovation is the 
creation of a ``Pay for Success'' model that will allocate $1.4 million 
a year in incentive payments to mental and substance use treatment 
agencies that provide outpatient treatment on demand for people in 
need. King County partnered with the Ballmer Group and Third Sector 
Capital Partners to design the innovative contracting arrangement and a 
rigorous evaluation; the pilot stemmed from a 2016 recommendation of 
the regional Heroin and Prescription Opiate Addiction Task Force to 
develop treatment on demand capacity.

    Across King County's lines of business, we are innovating to make 
health care more affordable and sustainable. We're using every 
available lever--how we purchase health care for employees, how we 
engage in Medicaid payment reform, and how we purchase services for 
low-income residents--to accelerate this.
                            Lessons learned
    Our involvement in health system transformation over the past 15 
years has shed light on three factors that have been most critical to 
supporting innovation.

        1. Work in coalition and align efforts. We have seen the 
        benefits of working in coalition at every step of our journey. 
        As an active member of Washington State's Healthier Washington 
        initiative, we come to the table with a wide range of public 
        and private entities- insurers, employers, health departments, 
        health systems, and others--to learn from each other, find 
        common ground, align our efforts, and commit to actions that 
        are mutually reinforcing. For example, when King County 
        negotiates contracts with health plans, we align with the 
        state's common measure set, a practice which helps avoid 
        unnecessary increases in administrative burden. Similarly, our 
        coalition approach to working with labor unions on benefit 
        design has remained thoughtful and fruitful over the years. In 
        monthly committee meetings, we monitor actuarial reports 
        together, review quality data from the Washington Health 
        Alliance, and co-design workplace health promotion activities, 
        all informed by a commitment to achieving the Triple Aim.

        2. Commit to continual improvement. King County embraces Lean 
        to help us solve problems. We respect the people who do the 
        work as the sources of continuous improvement, and we strive to 
        eliminate waste and deliver better value for the residents and 
        communities of King County. We apply these principles as a 
        purchaser of health care, working actively to understand the 
        products we are buying, pushing for greater transparency, and 
        working to eliminate waste. We also apply this in workplace 
        health promotion efforts. Last year, we reached out to and 
        heard from over 2,000 employees in the process of designing the 
        next generation of our well-being strategy. They had a lot to 
        say about what would better support their well-being, and 
        they're among the most important experts we should be listening 
        to.

        3. Work both downstream and upstream. Much of the current 
        dialogue on ways to address health costs focuses on the health 
        care system itself, such as its degree of waste, the variation 
        in prices and quality, and ways to improve care for those with 
        costly, complex conditions. Innovations in these areas are 
        certainly critical, and King County has been among those 
        working to change incentives and practices for the better. But 
        even as we do that work, we are mindful that much of our 
        spending is still for the treatment of physical, mental health, 
        and substance use conditions that are largely preventable. 
        Until collectively we pay even more attention to what's 
        happening upstream, we won't be able to truly impact downstream 
        health care costs over the long term. King County is an active 
        innovator in upstream efforts, investing in everything from 
        early childhood supports through the Best Starts for Kids 
        initiative, to mental health promotion and substance abuse 
        prevention, to public health programs, to workplace health 
        promotion. The evidence of cost effectiveness is strong and 
        growing. Yet at a time when more than 17 percent of the U.S. 
        Gross Domestic Product is spent on health care, only 3 percent 
        of the government's health budget is spent on public health 
        measures. \8\
---------------------------------------------------------------------------
    \8\  For the Public's Health: Investing in a Healthier Future. 
Institute of Medicine. April 2012.
---------------------------------------------------------------------------
              How Congress can help accelerate innovation
    We recommend three areas of attention from Congress that will be 
helpful in reducing the growth of health care costs, and enabling 
continued innovation and engagement at the local level from entities 
such as King County.

          First, lead the way in value-based payment, increased 
        transparency, and efforts to reduce waste in health care. 
        Purchasing power is greatest at the federal and state levels, 
        and action here is critical to accelerate strategies that pay 
        for value, such as accountable care organizations and bundled 
        payments--and to help assure that payers across Medicare, 
        Medicaid, and the employer-based system are well aligned. We 
        have experienced firsthand the way that federal investments in 
        the Centers for Medicare and Medicaid Innovation and its 
        partnership with states has spread to King County, allowing us 
        to more easily align our efforts with others. Looking ahead, 
        Congress should provide leadership to tackle one of the 
        thorniest problems we face--the spiraling costs of specialty 
        drugs and continued lack of true transparency in the 
        pharmaceutical industry.

          Second, support a robust prevention and public health 
        system at the local, state, and federal levels. Public health 
        systems work upstream to promote health and prevent disease, 
        addressing the root causes of poor health and health 
        inequities. It's a great value buy, with evidence that it 
        offers a positive return on investment. \9\ As value-based 
        purchasing in health care begins to create stronger incentives 
        to keep people healthy, there will be new opportunities and 
        needs for greater partnerships between public health systems 
        and clinical care systems. The underfunded prevention and 
        public health system needs a deeper investment in order to play 
        these and other critical roles that stand to help bend the cost 
        curve over time.
---------------------------------------------------------------------------
    \9\  McCullough JM . ``The Return on Investment of Public Health 
System Spending,'' AcademyHealth. June 2018.

          Third, protect the gains in coverage, care, 
        prevention, and innovations that the Affordable Care Act has 
        ushered in. Here in King County, the uninsured rate dropped 
        from 12 percent to 5.5 percent since new insurance options 
        became available. Over time, access to a healthier workforce 
        can help employers like King County and others across the 
        region better fulfill their missions and strengthen their 
        competitive edge.
        
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]        
        
 Attachment A: Poster placed in bus bases to highlight dental coverage 
                    benefits for transit employees.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 ______
                                 
                 [summary statement of dow constantine]
                               Background
    King County delivers vital regional governmental services including 
human services, transit, elections, wastewater treatment, public 
health, and criminal justice for nearly 2.2 million people. King County 
is the most populous county in Washington State and with 15,000 
employees, it is the state's thirteenth largest employer.
                         Summary of key points

    Our story illustrates that to succeed in moving toward a more 
affordable, high quality, and prevention-oriented health system, you 
need partnerships--between patients and providers, between management 
and employees, between employers and health plan administrators, and 
between the public health and the health care delivery systems.

    Together with labor partners, King County designed a high quality, 
lower cost health plan with a local HMO that is about one third cheaper 
than the traditional PPO plan. Many employees chose the HMO plan 
because it was substantially cheaper and offered high quality care. A 
wellness initiative was created where participation further rewarded 
employees with lower-out-of-pocket costs. Over a five year period, King 
County saved $46 million; this approach earned the 2013 Harvard 
Innovations in American Government award.

    When gains from this early work ceased, King County renewed its 
work to pay for value instead of volume, building off lessons learned 
from private sector leaders like Boeing, as well as other governmental 
agencies.

    This year King County added a new value-based plan choice for 
employees--accountable health networks. As a result, enrollment in 
value-based plans has grown from 21 percent of employees in 2011, to 37 
percent today. King County also overhauled its wellness program, 
disconnecting participation from what employees pay for their coverage. 
The new approach focuses on building an overall culture of health, 
going far beyond the typical calls to exercise more and eat better. 
Most important, King County takes a public health approach to employee 
healthcare by tailoring efforts to better respect and respond to the 
diversity of its workforce.
     How Congress can help improve affordability through innovation
        1. Continue to use your significant purchasing power to 
        accelerate strategies that pay for value over volume, increase 
        transparency, and help all payers better align efforts.

        2. Increase investments in upstream public health and 
        behavioral health strategies.

        3. Protect the gains in coverage, care, and prevention the 
        Affordable Care Act ushered in.
                                 ______
                                 
    Senator Murray. [Presiding] Thank you.
    Dr. Perlin.

    STATEMENT OF JONATHAN B. PERLIN, M.D., PH.D., M.S.H.A., 
   M.A.C.P., PRESIDENT, CLINICAL SERVICES AND CHIEF MEDICAL 
             OFFICER, HCA HEALTHCARE, NASHVILLE, TN

