[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
VALUE-BASED PURCHASING FOR PHYSICIANS UNDER MEDICARE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
JULY 21, 2005
__________
Serial No. 109-50
__________
Printed for the use of the Committee on Ways and Means
_____
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
E. CLAY SHAW, JR., Florida CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania WILLIAM J. JEFFERSON, Louisiana
J.D. HAYWORTH, Arizona JOHN S. TANNER, Tennessee
JERRY WELLER, Illinois XAVIER BECERRA, California
KENNY C. HULSHOF, Missouri LLOYD DOGGETT, Texas
RON LEWIS, Kentucky EARL POMEROY, North Dakota
MARK FOLEY, Florida STEPHANIE TUBBS JONES, Ohio
KEVIN BRADY, Texas MIKE THOMPSON, California
THOMAS M. REYNOLDS, New York JOHN B. LARSON, Connecticut
PAUL RYAN, Wisconsin RAHM EMANUEL, Illinois
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON HEALTH
NANCY L. JOHNSON, Connecticut, Chairman
JIM MCCRERY, Louisiana FORTNEY PETE STARK, California
SAM JOHNSON, Texas JOHN LEWIS, Georgia
DAVE CAMP, Michigan LLOYD DOGGETT, Texas
JIM RAMSTAD, Minnesota MIKE THOMPSON, California
PHIL ENGLISH, Pennsylvania RAHM EMANUEL, Illinois
J.D. HAYWORTH, Arizona
KENNY C. HULSHOF, Missouri
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C O N T E N T S
__________
Page
Advisory of July 21, 2005 and revised advisory of July 21, 2005
announcing the hearing......................................... 2
WITNESSES
Centers for Medicare and Medicaid Services, Hon. Mark McClellan,
Administrator.................................................. 8
______
American College of Physicians, C. Anderson Hedberg, M.D......... 60
American Medical Association, John H. Armstron, M.D.............. 50
Tufts University School of Medicine, Jerome P. Kassirer, M.D..... 68
SUBMISSIONS FOR THE RECORD
Alliance of Community Health Plans, Jack Ebeler, statement....... 84
American Academy of Family Physicians, Leawood, KS, Michael
Fleming, statement............................................. 85
American College of Obstetricians and Gynecologists, Michael
Mennuti, letter................................................ 88
American College of Surgeons, letter............................. 90
Halderman, Linda, Selma, CA, letter.............................. 94
Kern County Medical Society, Bakersfield, CA, Sandi Palumbo,
statement...................................................... 97
National Coalition for Quality Diagnostic Imaging Services,
Cherrill Farnsworth, statement................................. 105
VALUE-BASED PURCHASING FOR PHYSICIANS UNDER MEDICARE
----------
THURSDAY, JULY 21, 2005
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 1:08 p.m., in
room 1100, Longworth House Office Building, Hon. Nancy L.
Johnson (Chairman of the Subcommittee) presiding.
[The advisory and revised advisory announcing the hearing
follow:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
July 21, 2005
No. HL-7
Johnson Announces Hearing on
Value-Based Purchasing for Physicians Under
Medicare
Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on
Health of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on reforming physician payments under
Medicare by moving to a value-based purchasing program. The hearing
will take place on Thursday, July 21, 2005, in the main Committee
hearing room, 1100 Longworth House Office Building, beginning at 10:00
a.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only.
Witnesses will include the Honorable Mark McClellan, Administrator,
Centers for Medicare & Medicaid Services (CMS) and representatives from
Medicare provider groups. However, any individual or organization not
scheduled for an oral appearance may submit a written statement for
consideration by the Committee and for inclusion in the printed record
of the hearing.
BACKGROUND:
Physicians and other providers paid under Medicare's physician fee
schedule will receive cuts in payment rates of approximately 5 percent
annually for the next 7 years, beginning in January 2006. At the same
time, Medicare pays providers the same whether they deliver excellent
care or care that is ineffective, of poor quality, or out-of-date.
Since Medicare pays for resource use, the program and beneficiaries pay
for more and more services even when providers deliver ineffective or
inefficient care. Congress must continue to examine ways to address
these issues within the Medicare program, to stem the tide of rising
medical inflation, to prepare for increased enrollment from aging Baby
Boomers, and to ensure that the care delivered to Medicare
beneficiaries is of high quality.
In recent months, CMS and others have taken steps which provide a
basis for transition from a payment system that rewards the delivery of
additional services to one that rewards the delivery of quality care.
For example, in April CMS began its Physician Group Practice
Demonstration, to assess the ability of large physician groups to
improve care and create better patient outcomes and efficiencies by
implementing care management strategies. In May, the Ambulatory Care
Quality Alliance released a starter set of measures of quality and
efficiency for use in ambulatory care settings.
In announcing the hearing, Chairman Johnson stated, ``For several
years, I have argued that the current Medicare payment system for
physicians is unsustainable. We have reached the point where we can
begin to reward physicians who deliver high quality and efficient care
to our seniors under Medicare. This hearing will offer the Subcommittee
an opportunity to explore further a repeal of the old formula and
implementation of a value-based purchasing program based on the recent
work by CMS and others.''
FOCUS OF THE HEARING:
The hearing will focus on developments since the last Subcommittee
hearing in March on physician payments and value-based purchasing.
Witnesses will outline methods to pay for better results in Medicare.
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* * * CHANGE IN TIME * * *
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
July 21, 2005
No. HL-7 Revised
Change in Time for the Hearing on
Value-Based Purchasing for Physicians Under Medicare
Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on
Health of the Committee on Ways and Means, today announced that the
Subcommittee hearing on reforming physician payments under Medicare by
moving to a value-based purchasing program, previously scheduled for
10:00 a.m. on Thursday, July 21, 2005, in the main Committee hearing
room, 1100 Longworth House Office Building, will now be held at 1:00
p.m.
All other details for the hearing remain the same. (See Health
Advisory No. HL-7, dated July 14, 2005).
Chairman JOHNSON OF CONNECTICUT. Good afternoon. The
hearing will come to order. Today, we hold our third hearing
this Congress on physician reimbursements under Medicare.
During our first hearing, experts from the government
Accountability Office (GAO) and the Medicare Payment Advisory
Commission (MedPAC) and representatives from providers and
consumer goods identified problems with the formula used to set
payment updates for physicians and other providers paid under
Medicare's physician fee schedule. Experts in our second
hearing testified about steps that we could take to encourage
delivery of high-quality care and use our resources more
efficiently and effectively. Today, we will hear about progress
that has been made since our last hearing on this subject in
March. I am pleased to report that the Centers for Medicare and
Medicaid Services (CMS) and physician organizations have made
remarkable progress, which lays the groundwork for legislation
on value-based purchasing.
Last week Chairman Thomas and I wrote to Dr. McClellan, the
CMS administrator here today with us, to ask consideration of
administrative changes to the physician payment formula.
Specifically, we asked CMS to remove prescription drugs to
account for the cost of new and expanded benefits from
calculating payment updates. I look forward to Dr. McClellan's
response to our letter because I firmly believe that, together,
we can address the problems in the Sustainable Growth Rate
(SGR) formula. Frankly, if we don't, I believe that we cannot
move down the direction that we all believe is productive; that
is, a direction that ends up paying for quality.
In May, the Ambulatory Care Quality Alliance identified a
starter set of quality and efficiency measures for ambulatory
care. This is a critically important first step in developing a
value-based purchasing system. The starter set includes 26
measures of care, ranging from prevention measures for cancer
screening to chronic condition measures for diabetes, to
efficiency measures for overuse of antibiotics in children with
upper respiratory infections. While it is a good first step for
physicians providing primary care in an ambulatory setting,
more needs to be done.
I am encouraged by the collaborative effort of the American
Medical Association (AMA), the American College of Physicians,
American Academy of Physicians, America's Health Insurance
Plans, the National Quality Forum, the Alliance for Specialty
Medicine, the National Committee for Quality Assurance, and the
many other physician specialty organizations and others who
have devoted time and effort to identifying quality and
efficiency measures relevant to the care they provide to
patients.
While we are not yet ready to collect information on
quality and efficiency for all physicians, or to pay based on
the reportings or values of those measures, we are much closer
than we were only a few months ago. It is an enormous tribute
to all the groups I mentioned, all the many involved, and to
Dr. McClellan's leadership, that we are all thinking so
seriously and deeply about this challenge that faces us. It is
time we change the way we pay physicians.
I repeat my call to scrap the SGR formula because it is not
only unsustainable, it is irrelevant. Congress should implement
a stable annual update based on changes in the cost of
providing care. At the same time, we should encourage the use
of evidence-based principles to improve health care quality and
safety and promote the efficient delivery of care. We should no
longer pay providers the same regardless of the quality of care
they provide.
Finally, we should require CMS to prepare an annual
analysis of the growth in the volume of each of the services
paid under the physician service system and provide
recommendations for actions to control appropriate growth. I
maintain that the SGR system limits our ability and discourages
us from looking at sources of growth and judging what is
appropriate and what is inappropriate growth. In the real world
that faces us, we are going to have to make those judgments
more accurately, and we are going to have to be able to
understand where we need volume increases in the physician
performance areas in order to save costs in the hospital area.
A new value-based purchasing program should include
differential payment based on the quality and efficiency of
care provided. Measures should be evidence-based, consistent,
valid and not overly burdensome to collect; relevant to
providers, consumers and purchasers; provide a balanced measure
of performance; and include measures of resource use. The
system must guarantee fairness by taking into account a
patient's health status and willingness to comply with
physician orders. It should not directly or indirectly
encourage patient selection or deselection.
Finally, it is critical that physicians play an integral
role in the development of the clinical care measures.
Physician specialty organizations should identify clinical care
measures for consideration by consensus-building organizations,
which includes representatives from physicians--and I would say
practicing physicians--patients, physician organizations, CMS,
and experts in quality and efficiency. The CMS should be
required to select clinical care measures from among these
recommended by the consensus group. The CMS should also retain
authority to identify nonclinical care measures through
rulemaking. Our witnesses will expand on these and other
issues.
On our first panel we have Dr. Mark McClellan, the CMS
administrator. Dr. McClellan will provide us with details about
CMS's efforts to fix the physicians' payment update for 2006
and his plans for incorporating value-based purchasing for
physician services into Medicare. Our second panel includes Dr.
Hedberg from the American College of Physicians and Dr.
Armstrong from the AMA, who will describe the extensive work
that these organizations have undertaken in this area. In his
written testimony, our third witness, Dr. Kassirer, will
identify perverse financial incentives in medicine and outline
the negative consequences that result. I have been informed
that, due to short time available for the preparation of his
written testimony, he was unable to include his recommendations
for changes to address his concerns. I hope that during his
oral presentation and questioning thereafter we will have a
chance to hear his recommendations. Dr. Stark--I mean Mr.
Stark, would you like to make--I am free and easy with these
degrees.
Mr. STARK. I will take the increase in pay, thank you very
much. Madam Chair, this is the third hearing we have had in 6
months on physician payments under Medicare. While we have not
been able to look at your bill--and nor, as I understand it,
has the Administration had a chance, except to read it and then
not have it--it is very difficult for us to ask the right
questions and make the right statements because we haven't been
able to study your bill, which I understand is going to be
introduced next week, and that will give us no opportunity to
ask reasonable questions today and have decent input. That is
generally the way the current leadership in the House has been
working; and we, once again, have been precluded from
participating in this important topic.
I think the public's interest would be well served if we
spent some time, however, on other issues, such as conducting
oversight on the confusing Medicare prescription drug benefit.
All the hoopla about wanting Democrats to help promote this new
law--the word came out this morning that Secretary Leavitt and
his merry band are in Chicago right now, and the Chicago
Congresspeople were just notified this morning. So, it begs the
question whether this is a legitimate effort to inform
constituents or a political campaign to sell propaganda to
hand-picked crowds. As for today's hearing, I know that pay-
for-performance or value-base purchasing--or whatever the
current buzzword is--it is the current hot topic. However, I
think that we have to consider all aspects of the system to
fully understand the perverse incentives that exist today and
how, or even whether, they will be affected by the proposed
changes in payment policy once we get to look at them.
As for the topic of physician fees, we can't afford to
consider the update problem in isolation. For example, even
though per-service fees will be reduced under the current law,
data shows that the overall physician spending on a per-
beneficiary level will increase because of the greater volume
and intensity. I am not saying that successive years of
negative 5 percent updates are desirable, but the picture is
not as clear as some would have us believe, that doctors are
getting more pay per year and that the piecework rate is going
down. Maybe they are just doing things better and more quickly.
So, we need to pay physicians appropriately to maintain access.
I have no problem with physicians making a decent living, even
from Medicare, but the evidence on physician income suggests
that, although Medicaid reimbursements may be low in some
areas, physician incomes continue to rise. The only exception
is probably among general practitioners and primary care
providers, and I think we all feel somewhat sympathetic to
their overwork and underpay.
The current focus on pay-for-performance masks these
underlying problems. Value-based purchasing, whatever that is,
is not a replacement for SGR. Even if there is some potential
for these mechanisms to affect physician practice and
ultimately decrease inappropriate volume, this won't occur for
decades, and we need a way to control the total cost of
physician services today. Past experience with Medicare
demonstrates that volume goes up regardless of whether payments
are increased or decreased. While some of this increase may
very well be appropriate--for instance, more preventative
care--data shows time and time again that some is clearly not
appropriate. Perhaps it is time to delve more deeply into the
underlying payment issues in Medicare with the help of CMS and
MedPAC to ensure that we pay appropriately for appropriate
care. This is a much less sexy issue, but it is much more real
and complex.
There are two more critically important items that ought to
be on the table for discussion. Raising physician fees will
raise copayments for beneficiaries. Given the record-high
premium increases this year and the addition of the part D
premiums next year, it seems we should be able to agree that if
new money is spent--and I would still argue that this should be
budget neutral--budget premiums would be protected--I hope you
can agree with me on that--because the beneficiaries will soon
use up all their Social Security just to pay their Medicare
premium. Second, increasing physician fees exacerbates the
problem we will face as a result of the so-called 45 percent
trigger. This hidden sword of Damocles is designed to destroy
Medicare's entitlement status. Soon we will be chasing our
tails over how to clamp down on Medicare general revenue
support generated in part by this exercise of the trigger. I
hope that we can have an honest conversation about repealing
the nonsensical trigger provision sooner rather than later.
I understand what we are doing today is an important issue,
but I want to make sure that we have the right pieces in place
to ensure volume control before we throw SGR in the trash. I
want to protect the beneficiaries from premium increases that
could arise from this proposal. I look forward to eventually
seeing the bill, if only in the Congressional record, so that
we could have an open discussion of how it might be perfected.
Chairman JOHNSON OF CONNECTICUT. Thank you, Mr. Stark. I
would remind you that your staff did read the bill, and I think
I personally gave it to you last week.
Mr. STARK. No, we have never had a copy. The staff was not
allowed to take the bill with them. The same is true of the
Administration; they could read it.
Chairman JOHNSON OF CONNECTICUT. Dr. McClellan.
STATEMENT OF THE HONORABLE MARK MCCLELLAN, M.D., ADMINISTRATOR,
CENTERS FOR MEDICARE AND MEDICAID SERVICES
Dr. MCCLELLAN. Thank you, Madam Chairman, Congressman
Stark, all of the distinguished Subcommittee Members. It is a
real pleasure to testify with you on value-based purchasing for
physicians under Medicare. Paying physicians effectively is one
of the most important issues that we face in the Medicare
Program, and I am pleased that we are all working on it
together. At a time when we are bringing Medicare's benefits up
to date, when we have more opportunities than ever to provide
up-to-date care to seniors and people with disabilities to help
them live longer and better lives, we need to support the
participation and leadership of physicians through our payments
that take advantage of all these unique opportunities.
We need to ensure that physicians are adequately
compensated in Medicare. Medicare's payment system for
physicians should support and enable physicians to provide
quality care and prevent avoidable health care costs.
Physicians are in the best position to know what can work best
and improve their practices, and physician expertise, coupled
with their strong professional commitment to quality, means
that any solution to the problems of health care quality and
affordability must involve physician leadership.
The current system of paying physicians is simply not
sustainable, as you all noted in your opening statements. Just
as 7 years of projected negative updates in physician payments
are not sustainable, neither is simply adding larger updates to
the current payment system. The current system has resulted in
large increases in volume and intensity of services. Some of
the resulting expenditure growth reflects valuable improvements
in access to innovative medical care, but, as Congressman Stark
noted, some of it involves tests and visits and imaging
procedures that do not reflect clear medical evidence and that
vary widely across medical practices, with no clear
relationship to quality of care and outcomes. Despite all the
spending growth, physicians often are not getting the support
they need to prevent complications and help beneficiaries stay
well. CMS is committed to continuing to work with Congress and
the medical community to remedy this situation as soon as
possible.
One option recommended to CMS to deal with the physician
update issue would be to remove part B drugs from the services
included in the physician update formula. We are working hard
on this issue. Removing drugs, though, presents some difficult
legal issues that we haven't yet been able to fully resolve,
but, more importantly, it wouldn't solve the entire problem. It
should be noted that if we were able to work with physicians to
improve care, avoid duplicative services, and prevent
complications just enough to reduce the rate of growth in
Medicare spending over 5 years by about 1 percentage point, we
would save enough to pay for a physician update of 1.5 percent
in all of those years.
Implementing quality measurement and payment systems could
reduce the rate of growth, but, more importantly, these steps
would also provide better support to physicians to improve
quality and avoid unnecessary medical costs for patients and
taxpayers. So, I know we can do better. For example, a
physician who calls or e-mails a diabetic patient to help them
promptly change their insulin doses to keep their blood sugar
under control gets no financial support from Medicare, which
will pay a lot more if the physician requires the patient to
come all the way into the office, even though this approach
uses more resources and may lead to worse sugar control. We pay
oncologists much more to give patients with metastatic cancer
additional chemotherapy drugs, whose use is not guided by
evidence-based practice guidance, than we pay to help the
patient and their family understand their prognosis and achieve
more comfort and a better quality of life, something, again,
that the oncologist is in the best position to do. As another
example, 21 percent of our beneficiaries who are hospitalized
with heart failure are readmitted within 30 days. Studies show
that about half of these readmissions are preventable, yet
Medicare pays much less when physicians take steps to prevent
readmissions.
There are too many examples like these where we pay more
when patients have higher costs and worse results. That is
because Medicare's current physician payment rates for service
are the same regardless of its quality, its impact on improving
a patient's health, or its impact on keeping the overall cost
of health care down. It is time to provide better support to
physicians. Linking a portion of Medicare's payments to
clinically valid measures of quality and an effective use of
health care resources would give physicians more financial
support to take steps that actually result in improvements in
the value of care that people with Medicare receive. Madam
Chairman, I appreciate your leadership on this critical issue.
In the fiscal year 2006 budget, the President recognized
the need for payment reforms to improve the value of care
delivered to people with Medicare by building on current
Administration efforts to pay for better quality. The MedPAC
has also made many recommendations to implement measures of
quality and efficiency and to pay for value, and I think it is
critically important that physician organizations are helping
to lead the way. The AMA has supported the development of
quality measures in many specialties, and I particularly want
to thank Dr. Armstrong and his colleagues for their time and
expertise and collaboration with CMS and other Federal agencies
in these efforts.
A number of specialty societies, including the American
Academy of Physicians, the American College of Physicians and
the Society of Thoracic Surgeons, have helped lead the way in
developing clinical quality measures when they proposed
specific ways to use them to support better care. Using these
quality measures, CMS is now conducting a number of
demonstrations and pilots of payment reforms to pay more for
better quality, better patient satisfaction and lower overall
health care cost in the Medicare fee-for-service program. These
reforms also reflect the experience of private sector payers
and health plans that have already implemented the same kind of
programs. The CMS has implemented a demonstration project to
test pay-for-performance in our fee-for-service payment system
for physicians. In our physician group practice demonstration,
10 large multi-specialty physician group practices will
continue to be paid on a fee-for-service basis, but they may
also get performance-based payments for improving the quality
of care and, at the same time, reducing the growth in overall
Medicare spending for their patients.
We are seeing, as a result, investments in effective health
information technology systems, in patient reminders, in
medication assistance, in all the steps that help physicians
deliver better care but until now Medicare didn't support
financially. The experience in the private sector is even more
extensive. The Leapfrog Compendium on Pay-For-Performance
includes more than a hundred projects related to physicians.
For example, the Bridges to Excellence program, a not-for-
profit organization of employers, providers and plans, has
three programs to promote and reward improvements in the
quality of care for patients, physicians' offices, diabetes
care, and cardiac care.
The results of these and many more physician-led
initiatives lay a solid foundation for reforming Medicare
payments to improve quality and avoid unnecessary costs. In
fact, Medicare will shortly implement a pilot program for small
physician practices that is based on the Bridges to Excellence
program called our Medicare Care Management Performance
Demonstration to improve quality and reduce costs and to
provide support for implementing effective information
technology systems. Madam Chairman, it has taken a lot of
collaborative work to get to the point where we can now see the
way to a better payment system, to a better alternative, to
rapid and costly increases in volume of services on the one
hand and the continuing threats of lower payment rates even for
high-quality care on the other. It will take more work together
to make the transition to a better payment system, that, as you
said, it is time to do.
We look forward to working with you and others in Congress
and the medical community to develop a system that ensures
appropriate payments for physicians while also promoting the
highest quality of care without increasing overall Medicare
costs. The rapid recent increases in spending make these
collaborative efforts even more urgent. We need to increase our
emphasis on helping physicians improve quality and avoid
unnecessary costs by changing the current physician payment
system. Thank you very much for this opportunity, and I would
be pleased to answer any of your questions.
[The prepared statement of Dr. McClellan follows:]
Statement of The Honorable Mark McClellan, M.D., Administrator, Centers
for Medicare and Medicaid Services, U.S. Department of Health and Human
Services
Madam Chairman Johnson, Congressman Stark, distinguished
Subcommittee members, thank you for inviting me to testify on value-
based purchasing for physicians under Medicare. As you know, the
Centers for Medicare & Medicaid Services (CMS) is actively engaged with
both the Congress and physician community on this important topic.
Continued improvement of the Medicare program requires the successful
participation of physicians and we need to ensure they are adequately
compensated for the care they provide to people with Medicare. But how
we pay also matters. In addition to providing adequate payments,
Medicare's payment system for physicians should encourage and support
them to provide quality care and prevent avoidable health care costs.
After all, physicians are in the best position to know what can work
best to improve their practices, and physician expertise coupled with
their strong professional commitment to quality means that any solution
to the problems of health care quality and affordability must involve
physician leadership.
Because it is critical for CMS payment systems to support better
outcomes for our beneficiaries at a lower cost, CMS is working closely
and collaboratively with medical professionals and the Congress to
consider changes to increase the effectiveness of how Medicare
compensates physicians for providing services to Medicare
beneficiaries. I am engaging physicians on issues of quality and
performance with the goal of supporting the most effective clinical and
financial approaches to achieve better health outcomes for people with
Medicare. At the same time, however, we are concerned and are closely
monitoring the current volume-based payment system for physicians'
services, which projects seven years of negative updates in physician
payments. Simply adding larger updates into the current payment system
would be extremely expensive from a financing standpoint, and would not
promote better quality care. Under this system, there are significant
variations in resources and in spending growth for the same medical
condition in different practices and in different parts of the country,
without apparent difference in quality and outcomes. CMS is committed
to working with Congress and the medical community to remedy this
situation by developing reporting and payment systems that enable us to
support and reward quality.
CMS is engaged with a number of stakeholders to address this
situation. For example, MedPAC has made many recommendations to improve
the payment system. In addition, a number of specialty societies,
including the American College of Physicians, American Academy of
Family Physicians, and the Society of Thoracic Surgeons, are in the
vanguard of leading change. In addition, like many private-sector
health care payers and plans, CMS also is conducting a number of
demonstrations and piloting various payment reforms to reward providers
for better quality, better patient satisfaction, and lower overall
health care costs in the Medicare fee-for-service program.
Madam Chairman, in terms of physician payment, the best ideas of
physician organizations, health care experts, the private sector, and
our own demonstration programs are all pointing to the same conclusion.
Medicare needs to move away from a system that pays simply for more
services, regardless of their quality or impact on patient health, and
consequently contributes to reductions in the physician update under
the current payment formulas, to a system that instead encourages and
rewards efficiency and high quality care for the Medicare program and
its beneficiaries. As it stands, the physician payment system does not
always recognize clinically appropriate care. For example, Medicare
will pay for a duplicate x-ray or blood test right before surgery if a
hospital does not coordinate care adequately with the physician's
office. CMS' physician payment system should support, encourage, and
provide an incentive for physicians to achieve Medicare savings by
avoiding unnecessary services such as duplicate tests and to use those
savings in developing improvements to the physician payment system. In
addition, the physician payment system also may steer patient care
decisions. Oncologists, for example, are paid less for transitioning a
terminal patient to palliative care and focusing on quality of life
issues than for recommending and providing intensive procedures even if
the side effects of those procedures are significant and the benefits
negligible. In addition, currently the payment system does not reward
physicians who actively prevent readmissions for patients with heart
failure or diabetes.
Physician Payments Based on Statutory Formula
Updates to Medicare physician payments are made each year based on
a statutory formula established in section 1848(d) of the Social
Security Act. The calculation of the Medicare physician fee schedule
update utilizes a comparison between target spending for Medicare
physicians' services and actual spending. The update is based on both
cumulative comparisons of target and actual spending from 1996 to the
current year, known as the Sustainable Growth Rate (SGR), as well as
year-to-year changes in target and actual spending. The use of SGR
targets is intended to control the growth in aggregate Medicare
expenditures for physicians' services. Target expenditures for each
year are equal to target expenditures from the previous year increased
by the SGR, a formula specified in the statute comprising the following
four factors: (1) the estimated percentage change in fees for
physicians' services, (2) the estimated change in the average number of
Medicare fee-for-service beneficiaries, (3) the estimated 10-year
average annual growth in real gross domestic product (GDP) per capita,
and (4) the estimated change in expenditures due to changes in law or
regulations.
