[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

NEW MODELS FOR DELIVERING AND
PAYING FOR MEDICARE SERVICES

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

HEARING

before the

SUBCOMMITTEE ON HEALTH

of the

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

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

MAY 12, 2011

__________

Serial No. 112-HL3

__________

Printed for the use of the Committee on Ways and Means

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COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON HEALTH

WALLY HERGER, California, Chairman

SAM JOHNSON, Texas FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin MIKE THOMPSON, California
DEVIN NUNES, California RON KIND, Wisconsin
DAVE REICHERT, Washington EARL BLUMENAUER, Oregon
DEAN HELLER, Nevada BILL PASCRELL, Jr., New Jersey
PETER ROSKAM, Illinois
JIM GERLACH, Pennsylvania
TOM PRICE, Georgia

Jon Traub, Staff Director

Janice Mays, Minority Staff Director

C O N T E N T S

__________
Page

Advisory of May 12, 2011 announcing the hearing.................. 2

WITNESSES

Stuart Guterman, Vice President, Payment and System Reform,
Executive Director, Commission on a High Performance Health
System, The Commonwealth Fund.................................. 5
Lisa Dulsky Watkins, MD, Associate Director, Vermont Blueprint
for Health, Department of Vermont Health Access................ 26
Dana Gelb Safran, Sc.D, Sr. Vice President for Performance
Measurement and Improvement, Blue Cross Blue Shield of
Massachusetts.................................................. 41
Keith Wilson, M.D., Chair, Governing Board and Executive
Committee, California Association of Physician Groups.......... 52

SUBMISSIONS FOR THE RECORD

AARP............................................................. 89
American Chiropractic Association................................ 93
American College of Cardiology................................... 95
American College of Rheumatology................................. 98
American Geriatrics Society...................................... 105
American Occupational Therapy Association........................ 111
American Physical Therapy Association Private Practice Section... 113
American Physical Therapy Association............................ 117
Association of American Medical Colleges......................... 120
Coalition of State Medical and National Specialty Societies...... 122
Garrison Bliss................................................... 129
PTPNSGR.......................................................... 133

NEW MODELS FOR DELIVERING AND
PAYING FOR MEDICARE SERVICES

----------

THURSDAY, MAY 12, 2011

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

The Subcommittee met, pursuant to call, at 2:45 p.m., in
Room 1100, Longworth House Office Building, Honorable Wally
Herger [Chairman of the Subcommittee] presiding.
[The advisory of the hearing follows:]
HEARING ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

Chairman Herger Announces Hearing on Reforming Medicare Physician
Payments

Thursday, May 05, 2011

House Ways and Means Health Subcommittee Chairman Wally Herger (R-
CA) today announced that the Subcommittee on Health will hold a hearing
to explore new models for delivering and paying for services that
physicians furnish to Medicare beneficiaries. In what will be the first
in a series of hearings on this topic, the Subcommittee will focus on
models that have the potential to improve quality and constrain the
rate of cost growth. The Subcommittee will hear from witnesses who are
participating in delivery reform models. The hearing will take place on
Thursday, May 12, 2011, in 1100 Longworth House Office Building,
beginning at 2:00 P.M.

In view of the limited time available to hear from 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. A list of witnesses
will follow.

BACKGROUND:

The Sustainable Growth Rate (SGR) formula was implemented in 1998
as the mechanism that determines the rate by which Medicare fee-for-
service payments to physicians are updated on an annual basis. The SGR
limits the growth in Medicare physician service spending to the rate of
growth in the overall economy. The formula is cumulative in that the
tally of actual and target expenditures is maintained on an on-going
basis since the formula's inception. If expenditures are lower than the
target, physician payments are increased. If expenditures are higher
than the target, payments are decreased. As the rate of growth in
expenditures on physician services has consistently exceeded the rate
of growth in the economy in recent years, the SGR system has called for
a cut in physician payments in each of the past ten years. Congress has
intervened to avert the cuts each year since 2003 through numerous
pieces of legislation. As a result of this legislation and the
cumulative nature of the SGR, the magnitude of the projected cuts to
physician reimbursements and the cost to override future cuts have
grown. The Centers for Medicare and Medicaid Services (CMS) projects
that physicians will receive a 29.5% rate cut next year, absent
Congressional action. The nonpartisan Congressional Budget Office (CBO)
estimates that freezing payment rates at their 2011 levels for the next
10 years would increase Medicare spending by $298 billion.

The Medicare fee-for-service payment system provides an inherent
financial incentive for physicians to increase the number of services
they provide. The SGR formula has failed to constrain fee-for-service
expenditure growth, primarily because of increased utilization but also
because Congress has repeatedly passed legislation to override the cuts
called for by the SGR. In addition, Medicare payments to physicians are
currently made without taking into account the quality of the services
provided. There is broad acknowledgement of the shortcomings of the
current payment system and the growing importance of moving to payment
models that incentivize patient-centered, high-quality, and outcomes-
oriented care.

In announcing the hearing, Chairman Herger stated, ``There is
widespread agreement that Congress must abandon the practice of short-
term patches to avoid cuts to physician payment rates, which only make
the problem larger and more expensive to fix. The SGR system creates
tremendous uncertainty year after year forphysicians and Medicare
beneficiaries alike. This hearing will enable the Subcommittee to hear
details about other payment approaches that hold promise for driving
high-quality, efficient care. The experience of those at the forefront
of these innovative efforts will help the Subcommittee as it considers
how to better reimburse physician services.''

FOCUS OF THE HEARING:

The hearing will focus on innovative delivery and physician payment
system reform efforts.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Please Note: Any person(s) and/or organization(s) wishing to submit
for the hearing record must follow the appropriate link on the hearing
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From the Committee homepage, http://waysandmeans.house.gov, select
``Hearings.'' Select the hearing for which you would like to submit,
and click on the link entitled, ``Click here to provide a submission
for the record.'' Once you have followed the online instructions,
submit all requested information. ATTACH your submission as a Word
document, in compliance with the formatting requirements listed below,
by the close of business on Thursday, May 26, 2011. Finally, please
note that due to the change in House mail policy, the U.S. Capitol
Police will refuse sealed-package deliveries to all House Office
Buildings. For questions, or if you encounter technical problems,
please call (202) 225-1721 or (202) 225-3625.

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The Committee relies on electronic submissions for printing the
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Note: All Committee advisories and news releases are available on
the World Wide Web at http://www.waysandmeans.house.gov/.

Chairman HERGER. The Subcommittee will come to order. We
are meeting today to hear from four individuals who have
experience to share that will inform us as we consider how to
reform Medicare payments to physicians. This is a priority for
the Subcommittee as Medicare physician payment rates will be
cut by nearly 30 percent on January 1 unless Congress acts.
The flaws of Medicare's sustainable growth rate are well
known to members of this Subcommittee. Congress has repeatedly
enacted legislation to avert scheduled rate cuts that have been
called for under the SGR every year since 2003. This has
created deeper holes for the following years, and next year,
with the scheduled 30 percent cut, is no different.
These cuts could be devastating for patients and
physicians, especially in rural areas like my northern
California district. Many physicians have warned they will have
little choice but to stop participating in Medicare, leaving
seniors without access to the medical care they need.
Republicans and Democrats alike have kicked the can down
the road long enough. We cannot continue to patch over this
problem with short-term fixes of a few months or a year at a
time. The uncertainty of Medicare payment policies is taking a
toll on physicians, and with each passing year the cost of a
long-term solution grows larger. It is time that we work
together to find a fiscally responsible solution to this
problem.
In addition, we need the physician and provider community
to be willing participants in this endeavor to reform the SGR.
Medicare spending is on an unsustainable path, and we must find
a better way.
This is the first of what will be a series of hearings the
Subcommittee will hold on physician payment reform. It is my
hope that by starting early, we will arrive at a payment system
overhaul that can pass the House.
Today we will explore innovative delivery models that are
taking place across the country. The testimony we will hear
shares a common theme that coordinated care produces more
efficient care with better outcomes at a lower cost, and that
fee-for-service delivery systems encourage higher spending
without regard to quality.
I believe that the future of Medicare depends on a
transition away from the fragmented fee-for-service system to a
system where the incentives are aligned with better patient
care, not just more patient care. I am also open to hearing
other ideas as we continue to explore alternatives to the SGR.
Chairman HERGER. Before I recognize Ranking Member Stark
for the purposes of an opening statement, I ask unanimous
consent that all Members' written statements be included in the
record. Without objection, so ordered.
Chairman HERGER. I now recognize Ranking Member Stark for 5
minutes for the purpose of his opening statement.
Mr. STARK. Thank you, Mr. Chairman, and I want to thank
your staff for working with us to put together this first
hearing on the SGR reform. It is not a partisan issue, it is a
problem that has been around for more than a decade, and
neither party has been able to enact a permanent solution.
That said, it is not the Democrats that haven't tried, and
last year we passed a permanent reform of the SGR system that
would have gotten us out of this annual kick-the-can approach,
but our legislation would have essentially reset the existing
system and started over with a formula that divided physicians
into two groups, primary care, including the preventive service
and specialty care, and with different expenditure targets for
each group. While the physicians would still be accountable for
spending growth, access to primary-care services would have
been promoted by getting an extra allowance for the primary
care. Unfortunately, only one Member on your side of the aisle,
Dr. Burgess, was willing to join with us in that legislation,
but it was endorsed by virtually the entire physician
community.
Today's hearing is going to focus on a component of
reforming the physician payment system, delivery system reform,
and I think we will hear the witnesses say that we have no
chance of reforming that until we change the way we pay for
medical care, and that the existing fee-for-service system
merely incentivizes the provision for additional care.
So our witnesses today provide great examples of
experimentation going on across the country. I want to thank
them for taking the trouble to be here.
I also want to tell them that as an incipient receiver of
cataract surgery in the next week, I can't see you. I have your
names down here, and you are kind of that nice blur, so if I
misdirect a comment to you, please, please forgive me.
Again, thank you, and I look forward to hearing our
witnesses. I want to thank them for coming today and being so
patient because of the voting schedule that necessitated our
stretching this out into the late afternoon.
Thank you, Mr. Chairman.
Chairman HERGER. Thank you.
Chairman HERGER. Today we are joined by four witnesses. The
first witness will share ideas on how Medicare can encourage
physicians to participate in care models supported by different
payment systems. The following three witnesses will describe
their efforts to promote high-quality care at a lower cost
under these types of payment systems.
Our witnesses are Stuart Guterman, who is vice president of
payment and system reform at the Commonwealth Fund in
Washington, DC; Dr. Lisa Dulsky Watkins, M.D., who is the
associate director of the Vermont Blueprint for Health and an
employee of Vermont Department of Health Access; Dana Gelb
Safran, who is the senior vice president for performance
measurements and improvement at Blue Cross Blue Shield of
Massachusetts; and Dr. Keith Wilson, who is the chair of the
governing board of the California Association of Physician
Groups.
You will each have 5 minutes to present your oral
testimony. Your entire written statement will be made part of
the record.
Mr. Guterman, you are now recognized for 5 minutes.