    Dr. Perlin. Good morning. Let me also thank the Committee 
and staff for the privilege of being here to testify this 
morning and just might take a personal privilege of thanking 
both Chairman Alexander and Ranking Member Murray for their 
statesman-like leadership in helping us move forward in 
healthcare.
    I am particularly appreciative of the Chairman's 
extraordinary leadership and representation of Tennessee and 
will ever be indebted to Senator Murray for her championship of 
veterans, VA, and so I will mention our work together. So thank 
you for that.
    I am Dr. Jon Perlin and have the privilege of serving now 
as president of Clinical Services and chief medical officer of 
Nashville, Tennessee-based HCA Healthcare. With nearly 2,000 
sites of care, around about 250,000 colleagues, we include 
84,000 nurses, 30,000 allied health professionals, and 
approximately 45,000 affiliated physicians. Together, we have 
the privilege of providing care through more than 30 million 
patient encounters every year.
    I am delighted to be here with you today to discuss how 
innovation can help improve the value of healthcare. At HCA, we 
believe in math, science, and evidence.
    First, the math. Value is often defined as outcomes divided 
by cost, outcomes specifically in areas of quality and safety. 
So value improves when quality and safety increase, or costs 
drop, or both occur. And we offer three examples of innovation 
in HCA that not only improves patient outcomes and saves lives, 
but through publication and sharing of our innovations also 
improves value around the nation and around the world.
    Between the 1970s and early 2000s, in the first example, 
medical intervention shortened the length of pregnancy by about 
10 days. Concerns about elective pre-term delivery at less than 
39 weeks led HCA to partner with the March of Dimes to study 
this issue.
    In over just 90 days, 27 HCA hospitals examined 18,000 
deliveries. In using admission to the newborn intensive care 
unit as a proxy for potentially avoidable complications like 
respiratory distress, we found that the risk for complications 
was 4 times greater at 37 versus 39 weeks and over twice as 
great at 38 versus 39 weeks.
    Having created this evidence, we felt obliged to use it. 
Through a series of studies, we defined a now industry-standard 
39-week hard stop, which sanctions obstetricians for elective 
pre-39-week delivery. This became the basis of CMS' Strong 
Start for Healthy Mothers and Newborns program. And this 
fundamental change in practice is estimated to have saved 
Medicaid over $1 billion annually and countless babies and 
families from cost and distress. Good quality is always more 
efficient.
    In the second example that Chairman Alexander mentioned, we 
addressed the epidemic of avoidable hospital-acquired 
infections, infections that affect almost 5 percent of 
hospitalized patients and claim 80,000 lives annually. About 
one quarter of these infections are from forms of staph 
bacteria, including the highly drug-resistant MRSA. Colleagues 
at AHRQ, CDC, and Harvard asked if we could the HCA hospital 
platform to define which among three competing best practices 
was truly best in preventing these infections.
    In 18 months across 43 hospitals, enrolling 75,000 
patients, we discovered that an antiseptic sponge bath and 
antibiotic nose drops reduced potentially fatal bloodstream 
infections by 44 percent and MRSA infections specifically by 37 
percent. And a follow-on study done outside of HCA demonstrated 
that for every thousand patients treated this way, U.S. 
healthcare saved $171,000. Again, safety is more efficient.
    This HELP Committee held a hearing in conjunction with 
World Sepsis Day in September of 2013. You inspired us to do 
better for patients with this condition, in which overwhelming 
infection turns the body's immune system against itself. Sepsis 
is the 11th leading cause of death in the country, 9th in 
American hospitals and 3rd among all intensive care units. For 
every hour of delayed diagnosis, mortality increases by 4 to 7 
percent. Time is life.
    Using data science to examine the big data product of 
interoperable health information, we now have algorithms to do 
what no clinician can do--monitor labs and other data 24/7, 
365, for every patient in 164 HCA hospitals. The system 
identifies patients with sepsis more accurately than the best 
clinicians and excludes patients without sepsis twice as 
accurately.
    While we have not yet done a formal financial assessment of 
how less care and shorter hospitalization generates lower cost, 
we can tell you this. We are saving lives through this big data 
and predecessor strategy. In fact, to date, these improvements 
have saved over 5,500 lives for patients who would have 
tragically succumb to sepsis.
    Let me close by briefly mentioning an exciting recently 
announced initiative. HCA joined with a number of other major 
healthcare organizations collectively representing about 500 
hospitals to found Civica Rx, a new, not-for-profit generic 
drug company that addresses shortages and high prices of life-
saving medications.
    Civica Rx has identified 14 important generic drugs that it 
will produce and in many instances really lower prices for 
generic drugs for hospitals to a fraction of their current 
costs. This can save patients and healthcare systems hundreds 
of millions of dollars every year, and we believe that this 
initiative will result in more predictable supplies of 
essential generic medications, helping ensure patient needs 
come first in the generic drug marketplace.
    HCA is leading additional initiatives in infection 
prevention, timely identification of cancer patients, 
automating human labor with artificial intelligence tools, and 
sorting laboratory tests more carefully, to provide better care 
at lower cost.
    I look forward to discussing those activities with you, and 
we thank you again for the privilege of testifying today and 
for your leadership in fostering improvement in healthcare 
value through innovation.
    Thank you.
    [The prepared statement of Dr. Perlin follows:]
                prepared statement of jonathan b. perlin
    Chairman Alexander, Ranking Member Murray and Members of the 
Committee, I am Dr. Jonathan Perlin, and I have the privilege of 
serving as the President of Clinical Services and Chief Medical Officer 
of Nashville, TN-based HCA Healthcare. Our organization includes 179 
hospitals, 135 ambulatory surgical centers, 121 urgent care centers, 
and more than 1,200 additional sites of service. Our ranks number 
almost 250,000 colleagues, including 84,000 nurses, 30,000 allied 
health professionals and approximately 43,000 affiliated physicians. 
Together, we have the privilege of providing care through more than 30 
million patient encounters every year.

    I am delighted to be here with you today to discuss how innovation 
can help improve the value of healthcare. At HCA, we believe in math, 
science and evidence. First the math: Value is often defined as quality 
and safety divided by cost. Value improves whenever quality and safety 
increase, costs drop, or both occur.

    As for the science and evidence, safety and quality are always most 
efficient. Every breach of safety (like an avoidable infection) or 
negative variation in quality (like ordering the wrong test) is not 
only hurtful to the patient, but inefficient. This relationship is so 
obvious in manufacturing. If rework is required, flaws in the 
manufacturing process not only erode quality, they erode efficiency and 
drive avoidable cost.

    Good management means looking for opportunities to improve value 
where the science provides evidence of a known best practice. 
Innovation means using science to discover best practices when the 
answer is not known. Let's look at three examples of innovation in HCA 
that are not only changing practice for our patients, but through 
publication and sharing our innovations, are improving value for 
patients around the nation and the world.

    Between the 1970's and the early 2000's, medical interventions 
shortened the length of pregnancy by about 10 days. Babies are pretty 
robust, so no hospital, let alone an individual obstetrician, 
appreciated differences in outcomes between 37, 38 or full-term, 39-
week pregnancy. That said, there were some concerns that maybe there 
really was a difference.

    Because HCA has the privilege of delivering over 200,000 babies a 
year, the March of Dimes asked to partner with us to study the issue. 
Over 90 days, at 27 HCA hospitals, we looked at 18,000 deliveries. 
Using admission to the Newborn Intensive Care Unit as a proxy for 
potentially avoidable complications (such as respiratory distress), we 
found that the risk for complications was four times greater at 37 
versus 39 weeks and over twice as great at 38 than 39 weeks.

    Having created this evidence, we felt the obligation to use it. In 
a series of following studies, we defined the now industry-standard, 
39-week ``hard stop,'' which sanctions obstetricians for elective, pre-
term delivery. This, in turn, became the basis of the CMS ``Strong 
Start for Healthy Mothers and Newborns'' program. This fundamental 
change in practice is estimated to save the Medicaid program over a 
billion dollars annually. Good quality is more efficient.

    Let's turn our attention to the United States epidemic of avoidable 
hospital-acquired infections. This epidemic affects almost five percent 
of hospitalized patients or over two million people annually. 80,000 
patients pay the ultimate price, and that toll is more than the annual 
mortality of breast cancer, car accidents and HIV combined. By the way, 
about one quarter of these infections are due to forms of the staph 
bacteria, including the highly drug-resistant ``methicillin resistant 
staph aureus,'' known as MRSA.

    After demonstrating how our initial approach reduced such 
infections in HCA to one third lower than expected, colleagues at AHRQ, 
CDC and Harvard asked if we could again use the HCA platform of 
hospitals to find out which among three competing ``best practices'' 
was truly best. In 18 months, across 43 hospitals, we enrolled nearly 
75,000 patients and discovered that the practice of an antiseptic 
sponge bath with antibiotic nose drops reduced potentially fatal MRSA 
infections by 37 percent and all bloodstream infections by 44 percent. 
A follow-on study demonstrated that for every 1,000 patients treated 
this way, the health system saved $170,000. Safety is more efficient.

    Let me offer one final clinical example--improving care for 
patients with sepsis. This committee held a hearing in conjunction with 
World Sepsis Day, September 2013. You inspired us to do better for 
patients with this condition in which overwhelming infection turns the 
body's immune system against itself. Sepsis is the 11th leading cause 
of death in the country, 9th in hospitals, and 3rd among all intensive 
care units. Unfortunately, for every hour of delay in diagnosis, 
mortality increases by an additional four to seven percent. Time is 
life.

    Using data science to examine the ``big data'' product of 
meaningful use, we now have algorithms that monitor every patient in 
every hospital that's been part of HCA for more than a year. This 
system identifies patients with sepsis as accurately as the best 
clinicians and excludes patients without sepsis twice as accurately. It 
gives new clinicians a support system that can make them as good as the 
best clinicians, and it does what no clinician can do; it monitors all 
the relevant labs and other data 24x7x365. While we haven't yet done a 
formal financial assessment of how less care and shorter 
hospitalizations generate lower costs, what we can tell you is that 
this algorithmic system and its predecessor strategy have saved more 
than 5,500 lives.

    Science provides the evidence that innovation is a central tool for 
higher quality and safety at lower cost. In turn, it underpins the math 
that we join with you in seeking for higher-value healthcare.

    Let me close by briefly mentioning an exciting, recently announced 
initiative that HCA is a part of: HCA joined with a number of other 
major health care organizations, that collectively represent about 500 
U.S. hospitals, to found Civica Rx--a new, not-for-profit generic drug 
company that will help patients by addressing shortages and high prices 
of life-saving medications. Civica Rx has identified 14 important 
generic drugs as its initial focus, which it will either directly 
produce or subcontract to reputable manufacturers. In many instances, 
prices for generic drugs used in hospitals can be reduced to a fraction 
of their current costs. This can save patients, and the healthcare 
systems that care for them, hundreds of millions of dollars each year. 
We believe this initiative will result in lower costs and more 
predictable supplies of essential generic medications, helping ensure 
that patient needs come first in the generic drug marketplace.

    HCA Healthcare is leading additional initiatives in infection 
prevention, timely identification of cancer patients, automating human 
labor with artificial intelligence tools, and stewarding laboratory 
tests more carefully that result in better care at lower cost. I look 
forward to discussing those with the Committee.

    Thank you for both the privilege of testifying today and for your 
leadership in fostering improvement in healthcare value through 
innovation.
                                 ______
                                 
               [summary statement of jonathan b. perlin]
    Value is often defined as quality and safety divided by cost. Value 
improves when quality and safety increase, costs drop, or both. We 
offer three examples of innovation in HCA Healthcare that not only 
improve outcomes and save lives, but through publication and sharing 
our innovations, improve value around the nation and the world.