When actual spending exceeds targeted spending, the following
year's update is modified to bring actual spending back in line with
the targets. Unfortunately, actual spending has greatly exceeded
targeted spending, and the formula results in negative updates to
physician payments to correct this disparity. Recent rapid growth in
the volume and intensity of physicians' services per beneficiary is
driving the growth in Medicare physician spending and resulting in the
negative updates. Presently, we project a negative 4.3 percent update
to physician payment rates for 2006 and additional negative updates for
the following six years. The current system eventually corrects the
discrepancy and under our latest projections results in positive
updates after 2012. CMS is fully cognizant of the potential
implications of seven years of negative physician updates, remains
concerned, and is closely monitoring physicians' participation in the
Medicare program and beneficiaries access. What is especially
concerning is that these reductions in the payment rates for services
will occur at the same time as Medicare physician spending continues to
go up. Projected increases in the volume and intensity of services for
2006 would result in increases in total physician revenue from Medicare
for 2006. In other words, our current payment system has a risk in
terms of access problems, yet we still are facing sharply rising
increases in Medicare spending.
We need to do better. We will continue to work with Congress and
physician communities. Although we have not yet seen evidence of a
problem, we are closely monitoring access for people with Medicare.
Thus, we need to ensure payment for physicians is adequate and
appropriate. Both the President's Budget and the Congressional Budget
Resolution presume this will be done in a cost-neutral manner. We have
worked with Congress and physicians to understand more about why
physician volume, and thus spending, is going up, and to develop better
approaches to supporting physicians in providing high quality, up-to-
date care.
Volume and Utilization Drive Medicare's Increasing Physician
Expenditures
Despite an update to payment rates of 1.5 percent during 2004,
preliminary data indicate that overall expenditures for physicians'
services during 2004 grew by some 13 percent. Sharp rises in the volume
(number) and intensity (type) of services provided to people with
Medicare are the driving factors in increasing Medicare's expenditures.
Medicare beneficiary growth between 2003 and 2004 and payment
modifications required under the Medicare Modernization Act (MMA)
account for only a small fraction of total spending growth.
Such a large increase in expenditures has significant ramifications
for future Medicare spending, and thus, updates to physician payments.
This growth has increased the cost of addressing negative physician
updates. These increases strain the Federal budget and contribute to
annual increases in beneficiary premiums. That is why understanding the
sharp rise in these expenditures in 2004 is very important.
CMS' preliminary analysis of the 2004 increases in spending for
physicians' services indicates that major contributors to growth
included:
Increased spending for office visits, with a shift toward
longer and more intensive visits;
Higher utilization of minor procedures such as therapy
services;
Increased number of patients receiving more complex and
more frequent imaging services, with notable increases in MRI scans;
Increased use of laboratory and other tests; and
Greater utilization of currently covered drugs
administered in physicians' offices.
CMS has taken collaborative steps to better understand these
concerning trends, including what changes in utilization are likely to
be associated with important health improvements and which have limited
or questionable health benefits. We have been reviewing the technical
aspects of this situation in detail with health policy experts as well
as the AMA and various specialty societies. For example, the AMA has
provided us with some potential reasons accounting for growth. While it
was not possible with available data to precisely analyze the impacts
of every factor identified, we were able to assess the impacts of most
of them. Generally, our results indicate that while the factors the AMA
identified have contributed to higher spending, our preliminary
analysis suggests that these identifiable factors do not account for a
substantial part of the $10 billion spending growth between 2003 and
2004.
In a number of cases, although the rate of spending growth for a
particular service may be above average, it is not significantly
different than the growth in spending for other, similar procedures
where no special clinical developments have yet been identified. For
example, the AMA suggested several reasons for a particular increase in
the use of echocardiography. However, we compared the growth in these
services from 2003 to 2004 with the growth in all imaging services, and
found the increases to be the same for both groups (19 percent).
Therefore, although the increase in 2004 is large, by itself, the
increase in echocardiography services does not account for a
disproportionate percentage of the increase in imaging services
overall.
For several other services where clinical factors suggested growth
might be particularly rapid, we did observe large percentage increases
from 2003 to 2004, but the dollar impact was relatively minor. An
example is electrical stimulation for bone healing. Spending rose for
this service by 35 percent in 2004, but total spending was only $50
million, although a $13 million increase from 2003. This factor would
have minimal impact in explaining the overall growth in physician
spending from 2003 to 2004.
Of the factors the AMA identified, the one that appears to
contribute the most to overall spending growth is the drug
Pegfilgrastim (Neulasta). Spending for this drug in 2004 was $518
million, up from approximately $253 million in 2003. We have not been
able to confirm the clinical suggestion that by strengthening the
immune system of cancer patients, this drug is preventing immune-
related complications so that patients are kept out of the hospital,
shifting costs from Medicare Part A to Part B, rather than simply
increasing costs. But we remain interested in supporting the
development of such ``preventive'' evidence.
We appreciate the efforts of the AMA and the many specialty
societies that assisted CMS in identifying these medical trends. They
have helped further our understanding of the reasons for the growth in
spending. I am sure that all stakeholders involved in these critical
payment issues will benefit from an ongoing, evidenced-based dialogue
regarding these issues, particularly focusing on which changes in
utilization are likely to be associated with important health
improvements and which ones have health benefits that may be more
questionable.
Options to Change the Physician Update
The cost of avoiding the negative physician update simply by
increasing the update factor is quite substantial. One option suggested
by the Medicare Payment Advisory Committee (MedPAC) would legislatively
eliminate the SGR system in favor of an update that is similar to the
current Medicare Economic Index (MEI), which measures the weighted
average price change for various inputs involved with producing
physicians' services. CMS actuaries have reexamined the cost of an MEI-
based physician update using the recently released mid-session review
of the budget. These new budget estimates incorporate the recent
experience of substantial volume growth under the current physician
payment system. We now estimate the ten-year cost of this approach
would be $183 billion, an increase of $20 billion from our previous
assessment of $163 billion under the FY 2006 President's Budget
Baseline. Earlier this year Congressional Budget Office (CBO) estimated
the cost would be approximately $155 billion. An MEI-based payment
update would result in positive updates to physician payments of
between two and three percent for each of those ten years.
A second option recommended to CMS would remove prescription drugs
from the services included in the SGR, either prospectively or
retrospectively. We are currently reviewing the legal arguments
regarding whether CMS can take this step under existing authorities,
and our actuaries have estimated the payment and budget implications of
such changes. A prospective approach would not provide relief to the
negative updates projected for 2006 and the succeeding several years.
While it would eventually help close the gap between the cumulative
target and actual spending, it would not result in positive updates for
several years. CMS actuaries estimate this change would cost $36
billion over ten years using the mid-session baseline.
Some have suggested a retrospective approach that would remove
drugs retroactively from the services included in the SGR beginning
with 1997, the year the SGR was implemented. Some health care trade
associations have asked CMS to make this change administratively, as
have members of this Subcommittee, most recently Chairman Johnson and
Chairman Thomas. However, retrospective removal presents somewhat more
difficult issues of statutory authority than prospective removal. For
example, the statute requires the estimated SGR be refined twice based
on actual data. The crux of the issue is that after the SGR has been
refined twice, the statute does not provide for additional revisions,
which would be required for at least some prior years should drugs be
removed from the system retroactively. In terms of budget impact, we
estimate that this approach would cost $111 billion under the Mid-
Session Baseline. Moreover, even if the authority existed to remove
drugs from the SGR retroactively, positive updates may not occur for
physicians in 2006 or the succeeding few years. This is a notable
change from estimates using the FY 2006 President's Budget Baseline
where the preliminary estimate of the 2006 update would have been
positive. The change from a positive to negative update for 2006 is due
to higher actual physician spending for 2004 and revisions made to the
2003 data. In addition, prospective or retrospective removal of drugs
would increase beneficiary premiums. And because Part B drugs use shows
substantial variation across physician practices, payment reforms that
provide more support for higher-quality care would probably not ignore
drug use, but rather consider how drugs (and other important
treatments) are used to lead to better patient outcomes at a lower
cost.
It has also been suggested that the SGR be revised to account for
National Coverage Determinations (NCDs). The theory is that the
spending for NCDs shows up on the expenditure side but the SGR target
is not adjusted for them. While coverage of new medical technologies as
reflected in NCDs would seem to lead to changes in spending beyond
physician control, there has been substantial discussion of this theory
in recent years. Much of spending for NCDs is for services covered
before the NCD by local carrier discretion. Thus, an NCD does not
necessarily increase spending to the extent the local carrier covered
the service without an NCD. In many cases, an NCD might simply replace
differing local carrier policies with a uniform national policy. In
some instances an NCD might limit expenditures if the NCD has narrower
criteria than applied previously by local carriers. The use of the real
GDP per capita in the SGR formula was intended to be a proxy for a
number of factors that might increase the volume and intensity of
physicians' services (other than beneficiary enrollment growth and
statutory or regulatory changes), including coverage of new services
and other factors, whether within an NCD or otherwise. In addition, the
NCD impacts are generally small and unlikely to change the physician
update significantly. Also, we currently are reviewing the legal
arguments on whether CMS can take this step under existing authorities.
Nonetheless, CMS will continue to evaluate the evidence related to NCDs
and how they are accounted for in physician payments.
CMS will be issuing the proposed physician payment rule for 2006
soon and we welcome comments on these issues and other issues that
might affect the physician payment calculations.
Incorporating Performance Based Payments into Medicare
Medicare's current physician payment system pays all physicians
equally for a service regardless of its quality, its impact on
patient's health, or the efficiency with which services are furnished.
Consequently, the current system does not reward physicians when they
improve the quality of care, for example, by preventing acute health
problems that require expensive hospital admissions or other
complications that lead to a greater volume and intensity of services.
Many analysts have argued that this may be an explanation for why there
are substantial variations across geographic areas and among physicians
within areas in the use of services that do not appear to be explained
by quality of care or differences in patients treated. That is, the
current system often has the effect of directing more resources to care
that is not of the highest quality, such as duplicative tests and
services and hospital admissions to treat potentially avoidable
complications. Conversely, physicians who want to improve quality of
care find that Medicare's payment systems often do not provide them
with the resources or flexibility needed to do so. As a result,
physicians may be discouraged from investing in activities that,
properly implemented, have the potential to improve quality and avoid
unnecessary medical costs. Linking a portion of Medicare payments to
valid measures of quality and effective use of resources would give
physicians more direct incentives to implement the innovative ideas and
approaches that actually result in improvements in the value of care
that people with Medicare receive. We would evaluate the program to
assess any savings that might result.
In the FY 2006 budget, the President recognized the potential for
payment reforms to improve the value of care delivered to people with
Medicare by exploring programs that promote quality in a budget-neutral
manner. In its March 2005 Report to Congress, MedPAC offered several
recommendations including the development of measures related to the
quality and efficiency of care by individual physicians and physician
groups. I would like to note that the American College of Physicians is
supporting linking physician payment and performance.
CMS is already engaged with the physician community in the
development and improvement of specific quality measures. CMS has
worked in collaboration with the American Medical Association's
Physician Consortium for Performance Improvement and the National
Committee for Quality Assurance Ambulatory care to develop measures of
improvement in care. This partnership resulted in a set of proposed
measures that were submitted late last year for endorsement to the
National Quality Forum, a voluntary private consensus setting
organization. As part of the Ambulatory Care Quality Alliance (AQA),
led by the American Academy of Family Physicians, the American College
of Physicians, America's Health Insurance Plans, and the Agency for
Healthcare Research and Quality, CMS and other stakeholders, including
the American Medical Association and other physician groups, as well as
representatives of private sector purchasers and consumers, selected a
subset of these measures (26) as a starter set for implementation.
Additional measures that assess dimensions of specialty care and
efficiency will be added to this starter set. In addition, the AQA is
now developing approaches for reporting results to individual patients
and physicians and evaluating strategies to minimize physicians' burden
of reporting.
The entire starter set of ambulatory care measures are now in the
final stages of endorsement. These measures are designed to reflect
performance in primary care and also apply to certain specialists,
insofar as those specialists are involved in the furnishing of care to
patients with common chronic diseases, including diabetes and heart
disease. In addition, measures of effectiveness and safety of some
surgical care have been developed through collaborative programs like
the Surgical Care Improvement Program, which includes the American
College of Surgeons. The goal of the Surgical Care Improvement Program
is to prevent or decrease surgical complications, in an effort to
improve outcomes, and decrease hospital days and unnecessary use of
resources. We are also collaborating with many specialty societies,
such as the Society of Thoracic Surgeons, to develop quality measures
that reflect important aspects of the care of specialists and sub-
specialists. For example, we are working closely with oncologists to
develop measures of the adequacy of treatment planning and follow-up
that oncologists furnish as part of their evaluation and management
services; with cardiologists on measures of cardiac care for heart
attack or heart failure conditions; and with cardiovascular surgeons on
measures related to cardiac surgery. As part of this effort, on July
14, 2005, I sent a letter to a number of specialty societies,
summarizing some of the work to date and requesting an update on their
efforts to develop quality and performance measures. Historically, CMS
has had productive exchanges with most medical specialty organizations,
and if an organization has not entered discussions with us, I would
encourage them to initiate a dialogue with us as soon as possible so we
can work together to develop clinically valid measures and obtain our
goal of improving the care we provide the Medicare beneficiaries.
We also are preparing to implement the MedPAC recommendation to use
Medicare claims data to measure fee-for-service physicians' resource
use and to share these results with physicians confidentially to
educate them about how they compare with aggregated peer performance.
We are using existing claims data to simulate and test the measurement
and quantification of individual physician patterns of practice,
incorporating both services they order (including facility services) as
well as services they furnish. Resource use is often measured for
episodes of care and periods of time (e.g., 3 months). The most widely
used measure is total expenditures per episode or period of time. Other
measures of resource use are possible, such as examining the percent of
a physician's patients who have a particular service ordered. This can
indicate potential variations in practice that may affect costs
significantly without evidence-based benefits for patients. For
example, MRI scans may be ordered for patients with non-specific lower
back pain, a condition that often does not warrant the test. By
comparing relative use of such a service among physicians, a data-
driven foundation for identifying opportunities to avoid some medical
costs without harming patients may be developed. As a next step, we
expect to begin pilot projects to share the results with physicians
confidentially to educate them about how they compare to peers in an
effort to decrease the use of unnecessary services.
We also have implemented a number of demonstration projects
including one to test pay-for-performance in Medicare's fee-for-service
payment system for physicians. The Physician Group Practice
demonstration is assessing large physician groups' ability to improve
care that could result in better patient outcomes and efficiencies. Ten
large (200+ physicians), multi-specialty physician groups in various
communities across the nation are participating in the demonstration.
These physician groups will continue to be paid on a fee-for-service
basis, but they may earn performance-based payments for implementing
care management strategies that anticipate patients' needs, prevent
chronic disease complications, avoid hospitalizations, and improve the
quality of care. The performance payment will be derived from savings
achieved by the physician group and paid out in part based on the
quality results, which CMS will assess. Providing performance-based
payments to physicians has great potential to improve beneficiary care
and ensure fair and appropriate payment in the Medicare program.
In addition, CMS will implement the Medicare Health Care Quality
Demonstration. This demonstration program, which was mandated by the
MMA, is a five-year program designed to reduce the variation in
utilization of heath care services by encouraging the use of evidence-
based care and best practice guidelines. CMS also is implementing the
Medicare Care Management Performance Demonstration, a 3-year pay-for-
performance pilot with small and medium sized physician practices that
will promote the adoption and use of effective health information
technology, i.e., health IT that actually achieves improvements in the
quality of care and reductions in preventable costs for chronically ill
Medicare beneficiaries. This demonstration will provide performance
payments for physicians who meet or exceed performance standards in
clinical delivery systems and patient outcomes, and will reflect the
special circumstances of smaller practices. This demonstration project
will give CMS the opportunity to provide technical assistance to small
providers in adopting clinical information technology to improve
quality and avoid costs, as CMS has already been working to do in
limited pilots. This demonstration, required by the MMA, currently is
under development and will be implemented in Arkansas, California,
Massachusetts, and Utah. We are supporting an evaluation of this
demonstration with AHRQ and insights from health IT implementation that
produce improvements in quality and efficiency will be shared broadly
through AHRQ's National Resource Center.
Quality Improvement Organizations Assist Physicians' Offices
We recognize that taking advantage of performance-based payment
reforms may be more difficult for small providers, rural providers, and
providers in underserved areas. Consequently, CMS also has been
enhancing its activities to give such providers technical assistance
with proven systems improvements and quality improvement initiatives.
Beginning August 1 of this year, under our new three-year contract with
the QIOs, the QIOs will begin offering assistance to physicians'
offices who are seeking to achieve substantial improvements in care
through the adoption of health information technology, patient-focused
care processes, and clinical measures reporting. In each state, QIOs
will use the tools and methods developed in the Doctors Office
Quality--Information Technology (DOQ-IT) two-year pilot project to help
primary care physicians make changes to improve performance. This
initiative is part of CMS's overall commitment to supporting physicians
and other providers who are committing to success in our developing
programs of public reporting and pay-for-performance.
Over the past year, the CMS California QIO, Lumetra, has been
piloting CMS DOQ-IT assistance efforts for over 500 physicians and
their offices in California. Many of these physicians' offices are
small offices with one or two physicians and are located in rural or
underserved areas of California. Lumetra staff and consultants provide
consultation and technical assistance for these offices, supporting the
clinical process changes resulting from the incorporation of health
information technology in their offices, which in turn will allow them
to utilize electronic health records, electronic prescribing, decision
support and clinical practice guidelines relevant to their patient
population, and electronic billing and communications. In addition, QIO
staff will assist these offices in implementing office redesign to
enhance patient management, and increase office efficiency. All of
these efforts are designed to result in enhanced patient safety and
better quality of care. Our goal is to help support such effective
physician office enhancements becoming standard to all medical
practices in the coming years and CMS QIO efforts will help make sure
that all physicians' offices can accomplish these enhancements.
The QIOs also have implemented quality improvement projects that
lead to better care in rural and underserved areas. For example, Qualis
Health, the CMS Alaska QIO, has worked with the almost exclusively
rural Alaska providers to increase the rates of preventive services
available to rural Alaska residents. Mountain Pacific QIO, the CMS QIO
in Hawaii, is working to implement telehealth services to bring care
not otherwise available to rural Hawaiian beneficiaries.
Another example of QIO assistance to small physician offices is
their assistive role in CMS's release of the VISTA-Office Electronic
Health Record Software planned for August 1, 2005. CMS staff has been
working with the Department of Veteran's Affairs' (VA) staff to develop
an inexpensive and interoperable software package that will allow
implementation of a basic electronic health record (EHR) in physician
offices. A simplified version of the EHR used in VA Hospitals & Clinics
will be stand-alone and allow an in-office EHR that contains
computerized medical records, a medication formulary with refill and
drug-drug interaction notifications, a reminder system for preventive
services and diagnostic tests, and the potential to communicate
electronically with other systems in the future. It uses the VA product
base which is in the public domain and therefore affordable to small
practices taking care of rural and underserved populations. It also is
scalable and allows major software developers to devise add-on
enhancements. The QIOs will be instrumental in explaining and
facilitating the use of this product.
Medicare's Hospital Performance Based Payments Have an Impact
The experience with the MMA provision--paying hospitals an update
that is 0.4 percentage points higher if they report data on ten
measures of quality--suggests that relatively small payment incentives
can have a significant impact on provider behavior. Virtually all
hospitals are submitting the required data. There is an increasing
belief that linking a portion of Medicare payments to valid measures of
quality would support better health care. Any potential approaches to
dealing with the physician update would provide a perfect opportunity
for such linkage.
Evidence exists that some hospital admissions are preventable.
Heart failure patients have a readmission rate of 21 percent over 30
days, yet research shows that about half of the readmissions are
preventable. For example, providing angiotensin-converting enzyme
inhibitor (ACEI) drugs to heart failure patients is an example of high
quality care, yet ACEI prescriptions are found in only 66 percent of
audited patient records. Giving beta-blocker drugs to patients with
acute myocardial infarction (AMI) can reduce rehospitalizations by 22
percent, but only 21 percent of eligible AMI patients receive a
prescription for a beta-blocker. Pneumonia is a very common cause of
hospital admissions for Medicare beneficiaries, but many of these cases
could be prevented through pneumococcal and influenza vaccinations.
Studies have shown that proper adherence to vaccination protocols can
reduce hospitalizations for pneumonia and for influenza by about half,
with reduced diseases, mortality, and savings for the Medicare Program.
If physicians are supported in their efforts to better manage
patient care, preventable and costly hospitalizations, readmissions and
admissions for complications may be avoided. CMS' physician payment
system should support, encourage, and provide an incentive for
physicians to avoid unnecessary services such as preventable
admissions.
The Premier Hospital Quality Incentive Demonstration is a
demonstration project to test if providing financial incentives to
hospitals that demonstrate high quality performance in a number of
areas of acute inpatient care will improve patient outcomes and reduce
overall costs for Medicare. We believe that creating incentives to
promote the use of best practices and highest quality of care will
stimulate quality improvement in clinical practice. Under the Premier
demonstration, a hospital can receive bonuses in its Medicare payments
based on how well it meets the quality measures. Poorly performing
hospitals will face financial penalties in the third year.
Preliminary analysis of the demonstration has shown that quality of
care has improved significantly in hospitals participating. The
demonstration tracks hospital performance on a set of 34 widely-
accepted measures of processes and outcomes of care for five common
clinical conditions. The 17 measures included in Medicare's national
hospital quality reporting program are a subset of these measures. The
preliminary analysis shows improvement in all five clinical areas being
tracked in the three-year demonstration. The analysis of first-year
performance found median quality scores for hospitals improved:
From 90 percent to 93 percent for patients with acute
myocardial infarction (heart attack).
From 86 percent to 90 percent for patients with coronary
artery bypass graft.
From 64 percent to 76 percent for patients with heart
failure.
From 85 percent to 91 percent for patients with hip and
knee replacement.
From 70 percent to 80 percent for patients with
pneumonia.
Overall, these conditions account for a substantial portion of
Medicare costs. If we achieve improvements in aspects of care that are
proven to help patients avoid complications, patients are less likely
to require more costly follow-up care for such conditions, and they are
more likely to have a better quality of life. As evidenced by the early
work of some of our demonstration projects, we are seeing meaningful
results, which are providing a promising foundation to support the most
effective clinical and financial approaches to achieve better health
outcomes for Medicare beneficiaries.
Private Sector Initiatives Pave the Way for Improved Quality and
Efficiency
The private sector also has recognized opportunities to improve
quality and efficiency of care through better measurement of the
delivery of care in coordination with better reimbursement models. In
fact, the Leapfrog Compendium on Pay-For-Performance includes more than
100 projects related to physicians. For example, the Bridges to
Excellence (BTE) program, a not-for-profit organization of employers,
providers, and plans, has three programs to promote and reward
improvements in the quality of patient care for physicians' offices,
diabetes care, and cardiac care. To date, participating employers have
paid over $1.65 million in bonus payments to over 800 physicians in the
four participating markets for exceeding National Committee for Quality
Assurance performance criteria. Results to date indicate that
physicians can and do participate and report their performance
accurately.
A large health plan in New Hampshire launched a quality improvement
incentive program in 1998, rewarding primary care physicians for the
provision of quality care. The metrics for its quality improvement
incentive program are the Health Plan Employer Data and Information Set
(HEDIS) measures. The program uses claims and administrative data from
its disease management program to assess physician practice
performance. Incentive payments are awarded to practices scoring
greater than the network average. In 2001, the average physician bonus
payment was $1,183 and the highest bonus payment was $15,320. In the
first year, the plan's average rates for mammography, immunization, and
pediatric exams showed increases. Adult female patients receiving Pap
smear tests rose from an overall rate of 80 percent in 1999 to 98.5
percent in 2000 for the top quartile of physician practices. For all
performance measures for which 1999 baseline data were available, the
average incentive program physician practice conformity with
performance measures rose from 51.2 percent to 65.6 percent in 2000.
In 2003 a large health plan in Massachusetts launched a group
practice incentive program for groups of specialists. Group practices
are measured in three categories: patient satisfaction and access,
quality of care, and cost. Group practices that perform better than
average on the quality measures earn a bonus that could total up to
fifteen percent of the regular fees paid to that physician group.
An Illinois coalition of employers initiated a program in 2000 that
provides incentives to physicians for monitoring diabetes patients.
Compensation is awarded to physicians in the program who meet annual
goals in diabetic treatment thresholds. To gain physician buy-in into
the program, a committee of physicians developed the performance goals.
The coalition and medical group administrators negotiated the amount of
the financial incentives a medical group could receive if they met the
goals. Results reveal that diabetic care for patients in the program is
significantly better than state averages and cost trends for diabetics
are better than trends for all other conditions.
A Hawaiian medical association launched a voluntary practitioner
quality and service recognition program. Practitioners who enroll share
in a multimillion dollar budget earmarked to recognize practitioners
for adhering to recognized standards of quality and clinical practices
proven by research to improve clinical outcomes. Each program
participant receives an award based on his or her scoring in each of
the program components--quality indicators, patient satisfaction, and
business operations. Practitioners are measured on a total of 68
clinical measures. Analysis of data on key clinical quality indicators
over the six years of the program demonstrates statistically
significant improved performance.
In Minnesota a health partner's program recognizing outcomes offers
annual bonus awards to primary care clinics that achieve superior
results in effectively promoting health and preventing disease.
Eligible primary care groups are annually allocated a pool of bonus
dollars that is awarded if a group reaches specific comprehensive
performance targets. Since 1997, bonus awards have totaled over $2.5
million. The impact on quality of care has been substantial. The
proportion of diabetes patients meeting optimal care standards nearly
tripled since 1999, and the rates of optimal coronary artery disease
patients reaching all treatment targets doubled. The rate of members
receiving all preventive care doubled. Tobacco use assessment at all
visits increased from 45 percent to 85 percent over four years and more
patients are routinely provided assistance to quit. Diabetes eye and
kidney complications rates dropped by nearly 50 percent, and costs are
trending significantly below costs for all other patients. Tobacco use
rates dropped ten percent to an all time low. In Minnesota death from
heart disease dropped to the lowest rate in the nation and continues to
decline.
