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




 
                HEARING WITH MEDPAC TO DISCUSS HOSPITAL


                PAYMENT ISSUES, RURAL HEALTH ISSUES, AND


                       BENEFICIARY ACCESS TO CARE

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

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

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 22, 2015

                               __________

                          Serial No. 114-HL03

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
         
         
         
         
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                      COMMITTEE ON WAYS AND MEANS

                     PAUL RYAN, Wisconsin, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan,
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
DEVIN NUNES, California              JIM MCDERMOTT, Washington
PATRICK J. TIBERI, Ohio              JOHN LEWIS, Georgia
DAVID G. REICHERT, Washington        RICHARD E. NEAL, Massachusetts
CHARLES W. BOUSTANY, JR., Louisiana  XAVIER BECERRA, California
PETER J. ROSKAM, Illinois            LLOYD DOGGETT, Texas
TOM PRICE, Georgia                   MIKE THOMPSON, California
VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
LYNN JENKINS, Kansas                 RON KIND, Wisconsin
ERIK PAULSEN, Minnesota              BILL PASCRELL, JR., New Jersey
KENNY MARCHANT, Texas                JOSEPH CROWLEY, New York
DIANE BLACK, Tennessee               DANNY DAVIS, Illinois
TOM REED, New York                   LINDA SANCHEZ, California
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
JIM RENACCI, Ohio
PAT MEEHAN, Pennsylvania
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
ROBERT J. DOLD, Illinois

                       Joyce Myer, Staff Director

         Janice Mays, Minority Chief Counsel and Staff Director

                                 ______

                         SUBCOMMITTEE ON HEALTH

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   JIM MCDERMOTT, Washington
DEVIN NUNES, California              MIKE THOMPSON, California
PETER J. ROSKAM, Illinois            RON KIND, Wisconsin
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               BILL PASCRELL, JR., New Jersey
ADRIAN SMITH, Nebraska               DANNY DAVIS, Illinois
LYNN JENKINS, Kansas
KENNY MARCHANT, Texas
DIANE BLACK, Tennessee


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of July 22, 2015 announcing the hearing.................     2

                                WITNESS

Mark Miller, Executive Director, Medicare Payment Advisory 
  Commission.....................................................     5

                       SUBMISSIONS FOR THE RECORD

Association of American Cancer Institutes, statement.............    64
America's Essential Hospitals, statement letter..................    67
National Association of Chain Drug Stores, statement.............    72
National Rural Accountable Care Organization, letter.............    76
National Rural Health Association, testimony.....................    86
John Kastanis, President and CEO Temple University Hospital, 
  statement......................................................    92


                     HEARING WITH MEDPAC TO DISCUSS



                     HOSPITAL PAYMENT ISSUES, RURAL



                     HEALTH ISSUES, AND BENEFICIARY



                             ACCESS TO CARE

                              ----------                              


                        WEDNESDAY, JULY 22, 2015

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

    The Subcommittee met, pursuant to notice, at 10:06 a.m. in 
Room B-318, Rayburn House Office Building, the Honorable Kevin 
Brady [Chairman of the subcommittee] presiding.
    [The advisory announcing the hearing follows:]
    
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    
    Chairman BRADY. Good morning. It is my pleasure to welcome 
Dr. Miller back to the Health Subcommittee to help us continue 
our discussion on payment reforms.
    Earlier this year, Congress took the first step in this 
area and passed legislation to fix the way Medicare pays our 
nation's physicians. We did so in a broad, bipartisan, and 
bicameral way, and I was glad to see the President sign this 
important legislation into law.
    Well, now we need to take the next step, and that means 
looking at Medicare's acute-care payment system. I want to 
raise the topic of site-neutral payment reforms. This is a 
policy MedPAC has highlighted for several years now. The 
President's most recent budget even included a site-neutral 
policy with respect to services provided in hospital outpatient 
departments. So this area of payment reform is not--or at least 
should not be--a new or contentious topic.
    This year's June report brings us new information and data 
that could help elevate our discussion in this area.
    MedPAC has found that, for some cases, we are paying as 
much as $4,000 more per case, simply because there is a 
discrepancy regarding status. That is, was the patient supposed 
to be classified for inpatient status or outpatient status? 
Unfortunately, this is a real question that hospitals are faced 
with.
    But because the inpatient and outpatient payment systems 
are so different, it is hard to get an accurate assessment of 
what is driving this trend. More to the point, the codes that 
are used to determine what Medicare should pay for inpatient 
services are entirely different from those used for outpatient 
services. Not only does this mean hospitals are responsible for 
managing two different billing systems, but it means Medicare 
has to do the same.
    And the issues with payment disparity become magnified when 
we consider that Medicare is expected to spend more than $130 
billion on inpatient services, and $40 billion on outpatient 
services this year alone. Clearly, this is an area ripe for 
reform. MedPAC has proposed some innovative solutions; I look 
forward to hearing more today.
    Also, MedPAC's testimony focuses on indirect medical 
education, and disproportionate share hospital payments, two 
add-on payments that certain hospitals receive to help offset 
the cost of teaching medical students or treating a larger 
volume of uninsured or under-insured patients. It is important 
to note that when we are talking about payment disparities 
between the inpatient and outpatient systems that these two 
add-ons, IME and DSH, are only included on the inpatient side. 
Outpatient discharges are not eligible to receive these payment 
adjustments. As a result, these important payments get caught 
up in a financial numbers game and end up driving incentives.
    I believe both of these programs are critical and need to 
be designed to deliver the most targeted payments possible. As 
arbitrary add-on payments, they are not achieving their 
mission. As MedPAC notes in the June report, and as Medicare's 
own trustees tell us each year, the program is facing serious 
fiscal and demographic headwinds. Spending is out of control, 
and the current financial underpinnings will soon not be able 
to sustain the program for the long term. Congress needs to 
tackle these issues, and we need to tackle them now.
    We have already started down this path by successfully 
reforming how Medicare pays our local doctors. My hope is that 
we can carry this progress over into other payment areas.
    Chairman BRADY. With that, I would like to introduce 
today's witness, Mark Miller, the executive director of the 
Medicare Payment Advisory Commission, known as MedPAC. And 
before I recognize our Ranking Member, Dr. McDermott, for the 
purpose of an opening statement, I ask unanimous consent that 
all Members' written statements be included in the record.
    [No response.]
    Chairman BRADY. Without objection, so ordered. And I will 
recognize our Ranking Member, Dr. McDermott, for his opening 
statement.
    Mr. MCDERMOTT. Thank you, Mr. Chairman, for holding this 
hearing today. I hope it will be a constructive conversation 
about how we can improve and strengthen Medicare.
    I would like to thank our witness, Dr. Miller, for coming 
again today. We haven't seen you for a long time. We missed 
you, and we thought it was time to have a talk with you again.
    The work that MedPAC does makes an invaluable contribution, 
really, to the legislative process. We may not always agree 
with the Commission's recommendations, but we can trust that 
MedPAC's reports are based on the facts, data, and thoughtful 
analysis.
    Today's hearing is an excellent opportunity for the 
committee to carefully examine a number of issues that affect 
the future of the Medicare program. At the heart of the 
conversation must be the most important concern: that is, 
making sure that beneficiaries continue to have access to 
affordable, high-quality care. Any proposals that we discuss 
here, I think, should be seen through that lens. And any 
changes that we have to make have to be in the best interests 
of the beneficiaries.
    Medicare is really about beneficiaries. It isn't about 
providers, it isn't about drug companies, it isn't about 
hospitals, it isn't about anybody else. It's really about 
beneficiaries. Medicare is a key component of the social safety 
net in the country. It provides core health care benefits to 54 
million seniors and people with disabilities. And I hope this 
Committee will join me in looking at ways to strengthen, not 
cut the program, to ensure that it remains strong in the 
future.
    If we are looking to achieve savings, the first place we 
should look is to make sure that payments are appropriate and 
accurate. We should proceed with caution before radically 
cutting payments at the expense of hospitals that serve the 
most vulnerable patients, and the teaching hospitals that train 
the physician workforce.
    As we discuss the potential policy issues today, it is 
important to remember that many are not formal recommendations 
by MedPAC. They are thought-provoking ideas that provide us 
with starting points for discussion. It is the role of the 
committee to carefully consider these ideas and ask tough 
questions about what they mean for Medicare and the 
beneficiaries.
    I am hopeful that this hearing will serve as an opportunity 
for us to highlight a transformation that is radically shaping 
the health care system and practice of medicine. Across the 
country at this moment we are seeing a rapid and dramatic trend 
of hospitals merging together into massive health systems that 
exert tremendous market force. We count on our system to be 
working on the basis of competition, but it is increasingly 
questionable whether that occurs. We are witnessing hospitals 
purchasing small physicians' practices. As a consequence, more 
physicians are now hospital employees, something that was 
almost unthinkable when I went to medical school. This trend 
raises a question about the future of the medical profession, 
health care spending, and patient care.
    As policymakers, our role is to ask these questions. The 
committee needs to hold a hearing on this issue and other 
topics related to health care consolidation. It is not a 
partisan issue, and I believe that we can work together to ask 
these questions and find out how to address this issue and move 
forward. And I hope this morning will be sort of a beginning.
    So, welcome, Dr. Miller, to the committee.
    Mr. MILLER. Thank you.
    Chairman BRADY. Thank you, Dr. McDermott. And thank you, 
Dr. Miller. You are now recognized for five minutes.