    Between the 1970's and the early 2000's, medical interventions 
shortened the length of pregnancy by about 10 days. Concerns about pre-
term delivery at less than 39 weeks led HCA to partner with the March 
of Dimes to study the issue. Over just 90 days, 27 HCA hospitals 
examined 18,000 deliveries. Using admission to the Newborn Intensive 
Care Unit as a proxy for potentially avoidable complications (such as 
respiratory distress), we found the risk for complications was four 
times greater at 37 versus 39 weeks and over twice as great at 38 than 
39 weeks.

    Having created this evidence, we felt the obligation to use it. 
Through a series of studies, we defined the now industry-standard 39-
week ``hard stop,'' which sanctions obstetricians for elective, pre-39 
week delivery. This became the basis of the CMS ``Strong Start for 
Healthy Mothers and Newborns'' program. This fundamental change in 
practice is estimated to save Medicaid over a billion dollars annually 
and countless babies and families from cost and distress. Good quality 
is more efficient.

    The epidemic of avoidable hospital-acquired infections affects 
almost five percent of hospitalized patients, and claims 80,000 lives 
annually. About one quarter of these infections are due to forms of 
staph bacteria, including the highly drug-resistant ``MRSA.''

    Colleagues at AHRQ, CDC and Harvard asked if we could use HCA 
hospitals to find which among three competing ``best practices'' was 
truly best in combating these infections. In 18 months, across 43 
hospitals, we enrolled nearly 75,000 patients and discovered that an 
antiseptic sponge bath with antibiotic nose drops reduced potentially 
fatal MRSA infections by 37 percent and all bloodstream infections by 
44 percent. A follow-on study demonstrated that for every 1,000 
patients treated this way, U.S. healthcare saved $170,000. Safety is 
more efficient.

    The HELP Committee held a hearing in conjunction with World Sepsis 
Day, September 2013. You inspired us to do better for patients with 
this condition in which overwhelming infection turns the body's immune 
system against itself. Sepsis is the 11th leading cause of death in the 
country, 9th in hospitals, and 3rd among all intensive care units. 
Unfortunately, every hour of delayed diagnosis increases mortality by 
an additional four to seven percent. Time is life.

    Using data science to examine the ``big data'' product of 
interoperable health information, we now have algorithms that do what 
no clinician can: Monitor labs and other data 24x7x365 for every 
patient in 164 HCA hospitals. This system identifies patients with 
sepsis as accurately as best clinicians and excludes patients without 
sepsis twice as accurately. While we haven't yet done a formal 
financial assessment of how less care and shorter hospitalizations 
generate lower costs, we can tell you this algorithmic system and its 
predecessor strategy have saved more than 5,500 lives.

    HCA Healthcare is leading additional initiatives in infection 
prevention, timely identification of cancer patients, automating human 
labor with artificial intelligence tools, stewarding laboratory tests 
more carefully and joining with other health systems in the Civica Rx 
initiative to less expensively produce life-saving generic medications 
that are in short supply. These efforts result in better care at lower 
cost.
                                 ______
                                 
