- THE MEDICARE VALUE-BASED PURCHASING FOR PHYSICIANS ACT

[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]

THE MEDICARE VALUE-BASED PURCHASING FOR PHYSICIANS ACT

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

HEARING

before the

SUBCOMMITTEE ON HEALTH

COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

__________

SEPTEMBER 29, 2005

__________

Serial No. 109-42

__________

Printed for the use of the Committee on Ways and Means

_____

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COMMITTEE ON WAYS AND MEANS

BILL THOMAS, California, Chairman

E. CLAY SHAW, JR., Florida CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania WILLIAM J. JEFFERSON, Louisiana
J.D. HAYWORTH, Arizona JOHN S. TANNER, Tennessee
JERRY WELLER, Illinois XAVIER BECERRA, California
KENNY C. HULSHOF, Missouri LLOYD DOGGETT, Texas
RON LEWIS, Kentucky EARL POMEROY, North Dakota
MARK FOLEY, Florida STEPHANIE TUBBS JONES, Ohio
KEVIN BRADY, Texas MIKE THOMPSON, California
THOMAS M. REYNOLDS, New York JOHN B. LARSON, Connecticut
PAUL RYAN, Wisconsin RAHM EMANUEL, Illinois
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California

Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel

______

SUBCOMMITTEE ON HEALTH

NANCY L. JOHNSON, Connecticut, Chairman

JIM MCCRERY, Louisiana FORTNEY PETE STARK, California
SAM JOHNSON, Texas JOHN LEWIS, Georgia
DAVE CAMP, Michigan LLOYD DOGGETT, Texas
JIM RAMSTAD, Minnesota MIKE THOMPSON, California
PHIL ENGLISH, Pennsylvania RAHM EMANUEL, Illinois
J.D. HAYWORTH, Arizona
KENNY C. HULSHOF, Missouri

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C O N T E N T S

Page______
Advisory of September 22, 2005 announcing the hearing............ 2

WITNESSES

Centers for Medicare and Medicaid Services, Hon. Mark McClellan,
Administrator.................................................. 7

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American Medical Association, John H. Armstrong, M.D............. 52
America's Health Insurance Plans, Karen Ignagni.................. 43
Jevon, Thomas, M.D., Practicing Family Physician................. 39
Urban Institute, Robert Berenson................................. 32

SUBMISSIONS FOR THE RECORD

California Medical Association, San Francisco, CA, joint letter.. 67
Ebeler, Jack, Alliance of Community Health Plans, statement...... 71
EmCare, Inc., Dallas, TX, statement.............................. 75
Griskewicz, Mary, Healthcare Information and Management Systems
Society, Alexandria, VA, statement............................. 77
Johnson, Michele, Medical Group Managment Association, statement. 78
Mennuti, Michael, American College of Obstetricians and
Gynecologists, Washington, DC, letter.......................... 80
Moore, Justin, American Physical Therapy Association, Alexandria,
VA, statement.................................................. 81
Wojcik, Steven, National Business Group on Health, statement..... 84

THE MEDICARE VALUE-BASED PURCHASING FOR PHYSICIANS ACT

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THURSDAY, SEPTEMBER 29, 2005

U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Health
Washington, DC.

The Subcommittee met, pursuant to notice, at 3:00 p.m., in
room 1100, Longworth House Office Building, Hon. Nancy L.
Johnson (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]

ADVISORY

FROM THE
COMMITTEE
ON WAYS
AND
MEANS

SUBCOMMITTEE ON HEALTH

CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
September 22, 2005
No. HL-9

Johnson Announces Hearing on the Medicare Value-Based Purchasing for
Physicians Act

Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on
Health of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on H.R. 3617, the ``Medicare Value-
Based Purchasing for Physicians' Services Act of 2005.'' The hearing
will take place on Thursday, September 29, 2005, in the main Committee
hearing room, 1100 Longworth House Office Building, beginning at 3:00
p.m., or immediately following the full Committee hearing.

In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing.

BACKGROUND:

H.R. 3617, introduced by Congresswoman Johnson on July 29, 2005,
would repeal the Sustainable Growth Rate formula and replace it with a
stable and predictable annual update based on changes in the costs of
providing care. Such payments would be linked to health care quality
and efficiency.

This legislation would provide a differential payment update to
practitioners meeting pre-established thresholds of quality or pre-
established levels of improvement, equal to the Medicare Economic Index
(MEI). Practitioners not meeting these thresholds would receive an
update of MEI, minus 1 percent.

Measures of quality and efficiency would include a mix of outcome,
process and structural measures. Clinical care measures must be
evidence-based. Practitioners would be directly involved in determining
the measures used for assessing their performance.

The Centers for Medicare & Medicaid Services would be required to
analyze volume and spending growth annually, and make recommendations
on regulatory or legislative changes to respond to inappropriate
growth. The Medicare Payment Advisory Commission would review this
report and recommendations.

In announcing the hearing, Chairman Johnson stated, ``I introduced
the Medicare Value-Based Purchasing Act in response to testimony at our
three Subcommittee hearings on physician payments and value-based
purchasing this year. Many of my colleagues on this Subcommittee and in
the House support this bill, and I thank them for that support. For
several years, I have argued that the current Medicare payment system
for physicians is unsustainable. I believe that this legislation
represents an important step in our efforts to move Medicare into the
twenty-first century. We have the ability to vary payment based on the
quality and efficiency of care delivered to our seniors under Medicare,
and we should use it. This hearing will offer the Subcommittee an
opportunity to hear from witnesses about this important legislation.''

FOCUS OF THE HEARING:

The hearing will focus on the provisions in H.R. 3617.

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Chairman JOHNSON. Good afternoon, everyone. I am going to
call the hearing to order. Pete is on his way, but I am going
to start with my opening statement, assuming that he will
survive not hearing it. We are going to have five votes in an
hour, so we are going to try to hear all of our witnesses
before we do have to vote because it is such a long recess, and
after that, of course, people are flying off to planes. Let me
just open by saying I am very pleased to be holding this
hearing on actually a legislative initiative that we introduced
and a series of amendments that we have circulated. I want to
thank many of my colleagues on the Subcommittee for
cosponsoring the legislation and for many others for taking an
intense interest in it, because I think this initiative
represents an attempt to move into the 21st century. It is not
going to be perfect, but it is a serious start. There are 80
pay-for-performance systems out there already, and I think it
is very important that the Federal Government set a model of
how you do this and try to make sure that as the Nation moves
in this development--in this direction, there is some
homogeneity in both process and criteria.
Today's legislative hearing on H.R. 3617 follows a series
of hearings by this Subcommittee to explore ways to address
physician reimbursement under the Medicare Program. This
legislation incorporates the many ideas brought to the
Subcommittee by government agencies, physician and other
practitioner organizations, purchasers with experience in
value-based purchasing in the private market, and
representatives of Medicare beneficiaries. To promote health
care quality, as well as efficiency in Medicare, the bill would
no longer pay providers the same amount regardless of the
quality of the care they provide. Payment updates would be
linked to health care quality and efficiency. Under this
legislation, Medicare would provide a differential update for
physician services. All practitioners would receive a 1.5-
percent update in 2006 instead of the 4.4-percent decrease
projected under the current law, and in 2007 and thereafter--
2007, 2008, practitioners who report quality and efficiency
measures would receive an update equal to the medical economic
index (MEI). Those who do not report will receive a lower but
still positive update equal to the MEI minus 1 percentage
point. This is similar to how we currently pay hospitals under
Medicare.
Beginning in 2009, practitioners who meet pre-established
thresholds of quality or show pre-established levels of
improvement would receive a payment update equal to the MEI.
Those who do not meet this threshold would receive a positive
but lower update equal to MEI minus 1 percentage point. The
legislation provides a structure for a value-based program. It
outlines characteristics that quality measures must satisfy.
For example, measures must include a mix of outcome, process
and structural measures; be evidence-based if they are related
to clinical care; be consistent, valid, practical and not
overly burdensome to collect. So, there are a number of
criteria in the bill that measures must meet to assure that
they are objective and quality-oriented. The program must
address issues of fairness by adjusting measures and ratings to
account for very sick patients, those who cannot or do not
comply with directives or who are located in neighborhoods
where traditions delay entry into the health care system. It is
critically important that the value-based program not encourage
patient selection or de-selection. The legislation outlines a
process for selecting measures that ensures that practitioners
would be directly involved in the measures used to gauge their
performance.
Practitioners would submit clinical care--I am going to cut
short my opening statement and not go through the whole
process. It is laid out in the bill. But I do want to note that
I believe it is terribly important that clinicians have control
over clinical measures. So, in the bill, they do make the
proposals, and while the consensus-building body builds
consensus around which measures are most important to use, the
government actually cannot invent clinical measures. The
government can initiate on its own process and structural
measures and goes through the rulemaking process to assure that
they receive public input in the process of identifying
measures in those categories.
Our witnesses provide their thoughts on this legislation
and on the amendments that we have circulated. On our first
panel we have Dr. Mark McClellan, the Centers for Medicare and
Medicaid Services (CMS) Administrator. Our second panel
includes Dr. Robert Berenson of the Urban Institute and a
former CMS official who brings us a wealth of knowledge about
physician payments. Dr. Thomas Jevon is a family physician in
solo practice located in Wakefield, Massachusetts, who will
provide input from that perspective. Dr. Jevon also will share
his experiences with the Bridges to Excellence quality
improvement program as a solo practitioner. Karen Ignagni, from
America's Health Insurance Plans, will provide us with a
purchaser's point of view and give us examples of value-based
purchasing programs from her member companies. Our last
witness, Dr. John Armstrong from the American Medical
Association (AMA), will present the views of physicians of the
AMA, many of which have had experience with physician payment
systems similar to that recommended in the legislation. Mr.
Stark, welcome, and would you like to make an opening
statement?
Mr. STARK. I would love to. Thank you, Madam Chair. This is
our fourth hearing this year on this physician payment system
or problem, and we still haven't focused in on the underlying
issues that got us to where we are today. The administration,
majority, organized medicine and, I suppose, us by acquiescence
all know full well what the temporary increases in the Medicare
Modernization Act (MMA), would exacerbate the cliff or the drop
that we now face, yet we have done nothing to craft a solution.
We have had a lot of hearings, but no solutions. Organized
medicine and many in Congress have proposed to just repeal the
sustainable growth rate (SGR) with little or no discussion or
options as to what we could replace it with. I am not going to
defend the SGR, but--I will let Chairman Thomas do that--but in
my view, simply repealing it isn't an option. I think you told
us, Dr. McClellan, sometime in previous testimony that we are
talking $180 billion to do it, and that is a little scarce
right now. People are quite enchanted, if not overly focused,
on the this notion of pay for performance. Done properly, that
would show me some promise. But I don't believe it can be done
without a decent information technology plan in place.
I would be willing to look, but I just don't--I think that
particular issue--and I don't think until we are able to have
complete electronic recordkeeping and universal recordkeeping
that we can track pay for performance. Even then I suspect it
would take several years, if not 10, to get the whole system
going. I think the best thing we have now are the
demonstrations that CMS has for hospitals and physicians, and I
think we could watch those and evaluate those and have a better
idea then of how to expand from the demonstrations that are now
going forth. To rush to embrace this, is a fad as I call it,
has diverted our attention from underlying problems in
physician reimbursement, a system that needs to have these
problems addressed; RBS utilization, Committee process, coding
issues, perverse incentives, a whole host of things that I
think we have to straighten out. The critical component of fee-
for-service Medicare has been ignored. The current system
allows abusive providers to profit while the prudent providers
pay the price in terms of reduced fees. We have to keep in mind
that physician increases lead to premium increases unless we
prevent it. Our beneficiaries are going to have record high
increases, the next year increase again significant. We need to
protect these premiums, and I share AARP's stand on this.
I want to remind everyone--and although I would not be so
skeptical as to suggest it was intentional--increased physician
spending will get us very quickly toward this arbitrary 45-
percent cap on Medicare's general revenue support. That to me
is the sword of Damocles hanging over our head, and if that
drops, we are in the soup. That, in effect, destroys Medicare
as we know it. If that is the intention of the administration
and the majority, fine, let's talk about it; but the idea that
we hit the 45-percent cap and then we no longer have an
entitlement to me is something that I think should be repealed
or else addressed with some replacement for Medicare as an
entitlement. I would be willing to, as I discussed with the
Chair and with Dr. McClellan, to support--whether you care
whether I support it or not--but I would be willing to
negotiate to support some kind of a 2-year override in the plan
cuts, provided that we have some concrete steps for a new
mechanism, whether it is geographic or specialty-specific
targets, that would keep some control on overall expenditures.
The best way, of course, to pay for this all would be to bring
the plan payment down to fee-for-service rates, which is what
we always intended, and nobody has ever shown me that the plans
deserve this outrageous bonus that they are getting. In the
meantime, I would support starting with pay for performance in
the private plans. Let us start with these plans as MedPAC has
recommended. They already have the data. They claim they
deliver high-quality care. Let us hold them accountable, and,
as they say, let us see if they can walk the walk as well as
they talk the talk. Thanks.
Chairman JOHNSON. Thank you very much, Pete. I would like
to just acknowledge the presence of two of the Republican
physicians who have been very actively interested in the health
care legislation that we have been working on, Dr. Burgess of
Texas and Dr. Gingrey of Georgia. Welcome to sitting with us
this afternoon. All of the issues that Pete raised will be a
part of our discussion as we move forward. There are two sides
to every matter, and I hope that we can come to an
understanding that allows my colleague from California to work
with me on this legislation, because I certainly respect his
concerns. Dr. McClellan.

STATEMENT OF THE HONORABLE MARK MCCLELLAN, M.D., PH.D.,
ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S.
DEPARTMENT OF HEALTH AND HUMAN SERVICES

Dr. MCCLELLAN. Madam Chairman, Congressman Stark,
distinguished Subcommittee Members and other distinguished
Members, thank you for the opportunities to be with you here
this afternoon. In recent weeks we have seen once again the
critical role that physicians play in helping people recover
and stay well. We saw this in the response to Hurricane Katrina
where when evacuees needed care all through the gulf coast and
around the country, local physicians did not ask, how is this
going to be paid for, what are the rules? They asked, what kind
of care and assistance do evacuees need? They started providing
it. We responded by supporting those efforts through
modifications in our rules in Medicare and Medicaid and setting
up a new waiver program that is already now available to most
evacuees in our payment systems. In addition, I want to thank
the physician community for being one of our most critical
partners as we work to bring new drug coverage to Medicare
beneficiaries on schedule and nationwide. Physician
organizations and physicians all over the country have taken
steps, like making available brochures and other information on
where their patients can get the support they need to take
advantage of the new coverage.
On average, seniors are going to see their out-of-pocket
costs fall by many hundreds of dollars next year, and I truly
appreciate the effort physicians are taking to ensure that
their patients have access to the medicines they need in this
new program. As you well know, physician participation and
leadership are also critical in providing care to beneficiaries
in Medicare. We need to ensure that physicians are adequately
compensated for this care in the Medicare Program, but how we
pay also matters. Medicare's payment system for physicians
should be set up to encourage and support them in providing
quality care and preventing avoidable health care costs. After
all, physicians are in the best position to know what can work
best to improve their practice. Updates in the current payment
system for physician services are now projected to be negative
for the next 7 years. Continued negative updates for many years
are not sustainable in terms of assuring access to quality care
for Medicare beneficiaries. At the same time, simply increasing
spending by adding larger updates into the current payment
system is also not sustainable from the standpoint of
Medicare's costs or beneficiary premiums and cost sharing, so
it is critical now for Medicare to support physicians in
achieving better care for our beneficiaries at a lower overall
cost.
I would like to thank you, Madam Chairman, for your
leadership on this issue. I would like to thank the Ranking
Member for his continued efforts to make sure that Medicare and
our beneficiaries are getting the most value. There is also
bipartisan interest in the Senate. We intend to continue
working closely with you to consider changes to increase the
effectiveness of how Medicare compensates physicians and to
take new steps to avoid unnecessary costs. That is the best
path to a sustainable payment system. I also want to thank the
Nation's physician organizations for their leadership on issues
of quality and performance. Thanks in part to the leadership
and hard work of many physician organizations, substantial
progress has been made to develop quality measures for most
physician specialties. In fact, they have identified 66
evidence-based quality measures for 29 specialties, as I detail
in my written testimony. Those specialties represent 80 percent
of Medicare physician spending. This is tremendous progress
working together, and physician leadership has helped make it
possible. We are also developing the infrastructure needed to
support the reporting of measures like these on existing
physician claims as soon as 2006. While we are still analyzing
the issues, we are working out the details so that voluntary
reporting can be accomplished under existing statutory
authorities.
Our collaborative work on identifying and measuring quality
care so that we can better support it has been guided by some
widely accepted principles. Quality measures should be
evidence-based, valid, reliable and relevant to a significant
part of a physician's actual practice. It is always important
that quality measures do not discourage physicians from
treating high-risk or difficult cases, as you mentioned. In
addition, quality measures should be implemented in a realistic
manner that is most relevant for quality improvements in all
types of practices and patient populations while being least
burdensome for physicians and other stakeholders. To make sure
that these principles are met, quality measures should be
developed in conjunction with open and transparent processes
that promote consensus from a broad range of health care
stakeholders.
To achieve these goals, CMS joined in a process with the
National Committee of Quality Assurance (NCQA), the AMA's
Physician Consortium For Performance Improvement, other
physician organizations and stakeholders to develop measures
that would be appropriate for the ambulatory setting. We
supported the National Quality Forum (NQF) endorsement of
ambulatory care measures developed by the NCQA and the
Physician Consortium. More recently we have also been working
with the Ambulatory Care Quality Alliance, the American College
of Physicians, the American Academy of Family Practitioners,
the Nation's health plans and many other stakeholders to expand
these efforts, and we are building on this progress--that I
have already noted--with additional primary care quality
measures as well as measures in other specialties. Activity is
under way to prepare the other measures for NQF endorsement. As
a result of this activity, we have 66 measures, as I mentioned,
and 30 have already been endorsed or a part of the NQF process.
The bottom line is that quality measures or indicators have
been developed or are well along in the development process for
most physician specialties. There are strong collaborations
among health care providers and other stakeholders to build on
this rapid progress to improve quality and avoid unnecessary
costs. This is very good news for achieving our shared goal of
supporting the best efforts of physicians to keep seniors well
and to keep health care costs down. Madam Chairman, Mr. Stark,
thanks again for the opportunity to testify. I would be happy
to answer any of your questions.
[The prepared statement of Dr. McClellan follows:]
Statement of The Honorable Mark McClellan, M.D., Ph.D., Administrator,
Centers for Medicare and Medicaid Services, U.S. Department of Health
and Human Services
Madam Chairman Johnson, Congressman Stark, distinguished
Subcommittee members, thank you for inviting me to testify on value-
based purchasing for physicians under Medicare.
I want to take this opportunity to thank the physician community
for their heroic efforts on behalf of evacuees of hurricanes Katrina
and Rita. Physicians rushed to provide care for those in need without
even considering payments or program requirements. Providers who were
personally affected by the hurricanes as well as those in areas
sheltering evacuees have provided extensive medical services under the
most challenging conditions. We have acted expeditiously to provide
effective support for these efforts. We've done this through
administrative adjustments to our Medicare and Medicaid payment rules.
And we've implemented a new Medicaid waiver that provides for
immediate, temporary Medicaid coverage as well as financial support for
needed medical services that fall outside of standard Medicaid
benefits, all using existing systems in the affected states so that
they can be implemented quickly and effectively. Within just ten
business days CMS reviewed and approved waivers for the states housing
the vast majority of evacuees, including Texas, Arkansas, Mississippi,
Alabama, Georgia, Florida, Idaho, and the District of Columbia. And we
are working closely with all other states that need financial support.
Through these efforts, we are helping all evacuees get the care they
need as they get back on their feet, we are making sure that the health
care providers get reimbursed for providing that care, and we are
making sure that the states hosting the evacuees are covered for any
substantial expenses that they incur.
In addition, the physician community is one of our key partners as
we work to implement the Medicare Modernization Act (MMA). As you well
know, we are rapidly approaching the implementation date for Medicare's
new prescription drug coverage. As physicians have known for many
years, adequate access to medications is more important today than ever
before. Physician organizations have worked closely with us to help
inform their membership about the new benefits coming in Medicare to
help their patients get access to up to date care. Physicians all over
the country are helping beneficiaries take advantage of the new
coverage, for example by providing materials in their offices about the
basics of Medicare's prescription drug coverage, and letting them know
where to go to get the information and support they need to make a
confident decision. The new Medicare drug coverage will be available on
time, nationwide, at a lower cost and with more benefits available than
many people had expected. As a result, on average seniors will save
many hundreds of dollars next year in their total out of pocket costs.
I truly appreciate the time and effort physicians are taking to ensure
their Medicare patients have access to the medications they need.
As I testified in July, continued improvement of the Medicare
program requires the successful participation of physicians and we need
to ensure they are adequately compensated for the care they provide to
people with Medicare. But how we pay also matters. In addition to
providing adequate payments, Medicare's payment system for physicians
should encourage and support them to provide quality care and prevent
avoidable health care costs. After all, physicians are in the best
position to know what can work best to improve their practices, and
physician expertise coupled with their strong professional commitment
to quality means that any solution to the problems of health care
quality and affordability must involve physician leadership.
Updates to the current payment system for physicians' services are
projected to be negative for the next seven years. Such continued
negative updates raise real concerns about this payment system in terms
of assuring access to quality care for Medicare beneficiaries. At the
same time, simply increasing spending by adding larger updates into the
current volume-based payment system that is already experiencing
increases of 12 to 13 percent or more per year would have an adverse
effect from the standpoint of Medicare's finances or beneficiary
premiums and cost-sharing, and does not promote better quality care.
However, it is clear, under our current system, there is much
potential for physicians to improve the value of our health care
spending. Under the current system, there are substantial variations in
resources and in spending growth for the same medical condition in
different practices and in different parts of the country, without
apparent difference in quality and outcomes, and without a clear basis
in existing medical evidence. A study published in 2003 looked at
regional variations in the number of services received by Medicare
patients who were hospitalized for hip fractures, colorectal cancer,
and acute myocardial infraction. The researchers found that patients in
higher spending areas received approximately 60 percent more care, but
that quality of care in those regions was no better on most measures
and was worse for several preventive care measures. \1\ Further, there
are many examples of steps that physicians have taken to improve
quality while helping to keep overall costs down.
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\1\ Fisher, Elliott S., MD, MPH; David E. Wennberg, MD, MPH;
Therese A. Stukel, Ph.D.; Daniel J. Gottlieb, MS; F.L. Lucas, Ph.D.;
and Etoile L. Pinder, MS, ``The Implications of Regional Variations in
Medicare Spending. Part 1: The Content, Quality, and Accessibility of
Care,'' in The Annals of Internal Medicine, February 18, 2003, Vol.
138, Issue 4.
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Because it is critical for CMS payment systems to support better
outcomes for our beneficiaries at a lower cost, CMS is working closely
and collaboratively with medical professionals and Congress to consider
changes to increase the effectiveness of how Medicare compensates
physicians for providing services to Medicare beneficiaries. I am
engaging physicians on issues of quality and performance with the goal
of supporting the most effective clinical and financial approaches to
achieve better health outcomes for people with Medicare. We are
committed to developing reporting and payment systems that enable us to
support and reward quality, to improve care without increasing overall
Medicare costs. When clear, valid and widely accepted quality measures
are in place, pay-for-performance is a tool that could enable our
reimbursement to better support efforts to improve quality and avoid
unnecessary costs.
Currently, hospitals and physicians are paid under separate
systems. Under these systems, physicians do not receive credit for
avoiding unnecessary hospitalizations by providing better care to their
patients. However, in our physician group practice demonstration
project, physicians could receive performance based payments derived
from savings from preventing chronic disease complications, avoiding
hospitalizations, and improving quality of care.
The evidence is increasing that when we provide an incentive for
reporting and achieving better quality, health care providers respond
by using payments to take a range of steps from the simple to the high-
tech to make it happen. This should not really be surprising--our
health professionals are dedicated, and they want to do everything in
their power to get the best care to their patients. So when we support
better quality, we enable them to do what they do best.
We've seen this approach work first-hand with hospital payments
where we have tied the annual hospital payment update to quality
measure reporting. It has had a positive impact on the availability of
quality information, with about 70 percent of hospitals reporting
quality data.
Reporting clinically valid quality measures is an important step
toward making it easier to achieve major improvements in quality--if
you cannot measure it, it is hard to take steps to improve it. We have
been working hard in close collaboration with health professionals and
other stakeholders to promote the development of better measures.
Voluntary Reporting of Quality Measures Can Be Implemented Soon
Thanks to the leadership and hard work of many physician
organizations, we have made considerable progress creating consensus
around a set of primary care quality measures. In addition, we have
made substantial progress to develop quality measures for the majority
of physician specialties. We now have 66 quality measures for 29
specialties. Those 29 specialties represent about 80 percent of
Medicare physician spending. We are also developing the infrastructure
so that the reporting of these measures on existing physician claims
could begin as soon as 2006. While we are still analyzing the issues,
we are working out the details so that reporting can be accomplished
under existing statutory authorities.
CMS Works with Partners to Develop, Endorse, and Implement Quality
Measures
The ability to evaluate and measure quality is an important
component in delivering high quality care. For several years, CMS has
been collaborating with a variety of stakeholders to develop and
implement uniform, standardized sets of performance measures for
various health care settings. In recent months, thanks to the
leadership of many physician organizations, these efforts have
accelerated even further.
Our work on the quality measures has been guided by the following
widely-accepted principles. Quality measures should be evidence-based.
They should be valid and reliable. They should be relevant to a
significant part of medical practice. And to assure these features,
quality measures should be developed in conjunction with open and
transparent processes that promote consensus from a broad range of
health care stakeholders. It also is important that quality measures do
not discourage physicians from treating high-risk or difficult cases,
for example, through a risk adjustment mechanism. In addition, quality
measures should be implemented in a realistic manner that is most
relevant for quality improvement in all types of practices and patient
populations, while being least burdensome for physicians and other
stakeholders.
More than two years ago, CMS initiated a process with the National
Committee for Quality Assurance (NCQA), the American Medical
Association's (AMA) Physician Consortium for Performance Improvement,
and other stakeholders to develop measures that would be appropriate
for the ambulatory setting. As part of this endeavor, CMS took the lead
in supporting the National Quality Forum (NQF) endorsement of
ambulatory care measures developed by the NCQA and the Physician
Consortium. The NCQA is a private, not-for-profit organization
dedicated to improving health care quality by providing information
about health care quality to help inform consumer and employer choice.
The NQF is a private, not-for-profit membership organization created to
develop and implement a national strategy for healthcare quality
measurement and reporting. The result of this activity has been the
recent endorsement by the NQF of 36 ambulatory quality measures.
Examples of three ambulatory quality measures are the results of
the hemoglobin A1C and LDL and blood pressure tests for diabetic
patients. The clinical evidence suggests that patients who have a
hemoglobin A1C test below 9 percent, an LDL less than or equal to 100
mg/dl, and blood pressures less than or equal to 140/90 mmHg have
better outcomes. These measures are evidence-based, reliable and valid,
widely accepted and supported, and were developed in an open and
transparent manner. Evidence indicates that reaching these goals can
lead to fewer hospitalizations by avoiding complications from diabetes
such as amputation, renal failure, and heart disease.
Two quality measures endorsed by NQF for heart failure patients
include placing the patient on blood pressure medications and beta
blocker therapy. Here too, these therapies have been shown to lead to
better health outcomes and reduce preventable complications. Together,
diabetes and heart failure account for a large share of potentially
preventable complications.
In addition to primary care quality measures, other specialties are
developing measures. For example, measures of effectiveness and safety
of some surgical care at the hospital level have been developed through
collaborative programs like the Surgical Care Improvement Program
(SCIP), which includes the American College of Surgeons. Preventing or
decreasing surgical complications can result in a decrease in avoidable
hospital expenditures and use of resources. For example, use of anti-
biotic prophylaxis has been shown to have a significant effect in
reducing post-operative complications at the hospital level. This
measure is well developed and there is considerable evidence that its
use could not only result in better health but also avoid unnecessary
costs. These post-operative complication measures, which are in use in
our Hospital Quality Initiative, are being adapted for use as physician
quality measures. Application of this type of post-operative
complication measure at the physician level has the potential to help
avoid unnecessary costs as well as improve quality.
We also are collaborating with other specialty societies, such as
the Society of Thoracic Surgeons (STS), to implement quality measures
that reflect important aspects of the care of specialists and sub-
specialists. The STS has already developed a set of 21 measures at the
hospital level that are risk adjusted and track many common
complications as outcome measures. STS is also conducting a national
pilot program to measure cost and quality simultaneously, while
communicating quality and efficiency methods across regional hubs with
the objective of reducing unnecessary complications and their
associated cost. The STS measures have been adapted to a set of five
quality measures for physicians, such as for a patient who receives by-
pass surgery with use of internal mammary artery.
Many other specialties have also taken steps to develop evidence-
based quality measures. On July 14, 2005, I sent a letter to many
specialty societies, summarizing some of the work to date and
requesting an update on their efforts to develop quality and
performance measures.
I want to thank the AMA and specialty societies for their very
positive response to this effort. Six months ago few specialties had
quality measures. Today the majority of specialties have quality
measures. Many specialties have created quality task forces and are
participating in the quality measurement process. As a result, a total
of 66 quality measures now exist covering 29 specialties. These
specialties represent about 80 percent of Medicare physician spending.
NQF has endorsed 36 of the measures. Activity is underway to prepare
the other measures for NQF endorsement. The latest version of all 66
quality measures is attached to this statement.
CMS has had productive exchanges with most medical specialty
organizations. I would encourage organizations that have not entered
into discussions with us to initiate a dialogue as soon as possible so
we can work together to develop clinically valid measures. In certain
areas, compliance with evidence-based practice guidelines has the
potential to be a quality measure.
The process we have used with the medical profession to develop
quality measures beyond ambulatory care should greatly expedite and
facilitate the development, acceptance and implementation of quality
measures for additional specialties and services. By working in
collaboration with the societies, there has been considerable progress
in the measure development process. This preparation will facilitate
the NQF endorsement process. However, measures that have not yet gone
through the NQF endorsement process are still of great value. Physician
reporting of these measures will help foster their acceptance in the
medical community and help prepare physicians for their eventual
adoption. Moreover, since there is likely to be reporting of the
quality measures for a period of time before payment based on
performance, NQF consensus is not required to begin reporting of such
measures. The rapid progress to develop quality measures for the
majority of specialties is a clear indication that quality measures are
gaining acceptance as an important element in achieving better
performance in our health care system.
Our experience with hospital quality measures is that after a
measure is endorsed additional work with stakeholders is necessary to
assure successful implementation. The Hospital Quality Alliance played
an important role in implementation of the hospital quality measures by
facilitating hospital adoption and understanding of technical concerns.
The Ambulatory Care Quality Alliance (AQA) can serve a similar role to
help with physician adoption of the ambulatory quality measures. The
AQA is a consortium led by the American Academy of Family Physicians,
the American College of Physicians, America's Health Insurance Plans
and the Agency for Healthcare Research and Quality, CMS and other
stakeholders, including the AMA and other physician groups, as well as
representatives of private sector purchasers and consumers.
CMS is Developing a System to Simply Reporting of Quality Measures
The development, endorsement, and consensus process is not
sufficient to implement measures successfully. Detailed specifications
are needed about such items as the associated diagnosis codes and the
rules for reporting (e.g., the ordering vs. performing physician).
There is also a key issue about how a payor like Medicare can obtain
information on the quality measures. For this reason, while the rapid
development of quality measures is ongoing, CMS also has been working
on the technical methods for supporting effective, simple, and the
least burdensome reporting and payment based on these measures.
In the years ahead, it is expected that electronic record systems
can be developed that would provide information that is needed to
measure and report on quality while fully protecting patient
confidentiality. However, while electronic health records would greatly
facilitate the accurate and efficient use of information on quality
measures and quality improvement, progress on supporting quality
improvement should not be delayed until electronic health records are
widely used. Indeed, taking steps now to promote quality reporting and
improvement also could promote the adoption of and investment by
physicians in electronic records, which would facilitate more efficient
quality reporting and quality improvement activities. In the short
term, there is considerable evidence that information on a broad range
of quality measures can be obtained adequately via information
transmitted on existing claims. In particular, with adequate guidance
for appropriate coding practices by physician offices, the so-called G-
codes, HCPCS codes established by Medicare and reportable on existing
claims forms, can be the vehicle to report the information on claims.
While HCPCS codes generally represent services furnished, the G-codes
would report information on the quality measures, and could potentially
be a basis for payment based on the report of such information.
We are in the process of converting all the quality measures into a
series of G-codes that could then be reported by a physician on a claim
in a way that is simple and does not burden physicians. This reporting
mechanism has several advantages. It allows collection of information
on the quality measures via an existing system familiar to the
physician community. It makes reporting of the information simple for
physicians. Furthermore, it allows collection of the quality measures
to begin very soon--possibly as early as 2006.
Many changes in Medicare involve changes in the systems used by our
contractors to pay claims. We are currently assessing whether changes
in our contractor systems might be necessary to implement the reporting
of information on the quality measures on claims. We are also assessing
implementation issues under a scenario where reporting and subsequent
performance could result in a payment differential for physicians.
Many believe that a trial period of a year or two might be
appropriate where physicians would report on the quality measures,
including quality measures that have broad endorsement and support but
that have not yet fully completed a formal consensus process. The bill
you introduced, Madam Chairman, H.R. 3617, would begin with reporting
and move to performance. Some believe that Medicare could establish a
payment differential where physicians who report on the measures get a
different payment from physicians who do not report. Many believe that
after a trial period for reporting Medicare would then move to a system
where the payment differential would be based on performance for the
measures.
In many ways, where we are today with reporting quality measures
for physicians is analogous to where we were before the MMA enacted
section 501, the 0.4 percentage point payment differential for
reporting of 10 quality measures. Prior to MMA, mechanisms had been
established so that hospitals could voluntarily report information on
the quality measures. When MMA was enacted, hospitals quickly responded
and most of those institutions that had not previously reported the
measures did so. Today there are a total of 20 hospital quality
measures. Hospitals can voluntarily report information on the
additional 10 measures and such reporting does not have a payment
consequence. About 70 percent of hospitals are already reporting on 17
of the measures. Information on all measures reported by hospitals is
available on the CMS Hospital Compare website.
The bottom line is that quality measures or indicators have been
developed or are well along in the development process for most
physicians' specialties. We are currently developing G-codes to report
information on these measures on existing claims. We are sorting
through systems issues for our contractors. While we still have much
work to do, at this point, we believe that we can make rapid progress
in very short order so that broad initial reporting of measures that
are very relevant to the quality and cost of care for our beneficiaries
could begin as soon as 2006.
CMS Works to Ensure Resources are Utilized Appropriately
In many cases, quality measures may help us get more value for our
health care dollars. We need to build on this by examining appropriate
resource use. The well documented wide variation in resource use among
areas for treating the same medical condition raises questions about
whether Medicare is getting good value in all areas.
In my June 24 letter to you and Chairman Thomas, I indicated that
we supported and were preparing to implement MedPAC's March
recommendation to Congress that: ``The Secretary should use Medicare
claims data to measure fee-for-service physicians' resource use and
share results with physicians confidentially to educate them about how
they compare with aggregated peer performance.''
Measures of physician resource use have been used and are being
developed by a number of public and private entities. The most widely
used measure of physician resource use is total expenditures per case.
Total expenditures include all resources involved in furnishing the
case, including physicians' services, laboratory services and other
diagnostic tests, hospital services, other facilities, drugs, durable
medical equipment, etc.
The measures of resource use are generally applied to episodes of
care. The beginning of an episode may be defined by a new diagnosis or
treatment, such as hospitalization. Such episodes usually end after
claims related to the episode are not present for a defined period of
time. Such episodes could include heart attacks or broken hips. For
surgeons, coronary bypass surgery and hip replacements would be
considered episodes. Episodes also may occur for a full year in the
case of chronic diseases, such as diabetes, heart failure, and chronic
pulmonary disease.
We are working to implement the MedPAC recommendation using
information derived from claims data. We are developing resource use
measures that target particular tests and procedures that may be over--
or under-used, as overuse is inefficient and under-use raises quality
concerns. We also are developing pilot projects that will use software
programs created by a number of private sector entities. These programs
group services into episodes using claims data. The episodes are then
assigned to physicians so average resource use can be computed. We plan
to pilot test resource use for a few selected conditions in two states.
We are assessing measurement issues such as case-mix/severity
adjustment and identification of appropriate comparison groups. Our
goal would be to share results with physicians confidentially to
educate them about how they compare to peers and ultimately to
incorporate measures related to services, resources, and expenditures
into the payment system as envisioned in your bill, H.R. 3617.
Conclusion
Madam Chairman, thank you again for this opportunity to testify on
improving how Medicare pays for services. We look forward to working
with Congress and the medical community to develop a system that
ensures appropriate payments while also promoting the highest quality
of care, without increasing overall Medicare costs. As a growing number
of stakeholders now agree, we must increase our emphasis on payment
based on improving quality and avoiding unnecessary costs to solve the
problems with the current physician payment system. Thanks to the
leadership of many private-sector organizations working together, and
especially thanks to the leadership of physicians, we have made rapid
progress in developing quality measures and indicators as well as in
building an infrastructure to allow the reporting of such measures. I
would be happy to answer any of your questions.