STATEMENT OF MARK MILLER, EXECUTIVE DIRECTOR, MEDICARE PAYMENT 
                      ADVISORY COMMISSION

    Mr. MILLER. Chairman Brady, Ranking Member McDermott, 
distinguished committee members, I am Mark Miller, executive 
director of the Medicare Payment Advisory Commission. On behalf 
of the commissioners, I would like to thank you for asking us 
to testify today.
    The Commission's work in all instances is guided by three 
principles: to assure that beneficiaries have access to high-
quality, coordinated care; to protect taxpayer dollars; and to 
pay providers in a way to accomplish these goals. I will start 
off today by reviewing some hospital trends.
    Hospital inpatient admissions are declining, both in 
Medicare and among the privately insured population. This has 
been a trend for several years now, and it is fueled in part by 
movement of surgery from the inpatient to the outpatient 
setting. In contrast, service volume in the outpatient setting 
has been increasing rapidly. For Medicare fee-for-service, the 
increase has been 33 percent over the last 7 years.
    While it varies by market, overall there appears to be 
excess inpatient capacity in the country. Hospital occupancy 
rates are around 60 percent and have been declining. And in 
rural areas the occupancy rates are around 40 percent. This is 
an issue that will drive change in the near term. Regardless of 
whether a hospital is urban or rural, the focus of hospital 
care is changing from the inpatient setting to the outpatient 
setting.
    Another fact of life is that the hospital industry has been 
consolidating for several decades now. Again, it varies by 
market, but many hospitals have very strong bargaining 
positions relative to private insurers. And, consequently, 
private insurers pay hospitals well above their cost, and much 
more than Medicare pays. On average, hospitals are paid 150 
percent above their cost by private insurers. Our analysis has 
shown that these higher payment rates in turn results in higher 
costs. In other words, if a hospital is paid more by private 
insurers, all things considered, there are higher costs per 
admissions in that hospital.
    One other trend that I believe all of you are aware of is 
that there has been a lot of activity by hospitals in 
purchasing physician practices [sic]. Some argue that this is 
to integrate and coordinate care. Others argue that this is to 
capture market share and increase revenue by obtaining higher 
outpatient hospital payment rates for office services.
    Perhaps the most concerning version of this is where a 
hospital purchases a physician practice in the community, and 
then shifts the billing for those services from an office fee 
schedule to a hospital fee schedule. This means that insurers, 
private and Medicare, pay more, although very little has 
changed. And, of course, of most concern, the beneficiary has a 
higher copayment, as a result of this.
    Turning to some of the Commission's recommendations, the 
Commission has recommended increasing Medicare's hospital 
payment rate, but coupled that with site-neutral payment 
reductions to remove some of the market distortions I just 
mentioned. To improve coordination, the Congress adopted the 
Commission's recommendation for a penalty on hospitals with 
excessive readmission rates. Readmission rates have fallen, but 
there is a further adjustment needed for hospitals that serve 
substantial numbers of the poor.
    The Commission recommended retargeting the excess indirect 
medical education add-on payment to hospitals and other 
entities that administer reform graduate medical education 
programs that focus on care coordination, and provide training 
in alternative sites of care. The Institute of Medicine 
recently made a similar recommendation.
    Most recently, the Commission has made a series of 
recommendations regarding the recovery audit contractors, to 
strike a balance between program integrity and administrative 
burden on hospitals. At the same time, the Commission made a 
set of recommendations to improve the protections for 
beneficiaries who are treated in observation status in the 
hospital.
    With respect to rural care, the Commission has made a 
number of recommendations that have resulted in higher payments 
for rural hospitals over the years. And, as a result, the 900 
rural PPS hospitals have higher margins than those for urban 
hospitals. And, as you know, the remaining 1,300 rural critical 
access hospitals are paid on a cost basis.
    The Commission undertook a comprehensive review of access, 
quality, and payment between urban and rural areas in 2012. In 
general, the Commission found that urban and rural Medicare 
beneficiaries have similar levels of health care use, 
satisfaction, and quality, although there are some important 
differences that should be discussed, if we get into that.
    More importantly, the Commission strongly believes that 
there is a need for supports in rural areas, but that these 
supports are often not well targeted or designed. One principle 
for reform that I will mention here is that supports should be 
targeted to providers who have low patient volume, and are thus 
unable to cover their fixed cost, but serve as a vital source 
of access, meaning that they are distant from other providers. 
To put it simply, in short, targets should support low-volume, 
isolated providers.
    In closing, I would like to thank you for asking the 
Commission to testify today. I look forward to your questions.
    [The prepared statement of Mr. Miller follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    
    Chairman BRADY. Doctor, thank you very much. Clearly, our 
goal is to save Medicare for the long term. And to do that we 
have got to get the incentives right, both for providing high-
quality care to patients, affordability for our seniors, and to 
make sure this important program is around for a long time in 
the future.
    I found it striking that MedPAC concluded that Medicare 
paid roughly $4,240 more, on average, for an inpatient stay 
than for a comparable outpatient surgery. This sounds like a 
good place for Congress to start establishing site-neutral 
payment. I hope you agree with that.
    Mr. MILLER. It is certainly an area that should be looked 
at. It is one that we have begun to look at.
    Chairman BRADY. You know, focusing on just the 10 surgical 
DRGs, or the procedures, like MedPAC did, how difficult would 
it be for Congress to craft a policy--and, obviously, what we 
are looking for is providing appropriate care at the 
appropriate setting for the appropriate price, and not creating 
incentives for people to get moved into higher costs, 
procedures, or areas, when we could do it in a neutral 
approach.
    Mr. MILLER. I think that there is probably two ways to--or 
two ways to think about responding to that. One is whether 
there is the ability to kind of crosswalk between sets of 
services in the settings, so that you could create relatively 
comparable classifications of services, and actually focus on 
this is the service and set payments around that. And that, 
while it has a complexity to it, is probably something that 
could be done. And we could talk more about that. What I 
think----
    Chairman BRADY. And a crosswalk is what, exactly?
    Mr. MILLER. So it was what you were saying in your opening 
statement. You were talking about the notion that there were 
different systems and different codes, and that is why I was 
trying to bring it back to that. There are different systems 
and different codes, but you can probably work, you know, a 
crosswalk across that to begin to look at comparable, you know, 
groupings of services, or overlapping services. And the number 
that you are referring to in our report is a pass through, you 
know, the top 10 medical and the top 10 surgical services, 
where we try to do that.
    But what I do also want to say, just by way of, you know, 
of caution, is what is more difficult to comment on is the 
actual structure of the policy. So if you try and say, ``I am 
going to set up a site-neutral policy, where you have some 
services paid outpatient, some inpatient, and then some paid 
site-neutral,'' that is certainly a goal that you can move 
towards. But what will be key is how services get in and out of 
those three systems, and how, in a sense, you police the 
borders, if you will, when a service gets into one setting 
versus another.
    And so, that would be the kind of issues that you would 
have to think through, and not inadvertently create other 
incentives that drive services in one direction or another.
    Chairman BRADY. Just sort of proven out, the crosswalk, we 
think, is very important. We have gotten some pushback that 
that is difficult to do. I think--how difficult do you think it 
would be for CMS if we focused on these 10, you know, where you 
have identified them?
    Mr. MILLER. Yes, and I don't want to toss this off as 
simple, but I--you know, I decidedly think it is doable. These 
things--there are, you know, proprietary products that exist in 
nature. They do somewhat different things, so reasonable people 
can kind of end up with somewhat different categorizations.
    And so, there is some issues there that need to be smoothed 
through. And probably what you want, you know, if you were to 
ask CMS to do this, you would want, after they develop the 
crosswalk, you would want a clinical scrub, to make sure that 
you have some coherency in the categories that you created from 
a clinician's point of view--does this make sense to a 
physician?
    Chairman BRADY. Sure.
    Mr. MILLER. Nurse practitioner, that type of thing. And 
then, you know, you put it out for notice and comment.
    But, you know, my sense is that the intellectual technology 
to do the crosswalking exists.
    Chairman BRADY. Yes. One of the areas of reforms, 
obviously, inpatient/outpatient, are tremendously complicated. 
They are, in some sense, a demolition derby of reimbursements 
and incentives. The June Report, again, looking at these 
surgical procedures, June Report mentioned, really, two 
approaches: one, the site-neutral payment for these surgeries 
could be carved out of the inpatient/outpatient system and 
moved into a separate one; secondly, surgeries calling for 
site-neutral could be subsumed under the inpatient payment 
system.
    These are two approaches we ought to be looking at. We 
included one of them in our draft last November on hospital 
reforms. Can you lay out sort of for the subcommittee what you 
see, the pros and cons of that? A separate system for those, or 
moving them under an inpatient?
    Mr. MILLER. Okay. So--and I want to just do one thing 
quickly before I answer your question. You know, the way the 
Commission went at this was we were responding to kind of the 
two-midnight rule and a lot of the reaction to that, and a lot 
of concern on the part of the committees, and so forth, of what 
to do there. And the Commission ended up making recommendations 
on RACs and beneficiary protections, and talked about the 
payment stuff, but have not made recommendations on that yet. 
So I want to be real clear.
    Chairman BRADY. Got it.
    Mr. MILLER. We are talking about, you know, ideas, not 
policies, and not recommendations.
    I think one thing to think through is the reason that you 
want to do these types of things is that your need for 
oversight, RAC types of overview, becomes less. To the extent 