STATEMENT OF STUART GUTERMAN, VICE PRESIDENT, PAYMENT AND
SYSTEM REFORM, EXECUTIVE DIRECTOR, COMMISSION ON A HIGH
PERFORMANCE HEALTH SYSTEM, THE COMMONWEALTH FUND, WASHINGTON,
DC

Mr. GUTERMAN. Thank you, Chairman Herger, Congressman Stark
and Members of the Subcommittee for this invitation to testify
on Medicare physician payment.
I am Stuart Guterman, vice president for payment and system
reform at the Commonwealth Fund, which is a private foundation
that aims to promote a high-performance health system that
achieves better access, improved quality and greater
efficiency, particularly for society's most vulnerable members,
including those with low incomes, the uninsured, young children
and elderly adults.
The Congress faces a challenging dilemma in considering
Medicare physician payment. On the one hand Medicare spending
is rising at a rate that threatens the program's continued
ability to fulfill its mission. On the other, the sustainable
growth rate mechanism, which is intended to address that
problem, produces annual reductions in physician fees that are
equally difficult to accept. This dilemma arises from the
underlying mismatch between the primary cause of rising
spending, which is the volume and intensity of services
provided, and the focus of the SGR, which is to set the fees
that physicians receive for each service they provide.
Determining how much to pay physicians certainly is an
important issue, but what is critical is determining how to pay
physicians so that the Medicare program gets the best care
possible for its beneficiaries.
We do get what we pay for in our health system, more volume
and more intensity, with little reward for high performance
either in terms of effectiveness or efficiency. We need to
start paying for what we want; to reward providers for the kind
of care they would like to be providing, but all too often are
discouraged from or even penalized for under our current
system.
In changing how we pay for health care, we must recognize
the diverse array of organizational models that make up the
health care delivery system and the differences in the
environments in which those organizations operate.
Provider organizations vary widely in size, scope and
degree of integration and in the extent to which they may be
willing or able to assume broader clinical or financial
accountability for their patients' care. One size will not fit
all, which means that payment and health care delivery reform
must provide an array of payment approaches that apply to
providers in the context of their current organizational
structure, while at the same time establishing rewards and
requirements that both encourage high quality and value, and
provide incentives for those organizations to evolve as
necessary to meet the needs of their community.
The availability of more sophisticated and more substantial
rewards for high performance for organizations that can deliver
more effective and efficient care can be used to provide an
incentive to move toward more coordination and accountability
and away from the fragmented delivery system that patients
currently face. The right incentives can encourage providers to
work together either in formal organizations or in less formal
relationships in ways that enable them to take broader
responsibilities for the patients they treat and the resources
they use, and to benefit from doing so.
As organizational arrangements evolve, payment methods can
be adjusted to encourage and reward increasing levels of
accountability with continuous development and improvement over
time, but even over time different payment approaches and
organizational models may be required in different areas and
different circumstances to accomplish the goals of health
reform.
An important vehicle for developing an array of new
approaches to payment, organization and delivery is the new
Center for Medicare and Medicaid Innovation in the Centers for
Medicare and Medicaid Services. The innovation center is
mandated to pilot innovative payment and delivery system models
that show significant promise for maintaining or improving the
quality of care in Medicare, Medicaid and the Children's Health
Insurance Program, while reducing program costs.
These pilots provide a mechanism for identifying,
developing, implementing, testing and spreading innovative
approaches to health care financing and delivery that can help
improve health system performance. The underlying philosophy
should be one of rapid development and spread of innovative
payment and delivery models with the ability to move quickly,
learn as one proceeds, and try multiple strategies rather than
focusing on a single model; in other words, for CMS and other
payers, as well as providers, to move beyond business as usual.
Medicare, by promoting an array of innovations in payment,
organization and delivery, could lead the Nation to higher
health system performance and yield great benefits for
individuals, providers and society as a whole.
I am honored to be here with representatives of three
innovative organizations and interested to learn more about
what they are doing. Thanks.
Chairman HERGER. Thank you.
[The prepared statement of Mr. Guterman follows:]

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Chairman HERGER. Dr. Watkins, you are recognized for 5
minutes.

STATEMENT OF LISA DULSKY WATKINS, M.D., ASSOCIATE DIRECTOR,
VERMONT BLUEPRINT FOR HEALTH, DEPARTMENT OF VERMONT HEALTH
ACCESS, WILLISTON, VERMONT

Dr. WATKINS. Thank you very much. Chairman Herger,
Congressman Stark, Members of the Subcommittee, thank you for
this opportunity to address you today.
I don't think there is any question that fee for service
promotes volume and rushed care, as Mr. Guterman has pointed
out. And the point of the Vermont Blueprint is to address that
very issue with an emphasis on moving in a transition from
episodic or acute care to planned and preventive care.
The Vermont Blueprint for Health is leading system delivery
reform in our State and nationwide. We have been successful in
some ways largely due to strong bipartisan support from our
legislature and from our Governor over the last 8 years.
The 2003 launch of the blueprint, in response to the
overwhelming, looming problems with the cost of chronic
disease, as we look at the baby-boom generation aging and
increasing obesity-related problems such as diabetes and heart
disease, was a very specific chronic-care initiative. It has
since transformed significantly into a true spectrum of
prevention with health maintenance that is appropriate to age
and gender, now moving into pediatrics and ``birth to earth,''
if you will.
The overall goals are obviously to improve health care
services both in terms of the outcomes that are able to be
demonstrated clinically, as well as the experience with patient
care; look at the health of the population as a whole; and
control health care costs.
Our innovations in terms of payment reform have been
twofold and very specific. We are continuing with fee for
service because that is the nature of payment in our country
today. But, in addition, we have two new streams of funding
specifically for primary care, which has been the emphasis of
our work thus far.
One, it revolves around true, enhanced payments on a per-
patient, per-month basis attributed to those practices that are
recognized as Patient-Centered Medical Homes through the NCQA
recognition process, a grade, if you will, from 0 to 100. The
higher the grade, the higher payment per patient per month.
That goes directly to the practice. And this is not a function
of lab tests or cut-offs that are punitive; this is truly a
function of communication and access to the practice.
A second new stream of funding comes to the practice and
the community through the hiring of individuals at a Community
Health Team, a very novel approach to actually care
coordination at the local level. These multidisciplinary,
locally based care-coordination teams serve multiple practices
and actually do the outreach and coordination that desperately
needs to be done in primary care, but is not compensated for
and, therefore, often falls between the cracks.
As I said, these are two new funding streams, and the
innovation in Vermont has required that all insurers who do
business in the State of Vermont, our major commercial payers,
Vermont Medicaid and now Medicare, will be joining us to
actually pay for these innovations. So it is additional funding
to the primary care practices to benefit the patients and their
families. The Center for Medicare Innovation has made that
possible through the Multipayer Advanced Primary Care Practice
Demonstration, allowing Medicare to join with private insurers
and Vermont Medicaid in these innovations.
We do have trends that are very encouraging in terms of
cost and decreased utilization. A lot of that detail obviously
cannot be shared in 5 minutes, but we are actually seeing
decreased utilization of emergency rooms and inpatient days,
both of which are extraordinarily expensive. And this is very
encouraging as we look at our trends.
We have over 2 years of experience now in our first pilots.
We are rolling out to the entire State because we have
legislation that mandates that the insurers continue to allow
us to do this work and actually support every primary care
practice in the State of Vermont that chooses to be part of
them.
Our evaluation infrastructure is extraordinarily robust. We
are very excited to have probably more data than we will know
what to do with, hopefully within the next year or so, both in
terms of clinical data, experience of care, as well as a
return-on-investment model that is allowing us to look at the
financial impact and examine the efficacy of our program.
I don't have enough time to describe the anecdotes, but I
think I can really very clearly state that in terms of the
experience of this program, that both providers and patients
are extremely happy with it. Patients will describe the sense
of feeling someone cares about them, really wrapped around
them, and getting services that fall far outside the normal
traditional health care experience of going to the doctor's
office. And the providers who have been involved in this
process through these last couple of years have actually said
in very clear terms and in public that the joy of the practice
of medicine is back.
Thank you.
Chairman HERGER. Thank you.
[The prepared statement of Dr. Watkins follows:]