A health care leadership association of health plans, physician
groups, and health systems in California recently implemented
coordinated, state-wide pay-for-performance initiatives. Based on a
comparison of data from the first year (2003) and test year (2002)
nearly 150,000 more California women received cervical cancer
screenings, 35,000 more California women received breast cancer
screenings, 10,000 additional California children received two needed
immunizations, and 18,000 more Californians received a diabetes test.
The program paid an estimated $50 million to 215 California physician
groups in the pay-for-performance program in 2003 (paid out in 2004),
and an estimated total of $100 million to the same physician groups
under all of the association's quality programs.
The American Society of Clinical Oncology's Quality Oncology
Practice Initiative (QOPI) is an oncologist-led, practice-based quality
improvement initiative. QOPI's goal is to promote excellence in cancer
care by helping practices create a culture of self-examination and
improvement. The process employed for improving cancer care includes
measurement, feedback, and improvement tools for medical oncology
practices. Practicing oncologists and quality experts developed the
QOPI quality measures, which are derived from clinical guidelines or
published standards, adapted from the National Initiative on Cancer
Care Quality (NICCQ), or consensus-based and clinically relevant.
Although the measures not linked to financial reimbursement yet, QOPI
is an example of a specialty society-driven quality initiative that can
be easily linked to a pay-for-performance program.
Results of these and many more physician-led initiatives lay a
sound foundation for CMS to move forward collaboratively with you and
with leading physician and health professional organizations with
performance based payments for physicians in Medicare to improve
quality and efficiency. These approaches also are aligned with emerging
requirements from medical specialty boards for maintenance of
certification. While recertification has traditionally involved
demonstrating cognitive knowledge only, all boards are moving to link
maintenance of specialty certification with demonstrated efforts to
improve clinical care quality and performance. We recognize that
physicians need to be actively engaged in establishing this new
direction and will continue close consultation and collaboration to
assure improved quality and reduced burden for busy practitioners.
Conclusion
Madam Chairman, thank you again for this opportunity to testify on
improving how Medicare pays for physicians' services. We look forward
to working with Congress and the medical community to develop a system
that ensures appropriate payments for physicians while also promoting
the highest quality of care, without increasing overall Medicare costs.
The rapid increases in physician spending in 2004 make these
collaborative efforts even more urgent: we must assure both access to
high-quality care and fiscal sustainability. As a growing number of
stakeholders now agree, we must increase our emphasis on payment based
on improving quality and avoiding unnecessary costs to solve the
problems with the current physician payment system. I would be happy to
answer any of your questions.
Chairman JOHNSON OF CONNECTICUT. Thank you, Dr. McClellan.
I was interested in the statement in your testimony, which I
didn't see in your written testimony, that if you reduce one
physician services use by 1 percent--now is that across the
definition of physician services under SGR?
Dr. MCCLELLAN. Well, that is overall Medicare services. In
our discussions with a lot of the medical groups, they have
pointed out a lot of steps they could take to help reduce costs
in other parts of the Medicare program, for example, by
avoiding hospitalizations, by avoiding expensive surgical
procedures, and steps like that. So, if we can find ways to
work with physicians to support them in those activities, we
can get the overall cost down; that, in turn, can help give
physicians a more stable payment system.
Chairman JOHNSON OF CONNECTICUT. It also means that we have
to be able to see ``savings'' as money saved in part A by
actions taken in part B.
Dr. MCCLELLAN. That is right, and that is why understanding
the connections between steps that physicians can take and the
impact on overall costs is so important. Congressman Stark
mentioned that. We have been doing a lot of work to understand
that better, with help from the AMA and other societies, and I
think we are in a much better position to move forward in that
direction.
Chairman JOHNSON OF CONNECTICUT. One of the problems is
that many of the things that you need doctors to do--and you
give a number of examples in your testimony--increases office
expenses. It means they are seeing people to provide preventive
drugs. They are seeing people to provide preventive advice and
so on and so forth. Once they get someone in with an early
sign, there might be other tests. So, there is a lot of ways in
which front-loading the care to keep people out of hospitals
and emergency rooms actually increases services; and under the
SGR, that decreases physicians pay, does it not?
Dr. MCCLELLAN. That is correct.
Chairman JOHNSON OF CONNECTICUT. How can you possibly
provide incentive payments when 5 percent cuts are going to
wipe out any incentive payment, certainly even any positive
payment?
Dr. MCCLELLAN. I agree that the current system with its
forecast of 7 years of close to 5 percent payment cuts is just
not sustainable. At the same time, while many of these services
that physicians are providing in their offices more frequently
are going to help patients live longer and better lives, when
you look at the actual details, some of the services--again, as
Congressman Stark mentioned--do not appear to be related to new
medical evidence or new breakthroughs in medical technology. It
is things like patients seeing specialists four or five times
in 3 months, rather than just once.
Chairman JOHNSON OF CONNECTICUT. I appreciate that, but not
only is the SGR not sustainable, there isn't any way you can
make any progress on payment-for-performance as long as the SGR
formula is in place in the law; isn't that true?
Dr. MCCLELLAN. We would certainly be in better shape under
a different approach, and that is what we are seeing in some of
our----
Chairman JOHNSON OF CONNECTICUT. Wait a minute now. Not
only would you be in worse shape, you would also have negative
updates even if you add benefit-for-performance under the
current formula; isn't that true?
Dr. MCCLELLAN. That is right. Under the current formula,
the big increase that we see in utilization creates this
vicious cycle of automatic reductions and payment cuts, and you
get into that problem.
Chairman JOHNSON OF CONNECTICUT. Big increases in
utilization, as was made very clear in the letter from your
office to MedPAC, have a number of components to it since we
pay lots of other people, besides physicians, under this part
of the law. So, as long as we are responsible for evaluating
growth of services in those areas and managing that, we are in
as strong a position under repeal of SGR as we are currently.
In fact, we may be stronger because you will get a clear
identification of growth of costs and services in each one of
those areas, isn't that so? If you structure the loss so that--
--
Dr. MCCLELLAN. I do. I also think, though, that the
decisions, as I said in my opening statement, the decisions
that physicians make matter; and there are lots of things that
every doctor that I talk to around the country can do. These
are things that I know from my own medical practice, that if we
had a system that supported quality care rather than just more
volume, regardless of its impact on patients' health, could
help physicians provide more of those services. Those could
have an impact on reducing all types of other costs, not just
the costs in their own offices.
Chairman JOHNSON OF CONNECTICUT. I absolutely agree with
you, but I don't see how we shift to that system under the
current law, because the current law will defeat us before we
even get started. Certainly its plan of defeat is so many years
that, unless we do something about it, we can't proceed down
this new path, which will both improve quality and control
costs. We all agree it will control costs. So, I want to make
sure that it is clear and understood between us and everyone in
the room that you cannot do this unless you change current law.
Dr. MCCLELLAN. That is why we are here today. That is why
we are working so closely with all the Committees of
jurisdiction. That is why we are working so closely with the
medical associations on this very important priority.
Chairman JOHNSON OF CONNECTICUT. Now, a lot of examples
have been given to me. If we repeal the law--I suppose this
would be irrelevant--but the law requires that we adjust SGR
for law and regulation. Now, there are a lot of program
memorandums and a lot of national coverage decisions that have
the effect of increasing the cost under Part B.
In some of the later testimony, a lot of things are laid
out effective January 1. This is from the AMA's testimony: The
following new or expanded Medicare benefits, some of which have
been mandated by AMA, will be required: the physical
examination, diabetes screening, cardiovascular screening,
blood tests--it goes on through quite a long list.
It is also true that we have had national coverage
decisions that required that we cover PET scans for
Alzheimer's. That ailment involves a doctor's office visit,
carotid artery study, smoking cessation and many other things,
photodynamic therapy for macular degeneration. It is impossible
to cover these things without there being an increase in office
visits. So, those are not excluded from the SGR, and so they
are also part of what is causing the apparent need to cut
physician payments. In that 13-percent increase, I think 4.4
percent is office-based.
So, what I am getting at is, there are a lot of factors
here that the current payment system sort of obscures in terms
of our taking responsibility for controlling them. I think pay-
for-performance will not only enable us to save money and
improve quality, but it will also enable us to get at the
causes of some of the growth in Medicare spending. We can't do
it unless we make changes to the SGR formula, either of
dramatic dimensions or repealing altogether; and we can't
repeal it altogether without some pretty serious collaborative
efforts.
Dr. MCCLELLAN. Again, we are pleased to collaborate on
this. I can think of no issue more important than getting this
right. It is so important for quality and so important for
access of care and so important for avoiding unnecessary costs
in the Medicare Program.
Chairman JOHNSON OF CONNECTICUT. Thank you. I am going to
yield to Mr. Stark, but I do want to conclude by reminding us
that, if we don't repeal the current law, we can't proceed down
this road. Mr. Stark.
Mr. STARK. Thank you, Madam Chair. Dr. McClellan, let's go
down this road a minute. Let's pretend for a minute that you
are Dr. Walsh. You are a urologist. Would you operate on a
patient's prostate before you took an x-ray?
Dr. MCCLELLAN. Again, the required medical standards for
care depend on the specific circumstances, but I would sure
want to follow the best available evidence, and generally that
means getting it beforehand.
Mr. STARK. What I am getting at----
Dr. MCCLELLAN. Should I start referring to you as Dr.
Stark?
[Laughter]
Mr. STARK. You now have a series, as you have mentioned in
your testimony, of demonstrations; and it always seems to me
that, where we are not physicians here, and don't know anything
about the practice of medicine, that we ought to defer to those
who do--and neither do anybody on our staffs know anything
about the practice of medicine.
You have some demonstrations going on where you have 200
physicians in 10 large practices, some of the primary ones
around the country, including the Middlesex Health System in
Connecticut, and a variety of premier group practices. You have
another practice--another demonstration that is smaller and
medium-size physician practices, fee-for-service docs; and you
have another one that deals with the improvement of care. Don't
you suspect that we may learn something from those
demonstrations that would help us craft a better program to be
used universally?
Dr. MCCLELLAN. I do. That is the reason for undertaking
these programs that go across the spectrum of different types
of physician practices and----
Mr. STARK. Now we know, also, that although it is not a big
part of Medicare, what, 20 percent of our Medicare
beneficiaries are in managed care plus or HMOs or some kind of
managed care program; is that about right?
Dr. MCCLELLAN. That is about right, yes, close to 20
percent.
Mr. STARK. The MedPAC recommended to us--I don't know if
they recommended to you, but they recommended to us that any
program of this type really ought to start with managed care
plans for a variety of reasons. First, they claim, for the most
part, that this is what they are doing. The managed care guys
came to us and said we want a bonus because we do all these
things as part of our program. Second, they have the data,
whether the group is valid or not statistically. If you use a
group of managed care plans--we are paying them right now about
115 percent of what we would pay fee-for-service docs, why not
start--if we are going to implement something before your
demonstrations are finished--and we have to. Yours may take a
couple of years. Why not start with this group where we can get
kind of instant response, if you will, from those who say that
is what they are doing and where we could observe easily and
not get a lot of push-back from solo practitioners in
Susanville, California, who say, geez, I am up here 50 miles
away from anyplace and you are impacting my practice. What
would be wrong with following MedPAC's idea and starting much
more quickly with our managed care providers under Medicare?
Dr. MCCLELLAN. Well, I think we should be focusing on
improving quality and avoiding unnecessary costs across the
board; and that goes for Medicare advantage plans, too.
Mr. STARK. Well, that wasn't my question.
Dr. MCCLELLAN. Well, that is why we have implemented some
of the changes already. Just to get to the full answer of your
question, you are absolutely right, these plans are offering
additional benefits. People can save about a hundred dollars a
month now. They are more widely available than ever before as a
result of the payment reforms. What the payment reforms did was
put in place a system of competitive bidding. So----
Mr. STARK. Then why not start with these guys in terms of
the quality requirements and the study of what they yield?
Dr. MCCLELLAN. Well, the plans report quality measures now,
and they also get paid based on their bid. There is not a
regulated price that Medicare pays each Medicare management----
Mr. STARK. You require the minimum benefits that they have
got to provide--we do.
Dr. MCCLELLAN. Right. We also require----
Mr. STARK. Why can't we, therefore, require the standards
that we are discussing today? They more or less say what it is
they are doing.
Dr. MCCLELLAN. There certainly is a lot of interest in
that, and we are absolutely willing to look at it. I am just
saying the reason that that is a little bit different is
because there is not a Medicare regulated price there. We pay a
set amount for every physician service set by statutes that----
Mr. STARK. Let's deal with quality first and price second.
Let's just presume that the most important thing for us is
quality, and we could find out more quickly because we have a
universe that must respond--regardless, really, of what we pay
them--to the benefits that we prescribe they must provide. Then
they can bid among themselves for these base benefits.
If you want to say that, for a diabetic, certain tests have
to be done periodically, you could require that of every
managed care plan. It would be an argument of whether you have
got to pay them more for that or not, but you could immediately
get 20 percent of your beneficiaries, our beneficiaries,
covered. As I said, you have already got plans. You say, if
that is what they do, let's make them put their practice where
their mouth is and say, okay, if that is what you do, we are
going to add that requirement, we are going to study the
outcome.
We would be able to get going more quickly with people who
have submitted to us that that is why they are better, and they
are submitting that to the patients as well--I mean, to the
beneficiaries. I do suspect we are going to get push-back,
unless we pay them a lot, from a lot of sole practitioners. You
say, let's start with the guys who we have the availability to
change the way they practice already.
Dr. MCCLELLAN. I think what you are saying is, why don't
we--if we know what good care is, why don't we only pay if we
get the good care?
Mr. STARK. I am for that.
Dr. MCCLELLAN. Well, the performance-based payments are a
step in that direction. It doesn't go all the way that far
because there may be exceptions; some patients may be
difficult, or the measures may not be perfect. There are other
things that we don't measure that we also want to support, but
the performance-based payments are certainly moving in that
direction. One hundred percent of the payment is not determined
by quality, but at least a few percentage points are. I think
there is strong interest in moving in that direction.
Chairman JOHNSON OF CONNECTICUT. Let me just add to this
discussion before I recognize Mr. Hayworth, because I think it
is terribly relevant to my colleague from California's question
and didn't come out in the answer. We did change the law in
regard to the plans in the Medicare Modernization Act (P.L.
108-173). We actually mandated that they must do disease
management, and a lot of these quality protocols are associated
with the management of chronic illnesses.
Mr. STARK. All I am suggesting, Madam Chair, is, even the
ones you suggest, we could mandate on the plans, because we are
dealing with, as I said, a group that has a minimum standard
that they have to provide.
Chairman JOHNSON OF CONNECTICUT. First of all, the
likelihood is that they are not only doing that and a lot more.
When we developed these standards, we looked at the 29
standards around which consensus had been built; they are
pretty minimal, and most of the plans in the private sector are
well ahead of that. It is hard to hold the fee-for-service
system accountable in the same way because you don't have the
offsets that you have in the whole plan. The whole plan can pay
for it. That is just the one other comment that I would make,
is that in all your pilots you have a source of cross-subsidy,
because they are either very big special physician groups or
they involve plans that also have hospital reimbursement
responsibilities. So, they can pay for the pay-for-performance
and come out saving money. That is the problem with the
individual physician.
Dr. MCCLELLAN. The Medicare Care Management Demonstration,
one of the new ones that we are starting soon is for special
small companies. We are doing it in California----
Chairman JOHNSON OF CONNECTICUT. We will come back to that,
because you should talk about budget neutrality in that regard.
Mr. Hayworth.
Mr. HAYWORTH. Thank you, Madam Chairman. Dr. McClellan,
welcome; good to see you again. It is my understanding that CMS
defines physician services to include prescription drugs when
calculating the payment update, but does not include
prescription drugs in the definition of physician services
anywhere else. Why the different treatment?
Dr. MCCLELLAN. Well, Congressman, this stems in part from
the statute. There are two different definitions of physician
services. One is for payment rates under the physician fee
schedule and the other is for services that are covered under
the SGR formula, this automatic update formula that we have
been talking about. In fact, the statutory language is that the
SGR has to include ``other items and services that are commonly
performed or furnished by physicians or in a physician's
office.'' So, that is the reason why I think the historical
read has been that the SGR should include things like
laboratory tests and drugs and minor procedures, even ones the
physician doesn't perform himself or herself; and the thought
before the SGR, as Congressman Stark mentioned earlier, is that
physicians have a role in ordering or furnishing these
services.
Now, we are in the process of looking again at our
statutory authority for a possible different definition that
wouldn't include drugs, but that is the kind of thing that we
have to overcome to get there. There are a lot of really smart
lawyers working on this, and I hope they are going to be able
to get to a good and appropriate conclusion.
Mr. HAYWORTH. When lawyers meet doctors, we face
interesting challenges in public policy. It really is, when you
think--I guess the old expression was ``from soup to nuts''--
but we think about how medical care has advanced since 1965,
the various permutations we have tried to provide legislatively
to update Medicare 40 years later, and it is an unenviable task
upon which we collaborate. In that spirit, one other
interrogative. Will CMS have measures to assess the quality of
care delivered by each specialty and subspecialty of physicians
in Medicare in 2006?
Dr. MCCLELLAN. That is absolutely our goal. I would
emphasize that this is not a CMS activity, this is an activity
that is led in many cases--and certainly participated in all
effective cases--by the specialty societies. In a recent
response to a request for information on this topic from
Chairman Thomas and Chairwoman Johnson, I wrote back and
provided a list--and I would be happy to provide that to you--
of all the work that has been completed or is in progress among
the specialties.
[The information follows:]
Department of Health & Human Services
Centers for Medicare & Medicaid Services
Washington, D.C. 20201
Hon. William M. Thomas
Chairman, Committee on Ways and Means
U.S. House of Representatives
Washington, DC 20515
Dear Mr. Chairman:
Thank you for your letter in which you seek our assistance in
moving the Medicare Program toward value-based purchasing. We share
your goal of providing payments that help reshape the way we deliver
health care in this country to provide better support for greater
quality and fewer unnecessary costs, and improved health. We are
committed to working with the Congress, the provider community, and
other stakeholders to develop reporting and payment systems that enable
us to support and reward quality.
At present, the Medicare Program uses eleven different fee
schedules or prospective payment systems to pay claims for services
from over one million health care providers. As you mentioned, these
fee-for-service payment systems pay physicians and other health care
providers based on the number and complexity of services provided to
beneficiaries, regardless of their quality, efficiency, or impact on
health outcomes.
As a result, our payment systems often have the effect of directing
more resources to delivering care that is not of the highest quality,
such as duplicative tests and services, as well as hospital admissions
or visits to treat potentially avoidable complications. Conversely,
providers who have good ideas and want to take action to improve
quality of care find that Medicare's payment systems do not provide
them with the resources or the flexibility needed to do so. As a
result, providers are unable to invest in activities that, properly
implemented, have the potential to improve quality and avoid
unnecessary medical costs. Such activities could include patient help
lines, health information technology (HIT) systems that help patients
with chronic diseases understand how they can prevent complications
that result in costly hospitalizations and doctor visits, or reminder
systems for using preventive services. Linking a portion of Medicare
payments to valid measure of quality and effective use of resources
would give providers more direct incentives and financial support to
implement the innovative ideas and approaches that actually result in
improvements in the value of care that our beneficiaries receive.
In his FY 2006 Budget, the President recognized the need for
payment reforms to improve the value of care delivered to Medicare
beneficiaries. Such reforms would build on the action the
Administration has already taken to promote quality by using data from
Medicare providers to construct publicly available measures. The
Medicare Payment Advisory Commission (MedPAC) also offered several
recommendations in its March 2005 Report to Congress to promote value-
based purchasing. We generally support MedPAC's goals in this area, and
we are working actively with many outside organizations, particularly
in provider-led efforts, to achieve higher quality and better use of
resources.
Please find below summary responses to each of the questions you
raised in your recent letter. Where applicable, we have also attached
additional, more detailed material.
Development of Quality Indicators. The foundation of effective pay-
far-performance initiatives is collaboration with providers and other
stakeholders, to ensure that valid quality measures are used, that
providers are not being pulled in conflicting directions, and that
providers have support for achieving actual improvement. Consequently,
to develop and implement these initiatives, CMS is collaborating with a
wide range of health care providers, other public agencies, and private
organizations who share our goal of improving quality and avoiding
unnecessary health care costs. Enclosure 1 provides more detail about
our efforts to work with hospitals, skilled nursing facilities, home
health agencies, end-stage renal disease (ESRD) facilities, and
physicians to develop measures.
The healthcare community has already exhibited leadership and
interest in quality measurement, public reporting, and paying for
performance. We have heard repeatedly from individual providers and
provider organizations around the country about their desire to support
the development and implementation of appropriate measures and payment
methods and to participate in well-designed initiatives in this area.
We will continue to work with health care providers and Medicare
beneficiaries to make further progress on these efforts.
To date, we have worked with the Hospital Quality Alliance (HQA) in
the selection of a starter set often consensus-derived hospital
performance measures for public reporting. Consensus around these
measures was achieved because these measures are widely viewed as
meaningful elements of quality, they are clinically valid, and they are
feasible and not too costly to collect. These are the same measures
that were established under section 1886(b)(3)(B)(vii)(II) of the
Social Security Act, as added by section 501 (b) of the Medicare
Modernization Act (MMA). It is important to note that most hospitals
are already reporting a larger set of clinical quality measures than
were required by the MMA, and that we expect to expand these measures
further in the coming year to include standardized measures of quality
from the beneficiary's perspective and outcome measures, such as those
related to post-surgical complications.
CMS has also been working closely with consumer groups and nursing
home leaders through the Nursing Home Quality Initiative, a
collaborative effort to improve quality of care in nursing homes. A key
element of this effort is the development and improvement of specific
quality measures. Currently, we publicly report 15 measures of nursing
home services that are submitted by facilities via the Minimum Data Set
(MDS). The quality measures were endorsed by the consensus process of
the National Quality Forum (NQF). The nursing home industry, patient
advocacy groups, and other stakeholders are working with LIS to improve
these measures, while we build a more robust set of measures. For
example, in our recent proposed rule for payment of skilled nursing
facilities, we sought comment on additional quality measures and the
design of incentives for superior performance. In fact, we are
collaborating to assess and develop possible pay-for-performance
models, and have recently contracted with Abt Associates to develop a
potential demonstration project in this area.
CMS has also been collaborating with provider groups and other
stakeholders involved in home health care and care for patients with
end-stage renal disease. In the home health care setting, CMS now
receives quality data regarding the status of a patient's physical and
mental health, maintenance or improvement in the patient's ability to
perform basic daily activities, and patient medical emergencies. The
home health measures are based on information collected on Medicare or
Medicaid patients who receive care at a Medicare certified home health
agency. For dialysis facilities, CMS's Clinical Performance Measures
(CPM) Project currently monitors 16 quality measures that report the
quality of dialysis services in three areas: the adequacy of
hemodialysis and peritoneal dialysis; anemia management; and vascular
access management. In addition, CMS currently collects data on patient
nutrition, and is developing additional measures related to kidney
transplant referral and end stage renal disease bone metabolism.
We have also made substantial progress with physician groups and
other stakeholders on the development and use of measures for
physician-related services. Measures of the quality of ambulatory care
have been identified through collaboration between CMS, the American
Medical Association's Physician Consortium for Performance Improvement
and the National Committee for Quality Assurance (NCQA). This
collaboration resulted in a set of proposed measures that are currently
being considered for endorsement by the NQF. As part of the Ambulatory
care Quality Alliance (AQA), CMS and other stakeholders, including the
American College of Physicians, the American Academy of Family
Practice, and other physician groups, as well as representatives of
private health plans, selected a subset of these measures as a starter
set for implementation. These measures cover diabetes, heart disease,
asthma, and preventive screening. These measures are already in use in
an ongoing Medicare demonstration project.
The entire starter set of ambulatory care measures are now in the
final stages of endorsement. These measures are designed to reflect
performance in primary care and may also apply to some specialists as
well, insofar as specialists are involved in the furnishing of primary
care to patients with common chronic diseases, including diabetes and
heart disease. In addition, measures of effectiveness and safety of
some surgical care have been developed through collaborative programs
like the Surgical Care Improvement Program, which includes the American
College of Surgeons. We are also collaborating with many specialty
societies to develop quality measures that reflect important aspects of
the care of specialists and sub-specialists. For example, we are
working closely with oncol9gists to develop measures of the adequacy of
treatment planning and follow-up that oncologists furnish as part of
their evaluation and management services; with cardiologists on
measures of cardiac care for heart attack or heart failure conditions;
and with cardiovascular surgeons on measures related to cardiac
surgery.
While these collaborative processes have already resulted in
clinically valid quality measures for many physician specialties, some
specialty societies report that they are still in the development
stage, and a few are not reporting any activity. The progress of many
specialties to date clearly indicates broad interest from CMS and other
key stakeholders and consensus groups like the
NQF, to support the efforts of specialty societies to develop and
refine their measures. As we have indicated, we are pleased to work
with any medical specialty to support their quality measurement and
improvement efforts. Enclosure 2 provides a list by specialty of the
types of quality measures that have been developed or are under
development. A preliminary assessment indicates that the specialties
for which some measures have been developed account for about half of
Medicare physician spending. Specialties accounting for another 40
percent of physician spending have measures under development.
In addition, virtually all specialties have noted that evidence-
based guidelines for best practices have been developed for many
important aspects of the care they provide. Such guidelines do not
apply to all patients receiving care from a particular specialty, but
they do generally reflect the state of medical evidence about what
works best in the specialty for many of the common problems they treat.
Some have suggested that, while they work to develop more specific
clinical quality measures, a useful interim indicator is physician
reporting on whether a relevant practice guideline was followed for the
care of a patient (and possibly, a reason for not following a relevant
guideline). A number of private-sector efforts are implementing such
approaches now with the goal of improving quality, with some promising
results. Such data also help identify circumstances where better
medical evidence is needed to help improve practices, another key step
for achieving quality improvement. In addition, there is some evidence
that compliance with such guidelines may lead not only to better
quality but also to better use of resources.