    The Chairman. [Presiding] Thank you, Dr. Perlin.
    We will now go to a round of 5-minute questions by 
Senators. We have a briefing--a classified briefing--at 11:00 
a.m., which many of us hope to go to, but I think we have time 
for everyone to ask questions.
    We will begin with Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    Thank you for your comments, your testimony this morning 
and for your leadership in various fronts around the country.
    Some very good suggestions. I think there is some general 
applicability throughout all of this. As my colleagues know, my 
lens in this Committee really tends to focus on access to care 
in rural areas. And so, I would like to just present to each of 
you what you have shared with us is good, but is it workable in 
a place that is highly rural, where there is very little 
competition, where access to an MRI is not possible in your 
community and perhaps not even in your region? And so, the 
effort to gain access to many of the things that others might 
just take for granted are limited.
    I know, Dr. Gross, you are in Florida. Ms. DeMars, you are 
kind of all over the country. We have got Tennessee and King 
County. You have got two or three times more people in King 
County than we have in our entire state.
    Can you share with me how what you have learned can also be 
applicable in high-cost, very low-population areas where we 
simply do not have competition, or is it an entirely different 
model? We have had hearings in this Committee that are more 
specific to rural healthcare, but share with me what we can 
learn from you as applied to rural access.
    Dr. Gross. Mr. Chairman? So, although I am in southwest 
Florida, we are about 45 minutes from a critical access rural 
hospital. And that is actually the area that we partnered with 
to get bundled surgical pricing. And what that has been able to 
do is for us to drive elective surgical volume into this 
critical access hospital that would have normally left this 
region.
    They are actually starting to see inbound--so even a 10 
percent increase in margin for a hospital like this is actually 
huge. I mean, it is the difference between staying open and 
closing of certain wards.
    But we have restructured--worked with them to restructure 
their health benefits programs so that they are actually--if 
their employees sign up for our program, not only did they see 
a 20 percent reduction in their premiums, but they will 
actually lower--eliminate out-of-pocket costs. And what we are 
seeing is--restructuring, we actually saved that program about 
$800,000. We are projected to save that program about $800,000 
in the first year.
    Now if you could transition that savings to the county, the 
school board, the local prison employees, that has the ability 
to save that local community millions of dollars in annual 
costs that can go towards higher wages, can go towards new 
school facilities, or whatever. But instead of spending the 
money and wasting the money on unnecessary healthcare services, 
to provide healthcare better, with a solid foundation in 
primary care, is a way for the rural practices to actually save 
money.
    Using our approach, we have actually found a way. Because 
it is an under-served community. You cannot get fee-for-service 
practices to survive in this environment, but our membership 
requires a lower barrier to survive in this model. So we 
actually are not only going to succeed out there, we are going 
to thrive out there.
    Senator Murkowski. Others?
    Dr. Perlin. Thank you, Senator Murkowski, for a great 
question.
    One of the areas that we think applies greatly to intensely 
rural areas and critical access hospitals, the use of 
telehealth services. HCA has over 200 telehealth programs, and 
we have been able to stabilize essential critical access 
hospitals by providing telehealth support.
    For example, a stroke patient who does not need transfer 
can stay there and be managed--managed with some guidance, but 
a patient who really needs some intervention is the one that, 
when conditions are possible, can be airlifted out. And of 
course, we appreciate your support of our Alaska Regional 
Hospital, and these are the sorts of programs that we think 
really innovation can help to improve healthcare and value.
    Senator Murkowski. Good, thank you.
    Ms. DeMars. Senator Murkowski, the addition I would make is 
that it is in rural areas I think even more important for the 
buy side of the market, the purchasers, to get together and be 
able to speak with one voice with the providers that are in 
that market about what is important to them.
    An example that I can think of from our region is a 
relatively rural county that did not have urgent care services. 
The purchasers, the employers in that market, approached the 
local hospital to discuss the availability, making available an 
urgent care center, and they worked together to establish that 
capacity in that community.
    Senator Murkowski. Good, thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murkowski.
    Senator Murray.
    Senator Murray. Thank you very much, and thank you to all 
of our panel. It is really good testimony this morning. 
Appreciate you all being here.
    Executive Constantine, let me start with you. Thank you for 
explaining the series of steps that King County has taken over 
the last decade to control costs. I was especially interested 
in the work you have done to engage employees in these efforts, 
both the design and the cost containment programs.
    You testified you view your workers as the source of 
continuous improvement, and you have to employ multiple 
strategies to engage workers in a variety of roles, like the 
transit workers you mentioned, who can be the hardest to reach. 
Tell us a little bit more about how King County engages workers 
themselves and maybe what lessons that your experience can 
teach other employers.
    Mr. Constantine. When I came to office, we were in the 
depths of the recession, and there was a lot of pressure to cut 
costs and balance the budget. And we were confronted with this 
choice between either balancing the budget on the backs of the 
employees, including a struggle over who was going to be handed 
the inflated healthcare bill, or working with our employees to 
take on those cost drivers. And we chose to do that.
    We sat down with our employees. We had to build trust 
around our intentions to really work with them to do that, and 
we succeeded. Our employees understood that the system we were 
all using was not either delivering the best health outcomes 
nor was it efficient from a cost perspective. And so, they 
worked with us to create a set of incentives and a plan in our 
local HMO that would provide better service for the workers at 
less cost to them, as well as to the taxpayer.
    The beginning of that has led to further advances where we 
were able to have that trust with our employees, where this is 
not a zero-sum game, as between the employer and the employee, 
but there is this external challenge that we have to face 
together. And it has been very successful, and we have had the 
opportunity to keep building on that. And now as we move toward 
our Accountable Health Network, we are using that same trust we 
built with our employees to create new options for them, high-
value, lower-cost options that are delivering objectively 
better results.
    One of the additional things, Senator, that we learned is 
that we cannot treat all employees equally, just as we cannot 
treat a very diverse public equally. In our public health work, 
we recognize that subpopulations will have different challenges 
and different outcomes. We are taking that same public health 
approach and applying it to our employees and understanding 
that we have to approach bus drivers differently than we 
approach those who work in a white-collar desk job if we are 
going to have everyone have better health outcomes.
    Senator Murray. That has worked fairly well for you?
    Mr. Constantine. It is working well, and of course, it is a 
continuous improvement process, one in which we are engaging 
all of our employees and the unions that represent them as our 
strong partner.
    Senator Murray. I think that is a really strong point that 
your workers need to be involved in it. Otherwise, they will 
feel you are doing something bad to them.
    Mr. Constantine. That is exactly correct.
    Senator Murray. Good. Dr. Perlin, as we have heard from all 
of our witnesses today, and also in our previous hearings, the 
high cost of care hurts patients across our healthcare system. 
Along with other hospital organizations, HCA recently helped 
found Civica Rx. You mentioned it in your testimony. It is, as 
I understand it, a not-for-profit drug company that 
manufactures generic drugs so that hospitals can avoid drug 
shortages and overpaying for older drugs when manufacturers 
spike their costs.
    But one fact that was very clear to me in all of our 
hearings is that all stakeholders, all of them, need to play a 
role in bringing costs down. So I am very interested in Civica 
Rx and want to ask you how you are now going to use the savings 
that have been generated by that to improve affordability and 
quality?
    Dr. Perlin. Well, Ranking Member Murray, thank you very 
much for the question about Civica Rx. It is really an effort 
of a number of different partners in healthcare, as you 
mentioned. It is not only the healthcare providers, but three 
foundations that are joining as well.
    While it was a great question to ask how those savings may 
be used, I can mention this, is that when I looked back on the 
data about the cost inflation on hospital costs for the past 
few years, 2015, 38 percent of the cost increases of hospital 
care was directly attributable to the increase in the cost of 
pharmaceuticals. So this is one of the areas where I think by 
getting control over the cost of pharmaceuticals, we get better 
handle on the cost of healthcare overall.
    All that said, as you might imagine, there is some 
substantial work to be done in starting up a new entity to 
produce drugs that have the appropriate FDA regulatory 
approvals, whether they are directly manufactured or 
subcontracted. And so, we look forward to actually getting from 
concept to production and----
    Senator Murray. What is the timeline on that?
    Dr. Perlin. I am not sure exactly what the timeline is. I 
can find out when the first drug should be available, in 
written comment after the hearing.
    Senator Murray. Okay, thank you. And I would love to hear 
that. I think it is a really interesting concept.
    Dr. Perlin. Thank you.
    Senator Murray. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murray.
    Dr. Gross, let me make sure I understand this. So if I am 
in your area, for $60 a month for an adult, $25 for one child, 
$10 for each additional child, I can get your coverage. So that 
sounds like a family--the annual cost might be a $1,000, $1,200 
a year, something like that.
    Let me focus in on exactly what you get for that. Let me 
compare it. I visited a Federally Qualified Community Health 
Center in Lewis County, Tennessee, pretty impressive place. The 
doctors there told me that about--they could handle about 90 
percent of what walked in the door. You know, they are not open 
at night, but they are open 7:00 in the morning to 7:00 or 8:00 
at night. It is clean. They got a couple of doctors, nurses.
    The other 10 percent, they then refer to a hospital that is 
not too far away. I suspect most of the bills are paid by 
insurance--Medicare, Medicaid, and private insurance--and there 
would be some co-pay there. I do not know whether it would add 
up to $1,000 or $1,200 a year. But how do the services you 
provide compare with the primary care that someone might get at 
a Federally Qualified Community Health Center like the one in 
Lewis County, if you can make that comparison?
    Dr. Gross. Yes, so thank you for the question. While I 
cannot specifically compare the care to the Federally 
Qualified----
    The Chairman. Well, let me ask it this way. Of the people 
who walk in the door, can you take care half of their problems, 
roughly, 80 percent of their problems, 90 percent?
    Dr. Gross. I would estimate about 90 percent of our 
patients do not require outside referrals, but the other 
interesting thing we are able to do is because we are not 
working within an insurance system, we do not have to bring 
patients into the office for the purposes of charging. So we 
can do things over email, technology visits, texting your 
physician, and so you can avoid unnecessary emergency room 
visits. It allows us to spend time with the right patient in 
the right venue at the right time. So we can spend more time 
with the patient that is sick because we can handle simple 
things through----
    The Chairman. But so, I am in your area, and I come to you, 
and you could say to me that, ``Probably we can help you with 
80 or 90 percent of the problems that you are--the healthcare 
families your problem has. And when we cannot, we will then 
refer you to some place.'' Now, does that--do the surgeries 
that you talk about buying, is that part of the $60, or is that 
an additional charge that is paid for by the patient or by 
their insurance?
    Dr. Gross. So any procedure that is done in our office is 
included, no extra charge. So removal of a skin cancer we can 
do. Drainage of an abscess we can do. There is no extra charge.
    If I refer it out, then we negotiate that bundle. So a 
colonoscopy is $1,100 cash price. And the interesting thing 
about the colonoscopy is it bundles the pathology. So everyone 
sort of knows how you have to code the colonoscopy, and if it 
is not coded properly, your free colonoscopy could end up being 
$3,000 because--if they found a polyp.
    That is not the case. Our pathology is bundled. So the 
price going into the procedure is the price going out of the 
procedure. There are no surprise bills. It is all predictable 
expenses.
    The Chairman. What are the Federal regulations or laws that 
interfere with the expansion of practices like yours, if any?
    Dr. Gross. I think one of the biggest challenges is that 
drug primary care memberships have not been classified as--with 
the IRS as a 213(d), qualifying medical expense.
    The Chairman. What does that mean?
    Dr. Gross. That means that you can use it for health 
savings accounts, health reimbursement accounts. They are tax 
deductible. You are able to pay with pre-tax dollars. So direct 
primary care memberships are the only medical expense in the 
country that you cannot use for a health savings account.
    The Chairman. So you would like to--your recommendation 
would be that people be able to use their health savings 
account funds in order to pay the $60 a month?
    Dr. Gross. That is correct. That is sort of the point of a 
high-deductible health plan is that you can afford access to 
the routine care, and then you have your health plan as your 
safety net. So the direct primary care bundles well with an 
HSA, but when you prohibit the HSA use with a high-deductible 
health plan, it sort of defeats the purpose of the high-
deductible health plan.
    The Chairman. Would you provide us in writing after the 
hearing, any--please, any suggestions you have for changes in 
laws or regulations, such as that one, that would make it 
possible for there to be more primary care service centers like 
yours?
    Dr. Gross. Absolutely. And thanks for the question.
    The Chairman. Dr. Perlin, you have got a lot of 
experience--and I have just a little time left. But sometimes 
technology helps, sometimes it does not. It seems to overburden 
doctors, hospitals and cost lots of money. We have found that 
with electronic healthcare records. What can you tell us about 
how we should approach technology and making it an asset rather 
than a burden for our healthcare system?
    Dr. Perlin. Well, thanks for that question and thanks for 
your championship. Through entities like Center for Medical 
Interoperability, located in Tennessee, we are realizing the 
opportunities with data liquidity. What we mean by that is that 
rather than the EHR being both beginning and the end of health 
information, it is a piece of it. And once you have that health 
information, we can really use the tools of data science and 
artificial intelligence to improve healthcare, make it more 
efficient.
    Quick example. We have developed a product called Cancer 
Patient ID. It is being commercialized as Patient Insights, 
wherein it actually reads the reports from biopsies for 
patients who are having a biopsy to rule out lung or prostate 
or colon cancer.
    Instead of taking cancer navigators spending 75, 85 percent 
of their time reading reports and not working with patients, 
they now spend 75 to 85 percent of their time working with 
patients, incredible change in workflow. And it is all because 
of the data liquidity and the opportunity to really use these 
new data science, artificial intelligence tools. That is a huge 
efficiency in terms of improving the value of healthcare.
    The Chairman. Thank you, Dr. Perlin.
    Senator Jones is not here.
    Senator Smith.
    Senator Smith. Pardon me. Thank you very much, Chair 
Alexander and Ranking Member Murray, for this hearing.
    Thank you to Senator Baldwin for ceding her time so that I 
can go to one of the other committees I have to go to.
    Thanks so much to all of you for being here. These--I found 
these hearings on cost control to be very, very valuable and 
interesting, and I think it reminds us all to focus on our 
common interest in solving problems that expand access and 
lower cost, and as you were saying so well, improve the value 
of the healthcare that Americans are able to get.
    I would like to hone in an issue that I am very--am focused 
on having to do with mental health. You know, nearly one in 
five Americans suffer from challenges related to mental health, 
and this, of course, leads to high healthcare costs, and there 
are significant challenges around access to mental health 
services as well. And this is particularly true, given that 
many people with behavioral health problems wind up in 
emergency rooms and clinics where there is not the staffing 
that people need.
    The Certified Community Behavioral Health Clinic program is 
helping to drive the integration of primary care and behavioral 
health. And in my state, these clinics have--this program has 
allowed us to help fill vacancies in Minnesota clinics and are 
making a big difference in including--excuse me, in improving 
access to care and helping people. And also lowering healthcare 
costs.
    I would like to--I am interesting in working to reauthorize 
this program in Congress. But today, I would like to hear from 
all of you. Maybe I will start with Mr. Constantine. Give us 
your insights in how we can help better provide incentives for 
health systems to integrate mental health and primary care.
    Mr. Constantine. Well, and thank you, Senator, for your 
question.
    In Washington State, we are taking on the integration of 
primary care and mental health, or behavioral health generally, 
in earnest, and King County is right at the center of that. We 
worked with a whole network of providers in order to come up 
with a system that was seamless and that allowed that 
transition to happen in a way that is helpful to patients.
    Our real--one of our main concerns is the degree to which 
we are spending money reacting to little problems that have 
been allowed to blossom into crises.
    Senator Smith. Exactly.
    Mr. Constantine. 17 percent of the gross domestic product 
is spent on healthcare. Only 3 percent of Government health 
spending is on prevention. And we know that there is an 
enormous amount of value just in terms of cost saved, but also 
in terms of lives that are redeemed by getting to these 
challenges early.
    I believe that we have had some challenges in our region, 
because of the unusually high cost of living, in retaining 
professionals in behavioral health clinics. And we started to 
take that on with the assistance of the Ballmer Group, who 
helped provide us some pay-for-performance assistance that is 
building that treatment on demand capacity, but both making 
sure that there is adequate funding to keep professionals in 
this and that this integration is hastened so that we--because 
we understand that there is a strong connection between 
physical and mental health, it would be tremendously helpful to 
us at the local level.
    Senator Smith. Of course, I sit in the seat that was held 
by Paul Wellstone, who was such an advocate for mental health 
parity and worked along with Senator Domenici from New Mexico 
to really expand this. And I am concerned that we have not 
fulfilled the promise of mental health parity.
    Would anybody like to comment on that and just make a 
comment on how that ties to our core goal of improving value 
for healthcare?
    Ms. DeMars. Well, I would just like echo your concerns 
about the dire need for integrating behavioral healthcare into 
traditional healthcare. We see from the employer side, the cost 
of untreated mental healthcare and behavioral health conditions 
not only in terms of increased healthcare costs, but also 
workplace productivity and employee well-being. And it is 
something that I think is critical to solve.
    In Wisconsin, we are working, as employers and other 
purchasers with plans, to raise awareness of the need for 
integration of behavioral healthcare into medical care and 
thinking about ways that we can support that integration by 
paying differently while, at the same time, working to 
destigmatize behavioral health conditions.
    Senator Smith. Right, right. Well, I so appreciate your 
comments on this, and Mr. Chair and Ranking Member Murray, I 
look forward to continuing to work on this. I was very--just 
close by saying there was an interesting article in the 
Minneapolis Star Tribune talking about a very innovative 
strategy to get health behavioral therapists into preschools 
and early learning to address--to the point of being, needing 
to get upstream--addressing this challenge right when those 
little kids are exhibiting the first symptoms of challenge. And 
it is working. So I think we need to work more on this.
    Thank you very much.
    The Chairman. Thank you, Senator Smith.
    Senator Cassidy.
    Senator Cassidy. Mr. Chairman, first I would like to submit 
for the record, a written testimony from Ochsner Health 
System--and I am sorry, I have a script to read on this--that 
acknowledges the innovative work that they have done in 
improving patient care and outcomes, reducing costs. And some 
of that work includes developing a digital health program for 
the management of chronic disease, highlighted by both Apple 
and Microsoft.
    I ask unanimous consent that this statement be submitted.
    The Chairman. So ordered.
    [The information referred to follows:]
                  [statement of ochsner health system]
    Ochsner Health System (Ochsner) appreciates the opportunity to 
submit comments for the record for the Senate Health, Education, Labor 
& Pensions Committee hearing titled, ``Reducing Health Care Costs: 
Improving Affordability Through Innovation''. We commend you, Chairman 
Alexander and Ranking Member Murray for convening this hearing and 
exploring ways in which innovation can be deployed to help improve 
patient care and outcomes, enhance value in the provision of health 
care, and reduce costs. We stand ready to work with you and your 
colleagues on the Committee and serve as a resource on these and other 
health care delivery system issues. We would like to take this 
opportunity to highlight a selection of our advanced and national 
award--winning programs in digital medicine, discuss how we are using 
artificial intelligence and predictive analytics, and present a number 
of our other innovations in hospital care and use of telemedicine. 
These and other initiatives have resulted in significant improvements 
in the care and management of patients with chronic disease; 
accelerated diagnoses and treatment for patients with acute and 
deteriorating medical conditions; and, provided vital and real-time 
health information and continuous engagement with individual patients 
in hospital, home, and community based settings.
                   Overview of Ochsner Health System
    Ochsner, founded more than 75 years ago by five physicians in New 
Orleans, is one of the nation's leading health systems. Ochsner is 
Louisiana's largest not-for-profit health system and one of the largest 
independent academic health systems in the United States. Ranked as a 
top hospital in Louisiana by U.S. News, Ochsner also boasts national 
number one rankings by Carechex for organ transplant and liver 
transplant. A top 100 hospital by Truven Health Analytics 2017 and 
Becker's Great Hospitals in America 2016, we provide a comprehensive 
range of inpatient, outpatient, and in-home services through our 
network of more than 30 owned, managed or affiliated hospitals and more 
than 110 total sites of care, including its health centers and urgent 
care clinics, which are located throughout Louisiana and areas of 
Mississippi.