that you make payments more comparable, there is less 
incentives to push a patient in one direction or another. So, 
to the extent that you are setting out and saying, ``I want to 
set up payments so that this incentive is not so clear,'' that 
is one of the benefits of it. You are making decisions for 
clinical reasons, as opposed to financial reasons, and you may 
not have to have so much oversight.
    The risk--and I already said it, so I will try and be very 
abbreviated--is how you set those boundaries and what services, 
whether the services are well-defined or bluntly subject to 
gaming, depends on, you know--that is the risk you run when you 
try and set something up like this.
    If you do it inside one of the existing systems--because 
your other question was what if I did some site-neutral stuff 
inside inpatient, or I did some site-neutral stuff in kind of a 
stand-alone system--my sense is, particularly if you are 
talking about a small set of services or conditions, or 
whatever we are talking about here, is you probably have less 
churning and change if you put it inside at one of the existing 
systems.
    But I got to tell you, I am talking right off the top of my 
head, here. I would have to--want to think about this a lot 
more. Just saying that part----
    Chairman BRADY. Yes, good. Finish with this question. We 
talked about a bit, both in the opening statement and yours, 
there is a gradual migration services from inpatient to 
outpatient. We need to recognize that. So we are concerned that 
this means, for our policies and payments associated with that, 
such as indirect medical education and DSH, it has an impact.
    So, our goal is to preserve and protect these funds. I am 
concerned that they are not protected when they are so 
dependent on just one area, inpatient admission. One strategy I 
think Congress can pursue is reimburse indirect medical 
education and DSH in a lump-sum payment, rather than as a per-
discharge add-on. So what do you think of this approach, how it 
might preserve and protect IME and DSH goals?
    Mr. MILLER. I want to be really clear. This precise idea, 
or this precise notion, is not something that the Commission 
has talked about. And at the end of my answer I am going to 
tell you one thing the Commission has talked about.
    But to try and answer your question first, I think I 
understand your instinct. I think your instinct is what you are 
saying is--if you are tied to inpatient, and inpatient is going 
down, how do you preserve that, I think, if that is what you 
are saying. And, to the extent you were to capture that, and 
assign that dollar to a hospital, in theory, movements in 
volume up or down or in or out would make that a more stable--
regardless of movement, it would make that a more stable 
payment, all things considered.
    I would also think if you were to say that is the direction 
you would go, I am sure the Commission would also say, ``You 
want to think about, like, maintenance of effort types of 
things.'' If you get the block of dollars, you don't just back 
out of the teaching function, and that type of thing. But I 
assume, you know, if you are thinking about these kinds of 
things, you would be thinking about that.
    Now, the one thing I do have to say is the Commission went 
in a different direction on this, and said there is $3.5 
billion in direct medical education payments that are not well 
accounted for, and the Commission said, ``Take that as a lump 
sum,'' but it was payable to hospitals or other entities that 
created these new programs. So, in a sense, we went in a 
somewhat different direction here from your idea.
    Chairman BRADY. Well, I am not so sure we aren't going in 
that direction----
    Mr. MILLER. Well----
    Chairman BRADY [continuing]. As well, to be honest.
    Mr. MILLER. Well, that is----
    Chairman BRADY. Because I think we need a better--one 
thing, this is a bipartisan issue. How do we make sure we have 
the right training, the--for more doctors and future doctors? 
And we are intent on getting a much better insight into how all 
this is funded, and the results of that funding, going forward. 
So, Doctor, thank you very much.
    Dr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    I read your report, and over half of it is drug policy. 
About 100 pages are----
    Mr. MILLER. June Report, yes.
    Mr. MCDERMOTT. And it is interesting we are focusing on 
hospitals, because I think drugs--we recently passed a bill out 
of here called--the 21st Century Cures Act was passed out of 
the House. It didn't come through this commission--this 
Committee. But it had a provision in there that gave incentives 
to hospitals for the overuse of newer antibiotics.
    And my question was did they come to you and talk to you 
about that? Did the Energy and Commerce Committee come to you?
    Mr. MILLER. Not specifically, that I remember.
    Mr. MCDERMOTT. It seems like it is going to----
    Mr. MILLER. I am not sure I have got the provision well 
squared away in my head, just to be----
    Mr. MCDERMOTT. Well, they are saying, ``Use these new 
antibiotics, as opposed to the traditional antibiotics,'' there 
would be an incentive if you used the new antibiotics. 
Obviously, more expensive and better for the pharmaceutical 
industry, but I am not sure it doesn't drive up costs in 
hospitals.
    Mr. MILLER. And I am just not wired enough on the 
specific----
    Mr. MCDERMOTT. Okay, all right.
    Mr. MILLER [continuing]. Provision to help you.
    Mr. MCDERMOTT. That is fair enough. The issue that got you 
here--that is, the two-night, or the midnight, two-night--
midnight business and all that--do you think you can find a 
site-neutral payment system that will not disadvantage the 
patients?
    Mr. MILLER. And just to kind of try and pick up the thread 
here in my own mind, you know, the Commission approached the 
two-midnight issue, and ended up with a set of recommendations 
on RAC and beneficiaries, and ultimately didn't make 
recommendations on payment, and didn't feel that there was a 
necessity at that moment to deal with a--you know, the RAC, and 
the backlog issues through a payment change.
    Your question is a little bit different, perhaps. But can 
you create a site-neutral payment that is fair to the 
beneficiary? I think it is all in the design of the policy, so 
I would say it is possible. Not this site-neutral conversation, 
but the Commission has made recommendations in--on other site-
neutral policies between the physician setting and the 
outpatient setting. We actually think that helps the 
beneficiary, because it keeps their copayments down. In fact, 
it was one of the motivations for it.
    Now, here, in this--pushing together inpatient and 
outpatient, it would probably depend on what services and how 
you defined the actual thing, as to what the effect on the 
beneficiary's out-of-pocket would be. It would be very hard for 
me to comment, without knowing ``the thing.''
    Mr. MCDERMOTT. We are talking theoretically here. Do you 
think you then could design a policy that a doctor and a 
hospital wouldn't look at and say, ``Hey, let's do this, 
because that will qualify for this,'' which is a higher payment 
than that which is not a higher payment?
    Mr. MILLER. And what I have tried to say and respond to a 
couple of questions that have occurred so far is that is the 
trick, is, you know--right now there is an incentive between 
the inpatient and outpatient settings that look like this. And 
if I can get into the inpatient, and I can keep the inpatient 
for one day--or keep the patient for one day, that is a very, 
you know, profitable transaction. I think you----
    Mr. MCDERMOTT. Let me stop you right there.
    Mr. MILLER. All right.
    Mr. MCDERMOTT. Okay, it is transaction good for the 
hospitals.
    Mr. MILLER. Yes.
    Mr. MCDERMOTT. What about the beneficiary?
    Mr. MILLER. So it depends on whether the beneficiary--so, 
generally, the beneficiary's out of pocket is less in 
outpatient than it is in inpatient. If you jump the inpatient 
wall, you pay $1,000, $1,200 deductible. If you are staying in 
the outpatient, in general, the beneficiary's liability is 
less.
    However, if it is surgery, it is actually not as much 
difference. So it really kind of depends on--and this is why I 
am saying which services and what you do with them. And I think 
part of the reason the Commission said, ``If you started 
thinking about surgery''--I mean thinking about site-neutral 
here, you might start with thinking about surgery, because the 
event is pretty definable, it is harder to game. And the 
differences in the copayments may not be as much.
    Mr. MCDERMOTT. You are talking, therefore, about a patient 
who comes in with what looks like appendicitis, and they put 
him in observation, and they ultimately wind up becoming an 
operation for removal of the appendix. That is one kind. But 
the other kind of case would be somebody who has a pain in 
their chest, and they put him in for observation, and they 
never graduate to full-fledged ICU or cardiac surgery, or 
whatever.
    Mr. MILLER. And just to take that point and just put it a 
little bit differently----
    Chairman BRADY. Dr. Miller, could you do me a favor? Pull 
that microphone just a little closer to you.
    Mr. MILLER. I am really sorry about that. So nobody has 
heard anything I said up to this point?
    [Laughter.]
    Mr. MCDERMOTT. I have been listening.
    Mr. MILLER. Okay. All right. So now I have no idea what is 
going on.
    [Laughter.]
    Mr. MILLER. So, just to pick up on the thread of your 
question--I apologize, I didn't realize that was going on--
the--one of the things that the Commission did think about was 
whether we were talking about this kind of idea for medical or 
for surgical.
    For--and I am not a physician, so I apologize for 
everything that is about to happen. For a medical condition, it 
is more complex to kind of follow what is going to--it can be 
more complex--on what is going to happen with the patient. You 
know, your point. Chest pain, I have chest pain, I have a heart 
attack, you know, these types of things can be relatively 
fluid, as opposed to surgery, where the event and the procedure 
and the thing that is going to happen to the patient is more 
well-defined, and most of the cost is very present in that 
event. And I think that is why the Commission thought, if you 
start something, start looking there.
    Does that answer your question, or am I--now you are sorry 
I moved this close to me, right?
    [Laughter.]
    Mr. MCDERMOTT. Well, I--my feeling, then, is what happens 
to the patient at that point? Does he or she wind up more out 
of pocket?
    Mr. MILLER. And I think that really depends on the service. 
But in a surgical situation--and I don't want to speak too 
globally on this, because the Commission really sort of looked 
at this, but didn't dive as, you know, deep on it. Generally 
between, you know--for over--surgeries that tend to overlap 
settings, the beneficiary's liability is more comparable 
between the inpatient and outpatient setting than the 
liabilities for a medical procedure.
    Mr. MCDERMOTT. Can I have just a second to ask unanimous 
consent to drop in a letter from the American Hospital 
Association dated July 22nd?
    [No response.]
    Mr. MCDERMOTT. It is their----
    Chairman BRADY. Without objection.
    Mr. MCDERMOTT [continuing]. This Committee.
    [The information follows:]
    