We are exploring methods of reporting physician quality measures
through claims and other methods. Many measures with clinical aspects
can be reported through existing data systems. For example, in the
current oncology demonstration project, physicians are assessing the
symptoms of Medicare beneficiaries who are receiving chemotherapy using
validated, widely accepted symptom questionnaires that focus on nausea
and vomiting, pain, and fatigue. The physicians participating in the
demonstration project report on the patients' symptoms via the existing
Medicare claims system. Such a reporting mechanism could potentially be
used for other specialties, whether for reporting patient symptoms, or
for reporting on evidence-based practices that enhance the quality of
care.
Systems for Reporting and Analyzing Quality Indicators.
Implementing measures in a pay-for-performance system will require
infrastructure that can obtain appropriate information from providers,
store and aggregate it as necessary, and prepare it for use in payment
systems. Over the past few years, CMS has developed an infrastructure
that can serve to collect data for quality measurement purposes via
secure channels for its submission, storage, analysis, validation, and
reporting. The consistent construction and analysis of hospital quality
measures based on reported quality data from l1early all hospitals
illustrates the key aspects of such systems. Similar tools can be
applied in other settings, such as ambulatory care.
To submit data on quality measures, hospitals employ either Joint
Commission on Accreditation of Health care Organizations (JCAHO)
Performance Measurement System vendors or the CMS Abstraction and
Reporting Tool (CART). CART is a broadly applicable software tool that
providers and their designees can use to abstract clinical data needed
for quality measures from medical records. This tool was designed and
developed by CMS with input from JCAHO and the Quality Improvement
Organizations.
CMS has also developed a system for secure, HIPAA-compliant
transmission of clinical quality data on hospital care for the
consistent construction and validation of quality measures. Hospital
data is submitted via QNet Exchange--the CMS-approved electronic system
for secure communications and data exchange-to a national data
repository for private healthcare data. Currently this repository
contains infoffi1ation on the ten measures collected pursuant to
section 501 (b) of the MMA plus the growing number of additional
measures collected under the Hospital Quality Alliance Initiative. Data
can be submitted at any time throughout the year, but there is a
deadline for submission of each quarter's hospital discharges.
After the data are received in a valid format, the measures are
calculated by editing the data against appropriate logic to assure
valid measure development. This logic, specified by a diverse group of
Federal and non-government clinical experts, includes medical procedure
and condition codes, exclusion criteria, and other empirically based
measure-specific rules. Data submitted by hospitals are also validated
through independent abstraction of medical records by a CMS contractor,
the Clinical Data Abstraction Center. Hospitals have an opportunity to
review the results for 30 days before they are posted.
Size of Incentives Needed to Encourage Reporting. The experience
with section 501(b) of the MMA and other programs suggests that limited
adjustments in payment rates may he sufficient incentive to encourage
providers to perform well on measured aspects of performance. section
1886(b)(3)(B)(vii)(II) of the Social Security Act, which was added by
section 501(b) of the MMA, requires a 0.4 percentage point higher
payment update for acute care hospitals that submit information on ten
measures of quality for each of fiscal years 2005, 2006, and 2007. If a
hospital provides the information by a specific date in the prior year,
the full update applies to all inpatient discharges from that hospital
during a subsequent fiscal year. Nearly every eligible hospital in the
country was willing and able to submit the required data in order to
qualify for full update-a clear indication that well-defined incentives
can bring about appropriate system change.
Further, CMS has partnered with Premier Inc., a nationwide alliance
of not-for-profit hospitals, to conduct a demonstration program
designed to improve the quality of inpatient care for Medicare
beneficiaries by providing financial incentives. Payment adjustments
under the demonstration will be provided to hospitals scoring in the
top 20 percent for a given set of quality measures-an additional 2
percent on top of the normal DRO payment will be made to hospitals
scoring in the top 10 percent, and an additional I percent payment will
be made to hospitals in the next highest 10 percent. In the third year
of the demonstration, hospitals that do not achieve significant
absolute improvements above the demonstration baseline will be subject
to reductions in payments. Preliminary results released in May show
that these modest payment adjustments are sufficient to drive quality
improvement. This project further validates the fact that payment
incentives are bringing about real, meaningful change. We are
encouraged by these early results and are using this effort to begin
laying the foundation for a pay for quality program for all hospitals.
The Physician Group Practice Demonstration project presents another
example. This project is designed to test pay-for-performance in
Medicare's fee-for-service payment system for physicians. The project
is assessing the ability often large. multi-specialty physician groups
to improve care that could result in better patient outcomes and
efficiencies. Participating physician groups will continue to be paid
on a fee-for-service basis, but they are earning performance-based
payments of up to several percent (up to 5 percent of their performance
target) for implementing care management strategies that anticipate
patients' needs, prevent chronic disease complications, avoid
hospitalizations, and improve the quality of care. The performance
payment will be derived from savings in total Medicare benefits
achieved by the physician group for its patient population and paid out
in part based on the quality results.
CMS is also designing a pay-for-performance demonstration project
to improve the quality and efficiency of care for chronically ill
Medicare beneficiaries treated in small- and medium-sized physician
practices, by providing assistance in adopting and using effective
health information technology. The Medicare Care Management Performance
Demonstration project will provide quality reporting and performance
payments to physicians who meet or exceed performance standards in
clinical delivery systems and patient outcomes, and will reflect the
special circumstances of smaller practices. This demonstration is under
development and will be implemented in Arkansas, California,
Massachusetts, and Utah. Participating practices will receive technical
assistance from the Quality Improvement Organizations in their areas,
as well as bonus payments for achieving the project's objectives.
Resource Use. Measures of physician resource use have been used and
are being developed by a number of public and private entities. In its
March 2005 Report to Congress, MedPAC recommended that the ``Secretary
should use Medicare claims data to measure fee-for-service physicians'
resource use and share results with physicians confidentially to
educate them about how they compare with aggregated peer performance.''
CMS is preparing to implement the MedPAC recommendation in the near
future on a pilot basis, using information derived from claims data. We
are using existing claims data to simulate and test the measurement and
quantification of individual physician patterns of practice,
incorporating both services they order (including facility services) as
well as services they furnish. As a next step, soon we expect to begin
sharing the results with physicians confidentially to educate them
about how they compare to peers.
CMS Demonstrations. As I have noted above and also as we have
described in more detail in Enclosure 3, we are conducting a number of
demonstrations and piloting various payment reforms to reward providers
for better quality, better patient satisfaction, and lower overall
health care costs in the Medicare fee-for-service program. Building on
these initiatives, we recognize that many of the best opportunities for
quality improvement cut across settings of care. We have projects in
operation or in the advanced planning stages in the tee-for-service
sector that will use standard quality measures to support better care
coordination and continuity for beneficiaries with chronic illnesses
across different care settings. In the Medicare Advantage program, we
are moving toward full risk adjustment. which provides more resources
to health plans that are able to attract and retain high-cost
beneficiaries, thus providing stronger incentives to improve continuity
and quality of care, while avoiding unnecessary services. In
conjunction with these changes, we are seeing more efforts by Medicare
Advantage plans to provide greater continuity of care and support for
beneficiaries with predictably high costs, as well as more use of
performance-based payments.
We want to build on all of these steps to give providers the
support and resources they need to deliver better care and avoid
unnecessary costs. Linking a portion of Medicare payments to valid
measures of quality, using the kinds of approaches summarized here,
would support better health care. These direct incentives would foster
the development and implementation of innovative ideas and approaches
that will result in improvements in the health care that our
beneficiaries receive.
As evidenced by the early work of some of our demonstration
projects, and the leadership Congress provided in the MMA creating
incentives for hospital reporting. we are seeing meaningful
results. These results are a promising foundation to support the most
effective clinical and financial approaches to achieve better health
outcomes for Medicare beneficiaries. We look forward to continuing to
work closely with you and all of OUT stakeholders to advance these
important initiatives to improve quality and avoid unnecessary costs
for Medicare beneficiaries and throughout our health care system. I
also will provide this response to the cosigner of your letter.
Sincerely,
Mark B. McClellan, M.D., Ph.D.
Enclosure 1
DEVELOPING AND SELECTING STANDARDIZED QUALITY MEASURES
CMS has worked collaboratively with health care providers in an
effort to develop measures of quality in various settings and to reduce
the burden of their collection.
Development of Hospital Quality Measures
CMS and the Hospital Quality Alliance (HQA), which has
representation from consumers, hospitals, practitioners, purchasers,
and accreditation organizations, collectively selected a starter set
often consensus-derived performance measures for public reporting. The
measures were endorsed by the National Quality Forum (NQF) through a
consensus development process that includes input from consumers,
purchasers, clinicians, providers, researchers and quality improvement
experts. The NQF is a non-profit organization that represents a broad
range of health care stakeholders and provides endorsement of
consensus-based national performance standards for measurement and
public reporting.
This starter set of measures was incorporated into section 501(b)
of the Medicare Prescription Drug, Improvement and Modernization Act of
2003 (the MMA), which provided a financial incentive for those
hospitals that reported these measures. These measures are available at
the following link on the CMS website: http://www.ems.hhs.gov/quality/
hospital/StarterSet.pdf. On April 1, 2005, we launched the Hospital
Compare website, which allows comparison of data on these measures from
over 4,200 hospitals.
CMS and the HQA have identified an expanded set of measures that
hospitals may choose to report without payment ramifications. An
additional seven measures were released on April 1, 2005. These
measures are available at the following link on the CMS website: http:/
/www.ems.hhs.gov/quality/hospital/HospitalQualityMeasures.pdf. An
additional five measures have been endorsed by the NQF and are due to
be released later this year.
Development of Nursing Homes Measures
CMS currently uses data submitted via the Minimum Data Set (MDS) by
facilities to produce 15 measures, endorsed by the NQF, for public
reporting on Nursing Home Compare. These measures are available at the
following link on the CMS website:
http://www.ems.hhs.gov/quality/nhqi/Snapshot.pdf.
CMS has been working closely with consumer groups and nursing home
leaders through the Nursing Home Quality Initiative, a collaborative
effort to improve quality of care in nursing homes. A key element of
this effort is the development and improvement of specific quality
measures. In addition to the 15 measures reported via the MDS, we are
considering expanding this starter set to include measures that assess
safety, patient functional status, patient experience, and personnel
management. Safety measures would assess adverse events, such as
inappropriate medication use or falls and other injuries. In addition,
recent research has identified additional measures to assess functional
status in short-stay Medicare patients, although many of the measures
also reflect care provided to long-term patients as well. We are also
interested in measuring the experience of care from the perspective of
both patients and their families. Other possible measures might include
assessing such items as: nursing home staff turnover rates; nursing
director tenure; and staff immunization rates. Further, in its March
2005 report, MedPAC recommended the collection of data on a few
admissions and discharge measures in order to provide insight into
whether treatment goals (particularly for functional status) were met.
Development of Home Health Measures
Similar to the nursing home quality activities, CMS has also been
working with leaders and advocates for the home health industry through
our Home Health Quality Initiative. Under this initiative, measures are
reported to CMS that provide information on how well the home health
agencies provide care. Examples include: the status of a patient's
physical and mental health; maintenance or improvement in the patient's
ability to perform basic daily activities; and patient medical
emergencies. These measures are based on information collected on
Medicare or Medicaid patients who receive care at a Medicare certified
home health agency.
In its March 2005 report, MedPAC recommended using the outcomes-
based quality indicators (OBQIs) with appropriate risk adjustment as
pay-for-performance metrics. The measures recommended by MedPAC include
an assessment in improvement in the lives of home health patients and
markers for adverse events that prompt home health agencies and
surveyors to investigate further. OBQI measures are now in common use
and have been studied for some time. A number of such measures have
been endorsed by the NQF and are evidence based, well accepted, and not
unduly burdensome. MedPAC has also recommended that an initial set of
measures focus on improving patient's health and functioning as well as
measures of stabilization, recognizing that often the goal of the home
health agency is to simply stabilize the patient's condition.
Development of Dialysis Facility Measures
Initiated in 1998, CMS's Clinical Performance Measures (CPM)
Project currently monitors 16 quality measures that are based on the
National Kidney Foundation's Kidney Disease Outcomes Quality Initiative
(K-DOQI) Clinical Practice Guidelines. These measures report the
quality of dialysis services provided under Medicare in the areas of
adequacy of hemodialysis and peritoneal dialysis, anemia management,
and vascular access management. In addition to the CPMs, CMS also
collects data on patient nutrition and is developing additional
measures related to kidney transplant referral and ESRD bone
metabolism.
CPM data are collected on a national random sample of adult in-
center hemodialysis patients, all in-center hemodialysis patients less
than 18 years of age, and a national random sample of adult peritoneal
dialysis patients. Thirteen of the CPMs are calculated, and an annual
report of these findings is published and made available to the public
at the following link: www.cms.hhs.gov/esrd/1.asp. CPM data are not
collected in numbers sufficient for calculating dialysis facility-
specific rates. However, CMS is currently collaborating with the
dialysis organizations to collect and transmit CPM data electronically
on all their dialysis patients. We are also interested in measuring
care from the patients' perspective.
Development of Physician Measures
Ambulatory care measures have also been developed by the American
Medical Association's Physician Consortium for Performance Improvement,
the National Committee for Quality Assurance (NCQA) and CMS. A set of
about 99 ambulatory care measures was submitted to NQF for endorsement.
These measures are available at the following link on the CMS website:
http://www.cms.hhs.gov/quality/AmbulatoryMeasures.pdf. Although the
endorsement process is still underway, to date 49 draft ambulatory
measures have been endorsed. We expect that the final set will be
released in July 2005. In addition, nine final diabetes measures, also
known as the Diabetes Alliance measures have been endorsed by NQF.
A starter set of the ambulatory care measures, which is a subset of
the measures submitted to NQF, has been developed by the Ambulatory
care Quality Alliance (AQA), which is comprised of the Agency for
Healthcare Research and Quality (AHRQ), America's Health Insurance
Plans (AHIP), American College of Physicians (ACP) and American Family
Physicians (AFP). We have been working closely with the AQA to develop
this starter set of consensus-derived ambulatory quality measures for
physician offices. We are also collaborating with many specialty
societies to develop quality measures that reflect important aspects of
the care of specialists and sub-specialists. For example, we are
working closely with oncologists to develop measures of the adequacy of
treatment planning and follow-up that oncologists furnish as part of
their evaluation and management services; with cardiologists on
measures of cardiac care for heart attack or heart failure conditions;
and with cardiovascular surgeons on measures related to cardiac
surgery.
Enclosure 2
SPECIALTY SOCIETIES--with Applicable Measures Developed or under
Development
------------------------------------------------------------------------
------------------------------------------------------------------------
Internal Medicine Applicable measures have been submitted to
the National Quality Forum (NQF). The
measures are currently in the public
comment phase of the NQF process (e.g.,
Heart Disease: Coronary Artery Disease--
percentage of patients who were
prescribed a lipid-lowering therapy
(based on current ATP III guidelines)).
The Ambulatory care Quality Alliance (AQA)
starter set of measures are applicable
and ready (e.g., Hypertension: percentage
of patient visits during which either
systolic blood pressure >140 mm Hg or
diastolic blood pressure >90 mmHg with
documented plan of care for
hypertension).
------------------------------------------------------------------------
Internal Medicine-- The Coronary Artery Disease (CAD) and
Cardiology Heart Failure (HF) measures are
applicable and ready (e.g., Heart Failure
(HF): percentage of patients who also
have LSVD who were prescribed ACE
Inhibitor or ARB therapy; percentage of
patients who also have LSVD who were
prescribed beta-blocker therapy).
The specialty society is also developing
additional measures.
------------------------------------------------------------------------
Radiology The American College of Radiology has
appropriateness criteria for various
diagnosis procedures (e.g., chest x-ray,
computed tomography (CT) for detection of
pulmonary embolism in adults). Measures
on appropriateness of tests and
appropriate communication of results are
under development.
------------------------------------------------------------------------
Surgery--Ophthalmology The specialty society has readily
available practice guidelines and summary
benchmarks, which outline the process of
care elements that are important for
quality of eye care (e.g., appropriate
management of primary angle open
glaucoma; appropriate post-op care for
filtering surgery patients; complete post-
op examination post cataract surgery).
Further, the Academy helped initiate a
NCQA performance measure for glaucoma
screening consistent with Medicare's new
benefit, which was incorporated into
HEDIS 2006, and also has contributed to
the development of the diabetes eye exam
HEDIS measure, which is also part of the
AQA's starter set of ambulatory care
measures.
------------------------------------------------------------------------
Family Practice Applicable measures have been submitted to
the NQF. The measures are currently in
the public comment phase of the NQF
process (e.g., percentage of patients who
received an influenza immunization;
percentage of patients who received a
pneumococcal immunization; percentage of
patients with diabetes with one or more A
1 C test(s) conducted during the
measurement year).
The AQA starter set of measures are
applicable and ready (e.g., Hypertension:
percentage of patient visits during which
either systolic blood pressure > 140 mm
Hg or diastolic blood pressure > 90 mm
Hg, with documented plan of care).
------------------------------------------------------------------------
Surgery--Orthopedic Some Surgical Infection Prevention (SIP)
and Surgical Care Improvement Project
(SCIP) measures are directed for this
specialty (e.g., prophylactic antibiotic
received within 1 hour prior to surgical
incision; surgical patients with
recommended thromboembolism prophylaxis).
Additional measures include the
appropriate diagnosis and treatment of
back pain.
The specialty society is identifying and
developing quality measures, e.g., the
society has recently submitted 10
measures to NQF.
------------------------------------------------------------------------
Surgery--General The A V Fistula measure (Fistula First)
could be refined for this specialty
(e.g., the percentage of patients who
have an autogenous arteriovenous fistula
for dialysis vascular access).
Most SIP/SCIP measures are directed for
this specialty (e.g., prophylactic
antibiotic received within 1 hour prior
to surgical incision; surgical patients
with recommended thromboembolism
prophylaxis).
------------------------------------------------------------------------
Internal Medicine--Hema- Patient experience of care measures are
Oncology applicable, ready, and are currently
being used in the cancer demonstration
program (e.g., percentage of patients
reporting pain; percentage of patients
reporting nausea/vomiting; percentage of
patients reporting fatigue).
The specialty society is in the initial
stages of developing measures that are
related to their practice guidelines.
------------------------------------------------------------------------
Emergency Medicine The majority of the current hospital
measures are applicable to emergency room
physicians (e.g., aspirin and beta
blocker treatment at arrival for acute
myocardial infarction).
------------------------------------------------------------------------
Internal Medicine-- Applicable measures include appropriate
Gastroenterology attention to patient monitoring before,
during and after the procedure when using
conscious sedation measures; the
percentage of patients who had
appropriate screening for colorectal
screening.
------------------------------------------------------------------------
Internal Medicine-- Chronic Obstructive Pulmonary Disease
Pulmonology (COPD) measures are applicable (e.g.,
percentage of patients with COPD who had
a spirometry evaluation documented;
percentage of patients with systemic
corticosteroids for acute exacerbation).
------------------------------------------------------------------------
Anesthesiology Some SCIP measures are applicable (e.g.,
prophylactic antibiotic received within
one hour prior to surgical incision;
surgical patients with recommended
thromboembolism prophylaxis).
Additional measures include the
appropriate evaluation of the patient--
pre, during, and post procedure.
------------------------------------------------------------------------
Internal Medicine--Neurology Applicable measures include the
appropriate treatment of ischemic stroke;
stroke rehabilitation; diagnosis of
dementia.
------------------------------------------------------------------------
Psychiatry Applicable depressive measures have been
submitted to the NQF. The measures are
currently in the public comment phase of
the NQF process (e.g., Effective Acute
Phase Treatment: percentage of patients
who were diagnosed with a new episode of
depression and treated with
antidepressant medication and remained on
an antidepressant for at least 180 days).
------------------------------------------------------------------------
General Practice Applicable measures have been submitted to
the NOF. The measures are currently in
the public comment phase of the NOF
process (e.g., percentage of patients who
received an influenza immunization;
percentage of patients who received a
pneumococcal immunization; percentage of
patients with diabetes with one or more A
1 C test(s) conducted during the
measurement year).
The AQA starter set of measures are
applicable and ready (e.g., Hypertension:
percentage of patient visits during which
either systolic blood pressure >140 mm Hg
or diastolic blood pressure > 90 mm Hg,
with documented plan of care).
------------------------------------------------------------------------
Pathology Practice guidelines are available but
appear to be limited to interpretation.
Measures on appropriateness of tests and
appropriate communication of results are
under development.Internal
------------------------------------------------------------------------
Medicine--Nephrology ESRD and DOOI measures currently measure
at the facility level but could be
readily refined to measure at the
physician level (e.g., Regular
Measurement of the Delivered Dose of
Hemodialysis: the delivered dose of
hemodialysis should be measured at least
once a month in all adult and pediatric
hemodialysis patients).
------------------------------------------------------------------------
Physical Medicine and Applicable measures include stroke
Rehabilitation rehabilitation and the prevention of
complications.
------------------------------------------------------------------------
Internal Medicine-- Applicable measures have been submitted to
Rheumatology the NOF. The measures are currently in
the public comment phase of the NOF
process (e.g., Osteoarthritis: Functional
Assessment--percentage of patients
diagnosed with symptomatic osteoarthritis
that were assessed for function and pain
annually).
------------------------------------------------------------------------
Surgery--Neurological Some of the SIP/SCIP measures could be
refined for this specialty (e.g.,
prophylactic antibiotic received within 1
hour prior to surgical incision; surgical
patients with recommended thromboembolism
prophylaxis).
------------------------------------------------------------------------
Surgery--Colorectal Some SIP/SCIP measures are applicable
(e.g., prophylactic antibiotic received
within 1 hour prior to surgical incision;
surgical patients with recommended
thromboembolism prophylaxis).
------------------------------------------------------------------------
Nuclear Medicine Applicable measures regarding the
appropriate use of cardiac radionuclide
imaging; appropriate protocols;
appropriate patient preparation.
------------------------------------------------------------------------
Preventive Medicine Applicable measures have been submitted to
NQF (e.g., percentage of patients who
received an influenza immunization;
percentage of patients who received a
pneumococcal immunization; rate of
mammography screening; rate of cervical
cancer screening).
------------------------------------------------------------------------
Enclosure 3
DEMONSTRATIONS AND PILOT PROGRAMS
Premier Hospital Quality Incentive Demonstration. CMS has partnered
with Premier Inc., a nationwide alliance of not-for-profit hospitals,
to conduct a demonstration program that is designed to improve the
quality of inpatient care for Medicare beneficiaries by providing
financial incentives. Under the Premier Hospital Quality Incentive
Demonstration, about 270 hospitals are voluntarily providing data on 34
quality measures related to five clinical conditions: heart attack,
heart failure, pneumonia, coronary artery bypass graft, and hip and
knee replacements. Using the quality measures, we will identify
hospitals in the demonstration with the highest clinical quality
performance for each of the five clinical areas. Hospitals scoring in
the top 10 percent for a given set of quality measures will receive a 2
percent bonus payment in addition to the normal payment for the service
provided for Medicare discharges in the corresponding diagnosis-related
groups (DRGs). Hospitals in the next highest 10 percent will receive a
I percent bonus payment. In the third year of the demonstration
project, hospitals that do not achieve absolute improvements above the
demonstration baseline will be subject to reductions in payments.
Preliminary results show that the modest financial incentives under the
demonstration are sufficient to drive quality improvement.
Physician Group Practice Demonstration. CMS recently announced a
demonstration project to test pay-for-performance in Medicare's fee-
for-service payment system for physicians. The Physician Group Practice
Demonstration will assess the ability of large physician groups to
improve care that could result in better patient outcomes and
efficiencies. Ten large (200+ physicians), multi-specialty physician
groups in various communities across the nation will participate in the
demonstration, which began operations in April 2005. Participating
physician groups will continue to be paid on a fee-for-service basis,
but they will be able to earn performance-based payments for
implementing care management strategies that anticipate patients'
needs, prevent chronic disease complications, avoid hospitalizations,
and improve the quality of care. The performance payment will be
derived from savings in total Medicare benefits achieved by the
physician group for its patient population and paid out in part based
on the quality results, which we will assess.
Medicare Care Management Performance Demonstration. CMS also plans
to test a pay-for-performance system to promote the adoption and use of
health information technology to improve the quality and efficiency of
care for chronically ill Medicare beneficiaries treated in small- and
medium-sized physician practices. The Medicare Care Management
Performance Demonstration will provide performance payments for
physicians who meet or exceed performance standards in clinical
delivery systems and patient outcomes, and will reflect the special
circumstances of smaller practices. This demonstration is under
development and will be implemented in Arkansas, California,
Massachusetts, and Utah. Participating practices will receive technical
assistance from the Quality Improvement Organizations in their areas,
as well as bonus payments for achieving the project's objectives.
Medicare Health Care Quality Demonstration. CMS is also
investigating how to enhance quality and safety in the Medicare Health
Care Quality Demonstration. This demonstration program, which was
mandated by the MMA, is a 5-year program designed to reduce the
variation in utilization of heath care services, and to increase
quality and efficiency of care by encouraging area-level collaboration
and coordination to improve the use of evidence-based care and overall
area quality. We have sought public comment on the design of this
demonstration and will consider these comments in a request for
proposals. The project will be open to physician groups and other
providers that are involved in integrated health care delivery, for
example using effective interoperable electronic health information
systems that improve quality and avoid unnecessary costs.
Chronic Care Improvement Program. This pilot program will test a
population-based model of disease management. Under the program,
participating organizations will be paid a monthly per beneficiary fee
for managing a population of beneficiaries with advanced congestive
heart failure and/or complex diabetes. These organizations must
guarantee CMS a savings of at least 5 percent plus the cost of the
monthly fees compared to a similar population of beneficiaries. Payment
also is contingent upon performance on quality measures and
beneficiaries and provider satisfaction. The program will generate data
on performance measures that will be useful in improving the Medicare
Program as a whole.
Disease Management Demonstration for Severely Chronically Ill
Medicare Beneficiaries. This demonstration, which began enrollment in
February 2004, is designed to test whether applying disease management
and prescription drug coverage in a fee-for-service environment for
beneficiaries with illnesses such as congestive heart failure,
diabetes, or coronary artery disease can improve health outcomes and
reduce costs. Participating disease management organizations receive a
monthly payment for every beneficiary they enroll to provide disease
management services and a comprehensive drug benefit, and must
guarantee that there will be a net reduction in Medicare expenditures
as a result of their services. To measure quality, the organizations
must submit data on a number of relevant clinical measures.