    Our clinical care team offer expertise in more than 90 medical 
specialties and subspecialties, and includes approximately 3,600 
affiliated physicians, with 1,300 employed Ochsner physicians and 
20,000 employees, making us the largest private employer in Louisiana. 
In 2017, at Ochsner we saw more than 730,000 patients and through the 
Ochsner Health Network (see attached map) we treated more than 1 
million patients and saved our partners more than $60 million.

    Ochsner serves as a major referral center and treats patients from 
across Louisiana, every state in the nation, and more than 60 
countries. We are proud to provide a wide array of nationally-ranked 
and specialized clinical services to treat some of the most challenging 
and complex medical conditions, including: organ transplantation; 
oncology; neurosciences; cardiovascular care; high risk obstetrics/in-
vitro surgery; pediatric specialty care; and, programs focused on 
chronic diseases.

    From a broad perspective, Ochsner has developed the type of 
integrated delivery system that many policymakers envision featuring a 
comprehensive range of clinical services, coordinated systems of care, 
a sophisticated electronic health record (EHR), and the geographic 
reach, scale, and clinical capability necessary to manage and improve 
the health of a large patient population. Further, Ochsner is a major 
academic medical center with nearly 300 full-time residents and fellows 
participating in 28 ACGME accredited graduate medical education 
programs and four additional specialty programs; a global medical 
school partnership with The University of Queensland School of Medicine 
in Brisbane, Australia; and, programs of biomedical research. We 
currently have more than 700 active clinical trials, offer training and 
education to health professionals through our Ochsner Clinical 
Simulation and Patient Safety Center, and deliver clinical education to 
more than 575 allied health students each year through our Allied 
Health program.

    We are proud that for six years Ochsner has been actively engaged 
in the Medicare Shared Savings Program through its Accountable Care 
Organization (ACO) and has successfully transitioned to the Track 1+ 
ACO Program with approximately 25,000 attributed beneficiaries. In 
addition, Ochsner provides care for another 35,000 Medicare Advantage 
enrollees through a capitated, global payment mechanism that has 
fostered the acceleration of clinical innovation and the deployment of 
digital medicine technologies that are a key focus of the subcommittee 
hearing. In all, we have approximately 230,000 patients in value-based 
contracts and maintain a strong commitment to continuing to innovate so 
we can improve outcomes and reduce costs for the individuals, families, 
and communities we serve.
   Improving Health Through Innovation: Health Innovations by Ochsner
    In 2015, Ochsner formed its own innovation lab, known as innovation 
Ochsner (i O ), whose mission is to reimagine and revolutionize the 
delivery and experience of healthcare and dramatically improve health 
outcomes using technology, data and new thinking. Through iO, Ochsner 
has been a pioneer in developing solutions in the areas of digital 
health, advanced analytics and artificial intelligence (AI), and 
precision medicine. We are proud that our investment and focus in this 
area has resulted in a number of ground-breaking innovations, which are 
measurably advancing the quadruple aim of healthcare: improve the 
patient experience of care, improve the health of populations, reduce 
the per capita cost of health care, and improve the work life of the 
provider of care.
 Overview of Digital Medicine Programs for the Care and Management of 
                            Chronic Disease
    Ochsner has developed advanced digital medicine programs that 
immediately feed patient--generated data into its electronic health 
record (EHR), and was the first health system in the nation to 
integrate its Epic EHR system with the Apple Healthkit, which is an IOS 
app that acts as a health dashboard by capturing health and activity 
data from other apps and wearable devices. \1\ These data provide 
physicians and the care team a more complete view of a remote patient's 
health status and allows and empowers providers to offer proactive, 
holistic care and recommendations, from medication management to 
lifestyle factors, leading to better health outcomes, lower costs, and 
higher levels of patient engagement, satisfaction, and convenience.
---------------------------------------------------------------------------
    \1\  A profile of Ochsner's Hypertension Digital Medicine digital 
medicine program can be found on the Apple healthcare website under the 
heading ``Continue Patient Care at Home''https://www.apple.com/
healthcare/.

    Using the integrated data and health dashboard, Ochsner has 
developed and implemented programs targeted to support patients with 
congestive heart failure, diabetes, hypertension and cancer, as well as 
expectant mothers, to help them stay connected to their care teams 
between their in-person visits to their physicians. These programs can 
be expanded and adapted to treat asthma, arthritis, chronic obstructive 
pulmonary di--sease, high cholesterol and many other conditions. 
Chronic disease accounts for 75 percent of deaths and 86 percent of 
healthcare costs in the United States, so innovative models of care 
like Ochsner Digital Medicine that dramatically improve health outcomes 
are critical in our quest to save and change more lives.
 A New Care Model for the Most Prevalent Chronic Disease: Hypertension 
                        Digital Medicine Program
    The Hypertension Digital Medicine program is a new way to care for 
high blood pressure, the most prevalent chronic disease in the United 
States (and indeed the world), where half of all patients --still 
suffer from uncontrolled blood pressure. In contrast to traditional 
models of care, which are based on episodic data points and physician 
visits, our Hypertension Digital Medicine program offers a continuous 
care model, where patients send in regular data and are remotely 
monitored by a dedicated care team who provides proactive, preventative 
interventions. Patients enrolled in the program take their blood 
pressure weekly using a wireless, at-home blood pressure cuff. The 
results are transmitted to their care team, who is able to see the 
trends in each patient's blood pressure measurements. This is an 
innovative approach that allows more frequent data and a more 
meaningful feedback loop between patients and the care team, instead of 
relying on only a handful of readings each year during in-office 
visits. Using this real-time information and trend data, we can provide 
their patients timely and tailored feedback, such as medication 
adjustments, healthy eating tips, and exercise goals. Patients and 
doctors receive monthly reports to track progress.

    The early results of the program have been encouraging where more 
than 71 percent of patients who were previously out of control achieved 
control within 90 days of entering the program compared to 31 percent 
of patients following the traditional care model. \2\ For patients, 
lower blood pressure
---------------------------------------------------------------------------
    \2\  Milani RV, et al., Am J Medicine 2017;130:14-20.

    Ochsner Health System Written Testimony for the Hearing Record 
Submitted to the Senate Health, Education, Labor & Pensions Committee 
``Reducing Health Care Costs: Improving Affordability Through 
Innovation'' November 2018 means a lower likelihood of heart attack, 
stroke, and kidney failure. In turn, these changes in patient risk 
factors for numerous chronic diseases will reduce costs and improve 
---------------------------------------------------------------------------
patient quality of life.