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Conversion of Clinial Measures to G-Codes
Physicians Pay-for-Performance
As of: September 26, 2005

Internal Medicine, Family Practice, General Practice

Diabetic patient with most recent HbA1c level (within the
last 6 months) documented as less than or equal to 9%
Diabetic patient with most recent HbA1c level (within the
last 6 months) documented as greater than 9%
Clinician documented that diabetic patient was not
eligible candidate for HbA1c measure
Clinician has not provided care for the diabetic patient
for the required time for HbA1c measure (within the last 6 months)

Diabetic patient with most recent LDL (within the last 12
months) documented as less than or equal to 100 mg/dl
Diabetic patient with most recent LDL (within the last 12
months) documented as greater than 100 mg/dl
Clinician documented that diabetic patient was not
eligible candidate for LDL measure
Clinician has not provided care for the diabetic patient
for the required time for LDL measure (within the last 12 months)

Diabetic patient with most recent blood pressure (within
the last 6 months) documented as less than or equal to 140/90 mmHg
Diabetic patient with most recent blood pressure (within
the last 6 months) documented as greater than 140/90 mmHg
Clinician documented that the diabetic patient was not
eligible candidate for blood pressure measure
Clinician has not provided care for the diabetic patient
for the required time for blood measure (within the last 6 months)

HF patient with LVSD documented to be on either ACE-I or
ARB therapy
HF patient with LVSD not documented to be on either ACE-I
or ARB therapy
Clinician documented that HF patient was not eligible
candidate for either ACE-I or ARB therapy measure

HF patient with LVSD documented to be on B-blocker therapy
HF patient with LVSD not documented to be on B-blocker
therapy
Clinician documented that HF patient was not eligible
candidate for B-blocker therapy measure

AMI-CAD patient documented to be on B-blocker therapy
AMI-CAD patient not documented to be on B-blocker therapy
Clinician documented that AMI-CAD patient was not eligible
candidate for B-blocker therapy measure

AMI-CAD patient documented to be on antiplatelet therapy
AMI-CAD patient not documented to be on antiplatelet
therapy
Clinician documented that AMI-CAD patient was not eligible
candidate for antiplatelet therapy measure

Internal Medicine--Cardiology

CAD--with LDL documented to be less than or equal to
100mg/dl
CAD--with LDL documented to be greater than 100mg/dl
Clinician documented that CAD patient was not eligible
candidate for LDL measure

Counseling on the importance of blood sugar control and
monitoring of HgA1c documented to have been provided to patient with
diabetes mellitus
Counseling on the importance of blood sugar control and
monitoring of HgA1c not documented to have been provided to patient
with diabetes mellitus

Counseling on the use of antioxidants documented to have
been provided to patient with intermediate age-related macular
degeneration (AMD), or advanced AMD in one eye, based on data from the
Age-Related Eye Disease Study
Counseling on the use of antioxidants not documented to
have been provided to patient with intermediate age-related macular
degeneration (AMD), or advanced AMD in one eye, based on data from the
Age-Related Eye Disease Study
Clinician documented that patient with intermediate age-
related macular degeneration (AMD), or advanced AMD in one eye (based
on data from the Age-Related Eye Disease Study) was not eligible
candidate for antioxidant measure

Central corneal thickness measurement documented for a
patient who is primary open angle glaucoma suspect
Central corneal thickness measurement not documented for a
patient who is primary open angle glaucoma suspect
Clinician documented that patient who is primary open
angle glaucoma suspect was not eligible candidate for central corneal
thickness measure

Cataract surgery candidate documented to have been
questioned about his/her visual function, including a review of the
patient's self-assessment of visual status and visual needs
Cataract surgery candidate not documented to have been
questioned about his/her visual function, including a review of the
patient's self-assessment of visual status and visual needs

A 5% solution of povidone-iodine documented to have been
provided as an infection prophylaxis in the pre-operative period for
intraocular surgery
A 5% solution of povidone-iodine not documented to have
been provided as an infection prophylaxis in the pre-operative period
for intraocular surgery
Clinician documented that patient at the pre-operative
period for intraocular surgery was not an eligible candidate for 5%
solution of povidone-iodine infection prophylaxis measure

Surgery--Ophthalmology

Chronic open angle glaucoma patient documented to have
received optic nerve assessment
Chronic open angle glaucoma patient not documented to have
received optic nerve assessment

Surgery--Orthopedic

Patient documented to have received antibiotic prophylaxis
one hour prior to incision time (two hours for vancomycin)
Patient not documented to have received antibiotic
prophylaxis one hour prior to incision time (two hours for vancomycin)
Clinician documented that patient was not an eligible
candidate for the antibiotic prophylaxis one hour prior to incision
time (two hours for vancomycin) measure

Patient with documented receipt of thromboemoblism
prophylaxis
Patient without documented receipt of thromboemoblism
prophylaxis
Clinician documented that patient was not an eligible
candidate for thromboemoblism prophylaxis measure

Surgery--General

ESRD Patient requiring hemodialysis vascular access
documented to have received autogenous AV fistula
ESRD Patient requiring hemodialysis documented to have
received vascular access other than autogenous AV fistula
Clinician documented that ESRD patient requiring
hemodialysis was not a candidate for autogenous AV fistula (or other
autogenous AV fistula) evaluation measure

Internal Medicine--Hematology

Patient with multiple myeloma not in remission documented
to be treated with a bisphophonate
Patient with multiple myeloma not in remission not
documented to be treated with a bisphophonate
Clinician documented that patient with multiple myeloma
not in remission was not an eligible candidate for bisphophonate
treatment measure

MDS patient presenting with anemia (Hb < 11 g/dl)
documented to have received bone marrow examination, including iron
stain, prior to receiving erythropoietin therapy
MDS patient presenting with anemia (Hb < 11 g/dl) not
documented to have received bone marrow examination, including iron
stain, prior to receiving erythropoietin therapy
Clinician documented that MDS patient presenting with
anemia (Hb < 11 g/dl) was not an eligible candidate for bone marrow
examination, including iron stain, measure prior to receiving
erythropoietin therapy

CLL patient documented to have received confirmation of
CLL diagnosis by flow cytometry as part of initial diagnostic
evaluation
CLL patient not documented to have received confirmation
of CLL diagnosis by flow cytometry as part of initial diagnostic
evaluation
Clinician documented that CLL patient was not eligible
candidate for flow cytometry as part of initial CLL diagnostic
evaluation measure

MDS and acute leukemia patient documented to have received
cytogenic testing on bone marrow or peripheral blood (as appropriate)
as part of initial diagnostic evaluation
MDS and acute leukemia patient not documented to have
received cytogenic testing on bone marrow or peripheral blood (as
appropriate) as part of initial diagnostic evaluation
Clinician documented that MDS and acute leukemia patient
was not an eligible candidate for cytogenic testing on bone marrow or
peripheral blood (as appropriate) as part of initial diagnostic
evaluation measure

Emergency Medicine

AMI: Patient documented to have received aspirin at
arrival
AMI: Patient not documented to have received aspirin at
arrival
Clinician documented that AMI patient was not an eligible
candidate aspirin at arrival measure

AMI: Patient documented to have received B-blocker at
arrival
AMI: Patient not documented to have received B-blocker at
arrival
Clinician documented that AMI patient was not an eligible
candidate for B-blocker at arrival measure

PNE: Patient documented to have received antibiotic within
4 hours of presentation
PNE: Patient not documented to have received antibiotic
within 4 hours of presentation
Clinician documented that PNE patient was not an eligible
candidate for antibiotic within 4 hours of presentation measure

Internal Medicine--Gastroenterology

Clinician documented that patient received conscious
sedation consistent with guidelines, including procedural monitoring
(ASGE Guidelines)
Patient received conscious sedation in a manner that was
not outlined in the guideline specifications, including procedural
monitoring (ASGE Guidelines)
Clinician documented that patient was not an eligible
candidate for conscious sedation measure

Patient documented to have serum HCV RNA performed prior
to initiating HCV antiviral therapy
Patient not documented to have serum HCV RNA performed
prior to initiating HCV antiviral therapy

Internal Medicine--Pulmonology

COPD patient with documented spirometry evaluation in last
12 months
COPD patient without documented spirometry evaluation in
last 12 months

COPD patient documented to have received, at least
annually, smoking cessation intervention
COPD patient no documented to have received, at least
annually, smoking cessation intervention

COPD patient documented to have received annual influenza
vaccination
COPD patient not documented to have received annual
influenza vaccination

Anesthesiology

Patient who underwent general anesthesia for greater than
60 minutes documented to have immediate post-operative normothermia
Patient who underwent general anesthesia for greater than
60 minutes not documented to have immediate post-operative normothermia
Clinician documented that patient who underwent general
anesthesia for greater than 60 minutes was not an eligible candidate
for immediate post-operative normothermia measure

Patient treated with chronic pain management with
documented comprehensive history and physical consistent with
guidelines (ASA Guidelines)
Patient treated with chronic pain management without
documented comprehensive history and physical consistent with
guidelines (ASA Guidelines)

Internal Medicine--Neurology

Patient with acute ischemic stroke documented to be on
anti-thrombotic therapy (aspirin, ticlopidine, clopidogrel,
dipyridamole, and warfarin)
Clinician documented that patient with acute ischemic
stroke was not an eligible candidate for anti-thrombotic therapy
(aspirin, ticlopidine, clopidogrel, dipyridamole, and warfarin) measure

Patient with acute ischemic stroke and nonvalvular atrial
fibrillation documented to be on warfarin therapy
Clinician documented that patient with acute ischemic
stroke and nonvalvular atrial fibrillation was not an eligible
candidate for warfarin therapy measure

Non-ambulatory patient with acute ischemic stroke
documented to have received DVT prophylaxis within the first 24 hours
of admission
Clinician documented that non-ambulatory patient with
acute ischemic stroke was not an eligible candidate for DVT prophylaxis
measure within the first 24 hours of admission

Patient with mild to moderate Alzheimer's disease
documented to have received centrally acting cholinesterase inhibitors
Clinician documented that patient with mild to moderate
Alzheimer's disease was not an eligible candidate for centrally acting
cholinesterase inhibitor measure

Psychiaty

For patients with a newly diagnosed episode of major depressive
disorders:

Patient documented as being treated with antidepressant
medication during the entire 12 week Acute Treatment Phase
Patient not documented as being treated with
antidepressant medication during the entire 12 week Acute Treatment
Phase
Clinician documented that patient was not an eligible
candidate for antidepressant medication during the entire 12 week Acute
Treatment Phase measure

Patient documented as being treated with antidepressant
medication for at least 6 months Continuous Treatment Phase
Patient not documented as being treated with
antidepressant medication for at least 6 months Continuous Treatment
Phase
Clinician documented that patient was not an eligible
candidate for antidepressant medication for Continuous Treatment Phase

Internal Medicine--Nephrology

ESRD patient with documented dialysis dose of URR greater
than or equal to 65% (or Kt/V greater than or equal to 1.2)
ESRD patient with documented dialysis dose of URR less
than 65% (or Kt/V less than 1.2)
Clinician documented that ESRD patient was not an eligible
candidate for URR or Kt/V measure

ESRD patient with documented hematocrit greater than or
equal to 35
ESRD patient with documented hematocrit less than 35
Clinician documented that ESRD patient was not an eligible
candidate for hematocrit measure

ESRD Patient requiring hemodialysis vascular access
documented to have been evaluated for autogenous AV fistula
ESRD Patient requiring hemodialysis documented to have
been evaluated for vascular access other than autogenous AV fistula
Clinician documented that ESRD patient requiring
hemodialysis was not a candidate for autogenous AV fistula (or other
autogenous AV fistula) evaluation measure

Internal Medicine and Rehabilitation

Internal Medicine--Rheumatology

Patient with established diagnosis of rheumatoid arthritis
documented to be treated with a DMARD
Clinician documented that patient with established
diagnosis of rheumatoid arthritis was not an eligible candidate for
DMARD treatment measure or patient refuses

Osteoporosis patient documented to have been prescribed
calcium and vitamin D supplements
Clinician documented that osteoporosis patient was not an
eligible candidate for calcium and vitamin D supplement measure

Newly diagnosed osteoporosis patients documented to have
been treated with antiresorptive therapy and/or PTH within 3 months of
diagnosis
Clinician documented that newly diagnosed osteoporosis
patient was not an eligible candidate for antiresorptive therapy and/or
PTH treatment measure within 3 months of diagnosis

Within 6 months of suffering a nontraumatic fracture,
female patient 65 years of age or older documented to have undergone
bone mineral density testing or to have been prescribed a drug to treat
or prevent osteoporosis
Clinician documented that female patient 65 years of age
or older who suffered a nontraumatic fracture within the last 6 months
was not an eligible candidate for measure to test bone mineral density
or drug to treat or prevent osteoporosis

Patients diagnosed with symptomatic osteoarthritis with
documented annual assessment of function and pain
Clinician documented that symptomatic osteoarthritis
patient was not an eligible candidate for annual assessment of function
and pain measure

Surgery--Neurological

Surgery--Vascular

Patient documented to have required surgical re-
exploration
Patient did not require surgical re-exploration

Patient undergoing carotid endarterectomy, aortic aneurysm
repair, or lower extremity bypass surgery documented to have received
pre-operative beta-blockade
Patient undergoing carotid endarterectomy, aortic aneurysm
repair, or lower extremity bypass surgery not documented to have
received pre-operative beta-blockade
Clinician determined that patient undergoing carotid
endarterectomy, aortic aneurysm repair or lower extremity bypass was
not an eligible candidate to receive pre-operative beta-blockade

Patient undergoing carotid endarterectomy or lower
extremity bypass surgery documented to have received aspirin or
clopidogrel within 24 hours
Patient undergoing carotid endarterectomy or lower
extremity bypass surgery not documented to have received aspirin or
clopidogrel within 24 hours
Clinician determined that patient undergoing carotid
endarterectomy or lower extremity bypass surgery not a candidate for
aspirin or clopidogrel within 24 hours

Patient undergoing carotid endarterectomy documented to
have received heparin during surgery
Patient undergoing carotid endarterectomy documented not
to have received heparin during surgery
Clinician determined that patient undergoing carotid
endarterectomy was not eligible candidate for heparin during surgery

Patient undergoing carotid stent documented to have
received clopidogrel within 24 hours
Patient undergoing carotid stent documented not to have
received clopidogrel within 24 hours
Clinician determined that patient undergoing carotid stent
was not eligible for clopidogrel within 24 hours

Surgey--Thoracic, Cardiac

Patient documented to have received CABG with use of IMA
Patient documented to have received CABG without use of
IMA
Clinician documented that patient was not an eligible
candidate for CABG with use of IMA measure

Patient with isolated CABG documented to have received
pre-operative beta-blockade
Patient with isolated CABG not documented to have received
pre-operative beta-blockade
Clinician documented that patient with isolated CABG was
not an eligible candidate for pre-operative beta-blockade measure

Patient with isolated CABG documented to have prolonged
intubation
Patient with isolated CABG not documented to have
prolonged intubation

Patient documented to have received antibiotic prophylaxis
one hour prior to incision time (two hours for vancomycin)
Patient not documented to have received antibiotic
prophylaxis one hour prior to incision time (two hours for vancomycin)
Clinician documented that patient was not an eligible
candidate for antibiotic prophylaxis one hour prior to incision time
(two hours for vancomycin) measure

Patient with isolated CABG documented to have required
surgical re-exploration
Patient with isolated CABG did not require surgical re-
exploration

Obsterics/Gynecology

Patient documented to have received antibiotic prophylaxis
one hour prior to hysterectomy
Patient not documented to have received antibiotic
prophylaxis one hour prior to hysterectomy
Clinician documented that patient was not an eligible
candidate for antibiotic prophylaxis one hour prior to hysterectomy
measure

Patient documented to have received management of initial
abnormal cervical cytology consistent with guideline (ACOG Guidelines)
Patient documented to have received management of initial
abnormal cervical cytology in a manner that was not outlined in the
guideline (ACOG Guidelines)
Clinician documented that patient was not an eligible
candidate for management of initial abnormal cervical cytology measure

Surgey--Plastic & Reconstructive

Patient documented to have received antibiotic prophylaxis
one hour prior to incision time (two hours for vancomycin)
Patient not documented to have received antibiotic
prophylaxis one hour prior to incision time (two hours for vancomycin)
Clinician documented that patient was not an eligible
candidate for antibiotic prophylaxis one hour prior to incision time
(two hours for vancomycin) measure

Internal Medicine Endocrinology/Diabetes/ Metalbolism

Diabetic patient with most recent blood pressure (within
the last 6 months) documented as less than or equal to 140/90 mmHg
Diabetic patient with most recent blood pressure (within
the last 6 months) documented as greater than 140/90 mmHg
Clinical has not provided care for the diabetic patient
for the required time for HbA1c measure (within the last 6 months)

Critical Care

Prevention of catheter-related infection

Patient with documented catheter insertion including the
use of sterile barrier precautions in a manner consistent with
guidelines for prevention of IV catheter-related infections (CDC
Guidelines)
Catheter insertion performed in a manner that was not
outlined in the guideline specifications for prevention of IV catheter-
related infections (CDC Guidelines)

Management of catheter-related infection

Management of patient for catheter-related infection
(i.e., staphylococcus A and candida A), including removal of catheter,
blood cultures and empiric antibiotics was performed in a manner
consistent with guidelines for management of IV catheter-related
infections and is documented in chart (IDSA/ACCCM/SHEA/SCCM Guidelines)
Management of patient for catheter-related infection
(i.e., staphylococcus A and candida A), including removal of catheter,
blood cultures and empiric antibiotics was performed in a manner that
was not outlined in the guideline specifications for management of IV
catheter-related infections and is documented in chart (IDSA/ACCCM/
SHEA/SCCM Guidelines)

Internal Medicine--Geratic Medicine

For patients 75 years of age or older:

Patient documented to have received influenza vaccination
during flu season
Patient not documented to have received influenza
vaccination during flu season
Clinician documented that patient was not an eligible
candidate for influenza vaccination measure

Patient documented to have received pneumococcal
vaccination
Patient not documented to have received pneumococcal
vaccination
Clinician documented that patient was not an eligible
candidate for pneumococcal vaccination measure

Patient (female) documented to have been screened for
osteoporosis
Patient (female) not documented to have been screened for
osteoporosis
Clinician documented that patient was not an eligible
candidate for osteoporosis screening measure

Patient documented for the assessment for falls within
last 12 months
Patient not documented for the assessment for falls within
last 12 months
Clinician documented that patient was not an eligible
candidate for the falls assessment measure within the last 12 months

Patient documented to have received hearing screening
Patient not documented to have received hearing screening
Clinician documented that patient was not an eligible
candidate for hearing screening measure

Patient documented for the assessment of urinary
incontinence
Patient not documented for the assessment of urinary
incontinence
Clinician documented that patient was not an eligible
candidate for urinary incontinence assessment measure

Surgey--Colorectal

Patient documented to have received antibiotic prophylaxis
one hour prior to incision time (two hours for vancomycin)
Patient not documented to have received antibiotic
prophylaxis one hour prior to incision time (two hours for vancomycin)
Clinician documented that patient was not an eligible
candidate for antibiotic prophylaxis one hour prior to incision time
(two hours for vancomycin) measure

Nuclear Medicine

Patient documented to have received myocardial perfusion
imaging examination in a manner consistent with the guidelines,
including determination of proper patient preparation (SNM Guidelines)
Patient documented to have received myocardial perfusion
imaging in a manner that was not outlined in the guideline
specifications, including determination of proper patient preparation
(SNM Guidelines)
Clinician documented that patient was not an eligible
candidate for myocardial perfusion imaging measure

Patient documented to have received SPECT MPI for an
indication rated as appropriate/may be appropriate as outlined in the
ACC/ASNC SPECT MPI appropriateness criteria
Patient documented to have received SPECT MPI
appropriateness rating in a manner that was not outlined in the ACC/
ASNC SPECT MPI appropriateness criteria or for an indication not
specified

Preventive Medicine

Patient documented to have received influenza vaccination
during the flu season
Patient not documented to have received influenza
vaccination during the flu season
Clinician documented that patient was not an eligible
candidate for influenza vaccination measure
Patient (female) documented to have received a mammogram
during the measurement year or prior year to the measurement year
Patient (female) not documented to have received a
mammogram during the measurement year or prior year to the measurement
year
Clinician documented that female patient was not an
eligible candidate for mammography measure
Clinician did not provide care to patient for the required
time of mammography measure (i.e., measurement year or prior year)
Patient documented to have received pneumococcal
vaccination
Patient not documented to have received pneumococcal
vaccination
Clinician documented that patient was not an eligible
candidate for pneumococcal vaccination measure