Disease Management Demonstration for Chronically Ill Dual-Eligible
Beneficiaries. Under this demonstration, disease management services
are being provided to full-benefit dual eligible beneficiaries in
Florida who suffer from advanced-stage congestive heart failure,
diabetes, or coronary heart disease. The demonstration provides the
opportunity to combine the resources of the state's Medicaid pharmacy
benefit with a disease management activity funded by Medicare to
coordinate the services of both programs and achieve improved quality
with lower total program costs. The demonstration organization is being
paid a fixed monthly amount per beneficiary and is at risk for 100
percent of its fees if performance targets are not met. Savings above
the targeted amount will be shared equally between CMS and the
demonstration organization. Submission of data on a variety of relevant
clinical measures is required to permit evaluation of the
demonstration's impact on quality.
End Stage Renal Disease (ESRD) Disease Management Demonstration.
This demonstration is scheduled to begin later this year and extend for
4 years. Under this demonstration, organizations serving ESRD patients
will receive a capitated payment to test the effectiveness of disease
management models in increasing quality of care and containing costs.
Eligible organizations will receive capitated payments and accept risk
to provide a coordinated care benefit plan to ESRD enrollees. Incentive
payments of up to 5 percent will also be made to plans for achieving
quality improvements over the course of the demonstration. Quality
measurement will be based on a quarterly submission of patient-level
data on five key clinical indicators profiled in the CMS ESRD Clinical
Performance Measures (CPM) Project. Initiated in 1998, the CPM Project
currently monitors 16 quality measures that are based on the National
Kidney Foundation's Kidney Disease Outcomes Quality Initiative (K-DOQI)
Clinical Practice Guidelines. These measures report the quality of
dialysis services provided under Medicare in the areas of adequacy of
hemodialysis and peritoneal dialysis, anemia management, and vascular
access management. In addition to the CPMs, CMS will collect data on
patient nutrition and develop additional measures related to kidney
transplant referral and ESRD bone metabolism.
______
Care Management Demonstration for High Cost Beneficiaries. This
demonstration, which is approaching implementation, will test models of
care management in a Medicare fee-for-service population. The project
will target beneficiaries who are both high cost and high risk. The
announcement for this demonstration was published in the Federal
Register on October 6, 2004, and we accepted applications through
January 2005. The payment methodology will be similar to that
implemented in the Chronic Care Improvement Program, with participating
organizations required to meet relevant clinical quality standards for
the specific populations they target as well as guarantee savings to
the Medicare program.
Dr. MCCLELLAN. My read of the current situation is,
specialties account for about half of Medicare billing and have
quality measures that are already established. These include
specialties like internal medicine--you are going to hear from
them soon--who have been providing tremendous leadership on
many aspects of surgery and so forth, and about 40 percent or
more have measures that are in development right now.
In addition, I have been talking with some Members of
Congress who are physicians--there are getting to be more of
them; I think that is probably a good thing--as well as outside
experts about using proxies for quality measures where they are
not developed yet. Just about all specialty societies have what
are called evidence-based practice guidelines that they have
developed, where the medical experts come together, review what
all the evidence out there is and make some basic guideline
recommendations for effective ways of treating patients.
Whether or not those guidelines have been developed and are
being used is another way that you can help focus on supporting
physicians in using the best available medical evidence for
their treatment.
So, through all of those kinds of approaches we have made a
tremendous amount of progress, as Chairwoman Johnson said; and
I do think that if there is continued momentum--which the
Committee can help build--continued momentum from the medical
specialty societies, which are really putting a lot of effort
into this, I am very optimistic about having an even more
comprehensive set of measures in the future.
Mr. HAYWORTH. Dr. McClellan, thank you very much. Madam
Chairman, I appreciate the time.
Chairman JOHNSON OF CONNECTICUT. Mr. Lewis.
Mr. LEWIS. Thank you very much, Madam Chair. Thank you, Dr.
McClellan, for being here today and for your testimony.
Financial incentives are one way to influence behavior. What
other mechanisms can be used to change practice patterns for
maximized value? Are there other ways that payers can get
involved beyond pay-for-performance initiatives?
Dr. MCCLELLAN. Absolutely. There are many ways, and the
reason that there are many ways is because doctors care so much
about providing the best possible care under the circumstances.
Another area where we have been doing a lot of work lately with
physician organizations and other medical experts involves
helping to develop better evidence on what actually works. We
have a tremendous amount of data in the Medicare Program on how
patients are being treated that can help us understand and have
been used in many studies, for example, on issues ranging from
effectiveness of care to sources of health disparities to
understanding better why different kinds of outcomes occur and
what can be done about it. So, supporting development of better
evidence is one important way.
Another important way involves helping with the adoption of
systems that can improve care in our Quality Improvement
Organizations (QIO). We are now supporting local efforts for
quality improvement activities, such as helping small physician
groups evaluate and adopt electronic health record systems or
providing some support for local quality improvement efforts,
sharing ideas about things that physicians could do better
together, learning from their mistakes, and things like that.
So, there are a tremendous range of other activities beyond the
payment systems themselves that can improve quality of care,
and ideally all of these would be working together this time.
Mr. LEWIS. Thank you very much, Doctor. Doctor, I would
like to take an opportunity, since we have you here, to ask you
about some of my concerns and some of the physician concerns
about the implementation of Medicare part D. At our last
Subcommittee hearing almost every representative from an acute
care center was very concerned that our seniors are very
confused about this new benefit. We heard about the independent
envelopes going to the poor seniors. What has been done to
ensure that seniors have that question answered? We have known
about this confusion for a long time. What is CMS doing? It is
clearly not enough, because people are still confused.
Dr. MCCLELLAN. Well, this is our very broadest priority not
just in CMS but throughout the U.S. Department of Health and
Human Services (HHS), throughout the Administration and in work
with you and many other Members of Congress, is to help make
sure each beneficiary gets the information they need to make an
informed choice about the drug coverage that is coming. Under
the Medicare law, there is help for everybody with his or her
prescription drug costs, but different people get help in
different ways, and so we want to provide some very
personalized assistance. Earlier you mentioned the mailing.
That wasn't a mailing to everybody. It was a mailing to people
who are getting their drug coverage through Medicaid now. We
sent out close to 6 million letters. There were fewer than 100
that may have had this problem with the printing.
What we know, as I am sure you know from your contacts with
constituents, is that you don't depend on any one mechanism for
helping people find out about important new programs that
affect their lives. You try to do it through many different
ways. So, another approach that we are taking is through our
Medicare and You handbook, which Congressman Stark and many of
you commented on, in its earlier draft form, and we are
revising it now. Another approach that we are taking is to work
with outside organizations at the local level to help inform
seniors in every State. In Georgia, we have doubled the funding
for the State health insurance----
Mr. LEWIS. Could you repeat what you said about in the
State of Georgia?
Dr. MCCLELLAN. In the State of Georgia, for example, there
is a State Health Assistance Program that works, I think,
through the Department of Aging, that is providing local face-
to-face counseling to beneficiaries about the changes that are
coming. It is going to be providing help in the fall with
making a decision about the coverage. They hold local meetings
to inform seniors. They are doing trainer sessions. It is an
excellent program. I have spent some time talking with some of
their leadership myself. We are collaborating with many other
organizations. You mentioned people who are living in assisted
living or getting help with long-term care. Well, we are
working directly with the organizations and health
professionals that provide that care to help get information
out.
Mr. LEWIS. Do we have copies of that handbook?
Dr. MCCLELLAN. The ``Medicare and You'' handbook has been
in draft form. It is being finalized now. You will get copies
of the final version before it goes out to seniors in the fall.
In the meantime, Medicare has worked with many outside
organizations to develop brochures, pamphlets, and other types
of information customized to each type of beneficiary. That
information is available on our Web site, and we can work with
you and your office to make sure it gets to each of the
specific types of seniors in your district that you want to
reach. We are doing a tremendous amount of this local outreach
right now because one of the most effective ways to reach
people is face to face, involving people who are helping
seniors make decisions--have been helping them make decisions
for a long time about important decisions with regard to their
health care and their finances.
Mr. LEWIS. When do you expect to have the handbook
available?
Dr. MCCLELLAN. It will be mailed out by early October, and
we will have the final version before then. I don't have an
exact date. The key dates for seniors to know are that by
October they will be able to get specific information about the
plan options that are available to them, and then they can sign
up from November 15th through May 15th of 2006. There is going
to be some time to look at all this. You are right though, the
more that we can reach seniors now and let them know what is
coming the less confusion there will be and the more people
will be able to make confident decisions sooner and easily
about this important benefit. It is especially important if
many of the beneficiaries in your district qualify for the
extra help that will pay for 95 percent plus of their drug
cost. So, we really do need to reach them, and I would be
delighted to work with you more closely on that.
Mr. LEWIS. Thank you very much, Dr. McClellan.
Chairman JOHNSON OF CONNECTICUT. Thank you. Mr. McCrery.
Mr. MCCRERY. Thank you, Madam Chair. Dr. McClellan, before
I throw you a bit of a curve ball I want to say how much I
appreciate someone of your education and training and abilities
agreeing to work in the Federal Government. Our country is
fortunate to have someone of your capabilities serving our
country, so thank you.
Dr. MCCLELLAN. Well, thank you. It is a lot of fun, and I
am getting a lot of help, so that makes it easier.
Mr. MCCRERY. I am sure you have fun every day. Now for the
curve ball. I want to depart for just a moment from the subject
of today's hearing because I read an article in the New York
Times this morning, and I want you to confirm that it is true
or say that it is not true, and then maybe expound a little
bit. The article said that CMS announced that it was going to
make available to medical providers across the country the
current informational technology software being used by the
Veterans Administration (VA). Is that correct?
Dr. MCCLELLAN. Yes, Congressman. This is a software system
called VistA that the VA developed for electronic records in
their hospitals. It is open software. It is not something that
they pay to use. It is not proprietary. It is already available
for free. The challenge for some physicians has been that it
has not been very easy for them to adopt this in their offices.
So, what we are doing is making the installation process a
little bit easier, but it is essentially a system that has
already been developed by the VA and that many doctors inside
and outside the VA are already using to help get the benefits
of electronic healthcare.
Mr. MCCRERY. How do you see--how do you envision CMS's
effort--apparent effort to encourage the use of this particular
technology, this software, dovetailing with the market's
efforts to develop different bells and whistles, different
approaches that might be superior to that?
Dr. MCCLELLAN. Absolutely. In fact, as I mentioned earlier,
one of our QIO programs is to help small physician offices with
adopting and installing electronic health records. The cost of
these systems in many cases is significant. It is $10-, $20-,
maybe $50,000 or so for the practice of a few doctors. A lot of
the burden is just getting that system up and running and
finding one that can really do what you need it to do. There
are a lot of systems out there that do that, and a lot of the
help that we provide involves those commercial systems. So, for
many specialties, many physician offices, they are going to
want a system with additional bells and whistles that have
additional capabilities, and that is great. I think our only
goal is to make sure that all physicians are moving in the
direction of electronic health care as quickly and as
effectively as they can.
I think there is a vibrant private market for health
information technology systems. It is going to get even better
as we keep working together to establish interoperable
standards that the private sector wants to use so that these
systems can work with each other effectively. We are all for
supporting that effort. That is key to the whole quality
improvement effort behind performance-based payments.
Mr. MCCRERY. Well, as you know, we are developing
legislation in the House, and the Senate is doing the same on
the other side of the Capitol, which--I believe both approaches
will call for HHS to involve the private sector in developing
standards for interoperability. I am just curious if you have
thought about how encouraging the widespread use of this one
technology or this one software application that has certain
standards obviously in it will affect the development by HHS of
standards for interoperability that we think is best for the
country.
Dr. MCCLELLAN. It is a very good question. The VA has been
working with HHS and the rest of this Administration with this
goal of interoperability. The adoption of those standards will
be led by the private sector. That is where we are looking for
guidance here. As the adoption of those standards are adopted,
the VA and every other part of the FederalGgovernment is going
to have to make sure they are in compliance with them. The VA
is, I think, committed to making sure their software gets
updated to be fully compliant with additional standards as they
are developed. Again, I think there will be a broad range of
privately developed products that will provide not only the
sort of basic services the VA system does but many additional
services as well and may even work with or on top of the
existing VA software.
Mr. MCCRERY. Okay, good. Thank you.
Chairman JOHNSON OF CONNECTICUT. Mr. Doggett.
Mr. DOGGETT. Thank you very much, Madam Chairman; and thank
you for your testimony and service, Dr. McClellan. Is it
correct, with reference to the handbook that Congressman Lewis
was just asking about, that all or parts of it have already
gone to the printer?
Dr. MCCLELLAN. I believe that parts of it have gone to the
printer. I don't know if the whole thing has gone to the
printer.
Mr. DOGGETT. Well, the concern I have is that, while I
hardly agree with the attitude and the manner in which you
present it today--as far as cooperation with everyone here, as
you may know or may not know the level of cooperation up to
this point on this very important handbook has been rather
minimal. The initial draft was not provided to our staff.
It was provided, I think, to some interest groups,
including consumer interest groups; and eventually I gather,
after some additional revisions were made in the draft, our
staff was permitted to look at it in a time-restricted manner
in the HHS offices; limited to looking at the entire
publication for less than 2 hours. Since that time, staff has
received no indication, of any type, as to whether any of the
recommendations that they made have been accepted.
For example, the concern of our staff was that this
handbook--you are well aware of the concerns that have been
expressed not just about the Medicare prescription drug program
but in the U.S. Department of Education, the U.S. Department of
Agriculture--of using public resources to propagandize on
behalf of the Administration. There was a particular feeling
that people were being nudged toward HMOs and out of
traditional Medicare without--hearing what the benefits were
but not hearing what the limitations are. What opportunity is
there at this point for any meaningful further comment or
interaction on the contents of that book if part of it has
already gone to the printer?
Dr. MCCLELLAN. Well, just to go back, Congressman, the
whole document of that preliminary draft was made widely
available----
Mr. DOGGETT. Not to our staff----
Dr. MCCLELLAN. Well, we received detailed comments from
your staff on that first draft, and there were suggested
changes like separating our now private fee-for-service health
plans and Medicare that in the first draft had been combined
with original fee-for-service government plans. The suggestion
was that those should be separate, because the fee-for-service
programs, the private ones, are small. Most Medicare
beneficiaries in the original plan should have a clear
description of that. Absolutely right. I agree with that, and
that has been taken in revisions. On the point that you just
raised about Medicare Advantage plans versus the original
Medicare Programming, there is some tradeoff there. On the one
hand, under the Medicare Advantage Program, you are generally
going to get----
Mr. DOGGETT. Let me say, I understand there is a tradeoff.
Our concern about your handbook was that it only told about the
pluses and not the minuses. I guess the bottom line is, at this
point, when you talk about cooperation on the handbook, is
there any cooperation that will occur other than you will give
us a copy of what has already been printed up before everyone
else gets it?
Dr. MCCLELLAN. I just want to review the comment process
here, which is that we sent this draft, preliminary draft,
labeled as such, out to literally hundreds of groups, and got
comments back from them, from many of your staff, which we have
taken in the revision process. That is how this works. You get
input from all quarters, and then you finalize the document.
You have to finalize it according to a specific time schedule
because you have to mail this thing to 42 million beneficiaries
to get it out on time.
Mr. DOGGETT. Let me shift to physician payments, but say,
in conclusion, the amount of comment time that our staff had
was about an hour and a half sitting in an office without the
ability to take any of the papers back; and I think the level
of cooperation we are being offered at this point is that we
will get mailed a copy of the final published version ahead----
Dr. MCCLELLAN. That is what I am going to see to. It may
not make you feel any better, but our staff got to do that full
extensive round at first, and then there is more limited time.
Once you have responded to all those comments, there is more
limited time on the second round. I didn't get to see that
second round for much longer than you did----
Mr. DOGGETT. Well, that troubles me----
Dr. MCCLELLAN. We do need to meet the timeframe----
Mr. DOGGETT. Let me ask you on physician's payment, before
my time runs out. I believe you have indicated that we have got
a projection of another 4.3 percent cut this next year.
Dr. MCCLELLAN. Yes, sir.
Mr. DOGGETT. How do you recommend that the Congress deal
with that if you have not arrived at a long-term solution by
that time?
Dr. MCCLELLAN. The kinds of ideas that we are discussing
today, that would consider changing the way that we pay,
instead of just paying based on volume of services, changing to
a system that at least partly bases payments on quality on
steps that help patients stay healthier, avoid unnecessary
costs, keep overall costs down, is the right direction, and
that is why we and so many medical groups, I think Members on
both sides of the aisle, are interested in a better solution.
As Chairwoman Johnson said, we cannot abide 7 years of
projected negative updates. As Congressman Stark said, and as
the Administration has said, we cannot just add in more and
more money to a system that is already having rapid increases
in costs and in premiums. This is, I think, the best way
forward. There has been a tremendous amount of progress in the
last few months, and I am confident that if we all keep working
closely together and constructively, we can get to a better
result than where we are currently headed
Mr. DOGGETT. Madam Chairwoman, if I may just follow up. Do
you expect that the Administration will have a specific
recommendation to our Chairwoman and to all of us about what we
should do on the 4.3 percent cut that is coming up to
physicians within a few months?
Dr. MCCLELLAN. I certainly hope that we can all come
together on an effective approach. I know that you all are
drafting legislation as well. We are happy to continue to
provide technical support and help through that process.
Mr. DOGGETT. Thank you.
Chairman JOHNSON OF CONNECTICUT. Mr. Hulshof.
Mr. HULSHOF. Thank you, Madam Chair. Welcome, Dr.
McClellan. Picking up on Mr. McCrery's analogy, I am not sure
if this is going to be a curve ball or a fast ball or right
down the middle.
Dr. MCCLELLAN. As long as it is not aimed at the batter.
Mr. HULSHOF. For the Medicare population, cancer, diabetes,
heart disease and stroke are the primary killers.
Dr. MCCLELLAN. Yes.
Mr. HULSHOF. Obviously these diseases also account for
greatest the portion of spending in the Medicare Program. That
is why over the past decade, and certainly during at least my
short tenure here, Medicare has increased its focus on
prevention, on screenings, chronic care, obviously in an effort
to improve the overall health of those patients, those
beneficiaries. In fact, in the Medicare Modernization Act, we
did include these additional measures for early detection of
disease in seniors. As a result of that, more and more health
care is being delivered in the outpatient settings by
physicians, versus, say, inpatients, or in the hospitals.
I certainly support that focus. I believe, as most of us
do, that prevention, early detention and early diagnosis are
essential, and here is where the pitcher is beginning to wind
up, Dr. McClellan. I guess my question is whether the shift to
more outpatient physician services is being calculated
accurately in the current formula? It seems that, whether on
your end or perhaps on our end, we are, through Medicare,
encouraging beneficiaries to utilize more physician services,
while at the same time, we are trying to control the volume of
physician services through the SGR formula. So, let me just
give maybe an open-ended question to you. Can you comment on
how CMS projects utilization of physician services, and--maybe
the tougher one, maybe a loaded question--are you confident
that these calculations are accurate?
Dr. MCCLELLAN. Well, we certainly are trying to do the best
job that we can. It is a very important topic. I think the
especially good news is that recently, we have had a lot of
constructive input from the AMA, from other medical
professional groups, to help us understand, as Chairwoman
Johnson mentioned at the outset, why exactly costs are going
up. There is some discussion of this in my written testimony,
so I would refer you to that. I think you are right that there
are certainly some new treatments, new initiatives by doctors
in their offices to help patients with those very costly
chronic diseases, stay healthy and avoid complications.
The challenge that we have is that we have been peeling
back the layers of what we are spending money on and that we
are still seeing some cases where we are paying a lot of money,
but it is not clear what we are getting for it. My worry is
that we are not the experts here. What we would like to do is
support doctors in doing the best job possible in preventing
complications, and our current payment system does not do a
great job of that. That is not something that is going to be
fixed with more detailed calculations of exactly what caused
spending growth.
Just to give you a couple of examples, you mentioned heart
failure. Well, in the area of heart failure, we are seeing more
patients paying for more specialists in any given time period.
That may be good, but on the other hand, if you look at the way
our payment system works, if one specialist spends time talking
to a patient's internist, you may not need so much effort from
another specialist, or by the time they get to the next
specialist there won't be as much to talk about if all of these
different doctors are communicating well, sharing records,
managing the patient effectively together.
We pay less when they do that. We will pay more if they
have more specialist visits, we do not give any bonus, in fact,
it is kind of a penalty, because it means less use of lab tests
and everything else if all of these doctors are actually
talking to each other effectively about the patient's care. So,
those are the kinds of problems that we are not going to get at
just by making more accurate calculations about what exactly is
causing the increases in spending. I do think we need to keep
looking at those causes of increases in spending to find ways
to better promote effective care by doctors. Again, I think
more fundamentally, as many people here have said, we need a
payment system that more directly gives doctors the support
they need.
Mr. HULSHOF. I appreciate that answer.
Chairman JOHNSON OF CONNECTICUT. Thank you very much. Mr.
Thompson.
Mr. THOMPSON. Thank you, Madam Chair. Thank you for being
here, Doctor. What is the status of the demonstration projects
that CMS is doing?
Dr. MCCLELLAN. Which one? We are doing a number of
demonstrations.
Mr. THOMPSON. Aren't there three of them?
Dr. MCCLELLAN. For physician payments?
Mr. THOMPSON. Yes.
Dr. MCCLELLAN. Some of them are underway. Others are going
to be starting soon. The ones that we are implementing are, in
many cases, modeled on programs that are already being used by
other health care payers in the private sector. So, we are
spanning the spectrum between large multidisciplinary group
practices, down to small individuals, one or two doctor
offices, through the demonstration program.
Mr. THOMPSON. When are they expected to be completed?
Dr. MCCLELLAN. They will run over the next several years,
and we expect to keep getting useful information within a year
of the program starting. We had a hospital payment
demonstration program start a bit over a year ago, and we have
already learned a lot from it in just 1 year.
Mr. THOMPSON. So, you do not think we should complete these
before we implement the pay for performance?.
Dr. MCCLELLAN. It depends on what you mean by implementing
pay for performance. You will hear more from the medical
specialties in a minute, but what some of them have proposed,
and what I understand Chairwoman Johnson and others have been
working on, would be to start out with paying for reporting
information, not making the payments based on the information,
but pay on reporting information. Then, over several years,
move toward a performance-based payment. That would certainly
be enough time to incorporate what we have learned from these
demonstration projects.
Mr. THOMPSON. As we learn more from the demonstration
programs, we can tune-up?
Dr. MCCLELLAN. That is right. I think the questions we need
to answer are, how quickly and how extensively you can get down
that road. I do think that there are good measures either
available now or available by next year that we can start using
as we march through that process.
Mr. THOMPSON. Thank you. In your testimony you had
mentioned Lumetra and the work that they have been doing.
Dr. MCCLELLAN. Yes. That is the California QIO.
Mr. THOMPSON. I am assuming that the areas where they were
working are, if not in my district, in districts or in areas
similar to it.
Dr. MCCLELLAN. I hope so. I hope you will let me know if
they are not.
Mr. THOMPSON. Can you give me an idea of what sort of
problems they have been able to point out in regard to rural
practices and the hurdles that they are facing?
Dr. MCCLELLAN. There are several problems for rural
practices. One is they tend to be smaller, and so they are
unlike a large multi specialty group, where it is easier for
people to pool together, to invest in electronic record systems
or other steps that help them work together better to improve
quality. They may also be on their own more for making
decisions about patients. So, when you are in an urban setting
you are either practicing with doctors in different specialties
or they are right close by for referrals, whereas in the rural
setting you have to do more things on your own. That requires a
different approach when you are thinking about quality
improvement opportunities. What Lumetra has done is, just to
take electronic records systems as an example, is try to
identify systems that have already been working in certain
rural doctor practices. It is unusual for rural docs to have
electronic records, but it is not unheard of; it is increasing
around the country now.
So, they have tried to develop tailored support programs to
help rural doctors. They are on their own, they do not have a
lot of staff, they do not have a lot of time to devote to
figuring out how all of this software should be installed, so
they have tried to help them follow some simpler rules or
proven approaches to get those electronic record systems in
place. Just as a side note on rural doctors, and these
performance-based payments, when you look at some of the
performance measures that we are most interested in, and also
look at overall cost of health care, which we want to keep
down, many of these rural practices do very well already.
I do not know if it is just knowing your patients better
than you can in an urban setting or what, but in terms of
quality and cost, many of these rural doctors are doing well. I
think they could do well under these performance-based payment
systems, but just to make sure that happens we need to keep
building on support programs like what Lumetra is doing.
Mr. THOMPSON. I yield back.
Chairman JOHNSON OF CONNECTICUT. Thank you. Mr. Emanuel.
Mr. EMANUEL. I would like to thank you, Dr. McClellan. You
know I am about to say something that I really wish I was not
going to say.
Dr. MCCLELLAN. You do not have to say it.
Mr. EMANUEL. When you hear it, I think you will hear why.
Secretary Levitt is in my district, and I got an hour notice.
He is in the district today. My gut tells me that if he was in
Missouri, in my colleague's district, then he would be notified
well in advance and invited. That would be true about my
colleague from Arizona, that would be true about my colleague
from Louisiana, that would be true about my colleague from
Connecticut. We may have different views about the prescription
drug benefit. I am not an expert like you, and I am not an
expert like Dr. Levitt, but I have a couple of views about it.
I would rather be talking about the pay for fee services today
that we are supposed to be talking about.
Now, the prescription drug benefit is not very popular.
There is a lot of questions about it out there. In fact,
because of its complexity, there is a lot of hesitancy about
it. Now, you are going to the Copernicus Center in my district
today. I got about an hour notice that you were coming. I think
I know something about what the people on the north side of
Chicago think about that benefit, and I think I could be
helpful. Now we have differences on reimportation, we have
differences on direct negotiation, but I think this is a rank
amateur move. Now, your agency was cited by the GAO for the
advertisements you have done, and cited on the propaganda
issue. A lot of people have some doubts about it because you
politicized this process.