    Apple has featured Ochsner' s Digital Medicine program as a model 
for leveraging technology and data to improve health outcomes and 
patient engagement. \3\ Likewise, the HHS Office of the National 
Coordinator has recognized the program as a model for patient 
engagement it its Patient Engagement Playbook. Harvard Medical School 
and Harvard Business School have also recognized this innovative 
program through their Health Acceleration Challenge.
---------------------------------------------------------------------------
    \3\  A video describing the program is featured on the Apple 
healthcare website under the heading ``Continue Patient Care at Home'' 
and can be found at https://www.apple.com/healthcare/.
---------------------------------------------------------------------------
  0 Bar: A ``Genius Bar'' Providing Physician Approved and Prescribed 
                      Apps and Devices to Patients
    Ochsner has also launched a novel service to introduce patients and 
consumers to personalized health technology -the O Bar. A national 
model for promoting patient engagement in technology to improve 
outcomes, the O Bar makes it easy for patients and the communities we 
serve to learn about, test and obtain healthcare-related apps and 
connected devices, with the help of an Ochsner--staffed expert. Now 
with five locations in Jefferson Parish, New Orleans, Baton Rouge, 
Covington and Westwego, the O Bar offers a curated selection of apps 
focused on wellness, nutrition, fitness, diabetes, women' s health, 
smoking cessation and more, as well as state-of-the art medical devices 
including Bluetooth blood glucose monitors, wireless blood pressure 
monitors, activity trackers, and wireless scales. Ochsner physicians 
tailor and prescribe apps and devices for their patients and 0 Bar 
staff can help patients by downloading and demonstrating the use of 
apps and devices, and ensure that patients can easily access and use 
these digital health tools. \4\
---------------------------------------------------------------------------
    \4\  The O Bar has been featured on CNBC; the report can be viewed 
at https://www.cnbc.com/2015/06/09/take-this--app-and-ill-call-you-in-
the-morning.html.
---------------------------------------------------------------------------
             Optimal Hospital--Innovation in Hospital Care
    Ochsner has introduced new technology, science and work flows to 
improve the hospital experience for patients through its Optimal 
Hospital initiative. The program includes several elements. Patients 
are given wireless vital sign monitors to allow for continuous data 
collection that is entered automatically into the electronic health 
record, while still allowing for patient mobility. Patients are offered 
mobile tablets through which the patient can access information about 
their attending physician and care team, educational resources, the 
schedule of the day, test results, and medication information, all of 
which assists in helping patients feel supported and less overwhelmed 
while in the hospital. Physicians also have mobile access to devices 
and apps through which they can see patient test results, which can 
assist them in communicating with and caring for their patients 
throughout the day and in different locations within the medical 
center. The program has been well-received by patients and has improved 
efficiency and flow of information to physicians. \5\
---------------------------------------------------------------------------
    \5\  The Apple healthcare website also features a video describing 
aspects of the Optimal Hospital initiative and can be found under the 
heading ``Apple in the Hospital'' and can be found at https://
www.apple.com/healthcare/.
---------------------------------------------------------------------------
Use of Advanced Analytics to Predict and Improve Hospital Patient Care: 
2018 Microsoft Health Innovation Award for Artificial Intelligence and 
                            Machine Learning
    Ochsner has deployed the use of artificial intelligence and machine 
learning for acutely ill hospital patients using an iO-developed 
algorithm with more than one billion clinical data points, creating a 
deep recurrent neural network. This approach can predict health status 
deterioration of patients who are in the hospital but not yet in the 
ICU at a 98 percent accuracy rate. Using this tool, Ochsner's rapid 
response team of clinical providers is notified in real-time when 
patients exceed a certain risk threshold and thus can intervene 
proactively to address and possibly prevent adverse events, and provide 
better outcomes. Ochsner is one of the first health systems in the 
country to use this type of technology to improve patient care, and 
early results have been exceptional. During the 90-day pilot, cardiac 
arrests and other adverse events outside of the ICU were reduced by 44 
percent. These complex machine learning algorithms are powered by Epic 
machine learning and Microsoft Azure cloud platforms. \6\
---------------------------------------------------------------------------
    \6\  A video explaining this program can be accessed at https://
www.voutube.com/watch?v=ONgWbDALGAE&feature=youtu.be.
---------------------------------------------------------------------------
                   Telehealth and Telestroke Network
    Ochsner has developed an extensive telehealth and telestroke 
network, which serves more than 40 rural hospitals located throughout 
Louisiana and Mississippi. Unfortunately, these areas face a 
significant shortage of neurologists, psychiatrists, and other 
physician specialists, leaving too many communities without access to 
the specialty care their residents need and deserve. Ochsner' s 
telestroke program provides 24 hour -7 days per week coverage by 
vascular neurologists who--through telemedicine are immediately 
available to emergency room physicians in rural hospitals to help them 
quickly diagnose and treat patients presenting with symptoms of a 
possible stroke. A key indicator for stroke outcome is prompt and 
accurate diagnosis a delay in treatment can have catastrophic results. 
The program has been instrumental in successfully treating thousands of 
patients across the region in a timely manner and offering an important 
source of clinical support and expertise for rural hospitals and their 
medical staffs.
                               Conclusion
    Thank you for your leadership in holding a hearing to identify 
innovative practices in health care. We are eager to be a resource to 
you and your staff. We appreciate this opportunity to provide these 
examples and highlights of how Ochsner has developed and designed 
numerous clinical innovation initiatives and deployed digital 
technology to serve our patients, improve outcomes, enhance the patient 
experience, and reduce costs. We welcome an opportunity to present to 
you additional examples and details regarding how Ochsner is leading 
efforts to develop and deploy innovative practices and technology in 
the 21st century delivery of health care. Please call on us if we can 
be of assistance on this or other issues under the Committee's 
jurisdiction.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 ______
                                 