    
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    Chairman BRADY. Thank you, Dr. McDermott.
    Mr. Johnson, you are recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman.
    Mr. Miller, let me start by thanking you for testifying 
today. As you know, our nation has an incredibly complex 
hospital payment system, with different coding classification 
systems and reimbursement systems, and where the procedure is 
performed.
    MedPAC concluded in its June Report that, because Medicare 
generally pays more for patients who receive similar services 
in inpatient settings compared with outpatient settings, 
hospitals have a financial incentive to admit patients. To 
address the problem, MedPAC drafted a crosswalk to link 10 
comparable inpatient and outpatient surgical codes. Such a 
crosswalk allowed MedPAC to compare these similar codes, which 
you then found resulted in inpatient surgical costs, roughly 
4,000-plus higher than for similar outpatient surgeries.
    I think it is an important step to ensure greater 
transparency in Medicare spending, so we can ensure hospitals 
are not admitting patients solely for financial profit, but 
because it is medically necessary. So I would like to take 
these moments to ask a couple specifics.
    First, how important is it to have a crosswalk between 
similar surgical codes for inpatient and outpatient payment 
systems?
    Mr. MILLER. I think, if the committee wants to pursue the 
idea that it seems to be asking questions about, site-neutral, 
that type of thing, you have to have something like that.
    Mr. JOHNSON. Okay. How difficult was it for MedPAC to 
establish a crosswalk for these 10 surgical codes?
    Mr. MILLER. It was not simple. And I will just say, again, 
I think reasonable people could come to different places in 
crosswalking individual codes from one location to the other. 
But I think there is probably a manageable process that people 
could go through to come to a crosswalk that would generally be 
viewed as acceptable.
    You would want a clinical, as I said, overlay after you did 
those crosswalks, to make sure you were doing things in a 
clinically rationale way. I would say that.
    Mr. JOHNSON. Well, thanks. And finally, in your opinion, is 
this something CMS could pursue in the future?
    Mr. MILLER. I do. I think--I am sure they would prefer to 
speak for themselves, but, you know, my sense is that they 
could engage through a contracting process with, you know, 
firms that exist that do this, bring something in that would be 
used for public use. They would have to work with it, both 
mechanically and clinically, as I said, because I don't think 
these things are just off-the-shelf, everything is perfect, you 
know. They would have--and they would want to put it out for 
notice and comment, get people--the hospitals, physicians, 
beneficiaries, everybody--to comment on it. But I do think it 
is a process that they could pursue.
    Mr. JOHNSON. Everything is off the shelf, just like this 
hearing.
    Mr. MILLER. Yes, right.
    Mr. JOHNSON. Thank you, sir. I appreciate your opinion, and 
I appreciate your help on that issue. Thank you.
    Mr. PRICE [presiding]. The gentleman yields back. Mr. Kind 
from Wisconsin is recognized for five minutes.
    Mr. KIND. Thank you, Mr. Chairman.
    Dr. Miller, thank you for being here. I usually ask you a 
quick question about rural hospital reimbursements. In your 
2013--your recent report, you indicated in 2013 the overall 
margin rate for rural hospitals was about 22 percent. But also 
in the report you acknowledged that a large part of that margin 
was based on the HIT incentive programs that have been going to 
rural hospitals. That now is being phased out.
    So, are you--is MedPAC taking into consideration the phase-
out of the HIT incentive program, and what that is going to do 
to margins for rurals? Because 40 percent of them are operating 
in negative margin territory, already.
    Mr. MILLER. I think the answer to that is yes. The 
Commission--and one thing, and it went by really fast in my 
opening statement, so I will just say it again. We have made, 
for the last few years, positive Medicare payment increases for 
hospitals. We recognize that rural hospitals are about at 0.2, 
but let's just call it zero. Overall margins are negative for 
hospitals in Medicare. And, consequently, the Commission has--
among other reasons, the Commission has made recommendations 
for payment updates for rural and urban hospitals. So----
    Mr. KIND. Okay.
    Mr. MILLER. And, in thinking through those issues, we take 
into account things like your--exactly what you are asking. 
What is going to happen to this? What is going to happen to 
that. And we look forward to all of that----
    Mr. KIND. Okay, very good. Let me shift gears. Obviously, 
CMS has been pushing the metal a little bit hard now on 
changing the payment system, going to a more value and outcome-
based payment model. You, undoubtedly--and MedPAC, 
undoubtedly--has been watching this very closely. I want to get 
your impressions on how that is going, and whether there are 
some additional areas of acceleration when it comes to value-
based payment models, especially in the post-acute care area, 
where I think there is some substantial savings that can be 
had, while also increasing the quality of care.
    Mr. MILLER. So we are not talking about hospitals or rural, 
necessarily----
    Mr. KIND. Now, we have----
    Mr. MILLER. We are talking bigger----
    Mr. KIND [continuing]. Moved on to a totally different 
payment question here.
    Mr. MILLER. Okay. I am going to start. But if I don't have 
the right question here, you know, just redirect.
    So, if you are talking about kind of large, you know, 
payment delivery reform types of things, like accountable care 
organizations----
    Mr. KIND. Right.
    Mr. MILLER [continuing]. And that type of thing, so what I 
would say is, you know, coming out of the health reform 
legislation--so there were things like the re-admissions 
penalty, which I know is not particularly popular, but has 
actually had the effect of reducing re-admissions. And just by 
the way, the Commission has some ideas to address hospitals 
that deal with disproportionate shares of the poor that we 
could talk about if anybody wants.
    Moving on from that, ACOs, I think the analysis we have 
done there suggests that ACOs are producing small savings, 
onesie and twosie percent types, and it is in parts of the 
country where fee-for-service tends to be high, which, if you 
think about it for 30 seconds, kind of makes sense.
    On the bundling and post-acute care, there hasn't--you 
know, there is that demonstration--I don't want to make a 
global statement, and I don't think this is a Commission 
statement, but there hasn't been a lot to show there yet, that 
I have seen. And I think there is some concern on the part of 
the Commission that, you know, lots of people wanted the data, 
a lot fewer people wanted to take risk. And to the extent they 
wanted to take risk, they wanted to do it for only a few 
services.
    And so, getting a lot of traction in the post-acute care, 
say through a bundling strategy, I don't see a lot of it yet, 
and I am worried that what is out there isn't going to 
necessarily----
    Mr. KIND. Well, Mr. Brady and I have been working on some 
proposals, and undoubtedly would like to follow up with you and 
others at MedPAC for some advice or guidance, as we get ready 
to move forward on that.
    Mr. MILLER. Okay.
    Mr. KIND. Great, thank you.
    Mr. PRICE. The gentleman yields back. I was next in line, 
so--maybe I will let the Chair take over here, and then I will 
assume my rightful position.
    [Laughter.]
    Chairman BRADY [presiding]. So Dr. Price declined to 
recognize Dr. Price?
    [Laughter.]
    Chairman BRADY. Is that the case? Thank you for letting me 
step out for a minute.
    Dr. Price, you are recognized.
    Mr. PRICE. It was this perspective that I--welcome back.
    Mr. MILLER. It is good to see you.
    Mr. PRICE. Thanks for coming. And I appreciate your 
qualification on--as a surgeon--on your definition or your 
description of the difference between a medical observation and 
a surgical observation, and we will have a conversation about 
that offline.
    Mr. MILLER. Okay.
    Mr. PRICE. The--I have a number of questions I want to 
raise. The first is on meaningful use and electronic health 
records. In a 2012 MedPAC report you commented--MedPAC 
commented on--talking about the decreased uptake of utilization 
by physicians of EHRs. And I have been surprised that in the 
last three reports, or last three years, MedPAC hasn't 
addressed the issue of meaningful use and EHRs. Is there a 
reason for that? Do you plan on addressing this issue that is 
so incredibly important for the----
    Mr. MILLER. We can certainly dive back into it. You know, 
we are a small operation. We kind of--we can't cover the 
waterfront every year, all day. And so we tend to focus on 
things and then move to other issues. But if there is an 
interest in it, we can certainly try and look back into it.
    Mr. PRICE. Let me just share with you. I spent a couple 
hours this past Monday night in Atlanta with a group of, oh, 80 
to 100 physicians on the specific issue of meaningful use, and 
the incredible challenges that they are having in their 
practice, caring for their patients: decreasing productivity, 
increasing costs, decreasing access to care from the patient 
standpoint. And so I would urge MedPAC to take another look at 
it, especially in view of the fact that it appears that CMS is 
forging forward with stage three without regard to any 
information or statistics, real metrics that demonstrate that 
stage two has actually been a success.
    Let me shift to site-neutral payments. And I appreciate 
MedPAC's perspective on this, and the push that you all have 
made. I think it is an incredibly important issue. And I am 
curious as to whether or not you believe that CMS could go 
ahead and do site-neutral payments right now, without Congress 
acting.
    Mr. MILLER. Without Congress acting? I don't know the 
answer to your question, off the top of my head, not in any 
real, significant way, at least that we have been thinking 
about it. The recommendations we have made, and I think some of 
the discussion here--although I would really have to think 
about it--would require more changes in law. But I am not 100 
percent----
    Mr. PRICE. Sure.
    Mr. MILLER. It would depend on what you meant by ``site 
neutral,'' I suppose.
    Mr. PRICE. Well, especially outpatient surgical procedures 
and what I think are significantly-increased costs to the 
system, yes, but also, as Dr. McDermott has pointed out, to the 
patient, as well, in terms of copays and deductibles on things 
as insignificant as minor procedures, but as significant as 
major procedures like joint replacements, which are now being 
done in an outpatient setting in many, many instances, so I 
would----
    Mr. MILLER. And I want to say I want to think about the 
answer to your question, because, depending on if it is done 
inside an existing system, I wonder what flexibility the 
Secretary would have. So I want to withdraw a little bit, and--
--
    Mr. PRICE. Great.
    Mr. MILLER [continuing]. Think about it.
    Mr. PRICE. I would love to----
    Mr. MILLER. Yes, I don't know the answer to your question.
    Mr. PRICE. In-office ancillary services exception, GAO 
reported in multiple studies for between 2004 and 2010 that 
they didn't uncover any evidence at all that suggested that it 
would be appropriate to repeal the in-office ancillary 
exception. Milliman did a study that showed that costs in the 
hospital were greater than costs in the office. JAMA has done a 
recent report that demonstrated the same.
    Can you opine as to--or can you share with us what 
information you have provided to CMS as it relates to this, or 
opine as to whether--why you believe HHS or the Administration 
seems to be incentivizing a move towards hospitalization, as 
opposed to--and utilizing services in hospitals, as opposed to 
the office for these kinds of procedures and examinations?
    Mr. MILLER. Yes, and I am just going to--and you tell me if 
I am off base. I am not--I don't feel so much that people are 
actively trying to incent the move from office to hospital, 
although you may be aware of something I am not.
    More--the way I think about the issue is, historically, 
private and Medicare created payment systems to pay for 
hospital care and physician care. Hospitals is no mystery. 
Hospitals are more expensive.
    Mr. PRICE. Yes.
    Mr. MILLER. And a big argument is why and what people 
should pay for, and all of that. And so you end up with payment 
systems for comparable services that look like this. And then, 
hospitals have started to purchase physician practices, and 
then just shift the billings from one setting to the other.