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Chairman HERGER. Ms. Safran, you are recognized for 5
minutes.

STATEMENT OF DANA GELB SAFRAN, SC.D., SENIOR VICE PRESIDENT FOR
PERFORMANCE MEASUREMENT AND IMPROVEMENT, BLUE CROSS BLUE SHIELD
OF MASSACHUSETTS, BOSTON, MASSACHUSETTS

Ms. SAFRAN. Thank you, Mr. Chairman, Congressman Stark,
Members of the Committee. I am Dana Gelb Safran, senior vice
president for performance measurement and improvement at Blue
Cross Blue Shield of Massachusetts, and I thank you for the
opportunity to speak today about the work that we are doing on
payment reform.
As this committee considers the important issue of
physician payment, and specifically the SGR, I am pleased to
have this opportunity to share a model that has taken hold in
Massachusetts.
This work and its early results suggest that it may indeed
be necessary to think beyond physician payment to consider
overall system payment in order to realize the goal of
sustainable growth. A holistic view of payment may also be
necessary to reduce the fragmentation of care that we all
recognize as a key failing of our current system.
In 2007, Blue Cross of Massachusetts recognized that to
address the unrelenting and unsustainable medical cost trends
would require fundamental change in provider payment and
incentives. With an annual medical spend of about $13 billion,
we sought to develop a model that would do two things,
significantly improve the quality, safety and outcomes of care,
and significantly slow the rate of growth on that 13 billion.
The alternative quality contract, or AQC, developed in 2007 and
launched in 2009, was our effort to advance these twin goals.
Approximately 40 percent of our provider network has now
contracted under the AQC model. There are five features of the
model that differ from our traditional contracts. First, a
provider organization that enters an AQC contract agrees to
accept accountability for the full continuum of care for their
patients from prenatal care to end-of-life care and everything
in between. This doesn't mean that the provider organization
itself must be capable of providing every aspect of care, but
they must agree to be accountable for both the cost and quality
of care provided to their patients, regardless of where it is
provided.
Second, the AQC contract is a 5-year deal, which is
considerably longer than our traditional contracts.
Third, payment is based on a global budget for a defined
patient population. The AQC thereby moves way from fee-for-
service incentives and establishes a model in which the
provider assumes accountability for total medical spending on
its patient population.
Importantly, each AQC provider's budget is set based on
that organization's historical rate of spending for its patient
population. In this way providers are assured that their
starting budgets contain sufficient funds to care for their
patients, but have a strong incentive to spend those dollars
prudently.
A fourth distinguishing feature of the AQC is that the rate
of inflation on total medical spending over the 5-year contract
is negotiated up front and is designed to come down to rates
approximating general inflation over the 5-year period.
A fifth and very important feature of the AQC is that it
includes financial incentives tied to performance on a broad
set of quality and outcome measures. In total, the model
includes 64 nationally accepted, clinically important measures
of hospital and ambulatory quality.
To our knowledge, the AQC is the first contract that
requires providers to assume responsibility for the outcomes
achieved through their care, not solely for the care delivered
in the four walls of their setting. The importance of this
feature cannot be overstated.
Finally, let me highlight some early results of the AQC.
With respect to medical spending, year 1 results show the AQC
is on track to achieve its original goal of cutting spending
growth rates in half over a 5-year contract period. Each and
every AQC organization was successful in managing to their year
1 budget and achieving savings, despite the fact that AQC
groups vary enormously with respect to size, organizational
structure, geography and, importantly, their prior experience
with accountability for medical spending.
With respect to quality, each and every AQC organization
made significant improvements across a broad set of quality and
outcome measures. By the end of year 1, quality of care in the
AQC segment of our network was significantly higher than the
non-AQC segment, and rates of improvement were several fold
higher than prior improvement rates.
These early findings hold several important lessons, but
perhaps foremost among them is that the model provides evidence
that a payment system that creates provider accountability for
both medical spending and health care quality and outcomes
appears to be a powerful vehicle for realizing the goal of a
high-performance health care system with a sustainable spending
growth rate.
I thank you very much and look forward to your questions.
Chairman HERGER. Thank you.
[The prepared statement of Ms. Safran follows:]

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Chairman HERGER. Dr. Wilson, you are recognized for 5
minutes.

STATEMENT OF KEITH WILSON, M.D., CHAIR, GOVERNING BOARD AND
EXECUTIVE COMMITTEE, CALIFORNIA ASSOCIATION OF PHYSICIAN
GROUPS, DIAMOND BAR, CALIFORNIA

Dr. WILSON. Thank you, Chairman Herger, Ranking Member
Stark and members of the Health Subcommittee for inviting me to
testify on potential new models of health care delivery and
physician payment models for Medicare beneficiaries.
I am here representing the California Association of
Physician Groups, also known as CAPG, and its over 150-member
multispecialty and IPA groups. Together we care for over 15
million Californians, or one-half of the insured population of
California.
I am also here as a practicing physician and regional
medical director of HealthCare Partners, a large multispecialty
medical group, and IPA serving much of greater Los Angeles
Orange County area.
I would like to speak to the virtues of capitation in
contrast to the unsustainable nature of fee-for-service
medicine. I would also like to highlight the value of
capitation leading to a system of coordinated, integrated care
that is not usually replicated in the fee-for-service model.
In California we have over two decades of experience in
making prepaid medicine work, and I would like to share with
you some of the lessons learned.
Capitation is great at creating an environment in which the
at-risk provider groups are forced to focus on the total cost
of health care and consequently figure out creative ways to
impact the cost. This is usually best done by keeping patients
as healthy as possible and out of the hospital.
We have designed systems of care that treat the patient
based on their individual need and disease burden so that we
may improve and stabilize their condition. We do this through a
patient-centric model, allocating resources in a targeted
manner.
My written testimony highlights a few of these creative
interventions California groups have deployed, such as risk
stratification and disease-specific care management programs.
We have learned to protect the public from groups taking
excessive risk and subsequent failure through the
implementation of regulatory oversight by the Department of
Managed Health Care. California groups are required to report
quarterly on solvency metrics, such as tangible net equity,
timely payments and cash-to-claim ratios, among others.
We have also learned to avoid denial of care through public
reporting of quality metrics and patient satisfaction scores
deployed by the Integrated Healthcare Association.
Health plans incentivize physician group performance
through pay-for-performance quality metrics developed by
multiple stakeholders.
Capitation, if I might describe it a bit, consists of a
fixed payment paid directly to the medical group, usually in
the form of a PMPM, or per-member per-month payment. The
physician group, or IPA, is then accountable for providing care
for patients assigned to them within that budget. This payment
methodology allows a predictable revenue stream that enables
groups to plan for capital improvements and investment in
infrastructure, like health information technologies. Indeed,
some of the most sophisticated and advanced IT infrastructure
exists in California groups as a direct by-product of
capitation.
CAPG has developed a Standards of Excellence program that
allows groups to compare their internal processes and
capabilities on a voluntary basis. This program also provides a
roadmap to up-and-coming groups, identifying the tools and
capabilities they will need to provide patient-centered care.
We think the California model can be a model for the rest
of the country as we seek an alternative to fee-for-service
medicine and to promote the spread of ACOs. We see the ACO
model, however, as being handicapped, as they will need similar
infrastructure to California groups, but there is no source of
revenue such as capitation to benefit from.
We call for the deployment of capitation as the law allows
for groups that are ready to take risk. We also suggest a means
of front-loading revenue to groups and potential ACOs be sought
and found so that they can develop the systems of care
necessary to be responsible for a population of patients.
In closing, I would like to emphasize the superior
performance of capitated model in delivering better quality,
superior outcomes with great cost savings. One example of this
is the comparative bid days between capitated Medicare in
California yielding bed days of 982 per 1,000 versus
traditional fee-for-service Medicare yielding bed days of 1,664
per 1,000. This relative value to overall system in terms of
dollars and cents is astronomical.
I would like to thank you for the opportunity to speak to
the committee today. I hope this information has been useful,
and I would be happy to answer questions as I can.
Chairman HERGER. Thank you.
[The statement of Dr. Wilson follows:]

