[Congressional Record Volume 143, Number 144 (Thursday, October 23, 1997)]
[Extensions of Remarks]
[Pages E2069-E2070]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      INTRODUCTION OF LEGISLATION TO SAVE MEDICARE MONEY AND LIVES

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                       Thursday, October 23, 1997

  Mr. STARK. Mr. Speaker, on behalf of Representative Becerra and 
myself, I am today introducing legislation which will save Medicare 
money--and save the lives of many of its beneficiaries.
  The bill we are introducing passed the House in the Budget 
reconciliation bill (H.R. 2015) and was known as the Centers of 
Excellence proposal. CBO scored the provision as saving $300 million 
over the 5 years and $800 million over 10 years.
  To quote from the Department of Health and Human Service's 
justification:
  The Center of Excellence proposal originated as a result of a 
demonstration conducted in the early 90's under which certain 
facilities, referred to as ``Centers of Excellence,'' were paid a 
single fee to provide all of the facility, diagnostic and physician 
services associated with coronary artery bypass graft [CABG] surgery. 
The facilities were selected on the basis of their outstanding 
experience, outcomes, and efficiency in performing these procedures. 
Medicare achieved an average of 12 percent savings for CABG procedures 
performed through the demonstration.
  The House provision would have made the Centers of Excellence program 
a permanent part of Medicare by authorizing the Secretary to pay 
selected facilities a single rate for all services, potentially 
including post-acute services, associated with a surgical procedure or 
hospital admission related to a medical condition. As with the CABG 
demonstration, selected facilities would have to meet special quality 
standards and would be required to implement a quality improvement 
plan.
  The amendment was dropped in conference because of resistance from 
the Senate. Some Senators from States where no hospitals were 
designated felt that the program tended to cast into doubt the quality 
or excellence of non-designated hospitals. Mr. Speaker, the name of 
this program is not important--what is important is that it can save 
money and by encouraging beneficiaries to use hospitals that have high 
volume, quality outcomes, it can save lives. Therefore, I am dropping 
the term ``centers of excellence'' and just using the phrase 
``contracting entities.''
  Like Lake Wobegon, where all the children are above average, it is 
human nature for all Members of Congress to want their local hospitals 
to be above average. But not all hospitals are above average--and this 
is a serious matter. In fact, it is a matter of life and death. 
Hospitals which do large volumes of a certain type of procedure tend to 
have better outcomes and quality. Indeed, really good health policy in 
this Nation would prohibit hospitals from doing sophisticated 
procedures if they do not do a certain volume per month. This principle 
is applied to liver transplants, for example, and ought to be applied 
to some other procedures as well. We may all have pride in our local 
hospitals, but the fact is: some of them are killing people because 
they do not do enough of certain types of procedures and therefore are 
not skilled in those procedures.
  Medicare should be able to contract with certain hospitals for 
quality and volume--both to save money and to deliver better health 
care.
  We are about to begin a commission to make recommendations for the 
long-term survival of Medicare. Many on that commission will want to 
cut back benefits and ask beneficiaries to pay more--but before they 
do, they should explore every possible cost saving in the system. This 
bill is a two-fer: it saves money while improving quality.
  I regret this provision was not included in this summer's budget 
bill. I hope it will be included in the next Medicare bill that moves 
through Congress.
  As further explanation of why this legislation makes great sense, I 
am including below ``Extracts from the November, 1995 Research Report'' 
on the Centers of Excellence Demonstration.

   Centers of Excellence Demonstration--Extracts from November 1995 
                            Research Report

       Rational for the Demonstration: Physicians operate under 
     different payment incentives than hospitals, so hospital 
     managers have difficulties Implementing more efficient 
     practice patterns. A global fee that includes physician 
     services aligns incentive and encourages physicians to use 
     institutional resources in a more cost effective.
       Design of the Demonstration: Under the demonstration, 
     Medicare paid each of the hospitals a single global rate for 
     each discharge in DRGs 106 and 107 bypass with and without 
     catheterization. This rate included in all impatient and 
     physician services. The standard Medicare hospital 
     passthroughs were also included, i.e., capital and direct 
     medical education, on a prorated basis. Any related 
     readmissions were also included in the rate. Pre- and post-
     discharge physician services were excluded except for the 
     standard inclusions in the surgeon's global fee. All four 
     hospitals agreed to forego any outlier payments for 
     particularly expensive cases. The hospitals and physicians 
     were free to divided up the payment any way they chose,
       Medicare Savings under the Demonstration: From the start of 
     the demonstration in May 1991 through December 1993, the 
     Medicare program saved $15.3 million on bypass patients 
     treated in the four original demonstration hospital. The 
     average discounted amount to roughly 14 percent on the $111 
     million in expended spending on bypass patients, including a 
     90-day post0-discharge period.
       90 percent of the savings came from HCFA -negotiated 
     discounts on the Part A and B inpatient expected payments.
       8 percent came from lower-than-expected spending on post-
     discharge care
       Beneficiary Savings under the Demonstration: Beneficiaries 
     (and their insurers) saved another $2.3 million in Part B 
     coinsurance payments.
       Total Savings under the Demonstration: Total Medicare 
     savings estimated to have been $17.6 million in the 2.5 year 
     period.