I hope the mailing you send out to the 42 million senior
citizens does not include that same kind of political overture
statement, because we can help get this benefit accepted. If
you look at the acceptance by people for your discount card,
which is unbelievably low, it comes from politicizing this
process. I would prefer to use my time appropriately here, and
I kind of resent that I am doing this, but I would like to,
since you are the only one here from HHS, I would like to
logger with you. We have our differences, but we serve the same
people. I also have the eldest district in the State of
Illinois. There are some senior citizens, for a former
Congressman that happened to represent this district who were
once hood ornaments to that Congressman's car because of their
views of health care.
Now, I can help explain the benefit, whether I agree or
disagree or vote for it. Now, having said that, we will talk at
some other point about reimportation, direct negotiation, how
to deal with pricing. If this bill and the legislation was a
little simpler, you would not require all of the explanation
that is going to be involved in it. Now, with that, I would
like to ask you, how do you ensure that been beneficiary will
not pay more in this program than you would like to look at in
the fee-for-service and the bonus structure?
Dr. MCCLELLAN. For the physician payment?
Mr. EMANUEL. Yes.
Dr. MCCLELLAN. I will answer that, but I do want to go back
first to the issues raised earlier, because I truly appreciate
your interest and willingness to get the facts out about the
benefit itself. There a lot of people who disagree on what
exactly should be in the Medicare drug benefit and how it
should operate. I personally think these approaches that we are
taking to get the prices down and to make sure that the
benefits are up to date are going to make sure that Medicare's
benefits don't fall behind like they have over the last 40
years, but there are differences about that. What we are doing
with the outreach effort to educate seniors about the drug
benefit is really about the facts of the benefit itself, and
what it means for each of them. In your district, I did not
realize this event was in your district this morning.
Mr. EMANUEL. It is going on right now.
Dr. MCCLELLAN. That is a locally-focused event, and it
involves not just Republicans; Mayor Daly, I understand is
going to be there, and many local organizations that are
helping to get that information out to seniors to make sure
that we are working together.
Mr. EMANUEL. I have a degenerative gene. I happen to do
office hours at grocery stores. That is where I do my office
hours. I greet people, whoever comes in and wants to talk or
whatever. That is how I spend my time meeting my constituents.
Now, I voted against this, but I have done a mailing explaining
to people what the benefit is, where they can call. You and I
and your office and your entire loyal public servants serve the
same constituents. If I were somebody else on this panel, I
would be rolling my eyes that I am wasting my time doing this
with you personally. I really prefer not to be. The fact is, we
have differences, but there are going to be people who are
going to get that benefit. Now, we can have these differences,
we are going to keep debating them out, and that is why
politics is a good thing. There are some questions already
about how this has been managed by HHS, and the politicization
of this from the video that GAO cited you with. Now, I would
suggest if you can stop continuing the politics, I did not need
an hour-ahead call, you could have called ahead of time. I
probably could not have made it because of votes here, but I
would have appreciated it and could have helped you. Now, to
the real issue at hand here that is also an important issue.
Dr. MCCLELLAN. I do want to follow up with you on that and
make sure that we are working effectively together. I
appreciate your commitment to getting the facts out. On
physician payment, if you do not mind me running over for a
minute or two on answering this important question, that is
part of the challenge that we face. When we do anything that
increases the total spending in part B, 25 percent of that
increase is paid for by the beneficiaries. So, that is why I
think an approach of just adding more money into these same
payment systems, which are rapidly increasing in cost, but are
not helping to deliver high quality care as much as they could,
is not the right way to go. The kinds of stuff that we are
talking about, which would help doctors deliver better care,
and avoid unnecessary services and help beneficiaries not only
pay less money for their care, as a result, but also stay
healthier are very important.
There are some challenges in getting these systems
implemented, but there has been a tremendous amount of
progress. I also promised to keep you and other Members of this
Committee closely informed about any beneficiary impacts of
these kinds of payment changes, because we do want to try to
avoid that.
Chairman JOHNSON OF CONNECTICUT. Mr. Hulshof has a point to
make, and I would like to give Mr. Cardin a chance.
Mr. HULSHOF. Just for the record, Madam Chairwoman, I would
like the record to reflect that in the year 2000, the President
of the United States, who my friend from Illinois used to work
for, came to the University of Missouri, Columbia, presumably
to talk about patients' bill of rights. I was not invited, even
though the event was three blocks from my home. My political
opponent for Congress was invited, as was our late Governor,
Mel Carnahan, who was a Democratic Senatorial candidate. So,
since the gentleman referenced me earlier, I wanted the record
to reflect the political nature of that event as well.
Mr. EMANUEL. As you know from us being colleagues, I was
gone in 1998. Had I been there, I surely would have invited
you.
Chairman JOHNSON OF CONNECTICUT. Mr. Cardin.
Mr. CARDIN. Dr. McClellan, let me thank you for your
testimony. I am a little bit concerned, though, about your last
statement in that it gives me the impression that we are
spending more money than we should for physician reimbursement,
and we are not delivering the high level of care, at least that
is just looking at the language that you just supplied Mr.
Emanuel with. I am not so sure I agree with that statement. So,
I, at least, want the record to reflect that I do think that
the Medicare system does deliver a high level of care, and,
yes, I think we need to improve it.
I think there is now no disagreement that the SGR needs to
eliminated as the payment structure for physicians. That seems
to now be accepted, and we are now moving to where do we go
from there, and I accept that. I just really want to put my
concerns on pay for performance. I just do not quite understand
what we are trying to achieve. Let me explain. It seems to me
that if a physician provides high quality care, there is no
need for a bonus, because that is what they should be doing.
Dr. MCCLELLAN. Right.
Mr. CARDIN. Second, if a physician provides the normal
level of care, which is adequate care, there should not be a
discount for that, they should get a reasonable reimbursement.
So, I am not sure exactly what we are trying to achieve by
these new standards. Maybe you can help me with that. I have
the concern that if you set up a structure that gives extra
payment for particular services, that the natural effect may
well be to provide care for the reimbursement rather than
providing care for the quality. Now, make me feel better about
all of this.
Dr. MCCLELLAN. First of all, let me agree with you that
Medicare does provide high quality care for millions of
beneficiaries every day, and that is not just because of us
paying the bills, it is because we have a very high caliber of
health professionals in this country that we are able to work
with in delivering this care. This is an area where I think a
lot of people get it wrong in thinking about economics and
physicians. Physicians are not there doing this job every day
just because they want to make money, or even mainly because
they want to make money. These are smart people. I know a lot
of them. Not that I am one of them myself.
These are generally very smart people who are very
committed to the work that they are doing, and they are there
because they care about patients, because they want to deliver
high quality care. In order to do that, they also have to keep
their doors open. They have to be able to run their clinic, to
pay their staff, to buy the equipment, and pay the bills that
enable them to deliver high quality care. When we pay them in
ways that gets in the way of that goal of high quality care,
well, they cannot do their job as well as they could otherwise.
Just to give you one example, if a physician buys an
electronic health records system, and then uses it to send e-
mail reminders to their patients or to schedule visits more
appropriately, or to enable them to contact the patient to head
off complications or to get better information in on the
patient's lab tests that are done elsewhere, what happens? They
get paid less by Medicare. So, how can they make the
investments in these kinds of quality-improving systems that
they would like to be able to use to deliver better care if we
do not have a payment system that supports that. Instead, what
we will do is we will pay; if there are more lab tests done, if
more of those patients come in to see that doctor or other
doctors, if there are more complications for that patient with
chronic illness, and so we end up spending more money getting
less good health outcomes because we are not supporting doctors
as effectively as we should. That is the goal.
Mr. CARDIN. I agree with everything you said. I just urge
that this not be money driven. It seems to me that if you have
a dollar amount you are trying to achieve, and that is going to
compromise quality, because you have to reach that dollar
amount, then you compromise the whole concept of what you are
trying to do here. That is how I find too much policy driven
here in Washington, not because of you, but because of our
system here, and being so budget driven. So, I hope that in
developing this, that you are going to reach out and meet with
all of the different groups. I would really like to talk to you
about the game plan that you have in reaching out to the
different medical groups and groups that are out there to make
sure that they have input before we do this.
I am concerned about this being driven more by money than
driven by good health care policy. I could not agree with you
more, our system can certainly be improved. We know that we
have to get rid of the SGR. We all know that. That is going to
cause those doors to close, and we do not want to see that
happen.
Dr. MCCLELLAN. I think it is very important for this whole
effort to involve a lot of leadership from the physician
community. That is absolutely right.
Chairman JOHNSON OF CONNECTICUT. Thank you very much. We
will hear that from the physician community. I can certainly
provide you with the documents that they have circulated from
which we drew the criteria and the measures in our draft
proposal, which I would be glad to circulate too. Dr.
McClellan, thank you very much. I know you need to leave at
2:30, so I won't proceed with some specific questions that I
was holding until the end, but do I want to put them on the
record.
Dr. MCCLELLAN. We will be happy to follow up with you on
them.
Chairman JOHNSON OF CONNECTICUT. You know how strongly I
feel about consistent decisions in Medicare, because I think
they promote fair and equitable consequences. We have discussed
this at great length on the issue of reclassification and
recertification. I think the definition of physician services
ought to be consistent. The fact that the definition of
physician services is different under SGR than it is for the
whole rest of Medicare is certainly distorting this program and
hampering our ability to handle a fair and equitable
reimbursement structure for physicians.
Second, I think the spirit of the law is every bit as
important as the letter of the law. While the letter says that
the SGR has to be accommodated with changes in law and
regulation, I would certainly maintain that program memorandum
and national coverage decisions do have office visit
implications, and those ought to be better reflected, and that
is something we are going to have to look at carefully if we
cannot do something truly more intelligent, which is to repeal
the whole system, and substitute for it a more intelligent
payment system, but also one that analyzes growth and evaluates
it for appropriateness.
There is no evaluation of appropriateness going on right
now, although I know you and your staff are taking apart this
big increase from the last year to begin to look at that. The
new payment system, the new profiling effort will give us the
tools we need to judge appropriateness of service increases,
and we do not have those now. So, I do not want the system to
be destroyed through a 15-percent increase that may very well
represent a growth in preventive services, in quality
practices. We just do not know. So, we have a lot of work to do
together, if we are going to prevent the current law from going
into effect. I hope you and your staff will work closely with
us, and will be open to the level of change that we have to
make if we are going to go forward in the future in the way you
propose.
Dr. MCCLELLAN. Thank you very much.
Chairman JOHNSON OF CONNECTICUT. Thank you for being with
us. If the next panel would please come forward. Good afternoon
and welcome to the hearing. We hope that you will summarize
your testimony in roughly 5 minutes. This is a very important
subject, and you have written very interesting testimony. Then
we will have time for some questions. Thanks.
STATEMENT OF JOHN H. ARMSTRONG, M.D., MEMBER, BOARD OF
TRUSTEES, AMERICAN MEDICAL ASSOCIATION
Dr. ARMSTRONG. Thank you, Chairman Johnson. My name is John
Armstrong. I am a trustee of the AMA, and a practicing trauma,
critical care and general surgeon from Miami, Florida. The AMA
would like to commend you, Madam Chairman, and Members of the
Subcommittee, for your leadership in recognizing the need to
replace the current Medicare physician payment formula. We also
appreciate your repeated efforts, Madam Chairman, with Chairman
Thomas, in pressing CMS to make administrative changes to the
physician payment formula. This would help Congress enact a new
formula that keeps pace with physician practice costs by
lowering the cost of legislation.
We also commend Representatives Shaw and Cardin, and the
over 100 cosponsors of H.R. 2356, the Preserving Patient Access
to Physicians Act of 2005. This bill would replace the current
physician payment formula. Madam Chairman, today we are here to
discuss the legislation you are developing. We understand it
would repeal the fatally flawed physician payment formula, and
implement a value-based purchasing program for Medicare
physician services. The AMA and its member physicians are
staunchly committed to quality improvement. Over the last 5
years, the AMA has dedicated over $5 million in convening the
physician consortium for performance improvement for the
development of performance measures and related quality
activities.
As a result of these efforts, CMS is now using these
measures developed by the consortium in demonstration projects
on pay-for-performance authorized by the Medicare Modernization
Act. In June, our house of delegates adopted principles and
guidelines for pay-for-performance programs, and these are
attached to our written testimony. Overall, many of the
elements we understand would be included in your legislation
are consistent with a number of these principles and
guidelines.
For example, we understand your goals in developing
legislation are: To repeal the SGR and provide positive updates
for physicians that reflect increases in practice costs; to
allow voluntary physician participation; and to require
evidence-based valid performance measures developed by the
medical specialties in a transparent process. We want to work
further with you and Members of the Subcommittee to address
areas of concern.
Pilot testing prior to full implementation is essential.
Measures of efficiency should not simply reward the lowest cost
provider while ignoring quality of care. Efficiency measures
must meet the same evidence-based standards as quality
measures. There also needs to be a reliable method for risk
adjustment. In addition, we are concerned about potential
adverse effects of public reporting, such as exacerbating
disparities in care for minority and other vulnerable
populations. Providing patients with flawed information would
undermine the goals of value-based purchasing, and violate the
physician's oath of, first, do no harm.
Physicians should be fairly reimbursed for their
administrative costs, especially for information technology
systems necessary for the collection and transmission of
accurate quality data. Finally, the AMA appreciates the
Chairman's recognition that the current flawed physician
payment formula cannot coexist with a value-based purchasing
program. Value-based purchasing may save dollars for the
program as a whole by reducing hospitalizations, but the
majority of measures, such as those focused on prevention and
chronic disease management ask physicians to deliver more care.
If the physician payment or SGR formula is retained the so-
called reward for physicians will be additional pay cuts. This
would only compound an ongoing serious problem. Physician pay
cuts of 31 percent over the next 7 years are projected
beginning January 1, 2006.
A recent AMA survey showed that these cuts will impair
patient access. For example, more than a third of physicians
would decrease the number of new Medicare patients they accept.
More than half would defer the purchase of information
technology that is necessary to make value-based purchasing
work. A majority will be less likely to participate in Medicare
Advantage. It is clear that the current physician payment
formula must be replaced. We agree with your conclusion, Madam
Chairman, and the conclusion of Chairman Thomas, that CMS
should help lower the cost of enacting a new formula by using
its authority to remove drugs from the SGR retroactively, and
including in the payment formula increased spending due to
national coverage decisions and government health promotion
policies. We look forward to working with the Subcommittee on a
new payment system that truly benefits our patients. Thank you.
[The prepared statement of Dr. Armstrong follows:]
Statement of John H. Armstrong, M.D., Member, Board of Trustees,
American Medical Association
Chairman Johnson, Ranking Member Stark and Members of the
Subcommittee, the American Medical Association (AMA) appreciates the
opportunity to provide our views today regarding value-based purchasing
for physicians under the Medicare program.
The AMA would like to commend you, Madam Chairman, and each Member
of the Subcommittee, for all of your hard work and leadership in
recognizing the fundamental problems inherent in the Medicare physician
payment update formula and the need to replace the flawed formula. A
new formula that keeps pace with physician practice cost inflation is
critical. Without it, we are in grave danger of a Medicare meltdown
that would present serious access problems for our nation's senior and
disabled patients.
We also greatly appreciate, Madam Chairman, that you are in the
process of developing legislation that would repeal the current
physician sustainable growth rate (SGR) formula and replace it with an
alternative system that is intended to better reflect physician
practice costs. The draft legislation would also implement a value-
based purchasing program for Medicare physicians' services. Overall,
many of the elements that we understand you are considering for
inclusion in your legislation would be consistent with AMA principles
recently adopted by our House of Delegates relating to value-based
purchasing programs (or ``pay-for-performance'' programs), as we
discuss further below, along with a couple of issues about which we
urge further consideration.
In addition, the AMA extends its gratitude to Chairman Thomas and
Subcommittee Chairman Johnson for your repeated efforts in pressing the
Centers for Medicare and Medicaid Services (CMS) to join forces with
Congress to replace the flawed physician payment formula. As your
letter to CMS Administrator McClellan, dated July 12, 2005, states: ``A
permanent legislative fix to the Sustainable Growth Rate (SGR) formula
would be prohibitively expensive given current interpretation of the
formula, but could proceed through our joint efforts combining
administrative and legislative action.'' The letter also affirms CMS'
authority to remove the costs of drugs, back to the base period, from
calculation of the SGR, and requests that CMS review its procedures for
determining the costs of national coverage decisions (NCDs). The AMA
adamantly agrees with the Chairmen that CMS should retroactively remove
drugs from the SGR and reflect in the SGR increases in physician
spending due to NCDs, and we urge CMS to do so for the 2006 physician
payment rule.
We also commend Representatives Shaw and Cardin and the over 90 co-
sponsors of H.R. 2356 (the Preserving Patient Access to Physicians Act
of 2005) for your leadership and efforts in addressing the flawed
Medicare physician payment formula. Your bill also would relieve
looming Medicare physician access problems by repealing the current SGR
formula and implementing positive updates in 2006 and beyond that would
reflect increases in the cost of practicing medicine.
VALUE-BASED PURCHASING FOR PHYSICIANS AND CURRENT SGR FORMULA CANNOT
CO-EXIST
The AMA appreciates the Chairman's recognition that the current
flawed Medicare sustainable growth rate (SGR) physician payment formula
must be replaced and cannot co-exist with a value-based purchasing
program for physicians. The end-goals of the SGR and value-based
purchasing are in conflict.
Value-based purchasing programs are based on the notion that the
management of potentially costly conditions in the physician's office
will prevent or shorten hospitalizations paid for under Medicare Part
A. This also means, however, that more care will be delivered in
physician offices under Medicare Part B. Thus, although pay-for-
performance may save money for Medicare Part A or to the program as a
whole, it likely will result in increased spending on physician Part B
services. During his May 11, 2004 testimony before this Subcommittee,
CMS Administrator, Dr. Mark McClellan, suggested that one of the
agency's quality improvement projects, the Chronic Care Improvement
Project, ``may actually increase the amount of (patient-physician)
contact through appropriate office visits with physicians.''
Increased Medicare spending on Part B physicians' services would
trigger additional Medicare pay cuts for physicians because, as
discussed further below, Medicare pays for Part B physician services
based on the SGR spending target. If physician spending exceeds the SGR
target, Medicare payments to physicians are cut. In other words, pay-
for-performance and the SGR are inconsistent concepts. This would only
compound ongoing serious problems resulting from application of the
current SGR physician payment formula.
The flaws in the SGR formula led to a 5.4% payment cut in 2002, and
additional cuts in 2003 through 2005 were averted only after Congress
intervened. The Medicare Trustees project that physicians and other
health professionals face steep pay cuts (about 26%) from 2006 through
2011. If these cuts begin, on January 1, 2006, average physician
payment rates will be less in 2006 than they were in 2001, despite
substantial practice cost inflation. These reductions are not cuts in
the rate of increase, but are actual cuts in the amount paid for each
service. Physicians simply cannot absorb these draconian payment cuts
and, unless Congress acts, physicians may be forced to avoid,
discontinue or limit the provision of services to Medicare patients.
The AMA conducted a survey of physicians in February and March 2005
concerning significant Medicare pay cuts from 2006 through 2013 (as
forecast in the 2004 Medicare Trustees report.) Results from the survey
indicate that if the projected cuts in Medicare physician payment rates
begin in 2006:
More than a third of physicians (38%) plan to decrease
the number of new Medicare patients they accept;
More than half of physicians (54%) plan to defer the
purchase of information technology;
A majority of physicians (53%) will be less likely to
participate in a Medicare Advantage plan;
About a quarter of physicians plan to close satellite
offices (24%) and/or discontinue rural outreach services (29%) if
payments are cut in 2006. If the pay cuts continue through 2013, close
to half of physicians plan to close satellite offices (42%) and/or
discontinue rural outreach (44%); and
One-third of physicians (34%) plan to discontinue nursing
home visits if payments are cut in 2006. By the time the cuts end, half
(50%) of physicians will have discontinued nursing home visits.
A physician access crisis is looming for Medicare patients. While
the MMA brought beneficiaries important new benefits, these critical
improvements must be supported by an adequate payment structure for
physicians' services. There are already some signs that access is
deteriorating. A MedPAC survey found that 22% of patients already have
some problems finding a primary care physician and 27% report delays
getting an appointment. Physicians are the foundation of our nation's
health care system. Continual cuts (or even the threat of repeated
cuts) put Medicare patient access to physicians' services at risk. They
also threaten to destabilize the Medicare program and create a ripple
effect across other programs. Indeed, Medicare cuts jeopardize access
to medical care for millions of our active duty military family members
and military retirees because their TRICARE insurance ties its payment
rates to Medicare.
The AMA is happy to have the opportunity today to address problems
with the physician payment formula, as well as administrative action
that can be taken now to help alleviate the cost of enacting a new
physician payment formula. We also look forward to working with the
Subcommittee and CMS to ensure a stable, reliable payment system that
preserves patient access and keeps up with the costs of practicing
medicine. This would treat physicians similarly to other Medicare
providers, such as hospitals, home health agencies and skilled nursing
facilities.
VALUE-BASED PURCHASING PROGRAMS FOR PHYSICIANS
AMA Commitment to the Development of Effective Quality Improvement
Programs
The AMA is committed to quality improvement, and we have undertaken
a number of initiatives to achieve this goal. Over the last five years,
the AMA has spent over $5 million in convening the Physician Consortium
for Performance Improvement for the development of performance
measurements and related quality activities. The activities of the
Consortium, as well as other AMA initiatives in performance improvement
are described in the attached document.
AMA Pay-for-Performance Principles and Guidelines
As quality improvement efforts have evolved, so has the concept of
value-based purchasing (or pay-for-performance). The AMA believes that
physician pay-for-performance programs designed properly to improve
effectiveness and safety of patient care may serve as a positive force
in our healthcare system. If done improperly, however, they could harm
patients, and, thus, in our ongoing efforts to advance the development
and effective implementation of pay-for-performance programs, the AMA's
House of Delegates adopted in June comprehensive pay-for-performance
(PFP) principles and guidelines.
Overall, these principles address five broad aspects of pay-for-
performance programs: (i) quality of care; (ii) the patient/physician
relationship; (iii) voluntary participation; (iv) accurate data and
fair reporting; and (v) fair and equitable program incentives.
Associated with each principle, however, are more specific guidelines.
These principles and guidelines are attached.
Similar to these AMA principles, which support the use of quality
of care measures created by physicians across appropriate specialties,
the code set used to capture quality of care measures also needs to be
created by physicians working with the specialty societies. The CPT
codes set, using the CPT editorial process, provides the appropriate
combination of clinical methodological rigor and broad stakeholder
expertise to support the application of codes to quality of care
measures. In fact, the AMA/CPT Editorial Panel has already established
a Performance Measurement Advisory Group (PMAG) utilizing nationally
recognized performance measurement experts to provide guidance on the
development of CPT Category II performance measurement codes. To date
over 30 CPT Category II codes have been developed utilizing an
inclusive and thorough process.
We strongly urge use of the CPT Editorial Panel process and use of
the CPT Category II codes as the preferred code set for transmitting
performance measurement information under pay for performance programs.
Physician Value-Based Purchasing Legislation
The value-based purchasing legislation being developed by Chairman
Johnson appears to be consistent with a number of key AMA PFP
guidelines discussed above. For example, we understand the legislation
would require the development of a value-based purchasing program for
physicians' services that contains at least the following elements: (i)
allocation of new funds for physicians who report and meet performance
measures; (ii) voluntary physician participation; (iii) evidence-based
performance measures developed in a transparent, open process that
allows each of the individual medical specialty societies to have input
into the process of developing performance measures; (iv) allowance for
variations in individual patient care based on a physician's clinical
judgment; (v) performance measurement that is scored against both
absolute values and relative improvements in those values; (vi) a
phase-in of the program during 2007, 2008 and 2009; (v) safeguards
against patient de-selection; (vii) measures that take into account
patient non-compliance; (ix) patient privacy; (viii) the option by
physicians to bill at a group level; and (xi) the ability for
physicians to review and comment on and appeal performance ratings,
with a requirement that physicians' comments be released along with
their rating.
There are several areas of concern that the AMA urges the
Subcommittee to consider as it moves forward in developing value-based
purchasing legislation. First, all physicians should receive a base
payment update, while physicians achieving quality goals can receive a
bonus payment. In addition, any pay-for-performance program needs to be
pilot tested prior to full implementation. Since value-based purchasing
is a completely new concept with regard to Medicare payment for
physicians' services, pilot testing is critical for determining whether
this type of payment system achieves its intended purpose. Pilot tests
would also help identify program ``glitches'' and any needed
modifications prior to full implementation of the program.
Measures of efficiency are another strong area of concern.
Efficiency measures have the danger leading to rewards for the lowest-
cost provider, while ignoring quality of care. Thus, it is imperative
that efficiency measures meet the same standards as are applied to
quality measures. These measures must be evidence-based, valid measures
developed through a transparent process that allows input from the
medical specialties. Efficiency cannot only relate to cost issues, as
we have learned from the experience of UnitedHealthcare. Its United
Performance insurance product was introduced this year, but two large
medical groups have already informed United they will not participate
in the performance program because performance ratings for efficiency
essentially are based on United's financial liability, not the quality
of care provided. Finally, there must be broad-based consensus
regarding what constitutes appropriate levels of care before measuring
for efficiency.
Development of risk-adjustment techniques are of great concern to
the physician community. Currently, there is no reliable method for
risk-adjustment, which has grave consequences for purposes of
determining a fair comparison of physician performance, payment and
public reporting, as discussed below.
The AMA also is very concerned about public reporting, which if not
approached thoughtfully, can have unintentional adverse consequences
for patients, including, for example, patient de-selection in the case
of those with certain ethnic, racial, socioeconomic or cultural
characteristics that make them less compliant. Further, health literacy
may not be adequate to comprehend basic medical information. Yet,
programs must be designed so that appropriate information must be
available to patients to enable them to make educated decisions about
their health care needs. If done correctly, public reporting has the
potential to help provide such appropriate information to patients.
There remain, however, several critical issues that must be resolved
before public reporting provisions can be implemented. There needs to
be a method for ensuring that any publicly reported information is: (i)
attributable to those involved in the care; (ii) appropriately risk-
adjusted; and (iii) accurate, as well as relevant and helpful to the
consumer/patient. Moreover, in accordance with the AMA guidelines,
physicians must have the opportunity for prior review and comment and
the right to appeal with regard to any data that is part of the public
review process. Physicians should also have the right to have their
comments included with any publicly reported data.