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Chairman HERGER. I want to thank each of our witnesses for
describing their involvement and efforts that use payment
models that encourage coordinated, efficient care. One goal of
today's hearing is to understand the impact of Medicare paying
physicians on a fee-for-service basis, including its
contribution to the SGR problem.
With that in mind, I would like to ask the three witnesses
involved with different payment models to briefly state their
view of the fee-for-service payment method.
Dr. Watkins, if you could respond first, followed by Ms.
Safran and then Dr. Wilson.
Dr. WATKINS. I believe the fee-for-service model has been
severely detrimental, especially to primary care. I believe
that is true nationwide and not just in Vermont. The sense that
primary care providers have of being on a hamster wheel, of
having to see patient after patient and being rewarded for
seeing more patients in a day, as opposed to the quality of the
services they provide, is a never-ending negative cycle.
Chairman HERGER. Ms. Safran.
Ms. SAFRAN. I believe you summed it up well in your opening
remarks, actually, that fee-for-service payment system has
delivered to us really what it was designed to, which is a
system that incentivizes more services.
But now we realize that more services don't necessarily
provide to us better quality or better outcomes for the patient
population, and that, in fact, we will need a different system
of payment if, in fact, what we are looking for out of our
health care system is not simply a larger quantity of care, but
better quality and outcomes of care. And also we will have to
move away from a fee-for-service system if we look to resolve
the fragmentation that we have today, because paying each for
their own individual piece adds up to pieces not tied together
as a whole.
Thank you.
Chairman HERGER. Thank you. Dr. Wilson.
Dr. WILSON. Yes, sir. As a practicing provider, I have
worked under both fee and payment methodologies, fee-for-
service as well as capitation, and I can say pretty
unequivocally that I much enjoy the practice of medicine in a
capitated environment than I do in a fee-for-service
environment.
And as I have shared, you know, physician locker rooms with
docs who practice fee-for-service medicine, the motivation
behind those doctors' behavior is vastly different than the
doctors who practice under a capitated or a salary model. And I
think patients oftentimes are harmed by fee-for-service models
that are overly zealous, and they don't lead to coordination
and integration of care.
So in summary, I would just say that capitation and/or
other means of payment, even if it is just a salary model, lead
to a purer form of medicine being practiced than fee-for-
service, and I think patients benefit more in that model.
Chairman HERGER. Ms. Safran, your health plans go by the
Alternative Quality Contract Program of increased quality and a
slower rate of growth as the one we share. I have a few
questions related to your success in achieving these goals. How
much has provider-spending come in under budget?
Ms. SAFRAN. Well, in year 1 of the first 5-year contracts,
every AQC provider organization came in under budget, and that
ranged from 1 to 2 percent under their budget in what they were
able to achieve in just the first year of savings.
Chairman HERGER. Are you surprised that the AQC provider
groups have fared so well on 64 quality measures of outpatient
and inpatient care?
Ms. SAFRAN. I was very surprised. I have spent my career as
someone developing and implementing quality measures and have
never seen anything like the magnitude of improvement on a very
broad set of quality measures that we saw in year 1 of this
contract. So it was really clear that not just the incentives
that are in front of them that make a difference, though I will
not say that they don't, they are a very important piece, but
also important is the fact that they are receiving, on an
ongoing basis, information over the course of the year about
how they are doing on those measures so that they are able to
manage to success. And every one of those organizations has put
in place leadership that is very much dedicated to working with
the front-line physicians on that broad set of quality and
outcome measures.
Chairman HERGER. How have the AQC participants been able to
reduce costs through important improvements, such as decreased
hospital infections, so quickly?
Ms. SAFRAN. Well, in year 1 of the contract, the
improvements on spending really came through--more through the
work on thinking carefully about where those providers were
referring patients for things like standard laboratory tests
and imaging and other forms of care in which there are no
relationships in place, where, roughly speaking, it is a
commodity service. And the provider now was quite aware of the
fees that we pay for those services in different areas, and it
became important to them to refer their patients to lower-cost
settings for services where it was a commodity like a lab test
or imaging.
The harder work of reducing readmissions, changing overall
utilization of care, reducing non-urgent ED use, is work that
some of the more mature AQC organizations did make progress in,
and significant progress, in year 1. But those types of more
difficult changes are things that we know we are going to see
greater progress on in years 2 through 5 over the contract.
Chairman HERGER. Thank you.
Ranking Member Stark is recognized for 5 minutes.
Mr. STARK. Thank you, Mr. Chairman, and I would like to
again thank the witnesses for their very informative testimony.
Dr. Wilson, you have huge numbers in your groups. Now, are
the Kaiser physician groups part of your group?
Dr. WILSON. Yes, they are.
Mr. STARK. They are, I gather, I have been led to believe,
the largest professional partnership and the largest
professional corporation in the country; is that not correct?
Dr. WILSON. To my understanding, they are the largest
professional physician group in the country.
Mr. STARK. I know that in my district, or in the county
that I represent, there are 1.2 million people, and half of
them belong to Kaiser. They always say if you are run over by
somebody, you have a 50 percent if you take them to the Kaiser
emergency room that you are going to the right place.
Do you think that the Kaiser model, the staff model, could
be used in other areas? Kaiser has worked here in the
Washington area with not any great success, because they have
been unable to hire physicians, they have had to contract with
groups, and they have had to rent hospital rooms the same as
any other managed-care plan.
But if we could establish some type of staff model outline,
do you think that we could transmit that success to other parts
of the country?
Dr. WILSON. The answer would be yes. I think, you know,
there are obvious challenges in importing a new model of care
to a delivery system, and, you know, often there is a
requirement of critical mass before you can actually start to
impact the culture of that environment.
Kaiser, you are right, is the largest physician delivery
system in the State of California. The company that I work for,
HealthCare Partners, is the second largest physician
organization in the State of California, with practices in
Florida and Nevada.
I know Kaiser has exported its model to other parts of the
country successfully. Washington seems to be one of the
exceptions in which it didn't quite succeed, and, I guess,
Maryland as well.
But I do think the model is transplantable. I think
physicians coming out of training now are more likely to seek a
Kaiser type of practice than they are to hang their own
shingles. I think, you know, that the types of doctors
graduating training have changed. They are different than the
doctors that graduated with me.
But so in short, yes, I do think that model can be
explored.
I do think there are other models in California, I think,
that are potentially more easily exported than Kaiser, because
Kaiser is a bricks-and-mortar kind of organization, and so it
requires significant up-front cost. And so, you know, the
ability to just sort of plant that in an environment in which,
you know, the economics haven't been established is a little
bit more challenging.
But, you know, a large number of California physician
groups, or IPAs, Independent Practice Associations, which don't
have the overhead of a Kaiser model, but do bring the
infrastructure, the coordination of care, the integration, the
IT capabilities and the other things that capitation, as I
spoke of, lends itself to, but it is probably more easily
transplantable.
Mr. STARK. Thank you.
Ms. Safran, do you suppose that the recent Massachusetts
universal care law, or whatever it is, adds to the performance
that you noticed in the insurance plans, or adds to the
participation, I guess I should say?
Ms. SAFRAN. Well, without question, universal insurance has
drawn our attention now in Massachusetts to the cost of health
care and importantly to the rate of increase in that cost.
And so without a doubt the providers in the Massachusetts
market are aware that attention is on cost, that payment reform
is happening. They are very active conversations, not just
because of our model, but in the State as a whole. So
absolutely, I think that uptake of providers into our AQC model
happened much more quickly because of the attention to costs
that came upon us as we had universal insurance.
Mr. STARK. And in the great State of Vermont, is there
something we can learn there that can be exported? You are the
only single-payer State; is that right? Or the only single-
payer plan, I guess.
Dr. WATKINS. We have legislation that was passed in this
most recent session and will be signed into law by Governor
Shumlin. That legislation could best be described as a first
step towards an integrated payment system for the State of
Vermont.
Chairman HERGER. Excuse me. The gentleman's time has
expired. Thank you very much.
I recognize the gentleman from Washington Mr. Reichert for
5 minutes.
Mr. REICHERT. Thank you, Mr. Chairman. I will add my thanks
to all of you for being so patient and waiting in our waiting
room while we have been so busy voting.
I have just jotted down some common themes here. I know
that all of us--I think the good thing, as Mr. Stark has
stated, we are all here, this is a bipartisan effort,
recognizing that the patients are the focus of this effort,
trying to provide high-quality health care, cost-effective and
accessible, as we use those three descriptors.
But the witnesses today have been pretty consistent in
mentioning coordinated care, coordinated team, community care,
overall system payment, holistic system, holistic approach, a
full continuum of care, patient-centric model, coordinated,
integrated. I think that is what everyone is hoping for and
wishing for, and it looks like some of you on the panel today
have at least begun to accomplish some of those goals in making
the patient the center.
I am really interested, of course, in the seniors in this
discussion. And as we look forward to reforming the current
formula, I think it is important that we ensure that our
seniors continue to have access to quality and effective care
and affordable care. So I think it is key--and this question is
for Ms. Safran--it is key to communicate and educate our
seniors. So under your AQC plan, is there an education
component, you know, one where you would educate, especially
seniors, or anyone under the plan for that matter, about their
care provider now is an AQC plan member and, therefore, would
deliver service in a different way?
Ms. SAFRAN. The answer to your question is that we gave an
enormous amount of thought to how and whether to do education
for our members about the AQC, and in the end the plan has not
done any kind of proactive outreach and education to our
members about the AQC. And the reason for that is that the AQC
has a contract with our physician network and, in some cases,
with hospitals party to those contracts.
Our members have bought products from us that still stand,
that are unchanged by those contracts, and that in our
experience, when we have a communication with our members, it
won't surprise you to know members get confused and worried
when they hear from their health plans. And so we really hold
ourselves to a standard that we will communicate with our
members when there is something that they need to do, when
there is something that they need to pay attention to.
And as we struggled with what exactly would we tell them
about the AQC, it wasn't clear, in fact, that there is anything
different that they need to do. And, in fact, when we had the
impressive year 1 results, we thought again about communicating
with them and saying--you know, congratulating them on how
fortunate they are to be in practices like this. But in the end
we have left it to the physicians to communicate if they want,
but really there is nothing the plan needs to advise the
members about.
Mr. REICHERT. There is nothing in part of the contract that
would require the doctors to communicate any difference. And
wouldn't it be important for the patients to know that they are
now in this holistic sort of preventive care arena, or they
just, as they go through it, kind of realize that in
communicating with their provider?
Ms. SAFRAN. Well, I think they do realize it, and they
realize it in a very positive way. That is to say, in order to
be successful on the quality and outcome measures, these
practices are interacting with their patients in a way that the
patients, when they communicate with us, tell us that it feels
like concierge care, but they never paid a concierge fee,
because the practice is suddenly doing outreach to them between
visits to let them know about care that they need, to find out
how their management of their chronic condition is going and
what barriers they are facing. So that is what the members and
the patients are experiencing.
Mr. REICHERT. I appreciate that.
I notice that my time is getting short, and my next
question is going to be a little bit longer, Mr. Chairman, and
I will submit that question to Dr. Wilson in writing.
[The information follows: Dr. Wilson]