    Senator Cassidy. Next, Mr. Chairman, you just set me up 
with your conversation with Dr. Gross. Because I now know that 
you are going to cosponsor our bill----
    [Laughter.]
    Senator Cassidy.----that Senator Cantwell, Senator Carper, 
and I are working on, bipartisan, obviously, on direct primary 
care. Relatively simple change to the tax code to make these 
sort of arrangements that Dr. Gross spoke about so that the IRS 
will see that the DPC would be eligible to be paid for through 
a health savings account. Again, we have this--Cantwell, 
Cassidy, and Carper are doing this, and we would love to have 
all of you onboard as well.
    Dr. Gross, my--I am a physician, and my observation is that 
when you align the incentives of the patient and the physician, 
both in terms of her health, as well as the financial 
incentives, is when you get the best outcomes. It sounds like 
that is what you are doing. Because if you are getting a 
colonoscopy, all-in with anesthesia, facility fee, pathology 
for $1,100, that is probably a Medicare rate. But I suspect you 
are sending them to the provider that gives the greatest 
satisfaction, not the person who your wife or you play bridge 
with, and so--because otherwise, you lose your patient. You 
want them to be satisfied.
    I point that out because we have had conversations--
medicine is so complicated. How do you enable or equip the 
patient to make the right decision when, again, it requires a 
medical school education to fully fathom? But I gather your 
model aligns those incentives, again, working for her physical 
health as well as her pocketbook health. Is that a fair 
summary?
    Dr. Gross. No, I think it is absolutely a fair summary. You 
know, so what this program allows us to do is enter value into 
the conversation. Because if you do not know what things cost, 
then you cannot have the conversation. Because we believe--we 
take an oath to do no harm, and that should also include 
financial----
    Senator Cassidy. I have only got a few minutes. Let me 
interrupt. I am guessing that if an outpatient imaging 
procedure is required, and she is paying cash for it because 
her deductible is 6K or her HSA has paid for it, I suspect that 
you can get her the best price, cash price for that procedure?
    Dr. Gross. In many cases, the cash price is half the price 
of what would come out of pocket with an insurance.
    Senator Cassidy. But she would not know that, but you do. 
Correct?
    Dr. Gross. That is correct.
    Senator Cassidy. By the way, I will say, as practicing--
well, I am kind of a practicing physician - it is rare for the 
physician to know actually what it is going to cost because, 
frankly, it is difficult. And yet, in your practice, it is 
mandatory in order for you to give guidance. So, again, hats 
off.
    Dr. Gross. Thank you.
    Senator Cassidy. Ms. DeMars, thank you for kind of engaging 
on the price transparency issue. That is something I care 
about, and I appreciate that. What on the Federal level could 
be done to aid the issue of price transparency, if you will?
    Ms. DeMars. You know what, that is a tricky question, and I 
would say that for starters, the Federal Government, as a 
purchaser itself providing health benefits to its employees, 
can be doing more to make price transparency available to those 
employees.
    Senator Cassidy. So if you are saying through the Federal 
Employees Health Benefit Program or through Medicare, mandating 
price transparency for the beneficiaries of those programs?
    Ms. DeMars. Yes.
    Senator Cassidy. You know, that makes sense to me because, 
obviously, if a hospital system buys a physician's practice and 
begins to bill Medicare through hospital outpatient department 
rates, as opposed to a freestanding rate, the beneficiary's co-
pay goes up dramatically.
    Ms. DeMars. Yes.
    Senator Cassidy. She does not know it?
    Ms. DeMars. Correct.
    Senator Cassidy. She does not realize there has been a sale 
of a practice?
    Ms. DeMars. The co-pay would not necessarily go up, but--
yes. I am sorry. Yes, you are right. The co-pay would go up.
    Senator Cassidy. Yes. So now, also I think you are 
operating in a state in which there has been efforts to address 
surprise medical billing?
    Ms. DeMars. We do that ourselves through our co-op.
    Senator Cassidy. How do you do that? If somebody goes to an 
out-of-network physician, even if they are an in-network 
hospital, how do you manage that?
    Ms. DeMars. Well, on the front end, we take a lot of steps 
to ensure that all of the ancillary providers that patient 
might see going into that building are in our network.
    Senator Cassidy. But if there is only one ER group, do you 
get an assurance from the hospital CEO that ER group with be in 
network?
    Ms. DeMars. We address that, yes, on the front end. In 
cases where there are ancillary providers that are not part of 
our network or where the hospital may sell off a service to an 
outside group like dialysis, we take steps to bring that 
provider in network, but not at any price, or negotiate on a 
one-off basis that patient's bill.
    Senator Cassidy. Well, I am out of time, but I would be 
interested, since dialysis providers tend to be a monopoly, how 
you happen to do that? But anyway, I----
    The Chairman. Thank you, Senator Cassidy. We may have time 
to come back for a second round.
    On your bill, I am very interested in that, look forward to 
talking with you about it. It would have to be--it would be a 
Finance Committee bill. But fortunately, you are on the Finance 
Committee. Senator Murray might--she can speak for herself--she 
might have an interest in it. So let us talk about that, what 
the score might be and what we could do to help move that 
along.
    Senator Baldwin.
    Senator Baldwin. Thank you, Mr. Chairman.
    Wisconsin has a tradition of pioneering efforts to contain 
costs and increase the quality of care, and I am so glad to 
have you, Ms. DeMars, here to share some of those Wisconsin 
successes.
    One unique effort in our state is our state's all-payer 
claims database, the Wisconsin Health Information Organization 
that we know as WHIO. It helps increase transparency 
surrounding health costs and quality for subscribers that 
include physicians who can access claims data to help them 
compare costs and outcomes.
    In 2015, Congress enacted my bipartisan Quality Data, 
Quality Healthcare Act to expand access to Medicare claims data 
by modernizing the Qualified Entity Program. This helped unlock 
Medicare's data for those who can use it best, and it empowered 
doctors to make better decisions that will improve patient care 
and reduce costs.
    In your testimony, you shared WHIO's story in providing 
access to claims data as a qualified entity. Can you describe 
how healthcare decision-makers are utilizing this cost 
information and any barriers that remain in the QE program that 
prevent employers, providers, and insurers from unlocking the 
full potential of claims data to improve care quality and 
outcomes?
    Ms. DeMars. Thank you, Senator Baldwin.
    You are exactly right that I think the first step to 
meaningful transparency is having claims data available, having 
that pool of data available from which to do measurement and 
compare performance. And WHIO, as you described, is a great 
example of a model that is working. Not perfect, but the data 
that it provides has been useful to The Alliance and many other 
payers, as well as providers, in helping to understand a 
baseline and then track over time things like resource use and 
even some measures of quality.
    It is a strong underlying foundation that can be made 
better with greater participation by all payers, the access and 
availability of Medicare data, and also having that same 
resource available in all states. We have this in Wisconsin. We 
do not have this in Illinois. We do not have this in Iowa.
    Many of our employers cross multiple states, have employees 
in multiple states, and so the usefulness of information on a 
state-by-state basis, nice if everyone is in Wisconsin. 
Difficult if you are trying to share information across a 
broader population or compare what is happening in Wisconsin 
with what is happening elsewhere.
    Senator Baldwin. Making sense of healthcare costs can be 
really confusing and overwhelming for patients. And they may 
deal with high prices at the pharmacy counter or variations in 
the price, say, of an MRI from one hospital to the next, 
without knowing what they are getting for the money expended.
    I am really proud of The Alliance's work to empower 
patients with information that they can understand through the 
QualityPath initiative. It helps patients choose providers who 
deliver more efficient and high-quality care. Why is it 
important to give patients the information that they can and 
know how to use and specifically information about both costs 
as well as quality of care? And any other comments you might 
want to make about consumer-patient utilization of this 
information and how to expand that.
    Ms. DeMars. Yes, that is a great question. I think, for 
starters, most consumers do not understand the wide variation 
in costs. Nor do they believe, necessarily, or understand that 
there is differences in quality or that those two are not 
correlated. And so, I think it is critical for, first, 
education to occur, so that people understand that an MRI can 
cost $4,800 or $650 and that the quality of that care does not 
differ. So giving people that guidance is critically important.
    What we have found is that it is not enough just to make 
information available to people. We need to provide them with 
greater support. For us, that often comes in the way of their 
employers, helping them understand and use information by 
providing incentives in benefit plan designs or through other 
means, through workplace-based programs, to be aware of 
information and then use it effectively. We are also interested 
in finding ways to partner with providers because we understand 
that once their primary care provider makes a referral, it is 
sometimes difficult then to change if you find that there is a 
low-cost or high-quality provider that you have not been 
referred to.
    The Chairman. Thank you, Senator Baldwin.
    Senator Hassan.
    Senator Hassan. Well, thank you, Mr. Chair and to Ranking 
Member Murray, for convening this hearing.
    Thank you to all of our witnesses today for really 
important and meaningful testimony, and I want to start my 
questions with following up where Senator Cassidy was on 
surprise medical bills.
    I have a bill as well, which is actually in HELP Committee, 
and my senior Senator from New Hampshire has another bill on 
this issue dealing with the individual market and the 
uninsured. So I think there is a lot of bipartisan interest 
here. It is something we hear about from our constituents all 
the time.
    Studies have shown that nearly one in five emergency room 
visits involves care from providers who are out of network. And 
non-emergency situations often result in surprise medical bills 
as well. These situations are not the patient's fault, 
obviously. You do not know who is even reading your X-ray, for 
example. And it is fundamentally unfair to hold patients 
accountable for bills that they have no control over.
    That is one of the reasons I introduced the No More 
Surprise Medical Bills Act of 2018, and my bill focuses on the 
parts of the large employer market that states cannot regulate. 
And it would stop surprise medical bills, and it would 
establish an independent dispute resolution process based on 
``baseball style'' or final offer arbitration models to 
incentivize reasonable payments and resolve payment disputes 
between plans and providers without putting patients in the 
middle.
    I know that we have work going on both sides of the aisle 
on this, but Executive Constantine, I wanted to start with you 
on this. How are you and your partners in King County working 
together to come up with innovative solutions to protect 
patients from surprise bills and hold down healthcare costs?
    Mr. Constantine. Thank you, Senator.
    King County works with our healthcare plans and employees 
to increase transparency, as we have talked about this morning, 
in cost delivery so that our employees can make informed 
decisions about their healthcare needs. But surprise billing is 
an area where patients have made an educated choice. They have 
made a responsible choice to opt for an in-network provider, 
only to find out after the fact that, for whatever reason, the 
provider changed.
    As health plans work to more tightly coordinate care and 
manage costs, as with the new plan that I described for King 
County, this is only going to be a greater challenge. And 
unfortunately, there is not that much we can do, either as an 
employer or as a government, to protect our workers from this 
challenge. There has been legislation, the Washington State 
legislature tried to do what sounds very much like your bill. 
And I think it is absolutely critical that we stop surprise 
billing by holding the patient harmless and requiring those who 
are in a better position to understand who is to pay for what, 
who is covered and who is not, to take the responsibility.
    I am not an expert on which dispute resolution process 
should be used, but I do think that this is something that 
needs to happen at the national level and not just on a state-
by-state basis. I strongly support the intent of your bill. 
Everyone agrees, consumers should not be caught in the middle 
of these billing disputes. And as an employer, I feel a 
particular responsibility to our employee family to make sure 
that they are not getting stuck with a large, unexpected 
medical bill.
    Senator Hassan. Yes, I talked to one of my constituents, 
literally went in for a cut on his finger to the emergency 
room. There was no other option. It was a Saturday night. So he 
needed to go to the emergency room to get it taken care of.
    It was an in-network hospital. He ended up with a bill for 
$3,500. And he was able to negotiate it down to $1,200, all for 
really a cleaning off of the finger, and I do not even think 
stitches were involved. So I would appreciate continuing to 
work with all of you on that.
    Ms. DeMars, I appreciated your testimony about all the work 
that you all try to do to make sure that your patients are not 
getting hit with these surprise bills, but I did want to move 
on to one more topic, which is one that Senator Baldwin was 
talking about. New Hampshire also has an all-claims database, 
and actually, I will give a shout-out to my state. We were the 
first ones in the country to do it.
    We have been a leader in a lot of work related to promoting 
better value in healthcare. And we have for state employees 
something called Vitals SmartShopper Program. It offers 
financial incentives to employees to choose low-cost, quality 
options for their care. But I think to a point you were making, 
Ms. DeMars, and I just want to quickly get anybody else on the 
panel who wants to speak to it, for us, the critical thing has 
been to help patients understand that just because care is low 
cost--lower cost does not mean it is lower quality.
    How do we really help patients understand, and how can we 
have transparency in outcomes as well as cost? So I will start 
with anybody who wants to answer that.
    Go ahead, Ms. DeMars.
    Ms. DeMars. Happy to jump in. Yes, it is an education 
process. And I think that being able to show employees data in 
ways that are digestible, easy to understand and use, about 
cost and quality and how those two things are not correlated--
high cost does not mean high quality--has been impactful.
    I also think that as consumers increasingly have high-
deductible health plans, that is making a difference. People--
we have people's attention when they are paying the first 
$5,000 of their care. And we have found a willingness to take a 
look at and respond to information. Even more powerful if there 
is quality information to accompany the cost information.
    Senator Hassan. Well, I thank you. And I see I am over, Mr. 
Chair. I will invite the other witnesses to comment in writing 
as a follow up. Thank you so much.
    The Chairman. Thank you, Senator Hassan.
    We have a classified briefing at 11:00 a.m., but we have a 
little time for other questions.
    Senator Murray, do you have any other comments or 
questions?
    Senator Murray. Mr. Chairman, I just want to thank the 
panel. This has been really a good panel, and I appreciate all 
of your input.
    I do have additional questions I will submit for the 
record. I know Dr. Cassidy wants to ask some, and as you said, 
we have a hearing, but I just want to--really appreciate 
everybody. Mr. Chairman, look forward to working with you on 
it.
    The Chairman. Thank you, Senator Murray, and thanks for 
this, working with us together on this hearing.
    Dr. Gross, I just have one question. Do you ever go to 
employers and say, ``Why don't you buy our services for your 
employees?''
    Dr. Gross. Yes, and we have also had employers come to us 
as well.
    The Chairman. Does that happen often?
    Dr. Gross. It does. Mostly with the small employers, the 
small employer market. This is a hospital that we just 
incorporated into their benefits plan as a--I think it was 400 
plan, life plan. It is a self-funded plan, and again, we are 
going to see some extraordinary savings while expanding their 
coverage.
    The Chairman. So if I could--if I employ 20 people, I might 
come to you and say, ``I will pay you $1,000 or $1,200 per 
employee per year, and I will take the responsibly for 
providing a catastrophic insurance for big things.''
    Dr. Gross. Right. And so that was actually part of our 
original epiphany was we had a company with 10 employees that 
came to us and said, ``My insurance premiums are skyrocketing, 
and all my employees already see you. Why do I not just hire 
you to take care of my employees, and I will just take out a 
major medical plan?''
    If you look at the cost of the standard PPO plan now under 
the Milliman Index, it was about $29,000 for a family of 4 per 
year, as opposed to a direct primary care plus a major medical 
plan. The 10-year savings over that, that is about $250,000 for 
a family of 4. That is a huge savings for an employer of 10 
employees, potentially of saying there is that potential 
savings if the employee does not hit that mark. But even if 
that employee hit that $10,000 or $12,000 deductible every 
year, they would probably still come out about $100,000 ahead 
just by using the insurance as insurance and having a safety 
net.
    The Chairman. More than 90 percent of Americans have some 
form of health insurance. Do you know what percent of your 
customers have health insurance?
    Dr. Gross. Mine is probably closer to 50 percent.
    The Chairman. But 50 percent doing--still they pay the $60 
a month?
    Dr. Gross. Same price, yes.
    The Chairman. Dr. Cassidy.
    Senator Cassidy. We are out of time, and so I'd like to 
first submit into the record a letter from the AAFP, the 
American Academy of Family Physicians in support of the bill 
that we spoke of earlier.
    The Chairman. So ordered.
    [The information referred to follows:]
                                American Academy of
                                 Family Physicians.