Chairman JOHNSON. Thank you very much, Dr. McClellan. I
want to ask you a question that one of the amendments that we
proposed to the bill goes to, and it is also mentioned in Dr.
Berenson's testimony, if I can find the quote. Well--oh, yes,
here he says, but I am suggesting that relative values to
determine physician payments should be adjusted to try to
accomplish policy goals such as reorienting the care of those
with end-stage chronic conditions to palliation and caring
rather than curative interventions. Pay for performance might
be able to contribute to achieving this reorientation. Now,
that is a reorientation that does interest me a lot. The
amendment in the bill simply allows you to develop a pool of
money from part A and part B. It doesn't compel you to do it.
But after all the MEI and MEI minuses is a rather narrow
straight jacket in--payment system in which to think about
quality. When you look at what the premier system is
demonstrating about hospitals' ability to take on a far more
aggressive quality program and meet a much broader spectrum of
standards, you certainly want to allow that to develop in the
physician payment area.
If it developed in the physician payment area, at least I
believe that it would give you the tools, this larger pool of
money to address situations in which a physician's office
practice as a whole becomes a care management group, and
eventually to recognize palliative care and the kind of end-of-
life care that involves a team management approach and we know
would be so fruitful both for the quality of life of our
seniors in either of those situations and also so much more
respectful of our resources. So, I just wondered whether you
think pay for performance as we are thinking about it now,
identifying criteria for payment, and then structuring
differential payments can enable us to move to a system that is
rather more comprehensive in terms of both the number of--the
breadth of the team involved and the breadth of their quality
performance defined.
Dr. MCCLELLAN. I think the comprehensive approach has a lot
to recommend it, and that is reflected in many of our current
payment demonstrations and other activities. The fact of the
matter is that a lot of the opportunities for improvements in
physician care to lead to better outcomes and lower costs have
interactions not just in physician offices, but in hospital
care and in nursing facility care, in readmissions, in
treatments that are classified under part A, but that is a
distinction that goes back to the trust fund accounting. It
doesn't have reality in actual medical practice. All these
costs matter, and some of the best opportunities to avoid
unnecessary costs and complications go to part A. In some of
the demonstrations that we have under way now, like our
physician group practice demonstration, physicians in groups
can get additional payments when they take steps to improve
quality of care for their patients; for example, meeting
appropriate standards of care for patients with diabetes or
heart failure and reducing overall cost. We are seeing that
some of the best opportunity for reduced costs are in those
demonstrations, are in part A, by avoiding emergency room
visits, by avoiding readmissions to the hospital and other
steps. That is also where the bulk of costs are located. If
physicians can have an impact on 1 percent of overall Medicare
spending, well, that can translate to a positive update if they
are able to share in those gains. So, it is better outcomes for
patients, lower overall costs for the Medicare program, and
that is exactly----
Chairman JOHNSON. So, bottom line, avoiding that 45 percent
trigger is really about all of Medicare's costs, the biggest
costs being hospital and emergency room. If physicians
participate in caring for patients in a way that reduces our
use of hospital emergency rooms, we have a better shot at
avoiding that trigger. But physicians ought to have some
compensation or some recognition for developing a far more
holistic and preventive approach to patient care. I wanted to
just ask you a second question, and then I am going to move on
to Pete. The bill also sets up a way--I mean, it says we are
going to pay this way for docs, but anybody else covered by the
payment system is also going to be paid by this way, but then
CMS will have the responsibility they have never had before.
Their responsibility in the past is to watch this global
target, and when it got breached, doctors would be cut, nobody
else would necessarily be cut, and you just struggle with what
you do. Under this law, you would have the absolute obligation
to watch each group; for instance, you would have the
obligation under the law to look at what is happening in
imaging, to MedPAC, and need to develop some ways of
identifying how much of the growth in imaging is appropriate
and how much is inappropriate, and what we can do to control
it. Now, I know you have done some things to control it. I
think there is more things that you could do. But the thing is
it would shine the focus of attention and responsibility on
those areas under that target that were growing too rapidly.
So, I think actually this bill gives you better control of the
spending under the target than the old legislation did. Now, I
don't know whether you agree or disagree, and I don't know half
as much as about controlling spending as you do, but at least
what does that lever do for you?
Dr. MCCLELLAN. I think it does help. Having an emphasis on
quality measures is a great way to turn our payment system into
a program that supports better care, more efficient care,
better outcomes for patients at a lower cost, rather than
simply paying more for more services regardless of their
quality and their impact on patient outcomes. But----
Chairman JOHNSON. This makes you not only responsible for a
different payment system, but also a great deal more
accountable for spending increases in the services that doctors
prescribe and everything paid for under this section of the
law. So, it does increase accountability. Won't that give you a
greater incentive to control costs in those individual areas?
Dr. MCCLELLAN. It will simply help provide some incentives,
but I think even more importantly, if some of the payments to
providers are tied to these areas, they can get the financial
support they need to invest in systems that can get those costs
down. Right now if providers don't, if hospital and doctors
don't coordinate on sending over an X-ray, well, we will just
pay for an extra X-ray. You get more money when you have less
coordinated care. It would be far better if we paid for better
quality at lower costs and then used those financial resources
to support doctors and investing in things like electronic
medical records which could transmit the records. We don't pay
for that now, and this would be a big change in those
incentives.
Chairman JOHNSON. Thank you. Mr. Stark.
Mr. STARK. Thanks, Doctor, for being with us today. I want
to just ask you to go back--you brought it up, I wouldn't have,
but I am not so sure that I wouldn't ask you to go back and
review what you are doing relative to the Katrina/Rita
survivors. My sense is that with them being spread all over in
different States from which they may or may not formerly have
resided, that you have got to do something special in Medicaid,
like pay the Medicaid bills for a while or--it ain't going to
work. With all these people dislocated, somehow they won't get
attention if they--you know, they will be turned away, or get
to the bottom or the end of the line if somebody isn't sure
that they will get paid for treating them. I am worried about
that, and I hope you would consider that.
Dr. MCCLELLAN. Absolutely.
Mr. STARK. There are two questions. First of all, we are
going to hear a lot today about the impoverished physicians in
the United States, and I just want to--my sense has been on
these rate cuts that we are really talking about piecework. It
is a fee per procedure. But somehow, very seldom--certainly
never mentioned by the AMA, but by others--nobody talks about
the income these docs are getting from your Department on the
theory that maybe they don't play as much golf, so they do some
more procedures. Or maybe they are getting more productive, and
so they do it more quickly, and they can do more procedures in
the same amount of time. I have got some statements from you
over the last 3 years, and it would show us that--well, I do--I
must say I feel sorry for the GPs and the general surgeons who
are down around the 4 to 6 percent annual increase in payments
is what you are paying out, and I presume it mostly goes to
them. There may be some overhead in here. So, in spite of the
fact that they are talking about reduced fees, their income in
the aggregate is going up.
Then you get dermatologists, 13 percent a year on the
average; hematologists and oncologists, 24 percent a year
increase; even emergency medicine, although that may be the
whole bill for the emergency room. I don't know that that is
fair, but that is 14 percent. Cardiology is what, 12\1/2\
percent--no, a little under 12 percent annual increase,
neurology right up there. So, even family practice, who I would
have been inclined to think would have taken more of a hit down
with the general practice, but at any rate they are not going
broke. This is a per-procedure payment. In this discussion, I
just want to--and maybe I am missing some something here. I
would ask you to correct me if I am, but I don't think I am
misleading anybody by suggesting that your records show that
you are paying out more each year in spite of the reduced fee
for procedure.
But what do you think we should do--let us assume that we
are going to give the docs an increase. Let us say it is 2
years. What do you think we should do about the overall control
of costs? What is your idea? Would you support going to
regional or practice specialty caps? How--what do you see that
is out there for us? Because my thought is we would do a couple
of years of an increase, but with the idea that the--we are
there now. I mean, this will be the second go-round. But I
would hope that we would have something firmly in place that
would be a permanent system if we go for a couple-of-year
increase.
Dr. MCCLELLAN. Well, first of all, the overall spending
growth in part B is very concerning. It is not just physician
services, it is essentially all components of part B that have
been growing at double-digit----
Mr. STARK. Stop right there. You have about 600,000 docs.
Can you give us some--by specialty, some idea of what the
income, Medicare income, to these specialty docs has been
growing at, which is just to the physician component?
Dr. MCCLELLAN. For the physician component, in the past
couple of years it has been growing about 12 percent in total
spending. Now it is spending--and out of that you have to
remove expenses and so forth, but spending on the practices has
been going up at a rapid rate.
Mr. STARK. So, what do we do? Let us say we give them a
little more, which I think politically we will be pushed to do.
Then what do we do to rebuild this reimbursement system?
Dr. MCCLELLAN. As I said, I don't think the solution is
simply putting more money into the current payment system. I
think we need to move much more toward focusing on how you get
better results at a lower cost. Steps like paying for
performance I think can help a lot, but we do need to make sure
that any of these steps are done with an eye toward how we keep
overall costs on a sustainable path, and with the recent
increases in utilization----
Mr. STARK. You are going to propose what?
Dr. MCCLELLAN. I think some of the pay-for-performance
steps can make a big difference. We are doing demonstration
programs now where we are paying physicians more when they
improve quality and----
Mr. STARK. Where were the demonstrations--when could you
anticipate, a year, 2 years could we see some results out of
the demonstration?
Dr. MCCLELLAN. Absolutely within the next year, and you
were talking about a year, 2 years of period with reporting or
some other changes, definitely during that time period. We are
seeing some results now from the physician group practice
demonstration. We are seeing more investment in electronic
records, in keeping patients out of the hospital; and even out
of the doctor's office, how that is showing up in fewer
complications and emergency room visits and admissions. Our
hospital payment demonstration, we start it a year earlier, it
is showing improvements across the board in performance which
lead to fewer readmissions, shorter hospital stays, lower
costs. So, I think this evidence is coming up right now. There
is also already a lot of evidence from the private sector. You
will hear about Bridges of Excellence in a minute, other
programs for conditions like diabetes and heart failure; when
you pay to get better results, you see better support for
physicians to take steps that keep people well and avoid
complications. It is a pretty fundamental change in the way our
system works, which, as you said, has been piecework up to now.
Mr. STARK. Thank you.
Chairman JOHNSON. I would note that all of those
demonstrations allow the issue of, quote, savings to be viewed
across the care of the person, so we are able to count in
hospital savings and credit them to the work of the physicians.
One difficulty in this bill is that CBO refuses to allow that
kind of thinking, which is just real-world thinking. It is
outside of the box of the ludicrous legislation that we are
saddled with, but it is real-world thinking. So, the costs
really aren't what they appear to be. Mr. Hulshof.
Mr. HULSHOF. Thank you, Madam Chairman. I always enjoy
getting to follow my colleague from California. I would simply
say, or make the observation, that even given the statistics
cited about areas of specialty--and I certainly don't know
everyone in the room, but I think the only people here that get
to vote themselves a pay increase every year are those of us up
here. So, I would make that observation for what purpose it may
serve. Dr. McClellan, I appreciate that you are here. The other
observation I would make is a tip of the cap to Chairwoman of
this Committee, because this bill was put out over the--before
the August district work period, and the fact is that she did
that purposely so that everybody could push and pull and yell
or praise or talk about this in a constructive fashion. And, in
fact, we took that opportunity back home in Missouri to have
our physician advisory groups and others weigh in to say
whether this is good or bad, what are your concerns. Obviously
when you talk about self-reporting and things of that nature,
you know, the tendency is to brace yourself. So, I applaud the
fact that we have had some good discussion about this.
The easy applause line--and, again, Monday I spoke to a
physician group--the easy applause line in any physician group
is to say, we think we should toss the HCR overboard. I would
recommend, Dr. McClellan, if you want to say that publicly, you
are guaranteed to get an applause line. We do need to move to a
system that more accurately reflects the cost to providing
care. When you have a 4.5-percent increase in one calendar year
and looking at a 5.4 percent negative reimbursement the next
year, that is not the type of stability that one needs in the
practice of medicine. Not only that, to follow up on what Mrs.
Johnson has said, the inefficient physicians, the ones that--
the efficient physicians that have more in-office visits that
might keep that patient out of the hospital setting is going to
get reimbursed less than the other physician that has fewer
office visits who is willing to just push that patient into
some other setting. So, I would think that we are on the right
track. I don't know that we can look at this just in the
vacuum, however. You mentioned health information technology.
So, let me sort of bridge the gap, because I see the momentum
is really building for this. I know your views on that, and I
applaud those views as far as having some momentum behind being
more efficient, not only helping the patient safety aspect, but
obviously helping huge costs to the system.
As we move to the system of data collection and
dissemination of health care information, what is your
perspective on how CMS might be able to coordinate provider
reporting requirements with potential electronic standards and
private sector initiatives that are likely to come down the
pike? Maybe another way to ask the question is do you think
that CMS needs to look at--consider modernizing data collection
requirements to keep up with these changing needs? What general
thoughts do you have about that?
Dr. MCCLELLAN. I think that will certainly help, and we are
in the process of doing that. We are moving to some Internet-
based systems toward getting claims processing done now. We
have got that going now in Wisconsin and a few other States
around the country, and the physicians really like it. It saves
a lot of calls to Medicare, and it saves a lot of paperwork. We
are going to be phasing that in nationally over the next couple
of years. With respect to the quality measures and giving
better information on quality so we can support it, I do think
that it is feasible to start collecting those measures through
reporting in our claims systems in the near future, as soon as
next year, but that planning to move from that to a fully
electronic system that is based on interoperable health care
records and other electronically-based systems that can make
the reporting more automatic over several years. If we send a
very strong signal that this kind of quality-performing and
performance-based payment is important, that is going to create
more momentum and support for making the investments necessary
in getting widespread electronic health records.
Mr. HULSHOF. So, you see this--from your answer I take it
we can do this in tandem then. We don't have to initiate or pay
one piece of legislation.
Dr. MCCLELLAN. I see this working together as a gradual but
urgent process over the next few years to get to electronic
health care and to get to better quality.
Mr. HULSHOF. Thank you. Thank you, Madam Chair.
Chairman JOHNSON. Just to clarify, that is why the bill
allows the administration the power to set structural or
process criteria and ease the system in that direction. Mr.
Thompson.
Mr. THOMPSON. Thank you, Madam Chair. Thank you, Doctor,
for being here. I have just seen some AMA numbers that I find
very, very alarming. They are talking about some 40 percent of
doctors who are going to reduce the number of Medicare patients
that they see, and they also talk about the reduction in rural
areas of outreach, and I find this troubling for a couple of
reasons, not the least of which in rural areas we have another
set of problems that we are dealing with, and that is the
extreme difficulty we are having in recruiting and retaining
physicians in these areas. I see this as the proverbial train
wreck coming for anybody who not only represents a rural area,
but lives in a rural area and depends upon medical care in
those areas. I am wondering, if we cut rates again, this is
just going to exacerbate this problem, and it is going to be a
real catastrophe for benefactors throughout all rural America.
I am just curious as to what CMS has to say about this. I
wonder if you have run any estimates on what the real impact is
going to be of what the AMA's findings are along with the
proposed reductions.
Dr. MCCLELLAN. Well, if those findings were realized, that
would be a significant impact. I would even say that we do
ongoing analysis and ongoing monitoring of the access of our
beneficiaries to physicians in communities all over the
country, urban and rural. So, far we have not seen any
substantial problems of access to needed care. We haven't seen
any problems yet, and as I said a few minutes ago, if we saw
significant negative payment updates, significant reductions in
payments year after year, I don't think that is sustainable
because I think that would at some point create some real
problems in access to care.
Mr. THOMPSON. I would like to invite you to come to my
district, and I don't know that you have ever been there
before, but I will take you to some places where it is a very
real problem. Add to that, as I mentioned before, the
recruitment and retention issue, and it is a disaster area. I
think you guys should really be aware of that.
Dr. MCCLELLAN. I would like very much to take you up on
that and definitely to hear more about it. I have been.
Mr. THOMPSON. I am on an 8 o'clock flight in the morning.
Dr. MCCLELLAN. Thank you for the kind invitation. I was in
rural North Dakota recently hearing from some of the providers
there who actually would benefit tremendously from reforms in
the payment systems that paid more for better outcomes and
lower costs. Many of these rural providers are used to having a
lot of distance between them and their patients, and they will
go from satellite office to satellite office. They have set up
relationships with hospitals that may not be in the same
community, but they work smoothly together. We need to be doing
more to support this kind of high-quality care in rural areas,
and I think payment reforms could help do that.
Mr. HULSHOF. Would you yield just a second?
Mr. THOMPSON. Are you next?
Mr. HULSHOF. No. On your time. Now might be a good time to
ask for the Dr. Hulshof-Thompson telehealth bill.
Mr. THOMPSON. It is a great author, great bill.
Dr. MCCLELLAN. We will definitely talk with you about it.
Mr. THOMPSON. I like to see anything you have on rural
statistics, so----
Dr. MCCLELLAN. Absolutely, and how these kinds of payment
reforms can really help rural areas where some of the most
innovative idea like telemedicine are being developed to help
get the patients the care they need even when doctors are few
and far between.
Mr. THOMPSON. Thank you. The second question I have, as you
know, I represent an area in this area, locality 99. Sonoma
County, I think, was one of the 10 counties that was being
reimbursed at a lesser rate, been working on this for a while.
Your predecessor came out to Sonoma County and met. You have
offered a solution for this which does take care of 2 of the 10
counties--only 2 of the 10 counties--but unfortunately it takes
away from the other counties in the area. So, I am in that
difficult position where I want to help Sonoma County docs, but
at the same time five of my other counties are going to
experience, albeit small, but given the problems we are talking
about, it is going to be a significant hit. It seems to me
that--I will give you the fact this is a good first step, but
we really need to look at a bigger solution to this that takes
in all of the areas. I don't think we can continue to do the
proverbial robbing from Peter to pay Paul; all from Napa and
Mendocino to pay Sonoma. All of these areas are experiencing
very difficult problems, and how we can reconstruct the
reimbursement model is going to make a difference in who and
what kind of health care people get.
Dr. MCCLELLAN. That is absolutely right, and that is why we
put this idea out for comment. The comment period on this
physician payment, we will close this tomorrow. We are hoping
to get better ideas. I have a lot of sympathy for this
particular problem having practiced in Palo Alto right over the
Santa Cruz Mountains from Santa Cruz, which is another county
that is in 99 and affected by the payment issue. But,
unfortunately, I can really sympathize with the problem that
you are talking about, the zero sum here. We don't have the
administrative authority to increase payments across the board.
We can only do redistributions with our administrative
authority. But we will keep looking as best we can working with
you on finding a good solution.
Mr. THOMPSON. CMA had a proposal, as you know, that was a
little more fair.
Dr. MCCLELLAN. That would cost money. The problem with that
proposal is that we can't do it administratively. We are very
much looking for any good ideas in this challenging problem
though.
Mr. THOMPSON. Thank you.
Chairman JOHNSON. Thank you. I appreciate the problems that
my colleague from California has brought to you attention. I am
going to recognize Mr. Emanuel from Illinois, but I do think
CMS is significantly underestimating this access problem. The
data on the whole of the studies is old, even the AMA data.
When you ask doctors are they taking Medicare patients, they
mean they are taking new Medicare patients are people they took
care of for 20 years and just turned 65. But as you watch older
doctors age with their older patient base, there is a limit to
how long they can stay in practice if too many of their
patients are in the Medicare category and they are in one of
these payment areas where they are underpaid. So, Mr. Emanuel.
Mr. EMANUEL. I would like to thank the Chairlady, having
come in late, so I apologize to you for not--for missing part
of your testimony and some of the earlier questions. I have
just got in three areas, if I can. One is I want to add my
voice at least on the issues of the IT, information technology.
The Chairlady knows of my interest in the issue. Senator
Kennedy recently--he and I worked with--passed a bill in the
Senate. This is the only place that has low-lying fruit in the
sense of any other subject--let us just be honest, we are
talking about who is going to pay and shifting cost to who is
going to pick up the bill. This is one place where we can
actually pick up dollars, do what is right to do, and also find
a tremendous amount of synergy there where dollars can either
be saved or replowed back into--from savings into the medical
field, back into either expanding coverage or other type of
care.
My concern is--I raised with the Chairwoman in other
meetings on the IT space is not doing what is happening in the
mobile telephone areas, setting up too much freedom, and
therefore we have a system that doesn't work. We have no
improvement there. I do think it should be centrally managed,
set up boundaries, and I think Senator Kennedy's legislation is
very strong, and I hope we can get something done in this
environment. This may be one place we can get consensus and
bipartisan agreement on the IT space as it relates to
information technology and medical records, and I look forward
to working on that.
Second, in Illinois we have a delegation meeting, Democrat,
Republican. There was a big discussion today about the
confusion that we are all experiencing at our local offices as
relates to the prescription drug bill. I know you have been
working hard on trying to clarify that confusion. We have an
interest in as a delegation--you may be getting a letter soon--
about how Illinois can maybe--to wrap around on the Website
some information about--so people in the low-income area on the
wraparound don't miss in their coverage. We have a very good
State as it relates to helping those who are disadvantaged, and
how we can maybe get them the information, and what Illinois is
providing to people who are not automatically cut off before
they are enrolled. So, heads up, that is coming, a Democrat-
Republican----
Dr. MCCLELLAN. I look forward to it. On that point briefly
we have been working very closely with the State, as you know,
so the State can modify its existing program, its existing
Pharmacy Plus waiver to instead have a program that wraps
around, as you said, the Medicare benefit. The result is going
to be $140 million in savings to the State next year as well as
additional coverage for more people to get comprehensive access
to prescription drugs. We absolutely share the goal of making
sure everyone who is eligible can take advantage of it, because
it is such an important program and so much new help with drug
costs in Illinois.
Mr. EMANUEL. I think we are all trying to make sure that
people who are supposed to be served are getting served. I
think there is, A, a step into the unknown. B, there is a sense
that Illinois has a good program, and we want to make sure it
is dovetailed and is promoted as much as on your Website and on
your pages there for people specifically in Illinois. Just a
heads up there. Last thing on the subject, if I may, I look at
this and I think obviously we have to make some reforms here.
My worry here is given the cost, $150 billion over 10 years,
and throwing out wholesale this program. If you were--
obviously, it needs reform. It was--it solved a problem, but
now it is part of a problem. What would be the steps, what--if
your ideal--forget the legislative process. What would you
keep, and what would you reform? Starting with what you would
keep that you think exists in SER that is good, and what would
you reform because of the objective? My worry is on the cost
control. Where are you going to shift the dollars?
Dr. MCCLELLAN. Well, we need to make sure that physicians
are adequately compensated for the care they provide, but right
now, we will pay more in cases where care is not well
coordinated, where additional services, maybe duplicative
services are provided, the kinds of steps that Chairman Johnson
has been discussing, the kinds of ideas in pay for performance
approaches generally where we shift our payments to instead pay
more for better results for patients, better overall care,
lower overall costs would make a big difference. We have seen
that already in some of our demonstration programs and then
some in the private sector. So, that is a very important set of
steps that we can take right now because we have quality
measures available we can use, we have measures of resource use
that we can use, and as you said, we can plow in of these
savings into supporting IT and other steps to make our
healthcare system work better. I think we ought to start doing
this right away.
Chairman JOHNSON. Thank you very much. Thank you, Dr.
McClellan. I am going to call the panel up so that we can hear
everybody on the panel before the bells ring for the next
series of votes. Thank you for being with us, and we look
forward to working with you as we perfect this legislation, and
hopefully move it forward. Dr. Berenson, Dr. Jevon, Karen
Ignagni and Dr. Armstrong, if you would come forward. I hope it
is not missed on the Committee that this issue, the current
volume control mechanism in the physician payment system isn't
working. If we somehow can help doctors keep patients out of
hospitals and emergency rooms, we will lower overall costs, and
that is the most immediate thing we can do to actually begin to
flattening out the spending curve. So, it is urgent that we get
started. It is also true that we will have to keep working on
this. We had to keep working on the other payment system we put
in place, and so this is a new beginning, not an end. Dr.
Berenson, a pleasure to have you, sir. I read with great
interest your testimony. I think that we intend to do more
through what we are doing in this bill than you give us credit
for, but I am extremely interested in your comments and
measurement and on the other STR problems, so I look forward to
your testimony.

STATEMENT OF ROBERT BERENSON, M.D., SENIOR FELLOW, URBAN
INSTITUTE

Dr. BERENSON. Thank you, Madam Chairman and Mr. Stark and
Members of the Committee. As always, I appreciate the
opportunity to testify on the Chairman's Medicare Value-based
Purchasing of Physician Services Act of 2005. For over 2
decades I have been very interested in physician payment policy
as a practicing internist, as a medical director of a preferred
provider organization responsible for physician payment, and as
a senior official in the centers for Medicare and Medicaid
services. I have, in fact, written approvingly of Pay For
Performance, a new departure for Medicare and other purchasers
and plans to promote improved quality of care. As the payer
that often influences market directions, Medicare can play a
very important role in leading this activity in collaboration
with other purchasers. For different reasons, Pay For
Performance for Medicare Advantage plans and for renal dialysis
centers seems to me ripe for implementation right now. I have
mixed views on the work on hospital measurement in the premier
demo, but it seems to be proceeding well.
I generally applaud the goal of measuring physician
performance, holding physicians accountable for deviations from
desired performance and through publication of their
performance, helping Medicare beneficiaries make informed
choices about where to get their care. However, there are
particularly formidable barriers to assessing performance at
the individual physician level, and the current measures that
are being adopted are not relevant for many Medicare patients,
especially those with multiple chronic conditions and those who
are quite old. More work needs to be done in this area. In
addition, in the crucial areas of overuse and inefficient
provision of services, and in misuse, that is, errors of
commission or faulty judgment, measures are in their infancy,
and there is only so much I believe that you can do with
administrative data. So, I would conclude--in my introduction,
I would make the point that the state of the art of Pay For
Performance does not permit it to be the solution to all
healthcare problems. It has a role, but I think we are loading
too much on Pay For Performance.
The physician payment system used by most private insurers
and by Medicare is based on the Fee-for-service Payment Model.
The payments reimburse for transactions, not for population-
based healthcare, and the powerful inherent incentives and fee-
for-service for reimbursements are to drive up volume. Recent
data from both Medicare and private payers document that that
is exactly what is happening and volume is being increased to
unsustainable levels. In this fee-for-transactions environment,
the validated Pay For Performance measures that mostly address
primary and secondary prevention services and patient
experiences with care likely will have little effect on
utilization spending, even as they improve patient outcomes.
So, I looked with interest at the G-codes that Administrator
McClellan provided with his testimony, the kinds of measures
that physicians will be asked to submit, and they are, indeed,
related to underservice in some very specific important areas,
but are tangential to the issue of healthcare costs and what is
driving healthcare costs.
The Sustainable Growth Rate Mechanisms needs to be reformed
or replaced, and while significant changes are needed, current
Pay For Performance measures that focus on underuse of
preventive services simply will not serve as a substitute for
the STR mechanism. It seems to me that this well-intentioned
attempt is an example of the tail-wagging the dog, by that I
mean the engine that drives physician behavior is the financial
incentive to increase volume. Physicians, especially those who
may knowingly take advantage of that system, will surely ignore
any marginal payment incentive of one or 2 percent if the
behavior to gain the marginal income conflicts fundamentally
with the underlying incentives in the payment system. It would
be much easier to do an extra test, see an extra patient, or of
most concern, simply upcode visits to make up for what
otherwise would be lost under such a scenario. While there is
no conflict between the underlying payment incentives and a Pay
For Performance approach that rewards more care, that won't
contain costs or limit inappropriate utilization.
So, I am concerned that the attention on Pay For
Performance to some extent is distracting policy makers and the
medical profession from addressing what are increasingly
apparent flaws in the resource base relative value scale
payment system that controls physician payment in Medicare, and
in somewhat altered form in many private health plans. Very
briefly, physicians--Medicare's physician payments system is
facing fundamental problems that Pay For Performance alone will
not address in which few policy makers seem to have paid
attention to in recent years. There is a disconnect between
what we pay physicians and the underlying cost of production of
those services. Recently MedPAC did a study on specialty
hospitals and the DRG payment system documenting the problem on
hospital payments. I would assert that there are similar
distortions in the physician payment system that is driving
physicians to procedural services and away from evaluation
management services.
Again, there is little to no volume or cost control
incentives in the system. When you have a national volume
performance control, you are basically treating all physicians
the same when we know there are particular areas of problems in
certain--like imaging services that are going up 20, 25 percent
a year. Major surgical procedures are not increasing out of
control, evaluation management office visits are not, but in
some areas, we do have problems, and yet we have an STR
mechanism that is applied nationally and treats all physicians
the same.
Then finally, the point that you made in your remarks
earlier; we have no particular coding mechanism for encouraging
physicians to actually do care coordination or to hire staff
who can do care coordination. Again, I am not--I would love Pay
For Performance to give incentives for physicians to do that,
but as long as we have a fee-for-service system that is using
7,000 codes that document what the professional activities are
that physicians get to be reimbursed for, until we get to the
robust Pay For Performance system that I think we all hope for,
we should define some of those services as reimbursable, and
try to redirect physician services. So, let me conclude by
simply saying, I like Pay For Performance, I applaud your
leadership and Dr. McClellan's activities to try to get us on
that road, but I think we have loaded onto it too much baggage;
it is not going to solve all of our problems, and in
particular, it is not going to solve the volume and cost
problem in part B. Thank you very much.
[The prepared statement of Dr. Berenson follows:]
Statement of Robert Berenson, M.D., Senior Fellow, Urban Institute
I would like to thank Chairman Johnson and members of the
Subcommittee on Health of the Ways and Means Committee for the
opportunity to testify on the Chairman's Medicare Value-Based
Purchasing of Physicians' Services Act of 2005. For over two decades, I
have followed the evolution of Medicare's policies for compensating
physicians under part B--as a practicing internist, a medical director
of a preferred provider organization responsible for the physician fee
schedule, a senior official in the Centers of Medicare and Medicaid
Services overseeing payment policy for all providers, and a policy
analyst and commentator.
I have had the opportunity of looking at the issues that H.R. 3617
raises from virtually all sides and conclude that although pay-for-
performance efforts are important and show promise, they should not be
viewed as a substitute for the flawed sustainable growth rate mechanism
for controlling physician spending. There are important and largely
overlooked issues in the underlying payment system that have been all
but ignored in this debate and which are long overdue for attention.
First Steps on Pay-For-Performance
I have written approvingly of pay-for-performance (P4P) as a new
departure for Medicare and other purchasers and plans to promote
improved quality of care. Given the disappointing state of quality,
where it can be measured, providing incentives for physicians to do
better seems an appropriate response. As the payer that often
influences market directions, Medicare can play a uniquely important
role in leading this activity in collaboration with other purchasers.
Indeed, two years ago a group of highly respected health care leaders
from across the ideological spectrum agreed in an open letter in Health
Affairs that Medicare should lead on P4P. A particularly desirable
attribute of P4P is holding providers accountable against validated
measures of performance, rather than just paying claims for services
rendered.
The presence of validated and useful measures, as well as an
evolving culture that has accepted the desirability of meeting
objective performance measures, means that certain providers are ready
to participate in such a system. For health plans, the nearly two
decades old work on HEDIS and CAHPS measures and the tedious but
essential implementation work under the leadership of the National
Committee for Quality Assurance suggests that P4P can be a useful
approach to rewarding performance and improvement by Medicare Advantage
plans. In addition, ESRD providers are ripe for P4P because of the
presence of widely accepted process measures that are good predictors
of the outcomes of dialysis. In fact, MedPAC recommended that P4P
commence in Medicare with these two provider categories.
I have mixed views about the readiness of hospitals for P4P, but
the Premier demonstration seems to be off to a good start, and,
importantly, the expectations of what P4P can accomplish in the
hospital sector are appropriately limited; that is, the marginal
incentive for hospitals to meet explicit performance on the core CMS
measures are not integral to hospitals' basic reimbursement.
Importantly, the basic approach to hospital payment relies on
prospective payment through case rates--diagnosis related groups
(DRGs). Although, as we all learned through the MedPAC study of
specialty hospitals, DRG payments can be skewed and create distorted
incentives for hospitals to emphasize certain services at the expense
of others, nevertheless, the hospital prospective payment system
creates the basic incentives for hospitals to improve efficiency, at
least in caring for the patients that enter through their doors. P4P is
not looked to for the purpose of improving hospital efficiency.

Physician Pay-For-Performance

Which brings me to the subject of today's hearing--pay-for-
performance for physicians in Medicare. Here, I would make a point
about terminology. I have chosen to use the term pay-for-performance
rather than value-based purchasing, the term that the Chairman has
adopted to title the proposed bill. I believe value-based purchasing is
a much broader concept than pay-for-performance, which is but one of
many strategies that a value-based purchaser might adopt.
I generally applaud the goal of measuring physician performance,
holding physicians accountable for deviations from desired performance,
and through publication of performance, helping Medicare beneficiaries
make informed choices about which physicians they should seek care
from. However, there are formidable barriers to assessing performance
at the individual physician level. Further, in the crucial areas of
overuse and inefficient provision of services and in misuse, that is,
errors of commission and faulty judgment, measures are in their
infancy.
Physician pay-for-performance faces unique barriers in Medicare
because of certain characteristics of the Medicare beneficiary
population. In an important article that appeared last month in the
Journal of the American Medical Association, a group at Johns Hopkins
cogently argued that most clinical practice guidelines (CPGs) and
performance measures focus on single conditions, failing to recognize
that many Medicare beneficiaries have multiple chronic conditions, not
just a single one for which most guidelines and measures are directed.
The authors concluded, ``Basing standards for quality of care and pay
for performance on existing CPGs could lead to inappropriate judgment
of the care provided to older individuals with complex comorbidities
and could create perverse incentives that emphasize the wrong aspects
of care for this population and diminish the quality of their care.''
\1\ It will take years to develop validated measures relevant to the
large number of beneficiaries with complex comorbidities.
---------------------------------------------------------------------------
\1\ Cynthia M. Boyd, et al., Clinical Practice Guidelines and
Quality of Care for Older Patients With Multiple Comorbid Diseases.
JAMA 294(6): 716-723.
---------------------------------------------------------------------------
A related issue is that most CPG and P4P measures are relevant to
younger populations. For an 85 year-old, measures that focus on primary
and secondary prevention are not particularly relevant, whereas
measures appropriate to geriatric syndromes, e.g. reducing falls,
addressing incontinence and chronic pain, deserve priority. I recognize
that H.R. 3617 calls for measures that address issues related to frail
elderly and those with multiple chronic conditions, but the work to
develop age-relevant performance measures is just beginning.
One P4P initiative that seems to be on the right track is the
California-based activity under the auspices of the Integrated
Healthcare Association. However, it is important to identify the unique
aspects of IHA that suggest to me it will not be simple to replicate
the approach in Medicare. The IHA initiative assigns accountability to
relatively large multi-specialty medical groups contracting with health
plans under capitation arrangements that, similar to DRGs for
hospitals, transfers financial risk to the provider group. The
fundamental approach to promoting cost conscious physician behavior
resides in the basic professional capitation payment to the groups. In
this context, P4P provides an important complement by looking for and
measuring possibly substantial under-use of services, which is a
potential byproduct of incentives that could lead to withholding needed
care. Importantly, there are reasonable process measures of under-use
for certain important diseases that also supports the goals of the IHA
initiative.
In contrast, the Medicare physician payment system and, outside of
California and a few other places, the physician payment system used by
most private insurers based on a fee-for-service (FFS) model. The
payments reimburse for transactions, not for population-based health
care, and the powerful, inherent incentives in FFS reimbursements are
to drive up volume. Recent data from both Medicare and private payers
document that that is exactly what is happening--to unsustainable
levels. In this fee-for-transactions environment, the validated P4P
measures that mostly address primary and secondary prevention services
and patient experiences likely will have little effect on utilization
and spending even as they improve patient outcomes. Further, where
patients have free choice of physician at the point of service, as in
Medicare, PPOs and, now, many HMOs, patients obtain care in an a la
carte fashion, providing no easy way to assign the responsibility for
performance. It is far easier to attribute performance against
specified measures to multi-specialty groups that assume responsibility
for individuals who designate them as their source of care than to
independent physicians who take patients one by one and face no
incentives to conserve resources. Physicians are supposed to meet the
standards of care of their specialty, not assure that patients actually
have good outcomes at a reasonable cost. Thus, pay for performance
offers some promise as a tool to move physician orientation to actually
meeting patients' needs. We will see.
In short, physician P4P faces formidable barriers in Medicare, as
it does for most private plans. For all the P4P talk, the current round
of Center for Studying Health System Change (HSC) Community Tracking
Study site visits found that physician P4P was underway robustly only
in 2 of the 12 metropolitan areas that it tracks--in Orange County, in
the heart of the delegated capitation model of care and in Boston,
where there are large physician groups, often attached to the major
teaching hospitals. \2\ Although Medicare surely could lead on P4P, I
doubt that P4P is ready for the decisive role envisioned for it under
the Chairman's proposed legislation, a role that sees it as a
substitute for the flawed sustainable growth rate (SGR) formula for
holding down Part B expenditures.
---------------------------------------------------------------------------
\2\ Cara S. Lesser, Paul B. Ginsburg and Laurie E. Felland, Initial
Findings from HSC's 2005 Site Visits: Stage Set for Growing Health Care
Cost and Access Problems. Center for Studying Health System Change,
Issue Brief 97, August 2005.