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Mr. REICHERT. Thank you. I yield back.
Chairman HERGER. The gentleman yields back.
The gentleman from Wisconsin Mr. Kind is recognized for 5
minutes.
Mr. KIND. Thank you, Mr. Chairman. Thank you for holding
this very important hearing, and I want to thank our witnesses
for your testimony here today.
Listen, we have just gone through a very gut-wrenching
health care reform debate ourselves here in Washington, and
incorporated a lot of aspects of what is happening around the
Nation. I assume, Ms. Safran, the Massachusetts model, too, is
something that was under consideration.
And I think the ultimate verdict on health care reform is
going to be not only changing the way health care is delivered,
but how we pay for it. I mean, it is replete with studies here
that show that close to one out of every three health care
dollars is spent on tests and procedures and things that don't
work. They don't improve patient care. And oftentimes, because
of the overtreatment patients are receiving, they are being
left worse off rather than better off. That is close to $700
billion a year in a 2.3-, $2.4 trillion system that we are not
getting a good bang for the buck for.
And I have been encouraged hearing the testimony here
today, and perhaps there is an opportunity for some bipartisan
cooperation to move forward on a lot of the reforms that you
are all testifying about, a more integrated, coordinated,
patient-focused care system.
Now, for the sake of full disclosure, I come from a
country, western Wisconsin, that has the Mayo system in it,
Gundersen, Marshfield, Dean, that are doing this already and
producing tremendous results. And it sounds like that is a
model that we should be encouraging. And, in fact, it is
something we incented in the Affordable Care Act, those types
of models of care that are more coordinated and patient-
focused, which is really at the heart of the Affordable Care
Act, including payment reform.
And I am convinced that fee for service, as I am hearing
from all of you today, is an unsustainable model of payment for
our health care providers. It is not fair to them; it is not
fair to the patient. We are not getting a good bang for the
buck, and how do we get to a value- or quality-based
reimbursement system, that is going to be crucial.
And, Ms. Safran, you were talking about the quality
measurements that Massachusetts was just establishing, I think
64 criteria so--that you are using right now. My question to
you is who is establishing those quality measurements, and what
type of buy-in have you gotten from the practicing physicians
and the care providers in Massachusetts for that type of
criteria?
Ms. SAFRAN. So, that was my job, to establish which
measures. And we really drew from nationally accepted measures
wherever we possibly could, so that means NQF endorsed almost
every single one of those 64 measures. We then put the measures
through some additional paces to be sure that we think they are
ready for the high-stakes use involved, meaning attaching
dollars to payment on, you know, a score. And it was important
to us that that measure set include inventory and hospital
measures, and that in both of those settings that the measures
include clinical process, clinical outcome and patient care
experience measures. So that is how we have--and they have been
completely accepted because of the rigor that we paid attention
to in the measures that we chose.
Mr. KIND. Because some of the concern, I think, many of us
had or shared in regards to what Massachusetts was moving
forward on, so you are doing coverage before cost. And now it
seems like you are trying to play catch up with the cost issue
right now. And we are trying to get out ahead of that ourselves
with the Affordable Care Act to not fall into a similar type of
box as we move forward.
I know it is very unfair to ask it, you know, because
volumes and books can be written on each topic, but if I can
get just a quick response from you on a couple of key issues, I
think it is important as we move forward.
The role of comparative effectiveness research. Important
or not, Mr. Guterman?
Mr. GUTERMAN. I think comparative effectiveness research is
key, because if we are going to spend the vast amount of
resources that we spend on health care, and if we are going to
address the issue of the massive amount of waste in the health
care system, we need to know how to spend that money more
wisely so that we can get a better return on it for our
patients. And comparative effectiveness research is intended to
provide information to help decisionmakers, the physician and
the patient, make the decision for the appropriate care.
Mr. KIND. Dr. Watkins.
Dr. WATKINS. I completely agree with my colleague that it
is absolutely essential. We have the opportunity, because of
our involvement in the Multipayer Advanced Primary Care
Practice Demo through CMS Center for Innovation, to actually
work closely with our colleagues in other States and have a
multi-State collaborative that is actually beyond those States
involved.
Mr. KIND. Ms. Safran.
Ms. SAFRAN. No question that we need a better evidence base
to guide us. Less than 3 percent of medical decisions are made
every day--every minute of every day are based on solid
evidence. Comparative effectiveness is absolutely one important
way to do that. I think there are others, but we absolutely
need a better evidence base.
Mr. KIND. Dr. Wilson.
Dr. WILSON. I would agree with all that has been said
before me. Yes, comparative effectiveness would be good, and I
agree also that too little medicine is done through evidence-
based medicine.
Mr. KIND. Now, another big role that we had here,
unfortunately, under the Affordable Care Act was talking about
reimbursing providers in regards to counseling for advanced
directives. Good idea, Mr. Guterman.
Mr. GUTERMAN. When decisions get made about medical care,
having that decision be made between the patient and the
physician is always a good idea. And the more information
people have in making those decisions, the better it is.
Mr. KIND. May I get a written response from the rest of the
witnesses because I see my time has expired? Thank you, Mr.
Chairman, for your indulgence.
Chairman HERGER. Thank you.
The gentleman from Pennsylvania Mr. Gerlach is recognized
for 5 minutes.
Mr. GERLACH. Thank you, Mr. Chairman.
Thank you for coming today and being part of the panel.
Let me ask, Ms. Safran, in Massachusetts, a State that has
undergone tort reform relative to medical liability and medical
malpractice cases, and are there protections, medical
malpractice protections, for physicians in Massachusetts, like,
say, Texas and California, where there are caps on noneconomic
losses in medical malpractice cases?
Ms. SAFRAN. I apologize. That is a question that is out of
my area of expertise. I would be glad to get the answer,
though. I don't believe there has been significant tort reform
in Massachusetts that has been discussed.
Mr. GERLACH. Yes, I don't think so either, but I don't know
exactly if that is the case. But that really is the premise for
my question, because I am thinking in the AQC model that you
have, what has been the impact of an AQC contract with a group
of physicians relative to how they otherwise may be practicing
defensive medicine if their tort liability may still be just as
high as it might be, say, in New York, Pennsylvania, other
States where there are no tort reforms to protect them against
the medical liability cases? What have you seen as the
difference between a physician practicing in Massachusetts who
is not in an AQC arrangement versus one that is relative to the
types of defensive medicine costs that they produce?
Ms. SAFRAN. Well, the answer is that it is early right now
to know, to notice or see really any differences in the
patterns of use. And so I think if we were to look at the
data--and we have a formal external evaluation by Harvard
Medical School that is looking at the data to see how things
are changing--they would find that for the most part, the
savings in year 1 were based on choosing lower-cost settings
where that could be done, not by doing the hard work of
changing use.
However, there is a lot that these practices are doing to
start to try to understand the vast practice pattern variation
that exists even within a group of physicians who practice
together, caring for the same condition, how differently they
care for that. And we are helping to fuel that with data that
we provide on a very regular basis to highlight these
differences and what we hope is promote physicians discussing
with each other what best practice would look like, and to form
that consensus and reduce that variation.
Mr. GERLACH. Assuming the American Medical Association is
accurate in its estimate that in any given year there is
approximately 100- to $150 billion in defensive medicine costs
that are incurred around our Nation each year, and you could
probably extrapolate out from that overall figure how much of
that is out of Massachusetts, is this Harvard study that is
being undertaken, is it going to compare and contrast the
national experience relative to defensive medicine costs with
what is happening in Massachusetts both within an AQC setting
and a non-AQC setting?
Ms. SAFRAN. Yes. I don't know that they will bring in
national data specifically, but they absolutely have
information and will be studying over a long period of time to
see how practice patterns change in the AQC compared with how
things change or don't change outside of the AQC.
Mr. GERLACH. I would like to yield the balance of my time
to Dr. Price, if I may.
Chairman HERGER. The gentleman yields to Dr. Price.
Mr. PRICE. I thank the gentleman for his time, and I
appreciate his question because I think it is an interesting
line. I just want to say that all of us agree that the status
quo is unacceptable. It is just where we go from here.
I was curious about the response of the panel to the
question about comparative effectiveness research and the
overwhelming support for it. And I assume that would be the
same for the Independent Payment Advisory Board. Mr. Guterman,
you are wholly in favor of the Independent Payment Advisory
Board?
Mr. GUTERMAN. The notion of having a mechanism to translate
the best policy ideas into focusing on Medicare programs to try
to slow down cost growth is an interesting one. I think there