  Also included is an article from the October 23 Washington Post 
entitled ``Turning to a Specialist [Hospital] to Curb Rising Health 
Care Cost.'' It is an excellent explanation of how contracting with 
quality hospitals for a high volume of services can help both the 
Medicare trust fund and the patient.

        Turning to a Specialist to Curb Rising Health Care Costs

                         (By Steven Pearlstein)

       Legal Sea Foods. The Cap. Federal Express. Nucor Steel.
       One of the things common to all of these successful 
     companies is focus. Rather than try to be all things to all 
     people, they do one thing and do it very well. And by virtue 
     of their high volume and specialization, they have raised 
     quality and lowered prices for their consumers and made a 
     nice profit beside.
       But will the same formula work in health care? In small 
     way, it already has.
       At the Shouldice Hospital in Toronto, which performs only 
     hernia operations, the average price of $2,300 was more than 
     a third less than the cost of the same operation at the 
     typical general hospital in the United States. And yet 
     despite the lower cost, only one-half of 1 percent of 
     Shouldice patients need to have the procedure repeated, 
     compared with 10 percent of patients at general hospitals.
       And at surgeon Denton Cooley's famed Texas Heart Institute 
     in Houston, a coronary bypass operation cost $26,000, 
     compared with

[[Page E2070]]

     a national average of $30,000. More than 90 percent of 
     Cooley's patients lived five years beyond their surgery; 
     patients elsewhere didn't do nearly as well.
       According to Regina Herzlinger, a professor at the Harvard 
     Business School who collected the statistics, these early 
     moves toward specialization are almost sure to be replicated 
     as market forces continue to reshape the health care 
     industry.
       Herzlinger notes that a dozen or so medical conditions now 
     account for as much as two-thirds of the nation's health care 
     bill--things such as heart disease, depression, asthma, 
     diabetes, arthritis, cancer and pregnancy. That means that if 
     ways can be found to shave even 15 percent off the cost of 
     treating those conditions, the nation's health care tab could 
     be reduced by $100 billion each year.
       Specialization, of course, is nothing new to medicine. 
     There have long been mental hospitals and children's 
     hospitals, rehab centers and eye and ear infirmaries. But for 
     the most part, these centers have specialized in the hardest-
     to-treat cases, coupling care with medical research and 
     training in ways that have tended to raise costs rather than 
     lower them.
       The new genre of speciality facilities--``focused 
     factories,'' Herzlinger calls them--tend to be much more 
     entrepreneurial, hoping to leverage their lower prices and 
     higher quality to win contracts from big insurers and health 
     and maintenance organizations.
       In a sense, these facilities represent the second phase of 
     the effort to rationalize the nation's health care system. In 
     the first phase, competition forced doctors and nurses and 
     hospital administrations to accept higher workloads and less 
     pay while patients were forced to accept less choice and 
     convenience. Now, that process has pretty much reached its 
     limit.
       In the next phase, experts say, the way in which doctors 
     and hospitals go about delivering care will be reengineered, 
     disease by disease. Hospitals and doctors that come up with 
     standard treatments that generate the best medical outcomes 
     at the lowest prices will become the preferred providers of 
     the big health care plans. And look for these specialists to 
     roll out their successful model nationwide, driving local 
     suppliers out of the business in much the same way that 
     Subway has trounced the local sandwich shop and Home Depot 
     the local hardware store.
       The high-volume specialists will gain some advantage from 
     the fact that they can buy sutures more cheaply or because 
     they can better afford the cost of sophisticated medical 
     equipment. But more important, according to Herzlinger, is 
     that by doing the same thing over and over again, they gain 
     expertise and efficiency.
       At Shouldice Hospital, for example, each surgeon performs 
     an average of 600 to 700 hernia operations each year. That 
     means Shouldice surgeons do more hernia operations in two 
     years than most of their counterparts do in a lifetime.
       So promising are these results that big HMOs, such as 
     Oxford Health Plans in the New York area, are working with 
     specialists and hospitals to put together their own focused 
     factories in key markets.
       General hospitals look at all this with some apprehension. 
     Right now, the ``profits'' they earn from high-volume 
     procedures such as heart bypasses and baby deliveries are 
     used to make up for ``losses'' they suffer or running 
     emergency rooms and neonatal units. But if the profitable 
     business is taken away by the lower-cost specialists, 
     hospital administrators warn that they will have no choice 
     but to raise the price of the services they are left with.
       James Bentley, vice president of the American Hospital 
     Association, warns that what appears at first blush to be 
     cost saving may, in the end, turn out to be nothing more than 
     cost shifting.
       But a Georgetown University Medical Center, Kenneth D. 
     Bloem, the new chief executive, believes that the trend 
     toward specialization is inevitable--and that general 
     hospitals like his will have to begin preparing for it.
       That might require Georgetown to develop one or two focused 
     factories of its own, he said, while closing down some of its 
     departments that cannot achieve minimum economies of scale. 
     Or it might involve a new arrangement under which management 
     of Georgetown's departments--the coronary surgery unit, say--
     is turned over to one of the specialty companies.
       Right now, says Bloem, officials at a hospital such as 
     Georgetown still think of it as more like a medical 
     department store. In the future, he says, it may have to 
     operate more like a mall made up of a number of market-tested 
     specialty boutiques.
       In a small way, that process already has begun. The coffee 
     cart in the lobby of the hospital is run by Starbucks.

     

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