    More what I see is that motivation, is that there is a 
financial signal out there, and people have begun to pick up on 
it, and are moving in that direction. And our recommendations 
on site-neutral--and I think what was included in the 
President's budget, although I don't have that wired in my 
head--were to try and do a bit more of leveling that out----
    Mr. PRICE. Correct.
    Mr. MILLER [continuing]. So that that incentive didn't 
exist as strongly.
    Mr. PRICE. Correct. Did that mean my time is up, or that I 
have got a minute?
    Chairman BRADY. Thank you both very much.
    Mr. PRICE. I look forward to getting back with you, Dr. 
Miller.
    Mr. MILLER. Yes. Sorry for going on.
    Chairman BRADY. Mr. Pascrell, you are recognized.
    Mr. PASCRELL. Thank you, Mr. Chairman, and thank you, Dr. 
Miller, for your service.
    I would like to discuss with you graduate medical 
education. In my home state of New Jersey, there is 42 
hospitals maintaining residency programs. That number is 
increasing. I am proud that our hospitals are at the forefront 
of training the next generation of physicians. I know you are 
very interested in that.
    Mr. MILLER. The Commission is, yes.
    Mr. PASCRELL. Despite the fact that our teaching hospitals 
turn out many highly-trained physicians every year, New Jersey 
faces a physician shortage. My state's challenge retaining 
physicians in New Jersey after they complete their residencies 
is a big problem. But many of the states that my colleagues 
here today actually benefit from this problem. States like 
Pennsylvania and Delaware, with lower costs of living, benefit 
from residency programs that New Jersey hospitals undertake. 
When physicians complete their residencies, they move out of 
the state.
    A few months back I met with a family physician who 
completed his residency in New Jersey, and then moved to Texas 
to practice where the cost of living is much lower. Given the 
shortage in the physician workforce pipeline, impending 
physician retirements, the aging of the Baby Boomer population 
and a number of other issues, we need to be growing the number 
of Medicare-supported residency positions, not reducing them.
    The landscape of how we deliver health care is changing. 
The Affordable Care Act laid the foundation for moving away 
from a fee-for-service model towards quality-based payment 
systems. Congress could take one step further by repealing the 
sustainable growth rate earlier this year. That is what we did.
    One of the issues MedPAC has highlighted in the past is the 
role that GME funds and teaching hospitals can play in 
preparing new physicians to practice in a quality-based health 
system. One fact--one of our hospitals in New Jersey, the 
Hackensack Medical Center, has an extremely successful 
accountable care organization. They have adopted their GME 
program to promote this integrated tier model.
    Dr. Miller, can you talk a little bit about how teaching 
hospitals can leverage their position training the next 
generation of physicians to underscore the importance of 
quality-driven health care, care coordination, and a team-based 
approach to health care, which we talk about all the time? But 
this is going on in places throughout the United States. Would 
you respond to that?
    Mr. MILLER. I think so. So the Commission did some work 
back several years now, and, as I mentioned quickly in my 
opening statement, I think the IOM--read more recently--said 
some very similar things. And what the Commission said is we 
took a look at curriculums. And we are concerned that in the 
residency trainings there was not focus on team-based care, 
using evidence-based metrics to guide care, you know, using the 
HR--you know, the stuff that you think about in a reformed 
delivery system.
    And what we said was there should be a set of criteria--
and, given time, I won't drive you through it--there should be 
a process that includes many stakeholders--which I won't drive 
you through, it is all written down in the report--to come to 
this more comprehensive look at graduate training, to drive 
towards delivery reform, to have physicians and other health 
professionals who are versed in these skill sets, as well as 
training in alternative settings.
    Physicians see a lot of patients in nursing homes, offices, 
clinics, you know, urban and rural. And to drive in that 
direction, and then attach the GME dollar to the programs that 
meet that criteria. They could be hospitals. And, to the extent 
that your--the hospital example you said is driving in that 
direction, at least in the Commission's point of view, that is 
what we would be looking for.
    Mr. PASCRELL. Well, let me ask this final question, Dr. 
Miller. If you say--and I believe you believe in what you 
said--wouldn't it be--an incremental increase in those 
residency positions help states like New Jersey?
    Mr. MILLER. Well, we were so close, but the Commission does 
not agree with that, and----
    Mr. PASCRELL. Why not?
    Mr. MILLER. I will tell you. The Commission's view was 
simply expanding the number of slots is going to produce more 
of what we have, and it is not necessarily going to keep 
residents in your states. They can still leave.
    Mr. PASCRELL. Right.
    Mr. MILLER. And so I think there was some concern that, 
without a much more rigorous look at, you know, changing the 
graduate medical education strategy, and what is needed, we 
shouldn't just simply increase the number of slots.
    Mr. PASCRELL. Well, Mr. Chairman, I have a great deal of 
respect for Dr. Miller, as you know.
    Mr. MILLER. But you disagree.
    Mr. PASCRELL. But, through the Chair, I would like to get a 
more definitive answer to the question. We don't have the time 
right now. With your help, I think we can.
    Chairman BRADY. I would be glad to.
    Mr. PASCRELL. Thanks.
    Chairman BRADY. And, just so you know, we are going to be 
holding a hearing dealing with GME, and sort of get deeper into 
this subject, because it is a bipartisan----
    Mr. PASCRELL. In the fall?
    Chairman BRADY [continuing]. Issue, going forward. Yes.
    Mr. PASCRELL. Okay, thank you.
    Mr. MILLER. And I want you to know that if you would like 
us to come to your office and--you or your staff--and just take 
you through all of it, we are----
    Mr. PASCRELL. Yes, I think that would be a good idea, too.
    Mr. MILLER. More than happy to do that.
    Mr. PASCRELL. Thank you, appreciate it.
    Chairman BRADY. Mr. Smith--Dr. Smith, you are recognized 
for five minutes.
    Mr. SMITH OF NEBRASKA. I thought physicians were leaving 
rural America for urban America, but I hear otherwise. So 
obviously, I represent a rural constituency, and there are many 
challenges. And I talk to providers, and especially in rural 
areas, where, you know, support staff is probably not what it 
is in urban areas. I am not complaining about that, but the 
recovery audit contractor issue has had a significant impact, 
and it just has frustrated a lot of providers. So I had a bill 
last Congress which would have reformed the RACs, and I am 
continuing to work on this issue.
    But I was wondering. Now, the Commission made several 
recommendations for the RAC program. Can you touch on those 
recommendations, perhaps, and maybe give a brief rationale for 
each one? I don't want to put you on the spot, but if you do 
have those handy----
    Mr. MILLER. No, I do have them handy. This was in our most 
recent report. I figured it would come up at some point.
    So, with respect--just focusing on the RACs--and we also 
made recommendations on beneficiary protections, but just on 
the RACs, we basically said three things, that, instead of the 
RAC review being very comprehensive and hitting all kinds of 
hospitals, focus the RAC efforts on hospitals that have 
apparent patterns of one-day stays. And so, in a sense, it is 
just--it is targeting.
    Number two, RACs are a contingency fee-type of operation, 
and we want the RACs to bring the most credible and defensible 
cases, not just sort of, you know, take as--take their chances, 
and do as much as possible, and then see what happens. And so, 
we would say the contingency fee should, in part, be adjusted 
if they have poor overturn rates. They bring lots of cases, 
they get overturned, then their contingency fee should be 
brought down. Make it a financial incentive to bring good, 
strong cases.
    The third thing was to adjust the look-back period for the 
RAC. So RACs were able to go back several years on hospitals 
and say, ``I am challenging this particular admission.'' And, 
you know, two or three years, a lot of administrative costs 
trying to dig that out, electronic record. And it may be past 
the point that, if the claim was denied, that the hospital 
couldn't bill for the--a set of outpatient services that they 
did provide.
    So you might say, ``Well, this inpatient was unnecessary, 
but they did provide some outpatient services coming in the 
door,'' if you will. And so we said, ``That should be better 
aligned, so that the hospital has the ability to make this 
calculus: `I can defend this case, and so I am going to 
appeal,' or, `Actually, I am not so sure I can defend it, so I 
am not going to appeal it, I am going to actually just take the 
lower outpatient reimbursement, and walk away,' '' and that is 
the dynamic, rather than appealing everything or appealing 
nothing, that we are trying to get set up in there.
    Mr. SMITH OF NEBRASKA. Okay.
    Mr. MILLER. So those were the three RAC things.
    Mr. SMITH OF NEBRASKA. Sure. I appreciate that. Shifting 
gears here just a bit, I represent a number of critical access 
hospitals. Some are--well, they are all rural. Some of those 
are actually remote. And I know that you have previously said 
that the closing of rural hospitals is proportionate to the 
closure of urban hospitals. Is that an accurate description?
    I would say that the impact to the community, or--and 
perhaps to the patients themselves is disproportionate. Does 
the Commission take that into consideration at all?
    Mr. MILLER. Yes. And by saying it is proportionate, I don't 
think anybody was trying to say--and this drives right to a 
point that I would like to make; you may agree or not, but it 
does--the Commission, in writing that down on paper and 
reporting what is happening, we aren't trying to say, ``and 
therefore, there is no issue here.'' I--you know, obviously, if 
you are in a urban area and a hospital closes, and there is two 
other hospitals right nearby, the significance of that closure 
is very different than if you are the only hospital within 50 
miles.
    And the thing that we are trying to say is rural--and this 
comes from our rural commissioners. First of all, think of 
rural this way. There is rural, as in 50 miles from any other 
provider on a hilltop, and there is rural adjacent to an MSA. 
You are right across the border from, you know, a metropolitan 
statistical area.
    The access implications of closure in those two settings 
are very different.
    Mr. SMITH OF NEBRASKA. Right.
    Mr. MILLER. You know? You might have to travel somewhat 
further into the MSA, but you are--still have access to 
something.
    And so, the point that I think the Commission has been 
driving at for several years is think about the supports that 
go out to rural areas. And what you want is to really support 
that isolated, low-volume provider, because they can't ever be 
expected to cover their costs. They are too small, there is not 
enough admissions that roll through, or outpatient visits to 
cover their costs, and there is no other alternative.
    But all over the place we are--I think I am done.
    [Laughter.]
    Chairman BRADY. You know, by the way, no other witness ever 
stops when I do that, so I appreciate that very much.
    [Laughter.]
    Mr. MILLER. But I am going to finish. It is very short. A 
lot of our current supports for rural areas kind of make it 
critical to the community to hang on to their hospital, even if 
that hospital is close to another hospital, and they both have 
low volume, and, bluntly, they are more likely to have low 
quality. Whereas, if there was a consolidation, they might be 
economically more viable, and might even improve quality there. 
Sorry about that.
    Chairman BRADY. Thank you, Doctor, and thank you, Mr. 
Smith.
    Mr. Davis, you are recognized.
    Mr. DAVIS. Thank you. Thank you very much, Mr. Chairman.
    Thank you, Mr. Miller. Illinois's 7th congressional 
district, which I represent, contains the most hospital beds of 
any congressional district in the nation. In addition to that, 
we are home to four major academic medical centers. According 
to the new workforce projections, the nation faces a shortage 
of between 46,000 and 90,000 physicians by 2025, with shortages 
most acute in surgical specialties, the result of a growing 
aging population, and the newly insured, which tend to need 