are----
Mr. PRICE. You support the IPAB?
Mr. GUTERMAN. Do I support the IPAB?
Mr. PRICE. Yes.
Mr. GUTERMAN. I would like to see, frankly, the IPAB have
broader powers because I suspect that a lot of the issues that
they will have to deal with in terms of Medicare cost growth
are driven by the same factors that----
Mr. PRICE. Dr. Watkins, do you support the IPAB?
Dr. WATKINS. I don't feel qualified to answer your
question.
Mr. PRICE. As a physician running a large entity, you don't
feel qualified to answer whether or not the IPAB you support or
not?
Dr. WATKINS. I am sorry.
Mr. PRICE. Ms. Safran, do you support the IPAB?
Ms. SAFRAN. I apologize. I don't have enough information.
Mr. PRICE. Dr. Wilson, might you have an opinion on the
Independent Payment Advisory Board?
Dr. WILSON. Unfortunately I am not adequately familiar with
the expectations of that Board to render an intelligent
response.
Mr. PRICE. I thank you.
Chairman HERGER. The gentleman's time has expired.
The gentleman from New Jersey Mr. Pascrell is recognized
for 5 minutes.
Mr. PASCRELL. Thank you, Mr. Chairman. Thanks for having
the hearing, and thanks to the panelists. Excellent.
We are sitting here talking about changing the way we pay
providers, and I have listened to my friend from Wisconsin over
the last 3 years talking about containing costs enough times to
not only believe him, but listening to the specifics of where
he is coming from, and I think that is very, very important,
containing costs.
We might start, I think, maybe the four of you could agree
with me on this, by having patients look at their bills, if we
are talking about containing costs. Nobody knows what--
particularly if they are covered--what do I have to worry about
what is in the bill? My insurance covers, the Lord covers me,
whoever covers them. And you don't look at the specifics of
what is in that bill. And I think that that is a very dangerous
practice that we have gotten into.
The first words out of the patient is usually, don't worry
about it, I am covered. And what we should be concerned about
of what that means in the minutiae of the bill, how much things
cost.
And so we are moving away. I think both sides agree that we
need to move away from paying physicians for a specific
service. Fee for service, I think, is a dog that is not hunting
anymore, and we need to look for other models, and that is one
of the many of the questions that have gone in that direction
today.
I have said many times health care reform is entitlement
reform. I think it has already started. It will help us to
transform this health system. One-third of the entire new
Health Care Act is devoted to Medicare and Medicaid and how we
can contain those costs. Some of the ideas being discussed were
included in the Health Care Reform Act.
I am interested if these ideas are what you support, what
is contained in the Health Care Act? One proposal I think we do
have some bipartisan agreement on is the issue of the IPAB, the
Independent Payment Advisory Board. At least I have gathered
that from your written testimony.
I think this committee already has the knowledge, the
experience and the jurisdiction to determine appropriate
payments to providers as opposed to an independent body, and we
may debate that. We may debate that. But I think that this
group has done a pretty good job. If we can agree on this, I
think we can find other areas of agreement in terms of provider
payments.
We are here to specifically focus on physician payments,
and I hope we don't have to have another patch. I think the
chairman shares my view. We have had enough patches over the
last several years, and we need a permanent solution. It
reduces the anxiety in terms of the doctor, and we need to
reduce the anxiety in the patient. Of course, there is a lot of
questions out there as to what is a guaranteed benefit, what is
not a guaranteed benefit. We want to reduce anxiety in all
parties.
On our side we passed a permanent fix for Medicare
physician payment in H.R. 3961. We did that in 2009. The other
side of the building, of the Capitol, they are still trying to
clean out the offices, I think. I don't know what they are
doing over there.
So I have a couple of questions. On physician shortages,
workforce, we spent a lot of time on that when we put this
legislation together. Many of you know in the health care
reform bill that we did change and try to provide incentives to
respond to the shortage of physicians, of primary physicians,
and also nurses. A National Health Care Workforce Commission
was established and associated grants to help States improve
their efforts to promote an adequate health care workforce. We
can't ignore the growing shortages. Here we are changing,
reforming health care. Will we have enough folks to deliver the
service? That is not a good idea.
My question is for the witnesses. In Massachusetts, Vermont
and California, can you tell me how your models affect
workforce shortages, and do they create more stability in the
system for physicians? Who would like to take the first crack
at that? Doctor.
Dr. WILSON. I will take it.
In California, yes, we are very concerned about physician
shortage, especially in the primary care ranks. We anticipate,
if you look at the numbers, 45,000 physician shortage in the
next decade by 2020.
We think our model--and there has been probably as much
experience, if not more, in using midlevels as teams of care
and using physicians to coordinate that care. And so that is
one of the ways we anticipate mitigating this problem.
I still have anxiety because I think that looming physician
shortage is going to be a challenge for the Nation and not just
for California.
Chairman HERGER. The gentleman's time is expired. Perhaps
the witnesses could respond in writing to the question, please.
Chairman HERGER. The gentleman from Georgia Dr. Price is
recognized on his own time, 5 minutes.
Mr. PRICE. Thank you, Mr. Chairman.
Let me just first say that I am astounded at the lack of
responsiveness to my question about the Independent Payment
Advisory Board by three of the witnesses. This is a major,
major undertaking by this Federal Government to impose upon
physicians what they may or may not do for their payments, and
to have three supposed experts, individuals who lead large
physician groups and health care groups, not be able to opine
for this country about their stance on the Independent Payment
Advisory Board is amazing. It is astounding to me, absolutely
astounding.
So let me go to the other extreme. Do you believe that fee-
for-service medicine ought to outlawed? Stu.
Mr. GUTERMAN. No. We ought to look for different ways of
paying. There are different ways, in fact, of modifying fee-
for-service medicine so it serves the purpose better than
unfettered fee-for-service medicine that typifies most of the
health care system.
Mr. PRICE. And you believe one can have a coordinated care
system in a fee-for-service model?
Mr. GUTERMAN. I think it is more difficult unless you get
ahold of some of the incentives that fee-for-service medicine
provides.
Mr. PRICE. Dr. Watkins, do you believe that fee-for-service
medicine ought to be outlawed?
Dr. WATKINS. I do not.
Mr. PRICE. That is encouraging.
Dr. WATKINS. I believe that in our program we have actually
already demonstrated that with fee for service unchanged, we
have improved the quality of care delivered, the perception of
care on the part of the patients, and the perception on the
working conditions, if you will----
Mr. PRICE. That is within the fee-for-service model right
now.
Dr. WATKINS. That is true.
Mr. PRICE. Thank you.
Do you believe, Mr. Safran, fee for service ought to be
outlawed?
Ms. SAFRAN. I believe that we have to move our system away
from fee-for-service medicine for all the reasons that we have
talked about this afternoon. Whether we have to do that through
the use of law, or whether through a demonstration that we have
a way to do it that works better and provides better quality
and outcomes, I couldn't say. I would hope that we can reform
the system and move to another model of payment without
necessarily legislating away the fee for service.
Mr. PRICE. I think we need to move to another model as
well, but what I hear you talking about is coordinated care and
whether or not one can have a payment model for physicians that
appropriately compensates them for the wonderful work that they
do, and whether or not that needs to be in the kind of model
that you describe, I think, is really open to question.
Do you believe that one patient ought to be able to visit a
single physician and contract for that service individually
between those two individuals? Should that be legal?
Ms. SAFRAN. I want to understand better how that would look
and, for example, is that a physician----
Mr. PRICE. I walk into a doctor's office. I say, I am
feeling a little ill, I would like to have you evaluate me,
will you do that for--what is the charge--50 bucks, okay? Is
that all right? Should that be legal?
Ms. SAFRAN. That should be legal.
Mr. PRICE. Thank you very much.
Dr. Wilson, do you believe that fee-for-service medicine
ought to be outlawed?
Dr. WILSON. No, I do not. If I were just to refer to our
California model, we use fee-for-service medicine as well as
capitated and sub-capitated medicine, and I think the sort of
the overlying important issue here is how is care coordinated,
and how is it managed.
Mr. PRICE. Exactly. And that may be completely different
than the cost of it or how it is paid for, correct?
Dr. WATKINS. Correct.
Mr. PRICE. Mr. Chairman, I was struck yesterday by an
article from the Associated Press entitled ``Obama Plan for
Health Care Quality Dealt a Setback,'' which highlights
accountable-care organizations, and in it the article states
that at the Mayo Clinic, the administrator of the Mayo Clinic
wrote that 90 percent of their members, physician members,
would not participate because the rules as written were so
onerous, it would be nearly impossible for them to succeed. And
the American Medical Group Association went on to say that
their members, including the Cleveland Clinic, Intermountain
Utah, Geisinger Health Systems in Pennsylvania, et cetera,
would find that significant change to be much more difficult to
provide care. And I ask unanimous consent that that be included
in the record.
Chairman HERGER. Without objection.
[The information follows: The Honorable Mr. Price]