Further, in implementing performance measures, it is important to
learn from private sector programs already in existence. We know from
some private sector programs that application of measures is more
effective if they are implemented on a graduated basis. It is best to
begin by implementing only a limited number of measures to assess how
well they work, and then build upon the program from that starting
point. Thus, we recommend that pay-for-performance legislation include
limits on the number of measures with which physicians must comply over
certain time periods.
The AMA also urges that any value-based purchasing program ensure
that physicians are not burdened with additional administrative costs,
especially for information technology systems that are needed to
participate in the program. As discussed above, physicians cannot
continue to absorb unfunded government mandates, and value-based
payments for participation in the program should not be undermined by
administrative costs.
Finally, the AMA wishes to raise overall factors to be considered
as we move forward in developing value-based purchasing legislation for
physicians: (i) physician practices are vastly different in size and
type across the country, and, in stark contrast to hospitals, which are
fairly homogenous, one size does not fit all; (ii) the number of
patients needed to achieve a statistically valid sample size; (iii) the
desire to keep the data collection burden low, while at the same time
maintaining accuracy of the data; (iv) level of scientific evidence
needed in establishing appropriate measures; (v) the ability to trace a
performance measure back to one or many physicians involved in a
patient's care; and (vi) the complexities of distributing payments when
multiple physicians are involved in a patient's care, and without
violating any fraud and abuse laws and regulations.
We commend Chairman Johnson for your sensitivity to these important
factors, and we look forward to working with you to achieve a new
payment system for physicians that keeps pace with the cost of
practicing medicine and rewards physicians for the quality of care they
provide.
SPENDING TRENDS
Medicare pays for services provided by physicians and numerous
other health care professionals based a target rate of growth, called
the sustainable growth rate (SGR). If Medicare spending on physicians'
services exceed allowed spending in a particular year, physician
payments are cut in the subsequent year. Conversely, if allowed
spending is less than actual spending, physician payments increase.
Only physicians (and other health professionals whose payments are
tied to the physician fee schedule) are subject to arbitrary cuts due
to factors beyond their control. Every other category of health care
provider receives positive updates, based on a measure of inflation in
their practice costs. For example, CMS recently announced positive
updates of 2.5% for home health services and 3.2% for hospitals.
On March 30, the Centers for Medicare and Medicaid Services
reported that Medicare spending on physician services grew by 15% in
2004. Other Medicare data, including the 2005 Medicare Trustees Report,
suggests spending growth of 12% to 13%. About 7% represents an increase
in services per patient. This follows utilization increases of about
5.5% in 2001, 6% in 2002 and 5% in 2003. What happened in 2004 is not
some ``unprecedented'' spending spike. It is the continuation of a
trend brought about by expanded life-spans, more chronic disease and
better treatments.
Nevertheless, it is not surprising that Medicare spending on
physician services continues to increase. First, Medicare's two public
trustees have noted that much of the growth in physician services can
be traced to technological advances. Revolutionary changes in the
practice of medicine have made it possible to keep millions of
Medicare's elderly and disabled beneficiaries alive and active well
into their 80s. Second, the prevalence of expensive chronic conditions
such as kidney failure, heart disease and diabetes has increased
dramatically, despite these vast improvements in mortality and quality
of life, More than three-fourths of Medicare beneficiaries now have at
least one chronic illness and about two-thirds have a least two and 20%
have five or more. Thus, with the positive results of medical advances
and the increase in widespread chronic conditions among the elderly,
Medicare spending on physician services is a good investment. Congress
has recognized the value of investing in physician services by twice
intervening to avert sharp Medicare cuts.
CMS has also noted that an increase in Medicare payments for
physician and other health professionals would, in turn, increase the
Medicare Part B premium for beneficiaries. Physician pay cuts, however,
will ultimately cost beneficiaries more because these cuts will force
physicians to discontinue providing certain services in the physician's
office. Rather, patients will have to receive these services in higher-
cost hospital settings. This means that Medicare patients will
experience more inconvenience, exposure to life-threatening infections,
and higher deductibles and co-payments when they are treated in the
hospital. In fact, increased spending on hospital outpatient services,
whether due to the hospital payment update or utilization increases,
also increases beneficiary premiums.
PROBLEMS UNDER THE SUSTAINABLE GROWTH RATE SYSTEM
There are two fundamental problems with the SGR formula:
1. Payment updates under the SGR formula are tied to the gross
domestic product, which bears little relationship to patients' health
care needs or physicians' practice costs; and
2. Physicians are penalized with pay cuts when Medicare spending
on physicians' services exceeds the SGR spending target, yet, the SGR
is not adjusted to take into account many factors beyond physicians'
control, including government policies, that although good for
patients, promote Medicare spending on physicians' services. (as
further discussed below under ``Administrative Action Needed.'')
Problems with the Payment Formula Due to GDP
GDP Does Not Accurately Measure Health Care Needs
The SGR permits utilization of physicians' services per beneficiary
to increase by only as much as GDP. The problem with this
``relationship'' is that GDP growth does not track the health care
needs of Medicare beneficiaries. For example, when a slowed economy
results in a decreased GDP, the medical needs of Medicare patients
remain constant, or even increase, despite the economic downturn. Yet,
physicians and numerous other health professionals, whose Medicare
payments are tied to the physician fee schedule and who are doing their
best to provide need services, are penalized with lower payments
because of a slowly growing economy, resulting in the decreased GDP.
Further, GDP does not take into account the aging of the Medicare
population, technological innovations or changes in the practice of
medicine.
Historically, health care costs have greatly exceeded GDP. Yet, the
SGR is the only payment formula in Medicare tied to that index. In
contrast, payments for hospitals, skilled nursing facilities and home
health, for example, are all tied to their inflationary pressures.
Technological Innovations Are Not Reflected in the Formula
The Congressional Budget Office has said that Medicare volume
increases are due to ``increased enrollment, development and diffusion
of new medical technology'' and ``legislative and administrative''
program expansions. The SGR system's artificial cap on spending growth
ignores such medical advances when it limits target utilization growth
to GDP growth.
The United States' population is aging and new technologies are
making it possible to perform more complicated procedures on patients
who are older and more frail than in the past. Over the last decade,
life expectancy has risen by a year for women and two years for men.
Life-spans for both sexes rose by about a half year just between 1999
and 2002, and 65-year-olds of both sexes now can expect to become
octogenarians. Improvements in the field of anesthesia and surgery make
it possible to operate on older and older patients when complex surgery
is required. People 80 and older now frequently undergo extensive
surgery to prevent heart attacks and strokes.
Both Congress and the Administration have demonstrated their
interest in fostering advances in medical technology and making these
advances available to Medicare beneficiaries through FDA modernization,
increases in the National Institutes of Health budget, and efforts to
improve Medicare's coverage policy decision process
The only way for technological innovations in medical care to
really take root and improve care is for physicians to invest in those
technologies and incorporate them into their regular clinical practice.
The invention of a new medical device cannot, in and of itself, improve
health care--physicians must take the time to learn about the
equipment, practice using it, train their staff, integrate it into
their diagnosis and treatment plans and invest significant capital in
it. Although the Medicare hospital payment system allows an adjustment
for technological innovations, the physician payment system does not do
so. The physician payment system is the only fee structure of Medicare
that is held to GDP, and no other Medicare payment system faces as
stringent a growth standard.
Government efforts to foster technological innovations could be
seriously undermined as physicians now face disincentives to invest in
new medical technologies or to provide them to Medicare beneficiaries.
Site-of-Service Shifts Are Not Considered in the Formula
Another concern that is not taken into account in the SGR formula
is the effect of the shift in care from hospital inpatient settings to
outpatient sites for certain medical procedures. For example, when the
2005 Medicare Trustees report was released, CMS noted that expenditures
for inpatient hospital services covered by Part A were lower than
previous forecasts, but failed to mention that lower inpatient spending
was a contributor to increased Part B spending for physicians'
services.
It has been a goal by Congress and the Bush Administration to
utilize more physician services through disease management and
prevention initiatives in order to avoid expensive hospitalizations and
nursing home admissions. Technological innovations have also made it
possible to treat many services that once required hospitalization in
physicians offices instead. Physicians are keeping seniors with chronic
diseases out of hospitals by managing their care in the office.
Hospital days per 1000 population between 1995 and 2002 declined by
more than 15% among 65 to 74 year olds and by more than 10% for those
75 and older.
Where inpatient care is avoided, deductibles are reduced from about
$900 to about $100; if ambulatory care is involved, co-payments are
limited to 20% of Medicare's allowed charge in physician offices
compared to up to 45% in a hospital outpatient department.
While these trends have led to the treatment of increasingly
complex cases in physicians' offices, the increased use and intensity
that results is not recognized in the SGR formula.
Beneficiary Characteristics Are Not Reflected in the Formula
A related factor that also is unrecognized in the SGR formula is
changes over time in the characteristics of patients enrolling in the
fee-for-service program. For example, increases in patients diagnosed
with, or having complications due to such diseases as obesity, diabetes
and end stage renal disease, require greater utilization of physicians'
services. Yet, these types of changes in beneficiary characteristics
are not reflected in the SGR.
ADMINISTRATIVE ACTION NEEDED TO ASSIST CONGRESS IN REPLACING THE SGR
Apart from the inherent problems in the physician payment formula,
there are other problems with implementation of the SGR that seriously
threaten patient access and inequitably affect payment updates due to
factors that are beyond physicians' control.
1. CMS Must Remove Medicare-covered, physician-administered drugs and
biologics from the physician payment formula, retroactive to
1996
CMS has the Authority to Remove Drugs from the SGR
The AMA joins Chairman Thomas and Subcommittee Chairman Johnson in
urging CMS to remove spending on physician-administered drugs from
calculations of the SGR, retroactive to 1996. As discussed above, in
the July 12, 2005, letter to Administrator McClellan, Chairmen Thomas
and Johnson affirmed CMS' authority to remove spending on physician-
administered drugs from calculation of the SGR.
When CMS calculates actual Medicare spending on ``physicians'
services,'' it includes the costs of Medicare-covered prescription
drugs administered in physicians' offices. The July 12 letter explains
that CMS has excluded drugs from ``physicians' services'' for purposes
of administering other Medicare physician payment provisions. Thus,
removing drugs from the definition of ``physicians' services'' for
purposes of calculating the SGR is a consistent reading of the Medicare
statute. Further, drugs are not paid under the Medicare physician fee
schedule, and it is illogical to include them in calculating the SGR.
Finally, the July 12 letter also discusses that CMS has the authority
to revise its previous calculations of actual spending under the SGR by
removing the costs of drugs back to the base period using this revised
definition. Once CMS has revised calculations of actual spending back
to the base period, it will have revised calculations of allowed
spending, by definition, because the statute sets the base period
allowed spending equal to the base period actual spending. This process
would remove drugs entirely from both actual and allowed spending back
to the SGR base period. CMS has demonstrated its authority to revise
calculations of actual spending by actually revising spending to
account for omitted codes and more complete claims data. This analysis
was corroborated in a legal memorandum that we submitted to the
Subcommittee in February 2005. It was drafted by Terry S. Coleman, a
former Acting General Counsel of the U.S. Department of Health and
Human Services, as well as a former Chief Counsel and Deputy
Administrator of the Health Care Financing Administration.
CMS Should Remove Drugs from the SGR
In the past, some CMS officials have argued that including drugs in
the SGR was necessary to counter-balance incentives for over-
utilization in the drug reimbursement system. The AMA does not accept
this premise. Certainly physicians are not administering chemotherapy
drugs to patients who do not have cancer. Even if such incentives
existed, however, they were surely eliminated by the reductions in
payment for these drugs under the MMA. Pharmaceutical companies, not
physicians, control the cost of drugs. Further, pharmaceutical
companies and United States policy, not physicians, control the
introduction of new drugs into the market place.
Drug expenditures are continuing to grow at a very rapid pace. Over
the past 5 to 10 years, drug companies have revolutionized the
treatment of cancer and many autoimmune diseases through the
development of a new family of biopharmaceuticals that mimic compounds
found within the body. Such achievements do not come without a price.
Drug costs of $1,000 to $2,000 per patient per month are common and
annual per patient costs were found to average $71,600 a year in one
study.
Further, between the SGR's 1996 base year and 2004, the number of
drugs included in the SGR pool rose from 363 to 444. Spending on
physician-administered drugs over the same time period rose from $1.8
billion to $8.7 billion, an increase of 365% per beneficiary compared
to an increase of only 63% per beneficiary for actual physicians'
services. As a result, drugs have consumed an ever-increasing share of
SGR dollars and have gone from 3.7% of the total in 1996 to 10% in
2004.
This lopsided growth lowers the SGR target for real physicians'
services, and, according to the Congressional Budget Office, annual
growth in the real target for physicians' services will be almost a
half percentage point lower than it would be if drugs and lab tests
were not counted in the SGR. As 10-year average GDP growth is only
about 2%, even a half percent increase makes a big difference. Thus,
including the costs of drugs in the SGR pool significantly increases
the odds that Medicare spending on ``physicians' services'' will exceed
the SGR target. Ironically, however, Medicare physician pay cuts
(resulting from application of the SGR spending target) apply only to
actual physicians' services, and not to physician-administered drugs,
which are significant drivers of the payment cuts.
Medicare actuaries predict that drug spending growth will continue
to significantly outpace spending on physicians' services for years to
come. In 2003, MedPAC reported that there are 650 new drugs in the
pipeline and that a large number of these drugs are likely to require
administration by physicians. In addition, an October 2003 report in
the American Journal of Managed Care identified 102 unique
biopharmaceuticals in late development and predicted that nearly 60% of
these will be administered in ambulatory settings. While about a third
of the total are cancer drugs, the majority are for other illnesses and
some 22 medical specialties are likely to be involved in their
prescribing and administration.
The development of these life-altering drugs has been encouraged by
various federal policies including expanded funding for the National
Institutes of Health and streamlining of the drug approval process. The
AMA shares and applauds these goals. However, it is not equitable or
realistic to finance the cost of these drugs through cuts in payments
to physicians.
2. Ensure that government-induced increases in spending on physicians'
services are accurately reflected in the SGR target
As discussed above, the government encourages greater use of
physician services through legislative actions, as well as a host of
other regulatory decisions. These initiatives clearly are good for
patients and, in theory, their impact on physician spending is
recognized in the SGR target. In practice, however, many have either
been ignored or undercounted in the target. Since the SGR is a
cumulative system, erroneous estimates compound each year and create
further deficits in Medicare spending on physicians' services.
Effective January 1, 2005, CMS implemented the following new or
expanded Medicare benefits, some of which have been mandated by the
MMA: (i) initial preventive physical examinations; (ii) diabetes
screening tests, (iii) cardiovascular screening blood tests, including
coverage of tests for cholesterol and other lipid or triglycerides
levels, and other screening tests for other indications associated with
cardiovascular disease or an elevated risk for that disease, (iv)
coverage of routine costs of Category A clinical trials, and (v)
additional ESRD codes on the list of telehealth services.
As a result of implementing a new Medicare benefit or expanding
access to existing Medicare services, the above-mentioned provisions
will increase Medicare spending on physicians' services. Such increased
spending will occur due to the fact that new or increased benefits will
trigger physician office visits, which, in turn, may trigger an array
of other medically necessary services, including laboratory tests, to
monitor or treat chronic conditions that might have otherwise gone
undetected and untreated, including surgery for acute conditions.
CMS has not provided details of how these estimates were
calculated, and certain questions remain. Further, CMS reportedly does
consider multiple year impacts and cost of related services, but the
agency has not provided any itemized descriptions of how the agency
determined estimated costs. Without these details, it is impossible to
judge the accuracy of CMS' law and regulation allowances. For example,
in reviewing the 2004 utilization and spending data, we found that
utilization per beneficiary of code G0101 for pelvic and breast exams
to screen for breast or cervical cancer had increased 10% since 2003,
yet this benefit was enacted in BBA 1997 nearly eight years ago.
Likewise, per beneficiary utilization of code G0105, colorectal cancer
screening of a high-risk patient, also enacted in the BBA, was up 13%.
These impacts should be taken into account in revising the 2005 and
2006 SGR.
CMS should also seek to identify other spending increases
attributable to quality improvement programs and ensure that they, too,
are reflected in the SGR law and regulation factor. For example,
Medicare's Quality Improvement Organizations (QIO) have encouraged
physicians to determine the left ventricular function of all patients
with congestive heart failure, measured using a nuclear medicine test
or an echocardiogram. Further, CMS revised the codes for end-stage
renal disease services in 2004 to encourage four physician visits per
month. From 2003 to 2004, consistent with CMS' intent, Medicare
spending for the new ESRD codes rose 17% above 2003 spending for the
old codes.
Spending due to all of the foregoing government initiatives should
be reflected in the SGR.
3. Ensure that the SGR fully reflects the impact on physician spending
due to national coverage decisions
When establishing the SGR spending target for physicians' services,
the law requires that impact on spending, due to changes in laws and
regulations, be taken into account. The AMA believes that any changes
in national Medicare coverage policy that are adopted by CMS pursuant
to a formal or informal rulemaking, such as Program Memorandums or
national coverage decisions, constitute a regulatory change as
contemplated by the SGR law, and must also be taken into account for
purposes of the spending target.
When the impact of regulatory changes for purposes of the SGR is
not properly taken into account, physicians are forced to finance the
cost of new benefits and other program changes through cuts in their
payments. Not only is this precluded by the law, it is extremely
inequitable and ultimately adversely impacts beneficiary access to
important services.
CMS has expanded covered benefits through the adoption of more than
80 national coverage decisions (NCDs), including implantable
cardioverter defibrillators, diagnostic tests and chemotherapy for
cancer patients, carotid artery stents, cochlear implants, PET scans,
and macular degeneration treatment. While every NCD does not
significantly increase Medicare spending, taken together, even those
with marginal impact contribute to rising utilization. CMS has stated
its view that it would be very difficult to estimate any costs or
savings associated with specific coverage decisions and that any
adjustments would likely be small in magnitude and have little effect
on future updates.
We disagree, and strongly believe that CMS should make these
adjustments in its rulemaking for 2006. CMS already adjusts Medicare
Advantage payments to account for NCDs, so it clearly is able to
estimate their costs. With respect to the magnitude of impact, as one
example, CMS reported in January that the recent expansion of coverage
for implantable defibrillators would make the devices available to some
500,000 people. In addition, CMS has provided us with data showing that
2004 Medicare Part B spending on PET scans was $387 million, a 51%
increase over 2003, and the agency has acknowledged that PET scans play
an important role in diagnosing a number of diseases.
The AMA, along with 33 national medical organizations and state
medical associations, contracted with the National Opinion Research
Center (NORC) to estimate the costs of several NCDs to illustrate that
it is possible to make such estimates and provide a sense of their
magnitude. NORC's evaluation of the cost of the expanded coverage of
photodynamic therapy to treat macular degeneration considered the cost
of exams and flourescein angiography tests to determine the
appropriateness of treatment as well as treatment costs. NORC was also
able to separate the costs that Medicare would have incurred due to
local carrier coverage decisions from the expected costs associated
with the NCD for treatment of the occult form of macular degeneration,
for which Medicare prohibited coverage prior to the NCD. NORC
conservatively estimates that the new coverage is increasing
expenditures by more than $300 million a year and could boost spending
by more than twice that amount if used by all the eligible Medicare
patients.
While the AMA strongly supports Medicare beneficiary access to
these important services, physicians and other practitioners should not
have to finance the costs resulting from the attendant increased
utilization. Accordingly, CMS should ensure that the impact on
utilization and spending resulting from all national coverage decisions
is taken into account for purposes of the SGR spending target.
______
The AMA appreciates the opportunity to provide our views to the
Subcommittee on these important matters, and we look forward to working
with the Subcommittee and CMS to develop a payment system for
physicians that ensures patient access as well as payments that keep up
with the costs of practicing medicine.
Chairman JOHNSON OF CONNECTICUT. Thank you very much, Dr.
Armstrong, for that very clear evaluation of the response of
physicians if we do not take action. Dr. Hedberg.
STATEMENT OF C. ANDERSON HEDBERG, M.D., PRESIDENT, AMERICAN
COLLEGE OF PHYSICIANS, WINNETKA, ILLINOIS
Dr. HEDBERG. I am Dr. C. Anderson Hedberg, President of the
American College of Physicians. I offer the perspective of a
practicing internist who has spent almost four decades caring
for patients in the Chicago area, and as the leader of the
Nation's largest specialty society. The College believes firmly
that the medical profession has a responsibility to address
documented gaps in quality. We support the goal of
restructuring Medicare to provide incentives for improving
quality. We have joined with others to create the Ambulatory
Care Quality Alliance, AQA, a multi-stakeholder consensus group
that reached agreement in May on a starter set of performance
measures for ambulatory care. The AQA work groups are now
working on developing additional measures, including efficiency
measures, and on principles on data sharing and reporting for
the next AQA meeting in September. There are several points I
hope to leave with you.
First, the College appreciates Chairman Johnson's efforts
to develop a Medicare value-based purchasing framework that
includes repeal of the SGR formula. Second, we should be
mindful of how such a program will play out in the real world
of practicing physicians. Third, the initial steps toward
value-based purchasing must be followed by a reexamination of
the way that Medicare reimburses physicians.
The College understands that Chairman Johnson is working on
a bill that includes several policies essential to successful
implementation of Medicare quality improvement. First, quality
improvement cannot take place in an environment where
physician's fees are being cut. Addressing volume of services
through careful analysis will be far more effective in ensuring
appropriate care than using the flawed SGR. Second, quality
measures should be developed by medical specialty societies,
validated through a consensus-building organization such as the
AQA, and phased in gradually.
The College applauds Chairman Johnson for her willingness
to consider these important principles in her draft bill. As
this legislation moves forward, I ask you to keep in mind how
it will affect physicians and patients. One of my
responsibilities is to travel around the country to learn from
my colleagues. Internists, especially those in primary care
practices, tell me that payments are not keeping up with
practice expenses. Many are reluctantly considering closing
their doors to new Medicare patients or even getting out of
practice. They worry that pay-for-performance will be another
unfunded mandate leading to more paperwork, more expense, less
revenue and less time with patients.
They are concerned it could create adverse consequences for
sicker and noncompliant patients. Medical students tell me that
they do not see a future in primary care. We are already seeing
a marked decline in the number of students choosing to be
trained in general internal medicine.
If we do it right, value-based purchasing can help. Doing
it right means assuring that Medicare reimbursement is
sufficient to create positive incentives for performance
improvement. It means providing funding commensurate with a
physician's contributions to quality improvement. It means
assuring that the data collection necessary to support quality
improvement does not impose a heavy administrative burden on
the physician. It means supporting the role played by primary
care physicians, working with a team of subspecialty
consultants and ancillary personnel, to assure that patients
get the best possible care. Most importantly, it means that
better quality must be the measure of success; cost savings
should come as a result of quality improvement, but never at
its expense.
Finally, the initial framework should be followed by a
reexamination of Medicare payment policies. Paying physicians
on a per-visit or per-procedure basis is not a model that
supports continuous improvement in the care of patients with
chronic diseases. The College advocates a new payment model to
reward physicians for coordinating team-based care of patients
with chronic diseases. We welcome the opportunity to discuss
these ideas with the Subcommittee.
In conclusion, the College supports the goal of aligning
Medicare's incentives with physicians' commitment to improve
quality. As we do so, let us keep in mind two questions: Will
we end up with a system that supports the physician-patient
relationship by providing resources to help physicians improve
care of their patients? Or will it be a system that undermines
that relationship resulting in more paperwork, more expense,
less revenue, and less time with patients. As a life-long fan
of the Chicago Cubs, I am, by nature, an optimist. I believe
that when good people work together, good things will happen.
However, my optimism is tempered by the knowledge that hoping
for the best is not enough. Value-based purchasing is a
promising idea. Let's make sure we do what is needed to get it
right the first time, be aware of the risk of unintended
consequences and be prepared to make corrections if needed. I
appreciate your attention, and I will be pleased to answer any
questions.
[The prepared statement of Dr. Hedberg follows:]
Statement of C. Anderson Hedberg, M.D., President, American College of
Physicians, Winnetka, Illinois
The American College of Physicians (ACP), representing over 119,000
doctors of internal medicine and medical students, is pleased to
provide testimony on the issue of value-based purchasing for physicians
under Medicare. This testimony is provided for the July 21, 2005
hearing held by the Health Subcommittee of the United States (U.S.)
House of Representatives Ways and Means Committee. Our testimony will
focus on the following areas:
1. The steps the College is taking to lay the groundwork for
value-based purchasing by helping internists understand how to
incorporate proven quality improvement methods in their practices and
to provide them with the technological capacities to support quality
improvement.
2. The College's leadership role in selecting performance measures
for ambulatory care that could be used in a Medicare value-based
purchasing program as well as in other quality improvement programs.
3. The College's views on how to design a legislative framework
for value-based purchasing that will support and strengthen the ability
of physicians to engage in continuous quality improvement.
4. The College's views on the importance of carefully assessing
the impact of provider-based purchasing on practicing internists and
the relationships they have with their patients.
5. The College's views on the need to engage in a comprehensive
re-examination and restructuring of Medicare payment policies to
support quality improvement, particularly for patients with multiple
chronic diseases.
LAYING THE GROUNDWORK FOR VALUE PURCHASING
ACP firmly believes that the medical profession has a professional
and ethical responsibility to engage in activities to continuously
improve the quality of care provided to patients. We therefore commend
this committee for addressing quality in the Medicare program through
the concept of value-based purchasing. ACP was among the first medical
professional organizations to support the concept of linking payments
to physician performance on evidence-based measures. We recognize,
however, that pay-for-performance cannot by itself lead to quality
improvements if physicians in practice lack the capabilities to
incorporate proven quality improvement methods in their practices.
Accordingly, the College is engaged in over forty projects to improve
the quality of care provided to patients, including two new grant-
funded programs to improve the care of patients with diabetes and to
implement quality measures for the frail elderly.