more specialized care, especially the elderly, who are living 
longer. Medical schools have increased enrollment, and teaching 
hospitals are expanding training to address physician shortage. 
Medical schools and teaching hospitals are also working hard to 
ensure that new doctors coming into the system are trained to 
serve in new delivery models that focus on care coordination 
and quality improvement.
    I am concerned that reductions to Medicare graduate medical 
education would harm teaching hospitals' ability to effectively 
train the number of physicians we need in the future, and would 
adversely impact access to care for both the elderly and the 
newly insured.
    My question is, while Congress seeks to reform Medicare 
payments to graduate medical education, shouldn't we also be 
making sure--or trying to make sure--that we are able to meet 
the projected need, as we continue towards 2025?
    Mr. MILLER. I think the answer to that is yes. I think a 
couple things that I would say. With absolute respect--and I 
don't know the source of your numbers--but I would say, 
depending on who is doing the projecting, you can get very 
different kinds of numbers of what shortage and what is in 
shortage.
    There are also people in the academic community who have 
less of a stake in this, and have looked at this, and have 
argued that it is not so much aggregate supply as distribution 
problems, and have suggested also changes about which, you 
know, level of physician versus a nurse practitioner versus a 
PA that could--for example, to, you know, fill some of the 
needs.
    What I would say directly to your points are one question 
is, given the dollars that go to support slots, the Commission 
could think about which of those specialties are likely to 
either be in short supply or--and/or are less lucrative for the 
hospital to support, and shift the given dollar to support 
those kinds of training programs. So, some interns and 
residents are very valuable to the hospital, and they will 
support them even without a subsidy. Others are less valuable 
to the hospital, and they are less likely to support them. So 
you could think of, given a dollar, how you distribute that 
dollar.
    A second thing I want to say is the Commission did not 
ultimately reduce indirect medical education. It did redirect 
how it was--you know, it went to the various programs, and that 
is what I was saying in response to the question before you.
    Mr. DAVIS. Let me ask you a little bit about site-neutral 
payment policies. Do you see this adversely affecting teaching 
hospitals and disproportionate share hospitals, perhaps more 
than others, because of the clientele----
    Mr. MILLER. I definitely----
    Mr. DAVIS [continuing]. That they----
    Mr. MILLER. I definitely see where you are going, and the 
Commission contemplated this. And so I am just going to blow 
past this part. It depends on what kind of site-neutral you are 
talking about; it will affect different hospitals differently.
    But let's just say, for the purposes of your question, some 
site-neutral policy has an effect on a hospital that serves a 
disproportionate number of poor folks. The Commission said you 
could mitigate that, the effect of the policy, by looking at 
the amount of, you know, poor people, say, that hospital 
serves. They actually directly contemplated policy designs that 
would try and address that problem.
    Mr. DAVIS. Thank you very much. I know that time is a 
factor, but I would like to discuss these issues with you 
further, if we have an opportunity to do so.
    Mr. MILLER. As always, we are happy to brief you and your--
or your staff, whichever way you would like to go.
    Mr. DAVIS. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman BRADY. Thank you.
    Mr. Marchant, you are recognized.
    Mr. MARCHANT. Thank you, Mr. Chairman. I would love to pick 
up where Chairman Brady was talking at the very beginning. The 
Affordable Care Act splits the DHS funds into two pots: 75 
percent of the dollars go into a pot that is being reduced 
every year; and the other 25 percent, which is sometimes 
referred to as the empirically justified pot, is not being 
reduced.
    It is my understanding that MedPAC came up with this notion 
of empirically justified. Can you explain how MedPAC got to 
that classification, and their reasoning behind it?
    Mr. MILLER. I can, and I just--I think you are clear in 
your mind, I just want to be clear in everyone else's mind. We 
didn't come up with this system that you are referring to, the 
two parts, but we did come up with the empirically justified 
notion.
    So, this is work--and this is way back, now, but this is 
work when we were thinking about the indirect medical education 
add-on payment, and the disproportionate share add-on payment. 
And here is a way to understand it. It is a little bit 
technical, but I can do it, I think, very simply.
    Here is a hospital's cost per case. And, thinking about 
what drives that cost per case, it might be more complex 
patients in one hospital or another, or differences in wages 
from one area to another, or something like that. And so you 
could see that cost go up and down, based on what is happening 
in a given hospital.
    There are add-ons for IME and, to your question, 
disproportionate share. And the rationale for it has changed 
over time and who you are talking to. But at any--one way to 
think about it was it was supposed to help hospitals that 
served disproportionate shares of the poor. And the thought was 
serving poor folks increased the cost for the hospital.
    And so, if you run that analysis--which I can take you 
through in detail, but for this conversation, if you run that 
analysis--it says that is true, but it is this much more, and 
the adjustment is this much more. So, the adjustment over-
achieved, if you will, and gave the hospitals more than their 
cost increase.
    We just went through the analysis and said the adjustment 
actually, you know, should be smaller than it is. And we 
actually didn't even make a recommendation, we just 
analytically went through it and said this adjustor is set too 
high.
    Mr. MARCHANT. Is it your opinion that the DHS money is 
going to the hospitals with the greatest need?
    Mr. MILLER. All right. I know you think this is a yes or no 
question.
    [Laughter.]
    Mr. MILLER. But let me tell you--let me say it this way. If 
you think it is about poor Medicare patients, the answer is no, 
because the DSH adjustor contemplates poor Medicare patients 
and Medicaid. If you think it is about supporting poor Medicare 
and hospitals that get lots of Medicaid patients, it is 
probably tracking that. If you think it is about uncompensated 
care, it is not tracking that, so it depends on what you----
    Mr. MARCHANT. The next question----
    Mr. MILLER [continuing]. What you think--sorry.
    Mr. MARCHANT. The next question may help you with that.
    Mr. MILLER. All right.
    Mr. MARCHANT. I am particularly interested in the hospitals 
in the State of Texas. As you may be aware, we are not a 
Medicaid expansion state. So it is my understanding that The 
DHS formula is based, in part, on Medicaid days for hospital.
    Mr. MILLER. It is.
    Mr. MARCHANT. Is it possible that the--that in addition to 
losing money on the Medicaid DHS side, Texas hospitals are also 
losing money on the Medicare DHS side because of how the 
formula is calculated?
    Mr. MILLER. It is correct that if you have more Medicaid 
patients moving through your hospital, your DSH will be higher.
    Mr. MARCHANT. So, in a state that didn't expand, it is 
arguable that your volume is not what it would be in a 
neighboring state that has a similar situation that had 
expanded?
    Mr. MILLER. I think, factually, that is a true statement.
    Mr. MARCHANT. So I have one, two, three, four--six 
hospitals that have contacted me that I believe they feel like 
that their funding has been affected by the fact that Texas is 
not an expansion state, based on the formula.
    Mr. MILLER. I don't think the fact set is wrong. Without 
making a judgement about what people want to do, I think the 
fact set is correct. If you have more Medicaid patients moving 
through your hospital, your DSH payments will be higher.
    Mr. MARCHANT. So we are preparing some legislation that we 
will present to the committee to try to rectify this. Thank 
you.
    Chairman BRADY. Thank you. Mr. Roskam, you are recognized 
for five minutes.
    Mr. ROSKAM. Thank you, Mr. Chairman.
    Dr. Miller, thanks for your time. My question has to do 
with some of the work that The Oversight Subcommittee has done 
at Ways and Means, particularly in the--looking at fraud and 
improper payments.
    So, a few months ago we had the individual who is in charge 
of anti-fraud efforts at CMS before the subcommittee, and we 
posed a simple question to them. And the question was, ``What 
is your fraud and improper payments rate?'' And they said it 
was 12.7 percent, which is a number that is so big it just 
takes your breath away.
    Now, just for the sake of creating a sense of wonder, we 
had the person who is in charge of anti-fraud efforts at Visa, 
the credit card people, asked them the same question. His 
answer was, on $10 trillion worth of global transactions, their 
fraud rate is .06 percent. So this cavernous difference just 
really does take your breath away.
    There is a lot of discussion about how it is that we are 
going to make sure that the trust fund isn't depleted and so 
forth. One of the things--there is a general discussion about 
improper payments as one of the goals that you have, mitigating 
against improper payments.
    So, the reason for my inquiry about improper payments is 
this. Congress basically--you know, if you look out over these 
different things that we have done over the past few months, we 
have got a highway trust fund that is going broke, we have got 
this, that, and the other thing, we have the SGR, you know, 
Congress is basically grubbing around in the forest, looking 
for truffles, and trying to come up with a bushel of money to 
pay for these things.
    And yet, the amount of money that is going out the door in 
improper payments just literally, at our hearing, it just took 
our breath away. You do a back-of-the-napkin calculation on 
this, and it is--you know, it is a billion dollars a week. And 
the cumulative nature of this is just incredible.
    What insight would you have for us on the improper payment 
side, in particular? Because the interesting thing is there is 
obviously nobody that is defending the status quo. It is not a 
partisan issue, it is not a philosophical issue, it is not a 
geographic issue. It is just a common-sense thing, where we 
should all agree that payments should be proper. And, if they 
are proper, we are going to save a fortune.
    What insight would you have for the committee, as we 
venture out into this, particularly in the improper payment 
arena?
    Mr. MILLER. Right. And I just want to preface I am probably 
not the--you know, the fraud guy that you want to answer this 
question. The Commission tends to think of payment policy, 
looks at distortions, tries to stop, you know, bad practices. 
But detecting fraud is kind of a different option.
    So, the first thing I would say about the size of the 
number--and in no way am I trying to defend anybody or 
anything--is, you know, when I have gotten close to this issue 
a couple times in my life--and not close enough, and not really 
versed in it--there is this difference between fraud and 
catching fraud, and documentation of a service. So a service 
was provided, it is a legitimate provider, but someone takes it 
apart and says, ``You didn't provide the right piece of 
information.'' And I don't know if that 12 percent versus 
whatever you said----
    Mr. ROSKAM. I take your point. And just parenthetically, 
here is part of the problem with CMS. They can't tell you the 
difference.
    Mr. MILLER. And that is why, every time I get close to 
this, my head pretty much explodes. And so I am probably not 
the right person to do this.
    But the thing that I would say--so there are--you know, 
there is this distinction between outright fraud--and fraud is 
complicated, because people are actively trying to avoid 
detection, and I think that makes it hard. There is a cost of 
detecting it, and a cost of payment ratio. Those are generally 
pretty positive. And I have seen numbers like that.
    The other thing, which is just an off-comment I will say 
out loud, I think some of these data releases, where you begin 
to just kind of look at, you know--look at what the raw data 
says, has driven CMS and some of the other program integrity 
folks in directions that they probably wouldn't have otherwise 
seen, you know, individual sets of providers who come out at 
the top of the heap, and are just pulling reimbursements that 