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Mr. PRICE. I would just caution this panel and this
committee and this Congress that the SGR system was this
Congress' solution to how to pay physicians a few short years
ago, and it has run amok, clearly. It doesn't work. What we
ought to take from that, I believe, is that solutions imposed
from Washington often times result in terrible consequences for
patients, which is where we are right now with this system.
And I yield back.
Chairman HERGER. The gentleman's time has expired.
The gentleman from Oregon Mr. Blumenauer is recognized for
5 minutes.
Mr. BLUMENAUER. Thank you, Mr. Chairman, and I really do
appreciate your bringing before us people who are on the front
lines of trying to squeeze more value out of the system and
give us different approaches in how that can be accomplished.
Half of us on the committee come from regions of the
country that are low cost, high value. If they practice
medicine the way they do in Congressman Kind's district; my
district in Portland, Oregon; Seattle; and some parts of the
bay area, we wouldn't have a Medicare funding crisis. We would
have better outcomes. People would live longer. They would get
sick less often. They would get well faster. And you have
described ways--and I do, Ms. Safran, at some point like to get
information about your notion that only 3 percent of the
medical decisions were based on objective evidence. I want to
get that right.
I do agree with my friend from Georgia, the mess we have
got is imposed by Congress. And one of the reasons why some of
us supported the IPAB and, in fact, wanted it stronger is
because Congress has proven itself incapable of being able to
make some of the really difficult decisions with this fix and
that fix, and the SGR is a perfect example, which I didn't vote
for, was wishing away outcomes.
We are on a path now where much of what you have talked
about we attempted to incorporate in the reform legislation. It
would have been better, but we had a complete collapse in the
Senate, and we couldn't legislate it, but we have got embedded
some pilot projects and whatnot. The approach is in some
instances repeal it and start over. Part of it is to trim back
the bill. For example, there is some bipartisan interest in
reining in what powers we have given to the IPAB because people
are afraid it might work.
Another alternative is to actually accelerate the reforms
that were envisioned, demonstration projects. Things that you
are doing now appear to me to have been part of what at least
some of us wanted to see, hope will happen, and, in fact, can
occur under the framework, but it was made more complicated
because we didn't have a particularly functional legislative
arena.
But it is the law of the land now. There are elements in
place. I would like to know from each of you the extent to
which elements that are there in the reform legislation now can
incorporate your experience, build upon it, and perhaps be
strengthened by it.
Maybe we can talk to the three practitioners here who are
representing the systems.
Dr. Watkins.
Dr. WATKINS.I would be glad to speak to that. The Community
Health Teams, our multidisciplinary, locally based care
coordination teams are actually clearly outlined in the ACA in
Section 3502. And we are very clear that that level of
coordination is essential to providing quality care regardless
of what the structure is, where the payment is being made,
whether that is fee-for-service, if it is single payer. It
doesn't matter on some level. The need to do quality
improvement and to push that side of the equation is going to
be uniform regardless.
Mr. BLUMENAUER. Ms. Safran.
Ms. SAFRAN. I think that the proposed regs have within them
a working excellent framework that, in fact, bears a lot of
resemblance to what I have described to you about the AQC. But
fortunately, there is this comment period that hopefully can
provide feedback to CMS and create the changes that will enable
those who currently perceive that the risk/reward threshold is
such that they would be concerned to participate to change that
sum, because we have seen in our model that it is possible to
do that, as we have talked about, and have very quick uptake in
even a two-sided model such as the one that we have. So I am
optimistic that we can get it right.
Mr. BLUMENAUER. Thank you.
Dr. Wilson.
Dr. WILSON. I think the ACL model holds a ton of promise
and opportunity, and I think it would be a great benefit to
this country if it could be rolled out and adopted.
I have some concerns, as I mentioned in my testimony, about
with the funding of it, and I think many of the groups that
have spoken in that letter share those concerns. I think those
groups also agree with the intent of the ACL model and the
benefit it would bring to the American people. And so I think
if some things can be fixed, it still has an opportunity to
succeed.
Mr. BLUMENAUER. Thank you very much, Mr. Chairman.
Chairman HERGER. Thank you.
The gentleman's time has expired.
The gentleman from Washington Mr. McDermott is recognized
for 5 minutes.
Mr. MCDERMOTT. Thank you, Mr. Chairman. Thank you for
having this hearing and having these witnesses.
I was reading the material here, and I am a physician, and
I am a general practitioner, and I would like to join, okay? So
look at me as a somebody walking into the door in Vermont and
Massachusetts and California.
I saw in the California stuff Monarch Health in Irvine
covers all of Orange County, 2,500 physicians, 200,000
patients, and that is about 80 patients per doc if you just
sort of divide it by 2,500.
Two questions. Do I have to bring patients in to your
system to join it, or can I walk in the door and you will
assign me a panel? That is the first question.
And the second question is how am I going to be paid for my
patients? Because I have this general practice of kids and
people between 18 and 50 or 65, and then I have got some
seniors. Will I be capitated on all of them about the same way,
or what Medicare pays and what the commercials pay? Or how does
this work is what I want to hear from being a physician.
Because Dr. Price has raised all the questions. People
understand fee-for-service: Patient comes in, you do something,
you put out your hand, they give you money, that is it. How
does yours work? Please, the three of you, tell me what would
happen to me.
Dr. WATKINS. We are dealing exclusively at this point with
primary care.
Mr. MCDERMOTT. Yes.
Dr. WATKINS. So for our practices, when the practice goes
through the process of being recognized nationally for its
quality through the NCQA recognition process, once they get
that recognition, a fixed dollar amount per patient per month--
--
Mr. MCDERMOTT. How much?
Dr. WATKINS. It varies. Somewhere between $1.29 to $2.39, I
believe, per patient per month, for every patient attributed to
that practice covered by one of the three major commercial
insurers in Vermont, Vermont Medicaid and soon to be Medicare.
Mr. MCDERMOTT. So it doesn't make any difference whether
they are commercial or Medicaid or Medicare, I still get the
same $1.29 or $1.39.
Dr. WATKINS. That is exactly right, and it is a function of
what kind of score they got on that rubric.
Mr. MCDERMOTT. Do I have to bring my own patients, or will
you set me up in a practice somewhere and say, go to that
practice, they have got a bunch of extra patients?
Dr. WATKINS. Yeah, I wish we had a whole bunch of doctors
coming into the State that we could have that problem. We are
actually dealing with currently existing practices, and they
get enrolled through a process, a queue, if you will, that we
are rolling out through the State.
The fee-for-service schedule still exists, so the patients
who are seen in that practice are being--generating income for
the practice because of having their normal visits. But in
addition, if those patients are attributed to the practice by
the insurers, then they generate that income for the practice.
So that is additional money.
On top of that, a Community Health Team is established in
that area, also paid for by the insurers as a shared resource.
They each split it approximately 25 percent of the cost.
Mr. MCDERMOTT. This social worker and a visiting nurse----
Dr. WATKINS. Exactly. It is multidisciplinary team that is
locally based in contrast to the remote disease management
programs that the insurers also still have. But they really do
one-on-one counseling and interventions, outreach, panel
management----
Mr. MCDERMOTT. Let me stop you because I want to hear what
happens in Massachusetts.
Ms. SAFRAN. The answer is that your day-to-day existence as
a physician under an AQC model and how you would see patients,
who you would know who to see, and how you would get paid for
that would be largely the same. What would be--that is to say
there is still--as in Vermont, there is still a fee-for-service