---------------------------------------------------------------------------
P4P is Not a Subsitute for the Troubled SGR Mechanism

The SGR needs to be reformed or replaced. While significant changes
are needed, current P4P measures that focus on under-use of preventive
services simply will not serve as a substitute for the SGR mechanism
for constraining physician spending in Medicare. The well-intentioned
attempt, unfortunately, strikes me as a classic example of the ``tail
wagging the dog.'' By that I mean that the engine that drives physician
behavior is the financial incentive to increase volume. Physicians,
especially those who may be knowingly taking advantage of the system,
will surely ignore any marginal payment incentive of 1 or 2 percent if
the behavior to gain the marginal income conflicts fundamentally with
the underlying incentives in the payment system. It would be much
easier to do an extra test, see an extra patient, or--of most concern--
upcode visits to make up for what otherwise might be lost under such a
scenario. While there is no conflict between the underlying payment
incentives and a P4P approach that rewards more care, that won't
contain costs or limit inappropriate utilization. To the contrary, it
might increase spending, albeit for desired activities.
But on issues of overuse, I suggest that the conflict does exist.
For example, in Medicare spending for advanced imaging services
increased last year by 25 percent. Because much of the costs associated
with imaging services are fixed and able to be spread over the number
of imaging services provided, those providing these services have every
incentive to suggest the need for additional, discretionary imaging
services. And referring physicians, for various reasons, face no
constraint on ordering imaging services that, importantly, do no harm,
except to taxpayers and the relatively few beneficiaries without
supplemental insurance who actually have to pay a co-payment. Thus,
even if we could reliably measure overuse, I am skeptical that
physicians will markedly change their behavior to respond to a modest
1-2 percent change in payment.
In short, pay-for-performance is a worthy initiative and I applaud
the goal of trying to produce relevant and validated measures for each
specialty. However, I expect that this objective done correctly would
take many years. The current state of measurement and structural
impediments to P4P effectiveness does not constitute an acceptable
substitute for the SGR, which I think we all agree needs to be
replaced.

The RBRVS System Needs A Comprehensive Review

I am concerned that the attention on P4P is distracting both policy
makers and the medical profession from addressing what are increasingly
apparent flaws in the resource-based relative value scale (RBRVS)-based
payment system that controls physician payment in Medicare and, in
somewhat altered forms, in private health plans.
As suggested earlier, a value-based purchaser asks whether it is
obtaining the right kind and mix of services, of acceptable quality,
for the right cost. For example, a value-based purchaser would not
simply defer to the medical profession to determine the mix and
relative value of services provided by the profession, the explicit
concept that underlies the RBRVS-based payment system. Further, a
value-based purchaser would feel no obligation to provide payment
bonuses to all specialties if the areas of that need improvement could
be affected by a subset of physicians. The goal of value-based
purchasing, with P4P as but one strategy, should be to provide greater
value for beneficiaries and taxpayers, not to promote equitable access
to bonus payments for physicians, which seems to be the American
Medical Association's position. Thus, P4P should be seen a means to the
end of getting greater value for money spent and not as an end in
itself, that is, to measure and reward for the sake of measuring and
rewarding.
Given the problems in the Medicare physician payment approach that
preceded RBRVS, basing payment on dollar estimates of work and practice
overhead, rather than historic charges, was a clear improvement. And in
the first decade of implementation beginning in 1992, the volume
control mechanisms that limited spending functioned reasonably well.
Unfortunately, those days are over.
Briefly, Medicare's physician payment system is facing fundamental
problems that pay-for-performance alone will not address and to which
few policymakers seems to have paid attention in recent years.
1. Disconnect between costs and payments. For many services,
payments bear poor relation to underlying cost of production. The
MedPAC finding that skewed DRG payments were distorting market behavior
in relation to specialty hospital development is surely also true in
relation to physician payments. Recently, Paul Ginsburg and Joy
Grossman of the Center for Studying Health System Change wrote about
this phenomenon of distorted payments in relation to hospital and
ambulatory care based upon recent findings from the 12 HSC Community
Tracking Sites. \3\ I am currently reviewing HSC interviews from the
fifth round of site visits that demonstrate that physician behavior too
often reflects a strong bias toward performing procedures, even leading
them to be unavailable to perform the consultative role that
specialists traditionally have performed. For example, in some sites,
gastroenterologists have stopped caring for complex hospitalized
patients, preferring to perform routine endoscopies in ambulatory
endoscopy suites in which they are likely to have ownership interests.
In short, physicians respond to economic incentives, which has
distorted physician behavior, resulting in the provision of an
inappropriate mix of services. MedPAC has identified the issue of
mispricing of physician services and plans to study it in detail in the
near future. \4\
---------------------------------------------------------------------------
\3\ Paul B. Ginsburg and Joy M. Grossman When The Price Isn't
Right: How Inadvertent Payment Incentives Drive Medical Care Health
Affairs Web Exclusive, August 9, 2005
\4\ Chapter 9: Review of CMS's Preliminary Estimate of the
Physician Update for 2006 in ``Report to the Congress: Issues in a
Modernized Medicare Program'' MedPAC, June 2005.
---------------------------------------------------------------------------
One of the explicit objectives of the RBRVS system based on work
performed by William Hsiao and colleagues, was to redistribute from
procedural and technical services to what were then called
``cognitive'' services and now ``evaluation and management'' services.
Although there was initial redistribution in implementing the RBRVS
system in 1992, a preliminary Urban Institute study I helped produce
for MedPAC demonstrated that desired redistribution progress has
stopped for a number of reasons. \5\
---------------------------------------------------------------------------
\5\ MedPAC Report, June 2005.
---------------------------------------------------------------------------
Compounding the problem within the physician fee schedule is the
apparent overpayment in facility fees, which are paid separately from
the physician fee schedule, As a result, many physicians now invest in
ambulatory surgery centers, endoscopy suites, and diagnostic imaging
and testing centers. In short, to make up for what they consider
inadequate professional fees, in particular for their time associated
with patient visits and consultations, physicians increasingly are
becoming entrepreneurs, able to self-refer to increase volume and
revenues. Thus, in any serious attempt to fix the SGR mechanism,
consideration should be given to redirecting savings from reducing
overly generous facility fees to the pool of dollars that physicians
can receive for their professional services, so that physicians can
again resume their roles of acting in their patients' best interests
and performing services they have been trained for, rather than feel a
need to self-refer to support their investments. Again, MedPAC is doing
some work in this area, at least with respect to examining site-of-
service differentials.
2. Volume or cost control. Many have described the problems of the
SGR as the mechanism for controlling physician expenditures. Preceding
the SGR was the Volume Performance Standard (VPS), which had problems
as well, but was reasonably successful in the face of the daunting
volume incentives that fee-for-service provides. I believe one of the
problems in both approaches is that the volume control is applied at a
national level. When prices are cut as a result of national volume
controls, an individual physician's incentive is to increase services
that do no harm to patients, of which there are many. Thus, prudent
physicians are penalized and profligate ones are rewarded. This reality
does provide a strong rationale for individual level assessments of
utilization as performance measurement attempts to do. But again, the
physician who is increasing volume to increase revenues that go to the
bottom line is unlikely to respond to a P4P incentive of a percentage
point or two to restrain volume.
Interestingly, in recommending a national volume control mechanism
that was subsequently adopted in statute as the VPS, the Physician
Payment Review Committee (PPRC) understood that a control mechanism
applied nationally was a crude approach. In 1989, the PPRC expressed
hope that organized medicine would step up to the challenge of
developing clinical practice guidelines, enhanced peer review and other
professionally-grounded approaches to reducing excessive volume. That
never happened. PPRC also discussed moving to specialty specific and
geographic volume performance standards to target price cuts to where
the excessive volume was taking place. That never happened either.
And now, more than fifteen years later, we understand through the
work of Jack Wennberg, Elliot Fisher and their colleagues that
geographic variations in volume of physician services do not produce
important differences in quality. We are spending too much in
particular geographic areas, but the volume controls are being applied
nationally. Further, not all services are rising at unacceptable rates.
The volume of major surgical procedures is not rising out of control;
nor are doctor visits. Yet, the SGR spreads the pain of price cuts
indiscriminately. In short, the SGR mechanism is broken, but as long as
Medicare reimburses for professionally-determined transactions, there
needs to be more targeted volume control mechanisms to address
inflationary spending. We are asking too much of P4P to do the job of
controlling volume increases and the accompanying unsustainable
spending increases.
3. Lack of care coordination for beneficiaries with chonic
conditions. The current physician payment system does virtually nothing
to promote care coordination by physicians and their offices for the
increasing numbers of beneficiaries with multiple chronic conditions.
These patients typically see numerous unconnected physicians and other
health professionals and may take ten or more prescription and OTC
drugs without supervision. The Chairman knows of my interest in this
area. I have had the privilege of testifying here on how to improve the
provision of services to beneficiaries with chronic illnesses, and I
applaud the Chairman for her interest in helping enact important pilots
and demonstrations in the Medicare Modernization Act that are now
proceeding. Nevertheless, I continue to believe that physicians have a
crucial role to play in being part of teams that address the care for
patients with multiple chronic conditions. To achieve that objective,
basic payment policy must provide incentives for physicians to spend
some of their professional time and to allow others working under
physician supervision to take part in care coordination activities.
Simply, the Current Procedural Terminology (CPT) coding system that
Medicare and private payers use does not address care management and
care coordination. Frankly, care coordination is not an easy thing to
define and pay for. Nevertheless, a value-based purchaser would ask how
to promote the set of activities that Ed Wagner and colleagues have
delineated to constitute good chronic care management. At the same time
a value purchaser would try to offset that new spending by reducing the
volume of services that are serving no useful purpose, such as
intensive care unit stays for many patients in their last weeks and
months of life.
I am not recommending arbitrarily limits on what services patients
are eligible for. But I am suggesting that relative values that
determine physician payments should be adjusted to try to accomplish
policy goals, such as reorienting the care of those with end-stage
chronic conditions to palliation and caring, rather than curative
interventions. Pay--for-performance might be able to contribute to
achieving this reorientation. But the real action is in the nitty-
gritty coding and payment policy that has seemed on automatic pilot for
the past decade.

Conclusion

In summary, I think measuring physician performance and moving to
greater accountability for that performance is a desirable goal. But I
am concerned that inflated expectations about what pay-for-performance
can achieve has diverted attention from the increasingly evident
problems with many aspects of the basic physician payment system. In
particular, P4P currently does not provide a plausible mechanism for
controlling the volume of or spending on physician services. The RBRVS-
based payment approach has been a very important alternative to what
came before and worked well initially. But a number of problems with
the RBRVS conceptual foundation and its implementation have now become
apparent. MedPAC has identified some of the issues that I have briefly
discussed above, with tentative plans to explore them in greater
detail.
Measurement of physician performance and attempts to pay
differentially for performance should proceed, but P4P currently will
not address soaring volume increases of certain physician services in
particular geographic areas. P4P should not distract the committee from
a long overdue look at the basic payment system. As part of that
review, I believe better alternatives to the SGR will be found. And
until we have a solution, I think it unwise to simply repeal the SGR.

Chairman JOHNSON. Thank you very much, Dr, Berenson. Dr.
Jevon.

STATEMENT OF THOMAS JEVON, M.D., PRACTICING FAMILY PHYSICIAN,
WAKEFIELD, MASSACHUSETTS

Dr. JEVON. Madam Chairman, Congressman Stark, Members of
the Ways and Means Health Subcommittee, I would like to thank
you very much for the opportunity to testify before you today
regarding my experience participating in the Bridges to
Excellence program and other Pay For Performance programs. My
name is Dr. Tom Jevon, I am a solo family physician practicing
in a solidly middle class suburb about 15 miles north of
Boston. I may be among a rare group of physicians in that I
have used an electronic medical record since 1993. As a
practicing physician in an area dominated by very large HMOs,
as a leader of a 300 doctor physician hospital organization,
and as a member of a large network of providers, including Mass
General and Brigaman Women's Hospital, I have a lot of
experience with financial incentives for physicians. I truly
believe that most physicians support the concept of Pay For
Performance measures. They support the idea of rewarding their
colleagues who work harder and demonstrably do a better job
than their peers. For Pay For Performance plans to work,
however, they need to meet a number of criteria. Most
important, Pay For Performance only works for the primary care
physician like myself when real dollars are at stake. It takes
a bonus of $2,000 to get a physician interested, probably
$5,000 to grab his or her attention. The proposed differential
of 1 percent in the current draft of the bill would probably
translate into perhaps a thousand dollars, not enough to engage
a doctor in the effort.
The Pay For Performance has to capture the imagination, or
at least the attention of the doctor; we have to believe the
goal or measure will actually make a difference, that is, both
improve patient health, and hopefully improve the healthcare
delivery system. The Bridges to Excellence program pays
physicians bonuses if they show success in treating diabetics
better with improved education programs and objective
laboratory-based measures of diabetic control. The Pay For
Performance has to be transparent, accurate and fair. Our major
source of data for physician performance is the claims
physicians submit to be paid for services. Unfortunately, this
claims data is often inaccurate, delayed, and in many ways
flawed. This can cause all kinds of disturbing results, such as
the doctor universally known by his colleagues to be a weak or
inferior clinician achieving top scores on a patient
satisfaction index and being rated as a top physician in an HMO
network. We must improve our data and measurement techniques by
being careful about what we choose to measure and ensuring the
integrity of our data. Bridges to Excellence has been very
careful in this regard, they do not rely on claims to evaluate
physician performance. They also choose measures that can be
accurately measured and verified.
The physician effort to improve performance, including the
physician's cost to collect the data, can't outweigh the
financial benefit to be gained. In my own experience, I decided
not to apply for the Bridges to Excellence diabetic program
because the bonus I would achieve was not worth the word. On
the other hand, the bonus for me for an EMR was significant,
more than $5,000. It was an easy decision to apply for it. We
need to create grant programs or provide pools of cash for
special purposes when there isn't enough funding to make
significant cash payments to all physicians. In my own PHO, we
decided to give grants to a few earlier adopters of electronic
medical records. Medicare should encourage programs like
Bridges to Excellence that are simply bonuses, programs that
offer straightforward transparent rewards that are not wrapped
up in health insurance contracts, or simply the return of
expected physician fees. Like it or not, bonuses without
strings attached improve performance and outcomes. Physicians
must be intimately involved in both the design and
implementation of measures that report relative physician
quality. If the measure is unfair or flawed by bad data, there
is likely to be a huge backlash or disengagement or
disenchantment from physicians.
My own perspective is an that EMR is essential to any long-
term success with Pay For Performance. Access to an EMR allows
collaboration between patients, physicians and other healthcare
providers and can provide the accurate data we need to truly
and fairly measure relative physician performance and quality,
and develop fair Pay For Performance models. It allows us to
move away from our dependence on claims data for measuring
physician performance. To most physicians, Pay For Performance
is just the latest iteration in the struggle to control costs,
while at the same time improving quality. Physicians appreciate
that if they are not willing to engage in this on-going battle,
insurers and government will impose possibly Draconian
solutions. Yet many physicians are angry because on top of the
real business of healing, they are often caught in the middle
of doing society's job of deciding how to deploy health
resources all day, every day with every patient. For older
doctors, this is certainly not what they signed up for, nor was
it what they were trained for. As we design new payment
programs to incentivize physicians, we should not forget the
multiple, difficult and conflicting challenges that hardworking
physicians face each day. Thanks very much for the opportunity
to present my views.
[The prepared statement of Dr. Jevon follows:]
Statement of Thomas Jevon, M.D., Practicing Family Physician,
Wakefield, Massachusetts
Madame Chairman, Congressman Stark, and Members of the Ways and
Means Health Subcommittee, I would like to thank you for the
opportunity to testify before you today regarding my experience
participating in the Bridges to Excellence Program and other Pay For
Performance Programs.
My name is Dr. Tom Jevon, and I am a solo family physician
practicing in a solidly middle class suburb 15 miles north of Boston. I
am a typical primary care physician with a very busy practice seeing a
wide range of patients 5 days a week with both evening and Saturday
hours. I may be atypical in that I have used my own EMR (Electronic
Medical Record) since 1993 and have been deeply involved in managed
care for 15 years, not only as a practicing physician in an area
dominated by large HMO's but as director of medical management and vice
president for the 300 physician PHO (Physician Hospital Organization)
in our area. I am currently heading an effort to create a central,
shared EMR for the physicians in our PHO, which we plan to implement in
early 2006. I've also been involved in PCHI, (Partners Community Health
Care Inc) a large network of community hospitals, physician groups and
academic centers including Massachusetts General Hospital and Brigham
and Woman's Hospital, since it's inception more than 10 years ago. I
have grappled with the issues of different financial incentives for
physicians for years, both as a practicing physician and in my various
administrative roles. Our present contracts contain multiple pay for
performance measures, mostly an opportunity for physicians to win back
money withheld from their fees. Public reporting and measurement of
physician quality as well as tiered patient co pays based on these
results are also coming to our marketplace.
Pay For Performance
I truly believe that most physicians support the concept of Pay For
Performance Measures. They support the idea of rewarding their
colleagues who work harder and demonstrably do a better job than their
peers. For Pay For Performance plans to work however they need to meet
a number of criteria, many of which Chairwoman Johnson has elaborated
in her legislation.
However, Pay For Performance only works when real dollars are at
stake. Physicians are relatively insensitive to measures that provide
less than $2000 in their pocket. The 1% differential in the Johnson
bill would probably translate into perhaps $1000 into the average
primary care physician's pocket, probably not enough to engage him in
the effort. To really grab a physician's attention you need to be in
the $5000 and up range. Specialists with higher incomes may have a
higher threshold and generally require programs that are different from
those for primary care physicians.
Pay For Performance has to capture the imagination or at least the
attention of the doctor: We have to believe the goal or measure will
actually make a difference and either improve patient health or make
our system work better. The Bridges to Excellence (BTE) program pays
physicians bonuses if they show they really succeed in treating
diabetics better, with improved education programs and objective
laboratory based measures of diabetic control.
Pay For Performance has to be transparent, accurate and fair: Our
major source of data for physician performance is the claims physicians
submit to be paid for services. Unfortunately this claims data is often
inaccurate, always delayed and often flawed in many different ways. In
my PHO we have achieved hundreds of thousands of dollars for our
physicians, not by helping them achieve their performance goals but by
digging through data that starts out as looking improbable or unusual
and then turns out to be simply in error. This has nothing to with Pay
For Performance and every thing to do with flawed data. Once the data
is ``clean'' there are further hurdles; we need to apply adjustments
for Health Status, patient compliance and other factors unique to our
local environment. Even then we can see disturbing results like the
doctor universally known by his colleagues to be a weak clinician
achieving top scores on a patient satisfaction index and being rated as
a top physician in an HMO network.
We must improve our data and measurement techniques, by being
careful about what we choose to measure and ensuring the integrity of
our data. Our PHO uses claims data to measure physician performance
with diabetics with mixed results. Documenting annual eye visits has
been challenging, documenting blood and urine tests, less so. Measures
around physician performance with radiology based on claims data has
been very problematic. BTE has been very careful in this regard. They
do not rely on claims to evaluate physician performance. They also
choose measures that make sense and can be accurately measured and
verified.
The physician effort and cost of achieving a goal or simply
obtaining the appropriate data to measure that goal cannot overwhelm
the financial benefit to be gained: Physicians are far too busy and
overworked already to take on something that is clearly not worth the
effort. I decided not to apply for the BTE Diabetic program because the
bonus I would achieve was not worth the work. On the other hand the
bonus for me for an EMR was significant, more than $5000. It was an
easy decision to apply for it. I paid a $475 fee to register with the
National Committee for Quality Assurance, (NCQA) and document my
system's capabilities with their web-based tool. They evaluated my
submission and certified that I met their criteria for the Physician
Office Link program.
When there isn't enough funding to make significant cash payments
to all physicians create grant programs or provide pools of cash for
special purposes. We have decided to give grants to early adopters of
EMR in our PHO.
Medicare should encourage programs like Bridges to Excellence that
are true value added programs and offer straightforward, transparent
rewards that are not wrapped up in health insurance contracts or simply
the return of withheld physician fees. My own experience with BTE was
relatively painless. I used a NCQA website and screenshots from my
system to document exactly how my EMR was used, what data it routinely
contained on blinded patients. There were discreet criteria that had to
be met to achieve different levels or reward. For doing this I received
both recognition and a cash award. It felt good to be paid a bonus
without strings attached for going above and beyond the average
physician.
Physicians must be intimately involved with both the design and
implementation of measures that report relative physician quality. If
the measure is unfair or flawed by bad data there is likely to be a
huge backlash or disengagement or disenchantment from physicians.
I support many of the recommendations of the February 10th, 2005
Statement for the Record by Wendy Gaitwood from the American Academy of
Family Physicians. Specifically I support those recommendations that
require feedback to physicians about the data, disclosure of the
sources of the data, and assurances through the use of a 3rd party that
the data has been validated and verified.

Conclusion

My own perspective is that an EMR is essential to any long-term
success with Pay For Performance. Access to an EMR/EHR allows
collaboration between patients, physicians and other health care
providers, and can provide the accurate data we need to truly and
fairly measure relative physician performance and quality and develop
fair P4P models. It allows us to move away from our dependence on
claims data for measuring physician performance. EMR has its own
challenges, not the least of which are: huge changes in physician style
of practice, high costs both in dollars and physician time to
implement, ongoing expense to maintain, and a perceived threat to
physician autonomy. But I believe its benefits far outweigh its costs,
and it is really the only way forward.
To most physicians, Pay For Performance is just the latest
iteration in the struggle to control costs while at the same time
improving quality. Physicians appreciate that if they are not willing
to engage in this ongoing battle, insurers and government will impose
possibly draconian and noxious solutions. Yet physicians are angry
because, on top of the real business of healing, they are often caught
in the middle doing society's job of deciding how to deploy health
resources all day, every day with every patient. For older doctors this
is certainly not what they signed up for, nor was it what they were
trained for. We all yearn for something like the lawyer's role in
society: Serve only the needs of your client and leave all concern
about the costs to society resulting from your actions to someone else.
As we design new payment programs to incentivize physicians we should
not forget the multiple, difficult and conflicting challenges that
hardworking physicians face every day.
Thank you, again, for the opportunity to present my views.

Chairman JOHNSON. Thank you very much for your excellent
testimony. Ms. Ignagni.

STATEMENT OF KAREN IGNAGNI, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AMERICA'S HEALTH INSURANCE PLANS

Ms. IGNAGNI. Thank you, Madam Chair and Mr. Stark, Members
of the Committee, it is a pleasure to be here this afternoon.
As we were listening to the discussion, it occurs to me to
begin with the obvious, and all of you have mentioned it today.
We face three core challenges in healthcare, controlling costs,
improving quality and expanding access. The interrelationship
of these challenges is encapsulated in data provided by the
Rand Corporation that indicates only 55 percent of healthcare
services nationwide are delivered in accordance with best
practices. The payment system hasn't encouraged a do-it-right-
the-first-time attitude or commitment to best practices.
Indeed, until recently, efforts in the private sector payments
for good care, bad care or mediocre care has been the same, and
wide variations and practice patterns have been ignored.
Further exacerbating these trends quite seriously are data
recently reported in JAMA, indicating that physicians feel that
they are forced to practice defensive medicine with almost half
reporting that they used imaging technology in clinically
unnecessary circumstances. A dollar spent on unnecessary or
duplicative procedures is a dollar that could ameliorate the
burden of rising costs on employers and consumers, and be
devoted toward improving access or maintaining benefits in
public programs. These problems clearly didn't arrive overnight
and they will not be solved overnight.
As we move to considering how to move in the direction of
incenting quality, we think it is very critical to link that
conversation to the matter of reliable data. We are happy to
offer comments on these broad issues, as well as specifically
on H.R. 3617. In our written testimony, we emphasize the
following points: One, the importance of uniform performance
measurement to reduce the proliferation of multiple
uncoordinated and conflicting data requests going to physicians
from health plans, from employer coalitions, from consultants
and public sector. Two, the need to aggregate data, to
facilitate the reporting the data that fairly represents the
patient population served by a provider. We can't expect that a
particular provider should be judged by his or her population
served from a particular health plan, from a particular public
program, we need to aggregate data.
Three, we need to report data to consumers to help them
make more informed decisions back to providers so that they can
improve quality of care. Four, any legislation in our view
should require public officials to work with established groups
working on the data elements I mentioned above rather than
reinventing the wheel. Five, the measures should be updated
regularly to reflect new evidence, new understandings and new
information.
Our testimony also discusses and provides some examples of
private sector experience with innovative payment arrangements.
An important lesson we have learned is that quality and
efficiency measures go hand in hand. Many of our members are
offering physician financial rewards, others offer nonfinancial
rewards in the form of public recognition, preferential
marketing or streamlined administrative procedures. Still other
programs provide lower co-pays deductibles or premiums to
consumers who choose providers found to be of higher quality,
based on specific performance measurement.
AHIP and our members are active participants in the
Ambulatory Care Quality Alliance, AQA, which is working on the
matters I referred to above. The objective of that alliance is
to create uniformity in performance-based initiatives. The AQA
members include numerous physician groups, the American College
of Physicians, the Academy of Family Physicians, the American
Medical Association, the Osteopathic Association, the Society
For Thoracic Surgeons, the College of Surgeons, the AARP, the
National Partnership For Women and Families, the Pacific
Business Group on Health, the Agency For Healthcare Research
and Quality, and CMS.
Together, these organizations are working to identify what
should be measured for proficient performance, both quality and
efficiency, and develop a data aggregation model that will
comprehensively assess provider performance. We hope these
efforts will be useful to the Committee by putting in motion
baseline work that needs to be done to make this transition to
a quality-based payment system a success. Earlier this year,
AQA reached consensus on a common set of 26 ambulatory care
performance measurements to provide clinicians, consumers and
purchasers with a starter set, but it is only that, and now we
are working on additional sets of quality measures. But it is a
beginning.
More recently, AQA has been focused on developing pilot
projects that combine public and private payer data, leveraging
the experience of existing data aggregation efforts and
evaluating the most effect processes for measuring physician
level performance. We think that this is an important matter to
begin this work and to begin the conversation. AQA is currently
seeking to secure both public and private funding to implement
these pilot projects in 2006, and we are very optimistic about
that. AQA has also developed fundamental principles for
reporting reliable and useful quality information to consumers
and providers, and we would be delighted to share that with the
Subcommittee. In closing, Madam Chair, thank you for the
opportunity to testify. We applaud the beginning of this
conversation, and we would like to be as helpful as possible in
working on the issues that all of the members referred to in
their opening statements this afternoon. Thank you.
[The prepared statement of Ms. Ignagni follows:]
Statement of Karen Ignagni, President and Chief Executive Officer,
America's Health Insurance Plans
I. INTRODUCTION
Good afternoon, Madam Chairwoman and members of the subcommittee. I
am Karen Ignagni, President and CEO of America's Health Insurance Plans
(AHIP), which is the national trade association representing nearly
1,300 private sector companies providing health insurance coverage to
more than 200 million Americans. Our members offer a broad range of
health insurance plans to employers, state and federal governments, and
individuals, and also have demonstrated a strong commitment to
participation in Medicare, Medicaid and other public programs.
We appreciate this opportunity to testify, and to share our
thoughts with you about H.R. 3617 and the importance of establishing
payment incentives that promote quality, safety, and efficiency goals.
Indeed, this experience indicates that paying for quality and
efficiency is a promising strategy for improving overall health care
outcomes and advancing evidence-based medicine.
Historically, health care practitioners have not been paid based on
the quality of care they deliver. Until recently, positive clinical
outcomes, high patient satisfaction, and efficiencies have not been
rewarded. Instead, provider reimbursement--particularly in the Medicare
program--has been based on the volume and technical complexity of
services rendered. This approach rewards any over-utilization and
misuse of services, and results in higher payments when health care
complications arise. In effect, the current financing system creates
disincentives to improve quality and efficiency. More tests, more
visits, and repeated hospital stays are rewarded, whereas efficiency,
effectiveness and getting it right the first time are not.
The flaws of the current system are recognized by physicians. A
2004 survey \1\ of 400 primary care and specialty physicians, conducted
on behalf of AHIP by Ayres, McHenry & Associates, found that 86 percent
of physicians are concerned that the current payment system does not
reward practitioners for providing high quality medical care. Other
findings of this survey indicate that 71 percent of physicians favor
payments based in part on the quality of care they provide, and 62
percent believe that information on the quality of care provided by a
physician should be made available to the public.
---------------------------------------------------------------------------
\1\ ``National Survey of Physicians Regarding Pay-for-
Performance,'' Ayres, McHenry & Associates, Inc., September/October
2004
---------------------------------------------------------------------------
Additionally, this survey included other findings which may be
relevant to the subcommittee's discussions. Specifically, an
overwhelming majority of physicians indicate support for pay-for-
performance programs if the performance measures were developed with
physicians in that particular medical specialty (87 percent), if the
performance measures were clearly communicated to physicians before
they were used in payment arrangements (84 percent), and if the
performance measures were evidence-based and grounded in science (83
percent).
II. THE CASE FOR CHANGE
The U.S. health care system faces a number of significant
challenges. Rising health care costs are threatening to make health
coverage unaffordable for more Americans, and are holding back efforts
to meet the needs of the uninsured.
Rising Costs
The most recent data from the Department of Health and Human
Services (HHS) project that national health care spending increased by
an estimated 7.5 percent in 2004. Although this is the lowest rate of
increase since 2000, health care costs still are growing faster than
the overall economy and, as a result, large and small employers are
finding it more difficult to provide or maintain coverage for their
employees.
AHIP and our members are encouraged about what we can do in the
private sector to reduce growth in health care spending. From 1994
through 1999, national health expenditures were in line with overall
economic growth, because health insurance plans implemented a variety
of tools to constrain costs. This had a direct impact on the ability of
employers to purchase affordable coverage for their employees.
Indeed, the Lewin Group estimated that up to 5 million people \2\
who otherwise would have been uninsured were able to receive coverage
as a result of these costs being restrained.
---------------------------------------------------------------------------
\2\ The Lewin Group LLC, Managed Care Savings for Employers and
Households: 1990 through 2000; 1997
---------------------------------------------------------------------------
As the policy debate shifted away from containing costs,
legislative proposals at both the federal and state levels focused on
rolling back the mechanisms that were keeping health care affordable.
This led to a new cycle of accelerating health care costs with
a2deleterious effect on purchasers and consumers.
Recognizing this challenge, our members have developed a new
generation of cost containment tools that already are having a positive
impact and showing promise for the future. For example, the rates of
increase in pharmaceutical expenditures have significantly declined as
a result of our members' implementation of programs to encourage
greater use of generic drugs and other measures that encourage case
management of chronic conditions. The Center for Studying Health System
Change has reported \3\ that growth in prescription drug spending fell
to 7.2 percent in 2004, down from almost 20 percent in 1999.
---------------------------------------------------------------------------
\3\ Strunk, B., Ginsburg, P., & Cookson, J. (June 2005). Tracking
Health Care Costs: Spending Growth Stabilizes at High Rate in 2004.
Center for Studying Health System Change. Data Bulletin No. 29.
---------------------------------------------------------------------------
Quality Concerns
Through its landmark reports released in 1999, To Err is Human, and
in 2001, Crossing the Quality Chasm, the Institute of Medicine (IOM)
focused the nation on the critical need to improve health care quality
and patient safety, coordinate chronic care, and support evidence-based
medicine. Variation in medical decision-making has led to disparities
in the quality and safety of care delivered to Americans. The 1999 IOM
report \4\ found that medical errors could result in as many as 98,000
deaths annually, and a 2003 RAND study \5\ found that patients received
only 55 percent of recommended care for their medical conditions.
---------------------------------------------------------------------------
\4\ ``To Err is Human,'' Institute of Medicine, 1999
\5\ ``The Quality of Health Care Delivered to Adults in the United
States.,'' Elizabeth A. McGlynn, RAND, June 25, 2003
---------------------------------------------------------------------------
A wide range of additional studies indicate that Americans
frequently receive inappropriate care in a variety of settings and for
many different medical procedures, tests, and treatments. Such
inappropriate care includes the overuse, underuse or misuse of medical
services. Studies also show that patterns of medical care vary widely
from one location to another, even among contiguous areas and within a
single metropolitan area--with no association between higher intensity
care and better outcomes. For example:

The Dartmouth Atlas of Health Care \6\ documents wide
variation in the use of diagnostic and surgical procedures for patients
with coronary artery disease, prostate cancer, breast cancer, diabetes,
and back pain. For example, the rates of coronary artery bypass graft
(CABG) surgery were found to vary from a low of 2.1 per 1,000 persons
in the Grand Junction, Colorado hospital referral area, to a high of
8.5 per 1,000 persons in the Joliet, Illinois region. The Atlas' most
recent findings \7\ reveal wide variation in hospital care and outcomes
for chronically ill Medicare patients. For example, the length of
hospital stays varied--depending on a patient's geographic location--by
a ratio of 2.7 to 1 for cancer patients and by a ratio of 3.6 to 1 for
congestive heart failure patients.
---------------------------------------------------------------------------
\6\ Center for the Evaluative Clinical Sciences, Dartmouth Medical
School, The Dartmouth Atlas of Health Care, ``The Quality of Medical
Care in the United States: A Report on the Medicare Program,'' 1999
\7\ Fisher, E., Health Affairs, October 7, 2004
---------------------------------------------------------------------------
The longstanding nature of quality problems in the U.S.
health care system is evidenced by a 1999 article \8\ in The New
England Journal of Medicine, which stated:``A number of studies have
demonstrated overuse of health care services; for example, from 8 to 86
percent of operations--depending on the type--have been found to be
unnecessary and have caused substantial avoidable death and
disability.'' A more recent study, published in the June 1, 2005
edition of the Journal of the American Medical Association \9\,
indicated that 93 percent of practicing physicians in the state of
Pennsylvania reported practicing defensive medicine--with 43 percent
reporting that they used imaging technology in clinically unnecessary
circumstances.
---------------------------------------------------------------------------
\8\ Dr. Bodenheimer, T., The New England Journal of Medicine, Vol.
340, No. 6, pp. 488-492, 1999
\9\ ``Defensive Medicine Among High-Risk Specialist Physicians in a
Volatile Malpractice Environment,'' Journal of the American Medical
Association, June 1, 2005.
---------------------------------------------------------------------------
The National Committee for Quality Assurance (NCQA) \10\
documents the state of health care quality annually, reporting in 2004
that ``enormous quality gaps''' persist as ``the majority of Americans
still receive less than optimal care'' with between 42,000 and 79,000
avoidable deaths occurring each year. While health care quality is
improving in some areas, the health care system remains ``deeply
polarized, delivering excellent care to some people, and generally poor
care to many others.''
---------------------------------------------------------------------------
\10\ NCQA, The State of Health Care Quality: 2004, 2004

These research findings clearly indicate the need for innovative
strategies to improve quality and efficiency throughout the U.S. health
care system. Decisive action is needed to address these wide-ranging
variations in medical decision-making, as well as the overuse, underuse
and misuse of health care services. While we understand that the
subject of this hearing is paying for quality, we have thoughts about
other strategies that could support these efforts and would be
delighted to share them with the subcommittee.
III. WHERE WE GO FROM HERE
We need to move toward a health care system that rewards
physicians, hospitals and other health care practitioners for high
quality performance. Although the private sector is implementing
programs to meet this challenge, it is time for Medicare and other
federal programs to make similar changes and reward health care
practitioners for best practices and improved patient outcomes. This
would be an important step toward advancing an evidenced-based health
care system that yields better health outcomes and greater value for
beneficiaries.
We applaud you for introducing legislation--H.R. 3617, the
``Medicare Value-Based Purchasing for Physicians Act of 2005''--to
provide incentives to physicians to provide high quality health care.
We support the objectives of improving quality, efficiency, patient
safety and satisfaction, and believe that a strong commitment to these
goals will result in benefits to a variety of key stakeholder groups.
Consumers benefit from public disclosure and the opportunity to select
the best practitioners. Clinicians who perform well will be sought
after, and all clinicians will benefit from receiving feedback on how
their performance compares to their peers. For public programs,
transitioning to a payment-for-quality system will improve care and
shrink the wide variation in practice patterns around the country.
AHIP's members are committed to working with stakeholders across
the health care community, particularly health care professionals who
work on the frontlines every day, to develop a strategy that accounts
for the quality of care delivered to patients. In November 2004, AHIP's
Board of Directors demonstrated this commitment by approving principles
that are in sync with the goals underlying H.R. 3617 and at the same
time offer additional thoughts for advancing quality-based payment
systems. AHIP's principles include eight key elements:

Programs that reward quality performance should promote
medical practice that is based on scientific evidence and aligned with
the six aims of the IOM for advancing quality (safe, beneficial,
timely, patient-centered, efficient, and equitable).
Research is urgently needed to inform clinical practice in
priority areas currently lacking a sufficient evidence-based
foundation.
The involvement of physicians, hospitals and other health
care professionals in the design and implementation of programs that
reward quality performance is essential to their feasibility and
sustainability.
Collaboration with key stakeholders, including consumers,
public and private purchasers, providers, and nationally recognized
organizations, to develop a common set of performance measures--
process, outcome and efficiency measures--and a strategy for
implementing those measures will drive improvement in clinically
relevant priority areas that yield the greatest impact across the
health care system.
Reporting of reliable, aggregated performance information
will promote accountability for all stakeholders and facilitate
informed consumer decision-making.
The establishment of an infrastructure and appropriate
processes to aggregate--across public and private payers--performance
information obtained through evidence-based measures will facilitate
the reporting of meaningful quality information for physicians,
hospitals, other health care professionals, and consumers.
Disclosure of the methodologies used in programs that
reward quality performance will engage physicians, hospitals, and other
health care professionals so they can continue to improve health care
delivery.
Rewards, based upon reliable performance assessment,
should be sufficient to produce a measurable impact on clinical
practice and consumer behavior, and result in improved quality and more
efficient use of health care resources.

IV. IMPORTANCE OF UNIFORM PERFORMANCE MEASUREMENT, DATA AGGREGATION AND
REPORTING
Performance Measurement
A critically important step in moving forward with programs that
reward quality performance is the development of a uniform, coordinated
strategy for measuring, aggregating and reporting clinical performance.
Disseminating information derived from aggregated performance data--
which provides stakeholders with a more comprehensive view of
performance across marketplaces--would yield benefits on several
levels. Consumers would be allowed to make more informed decisions
about their health care treatments. Physicians, hospitals and other
health care professionals would be better able to improve the quality
of care they provide. Purchasers would receive greater value for their
investment in health care benefits. Health insurance plans could
continue to develop innovative products that meet consumer and
purchaser needs.
Unfortunately, the nation lacks a uniform and coordinated strategy
for measuring and aggregating physician performance data. While many
different private and public sector groups have attempted to step up to
the challenge by designing models for assessing performance and
reporting data, the proliferation of multiple, uncoordinated and
sometimes conflicting initiatives has significant unintended
consequences for different stakeholders. For example, duplicative
efforts:

unnecessarily burden physicians, other clinicians, and
health insurance plans with different data requests, shifting focus
away from quality and efficiency improvement;
create confusion among consumers due to different
information that is being publicly reported; and
detract from collective efforts to efficiently make
decisions and design programs that meet broad quality goals.

Perhaps most important, however, are the adverse effects numerous
initiatives have on patient care and the health care system as a whole.
Without a uniform approach to select performance measures for public
reporting, they will continue to divert limited resources and focus
away from establishing clear priorities and reaching goals.
To create uniformity across purchasers, coalitions and consulting
firms, AHIP has been working in a collaborative effort with the
Ambulatory Care Quality Alliance (AQA), whose membership also includes
the American College of Physicians (ACP), the American Academy of
Family Physicians (AAFP), the American Medical Association, the
American Osteopathic Association, the Society for Thoracic Surgery, the
American College of Surgeons, AARP, the National Partnership for Women
and Families, the Pacific Business Group on Health, and the Agency for
Healthcare Research and Quality (AHRQ), with the support of the Centers
for Medicare & Medicaid Services (CMS). Together, these organizations
are working to identify what should be measured for physician
performance--both quality and efficiency--and develop an effective and
efficient data aggregation model that would comprehensively assess
provider performance.
The AQA recently reached consensus on a common set of 26 ambulatory
care performance measures. These measures are grouped under eight
separate categories: (1) prevention; (2) coronary artery disease; (3)
heart failure; (4) diabetes; (5) asthma; (6) depression; (7) prenatal
care; and (8) overuse or misuse of medical services. Many of the
measures under these categories are ``bundled'' measures--i.e.,
multiple measures which if used collectively, have the potential to
more comprehensively and accurately assess physician performance and
provide improved outcomes for patients.
These measures are intended to serve as a ``starter set'' that will
provide clinicians, consumers, and purchasers with a set of quality
indicators that can be used for quality improvement, public reporting,
and pay-for-performance programs. Over the next several months, AQA
will be seeking to expand this starter set to include efficiency,
patient experience, non-primary care and other key measures.
Data Aggregation
In addition to working toward a strategy for performance
measurement, AQA is developing a uniform data aggregation strategy. The
aggregation model developed by this alliance would include the
following key attributes:

transparency with respect to framework, process and rules;
a process that allows provider performance to be compared
against both national and regional benchmarks and makes the data useful
for physicians to improve the quality and efficiency of care they
provide to their patients;
collection of both public and private data so that
physician performance can be assessed as comprehensively as possible;
a process that facilitates public reporting to consumers
of user-friendly and actionable information about physician quality and
efficiency;
standardized and uniform rules associated with measurement
and data collection; and
potection of privacy and confidentiality of data while
ensuring necessary access to appropriate stakeholders.
Launching Pilots
A first step toward achieving this model is to implement pilot
projects that combine public and private payer data, leverage the
experience of existing aggregation efforts, and evaluate the most
effective processes for measuring physician-level performance. AQA--
which at its last meeting reached consensus on the need and value for
pilots--is currently seeking to secure both public and private funding
to implement such pilots in 2006.
Key elements of the proposed pilots would include:

assessment of clinical quality, efficiency and patient
experience;
collection and aggregation of Medicare claims data and
private sector data from multiple sources;
exploration of both existing and new methods for
collecting, submitting and sharing data from physicians' medical
practices;
dissemination of measurement information.

The proposed pilots would address numerous important issues,
including the most effective methods for linking measures, and data
from multiple sources; the most effective ways to address
methodological issues (e.g., sample size for validating physician
performance, how to attribute performance to particular physicians, and
which risk-adjustment model is most effective); and what type of
information should be reported back to physicians and other
stakeholders. We believe that these pilot efforts could inform the
subcommittee's discussions, and we hope you will be supportive of this
broad effort.
Consumer Reporting
AQA is also exploring strategies for reporting reliable and useful
quality information to consumers, providers and other stakeholders. The
Alliance recently developed fundamental principles for reporting with
the objectives of facilitating more informed decision-making about
health care treatments and investment, facilitating quality
improvement, and informing providers of their performance. Two AQA
committees are working on this issue--one specifically addressing the
issue raised in H.R. 3617 about how to communicate these data to
physicians; and the other focusing on how to communicate this
information to consumers. We hope this effort, which involves a broad
range of stakeholder groups, also will be helpful to your discussions.
The AQA will continue to move forward in the areas of measurement,
aggregation and reporting, and encourage various stakeholders to become
involved in this important effort to improve health care quality and
patient safety. The work currently being undertaken by the AQA,
including the development of a common set of measures and pilot
projects which aggregate public and private sector data, will help us
reach our goals of identifying quality gaps, controlling skyrocketing
cost trends, reducing confusion and burdens in the marketplace, and
otherwise addressing the challenges of the current health care system.
V. COMMENTS ON H.R. 3617
We appreciate this opportunity to offer for your consideration
comments on key elements of H.R. 3617.
A. Characteristics and Fairness of Performance Measures
Health plans strongly support the criteria set forth in H.R. 3617
for performance measures. Many of these characteristics--such as the
requirement that measures should be evidence-based, valid, and not
overly burdensome to collect--are consistent with the criteria endorsed
by the Ambulatory Care Quality Alliance (AQA). Similarly, the other
criteria set out in the bill--such as outcome measures; process
measures; structural measures (e.g., use of health information
technology); measures of overuse, misuse and underuse; and measures
that assess the relative use of resources, services or expenditures--
have been recognized by the AQA as critical areas that need to be
addressed. We, at the same time, urge the committee to consider
supporting other important characteristics endorsed by the AQA,
including that measures be aligned with the IOM's six aims for
improvement (safe, effective, patient-centered, timely, efficient and
equitable), that physician-level measures should as much as possible
complement measures in other health care settings and that measures
should as much as possible be constructed so as to result in minimal or
no unintended harmful consequences (e.g., adversely impact access to
care).
Health insurance plans agree that performance measures should be
applied and implemented fairly. This requires that measures be
appropriately risk-adjusted to take into account differences in
individual health status and conditions, and that an adequate sample be
used to ensure a statistically valid assessment of physician
performance. Fairness also requires the use of outcomes measures, as
well as measures that reflect processes of care that physicians can
influence (e.g., measures that assess the appropriate treatment for
children with upper respiratory infection and the appropriate testing
for children with pharyngitis).
B. Selection Process for Measures
A good deal of work is currently being done to create a robust
measurement set that can be used on a uniform basis for performance-
based payments throughout the health care system. The National
Committee for Quality Assurance (NCQA) has been working with the health
plan and purchaser communities to create programs, such as Bridges to
Excellence, that align incentives around higher quality, efficient
care. The AMA Physician Consortium for Performance Improvement, which
includes representation from 70 national medical specialty societies,
has been working to develop evidence-based clinical performance
measures to improve patient care and foster accountability. The
National Quality Forum (NQF) reviews the work of these organizations
and other entities in an attempt to reach consensus on a preferred set
of performance measures and quality reporting. The Ambulatory Care
Quality Alliance, (AQA) which includes the involvement of NCQA, the AMA
Consortium and NQF--along with CMS and AHRQ--strives to reach consensus
across purchasers, physicians, consumers and health plans on the most
appropriate performance measures that have been endorsed by NQF or
validated through experience for immediate use. The AQA currently is
working to gain consensus on common rules and logic for efficiency
measures, as well as targeting those performance measures that address
underuse, overuse and misuse. Given the depth and breadth of ongoing
work, we believe it is essential for the Secretary to work with these
groups in selecting quality and efficiency measures as opposed to
reinventing the wheel. The selection of measures not currently being
utilized by the private sector will create unnecessary inconsistency,
add confusion, and impose an additional burden on physicians. By
contrast, the collaborative efforts of the AQA are paving the way for
greater standardization and uniformity in value-based purchasing
initiatives.
C. Periodic Revision of Measures
It is important that quality and efficiency measures be evaluated
periodically for their relevance and ability to improve care. To
evaluate improvements in care, trending data is important; for example,
a minimum of two years of data are needed to evaluate provider
efficiency. Thus, periodic review and revision should occur in a timely
period. However, as new evidence becomes available, these measures
should be revised as soon as possible to reflect such evidence, while
not being disruptive to data collection efforts.
D. Disclosure and Reporting
Public reporting will encourage quality performance. While our
members believe that physicians should be involved actively in the
selection of measures and reviewing information before it is disclosed,
such processes should ensure the timely provision of meaningful
information.
VI. THE PRIVATE SECTOR'S EXPERIENCE
Your proposal for a value-based purchasing program in Medicare is
similar in many respects to initiatives that many private sector health
insurance plans have implemented in recent years. Health insurance
plans have long been at the forefront of developing innovative payment
arrangements that have promoted population-based health care, improved
care for the chronically ill, and encouraged prevention.
Many of our members currently are offering financial awards to
physicians in the form of increased per-member-per-month payments or
non-financial rewards in the form of public recognition, preferential
marketing or streamlined administrative procedures. Additionally, some
plans are offering consumers reduced co-payments, deductibles, and/or
premiums in exchange for using providers deemed to be of higher
quality, based on specific performance measures. The categories of
performance measures most commonly reported include clinical quality,
utilization experience/efficiency, patient satisfaction, and
information technology infrastructure. Specific examples of these
initiatives are outlined in Appendix A.
While still in their early stage in some markets, initiatives that
reward quality and tier clinicians according to how they achieve
quality goals have an early track record in several states, including
California, Massachusetts, and Michigan. What we have learned is that
quality and efficiency measures go hand in hand.
Based on the experiences of our members, we know that programs for
rewarding quality performance have a number of common features:

Reason for Implementation: Across the board, the programs
seekto enhance and sustain clinical quality, facilitate excellence
across provider networks, and improve and promote patient safety.
Role of Clinicians: Nearly all plans indicate that
clinicians are actively involved in key aspects of rewarding quality
performance programs, including program development, selection of
performance measures, and determination of how rewards are linked to
provider performance.
Emphasis on Specific Measures: In rewarding quality
performance programs for physicians and medical groups, achieving
clinical quality goals plays the most significant role in the formula
for determining financial rewards. In programs for hospitals,
utilization experience/efficiency and patient safety objectives tend to
play equivalent roles.
Consumer Incentives: Efforts are being launched to
encourage consumers through reduced co-payments, deductibles, and/or
premiums to use providers that are achieving quality performance.
VII. CONCLUSION
Thank you for the opportunity to testify on this important issue.
Today's health care system is at a critical crossroads. We need to work
on the three interrelated goals of controlling costs, improving
quality, and expanding access. Progress on cost containment and quality
improvement can free up resources to expand access to health care
coverage for all Americans.
We applaud the subcommittee for focusing on value-based purchasing
as an important step toward improving the quality, safety and
efficiency of the U.S. health care system, and we look forward to
working closely with you to achieve these goals.
Appendix A
SPECIFIC INITIATIVES FOR REWARDING QUALITY PERFORMANCE
To provide a better understanding of pay-for-performance
initiatives in the private sector, we are providing brief examples of
programs being implemented by our members across the country.
Aetnahas launched a network of specialist physicians who
demonstrate effectiveness based on certain clinical measures, such as
hospital readmission rates over a 30-day period, reduced rates of
unexpected complications by hospitalized patients, and efficient use of
health care resources. Consumers who choose these specialists benefit
through lower co-payments, and providers benefit through increased
patient volume. The Aexcel network, which is currently available in
nine markets across the country, includes physicians in twelve medical
specialties--cardiology, cardiothoracic surgery, gastroenterology,
general surgery, obstetrics/gynecology, orthopedics, otolaryngology,
neurology, neurosurgery, plastic surgery, vascular surgery, and
urology.
CIGNA HealthCare of California participates in the
Integrated Healthcare Association's (IHA) quality incentive program.
CIGNA rewards the top 50 percent of contracted physician groups for
meeting each of the IHA clinical and member satisfaction metrics. Top-
performing groups in all components of the Rewards Program are eligible
to receive a minimum of $1.60 per member per month. Payment is based
upon the total annual member months of the group's population. In the
first year of the program, the payout in CaliforniaforIHA was $4
million.
Health Net of Connecticut has entered into a partnership
with the Connecticut State Medical Society-Individual Practice
Association (CSMS-IPA) to establish a ``P4Q'' program that will reward
eligible physicians for providing high quality, cost-effective care.
The P4Q program, announced in July 2005, includes both primary care
providers and specialists, providing them with an opportunity to earn
bonus compensation beyond their current fee-for-service reimbursement.
Diabetes treatment, breast cancer screenings and childhood
immunizations are included among the areas where physicians will be
rewarded for taking preemptive action. The first bonuses are expected
to be paid out in the second quarter of 2006, based on performance
measures for 2005.
HealthPartners has implemented an Outcomes Recognition
Program that offers annual bonuses to primary care clinics that achieve
superior results in effectively promoting health and preventing
disease. Since 1997, this program has awarded more than $3.95 million
in bonuses to primary care groups that meet performance goals focusing
on diabetes, coronary artery disease, tobacco cessation, generic
prescribing, and consumer satisfaction.
Highmark Blue Cross Blue Shield has adopted a Quality
Incentive Payment System that rewards primary care physicians for
demonstrating improvement in measures for preventive screenings,
treatment of chronic conditions, and other quality and service issues.
In the tenth year of the program (2003), more than $12 million in
bonuses were paid to primary care physicians who exceeded the average
performance measure on various indicators.
Independent Health uses a Quality Management Incentive
Award Program that involves a physician advisory group in developing
performance targets for key issues such as patient satisfaction,
emergency room utilization/access, office visits, breast and colorectal
screening, immunizations, and treatment for diabetes and asthma. In
addition to paying bonuses to physicians who exceed these targets, this
program has documented significant improvements in clinical care for
enrollees.
PacifiCare Health Systems has developed a Quality
Index^' profile that uses clinical, service, and data
indicators to rank medical groups. Enrollees pay lower co-payments for
office visits if they select physicians from a ``value network'' of
higher quality, lower cost providers. Additionally, PacifiCare's
Quality Incentive Program incorporates a subset of the Quality
Index^' profile and has demonstrated an average improvement
of 20 percent in 17 of 20 measures, with rewards to high performing
physicians exceeding $15 million in the past three years.
WellPoint's quality programs provide increased
reimbursement to hospitals and physicians based, in part, on achieving
improved quality measures. For example, hospitals selected for Anthem
Blue Cross and Blue Shield's Coronary Services Centers program in
Indiana, Kentucky, and Ohio must meet stringent clinical quality
standards for patient care and outcomes for certain cardiac procedures.
Anthem Blue Cross and Blue Shield of Virginia's Quality-in-Sights
Hospital Incentive Program (QHIP) rewards hospitals for improvements in
patient safety, patient health, and patient satisfaction. The 16
hospitals that participated in the first year of QHIP in 2004 are
receiving a total of $6 million for actively working to implement
nationally recognized care and safety practices that can save lives.
Blue Cross of California has a comprehensive physician pay-for-
performance program that paid $57 million in bonus payments to 134
medical groups based on quality criteria in 2003. Blue Cross of
California also has a PPO Physician Quality and Incentive Program
(PQIP) that allows more than 4,000 physicians insix countiesin the San
Francisco areato receive financial bonuses for superior performance on
clinical quality, service quality, and pharmacy measures.

Chairman JOHNSON. Thank you. Dr. Armstrong.