are just unbelievable. I think those kinds of things, those 
public releases of data, can also help, almost from a crowd 
sourcing point of view, to get other eyes on the problem.
    Mr. ROSKAM. So a sunshine policy. I mean that is sort of--
--
    Mr. MILLER. Yeah----
    Mr. ROSKAM [continuing]. Disinfectant theory.
    Mr. MILLER. My sense is that those things have driven 
people into identifying providers that had huge drug spends, 
you know, huge Part B spends, that type of thing.
    Mr. ROSKAM. Okay.
    Mr. MILLER. But I don't know this issue real deep. I 
understand what you are trying to ask, but----
    Mr. ROSKAM. Okay, thank you. Yield back.
    Chairman BRADY. Thank you.
    Mrs. Black, you are recognized.
    Mrs. BLACK. Thank you, Mr. Chairman. And thank you for 
being here, Dr. Miller. A very interesting discussion today.
    I want to ask you about the Medicare hospital area wage 
index, which is supposed to ensure that Medicare hospital 
payments reflect the geographic differences in wages. I have 
concerns that many have raised over the years that the area 
wage index is neither accurate nor fair. The fact is that 
around one-third of all hospitals who receive exceptions to the 
area wage index shows that the system is not working.
    I am even more concerned about the adverse impact that the 
current system is having on hospitals in Tennessee, in 
particular, and in the South, across the South, which have seen 
their area wage index levels rapidly decreasing over the years, 
while the area wage index levels in other states have been 
increasing.
    So, Tennessee hospitals are being penalized, because they 
have experienced an increase in cost, including wages over the 
years, but these increases have not been quite as high as the 
hospitals in other states, where--with the wage index levels. 
It is simply unfair. I mean they have done a good job in 
keeping costs down, but they are being actually punished for 
that.
    So, back in 2007 MedPAC actually recommended that Congress 
repeal the area wage index. And is this still MedPAC's 
recommendation, that Congress would repeal this wage index?
    Mr. MILLER. I got to tell you, I have been tearing up 
through this whole thing, because people have kind of forgotten 
that idea. And the Commission did make a set of 
recommendations. We do understand what you are saying, and the 
issues that are being raised there. And we made that 
recommendation several years ago, and the fundamental--there is 
a number of things that are going on in it.
    But to get to the heart of your question, what is going on 
is we would move the wage index system off of a hospital-
reported wage, and base it more on area wages in--or wages in 
the area for the labor that hospitals, offices, post-acute-care 
providers are drawing. And that may sound like a big, technical 
thing, but what it actually does is, if a hospital decides that 
it happens to be flush, and it raises its wages, all other 
things being equal, the wage index relative to other hospitals 
goes down, because it is down across hospitals. Whereas, we 
think it would be a lot fairer to hospitals and other providers 
to base it on the wages in the area, which are much more--less 
sensitive to an individual hospital's behaviors. And we think 
that that would bring some greater equity and address some of 
the issues that you are raising.
    There is a whole set of other things which I won't make you 
crazy with that we also recommended at the same time. But, yes, 
that is our policy. We did recommend that change. We think it 
addresses at least some of the things that you are raising.
    Mrs. BLACK. I know that that was your recommendation back 
in 2007. Is MedPAC doing anything now to update that 
recommendation?
    Mr. MILLER. We can go through and update the analysis 
again. But the principles still stand. And, I mean, bluntly, 
this requires the Congress to take action.
    Mrs. BLACK. Okay.
    Mr. MILLER. And you know the dynamics here. I mean this 
means some----
    Mrs. BLACK. That is right.
    Mr. MILLER. Right. And that is the issue.
    Mrs. BLACK. There will always be winners and losers. But 
when we look at what is happening in Tennessee, it really is an 
unfair system.
    Mr. MILLER. And----
    Mrs. BLACK. For our reimbursements. Thank you, Mr. 
Chairman, I yield back.
    Chairman BRADY. Thank you.
    Ms. Jenkins, you are recognized.
    Ms. JENKINS. Thank you, Mr. Chairman, for holding the 
hearing.
    Thank you, Mr. Miller, for joining us. I want to return to 
a discussion Congressman Smith started with you, and discussed 
the issue of rural hospitals, and some closures.
    MedPAC's March 2015 report addresses the rural hospital 
closure crisis, and finds that rural hospitals represented 44 
percent of all closures. The report finds that the closed 
hospitals are an average of 21 miles to the next nearest 
hospital. Yet the report does not specifically address the 
issue of access to care in rural America.
    My congressional district has a number of these rural 
hospitals, and the State of Kansas has 83 critical access 
hospitals, more than any other. These hospitals provide 
excellent care to my constituents. And, without them, my 
constituents would lose local access to care. When a patient 
has a heart attack, 21 additional miles of travel makes a 
difference.
    So, my question is, has MedPAC considered the impact of 
access to care for rural Americans if and when these necessary 
safety net providers close?
    Mr. MILLER. So, I mean, my answer would be yes. Each year 
we assess access, quality, capital markets, cost, and payments, 
and a number of factors in setting an update payment for the 
hospitals. And I can't remember if you were here when I was 
talking to Mr. Kind. The Commission, for the last couple years, 
has made positive payment updates for hospitals the last couple 
of years. Over 10 years--or longer, even--the Commission has 
made recommendations with respect to rural payment that have 
increased payments to rural hospitals, trying to address some 
of the issues that you raise.
    Now, all that said, I also want to say something else, 
which is in 2012 the Commission did--and this was an exchange I 
believe I had with Mr. Smith, which was when you think about 
the supports, think about, you know, how--and particularly the 
Congress is always working with a limited dollar. Think about 
where that dollar is going to make the greatest difference. If 
you just say all--increases to all rural, you are increasing 
payments for a hospital that sits right next door to, you know, 
an urban area, and a hospital that is 50, you know, miles out 
on a hilltop. And so, there are other ways to think about how 
the support is provided.
    And the other thing I think is just a fact of life--and it 
is for urban and rural hospitals, but to Mr. Smith's point, and 
to your point, it can mean a lot more in a rural area--is if 
admissions continue to fall, these hospitals are--urban and 
rural--are going to have to rethink their mission. And an idea 
that seems to be floating around some of the urban--or rural 
areas, sorry, that I have talked to people about is the notion 
of whether--is it a full inpatient hospital that you need at 
that point, or do you need something more like an emergency 
room/urgent care type of thing.
    Because, you know, your point is a heart attack, to go 21 
miles or more miles, I get your point. But what about a 
routine, you know, inpatient hospital service, if, in fact, the 
admissions are declining? It is going to be struggle for 
hospitals, and particularly for rural areas, to support 
hospitals if admissions continue to decline.
    Ms. JENKINS. Okay, I agree. Another study I saw from the 
National Rural Health Association, it reports that 283 
additional rural hospitals are on the brink of closure, just 
shutting their doors. And this means, you know, for these 
communities, they are not going to have the comprehensive local 
care that they need to survive. And, of course, I think you 
understand when rural hospitals close there is a domino effect, 
and employers are affected, communities, families, and the 
like.
    Just quickly, where are folks that call rural America home 
receive needed health care--where are they supposed to receive 
the needed health care, if we see these rural hospitals 
closing?
    Mr. MILLER. And I think it goes back to a point that I was 
making a minute ago, which is, again, how many fully 
comprehensive hospitals do you need for any given set of miles? 
I absolutely agree that you need some set of comprehensive 
care. But if the--we are supporting hospitals that are in rural 
areas that are very close to one another.
    And a question for the Congress, particularly with a 
limited dollar, is if there was a consolidation there, one 
hospital, it might be more financially viable. It might have 
higher quality. And it could be that we need to have these 
conversations about a different community saying, okay, they 
will have an emergency facility, and this--you will have some 
consolidation for the hospital, and then an emergency facility 
to serve where you don't have a full hospital. Sorry.
    Chairman BRADY. Thank you, Ms. Jenkins.
    Mrs. Noem, you are recognized.
    Mrs. NOEM. Thank you, Mr. Chairman, and thank you for 
allowing me to be a part of this Committee hearing today. I 
appreciate the ability to sit at the dais.
    Mr. Miller, I am from South Dakota, so home of where the 
deer and antelope play, and it is a long ways to drive 
anywhere. We have had many consolidations already, but yet it 
is still a struggle for our people to get access. So I wanted 
to visit with you a little bit about the unique challenges that 
some of our rural providers face. And in your testimony you 
stated that the last time MedPAC looked at rural Medicare 
beneficiaries' access to care, you found that the mix of--for 
rural providers was incoherent, and that it lacks a common 
framework.
    So, in South Dakota, the providers that I meet with, they 
would agree with you. They tell me that they are forced to 
chase after dollars many times, using a bizarre mix of 
adjusters and add-ons, which only adds to their administrative 
burdens. And, to make matters worse, CMS often carves real 
providers out of payment reforms, leaving them behind.
    So, as the committee considers payment reform, can you 
suggest how we can improve the situation for rural providers?
    Mr. MILLER. Okay. I mean we are having a, you know, 
theoretical or principle conversation.
    Mrs. NOEM. Absolutely.
    Mr. MILLER. Again, focus your dollar, first and foremost, 
on isolated, low volume, okay? Because isolated means there is 
no other alternative, low volume means I can't support my 
costs. And so, you know, if there is a dollar the Congress has, 
that first dollar should go to those types of facilities. I 
hate to keep harping on this. One that is right next door to an 
urban area, maybe the need is not as great.
    And I have to tell you my rural commissioners, when we went 
through this--and I don't want you to think we don't look at 
rural every year. We just did a comprehensive thing in 2012. I 
mean the rural commissioners were saying, ``Rural isn't rural 
isn't rural.'' It differs, depending on how far and how 
frontier you get.
    A second principle that the Commission talked about was the 
notion that you can provide supports, but you can either do it 
open-ended or in a fixed way. If you provide an open-ended 
support, you are probably giving them--and there is evidence of 
this, that costs go up. And so then your supports have to chase 
that cost over time. If you give a fixed support, the provider 
continues to have some pressure to contain their cost. So we 
would say think about that.
    It gets into individual measures. The empirical basis for 
some of the adjustments is questionable, and gets into a little 
bit more technical conversation. But there are things where, 
you know, the analysis would say, ``This is how much support 
you should give,'' and there is this much, and you get kind of 
funny distortions, or people chasing what you said.
    Mrs. NOEM. Yes.
    Mr. MILLER. Because I have talked to rural people, and they 
say the same thing that you are saying.
    On the quality front, there is a dilemma. And I think that 
is what you meant by leaving them out of reform----
    Mrs. NOEM. Payment reforms.
    Mr. MILLER [continuing]. Or at least part of it is, you 
know, they can't play as much in the quality. And this is a 
dilemma, in the sense that if you have a small--it is hard to 
get an accurate measure. You get real noisy quality results.
    I mean the Commission has talked about accumulating 
multiple years of data. If rural providers are willing to be 
treated as a group, you can consolidate them and say, ``Judge 
us on our net performance'' is the way to try and jump those 
kinds of fences.
    Mrs. NOEM. Have you come to a conclusion on that? Do you 