payment schedule, we still have a fee schedule with you, you
still bill for that service. However, you are now part of an
organization that has assumed accountability for the total cost
of care for your population. So even while you are going about
your day-to-day business of taking care of patients in much the
same way, you are having a new level of information and support
from your practice, however that is defined, about how you are
doing, about how you are doing on your quality measures, about
which of your patients need things that they haven't gotten
yet, about which of your patient have blood pressures that are
out of control and you need to adjust their medicines, about
how your overall level of use of lab tests and high-cost
imaging compares with other PCPs who practice in the same
hallways that you do.
Mr. MCDERMOTT. How do I get paid?
Ms. SAFRAN. You get paid by us, by Blue Cross. You get paid
for the claims that you submit.
Mr. MCDERMOTT. Exactly the way they are talking about in
Vermont; that is, a certain amount each month for every patient
I got enrolled.
Ms. SAFRAN. Yes--no. Just paid for your claims. For the
visits that you have generated, you are still getting paid for
that; however, there is now accountability in your practice for
whether you are at the end of the day spending too much, and
the practice as a whole will have its own way of dealing with
the individual clinicians. It is not proscribed by Blue Cross
for how they address that.
Primary care physicians under the AQC have gotten enormous
increases in revenue because of the quality dollars that we
have put on the table that these organizations feed right back
to primary care, because that is who is generating those
quality dollars.
Chairman HERGER. The gentleman's time is expired.
The gentleman from Louisiana Dr. Boustany----
Mr. MCDERMOTT. Mr. Chairman, can I ask the gentleman from
California to submit in writing--I would appreciate knowing how
you do it in California.
Chairman HERGER. Yes. And all of our members, if we have
questions, should be--I would like to request to be able to
submit our witnesses in writing, and that within a reasonable
amount of time they be responded to.
Chairman HERGER. With that, again, the gentleman from
Louisiana Dr. Boustany is recognized for 5 minutes.
Mr. BOUSTANY. Thank you, Mr. Chairman.
I am a cardiac surgeon, and my father was a physician, so I
know a little bit about physician behavior. And I was involved
very much in attempts to put different groups together back in
the 1990s, and also initiated a number of quality initiatives
at the hospitals where I practiced that allowed us to achieve
top 100 status for heart surgery.
I am kind of concerned that these ACO regulations as we
have seen them appear to be a little bit overly proscriptive
and burdensome. And, Mr. Guterman, I would be curious to know
your opinion. I know it is a first impression based on what has
just come out, but could you give me your opinion on that?
Mr. GUTERMAN. We have heard some feedback, as Mr. Price
cited, that some folks are feeling that way. And we have called
for CMS to work with the provider community to be able to come
up with a set of rules that is viewed as reasonable from both
sides.
Unfortunately, we can pay however we want, but we still--in
order to really achieve improvement in the health care system,
we need to have both sides kind of build up enough thrust to
escape the gravity of business as usual, and that applies both
to the government and to the providers of health care.
Mr. BOUSTANY. Thank you.
Do you think gainsharing might be a useful way to
incentivize more integration and coordination of care?
Mr. GUTERMAN. Before I was with Commonwealth Fund, I was at
the Centers for Medicaid and Medicare Services, and we did
develop a gainsharing demonstration. We think it can be
promising. As with any innovation in payment approach, it needs
to be monitored so that the right incentives get transmitted,
but it certainly could be a promising way as a tool to achieve
the kind of efficiencies and effectiveness that you want to
achieve.
Mr. BOUSTANY. I have had conversations with CMS, and it is
felt there that no further statutory authority is needed to
proceed with a gainsharing demonstration or model. But I have
concerns that if we were to do so, physicians in hospitals that
might be willing to do this would want statutory protection,
because based on some of my previous experiences with this,
oftentimes lawyers will say, well, we think you can do this,
but it hasn't been to court yet; we think it will pass muster.
Do you think if we are going to move forward, we need
further statutory protections to allow this sort of model to go
forward?
Mr. GUTERMAN. I don't think I have the expertise to answer
that question definitively, but I do remember when I was at
CMS, we ran into difficulties in the court in getting the first
attempts at gainsharing demonstrations to be put into place.
Mr. BOUSTANY. Thank you, sir.
And one other question for the panel, I know you have had
success with your models, capitation and so forth. It seems to
me a lot of what has been focused on here has been the primary
care piece to this. And you have to bring in the specialties,
and then you have got specialties like cardiac surgery and
liver transplantation. Do you have surgeons, all those
surgeons, in your plan, and are they on some salary? How does
that work?
Dr. Wilson.
Dr. WILSON. Sure. Cardiac surgeons, neurosurgeons, surgeons
that typically require a larger population base to fill out
their practice typically don't sign on as employee docs in
practices of any reasonable size. And so typically those
relationships exist in one of several contracted methodologies.
For some of our network, and I am now going to refer to my
network specifically, we have sub-capitated contracts with our
thoracic surgeons. They take on responsibility for a population
of patients and provide that care and have their own quality
metrics, and then they are responsible to us, and we hold them
accountable for the care that they provide and the
responsiveness they have to their patients.
We also conduct patient satisfaction surveys and look at
their performances. And in other parts of the network, we may
have case rates that define the cost of an episode of care
based on whatever intervention is needed, and even still in
some other parts of our network, we may have just a strictly
fee-for-service arrangement. And all of the above.
Mr. BOUSTANY. Is it the same thing in Vermont with the
specialties, the surgical specialties, the procedure-based
specialties?
Dr. WATKINS. We are a very small State, as I am sure you
are aware. Our total population is just over 600,000. There are
only a few people that actually practice medicine at that
level. There is one academic medical center in the State and
one in neighboring New Hampshire. The Blueprint for Health has,
as I said--and we are in our early days still focused
exclusively on primary care, but we do have ongoing discussions
around a much broader view of what payment reform means,
obviously having to loop in specialists. So that is in the
future.
Mr. BOUSTANY. Thank you.
I see my time has expired, Mr. Chairman.
I think we probably need to look at how specialties are
reimbursed. That is one of the big drivers of cost, and it is
going to be different than what would apply to primary care. At
least that is what my instinct tells me on this. So thank you.
Chairman HERGER. And thank you. I believe that is something
that the committee should be looking into as well.
With that, I want to thank each of our witnesses for your
testimony today. Your experiences with delivery models that
have shown to improve care and reduce spending would be of
great benefit as the subcommittee seeks to reform Medicare
physician payments.
Our work in this area has perhaps never been more
important. As the Medicare Board of Trustees will report
tomorrow, the current rate of growth in Medicare spending is
unsustainable. The program will soon go bankrupt if changes are
not made.
There has been a vigorous debate over the future of
Medicare in recent weeks. I, along with many of my colleagues
on the Republican side, believe we ultimately need to bring
competition and market forces into the Medicare program in
order to reduce costs, which is in sharp contrast to the
approach the President has proposed.
Regardless of the outcome of the debate over Medicare's
long-term future, we will continue to focus our efforts to
finding the best way to fix the SGR.
As a reminder, any Member wishing to submit a question for
the record will have 14 days to do so. If any questions are
submitted, I ask that our witnesses respond in a timely manner.
[Whereupon, at 4:10 p.m., the subcommittee was adjourned.]
[Submissions for the Record follow:]
AARP

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