STATEMENT OF JOHN H. ARMSTRONG, M.D., MEMBER, BOARD OF
TRUSTEES, AMERICAN MEDICAL ASSOCIATION

Dr. ARMSTRONG. Thank you, Chairman Johnson. My name is John
Armstrong, I am a trustee of the American Medical Association
and a practicing trauma critical care and general surgeon from
Miami, Florida. The American Medical Association would like to
commend you, Madam Chairman, on introduction of your bill, H.R.
3617, the Medicare Value-based Purchasing For Physician
Services Act of 2005. We are grateful to you and Members of the
Subcommittee for your leadership in recognizing the need to
replace the current Medicare physician payment formula, the
SGR, and provide appropriate incentives for improving quality
of care for Medicare patients. We also appreciate your repeated
efforts, Madam Chairman, with Chairman Thomas in pressing CMS
to make administrative changes to the physician payment formula
retroactive to 1996 that would help Congress lower the cost of
enacting a new formula. We agree, and urge CMS to do so
immediately.
Today we are here to discuss H.R. 3617, which is critical
for ensuring continued quality of care and access to healthcare
services for Medicare patients. The American Medical
Association and its member physicians are staunchly committed
to quality improvement. We have convened the Physician
Consortium For Performance Improvement for the development of
physician performance measures. As a result of these efforts,
24 of 36 measures for physician-care endorsed by the National
Quality Forum were developed by the consortium. The CMS is also
using measures developed by the consortium in demonstration
projects on Pay For Performance authorized by the Medicare
Modernization Act. In June, our house of delegates adopted Pay
For Performance principles and guidelines. A number of the
provisions in H.R. 3617 are consistent with these.
First, H.R. 3617 would repeal the fatally flawed SGR and
provide positive updates for physicians that reflect increases
in practice costs. We appreciate your recognition that value-
based purchasing and the SGR are not compatible. Value-based
purchasing may save dollars for the Medicare Program as a
whole, but many of the measures ask physicians to deliver more
care. This concept conflicts with the SGR, which penalizes
physicians with payment cuts when volume increases exceed a
target. Additional pay cuts would only exacerbate the projected
26-percent reduction in physician reimbursement over the next 6
years, beginning with the first of this coming year. A recent
AMA survey shows that these cuts will impair patient access.
Second, H.R. 3617 would require evidence-based valid
performance measures developed by the medical specialties in a
transparent process. Third, the bill would mandate a volume
growth study for physician services. This is important for
carefully distinguishing between appropriate and inappropriate
utilization of services. We are happy also to have the
opportunity to offer suggestions for enhancement of H.R. 3617
and want to work further with the Subcommittee in this effort.
We would strongly support a greater amount of time for
transitioning to a value-based program for physician services.
A ramp-up period in 2006, with a phase-in from 2007 through
2010, would allow for proper development of the program. Pilot
testing prior to full implementation is essential. Medicare
value-based purchasing for physician services is a completely
new concept, and demonstration results with this type of system
are currently not available. The CMS only began a limited
demonstration in April that applies to large group practices,
not a wide array of physician practices, and a demonstration
mandated by the AMA is still under development.
Further, we urge the decisions about public reporting be
deferred until there is full resolution of certain elements,
such as risk adjustment, that could affect how information is
reported. Inaccurately reported information could adversely
impact access to care for vulnerable populations. This would
undermine the goals of value-based purchasing and violate our
physicians' oath, first do no harm. Patients are served only if
they are provided accurate, relevant and user friendly
information. We urge clarification that H.R. 3617 would require
resource use efficiency measures to meet the same rigorous
evidence-based standards that apply to other measures. All
physician measures must be valid, evidence-based measures that
improve quality of care.
To conclude, we emphasize that stable medical practice
economics are essential for value-based purchasing. Physicians
must have the financial ability to invest in tools and
initiatives, such as information technology that are necessary
for moving medicine forward and continually achieving the new
levels of quality improvement envisioned by value-based
purchasing programs. The American Medical Association was
founded on the mission of serving patients and ensuring access
to quality care. We look forward to working with the
Subcommittee and Congress to make improvements in the Medicare
Program that allow physicians to carry out that mission in
service to our patients. I thank you for the opportunity to be
here today.
[The prepared statement of Dr. Armstrong follows:]
Statement of John H. Armstrong, M.D., Member, Board of Trustees,
American Medical Association
The American Medical Association (AMA) appreciates the opportunity
to provide our views today regarding H.R. 3617, Chairman Johnson's
``Medicare Value-Based Purchasing for Physicians' Services Act of
2005,'' which now has 31 cosponsors. We would like to commend you,
Madam Chairman, and Members of the Subcommittee, for all of your hard
work and leadership in recognizing the fundamental need to replace the
Medicare physician payment update formula and provide appropriate
incentives for improving quality of care for Medicare patients.
A 4.4% Medicare physician pay cut is scheduled to become effective
January 1, 2006, and is the first in a series of cuts expected over the
next six years, totaling 26%. H.R. 3617 is crital for ensuring
continued quality of care and long-term access to health care services
for Medicare beneficiaries.
AMA COMMITMENT TO THE DEVELOPMENT OF EFFECTIVE QUALITY IMPROVEMENT
PROGRAMS
The AMA has long been committed to quality improvement, and we have
undertaken a number of initiatives to achieve this goal. The AMA has
convened the Physician Consortium for Performance Improvement for the
development of performance measurements and related quality activities.
Consortium membership includes: (i) clinical experts representing more
than 65 national medical specialty and state medical societies, and
additional medical specialty societies continue to join the Consortium;
(ii) experts in methodology; (iii) the Agency for Healthcare Research
and Quality (AHRQ); (iv) the Centers for Medicare and Medicaid Services
(CMS); (v) the Joint Commission on Accreditation of Healthcare
Organizations--liaison member, and; (vi) the National Committee for
Quality Assurance (NCQA)--liaison member.
The Consortium has grown to become the leading physician-sponsored
initiative in the country in developing physician-level performance
measures, and senior CMS officials have stated that CMS is looking to
the Consortium to be the primary measure development body for physician
level performance measures used by CMS for quality improvement and
accountability purposes (e.g., pay-for-performance). In fact, CMS is
now using the measures developed by the Consortium in its large group
practice demonstration project on pay-for-performance, and plans to use
them in demonstration projects authorized by the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (MMA). Once measures
have been developed through the Consortium, they should be reviewed and
endorsed in a transparent process by a multi-stakeholder organization,
such as the National Quality Forum (NQF), as is required by H.R. 3617.
In fact, the NQF recently endorsed 36 measures for outpatient care, 24
of which were developed by the Consortium.
In June of this year, the AMA House of Delegates also adopted
comprehensive pay-for-performance principles and guidelines that
address five broad aspects of pay-for-performance programs: (i) quality
of care; (ii) the patient/physician relationship; (iii) voluntary
participation; (iv) accurate data and fair reporting; and (v) fair and
equitable program incentives. More specific guidelines are associated
with each of the AMA pay-for-performance principles, and we provided
these principles and guidelines to the Subcommittee at its July 21,
2005 hearing on value-based purchasing.
LEGISLATION TO ESTABLISH VALUE-BASED PURCHASING FOR PHYSICIANS'
SERVICES UNDER MEDICARE
AMA/Medical Specialty Conceptual Framework for a Phased Approach to
Pay-For-Performance
The attached conceptual framework for a phased-in approach to a
Medicare pay-for-performance program was as jointly developed by the
AMA and over 70 medical organizations, and we believe it will be
helpful in providing guidance as we work toward refinements of H.R.
3617. We are committed to working with the Subcommittee, Congress and
the Administration to help develop a fair, ethical, patient-centered,
and evidence-based Medicare pay-for-performance program.
The attached framework is the result of extensive work by
organizations representing a wide variety of physician specialties. It
is our belief that the only way pay-for-performance will be successful
in Medicare is if it recognizes the great diversity of physician
practices in this country. Many medical specialty organizations have
shared with Congress very detailed principles outlining the necessary
elements for pay-for-performance to work effectively. This framework is
not intended to supersede these important documents, but rather to
highlight areas of consensus in medicine to provide you with our best
sense of how Medicare might begin to implement pay-for-performance.
Provisions in H.R. 3617 that are Consistent with AMA Pay-for-
Performance Principles and Guidelines
As discussed further below, the AMA strongly supports theprovision
in H.R. 3617 that would repeal the current Medicare physician payment
sustainable growth rate formula (SGR) and replace it with updates that
reflect increases in medical practice costs. This would treat
physicians similarly to other Medicare providers, such as hospitals,
home health agencies and skilled nursing facilities. H.R. 3617 also
would ensure that physicians receive a base payment update, while
physicians achieving quality goals would receive a bonus payment, and
we strongly support this provision as well. We are happy to work with
the Subcommittee in working through the details of the timing sequence
of these payments, while keeping in mind that all physician
organizations should have equal opportunity to qualify for available
bonus payments
In addition, the AMA greatly appreciates that a number of
provisions in H.R. 3617 are consistent with key pay-for-performance
principles and guidelines recently adopted by our House of Delegates.
These provisions would: (i) require that evidence-based, valid
performance measures be developed in a transparent process by the
medical specialties and validated through a consensus-building
organization involving multiple stakeholders, such as the Physician
Consortium for Performance Improvement; (ii) require a phased-in
approach to allow all physician specialties the opportunity to
participate in the program; (iii) allow voluntary physician
participation in the program; (iv) require performance measurement to
be scored against both absolute values and relative improvements in
those values; (v) require safeguards against patient de-selection, as
well as measures that take into account patient non-compliance, and
(vi) require the Secretary of HHS to educate physicians and
beneficiaries about the value-based purchasing program.
We also applaud the fact that H.R. 3617 would require a payment
update equal to the Medicare Economic Index (MEI) for new physicians
for the year they are determined by the Secretary to be ``new.'' In
addition, the bill would require a physician volume growth study
whereby HHS must annually report on physician volume growth, with
recommendations for responding to inappropriate volume growth by
service, specialty and region. (The Secretary of HHS would also review,
over 5 years, improvement in quality and efficiency, access and
fairness of implementation of program.) There are many reasons for
growth in the volume of Medicare services, and without further study it
is impossible to determine what volume growth is appropriate or
inappropriate. Earlier this year, for example, Medicare officials
announced that spending on Part A services is decreasing. This suggests
that, as technological innovations advance, services are shifting from
Part A to Part B, leading to appropriate volume growth on the Part B
side. The volume growth study in H.R. 3617 is important for
distinguishing between appropriate and inappropriate volume growth. If
there is a problem with volume growth regarding a particular type of
medical service, the AMA would look forward to working with Congress
and the Administration to address it.
Factors to Consider for Improvement of H.R. 3617
Public Reporting
The AMA is concerned about public reporting. Potential, adverse
affects of public reporting must be avoided. If not approached
thoughtfully, public reporting can have unintentional adverse
consequences for patients, including, for example, patient de-selection
in the case of those who, for a variety of reasons, are non-compliant.
Further, health literacy may not be adequate to comprehend basic
medical information. Thus, several critical issues that must be
resolved before public reporting provisions can be implemented. There
needs to be a method for ensuring that any publicly reported
information is: (i) attributable to those involved in the care; (ii)
appropriately risk-adjusted; and (iii) accurate, as well as relevant
and helpful to the patient.
Moreover, with regard to public reporting, it is critical that
physicians have the opportunity for prior review and appeal with regard
to any data that is part of the public review process, and physician
comments should be included with any publicly reported data. This is
necessary to give an accurate and complete picture of what is otherwise
only a snapshot, and possibly skewed, view of the patient care provided
by a physician.
We urge clarification of the provisions in H.R. 3617, however, that
address the opportunity for prior review and appeal with comment. The
bill contains a provision establishing an appeals process and allowing
the opportunity for prior review and comment on information concerning
whether the physician met performance objectives, with comments to be
made public with the report. Yet, the bill prohibits administrative or
judicial review of certain matters, including the development and
computation of physician ratings, as well as the application of
performance improvement standards and thresholds to physicians. These
provisions (e.g., those barring administrative and judicial review of
the application of performance standards to physicians) may be in
conflict with those allowing physician appeal and comment of whether
they met performance objectives. Thus, we urge that H.R. 3617 make
clear that physicians have the opportunity for prior review, appeal and
comment on publicly reported data.
Pilot Testing
We urge that H.R. 3617 include a provision for pilot-testing of any
value-based purchasing program prior to full implementation. Since
value-based purchasing is a completely new concept with regard to
Medicare payment for physicians' services, pilot testing is critical
for determining whether this type of payment system achieves its
intended purpose. Pilot tests would also help identify program
``glitches'' and any needed modifications. For example, we are
concerned about the impact of a pay-for-performance program on patients
in areas that are under-served or have a high-disease burden. Pilot
testing could illuminate appropriate methods for ensuring access for
these patients.
A limited demonstration project being conducted by CMS, i.e., the
Physician Group Practice Demonstration, began only in April of this
year, and thus results from that demonstration will not be forthcoming
for some time. Moreover, this demonstration only applies to large group
practices and not to the wide array of physician practices across the
country. In addition, CMS' Care Management Performance Demonstration,
authorized by section 649 of the MMA, is still under development and
has not yet begun. Thus, it is not clear when results from this
demonstration will be available.
In addition to pilot testing by CMS, we believe the Agency for
Healthcare Research and Quality could also play a valuable role in
identifying best practices related to value-based purchasing. Evidence-
basedresearch, coupled with CMS pilot tests, wouldhelp ensure that no
unintended consequences arise from the application of this new concept
in Medicare.
Measures of Efficiency
Measures of efficiency are another strong area of concern.
Efficiency measures have the danger that the lowest-cost treatment will
supersede the most appropriate care for an individual patient. We
appreciate that H.R. 3617 requires that efficiency measures relating to
clinical care meet the same high standards that apply to quality
measures. Efficiency measures must be evidence-based, valid measures
developed by the medical specialty societies in a transparent process.
We urge the following considerations, however, with regard to
efficiency measures. There must be broad-based consensus regarding what
constitutes appropriate levels of care before measuring for efficiency.
In addition, all efficiency measures should be evidence-based. (The
same is true for quality measures.) All measures must have a valid
basis, with sufficient evidence to show that the measure will improve
quality of care. Thus, H.R. 3617 should extend the evidence-based
requirement to all measures, including efficiency measures that the
bill designates as not relating to clinical care.
Risk Adjustment
Development of risk-adjustment techniques are of great concern to
the physician community. A reliable method for risk-adjustment is
critical. Without it, there will not be an adequate reflection of a
physicians' performance. As we move toward developing a reliable risk-
adjustment technique, physician organizations must be consulted and be
integrally involved in the process. We caution, however, that the
measure development process must remain within the domain of the multi-
stakeholder organization (such as the Physician Consortium for
Performance Improvement) and medical specialty societies, and the
separate process for developing risk adjustment techniques should not
interfere with measure development.
Phase-In of Value-Based Purchasing Program
In accordance with the pay-for-performance AMA/specialty society
joint conceptual framework discussed above, the AMA urges a greater
amount of time in transitioning to a value-based program for
physicians' services. Under this framework, there would be: (i) a
``ramp up'' period in 2006; (ii) pay-for-reporting in 2007 through 2009
with regard to various levels of quality information and measures, and
(iii) pay-for-performance in 2010.
This timeframe would allow for the development of evidence-based
measures, as well as their validation and endorsement through the
appropriate process. This is necessary so that each medical specialty
has an opportunity to participate in the value-based program.
Administrative Costs
The AMA also urges that any value-based purchasing program ensure
that physicians are not burdened with additional administrative costs,
especially for information technology systems that are needed to
participate in the program. As discussed above, physicians cannot
continue to absorb unfunded government mandates, and value-based
payments for participation in the program should not be undermined by
administrative costs.
Other Critical Considerations
The AMA also wishes to raise overall factors to be considered as we
move forward in developing value-based purchasing legislation for
physicians: (i) the number of patients needed to achieve a
statistically valid sample size, which is particularly important for
purposes of determining how ``billing units,'' as set forth under H.R.
3617, are ultimately defined; (ii) the desire to keep the data
collection burden low, while at the same time maintaining accuracy of
the data; (iii) level of scientific evidence needed in establishing
appropriate measures; (iv) the ability to trace a performance measure
back to one or many physicians involved in a patient's care; (v) the
complexities of distributing payments when multiple physicians are
involved in a patient's care, and without violating any fraud and abuse
laws and regulations; and (vi) protection of patient privacy.
Finally, as we move forward in the development of value-based
purchasing programs for physicians' services, care should be taken to
review savings achieved in certain parts of the Medicare program due to
these programs. In fact, AMA policy seeks to ``ensure that any Medicare
Part A savings which are achieved when physicians' efforts result in
fewer in-patient complications, shorter lengths-of-stays, fewer
hospital readmissions, etc., are "credited" and flow to the Part B
physician payment pool.''
We commend Chairman Johnson for your sensitivity to these important
factors, and we look forward to working with you to achieve a new
payment system for physicians that keeps pace with the cost of
practicing medicine and rewards physicians for the quality of care they
provide.
H.R. 3617 Recognizes the Need to Repeal the Current Medicare Physician
Payment Sustainable Growth Rate Formula
The AMA applauds the Subcommittee's recognition that value-based
purchasing is not compatible with the current fatally flawed SGR
physician payment formula. We also strongly support the provision in
H.R. 3617 that would repeal the SGR and replace it with updates that
reflect increases in medical practice costs.
Specifically, H.R. 3617 would establish a 1.5% update in 2006.
Thereafter, the update would be based on MEI, which is Medicare's index
for measuring medical practice cost inflation. In 2007-08, the payment
update would be based would MEI if certain performance reporting
requirements are met. If not, the update would be MEI minus 1. In 2009
and subsequent years, the update would be MEI if reporting requirements
and quality and efficiency measures are met. If not, the update would
be MEI minus 1.
H.R. 3617 recognizes that the current Medicare physician payment
system is not compatible with a value-based purchasing program for
physicians. Value-based purchasing may save dollars for the Medicare
program as a whole by reducing medical complications and
hospitalizations. The majority of measures, however, such as those
focused on prevention and chronic disease management, ask physicians to
deliver more care. During his May 11, 2004 testimony before the House
Ways and Means Health Subcommittee, CMS Administrator, Dr. Mark
McClellan, suggested that one of the agency's quality improvement
projects, the Chronic Care Improvement Project, "may actually increase
the amount of (patient-physician) contact through appropriate office
visits with physicians."
The SGR is a spending target that penalizes volume increases
exceeding the target. If the SGR is retained, the so-called reward for
physicians will be additional pay cuts. This is antithetical to the
desired outcome of value-based purchasing and would only compound an
ongoing serious problem.
The flaws in the SGR formula led to a 5.4% payment cut in 2002, and
additional cuts in 2003 through 2005 were averted only after Congress
intervened. Without Congressional and Administrative action, Medicare
payments to physicians will be cut by 4.4%, beginning January 1, 2006.
As discussed above, this is the first of a series of cuts that are
projected by the Medicare Trustees over the next six years, totaling
about 26%. If these cuts begin, on January 1, 2006, average physician
payment rates will be less in 2006 than they were in 2001, despite
substantial practice cost inflation. These reductions are not cuts in
the rate of increase, but are actual cuts in the amount paid for each
service. Physicians simply cannot absorb these draconian payment cuts
and, unless Congress acts, physicians may be forced to avoid,
discontinue or limit the provision of services to Medicare patients.
A recent AMA survey indicates that if significant Medicare pay cuts
become effective beginning in 2006:

More than a third of physicians (38%) plan to decrease the
number of new Medicare patients they accept;
More than half of physicians (54%)plan todefer the
purchase of information technology, which is necessary to make value-
based purchasing work;
A majority of physicians (53%) will be less likely to
participate in a Medicare Advantage plan; One-third (34%) of physicians
whose practice serves a rural patient population will discontinue rural
outreach services;
One-third of physicians (34%) plan to discontinue nursing
home visits if payments are cut in 2006. By the time the cuts end, half
(50%) of physicians will have discontinued nursing home visits.

A physician access crisis is looming for Medicare patients. While
the MMA brought beneficiaries important new benefits, these critical
improvements must be supported by an adequate payment structure for
physicians' services. There are already some signs that access is
deteriorating. A MedPAC survey found that 22% of patients already have
some problems finding a primary care physician and 27% report delays
getting an appointment. Physicians are the foundation of our nation's
health care system. Continual cuts put Medicare patient access to
physicians' services at risk. They also threaten to destabilize the
Medicare program and create a ripple effect across other programs.
Indeed, Medicare cuts jeopardize access to medical care for millions of
our active duty military family members and military retirees because
their TRICARE insurance ties its payment rates to Medicare.
PROBLEMS WITH THE SUSTAINABLE GROWTH RATE
There are two fundamental problems with the SGR formula:

1. Payment updates under the SGR formula are tied to the gross
domestic product, which bears little relationship to patients'
health care needs or physicians' practice costs; and
2. Physicians are penalized with pay cuts when Medicare
spending on physicians' services exceeds the SGR spending
target, yet, the SGR is not adjusted to take into account many
factors beyond physicians' control, including government
policies, that although good for patients, promote Medicare
spending on physicians' services.

CMS Administrator McClellan recently stated that the current system
of paying physicians is simply not sustainable. We agree, and urge CMS
to use its authority to take administrative action to help Congress
avert physician pay cuts and ensure that a stable, reliable Medicare
physician payment formula is in place for Medicare patients, as
discussed below.
ADMINISTRATIVE ACTION NEEDED TO ASSIST CONGRESS IN REPLACING THE SGR
CMS has the Authority to Remove Drug from the SGR, Retroactive to 1996
The AMA extends its gratitude to Chairman Thomas and Subcommittee
Chairman Johnson for your repeated efforts in pressing CMS to join
forces with Congress to replace the flawed physician payment formula.
As your letter to CMS Administrator McClellan, dated July 12, 2005,
states: ``A permanent legislative fix to the Sustainable Growth Rate
(SGR) formula would be prohibitively expensive given current
interpretation of the formula, but could proceed through our joint
efforts combining administrative and legislative action.'' The letter
also affirms CMS' authority to remove the costs of drugs, back to the
base period, from calculation of the SGR. The AMA adamantly agrees with
the Chairmen that CMS should retroactively remove drugs from the SGR,
and we continue to join the Chairmen in urging CMS to do so for the
2006 physician payment rule.
Recently Administrator McClellan testifiedthat removing drugs will
not have any impact on physician payment updates under the SGR for at
least several years. We believe that this statement is based on a
scenario where drugs are removed going forward, rather than from the
base-year forward. Nonetheless, under any scenario, removing drugs will
significantly reduce the cost of legislation to address the looming
Medicare pay cuts and CMS should take this step as soon as possible.
Indeed, CMS told Congress earlier this year that removing drugs
prospectively is worth about $36 billion, while removing them from the
base-year forward is worth $111 billion.
CMS has the authority to remove physician-administered drugs from
the SGR, retroactive to 1996. When CMS calculates actual Medicare
spending on ``physicians' services,'' it includes the costs of
Medicare-covered prescription drugs administered in physicians'
offices. CMS has excluded drugs from ``physicians' services'' for
purposes of administering other Medicare physician payment provisions.
Thus, removing drugs from the definition of ``physicians' services''
for purposes of calculating the SGR is a consistent reading of the
Medicare statute. Drugs are not paid under the Medicare physician fee
schedule, and it is illogical to include them in calculating the SGR.
Further, if CMS adopts a revised definition of ``physicians'
services'' that excludes drugs, it can revise its SGR calculations
going back to 1996 using its revised definition.
These revisions would not affect payment updates from previous
years, but would only affect payment updates in future years. This
recalculation would be similar, for example, to the recalculation of
graduate medical education costs in a base year for purposes of setting
future payment amounts. That recalculation was approved by the Supreme
Court.
CMS Should Remove Drugs from the SGR
Drug expenditures are continuing to grow at a very rapid pace. Over
the past 5 to 10 years, drug companies have revolutionized the
treatment of cancer and many autoimmune diseases through the
development of a new family of biopharmaceuticals that mimic compounds
found within the body. Such achievements do not come without a price.
Drug costs of $1,000 to $2,000 per patient per month are common and
annual per patient costs were found to average $71,600 a year in one
study.
In 2004 alone, six oncology drugs received FDA approval or expanded
approval, and two others received approval in 2003. As Dr. McClellan
noted in testimony earlier this year, spending for one recently-
developed drug, Pegrilgrastim (Neulastra) totaled $518 million last
year, more than double the 2003 total. This drug strengthens the immune
systems of cancer patients receiving chemotherapy, thereby improving
and extending the lives of many and potentially reducing hospital costs
in the process.
While the bulk of all physician-administered drugs are used to
treat cancer patients, other factors--such as a rise in the number of
patients with compromised immune systems and the number of drug-
resistant infections in the U.S--also have contributed to the rapid
growth of drug expenditures. This growth has dwarfed that of the
physician services the SGR was intended to include. Between the SGR's
1996 base year and 2004, the number of drugs included in the SGR pool
rose from 363 to 445. Spending on physician-administered drugs over the
same time period rose from $1.8 billion to $8.6 billion, an increase of
358% per beneficiary compared to an increase of only 61% per
beneficiary for actual physicians' services. As a result, drugs have
consumed an ever-increasing share of SGR dollars and have gone from
3.7% of the total in 1996 to 9.8% in 2004.
This lopsided growth lowers the SGR target for real physicians'
services, and, according to the Congressional Budget Office, annual
growth in the real target for physicians' services will be almost a
half percentage point lower than it would be if drugs and lab tests
were not counted in the SGR. As 10-year average GDP growth is only
about 2%, even a half percent increase makes a big difference. Thus,
including the costs of drugs in the SGR pool significantly increases
the odds that Medicare spending on ``physicians' services'' will exceed
the SGR target. Ironically, however, Medicare physician pay cuts
(resulting from application of the SGR spending target) apply only to
actual physicians' services, and not to physician-administered drugs,
which are significant drivers of the payment cuts.
Medicare actuaries predict that drug spending growth will continue
to significantly outpace spending on physicians' services for years to
come. In 2003, MedPAC reported that there are 650 new drugs in the
pipeline and that a large number of these drugs are likely to require
administration by physicians. In addition, an October 2003 report in
the American Journal of Managed Care identified 102 unique
biopharmaceuticals in late development and predicted that nearly 60% of
these will be administered in ambulatory settings. While about a third
of the total are cancer drugs, the majority are for other illnesses and
some 22 medical specialties are likely to be involved in their
prescribing and administration.
The development of these life-altering drugs has been encouraged by
various federal policies including streamlining of the drug approval
process and increased funding for the National Institutes of Health. In
fact, under the leadership of Dr. McClellan and this Administration,
the NIH has made substantial progress toward its goal of wiping out
cancer deaths by 2015 and much of that progress is tied to the
development and more rapid diffusion of new drugs. The AMA shares and
applauds these goals. It is not equitable or realistic, however, to
finance the cost of these drugs through cuts in payments to physicians,
and thus these costs should be removed from calculations of the SGR.
Government-Induced Increases in Spending on Physicians' Services should
be Accurately Reflected in the SGR Target
The AMA agrees with Chairmen Thomas and Johnson, as stated in the
July 12, 2005, letter referenced above, that CMS should take steps to
ensure that the SGR accurately reflects spending increases due to such
matters as expanded Medicare benefits and national coverage decisions.
As discussed above, the government encourages greater use of
physician services through legislative actions, as well as a host of
other regulatory decisions. These initiatives clearly are good for
patients and, in theory, their impact on physician spending is
recognized in the SGR target. In practice, however, many have either
been ignored or undercounted in the target. Since the SGR is a
cumulative system, erroneous estimates compound each year and create
further deficits in Medicare spending on physicians' services.
Effective January 1, 2005, CMS implemented the following new or
expanded Medicare benefits, some of which have been mandated by the
MMA: (i) initial preventive physical examinations; (ii) diabetes
screening tests, (iii) cardiovascular screening blood tests, including
coverage of tests for cholesterol and other lipid or triglycerides
levels, and other screening tests for other indications associated with
cardiovascular disease or an elevated risk for that disease, (iv)
coverage of routine costs of Category A clinical trials, and (v)
additional ESRD codes on the list of telehealth services.
As a result of implementing a new Medicare benefit or expanding
access to existing Medicare services, the above-mentioned provisions
will increase Medicare spending on physicians' services. Such increased
spending will occur due to the fact that new or increased benefits will
trigger physician office visits, which, in turn, may trigger an array
of other medically necessary services, including laboratory tests, to
monitor or treat chronic conditions that might have otherwise gone
undetected and untreated, including surgery for acute conditions.
CMS has not provided details of how its estimates are calculated,
and certain questions remain. Further, CMS reportedly does consider
multiple year impacts and cost of related services, but the agency has
not provided any itemized descriptions of how the agency determines
estimated costs. Without these details, it is impossible to judge the
accuracy of CMS' law and regulation allowances. For example, in
reviewing the 2004 utilization and spending data, we found that
utilization per beneficiary of code G0101 for pelvic and breast exams
to screen for breast or cervical cancer had increased 10% since 2003.
Although this benefit was enacted in BBA 1997 eight years ago, clearly
it is continuing to effect SGR expenditures as continued promotion of
the benefit by both the government and beneficiary organizations prompt
more beneficiaries to take advantage of it. Likewise, per beneficiary
utilization of code G0105, colorectal cancer screening of a high-risk
patient, also enacted in the BBA, was up 13%. These impacts should be
taken into account in determining the 2004, 2005 SGRs and 2006 SGRs.
In addition, CMS recently announced that physicians will receive an
increased payment as a result of additional paperwork burden that will
be shifted to physicians in documenting patient need for power
wheelchairs and scooters. These increased payments should be reflected
in the SGR. Further, in its 2006 payment preview, CMS identified
physical therapy as an area of rapid volume growth contributing to
accelerated growth in 2004. The physical therapy community has
identified a number of regulatory changes that likely encouraged that
growth, and CMS should examine the degree to which legislative and
regulatory changes on the Part A side have led to a shift of services
into outpatient settings where they are included in the SGR pool.
Spending due to all of the foregoing governmentinitiatives should be
reflected in the SGR.
Medicare Physician Spending Due to National Coverage Decisions should
be Reflected in the SGR
When establishing the SGR spending target for physicians' services,
the law requires that impact on spending, due to changes in laws and
regulations, be taken into account. The AMA believes that any changes
in national Medicare coverage policy that are adopted by CMS pursuant
to a formal or informal rulemaking, such as Program Memorandums or
national coverage decisions, constitute a regulatory change as
contemplated by the SGR law, and must also be taken into account for
purposes of the spending target.
When the impact of regulatory changes for purposes of the SGR is
not properly taken into account, physicians are forced to finance the
cost of new benefits and other program changes through cuts in their
payments. Not only is this precluded by the law, it is extremely
inequitable and ultimately adversely impacts beneficiary access to
important services.
CMS has expanded covered benefits through the adoption of more than
80 national coverage decisions (NCDs), including implantable
cardioverter defibrillators, diagnostic tests and chemotherapy for
cancer patients, carotid artery stents, cochlear implants, PET scans,
and macular degeneration treatment. While every NCD does not
significantly increase Medicare spending, taken together, even those
with marginal impact contribute to rising utilization. CMS has stated
its view that it would be very difficult to estimate any costs or
savings associated with specific coverage decisions and that any
adjustments would likely be small in magnitude and have little effect
on future updates. We disagree, and strongly believe that CMS should
make these adjustments in its rulemaking for 2006. CMS already adjusts
Medicare Advantage payments to account for NCDs, so it clearly is able
to estimate their costs.
Accordingly, CMS should ensure that the SGR reflects the impact on
utilization and spending resulting from all national coverage decisions
for purposes of the 2006 physician fee schedule rule.
The AMA appreciates the opportunity to provide our views to the
Subcommittee on these important matters, and we look forward to working
with the Subcommittee and CMS to develop a payment system for
physicians that ensures quality for our patients and reflects the costs
of practicing medicine.

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ATTACHMENT--AMA TESTIMONY
2006 Ramp-up
Medicare Update: Total additional dollars allocated to fix the SGR at
least equal to the amount required to provide a fee schedule
update equal to the increase in the MEI.
Development Period
Measure Development (ongoing)
PFP Pilot Tests/Demos
2007 Pay for Reporting
Medicare Update: Total additional dollars allocated to fix the SGR and
fund a pay for reporting program are at least equal to the
amount required to provide a fee schedule update equal to the
increase in the MEI. All physicians guaranteed a payment
``floor'' of positive updates.
Reporting basic quality information such as:

Practice structure (e.g. functions of IT use--patient
registries)
Participation in patient safety programs/use of protocols
(e.g. mark your site, time out)
Development Period
Measure Development (ongoing)
PFP Pilot Tests/Demos
2008-2009 Pay for Reporting/Pay for Participation
Medicare Update: Total additional dollars allocated to fix the SGR and
fund a pay for reporting/pay for participation program are at
least equal to the amount required to provide a fee schedule
update equal to the increase in the MEI. All physicians
guaranteed a payment ``floor'' of positive updates.
Transition to participation in more advanced quality
improvement programs and reporting of evidence-based quality measures.
Quality performance data will be transmitted back to physicians for
internal quality improvement purposes. This phase would also test the
feasibility of collecting data and accurately measuring physician
performance in preparation for PFP.
Development Period
Measure Development (ongoing)
PFP Pilot Tests/Demos
2010 Pay For Performance
Medicare Update: Pay for performance (PFP) provisions are triggered
contingent on repeal of SGR formula. Long term solution must
assure that sufficient dollars are allocated to allow for
positive annual fee schedule updates linked to inflation and
money to be set aside to fund the proposed PFP program. All
physicians must be guaranteed a payment ``floor'' of positive
updates.
% of Medicare payment of physicians (all specialties)
based on quality performance
Program focus on continuous quality improvement
Performance measured on evidence-based measures of process
and/or outcomes with appropriate risk adjustment, valid sample size,
etc..
Any ``efficiency measures'' used are transparent, evidence
based, and focus on clinical quality improvement
Only after adequate safeguards are put in place to prevent
unintended consequences such as patient de-selection is public
reporting permitted
HHS conducts studies on Medicare program savings resulting
from Part B quality efforts