think that would be accurate? Or have you floated that idea to 
rural providers to see if they would consider----
    Mr. MILLER. We have certainly discussed that in principle 
in our reports. I mean, obviously, when somebody comes to you 
and says, ``Okay,'' it is the two of us, it is hard, you know, 
for us to say that one is noisy, that one isn't noisy. We would 
have to see the thing to know.
    And, actually, there is also some people who are trying to 
organize networks of rural providers and ACOs, as well.
    Mrs. NOEM. Okay.
    Mr. MILLER. You know, again, kind of accumulating a number 
of rural providers.
    Mrs. NOEM. Okay, thank you.
    I yield back, Mr. Chairman.
    Chairman BRADY. Thank you, Mrs. Noem.
    Mr. Crowley, you are recognized.
    Mr. CROWLEY. Thank you, Mr. Chairman, and thank you for 
allowing me to sit on your committee hearing today.
    I know this Subcommittee is looking primarily at hospital 
policy issues, and so I am glad to have the opportunity to 
participate in the discussion.
    Mr. Miller, as you know, I resent--represent part of New 
York City, home to a number of world-class medical 
institutions, from teaching hospitals to cancer centers to 
medical schools. So I have had many discussions with health 
care systems on how much they rely on Medicare payments, just 
to be able to provide care to their populations.
    Today I want to focus on the issue of graduate medical 
education, or GME. At the start there is a point that I want to 
make clear. Training our nation's doctors has long been a 
shared responsibility between individual teaching hospitals and 
the Federal Government. And that is because it is a shared 
benefit. The teaching hospitals may be the one receiving the 
payment to offset a portion of their cost, but it is the whole 
country that benefits from more well-trained doctors.
    Ensuring that our academic medical centers receive adequate 
funding through GME is not just an issue for that hospital. It 
is an issue for our entire nation. The doctors who are trained 
in New York, for example, going to practice all over the 
country. And they practice in every specialty, too, from 
primary care and family medicine to the most targeted 
specialties. So, I really do think that the discussion of how 
we pay for graduate medical education can't just start and stop 
with dollars and cents at a single hospital. It has to consider 
the investment that we make in caring for our senior citizens, 
and in our nation's entire health workforce.
    Part of that investment is also in the highly complex and 
costly patient care missions that teaching hospitals undertake. 
They run advanced trauma centers and burn units, and they see 
more complex patient cases. They treat patients with rare and 
difficult diseases like Ebola. And that helps train future 
doctors in all those areas. Graduate medical education payments 
designed--were designed by Congress to reflect all these 
undertakings, beyond just the explicit costs you may see on 
paper. And teaching hospitals will continue to take on new 
challenges.
    Mr. Miller, in your testimony you say that to provide our 
health care delivery system, we need to ``ensure that our 
residency programs produce the providers and skills necessary 
to integrate care across settings, improve quality, and use 
resources efficiently.'' Well, from what I have seen, our 
teaching hospitals are tackling that challenge head on.
    One of the things we have strived to do with the Affordable 
Care Act are--the permanent doc fix and other initiatives, is 
to highlight the importance of coordinated care, preventative 
care, and other quality measures. We all recognize that care 
does not just happen within the four walls of a hospital, and 
it shouldn't. Teaching hospitals are doing more to train 
residents in community care settings, and to focus on giving 
residents the skills they need to provide exactly the kind of 
care that MedPAC and others have called for. And they have to 
use resources efficiently, because they are getting hit with 
cuts from all sides.
    I would argue that a sufficient investment in GME, not 
cutting and redirecting funding away, is what enables hospitals 
to do all these things. Do you disagree? Why can't we 
accomplish these goals without cutting funding?
    Mr. MILLER. The Commission has a policy on GME, or a 
recommendation on GME, that I can take you through. The 
Commission's policy took a block of the current IME dollars and 
allocated them in a different way. It didn't reduce them.
    But I also would say, in response to at least some of the 
points that you are making, as it stands--we are talking about 
$3.5 billion--the accountability for that dollar doesn't exist. 
The notion that it is being devoted to teaching and, you know, 
training for, you know, a reformed delivery system, or whatever 
the case may be, currently we have no accountability for it. It 
is just a dollar that flows into the hospital. It can be used 
for anything.
    So I think we would agree, in the sense of saying you take 
the dollars that exist, you allocate them differently--which I 
can take you through--and you target them to hospitals--and 
this is the part where you may disagree, but just to be clear--
and other providers who are running graduate medical education 
programs that are more comprehensive in team-based care, 
evidence-based medicine, and also alternative sites of care, 
where they are trained, in addition to the hospital. But we 
didn't talk about eliminating the dollar.
    Mr. CROWLEY. I appreciate that. I can appreciate 
accountability, as well. And I think you appreciate the 
complexity, in terms of the teaching of a modern doctor today.
    As a New Yorker, we can chew and walk gum [sic] at the same 
time, and I think we can do more and do it better. I agree with 
you on that.
    I believe we need strong investment in graduate medical 
education, like raising the outdated cap on the number of 
residents that Medicare supports. And I am just finishing, Mr. 
Chairman. I have a bill to do just that with my good friend and 
my colleague, Dr. Boustany, in a bipartisan way, and a large 
bipartisan support for that, Mr. Miller, as well.
    Mr. Chairman, I know you have talked about putting together 
legislation to help support our nation's hospitals, and I hope 
you will consider this issue as a priority to include. I also 
hope you will recognize the hurtful impact of cuts to GME 
program, not only in the hospitals that rely on this federal 
contribution, but on the doctors that train there, on the 
patients who they will see throughout their careers.
    I look forward to working with you and the committee to 
ensure that we continue to provide needed funding to our 
nation's teaching hospitals. And, with that, I yield back.
    Chairman BRADY. Thank you, Mr. Crowley.
    Mr. Renacci, you are recognized.
    Mr. RENACCI. Thank you, Mr. Chairman. And thank you, as 
well, for allowing me to be part of this Committee hearing this 
morning.
    Dr. Miller, your testimony and the June MedPAC Report 
raised some critical issues, especially as they relate to 
improving hospital payment policy. The ACA included a new 
program, which is addressed in the report, aimed at reducing 
unnecessarily hospital readmissions. The program is known as 
the Hospital Readmission Reduction Program. The goal of this 
program is one that I and many of my colleagues support. In 
fact, it is estimated that nearly 18 billion per year is wasted 
on avoidable readmissions that--18 billion per year is wasted 
on avoidable admissions of Medicare patients alone. Reducing 
these preventable readmissions would reduce costs and improve 
outcomes.
    However, the implementation of this program has been 
problematic, especially for those hospitals serving low-income 
patients. Dr. Miller, can you explain the correlation between 
hospitals serving low-income patients and readmission 
penalties? Is there a direct correlation, in your opinion? And 
do you have some concerns?
    Mr. MILLER. Yes, and we have some fixes, as well. So there 
is a relationship. Depending on what you mean by direct, it--
this is more a subtlety. There seems to be a critical mass. So, 
you know, you get more poor people, you don't see a lot of 
change in readmission rates. Then you hit a certain level of 
having poor people as a percentage of your hospital, and then 
you start to see higher readmission rates. There is a 
relationship. It is not directly one to one, but there is a 
relationship, and we have laid this out in the report, and we, 
you know, fundamentally agree with the statement that you are 
making.
    The Commission ended up saying this. And what we ideally 
want--we have made some other recommendations to refine the 
measure--what we really want is we don't want the penalty 
dollar. We want the hospital to avoid the readmission. It is 
better for the patient. You know, the program saves money by 
avoiding the readmission. You know, the penalty is really just 
a motivation. And, actually, a very small amount of dollars are 
actually driving relative change. And so I am hoping that this 
is headed in a positive direction.
    With respect to the proportion of poor people, this is what 
we would do. We would not adjust the measure. So if a hospital 
has a good or a bad readmission rate, that remains on paper, 
because we think hospitals need to be focused on that, the 
public needs to be aware of it. Whether you are rich or poor, 
you should know what your readmission rate is in a given 
hospital that you are about to walk in the door.
    However, mitigate to some extent the effect of the penalty. 
And the way you do that is you say that the penalty will be 
mitigated based on how many proportions of poor people, and we 
would put hospitals in a category and say lots of poor people, 
the penalty is not as heavy, few poor people, the penalty is 
heavier.
    And then, within any category, you have to outperform your 
colleagues. So if I am a hospital with lots of poor people and 
I do well on readmissions, you know, I am spurring other 
hospitals to improve their performance. So we would mitigate 
the effect, but we would do it through the penalty, not adjust 
the measure.
    Mr. RENACCI. But you do agree, then, that hospitals that 
have these lower-income patients inevitably are going to have 
these readmissions more than other hospitals.
    Mr. MILLER. Yes, but we also believe that there are 
hospitals out there with lots of poor people who have 
relatively low readmission rates, and change can occur. And we 
would mitigate the penalty to help them along. But yes, we 
agree with the statement you made.
    Mr. RENACCI. All right. Well, I share your concerns that 
many of the hospitals--especially in my district--that serve 
the most needy are being unfairly penalized under the Hospital 
Readmission Reduction Program.
    I have introduced H.R. 1343, the Establishing Beneficiary 
Equity in the Hospital Readmission Program, which would require 
risk adjustment for socio-economic factors when calculating 
hospital penalties, ensuring these critical hospitals can 
continue to take care of the least among us without being 
penalized for doing so, and I thank you for your word MedPAC 
has done on this issue.
    And I yield the remainder of my time.
    Chairman BRADY. Thank you, Mr. Renacci. You know, going--as 
you have noticed, we have a hearing on competition next week, 
focusing on rural disparities. We are going to be discussing 
GME and hospital payment reform, in the hopes of bringing--
through the fall, in the hopes of bringing some legislation to 
the floor and to the committee there. Today's hearing was very 
helpful and insightful, as we go forward with that.
    So, Dr. Miller, thank you for your testimony. Appreciate 
your continued assistance. We will need it, getting answers to 
the questions that were asked by those on the committee.
    And as a reminder, any Member wishing to submit a question 
for the record will have 14 days to do so. And if any Member 
does, Doctor, I ask that you respond in writing in a timely 
manner, which I know you will.
    Again, thank you. With that, the committee is adjourned.
    [Whereupon, at 11:40 a.m., the subcommittee was adjourned.]
    [Public Submissions for the Record follows:]
          Association of American Cancer Institutes, statement
          
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            America's Essential Hospitals, statement letter
            
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          National Association of Chain Drug Stores, statement
          
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              National Rural Health Association, testimony
              
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 John Kastanis, President and CEO Temple University Hospital, statement
 
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