Hon. Lamar Alexander, Chairman,
Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC.

Hon. Patty Murray, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC.

    Dear Chairman Alexander and Ranking Member Murray:

    On behalf of the American Academy of Family Physicians (AAFP), 
which represents 131,400 family physicians and medical students across 
the country, I write to share the organization's views on health care 
innovation in response to the Committee's hearing, ``Reducing Health 
Care Costs Through Innovation.'' AAFP appreciates the opportunity to 
highlight primary care innovations including Advanced Primary Care, 
broader systems to address Social Determinants of Health, Direct 
Primary Care, and Independence at Home.

    The benefits of primary care access are well-understood. U.S. 
states with higher ratios of primary care physician-to-population 
ratios have better health outcomes, including lower rates of all causes 
of mortality: mortality from heart disease, cancer, or stroke; infant 
mortality; low birth weight; and poor self-reported health. The impact 
of better ratios holds true even after controlling for socio-
demographic measures (percentages of elderly, urban, and minority; 
education; income; unemployment; pollution) and lifestyle factors 
(seatbelt use, obesity, and smoking).
                         Advanced Primary Care
    Advanced primary care activities and demonstrations are new 
delivery models focused on patient needs where primary care serves as a 
robust foundation for maximizing value in health care delivery. An 
investment in advanced primary care has been shown to spur better 
health outcomes and lower costs. In its sentinel research report, the 
Patient-Centered Primary Care Collaborative's 2018 indicates that new 
primary care delivery models, namely patient-centered medical homes 
(PCMH), played an integral role in the success of some accountable care 
organizations. Utilizing both the 2014 Medicare Shared Savings Program 
(MSSP) data set and the National Committee for Quality Assurance (NCQA) 
PCMH data set, the study documented that Medicare ACOs emphasizing 
broad adoption of the PCMH model had a higher likelihood of producing 
important savings, earned higher quality scores, and showed positive 
patient outcomes. On average, the programs with the higher number of 
PCMH primary care practices produced savings at 1.2 percent as compared 
to .6 percent for those with no advanced primary care practices.

    In addition, ACOs with a strong emphasis on the PCMH model were 
associated with higher pneumococcal vaccination and depression 
screening scores. They also demonstrated better tobacco screening and 
cessation rates, and higher diabetic and coronary artery disease 
composite scores. The PCPCC study provides valuable information about 
the important synergies associated with advance primary care delivery 
and ACOs, but more research is needed to understand how to generate 
greater savings and evaluate programs' longitudinal health outcomes.
                     Social Determinants of Health
    There are numerous exciting advances associated with health care 
delivery that better address the critical role that social determinants 
of health (SDOH) play in overall health care delivery improvements. A 
2018 Health Affairs report suggests that community financing programs 
targeted at addressing SDOH are improving health outcomes, reducing 
health disparities, and reducing cost. Family physicians play an 
important role in identifying and addressing the social determinants of 
health for individuals and families, incorporating this information in 
the biopsychosocial model to promote continuous healing relationships, 
whole-person orientation, family and community context, and 
comprehensive care.

    To support that mission, the AAFP established its Center for 
Diversity and Health Equity to provide opportunities to become a more 
thoughtful and visible leader in addressing SDOH. The AAFP has 
developed a new SDOH screening tool as part of an initiative called the 
EveryONE Project, and actively promotes this tool to our 131,400 
members. The Academy also offers family physicians use of the AAFP's 
nationwide Neighborhood Navigator referral network, which connects 
patients to food, housing and other resources to address SDOH based on 
their individual needs. AAFP also conducted a 2017 survey that found 
that nearly 60 percent of family physician respondents currently screen 
patients for SDOH and 52 percent follow up on identified needs by 
referring patients to community-based social services. As with other 
innovations, systems designed to address SDOH merit federal review to 
understand and promote best practices, identify opportunities for 
public-private partnerships, and bring promising programs to scale.
                          Direct Primary Care
    The Direct Primary Care (DPC) innovation model is a practice and 
payment model where patients pay their physician or practice directly 
in the form of periodic payments for a defined set of primary care 
services. DPC practices typically charge patients a flat monthly or 
annual fee, under terms of a contract, in exchange for access to a 
broad range of primary care and medical administrative services.

    The DPC practice framework includes any practice model structured 
around direct contracting with patients/consumers for monthly or annual 
fees. For primary care services, DPC can replace the traditional system 
of third party insurance coverage. Typically, these periodic payments 
provide patients enhanced services over traditional fee-for-service 
medicine. Such services may include real time access to their personal 
physician via advanced communication technology, extended visits, home-
based medical visits, and highly personalized, coordinated, and 
comprehensive care administration.

    The AAFP supports the physician and patient choice to, 
respectively, provide and receive healthcare in any ethical healthcare 
delivery system model, including the DPC practice-setting. The Academy 
has supported the Primary Care Enhancement Act of 2017 (S. 1358), 
introduced by Senators Bill Cassidy and Maria Cantwell, to allow HSA 
enrollees to contract for services from a DPC practice and pay for it 
through the Health Savings Account structure. It is our hope that DPC 
is included in statutory health innovations as a high quality, patient-
centered option.
                          Independence at Home
    The AAFP also supports the Independence at Home program, a 
demonstration that provides high-quality primary care for Medicare 
patients with severe chronic illnesses and disabilities. We are pleased 
the Bipartisan Budget Act of 2018, passed by Congress and signed by the 
President on February 9, 2018, extended the Independence at Home 
demonstration for two years. The program is based on 20 years' worth of 
data showing that home-base primary care is an effective way to deliver 
care for seriously ill patients and to produce savings. Research shows 
that the demonstration program produced high quality care for seniors 
with chronic diseases and met their complex needs. We urge the 
Committee to examine this program as its health care review process 
continues.

    We appreciate the opportunity to share innovative health care 
programs. Please contact Sonya Clay, Government Relations 
Representative, at 202-232-9033 or [email protected] with any questions or 
concerns.

            Sincerely,

                                         Michael L. Munger,
                                                         MD, FAAFP,
                                                       Board Chair.

                                 ______
                                 
    Senator Cassidy. Mr. Constantine, Dr. Perlin, you had 
talked about--in the written testimony of Mr. Gross, the issue 
of price transparency. This is what it costs in the hospital, 
this is what it costs--this is what it costs in his clinic. And 
we discussed price transparency, but I think there has been 
resistance from hospital systems regarding price transparency.
    Now we only have about 5 minutes, and I just asked you the 
theory of life.
    [Laughter.]
    Senator Cassidy. So I will ask you to submit in writing, 
because I really think it kind of goes to the crux of it, why 
should there not be price transparency of what an all-in 
colonoscopy costs at a hospital? We understand burn patients 
are a different category, but--or a multiple trauma patient--
that is what insurance is for.
    But it does seem as if the--I bought your cardiology 
practice, you are now coming here to see the cardiologist. 
There should be some transparency there.
    Again, we are out of time. So if you would submit that for 
the record, I would appreciate that.
    Thank you.
    The Chairman. Thank you, Senator Cassidy.
    Well, thanks to the four of you for coming. This has been 
very helpful, and as we learn and listen, my hope is that we 
have plenty of ideological and political differences, and you 
can see them on display with a Committee this big, but we also 
usually find a way to identify those things on which we agree. 
And we certainly ought to be able to find ways to deal with the 
problem if it is true, and it appears to be true that as much 
as 50 percent of the money Americans spend on healthcare is 
spent unnecessarily.
    Some of those ideas may be big. Some of them may be small. 
And Senator Murray and I and the Members of the Committee will 
work together over the next couple of years to see what we can 
do about that.
    Your testimony has been very helpful. If you have things 
you wish you had said but did not, we will read what you write 
us, and we look forward to staying in touch with you.
    The hearing record will remain open for 10 days. Members 
may submit additional information for the record within that 
time, if they would like.
    The Chairman. The HELP Committee will meet again tomorrow, 
November 29, for an Executive Session.
    Thank you for being here today.
    The Committee will stand adjourned.
    [Whereupon, at 10:54 a.m., the hearing was adjourned.]

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