Chairman JOHNSON. Thank you very much to all of the
panelists. Dr. Armstrong, we really have appreciated the
leadership that the AMA has provided to the physician community
in leading the discussion on Pay For Performance, and not only
the AMA, but all of the specialty organizations have been very
helpful both to us and to the administration in beginning to
identify clinical quality standards. As to this issue of public
reporting, which I think is terribly important, it doesn't
happen for 3 years. I think you are absolutely right, by then
we need to be assured that the risk adjustment to process is
accurate and that the data is accurate. I thought Dr. Jevon's
comment about his effort to have to clean up his data was very
interesting. Ms. Ignagni, you and your organization have been
excellent at data issues and integrating data, and the sort of
extraordinary number of things happening in the data management
world does give me hope that Pay For Performance will push
ahead. Remember at first it is on reporting things that are
much simpler; by the time we really get to paying for clinical
performance, I think we should have incentivized the world to
be much more--to clean up the data that we use and to have much
better grasp of what is usable and what isn't. The bill does,
of course, require that the data be accurate and widely
respected and so on. So, I do--I wanted to acknowledge those
issues because they are all very important. Dr. Jevon, I just
wanted to briefly ask you, it sounds to me like the systems
that you have been involved in give bonuses because then a
physician can actually see this is $5,000, whereas no matter
what the percent is, it is hard to see what is going to be at
the end of the year?
Dr. JEVON. Well, I mean, there are different options for
physicians. I have certainly been in a lot of programs where 10
percent of what your--10 percent of your fees are withheld and
you get back parts of that----
Chairman JOHNSON. Well, we are not going to get into that.
Dr. JEVON. All right. So, Bridges to Excellence is clearly
a bonus program, it is above and beyond. You apply, and if you
meet their qualifications and you can prove that you are doing
better things in several different areas, then you receive a
bonus based on each patient that you see that is involved in
the program.
Chairman JOHNSON. But that might be an easy way to address
the issue of reduced hospitalizations. So, at the end of the
year you get a bonus based on performance.
Dr. JEVON. Based on performance----
Chairman JOHNSON. For the effective level of
hospitalization versus your level of hospitalization.
Dr. JEVON. Right. I don't know of any programs now that
exist based on that. I mean, what I would mention is that in
our world, with the under 65 population we have had tremendous
success developing management programs that go after our
sickest patients, treat them intensively at home to prevent
hospitalization. So, I think this is a huge area for Medicare,
because you know, the saying among us is that the top 2 or 3
percent of your patients consume 50 percent of your costs. So,
if you focus laser--use a laser like focus on those patients,
you can take care of them better and keep them out of hospital.
Chairman JOHNSON. It does seem to me, knowing as little as
we do in so many aspects of this, giving the administration the
opportunity to use bonuses could be a very good thing because
you a couple that with MEI and MEI minus for some of the more
complicated situations at the beginning, and at least begin to
learn something about it. There are some definable
circumstances. Anyway, we will think about that, and anyone on
the panel who wants to help us think about that, I would
appreciate. Dr. Berenson, I really was excited by your
testimony because repealing SGR is clearly what we have to do.
While I think we can use Pay For Performance to do more than
you think we can use it for, certainly site of service
differentials we are beginning to identify as a terrible cancer
in the system. The Specialty Hospital Movement did demonstrate
that. The administration is doing some work on that, we are
doing some work on that. Next year we are going to look at all
the rehab reimbursements in all the sites and try to take on
those areas. MedPAC is doing this too, where there are clear
differentials based on site that are driving care. I think we
can kind of handle that, at least I think we can move in that
direction because it is definable.
There are two issues that I want to get your opinion on;
one is, you know, we don't repeat will SGR and leave nothing
there, we repeal the SGR, we put in place a Pay For Performance
system that actually can have very powerful criteria. I mean,
eventually it can have electronic health records is one of the
things that we have to move toward and parse that out to make
steps toward, as well as clinical data and histories and things
like that; but it does require that there be both focus and
accountability on other spending increasing in the program. If
you look at Herb Koone's letter about the 15-percent increase,
you know, the physician portion of it, and especially the
office visit portion of it, was not one of the biggies, the
biggie was imaging. So,me of that imaging we know to be a good
idea, some we know to be a bad idea; it is very hard from
Washington to figure out what is good and what is bad and you
have to be careful. But they are doing some sensible things. If
you go in and get the patient all set up and take one body part
and then you take successive body parts, well, you are not
going to get paid as much for the other two.
They are doing some other things. There are some
credentialling things we can do that--we are very positive in
the mammogram area, although we were unable to pay accurately
so in the end it was sort of catastrophic. So, any--but I think
requiring accountability, you know, requiring focus on each of
the other--therapy, physical therapy helps us to say, well,
this is going too fast, why is it going too fast? Is it number
of patients, is it number of--types of changes in treatment
protocols. One of the reasons why this third proposal that we
are making to allow CMS to use AMB is that a lot of times the
intenser treatment pattern is keeping people out of hospitals,
and if we punish the system for the volume going up in this
volume-based SGR system, when actually system-wide it is
cutting costs, then we are just nuts. So, I want to try to get
over that hump through this, and then through this experience
we can see exactly what we need to do. In the interim, the cost
control mechanism in the bill is not only the Pay For
Performance, which is modest, but also focusing on the other
areas, and specifically being responsible for controlling cost
increases. Now why is that not going to have any effect?
Dr. BERENSON. I guess I don't understand what constrains in
the bill, what constrains physician spending once the update is
tied to the MEI, what constrains the overall spending.
Chairman JOHNSON. There are two things. One is, a lot of
the quality indicators will reflect a commitment to management
and will be able to--remember--well, you probably wouldn't
because I don't know why you would notice in this bill, but we
do do profiling; so we do send that back to physicians about
what resources they are using to accomplish their goal. So,
when we look at quality indicators, you know, over time we will
have the ability to say, you know, the outcome should be X,
these are the things we know have to be done to include that
outcome--to reach that outcome, but how come you are doing all
these other things? Now you have to go good risk adjusters or
you won't be able to deal with complex patients and all that
stuff, but why can't that approach work?
Dr. BERENSON. Well, I guess on this one I am from Missouri.
It sounds good. I remember going to a PPRC profiling conference
in 1991 because we were--in anticipation of the volume
performance standard there was a desire--and organized medicine
was at the table and we are going to have clinical practice
guidelines and we are going to do evidence-based everything.
There was a whole full-day meeting on how profiling of
physicians and feedback of information was going to then change
practice patterns, and we are now 15 years later and that
hasn't happened.
I am not a real expert in Pay For Performance technology,
but from what I have seen, there is a big--well, from what I
have seen we have pretty good confidence on the measures of
underuse. I am looking again at the measures that Mark shared
with us. We want orthopedists do give antibiotics before
surgery and that is desirable. That has very little to do with
what is going on out there, which is orthopedists trying to
form their own hospitals, referring their patients, doing
surgeries that may or may not be appropriate; and I guess I
don't see the technology, the Pay For Performance technology
that is going to affect that behavior.
Again, to use the example just before, you get a report
card saying that you are a high user and you are not going to
get a two percent bonus. That, to me, is insignificant compared
to the basic incentive to do more surgery. Now you are an owner
of the facility, so you are not only making money as the
professional doing the procedure, but as the owner of the
facility. To me, the Pay For Performance is well-intentioned,
and good doctors might respond to it, and the ones we are
having problems with will ignore it.
Chairman JOHNSON. Yes. You are absolutely right, this
doesn't solve all the problems. I think the administration is
taking some actions, I am not sure they are going to be enough.
I hear what you are saying about specialty hospitals. I think,
though, part of the problem is they payment of what is a
hospital and what is a ambulatory surgery center. We will see
what the administration does to sort that out and what impact
that has. But that is right, Pay For Performance doesn't
address that kind of manipulation of the system. But I think in
combination with other things, site-specific differentials and
in a sense specialty hospitals or site specific differentials,
it does give us a critical tool without which we can't either
reach higher quality or----
Dr. BERENSON. I am all for doing all of this, I just think
that if we really focus on the various tools around dealing
with volume, we get away from--I mean, to me there is two major
flaws in the SGR, tying it to the GDP just makes no sense at
all. Number two, it functions at a national level, so good guys
are penalized and bad guys are rewarded when they generate
volume.
The problem in volume right now, we all look at imaging;
some of what MedPAC has suggested makes some sense to me, but
fundamentally we are paying too much for advanced imaging, we
are paying too much for an MRI when every medical group outs
there wants to buy their own MRI. So, I believe there should be
some authority for the more administrator to do--this was
around a few years ago--inherent reasonableness tests to make
some modification on prices when it is very clear that we are
getting too much--that is what a value purchaser would do would
assess are we getting enough MRIs for our patient population
and would conclude we are getting plenty, let's try reducing
the price somewhat and see what happens.
Clearly there need to be constraints on; there needs to
be--you can't let a rogue administrator just pick and choose.
But I think there needs to be more ability to pick these
targets of opportunity and not have it have to come back to
Congress and go through the political drill of getting
everybody to agree that this is a reasonable place to make some
cuts. So, I am all for having the administrator having a target
and having some flexibility to do some things within
constraints to make that target, Pay For Performance can
certainly be one of the tools; but again, it can't clearly be--
I think pricing policy is what Medicare basically does, and
there needs to be more flexibility to do some things outside of
formulas, national formulas.
Chairman JOHNSON. Thank you very much. We may have a chance
to talk again and see if we can refine some of these aspects of
the bill. Mr. Stark.
Mr. STARK. Well, I just want to thank the panel, Dr.
Berenson and Dr. Jevon, for their comments and what they have
added to--I guess to clarify some of our confusion. I really
don't want to add anything to what the witnesses have said. I
think you all have interests which are clear, and I appreciate
your interest in the problems that we have to solve to bring
decent care to our beneficiaries. We have an impending vote, so
I think this session will soon come to an end, and thank you
very much all for being here.
Chairman JOHNSON. I thank the panel very much. If there is
any concluding comment any one of you wants to make, I would be
happy to hear it. Dr. Jevon, you were nodding your head
vigorously as Dr. Berenson talked about some of the excess.
Dr. JEVON. It is very difficult. For me the issue is--you
know, healthcare can be very local, and with national policy it
is very frustrating for doctors. We have our own issues, each
of us, wherever we practice, and I do think--if Medicare wants
to be successful in controlling costs, they need to develop
that flexibility and possibly give--develop programs that say
to a region or to a group of doctors or a network of doctors,
here are your goals, this is what we want.
Chairman JOHNSON. Well, that is very interesting. We will
conclude the hearing, but you should know that there is a
demonstration project that works that way with groups of
physicians, and in the bill physicians have the right to be
seen as one--a group to be seen as one and be accountable as
one. So, that opens that avenue. Dr. Berenson.
Dr. BERENSON. I was just going to say, I love the group
practice demo, I think it is terrific, and especially the
opportunity to achieve savings in part A. My only caution is--
and I know Mark talks about it a lot--is for groups of 200 or
more, and that is not where a lot of the care is being
provided. In fact, I had a chance yesterday to visit the one in
Middletown, Connecticut, which I know you know about, and they
have got an organization that can manage that kind of a
situation. Most doctors are not in that kind of situation. I am
all in favor of giving incentives for docs to form larger
groups, but until we get there, I guess I am just a little
skeptical about our ability to measure at the individual
physician level, to make valid inferences about performance at
the individual doctor level around not only--I mean, quality,
we will need to develop the risk adjusters to make those
inferences on quality, but about efficiency at the individual
doctor level, I am quite skeptical about. I know there is this
episode group that people are talking about which defines an
episode of diabetes or congestive heart failure as 365 days, I
am not quite sure what an episode that is. We are looking, I
think, at capitation or something.
These are major issues, this is not just some tinkering
with Pay For Performance. So, I think we are stuck as long as
we have that form of practice--and a lot of Americans and a lot
of doctors seem to prefer that form of practice--I think we are
stuck with having to deal with some volume control mechanisms.
In a fee-for-service system, the STR is lousy, so we need to go
to some more targeted measures and provide some discretion for,
I think, the administrator to go to those targets and not have
to come back to Congress to get permission to do this and to do
that.
Chairman JOHNSON. Ms. Ignagni.
Ms. IGNAGNI. Madam Chair, I know the time short so I will
be very brief. I hope that as you engage in these
deliberations, in addition to the how, you look at the what as
well in terms of the data issues. They are significant. We
think that there is a way to begin to look fairly from a
physician perspective at a range of data as opposed to a small
slice of patients, we think that is very, very are important.
Number two; if you look at the research, I think you come
away with a strong sense that there is a real disconnect
between the pace of development at the clinical trials level
and the diffusion of the lag and diffusion into practice. So,
we think there are--and clearly there isn't time to talk about
all of this today, but this is one part of a larger strategy,
and we would be delighted to offer more information on what the
private sector is doing to inform the community. But at the
same time, I think the work that has been done in this
Committee, the thinking around arc and setting up a center for
effective practices, we can get more information out there, all
of those issues we think are very, very relevant. Then finally,
on the disclosure piece, we think it is very important to begin
to involve consumers and purchasers in those disclosure
conversations in addition to physicians so that we can move
forward in a way that everyone will find acceptable.
Chairman JOHNSON. Excuse me. I didn't realize we were
voting, I don't have my beeper, so I hadn't noticed that we
were voting. But thank you very much. I have 10 minutes left,
so I do have to call it to an abrupt halt. Thank you very much.
[Whereupon, at 4:44 p.m., the hearing was adjourned.]
[Submissions for the record follow:]

California Medical Association
San Francisco, California 94105
September 29, 2005
The Honorable Chuck Grassley The Honorable Bill Thomas
The Honorable Max Baucus The Honorable Nancy Johnson

Dear Senators Grassley and Baucus and Representatives Thomas and
Johnson:

This letter represents the work of leaders from California's
physician, consumer, purchaser, payer and academic communities that are
coming together to affirm the need to reform how Medicare measures,
reports on and pays for physician services. The current payment system
for health care is not working. A Medicare Value Purchasing program
must be enacted and implemented now! We urge that Medicare lead reforms
to advance a system which increasingly rewards physicians for providing
the right care at the right time; supports prevention and ongoing care
for the chronically ill; rewards both better performance and physicians
who improve; and in which both physicians and patients have the tools
and information necessary to ensure high-quality, appropriate care.
Our consensus on many of the core elements of a Medicare Value
Purchasing program is unique in that it is anchored in our work in
California where diverse stakeholders working together have improved
care for patients and engaged physicians in quality improvement. One
example of California's pioneering efforts can be found in the
Integrated Healthcare Association's pay for performance program.
Through this program multiple health plans and hundreds of physician
groups representing over 35,000 physicians and serving over 6 million
consumers have collaborated to develop a uniform measurement set and a
single public report card. Millions of dollars have been paid in
performance incentives and motivated significant quality improvements.
As a result, patients are getting better, more effective care, and
medical groups and physicians are being rewarded for performance
improvement.
This letter addresses Congress' consideration of a variety of
proposed Medicare payment reforms, such as proposed by Senators
Grassley and Baucus, and Congresswoman Johnson. At the same time, there
is appropriately significant attention being given to the need to
provide support for the adoption of health care technology
infrastructure that is directly linked to physicians' ability to
optimize the quality of care delivered, improve patient experience and
save costs by delivering care more effectively.
There are specific elements of each of the Medicare Value
Purchasing proposals that we respectively support, oppose or believe do
not go far enough. We agree, however, that moving to robust
measurement, substantial performance-based payments and full public
reporting should be done as rapidly as possible, while ensuring that
they are done correctly and incrementally. Whether full implementation
is completed in three or five years is far less important than that the
process start immediately and move ahead in a way that effectively
engages physicians and consumers. What follows is a description of our
common vision and of the core elements regarding the measures, payments
and public reporting that we believe should be part of any ultimate
reform package.
Vision for Medicare Purchasing Reform
Medicare Value Purchasing is a necessary first step to creating a
physician measurement, payment and reporting system designed to improve
the quality, safety, effectiveness and efficiency of health care. In
summary, as described in more detail below, the launch of this reform
should include:

Measurement of Performance that can be quickly
implemented, by starting with measures currently in use, fairly adjusts
for physicians' patient populations where appropriate, is centered on
patients' needs and experiences, and is usable by physicians to improve
the care they deliver;
Performance-Based Payments as part of an overhaul of the
annual physician fee schedule updates to base increases on the Medicare
Economic Index (MEI). Performance-based payments should grow over time,
becoming an increasingly substantial portion of physician payments,
initially rewarding for agreement to participate, and then for both
performance and improvement; and
Performance Reporting that provides feedback to physicians
on their own performance, with a progression to public reporting that
provides as full and fair a picture as possible of physicians'
performance and improvement.

Implementation must start now. These elements, while unto
themselves major reforms for the current health care system, are but
first steps. Next steps should include implementing parallel efforts
for other health care providers and shifting the focus to measure and
reward care for the whole person. For example, measurement, reporting
and payment systems should increasingly consider all of patients'
episodes of care, enhanced measures of care processes, actual health
outcomes, end-of-life and palliative care, delivery of preventive
services and coordination of care for the chronically ill.
Measurement of Performance
Due to the groundwork laid by medical professional societies,
California's multi-stakeholder initiatives and other efforts over the
past several years, there exist many quality of care measures that are
objective, quantifiable and transparent. Medicare can build on these
existing measures and foster the rapid development of new metrics for
the full spectrum of patients' care needs and physicians' practices.
Measurement principles for Medicare Value Purchasing include:

Measures should build on existing measurement initiatives
and measures currently widely used. The relatively limited number of
measures available for immediate adoption need not delay
implementation; rather, it can be part of the impetus for expanding
available measures;
Measures using administrative data and electronic medical
records are preferred to minimize costs of collection;
Measures should start with those easier to collect,
building in a timeline for later adoption of outcome measures where
possible. Examples of readily collected measures include process
measures (e.g., the percentage of diabetes patients tested for blood
sugar levels); structural capacity of physicians to provide high
quality care (e.g., ability of physicians to identify and follow
categories of patients or to adopt health information technology); and
patient experience of care, using standardized and validated
instruments and survey processes;
Measures of efficiency that go beyond conventional
utilization review and provide appropriate attribution to each member
of the health care team to create a total ownership of health care
concept which evaluates the relative use of resources, services and
expenditures;
New measures and increasingly comprehensive measure sets
that assess prevalent and important (based on health status
implications) conditions across all specialties need to be developed
and submitted to consensus bodies for endorsement. Over time, increased
attention should be given to measures of care coordination across
providers and settings. Both physicians and consumers must be actively
engaged in measure development and review processes; and
Measures should reflect attributes that assure their
acceptance by physicians and their reliability for patients. Attributes
include their being evidence-based, subject to appropriate attestation,
audit and confirmation, consistent, valid, not overly burdensome to
collect, relevant to physicians and patients, fairly reflect
physicians' patient population and are adjusted to assure there are
little or no inappropriate patient selection or de-selection effects.
Performance-Based Payment
Payment based on performance is critical to Medicare physician
payment reform. This would include replacing the current Sustainable
Growth Rate (SGR) with the Medicare Economic Index (MEI), a portion of
which would be set aside to reward each physician's participation,
performance and improvement as appropriate. Specific elements of the
payment system for Medicare Value Purchasing include:

The portion of the funds allocated to performance-based
payment should grow over time, and must eventually reach a substantial
portion of a participating physician's pay, while keeping the overall
program cost within the MEI. Performance-based payment to participating
physicians should vary based upon their performance;
Initially reward for agreeing to participate and share
performance information; and then shift to rewarding performance (first
compared to local peers and then national) and improvement; Payment
designs that provide incentives for each medical specialty to ensure
that robust sets of performance measures are rapidly adopted. Payments
should be linked to the appropriateness and comprehensiveness of
measure sets within specialties; Payment and/or measures are adjusted
to ensure appropriate incentives for those who care for the sickest, or
those with complex, chronic conditions; Payment and/or measures that
encourage the adoption of care management processes or techniques;
Payments for care based on new technologies reflect the extent to which
they improve the quality of care and its cost-effectiveness; and
Payments specifically integrate rewards for both total cost of health
care impacted by physicians' actions and health care quality. As the
payment system evolves, this consideration should specifically take
into account savings generated--or additional costs incurred--related
to prescription drugs and hospital services.

We believe that concerns of potential unintended consequences of
moving too rapidly to increase the portion of physician payment that is
performance-based are reasonable. However, we agree on the need to
quickly increase performance-based payment because we recognize that
payment today has its own unintended negative consequences. All too
often payments today reward volume over quality, or care that is
wasteful and inappropriate instead of patient-centered and efficient.
Performance Reporting
Providing performance information is critical to the goal of
improving care delivery, both to the physicians themselves and to
patients to enable them to be better engaged in their own health care.
Specific elements of the performance reporting for Medicare Value
Purchasing include:

Before any information is made public, the physician (or
whatever unit of delivery is measured) should receive their specific
performance. Physicians should be given actionable information from
which they can improve and the opportunity to comment on concerns they
have about the performance results;
Public reporting should include all Medicare contracting
physicians, with performance information occurring in a phased manner:
initial reporting should positively identify participating physicians;
then those who performed well or with marked improvement; and then full
public reporting of both composite and all valid specific measures of
all participating physicians; and
Full background for any measures, their methodologies of
measurement and adjustments for patient population should be publicly
available to both physicians and the public.
Conclusion
We believe that the sooner a Medicare Value Purchasing program is
implemented, the sooner we will be rewarding better care delivery and
promoting the quality and value improvements we must expect. We
appreciate your consideration of our thoughts.
Sincerely, \1\
---------------------------------------------------------------------------
\1\ With the exception of signators from the California Medical
Association, the California Association of Physician Organizations and
the Pacific Business Group on Health, which have endorsed this
consensus statement as organizations, the group affiliations of
signators are listed for identification purposes.
---------------------------------------------------------------------------
Jack Lewin, MD
Executive Vice President and CEO
California Medical Association

Peter V. Lee, JD
President and CEO
Pacific Business Group on Health

Ron Bangasser, MD
Director of External Affairs
Beaver Medical Group
Former President--California Medical Association

Robert Margolis, MD
Chief Executive Officer
HealthCare Partners Medical Group
Chairman-Elect, National Committee on Quality Assurance (NCQA)

Bruce G. Bodaken
Chairman, President & CEO
Blue Shield of California

Arnold Milstein, MD
Medical Director
Pacific Business Group on Health

Donald Crane
President and CEO
California Association of Physician Groups

Jo Ellen H. Ross, MNA
President and CEO
Lumetra

Jarvio Grevious
Deputy Executive Officer, Benefits Administration
California Public Employees Retirement System

Stephen Shortell, PhD
Dean, School of Public Health
University of California, Berkeley

Jennie Chin Hanson
Board of Directors
American Association of Retired Persons (AARP)

Tom Williams
Executive Director
Integrated Healthcare Association (IHA)

Statement of Jack Ebeler, Alliance of Community Health Plans
The Alliance of Community Health Plans (ACHP) is pleased to have
the opportunity to submit written testimony to the Health Subcommittee
regarding the introduction of value-based purchasing strategies in
Medicare. ACHP is a leadership organization of 14 non-profit and
provider-sponsored health plans that are among America's best at
delivering affordable, high-quality coverage and care to their
communities. Our members seek to transform care by pursuing the six
aims for quality health care set forth by the Institute of Medicine--
health care that is safe, effective, patient-centered, timely,
efficient and equitable. We proudly count among our membership six of
the National Committee for Quality Assurance's highest quality Medicare
plans in 2004.
ACHP member plans serve more than one million Medicare
beneficiaries--about 20 percent of current Medicare Advantage members--
and will expand their Medicare Advantage plan offerings with the
introduction of Medicare Advantage-Prescription Drug Plans in 2006.
ACHP supports the introduction of value-based purchasing strategies
throughout the Medicare program. For value-based purchasing to promote
the broadest range of high-quality options for beneficiaries,
performance measures should be developed for all sectors of Medicare
and quality-based payment incentives introduced for Medicare Advantage
and fee for service.
ACHP and Health Care Quality
ACHP has a long legacy of leadership on quality improvement and was
formed more than twenty years ago to help health plan leaders share
best practices, learn and innovate. One of the earliest products of
this collaboration was the creation of the Health Plan Employer Data
and Information Set (HEDIS^'), which has now become the
standard for assessing health plan performance in the commercial and
public sector. Through the National Committee for Quality Assurance
(NCQA)--which today manages and updates the HEDIS^'
measurement process--employers, Medicare, Medicaid and other payers
regularly monitor and evaluate health plan quality. The
HEDIS^' clinical quality reporting process, coupled with the
CAHPS^' survey of patient satisfaction, provide a vital and
meaningful assessment of health plan performance for beneficiaries and
for public and private payers.
In 1997, the Health Care Financing Administration (now the Centers
for Medicare and Medicaid Services) began requiring all health plans
participating in Medicare to collect and report on HEDIS^'
performance measures. Today, these measures include clinical service
indicators such as cancer screening and the screening and control of
heart disease and diabetes risk factors. To help Medicare beneficiaries
make informed decisions about their health plan choices, CMS makes
comparative information about plan performance on these measures
available on-line through www.medicare.gov or in printed form on
request from 1-800-MEDICARE.
New health plan measures are regularly developed by NCQA and added
to the Medicare HEDIS^' reporting requirements. In 2004, NCQA
added colorectal cancer screening and osteoporosis measures. In 2006,
NCQA will add health plan reporting measures to evaluate the
appropriate use and monitoring of medication in the elderly--a timely
addition given the introduction of Medicare's Part D prescription drug
benefit.
Having led the way in establishing health plan performance
measures, ACHP is committed to translating what we learn from these
measures into quality improvement strategies. This work takes two
forms. First, ACHP members regularly review their clinical quality and
patient experience performance to identify areas for improvement and,
through ACHP-sponsored programs, share strategies and best practices.
Second, ACHP assesses the ways in which public policy can support high-
quality care and advocates for policies that encourage quality
improvement. Our learning sessions have included explorations of how
and when plans can use pay-for-performance incentives to help drive
quality improvements in specific health care settings and across
multiple settings. Our policy agenda includes a commitment to helping
Medicare link quality improvement and payment by promoting the creation
of quality reporting and value-based purchasing strategies throughout
Medicare.
Medicare Advantage and Fee-for-Service Performance Measurement
The earliest stages of performance measurement often begin with
structural assessments such as whether an organization has a quality
committee in place or information technology capacity. Performance
measurement quickly progresses to ``process'' measures that assess
whether some recommended process or service has occurred. For example,
a process measure might assess whether patients with coronary artery
disease are regularly screened for high cholesterol. More advanced
measures, sometimes called ``intermediate outcome'' measures, evaluate
the clinical follow-up to process steps, such as whether those
identified with high cholesterol had it brought under control.
Medicare Advantage. All local Medicare Advantage HMOs are required
to report to CMS on various process and intermediate outcome
performance measures, which assess whether clinical services were
provided and whether those services helped control chronic disease risk
factors. Process measures are often reportable from claims data. The
more advanced intermediate measures, which capture information about
patients' health status, often require access to patient medical
records. Access to records is needed because information such as blood
pressure readings and lab test results (to determine if cholesterol or
blood sugar is controlled) are not recorded on claims. Health plans
generally employ nursing staff to audit medical records and report this
data. There are no incentives or bonuses linked to this reporting.
Hospitals. With the passage of the Medicare Modernization Act,
hospitals that participate in Medicare were encouraged to voluntarily
report to CMS on a discrete set of performance measures with the
incentive of receiving of an additional 0.4 percent payment update for
reporting. More than 98 percent of hospitals report and receive the
payment incentive.
Physicians. Physicians do not currently report on quality measures
and are not required nor offered incentives to report. However, several
efforts, including the Ambulatory care Quality Alliance's (AQA) work,
are underway to identify measures of physician performance. Many of
these measures build on the HEDIS ^' measure set used to
assess plan performance. It is unclear what mechanisms will be used to
collect several of the proposed measures that will likely require
extraction and validation of data from medical records.
The chart below identifies the performance measures CMS requires of
health plans, the voluntary measures reported by hospitals and the
potential physician measures developed by the AQA.

----------------------------------------------------------------------------------------------------------------
Hospital Core/ Ambulatory
Health Plan HEDIS Quality Quality
Measure Medicare Measures Alliance Alliance
(REQUIRED) Measure Set Measure Set
(VOLUNTARY) (PROPOSED)
----------------------------------------------------------------------------------------------------------------
Prevention Measures
�������������������������������������������������������������
Controlling high blood pressure P
�������������������������������������������������������������
LDL screening P
�������������������������������������������������������������
Colorectal cancer screening P P
�������������������������������������������������������������
Breast cancer screening P P
�������������������������������������������������������������
Cervical cancer screening * P
�������������������������������������������������������������
Inquire about tobacco use P
�������������������������������������������������������������
Medical assistance with smoking cessation /Advising smokers P PPP + P
to quit
�������������������������������������������������������������
Flu shot P *
�������������������������������������������������������������
Pneumonia vaccine P P P
�������������������������������������������������������������
Osteoporosis
�������������������������������������������������������������
Osteoporosis management P
�������������������������������������������������������������
Diabetes
�������������������������������������������������������������
HbA1C tests P P
�������������������������������������������������������������
HbA1C management control P P
�������������������������������������������������������������
Blood pressure management for patients with diabetes P
�������������������������������������������������������������
Lipid measurement for patients with diabetes P P
�������������������������������������������������������������
LDL cholesterol level for patients with diabetes P P
�������������������������������������������������������������
Eye exam for patients with diabetes P P
�������������������������������������������������������������
Monitoring for nephropathy P
�������������������������������������������������������������
Heart Attack/Coronary Artery Disease (CAD)
�������������������������������������������������������������
Aspirin at arrival P
�������������������������������������������������������������
Aspirin prescribed at discharge P
�������������������������������������������������������������
Beta-blocker after MI/at arrival P P P
�������������������������������������������������������������
Persistence of beta-blocker after MI/at discharge P P P
�������������������������������������������������������������
Cholesterol management after acute cardiovascular event / P P
for patients with CAD
�������������������������������������������������������������
ACE inhibitor for left ventricular systolic dysfunction P
�������������������������������������������������������������
Thrombolytic agent within 30 minutes of arrival P
�������������������������������������������������������������
PTCA (angioplasty) within 90 minutes of arrival P
�������������������������������������������������������������
Heart Failure
�������������������������������������������������������������
ACE inhibitor prescribed(for left ventricular systolic P P
dysfunction)
�������������������������������������������������������������
Left ventricular function assessment P P
�������������������������������������������������������������
Comprehensive discharge instructions P
�������������������������������������������������������������
Pneumonia
�������������������������������������������������������������
Oxygenation assessment P
�������������������������������������������������������������
Initial antibiotic w/in 4 hours of arrival P
�������������������������������������������������������������
Blood culture before first antibiotic received P
�������������������������������������������������������������
Mental Illness
�������������������������������������������������������������
Follow-up after hospitalization for mental illness P
�������������������������������������������������������������
Antidepressant medication management (acute phase) P P
�������������������������������������������������������������
Antidepressant medication for at least 6 months P P
(continuation phase)
�������������������������������������������������������������
Asthma
�������������������������������������������������������������
Use of appropriate medications * P
�������������������������������������������������������������
Asthma: long-term control medication prescribed P
�������������������������������������������������������������
Customer Satisfaction
�������������������������������������������������������������
Courteous and helpful office staff P
�������������������������������������������������������������
How well doctors communicate P
�������������������������������������������������������������
Getting care quickly P
�������������������������������������������������������������
Getting needed care P
�������������������������������������������������������������
Rating of all health care P
�������������������������������������������������������������
Rating of health plan P
�������������������������������������������������������������
Rating of personal doctor P
�������������������������������������������������������������
Rating of specialist seen most often P
----------------------------------------------------------------------------------------------------------------
+ The Hospital Quality Measures include three smoking cessation measures: one for heart attack patients; one
for heart failure patients and one for pneumonia patients.
* Note: Data collected or proposed to be collected for non-Medicare eligible age groups.
The chart does not include four AQA prenatal and child-specific measures.

Value-based Purchasing
ACHP believes that value-based purchasing strategies are an
essential means of raising the quality of all sectors of Medicare. We
applaud the Subcommittee for its ongoing efforts to examine models for
physician incentives. ACHP strongly supported the provision in the MMA,
originally sponsored by former representative Jennifer Dunn (R-WA),
calling for an Institute of Medicine study and report on appropriate
measurement and payment incentives in Medicare. Given the state of
measurement development and data collection processes, we share the
assessment of the Medicare Payment Advisory Commission that health
plans may be among the most logical places to begin using quality
payment incentives because established measures are in place and
already regularly collected. We believe that adopting value-based
purchasing for Medicare Advantage plans would be an important initial
step in moving Medicare toward a more performance-driven system, while
also helping to inform the development of measures and mechanisms for
using incentives with physicians, hospitals and other health care
sectors. However, wherever the Subcommittee chooses to begin, it should
quickly move to introduce value-based purchasing strategies across the
Medicare program so that beneficiaries are able to participate in a
program that values and promotes quality regardless of how they choose
to receive their care.
The principles ACHP has crafted to help inform the development of
Medicare value-based purchasing are outlined below:

Payment-for-performance should eventually apply to all
Medicare providers, including fee-for-service and Medicare Advantage.
Given health plans' long record of reporting on standardized measures
of quality, it is reasonable to begin with Medicare Advantage plans,
including HMOs and PPOs.
Payment-for-performance incentives should be based upon
standards of excellence and improvement and favor excellence. Measures
to evaluate both fee-for-service Medicare and Medicare Advantage plans
should be developed. In the interim, incentives should be based on
existing measures, strongly favor clinical effectiveness and recognize
patient experience.
To ensure successful implementation and sustainability,
pay-for-performance incentives should be financed with new resources.

Thank you for the opportunity to share our views. We look forward
to working with the Subcommittee on this important issue.

Statement of EmCare, Inc., Dallas, Texas

The Vital and Unique Role of Emergency Medicine Physicians Must Be
Considered in Any Performance Based Standards

Background on EmCare, Inc.:
EmCare, Inc. (``EmCare'') is one of the nation's leading emergency
medicine physician practice management organizations. Through its
emergency medicine physicians, EmCare provides emergency care in over
300 hospitals throughout the country. These hospitals range from some
of the larger urban hospitals with the highest volume emergency
departments to the smaller community hospitals with relatively low
patient volumes, all of which depend on EmCare's physicians to deliver
high quality care. We appreciate the opportunity to submit comments to
the Ways and Means Committee on the Medicare Value-Based Purchasing for
Physicians Act
EmCare supports the congressional efforts which support the
Medicare Value-Based Purchasing for Physicians Act and which will
protect America's physicians from a reduction in reimbursement for
services provided to Medicare patients. We strongly believe that the
current Medicare Physician Fee Schedule methodology, which will result
in a 4.3% payment cut for physicians in 2006 unless Congress acts to
halt the reduction, will have a detrimental impact on all beneficiaries
and their access to care. Because of EmCare's unique role in providing
care to patients in emergencies, we are deeply and especially concerned
about the impact of this reduction on those beneficiaries who depend on
care received through hospital emergency departments.
The sustainable growth rate's reliance on the gross domestic
product level under the Fee Schedule methodology bears little relation
to physicians' actual practice expenses and, therefore, does not
address the increases in practice expenses being experienced by
physicians.
This is particularly true for emergency medicine physicians.
Increasingly large numbers of Medicare beneficiaries are receiving
services from participating physicians, while the costs associated with
professional liability insurance and pharmaceuticals have rapidly
grown. In addition to these costs, emergency medicine physicians assume
a disproportionate share of the costs related to furnishing
uncompensated care. Emergency medicine physicians incur unique costs
mandated by the Emergency Medical Treatment and Labor Act (``EMTALA'').
The EMTALA mandate applies to all patients, not just Medicare
beneficiaries. EmCare strongly supports access to emergency medical
services regardless of a patient's ability to pay and we are dedicated
to that principle every single day twenty-four hours a day.
Because of our unique circumstances and our physicians' delivery of
medical care within the emergency department setting, we are very
concerned that the existing Fee Schedule does not recognize the true
costs associated with furnishing emergency medical services, due in
part (but not completely) to the large percentage of uncompensated care
furnished in hospital emergency departments. Due to the fact that the
current Fee Schedule does not take this significant factor into
account, it seriously threatens the care furnished by hospital
emergency departments, which provide the crucial safety net of health
care for millions of patients.
The tragic consequences of Hurricanes Katrina and Rita have again
revealed the critical importance of emergency medicine professionals to
the nation's public health safety net. The nation's emergency medicine
physicians responded heroically to the twin impacts of Katrina and
Rita. Working in difficult conditions in hospitals and clinics as well
as in makeshift care areas in public buildings and airports, these
emergency health care providers furnished services to all patients who
needed and sought care. While the water is being pumped out of New
Orleans and other areas, local hospital emergency departments have
continued to work tirelessly to handle the surge of cases from evacuees
in addition to their regular emergency patient load.
As the Committee deliberates the Medicare Value-Based Purchasing
for Physicians Act, we ask that you consider the extraordinary
challenges and conditions faced by emergency medicine physicians. We
outline below our suggestions of the factors that should be considered
in establishing quality and efficiency measures for services furnished
by emergency physicians
How to Measure and Reward Services Provided by Emergency Physicians
1. Access
EMTALA mandates that emergency medicine physicians provide
care to all patients regardless of ability to pay. This imposes
significant monetary and administrative requirements that are unique to
emergency physicians and hospital departments.
Complete access of all patients to medical care in the
emergency setting should be recognized by Congress as the primary
factor for measuring emergency physicians' performance.
II. Core Measures
The core measures used for the National Voluntary Hospital
Reporting Initiative can be used as a proxy to measure emergency
physicians' performance. Because these core measures currently apply
only to hospitals, certain controls would need to be put in place to
measure individual physicians. For example, a unique physician
identifier can be used track the services provided by each physician.
Only the core measures that apply to emergency medicine
and are under the control of emergency medicine physicians should be
used in developing quality and efficiency measures for emergency
medicine physicians.
III. Unique Setting
Emergency physicians deliver care in a unique setting.
Typically, the physician does not have an existing relationship with
the patient and full access to the patient's medical history.
As a result, emergency physicians must make an immediate
assessment of the patient's condition often based on limited
information. The emergency physician has little or no contact with or
responsibility for a patient's pre--and post-emergency care. This
factor makes impossible a clear ``outcomes'' based standard for
emergency physicians.
IV. Auditing
Current standards already exist and are used to audit the
metrics applicable to emergency medicine physicians.
Conclusion
As dramatically demonstrated by Hurricanes Katrina and Rita,
emergency medicine physicians play a critical role in rendering care to
all patients wherever and whenever such medical care is medically
needed. For patients who lack health insurance, this provides a vital
safety net. The hard lessons taught by Katrina and Rita show that the
nation's emergency care system must be taken seriously and protected by
policymakers and planners.
Consequently, we urge the Committee to take into account the
factors discussed above, including, but not limited to, the significant
level of uncompensated care furnished by emergency physicians as part
of any pay-for-performance methodology which may be created by the
Committee and the Congress.
Thank you for the opportunity to submit these comments.

Statement of Mary Griskewicz, Healthcare Information and Management
Systems Society (HIMSS) Advocacy & Public Policy Steering Committee,
Alexandria, Virginia
BACKGROUND:
Madame Chair, Congressman Stark, and distinguished members of the
Subcommittee, I am honored to submit this statement for the record. My
name is Mary Griskewicz and I have the pleasure of serving as the 2005-
2006 Chair of the Healthcare Information and Management Systems Society
(HIMSS) Advocacy & Public Policy Steering Committee. I live in
Connecticut and work professionally for IDX Systems Corporation as a
Program Manager, Corporate Strategy and Business Development.
HIMSS vision is to advance the best use of information and
management systems for the betterment of healthcare.
On behalf of HIMSS and the thousands of professionals in the
healthcare information technology community, we want to commend you and
your Subcommittee for your leadership role in promoting initiatives
that increase the use of information technology throughout the
healthcare sector. In particular, Madame Chair, we know personally of
your commitment to this cause as was reflected during your remarks at
our congressional reception where you were presented with the 2003
HIMSS Advocacy Award.
HIMSS and our Healthcare IT community colleagues are thankful for
your efforts to highlight our shared goal of utilizing a National
Health Information Infrastructure (NHII) to seamlessly transmit
electronic healthcare records (EHRs) to improve patient safety and
healthcare quality.
As you are well aware, healthcare IT continues to take steps and
move forward to address President Bush's call to establish electronic
health records for most Americans within ten years. The federal
government's support of the of the Office of the National Health
Information Coordinator, Agency for Health care Quality and the
governments efforts to coordinate public and private health IT efforts
by developing strategies, contracting for studies, and funding
prototypes and demonstrations to enable health IT and most recently the
appointment of the members to the American Health Information Community
board created by Secretary Leavitt. The recent findings of the
September 14, 2005, RAND study indicate ``Widespread adoption and
effective use of electronic medical record systems (EMRs) and other
health information technology (HIT) improvements could save the U.S.
health system as much as $162 billion annually by greatly improving the
way medical care is managed, greatly reducing preventable medical
errors, lowering death rates from chronic disease, and reducing
employee sick days''. http://www.rand.org/health/
Federal law requires Medicare payments to physicians to be modified
annually using a formula known as the sustainable growth rate (SGR).
Because of flaws in the formula methodology, it has mandated physician
fee schedule cuts in recent years; these cuts have been averted only by
congressional short-term fixes. Absent additional, long-term
congressional action by December 31, 2005, the SGR will continue to
mandate physician fee schedule cuts of approximately 5% per year for
the next five years. Congress must modify the sustainable growth rate
formula to allow adequate payment to cover physician cost. In addition,
Medicare is the largest single purchaser of healthcare and it needs to
be restructured to incentivize providers to provide excellent care to
beneficiaries.
We are pleased Madam Chair that you have recently introduced H.R.
3617, the Medicare Value-Based Purchasing for Physicians' Act of 2005,
into the U.S. House of Representatives for consideration. The
legislation has fifteen co-sponsors and was referred by the House
Speaker to both the House Energy & Commerce and Ways & Means Committees
for action.
Senators Charles Grassley (R-IA) and Max Baucus (D-MT), Chair and
Ranking Minority Member respectively of the U.S. Senate Finance
Committee, have introduced S. 1356, the Medicare Value Purchasing Act
of 2005, into the United States Senate for consideration. This
legislation is co-sponsored by four U.S. Senators and has been referred
to the U.S. Senate Finance Committee for consideration.
The primary purpose of both pieces of legislation is to provide
promote value-based purchasing for the Medicare program. While Senate
bill S.1356 the Medicare Value Purchasing Act of 2005 attempts to
improve the Medicare reimbursement payment system to physicians without
attempting to stem the declining reimbursement rates. The President of
the American Academy of Family Physicians has said that ``these new
requirements on physicians will mean they face lower payments and
additional costs. This is not a formula for improving health care
quality.''
The House bill, on the other hand, proposes to resolve the
sustainable growth rate (SGR) dilemma and promote value-based
performance by encouraging physicians to electronically report medical
quality indicators. The House bill focuses only on physician
reimbursement. It is estimated that the cost of H.R. 3617 is $100
billion over 10 years just to solve physician reimbursement.
HIMSS Position:
HIMSS believes that Medicare should play a leadership role
in improvements in health care quality. Medicare is the largest single
purchaser of health care, providing health care coverage to over 40
million Americans. Yet when the program was created back in the 1960's,
it was structured so that providers received the same payment
regardless of whether they provided excellent or sub-standard care to
beneficiaries. It is time to make a dramatic, but necessary change to
the payment system by aligning payment policies to encourage and
support quality care.
HIMSS supports H.R. 3617, the Medicare Value-Based
Purchasing for Physicians' Act of 2005, because it supports both
implementing value-based purchasing programs under Medicare that links
a small portion of Medicare payment to the delivery of high quality
healthcare and the need to develop a more sustainable reimbursement
model.
HIMSS strongly believes that the SGR dilemma and the
value-based purchasing requirements need to be addressed in tandem
because clinicians cannot continue to face declining reimbursements for
Medicare patients.
HIMSS strongly supports reimbursing physicians based on
the quality of care they provide their patients.
HIMSS believes that the Senate bill will probably increase
doctors' costs in order to meet and report specific care standards, but
it does not help them obtain the technology to meet these requirements.
If doctors don't have the technology to participate in the reporting
system, their reimbursement will be cut even further, which will hinder
their ability to ever be able to afford the technology
The Senate bill is limited to provisions that directly
relate to quality improvement, value-based purchasing, data
coordination, and health information technology, but does not address
the SGR dilemma. However, the bill does acknowledge, through ``Sense of
the Senate'' language, that the negative physician payment update needs
to be addressed. This language points out the unsustainable nature of
the SGR formula and the need to develop a more sustainable model that
is more appropriate in controlling the volume of physician services
provided. HIMSS is pleased that the Senate recognizes that this needs
to be addressed.
CONCLUSION:
We believe that the passage of HR 3617 will help us reach our goal
to incentivize providers of care accordingly supporting the Presidents
goal of achieving a national electronic health record for most
Americans. We have noted that, the interest and attention on health
information has been heightened. More specifically the events
surrounding the Katrina relief efforts have highlighted the need for an
Electronic Health Record, and the need to provide continued incentives
to the providers of care that would allow them to use the technologies
that will support the adoption of the electronic health record.
HIMSS supports H.R. 3617 because it resolves the SGR issue for
physicians and attempts to promote value-based purchasing. This
legislation is solidly aligned with HIMSS Legislative Principles and
recognizes the key role that information systems can have in improving
the health of all.
HIMSS will promote passage of this legislation as part of its
overall advocacy agenda.
As you proceed forward in the months and years ahead, the 17,000+
individual HIMSS members and over 275 corporate HIMSS members
representing over 2,000,000 employees are committed to working with you
and others to make our shared vision of the widespread adoption of
information technology and management systems in the healthcare sector
a reality.

Statement of Michele Johnson, Medical Group Management Association
Introduction
This statement is submitted on behalf of the Medical Group
Management Association (MGMA) to the Ways and Means Health Subcommittee
hearing entitled, ``Value-Based Purchasing for Physicians under
Medicare, H.R. 3617.'' MGMA represents 19,500 members who manage and
lead more than 11,500 ambulatory medical offices in which more than
240,000 physicians provide medical care.
Problems with Current Method of Medicare Updates to Medicare Pratices
Currently, Medicare provides annual updates to physician
reimbursement through the Sustainable Growth Rate (SGR). In January
2006, unless Congress acts to prevent the formula from taking effect,
Medicare's ``update'' to physician services under the SGR will be a--
4.4 percent cut. Chairman Johnson understands that the SGR is a
fundamentally flawed and unreasonable method of calculating physician
updates. Physician practices face the prospect of significant cuts in
Medicare reimbursement year after year, while their overhead costs rise
significantly. This is true only for physician practices; other
segments of the health care system receive regular annual updates
because they do not utilize the SGR formula. In 2006, Medicare
Advantage plans, hospitals, nursing homes and home health providers
will all receive positive updates to their reimbursement rates.
Medical group practices confront this looming 2006 cut within the
context of their recent experience with Medicare reimbursement. Because
Congress was unable to act in time, physicians received a 5.4 percent
reduction in 2002. Congress recognized the threat to Medicare
beneficiary access and stopped the SGR from further reducing physician
reimbursement in 2003, 2004 and 2005. While this was a relief to
physician practices, these increases did not come close to keeping pace
with the increase in medical costs. Because the SGR is not an accurate
methodology for updating physician reimbursement annually, the Medicare
Payment Advisory Committee has repeatedly recommended to Congress that
the SGR be statutorily replaced with the Medicare Economic Index (MEI).
The MEI is a price index, calculated by CMS, which more accurately
reflects the costs of delivering medical care in physicians' offices.
MGMA has preformed cost surveys of medical practices for over 50
years. MGMA data indicates that the cost of operating a group practice
rose by an average 4.8 percent per year over the last 10 years. In
fact, between 2001 and 2003, MGMA data show that operating costs
increased more than 10.9 percent. However, in this same timeframe,
Medicare physician payment rates increased between 1.5 to 1.6 percent.
This means that increases in Medicare reimbursement have already failed
to keep pace with the rate of inflation in practice costs as calculated
by the MEI or by the MGMA's cost survey data. The Medicare Board of
Trustees estimates that the cost of providing medical care will
increase by an estimated 15 percent over the next six years, while
current reimbursement levels are scheduled to drop by an estimated 26
percent.
The chart below compares the recent annual increases under the SGR
formula with the increase in medical operating expenses as calculated
under the MEI and MGMA's own cost survey data.

Comparisons of SGR Updates with Calculations of Actual Increases in
Medical Practice Operating Expenses

----------------------------------------------------------------------------------------------------------------
Increase in Medicare
Year reimbursement under Medicare Economic MGMA cost survey data
SGR Index (MEI)
----------------------------------------------------------------------------------------------------------------
2002 -5.4 % 2.9% 7.5%
������������������������������������
������������������������������������
������������������������������������
----------------------------------------------------------------------------------------------------------------

H.R. 3617 Repeal of SGR
MGMA supports Chairman Johnson's H.R. 3617, the Value-Based
Purchasing for Physicians bill because it envisions significant reform
to Medicare's physician reimbursement methodology. MGMA believes the
bill demonstrates an awareness that physicians must be adequately
reimbursed for the services that they deliver. MGMA concurs with the
intent of the legislation to create a link between quality improvement
based on evidence-based performance measures and full annual updates.

American College of Obstetricians and Gynecologists
Washington, DC 20024
September 29, 2005
The Honorable Nancy Johnson
Chair, Health Subcommittee
Ways and Means Committee
1136 Longworth House Office Building
Washington, DC 20515

Dear Mrs. Johnson:

On behalf of the American College of Obstetricians and
Gynecologists (ACOG), representing 49,000 physicians and partners in
women's health, thank you for the extraordinary leadership and
commitment you've shown in your effort to correct a serious problem in
the Medicare program by repealing the flawed Sustainable Growth Rate
(SGR) formula and putting in place a system that works for physicians,
and helps ensure access to high-quality care for our patients. Your
legislation, H.R. 3617, the Medicare Value-Based Purchasing for
Physicians' Services Act of 2005, has our full support.
ACOG has long been dedicated to maintaining the quality of care
provided by obstetricians and gynecologists and has a robust ongoing
process where we provide women's health physicians and providers with
current quality information on the practice of obstetrics and
gynecology. For nearly two decades, ACOG's Committee on Quality
Improvement and Patient Safety has regularly reviewed practice and
patient safety issues and encouraged our members to incorporate ACOG's
recommendations into their practices. ACOG's Practice Committees
regularly publish practice guidelines developed by committees of
experts and reviewed by leaders in our specialty and the College. Each
of these guidelines is reviewed periodically and reaffirmed, updated,
or withdrawn based on new clinical evidence to ensure continued
appropriateness to practice.
In 2004, in cooperation with the American Board of Obstetrics and
Gynecology (ABOG), an independent, non-profit organization that
certifies obstetricians and gynecologists in the United States, ACOG
created Road to Maintaining Excellence, an initiative to allow ob-gyns
to evaluate their own practice activities, reinforce best practices and
assist in improving others. Currently in pilot stages, Road to
Maintaining Excellence will require ACOG Fellows to complete
questionnaire-based modules that focus on a single aspect of clinical
practice, like prevention of early-onset group B Streptococcal disease
in newborns and prevention of deep vein thrombosis and pulmonary
embolism. As Fellows complete each module, data will be summarized and
compiled by ACOG, and periodically reported to our members. Road to
Maintaining Excellence will provide Fellows with valuable information
about how their practice patterns compare to those of their colleagues
but is not intended to be used as a performance measurement set or as a
basis for payment.
ACOG has been working collaboratively with our primary care
colleagues, as well as our colleagues in specialty and surgical care,
to be supportive of moving toward value-based physician payments,
linked with fixing the SGR. As Congress moves forward in establishing
quality incentives in Medicare, ACOG believes that certain principles
should be kept in mind, many of which are reflected in your discussions
of pay-for-performance and your draft legislation.

All physicians should receive a positive Medicare payment
update as a floor for additional reporting or performance incentives.
Under the current SGR formula, physicians will receive unsustainable
payment cuts of nearly 30 percent over the next six years. Some
performance measures may involve additional office visits, lab tests,
imaging exams or other physician interventions that would only
exacerbate the current volume formula. Physicians must not be penalized
for any volume increase resulting from compliance with performance
measures. To ensure an equitable accounting of the costs and savings
generated from pay-for-performance, Medicare should account for savings
to Part A generated by Part B performance improvements.
The new payment system should be phased in, beginning with
an administratively simple ``pay-for-reporting'' period that provides
information about the quality and safety processes physicians are
engaged in and assesses the availability of health information
technology. Quality and safety process measures used in the Medicare
system should have widespread acceptance in the medical community. One
such process measure in obstetrics could involve use of a prenatal
flowsheet, a performance tool developed by ACOG that was recommended

for use by an ACOG-led prenatal workgroup of the American Medical
Association's Physician Consortium for Performance Improvement. In ob-
gyn surgery, ACOG supports the procedural measures laid out in the
first phase of the American College of Surgeons Framework for Surgical
Care, including confirmation of operative site and side marking, pre-
operative ``time out,'' immediate post-operative documentation, post-
operative pain management and appropriate post-operative care.
Clinical performance measures should be developed by each
specialty in a transparent process that considers scientific evidence,
expert opinion and administrative feasibility of each measure. Measures
should be appropriately risk-adjusted to account for a variety of
factors, including patient compliance and complexity. Increased quality
should be the goal of efficiency measures, and these measures, too,
should be driven by data-based clinical evidence and expert opinion
when data are lacking.
Health information technology is prohibitively expensive
for some small practices, particularly for the 23 percent of ob-gyns in
solo practice, but is a necessary efficiency and a vital component of
pay-for-performance. Acquisition of this technology should be
encouraged with federal financial assistance for the purchase of
hardware and software and for system training. National standards for
health information technology would facilitate physician adoption of
these systems, by reassuring physicians that the technology they invest
in would not become obsolete. Because use of health information
technology may be among the elements of the early ``pay-for-reporting''
system, it is vital that these steps be taken promptly.
Congress needs to address the universe of legal issues
surrounding data reporting. Information collected by CMS must be
protected from use in medical liability litigation against physicians
or as a basis for negligent hiring or retention claims. This may
necessitate specifically exempting physician data from Freedom of
Information Act requests. Care should be taken to avoid other
unintended and unfortunate consequences of public data reporting, such
as physician selection of patients with the fewest medical risk factors
or the best history of compliance with instructions. This is essential
to ensure continued access to care for low-income and minority
populations who tend to enter the health care system at an acute stage
of disease and illness and suffer worse outcomes regardless of the
quality of care they receive.

We recognize the challenges in creating a quality improvement
program for Medicare that leads us to meaningful clinical measures and
improved quality for beneficiaries. We applaud your leadership and your
commitment to this effort and we sincerely thank you for your
willingness to work cooperatively with ACOG and the medical community
in these important discussions. ACOG stands ready to work with you as
we embark on this historic change in Medicare.
Sincerely,
Michael T. Mennuti, MD
President

Statement of the American Physical Therapy Association, Alexandria,
Virginia
The American Physical Therapy Association (APTA) appreciates the
efforts of the House Committee on Ways and Means and its Subcommittee
on Health to improve the delivery of health care, especially your focus
on quality care for seniors and persons with disabilities. The
transition to a payment system for high quality, efficient health care
services is vitally important to the beneficiaries that physical
therapists serve under the Medicare program. APTA endorses and supports
HR 3617, the Medicare Value-Based Purchasing for Physicians' Services
Act of 2005. While we support HR 3617, we encourage the Committee to
address all of the inadequacies in the current payment system in
conjunction with its action on this legislation.
Elimination of the Flawed Sustainable Growth Rate (SGR) Methodology
Prior to Moving Forward with Value-Based Purchasing for Health
Professionals' Services:
HR 3617 eliminates the flaws of the existing system that determines
Medicare payments to physical therapists and other providers under the
Part B physician fee schedule, as well as improving the program's long-
term solvency by creating incentives to improve the quality of care
provided to the nation's seniors and persons with disabilities. We are
concerned that any effort to proceed with the transition to value-based
purchasing or ``pay for performance'' without also addressing
underlying flaws in the outpatient payment of physical therapy services
would be inefficient and would ultimately erode the purpose of this
legislation. By repealing the Sustainable Growth Rate (SGR) and
replacing it with the Medicare Economic Index (MEI), the MedicareValue-
Based Purchasing for Physicians' Services Act of 2005 (HR 3617)
resolves one of the current payment inadequacies under Medicare Part B,
and APTA commends Chairwoman Johnson and the Committee for addressing
this critical payment issue.
Therapy Caps' Inconsistency with Value-Based Purchasing for Physical
Therapists' Services under Medicare:
The pending restoration of financial caps on outpatient physical
therapy services under Medicare threatens to limit this legislation's
ability to fully achieve its objective. Congress must address the
arbitrary caps placed on outpatient physical therapy services by the
Balanced Budget Act of 1997 prior to transitioning to a valued-based
system. If the therapy caps are not repealed, the effect of HR 3617
would be the application of two different payment systems to
rehabilitation services at the same time: one system that pays for
quality, efficiency, and improved outcomes in clinical practice
implemented on top of another that arbitrarily caps beneficiary
coverage that is based upon the former paradigm of volume and
utilization. The implementation of an arbitrary financial limit is
inconsistent with the goals represented by a value-based purchasing
system. The objective of HR 3617 is the transition to a payment system
that rewards quality, outcomes, and efficiency in clinical practice;
arbitrary caps on services undermine and erode this objective. APTA
stands ready to work with you and your Committee to address the therapy
caps and incorporate value-based purchasing into the solution for this
issue.
Inclusion of Non-Physician Providers in the Medicare Value-Based
Purchasing for Physicians' Services Act of 2005 (HR 3617):
It is our understanding that your legislation is intended to
include physical therapists practicing in outpatient settings, but we
would encourage you to specifically reference physical therapists as
participants in the development and attainment of clinically
appropriate processes and measures to enhance the quality of
rehabilitation care. We strongly encourage the inclusion of non-
physician providers in the value-based purchasing discussions conducted
by this committee and CMS. In the 2006 Medicare Physician Fee Schedule
proposed rule, CMS discusses its current involvement with the physician
community in developing useful quality measures and understanding
overall trends. Although we are pleased to see that CMS is willing to
work collaboratively with physicians to develop quality measures, we
strongly urge CMS and this committee to also include physical
therapists and other non-physician groups in these discussions. There
are more than 120,000 physical therapists in the United States, many of
whom provide services to Medicare beneficiaries and would be able to
provide useful information regarding appropriate quality measures for
physical therapy services. CMS has indicated that 3,747,395 Medicare
beneficiaries (9.3%) accessed outpatient therapy services in CY 2002,
resulting in expenditures of $3,392,226,958 for the Medicare program,
which accounts for 2.3% of all Medicare Part B expenditures during that
year. Although the annual per-patient expenditure for PT services is
only $760, 88% of the recipients of Medicare-covered rehabilitation
receive physical therapy specifically, totaling $2.54 billion and
accounting for 75% of the total costs of all outpatient rehabilitation
services combined. These numbers clearly indicate that physical therapy
is an essential outpatient benefit that should be incorporated into any
transition to value-based purchasing for physicians and other health
care professionals.
Standardizationof a Consistent and Uniform Benefit for Physical
Therapist Services in All PartB Settings:
APTA believes that the fragmentation of rules and regulations
across the multiple settings in which physical therapists provide
services to Medicare beneficiaries creates serious problems for a
uniform and consistent value-based purchasing payment system.
Currently, physical therapists provide outpatient services in eight (8)
Part B settings, each governed by different requirements regarding
supervision, certification of plans of care, and billing authority.
APTA believes that value-based purchasing would be enhanced and
provider accountability increased by moving physical therapy to a
uniform part B benefit similar to the physical therapist in private
practice (PTPP) benefit, which improves accountability with individual
provider numbers for each licensed physical therapist, similar to
physician providers. We would welcome the opportunity to simplify the
Part B physical therapy benefit by eliminating the fragmentation of
physical therapy services across all Part B settings.
APTA's Efforts to Support Value-Based Purchasing for Physical
Therapists Services: A Foundation for Pay For Performance in
Therapy Services:
APTA believes that physical therapist practice is congruent with
this initiative due to its focus on measurable outcomes of function,
movement, and activities of daily living. We support reforming the
Medicare payment system to reward providers for meeting clinically
appropriate benchmarksto promote quality and improve the health
outcomes of the Medicare population. APTA has been actively engaged in
several initiatives to expand the utilization of health information
technology and outcome measures that would lead to quality improvements
in the provision of physical therapy services as well as to an
effective value-based purchasing system for this essential service to
Medicare beneficiaries.
To achieve these objectives, APTA has developed a specialized
point-of-care electronic patient record system (CONNECT) designed for
use by physical therapists, and a patient self-report instrument, the
Outpatient Physical Therapy Improvement in Movement and Assessment Log
(OPTIMAL) which documents the outcomes of physical therapist treatment.
Specifically, OPTIMAL provides an outcome measure of the patient's
functional status related to changes in movement. The patient uses
OPTIMAL at the initiation of treatment and at discharge to indicate the
level of difficulty experienced in performing 21 actions (e.g. rolling
over, sitting, standing, bending, reaching, etc.) and the level of
self-confidence in the ability to perform them. We firmly believe that
OPTIMAL will be a valuable instrument in a pay-for-performance system.
CONNECT enables practices to document the performance of a physical
therapist in a particular practice and benchmark that performance with
other clinicians. APTA would be happy to share the data derived from
CONNECT with CMS so that it may be used to develop quality measures for
a pay-for-performance system. APTA's ultimate objective is to develop a
national outcomes database that will enable the profession to determine
the effectiveness of physical therapist practice and to provide quality
measures to assist payers such as Medicare shift to payment systems
that reward quality. We believe our efforts are consistent with the
objectives that your legislation outlines and should assist the Centers
for Medicare and Medicaid Services (CMS) in developing and implementing
quality measures for physical therapists of the kind envisioned by your
legislation.
Recognizing the need for evidence-based practice, APTA also
initiated a project several years ago referred to as ``Hooked on
Evidence,'' which involved the creation of a website dedicated to
literature review on physical therapy efficacy. Specifically, APTA's
Hooked on Evidence Website consists of a database of current evidence
on the effectiveness of physical therapy interventions drawn from
scientific research literature. The website allows physical therapists
to search a database of extractions from peer-reviewed literature
relevant to physical therapy, which has been aggregated to produce
research-based guidelines for clinical practice.
APTA has also developed the Guide to Physical Therapist Practice
(``the Guide''), which helps physical therapists analyze their patient/
client management and describe the scope of their practice. The Guide
delineates tests and measures and the interventions that are used in
physical therapist practice. It also identifies preferred practice
patterns that will help physical therapists (a) improve quality of
care, (b) enhance positive outcomes of physical therapist services, c)
enhance patient/client satisfaction, (d) promote appropriate
utilization of health care services, e) increase efficiency and reduce
unwarranted variation in the provision of services, and f) diminish the
economic burden of disablement through prevention and the promotion of
health, wellness, and fitness. Through the development of a health
information technology infrastructure that supports quality improvement
by providing physical therapists with tools to support evidence-based
clinical decision making and incorporate performance measurement in
their practices, APTA is helping to lay the groundwork for Medicare
pay--for-performance.
Conclusion:
In summary, we recommend the following principles to enhance the
H.R. 3617, the Medicare Value-Based Purchasing for Physicians' Services
Act of 2005:

Maintain the repeal of the Substantial Growth Rate (SGR)
and its replacement with the Medicare Economic Index (MEI) in HR 3617.
Eliminate the arbitrary therapy caps for physical
therapists, occupational therapists, and speech language pathologists.
If value-based purchasing rewards high quality, efficient, and
clinically appropriate care, implementation of the therapy caps would
unnecessarily limit essential benefits for our seniors and persons with
disabilities, and would ultimately lead to increased costs in other
areas.
Include non-physician providers explicitly as part of
value-based purchasing under Medicare. Physical therapists are paid
according to the same fee schedule as physician providers and should be
included in this new payment framework.
Standardize the Part B benefit regarding physical therapy
services.
Utilize the foundation established by APTA to assist CMS
in the transition of outpatient physical therapy to value-based
purchasing.

We appreciate your sensitivity to concerns about the capability of
all providers to become eligible for incentives and the need to
eliminate current payment problems before attempting to create this new
system. We also have questions about how CMS will select and implement
reporting requirements and assessment measures. We look forward to
working with you in addressing these and other issues as the House
considers this legislation and other Medicare issues this fall. APTA is
eager to work with you and your staff to ensure that legislation
creating new structures in the Medicare program to provide incentives
for reporting and transitioning to value-based purchasing is enacted in
a fashion that ensures appropriate beneficiary access to care, reduces
the administrative burden on both patients and providers, and improves
the quality of care for all Medicare beneficiaries.

Statement of Steven Wojcik, National Business Group on Health

Congress Should Implement Medicare Pay-For-Performance Now
Issue: Congress is considering legislation that would implement
value-based purchasing, or pay-for-performance, on a program-wide basis
in Medicare. Pay-for-performance programs reward health care providers
for quality care and efficiency through higher reimbursement and
payments.
Too often, payment for health care is made without regard to
whether services are needed or how well they are performed. While cost
is tied to quality or performance in most other industries, in health
care, including in Medicare, the opposite tends to happen--we end up
paying more for poor service and the additional health care needed to
``correct'' poor quality.
The pay-for-performance movement continues to rapidly expand in the
marketplace. In recent years, employers and other health care
purchasers have developed and adopted payment programs to reward
quality and efficiency in the health care system. For example, several
of the Business Group's employer members participate in Bridges to
Excellence and the pay-for-performance program of the Integrated
Healthcare Association, two of the leading movements. Today, most large
insurers and health plans have a provider incentive program. The
Medicare program has several pay-for-performance demonstrations
underway.
Pay-for-performance promises to advance evidence-based medicine,
improve the quality of health care and the health of Medicare
beneficiaries, which translates into better value for the Medicare
program.
Position: The National Business Group on Health, a member
organization of over 240 primarily large employers who provide coverage
for 50 million Americans, strongly urges Congress to pass legislation
that would implement pay-for-performance on a widespread basis in the
Medicare program for hospitals, physicians, and other health care
facilities and professionals. Pay-for-performance in Medicare would
harness the government's leverage as the largest purchaser of health
care in the U.S. to improve the quality and efficiency of Medicare and
the overall health care system.
The Business Group believes that a Medicare pay-for-performance program
should include the following:
The performance measures adopted by Medicare should be
measures developed by nationally recognized quality measurement
organizations, such as the National Committee for Quality Assurance
(NCQA), researchers, and practitioner groups that have been vetted and
recommended by consensus-building organizations that represent diverse
stakeholders, such as the National Quality Forum (NQF).
Rewarding quality is paramount but rewarding quality care
that is provided efficiently is also important and should be an
essential part of any pay-for-performance initiative in Medicare.
When measuring quality, focusing on misuse and overuse is
equally important as underuse.
To the extent possible, performance measures should
incorporate outcomes of care in addition to structure and process
measures
CMS should make meaningful disclosure of performance
results to the public, which will reinforce the value of pay-for-
performance.
The health care system will need sufficient health
information technology infrastructure to report performance measures.
Some providers, particularly solo and small group physician practices
and those serving low-income urban and rural areas, may need financial
assistance to purchase needed systems, software, training and related
services.
The Medicare program should consider expanding the
proportion of Medicare payment and reimbursement based on performance
over time as it implements pay-for-performance.

Pay-for-Performance in Medicare is Needed Now to Improve Quality
and Safety:
A landmark 1999 Institute of Medicine (IOM) report estimated that
preventable medical errors in hospitals might cause as many as 98,000
deaths annually. Many more people are injured in hospitals and
countless more preventable deaths and injuries occur in outpatient
settings.
A 2003 RAND study found that patients received only 55 percent of
recommended care for fairly common medical conditions for which a broad
consensus exists on care standards.
The Dartmouth Atlas of Health Care's most recent findings reveal
wide variation in hospital care and outcomes for chronically ill
Medicare patients.
Fisher and colleagues (Annals of Internal Medicine, 2003) estimate
that up to 30% of Medicare spending may be for excessive and
unnecessary care.