ACP is also actively engaged in initiatives to develop the health
information technology infrastructure to support quality improvement.
We serve on the boards of the Certification Commission for Health
Information Technology and the Electronic Health Initiative; co-chair
the Physicians Electronic Health Record Coalition (PEHRC), and are
actively involved in the Connecting for Health initiative. We have
developed recommendations for legislation to provide initial funding
and sustained reimbursement support to help clinicians, particularly
those in small practices, acquire and use HIT to support their
participation in quality improvement projects. The College has joined
with other stakeholders to submit proposals in response to Secretary
Leavitt's requests for proposals on standard harmonization and
certification of electronic health records.
The College is also committed to providing practice internists with
practical tools to help them improve quality. ACP's Physicians
Information and Education Resource (PIER) provides ACP members--at no
cost to them--with access to ``actionable'' evidence--based guidelines
at the point of care for over 300 clinical modules. PIER has also been
incorporated into several electronic health record systems. PIER is
currently in the process of aligning its evidence-based content to
support a starter set of measures selected by the Ambulatory Care
Quality Alliance (AQA). PIER is also creating paper order sets that
imbed such quality measures in the order set, so that physicians who
have not made the transition to electronic health records could still
rely on PIER content to support their participation in performance
measurement initiatives.
ACP's PracticeManagementCenter has developed resources to help
internists go through the decision-making process on electronic health
records and is in the process of working with other entities in the
College to provide internists with tools and best practices to help
them redesign their office processes to improve health care quality.
ACP is also directly involved in supporting several federal
demonstration projects to improve quality. We are directly involved in
implementation of the Chronic Care Improvement Program/Medicare Health
Support pilots in Mississippi and Pennsylvania as authorized by Section
721 of the Medicare Modernization Act, working with the awardees to
develop mechanisms to support physicians' roles in coordinating and
improving care of patients with diabetes and congestive heart failure.
The College has also endorsed the Doctor's Office Quality Information
Technology (DOQ-IT) demonstration project and is working with the
American Health Quality Association to support the 8th Scope
of Work.
Through these and other initiatives, the College is laying the
groundwork for Medicare value-based purchasing by educating internists
on how to incorporate performance measurement and improvement in their
practices, by providing them with evidence-based clinical decision
support, by partnering with others to develop the health information
technology infrastructure to support quality improvement, by providing
internists with practical tools to help them redesign office processes
to improve quality, and by gaining first-hand knowledge from federal
demonstration projects and pilot programs on how to incorporate quality
improvement in the Medicare program.
SELECTING PERFORMANCE MEASURES FOR AMBULATORY CARE
ACP's long-standing commitment to evidence-based medicine and
continuous quality improvement is also evidenced by our active
involvement in the Ambulatory Care Quality Alliance (AQA), which in May
2005 took a major step toward improving the quality of the U.S. health
care system by selecting a ``starter set'' of 26 clinical performance
measures for the ambulatory care setting. (We ask that the starter set
of measures, which is attached to this statement, Attachment 1, be
recorded in the official record on this hearing.) ACP is one of four
original organizations that organized and convened the first AQA
meeting in the fall of 2004 (the other three co-conveners are America's
Health Insurance Plans, the American Academy of Family Physicians, and
the Agency for Healthcare Research and Quality) and we continue to
serve on its steering committee.
The AQA, a national consortium of large employers, public and
private payers, and physician groups, aims to improve health care
quality and patient safety through a collaborative process in which key
stakeholders agree on a strategy for measuring, reporting and improving
performance at the physician level. The AQA also works to promote
uniformity in order to provide consumers and purchasers with consistent
information and to reduce the burden on providers. This approach is
similar to the Hospital Quality Alliance, which involved a broad array
of stakeholders with the goal of producing a standardized set of
measures for inpatient care.
The AQA's starter set of ambulatory care measures is intended to
provide clinicians, consumers and purchasers with a set of quality
indicators that may be utilized for quality improvement, public
reporting and pay-for-performance programs. The rationale behind the
measurement starter set is to allow physicians to get used to tracking
a few simple performance goals, while more sophisticated measurements
and implementation guidelines are developed. While the College and
other medical groups would prefer to take an evidence-based approach by
waiting for results from pay-for-performance pilots and demonstrations,
the market simply will not wait. Instead, ACP is confident that the
AQA's starter set of measures represents the first of several
generations of increasingly sophisticated performance measurement sets
that can be used with confidence to measure quality of care in the
ambulatory area.
AQA's uniform starter set comprises prevention measures for cancer
screening and vaccinations; measures for chronic conditions including
coronary artery disease, heart failure, diabetes, asthma, depression,
and prenatal care; and, two efficiency measures that address overuse
and misuse. Except for the two efficiency metrics, the AQA limited its
review to those measures that are currently under review by the
National Quality Forum.
ACP, and the other members of the consortium, worked hard to ensure
that the initial set of measures relied principally on administrative
data that is readily available for most practices, thereby reducing the
administrative burden of having to extract information from medical
records. In addition, they ensured that the starter set met the
standards of scientific validity, feasibility, and relevance to
physicians, patients and purchasers. AQA participants are also
beginning to seriously address the complex issues associated with
creating the infrastructure for performance reporting. The AQA is also
working on a model for aggregating, sharing and stewarding data that
maintains appropriate restrictions on privacy and confidentiality, as
well as principles for reporting information to providers, consumers
and purchasers.
ACS'S VIEWS ON A LEGISLATIVE FRAMEWORK FOR VALUE BASED PURCHASING
The College recently released a detailed draft proposal for a
legislative framework for Medicare that linked financial incentives to
performance quality, which was shared with the staff of the Ways and
Means Health Subcommittee and other key health committees. ACP, along
with other national organizations representing primary care physicians,
also sent a letter to Congressional leaders that affirmed our joint
commitment to work with Congress to develop an effective legislation on
framework for Medicare quality improvement (Attachment 2). There are
several key elements, as outlined in our recommended framework and in
the joint letter that we believe should be incorporated into any
legislation to establish a Medicare value-based purchasing program.
THE USE OF AQA PRINCIPLES IN A VALUE-BASED PURCHASING SYSTEM
First, it is critical that any value-based purchasing system that
links physician reimbursement to evidence-based performance measures
follow principles similar to those that guided the AQA process. For
one, there must be an explicit role for a consensus-oriented multi-
stakeholder group to select and validate quality and efficiency
measures for clinical conditions and to evaluate issues of feasibility
and meaningful data collection. It is absolutely necessary that this
process be transparent. It is also important that adequate feedback be
provided on why certain measures are not selected in order to allow the
measures to be further refined and resubmitted and to ensure that the
scientific evidence behind the measure, administrative feasibility of
data collection, and other elements are well considered. This multi-
stakeholder group must also have strong representation of national
physician specialty societies in the leadership and governing board
structure of the entity. The leadership of ACP and others in the AQA
process has been essential for the credibility of the process, and we
would hope to maintain a comparable leadership role in any new entities
created by legislation.
THE USE OF EFFICIENCY MEASURES
Second, ACP supports evidence-based clinical performance measures
in a value-based purchasing program that address overuse, underuse and
misuse, but we are concerned that efficiency measurement will be driven
by statistical economic profiling rather than a review of the clinical
evidence. Appropriate quality measures take into account evidence to
support or not support particular interventions based on evidence-based
guidelines on overuse and underuse rather than just using a statistical
profile of cost and volume. A strict volume/cost analysis derived from
claims data for utilization patterns will not provide accurate data on
quality or cost and should not be used to determine payments based on
performance. Comparisons of utilization patterns are not a substitute
for true efficiency measures that consider the quality and costs
associated with treatment of particular conditions.
It is unlikely that a risk adjustment methodology will soon be
developed that can adjust for all problems related to reporting on the
efficiency of individual physicians in providing care to patients based
on a comparative analysis of claims. Statistical comparisons need to
take into account not only the need to risk adjust for severity of
illness, but also for socioeconomic factors such as income, race,
culture, and language proficiency, which significantly influence a
patient's willingness to trust the health care provider and comply with
recommended treatments. Without such adjustments, physicians who see a
disproportionate number of low-income or racial/ethnic minority
patients would be penalized for factors outside their control and
dissuaded from participating in quality improvement programs. Quality
improvement programs should not inadvertently exacerbate health
disparities or create other unintended consequences for patients or
physicians who have sicker patient populations as well as noncompliant
patient populations.
PUBLIC REPORTING
Third, while ACP understands that public reporting potentially
provides patients and purchasers with a more informed choice about
physicians; public reporting can create severe adverse unintended
consequences for patients if not done correctly. Studies show that
public reporting can create unintended incentives for physicians to
avoid higher risk or non-compliant patients that will result in their
public report being less favorable. This is particularly a concern for
patients with certain ethnic, racial, socioeconomic or cultural
characteristics that make them less compliant with recommended
treatments, less likely to see a physician for preventive care, and
less likely to take prescribed medications. Sufficient risk adjustment
and methodologies to reduce the risk that public reporting will create
such unintended consequences are essential before physician-specific
quality data are released to the public. In addition, many patients
function at a health literacy level that makes it difficult for them to
understand basic medical information given to them by their clinician,
never mind comparative data on quality. More studies are needed on
whether patients benefit more from seeing reports on whether or not
their physician surpasses a minimum threshold of quality improvement or
from ranking of physicians based on quality indicators. For this
reason, the College has advocated for a well-designed demonstration
project on public reporting of quality improvement data.
ACP agrees with the Medicare Payment Advisory Commission (MedPAC)
recommendation that physician performance profiling first be shared
confidentially with physicians as an educational tool. Furthermore, ACP
believes that when public reporting is implemented, physicians should
be allowed to not only review data before it is released but to appeal
it to an independent reviewer that would be charged with resolving
concerns relating to the public report in a way that assures that all
information that is reported is unbiased and accurate. Physicians
should also have the right to have their comments on the report
included along with the data that are reported.
A PHASED IN APPROACH
Fourth, ACP strongly supports a phased in approach to valued-based
purchasing linked to physician performance.
The College believes that a Medicare value based purchasing program
should start with pay for achieving basic structural measures (pay-for-
reporting), followed by payment for participating in quality
improvement programs that use evidence-based clinical measures (pay-
for-participation), followed by pay for achieving quality gains as
measured by such evidence-based measures (pay-for-performance):
Stage One: Pay-for-Reporting
ACP recommends Medicare institute a pay-for-reporting initiative
beginning in 2007 using a structure along the lines of the MedPAC
recommendation to begin paying for structural measures (i.e., assessing
whether the provider has the capability to deliver quality care)
consisting of quality-enhancing functions and outcomes facilitated by
the use of information technology (HIT) and other improvements. A
process should be created for physicians to begin reporting during the
calendar year that they have the structural capabilities to support
quality improvement. Additional payments would then be allocated to
physicians, during the same calendar year, who met the pay-for-
reporting requirements.
Stage Two: Pay-for-Participation
ACP recommends that Medicare should institute a more robust and
voluntary pay-for-participation program beginning in 2008 that would
allocate additional payments (i.e., in addition to and separate from
the annual Medicare fee schedule update) to physicians on a graduated
basis who agree to voluntarily participate in quality improvement
programs that use evidence-based measures for clinical conditions that
have the greatest potential to yield the greatest quality improvements
and potential system-wide savings stemming from improved quality.
During the pay-for-participation phase, payment should be based on
documentation of participation in such programs, not on how well the
individual physician does in meeting the actual measures.
Such additional payments should be graduated and proportionate to
the level of commitment on the part of the physician to participating
in approved performance measurement programs. Because participation in
performance measurement programs involves substantial costs (for HIT,
data collection and reporting) and time commitment from physicians and
their staffs, pay should increase proportionately based on the number
of dimensions of care being measured, the number of measures, the time
and costs associated with documenting performance based on the
measures, and the level of HIT acquired by the practice to support
participation in approved quality improvement programs. For example,
physicians who just meet the basic structural measures as outlined in
Stage One should receive a lower bonus payment than physicians who are
participating in programs that use multiple evidence-based measures
designed to improve care of patients with high cost chronic diseases. A
graduated payment structure would create stronger incentives for
physicians to participate in performance improvement programs (and for
specialties to develop evidence-based measures of performance) than
paying all physicians the same amount regardless of their level of
commitment to such programs.
Stage Three: Pay-for-Performance
ACP recommends that HHS be directed to consult with medical
professional societies and other stakeholder groups on development of a
pay-for-performance program that would be initiated no earlier than
calendar year 2010. The pay-for-performance program would provide
graduated bonus payments to physicians who demonstrate success in
meeting evidence-based performance measures.
ASSURING SUFFICIENT FUNDING
Fifth, the College believes it is essential that Congress assure
adequate funding for the value-based purchasing program, starting with
repeal of the sustainable growth rate (SGR) formula. The need for a
long term solution for updating the Medicare physician fee schedule is
underscored by continued projections of deep cuts. Despite Congress'
success in preventing cuts from taking effect in 2003-2005, payment
reductions of over 4 percent next year and 26 percent from 2006-2011
are forecast. The underlying flaw of the SGR formula is the link
between the performance of the overall economy and the actual cost of
providing physician services. The medical needs of individual patients
are not related to the overall economy.
ACP strongly urges Congress to pass legislation to replace the SGR
formula once and for all. In the future, annual updates in Medicare
payments should instead be linked to increases in the actual costs of
medical practice. ACP supports basing updates on the projected change
in input prices less an adjustment for productivity growth, as has been
recommended by MedPAC. Applying this methodology would result in a 2.7
percent increase in the fee schedule conversion factor next year and a
similar increase in 2007 (currently projected to be 2.4 percent).
ACP also supports the MedPAC recommendation that volume should be
managed through a process in which the reasons for each significant
volume increase are identified, and specific measures be taken either
administratively or through legislation to control those increases not
related to improvements in quality of care. Addressing volume through
careful analysis and consideration, with appropriate policy
interventions, will be far more effective in assuring that appropriate
care is provided than the flawed SGR.
APPLYING ACP'S RECOMMENDED FRAMEWORK TO CHAIRMAN JOHNSON'S PROPOSED
DRAFT LEGISLATION
The College understands that Chairman Johnson will be introducing a
value-based purchasing bill. Based on our understanding of what the
bill likely will include, the College anticipates that the overall
approach will be consistent with the College's recommendations, as
summarized above.
We are very pleased that the bill will likely include repeal of the
SGR and will base future updates on the Medicare Economic Index, minus
a productivity factor, as recommended by MedPAC. By doing so, it
recognizes that successful implementation of Medicare quality
improvement cannot take place in an environment where physician fees
are being cut. We also understand that the proposal will reduce the
update by a yet-to-be-defined percentage for physicians who decline to
participate in the performance measurement and reporting program.
Although the College would prefer that new money be provided to
support the value-based purchasing program, we understand that budget
constraints may limit the initial funding to an amount that is no
higher than levels recommended by MedPAC. However, we urge the
subcommittee to establish a floor on the annual updates in 2006, 2007,
and 2008, so that all physicians receive a positive update. The College
specifically recommends that all physicians receive an update that is
no lower than 1.5 percent, and that an additional amount be provided to
those who participate in the performance reporting and measurement
program, up to the full amount recommended by MedPAC.
We also recommend that the bill give HHS the authority to weigh the
performance-based payments so that those physicians who engage in
reporting data using multiple measures can qualify for higher payments
than those who report on only a few structural measures. For instance,
an internist who participates in a program that uses the AQA starter
set will be obligated to report performance for as many as 24 separate
measures (the two measures relating to pediatric care are not
applicable to most internists), requiring a substantial investment of
time and practice resources. Unless performance--based payments are
commensurate with effort, physicians will be discouraged from doing
anything more than the most elementary and basic measurement and
reporting required to qualify for the full update.
We also understand that the bill likely will call for a gradual
phase-in of the measures, starting with pay-for-reporting of structural
and quality measures before Medicare begins paying physicians on the
measures themselves, similar to the step-wise approach recommended by
ACP.
We also understand that the proposal will likely recognize the
critical role played by medical specialty societies in developing
measures that are then validated through a consensus building
organization involving multiple stakeholders. As noted above, our
experience with the AQA demonstrates that a consensus process, with
physician leadership, can result in getting ``buy-in'' from physicians,
purchasers, payers, and consumers on a practical set of measures.
The College is concerned that the value-based purchasing program
for physicians is funded totally out of savings in Medicare Part B and
in reductions and set asides from the conversion factor paid to
physicians. Value-based purchasing should recognize physicians'
collective and individual contributions to achieving system-wide
savings through better quality. Accordingly, we urge that a provision
be included in the legislation directing the Secretary to develop a
methodology, in consultation with the Medicare Payment Advisory
Commission (MedPAC), the Practicing Physician Advisory Council (PPAC),
national membership organizations representing practicing physicians
and other appropriate experts to increase the total pay-for-quality
bonus pool available to physicians based on evidence that the value-
based purchasing program for physicians has resulted in system-wide
Medicare savings. Such savings should include savings in Medicare Part
A, such as from preventing unnecessary hospitalizations caused by
complications. The methodology should allow for individual physicians
to share in such system-wide savings that are attributable to their
participating in performance measurement and improvement programs and
physician-guided chronic care coordination. The methodology and
recommendations should be reported to Congress no later than December
30, 2006. Legislation should be required to institute the methodology.
In summary, based on our understanding of the overall direction
that Chairman Johnson is likely to propose in her bill, the College
expects that we will be able to support the legislation, although we
hope to have the opportunity to continue to recommend ways to make the
framework as effective as possible, including assuring that the overall
funding for the program is sufficient to result in the desired changes.
We commend Chairman Johnson for her leadership on this issue and her
responsiveness to the views offered by ACP and other medical
organizations on how to structure the legislation.
ASSESSING THE IMPACT OF VALUE-BASED PURCHASING ON PRACTICING INTERESTS
As Congress moves forward on developing a Medicare value-based
purchasing program, we believe that it is essential that Congress be
mindful of the potential impact on practicing internists and potential
unintended adverse consequences.
Internists are encountering an aging population that requires
substantial care and support as a result of an increasing number of
chronic conditions. These practitioners, who provide the predominance
of care to our Medicare beneficiaries, are also aware of the
significant gaps in health care quality as reflected by the landmark
Institute of Medicine report, Crossing the Quality Chasm. Our members
are primed to meet this challenge to improve healthcare quality, safety
and access, and make the necessary changes in their practices to better
meet the needs of their patients. These changes include the increased
need to coordinate care, to reach out to patients to ensure they are
following their treatment regimens and to implement available health
information technology (e.g. electronic health records, patient
registries, e-prescribing, clinical decision support tools) into their
daily office routine. These changes are difficult to make in an
environment characterized by the specter of payment cuts throughout the
foreseeable future. Repealing the SGR is an essential first step, but
by itself, will not stabilize the economic environment for many
internists sufficiently to allow them to provide high quality care and
engage in continuous quality improvement.
For most primary care physicians, Medicare payments are not keeping
up with their practice expenses. Many are reluctantly considering
closing their doors to new Medicare patients or even getting out of
practice. They worry that pay-for-performance will be another unfunded
mandate, leading to more paperwork, more expense, less revenue, and
less time with patients. They are concerned that it could create
unintended adverse consequences for sicker and non-compliant patients.
It is not just physicians in practice who express these concerns.
Medical students do not see a future in primary care, as evidenced by
the marked decline in recent years in the number of physicians who are
being trained in general internal medicine and family practice.
Done correctly, value-based purchasing can help. By doing it right,
it means assuring that Medicare money is sufficient to provide updates
based on inflation and to create positive incentives for performance
improvement. It means providing rewards commensurate with an individual
physician's commitment of time and resources to support quality
improvement. It means lifting up all boats rather than leaving some to
founder. It means assuring that the data collection does not impose a
heavy administrative burden. It means supporting the crucial role
played by primary care physicians, working with a team of skilled
subspecialist consultants, in assuring that patients get the best care
possible. Most importantly, it means that better quality must be the
measure of success; cost savings should be the result of quality
improvement but never at its expense.
Primary care is at an important crossroads at this time. Fewer
physicians are choosing to enter into primary care and those in the
profession are expressing increased dissatisfaction. Primary care can
be re-energized to the extent this current pay-for-quality discussion
in Congress results in an improved payment system that adequately
rewards physicians for providing the coordinated quality care required
and implementing necessary practice changes. If the discussion results
in a pay-for-quality system perceived as punitive by our practitioners,
replete with additional unfunded demands and unproductive ``time
stealers'' from the physician and their staff, it can serve as the
straw that figuratively breaks the camel's back and leads to an
unfortunate acceleration in the shortage of primary care practitioners.
Reduced access to primary care physicians would be very detrimental to
our Medicare beneficiaries. The majority of Americans have demonstrated
a preference for a sustained relationship with a primary care provider
and studies indicate that a continuous patient-physician relationship
correlates with patient satisfaction, improved health, positive
outcomes, reduced malpractice litigation, as well as reduced emergency
department use and reduced health care costs per patient.
RE-EXAMINING AND REFORMING DYSFUNCTIONAL PAYMENT POLICIES
Finally, the initial framework should be followed by a
comprehensive re-examination of Medicare payment policies.
Unfortunately, Medicare payment policies are based on the way that care
was provided in 1965--not the way it is being delivered today or will
be in the future. When Medicare was created in 1965, patients
generally were treated only when sick (acute condition); there was
little or no emphasis on prevention and coordination; care was based on
doctor's best judgment as informed by continuing medical education and
journals but not on scientific guidelines; and payment was made only
for work involved in a specific visit or procedure, not on results.
Medical care today and in the future will involve treating patients'
chronic conditions, not just acute illnesses; preventing and managing
illness rather than just treating disease; care will be rendered by
coordinated teams of health professionals; clinical judgment will be
informed by evidence-based clinical decision support; and the results
of care will be rewarded.
The College specifically advocates a new payment model to reward
physicians for coordinating team-based care of patients with chronic
diseases in a way that will result in better quality and potential
cost-savings, including the work that falls outside of the traditional
office visit, such as working with family caregivers on helping
patients manage their own diseases and arranging for team-based care
involving other health professionals. This ``patient-centered,
physician-guided'' chronic care model is based on the work of Ed
Wagner, MD, FACP and it provides physicians designated by beneficiaries
as their ``medical home'' with payments based on their ability to
effectively manage and coordinate care. We welcome the opportunity to
discuss our ideas with the subcommittee.
CONCLUSION
In conclusion, the College supports the goal of aligning Medicare's
incentives with physicians' commitment to improve quality and we
commend Chairman Johnson for her leadership on developing a practical
approach to value-based purchasing that includes repeal of the SGR. As
Congress moves forward on the legislation, we ask that you keep in mind
two critical questions: will we end up with a system that supports the
physician-patient relationship by providing resources to help
physicians improve care of their patients? Or will it be a system that
undermines that relationship, resulting in more paperwork, more
expense, less revenue, and less time with patients? The College is
dedicated to working with the subcommittee to assure that it is the
first question, not the second, which gets a resounding yes from
physicians and their patients.
Chairman JOHNSON OF CONNECTICUT. Thank you very much. Dr.
Kassirer.
STATEMENT OF JEROME P. KASSIRER, M.D., PROFESSOR, TUFTS
UNIVERSITY SCHOOL OF MEDICINE, BOSTON, MASSACHUSETTS
Dr. KASSIRER. Thank you, Madam Chairman. I am Jerome
Kassirer, a physician and professor with medical school
appointments at Tufts University in Boston and Case Western
Reserve University in Cleveland. I am a former editor of the
New England Journal of Medicine and author of On the Take, How
Medicine's Complicity with Big Business Can Endanger Your
Health. I am representing no institution or no medical
professional organization. With respect to financial
incentives, I will assert that the medical profession has
become excessively dependent on the largesse of the
pharmaceutical industry, that these financial connections have
a negative influence on the quality and cost of patient care
and the trust of the public, and that the profession's response
to these threats has been inadequate.
American doctors train many years, many go into massive
debt to become physicians, and then work very hard in practice.
There is no other country where I would prefer to get care for
myself or my family. Our medical institutions are respected
around the world. Like the rest of us, however, doctors respond
to financial incentives. I need not remind any of you that what
a struggle it has been to try to eliminate self-referral of
patients to privately-owned health care facilities. The
magnitude of self-referral and the professional incentives of
value-based purchasing, in my opinion, pale compared to the
enormous financial incentives generated for doctors by the
pharmaceutical and device industries. By themselves, the drug
companies are powerless, but they have willing accomplices,
namely, many thousands of physicians. We do not need to look
far back for striking examples of medical decisions that may
have been influenced by perverse financial incentives.
A few weeks ago a U.S. Food and Drug Administration (FDA)
panel recommended that Vioxx return to the market by a narrow
margin despite its cardiac toxicity. Nine of the 10 panel
members who had financial arrangements with industry voted in
favor. Panel members with no conflicts voted 12 to 8 against.
The drug's return would have been vetoed if none of the
conflicted members had voted. Recently State Medicare managers
became alarmed about the burgeoning use of the drug Natrecor.
The drug had been approved for patients with acute episodes of
heart failure, but instead, it is being given by infusion
routinely and repeatedly in many doctors' offices, despite the
opinion of experts that routine use of the drug has no benefit,
and that the drug causes kidney damage and even death.
The incentive for each office infusion is about $600. The
issue here is similar to the cancer drugs discussed by Dr.
McClellan. Last week, the Wall Street Journal reported that in
2004, the number of pharmaceutical company-sponsored meetings
and talks that featured doctors as speakers had grown to nearly
240,000, a four-fold increase over the previous 6 years. There
is a natural tendency for a speaker to reciprocate for a $1,000
or $2,000 honorarium by favoring a company's products,
including their off-label uses. We have learned that if they
criticize the company's products, their tenure as a speaker
will be short. A year ago, a practice guideline on cholesterol
issued by three prestigious organizations unveiled treatment
recommendations so stringent that millions of Americans at risk
for heart disease would have had to start taking expensive
statin drugs.
As it turned out, six of the nine panel members who wrote
the recommendation had been on the payrolls of three to five of
the companies that manufacture statins. Flaws in research study
design, bias in reporting of research, and risk to patients in
clinical trials constitute another serious consequence, and a
constant promotion of expensive drugs with free samples
heightens the cost. If anything, companies are tightening and
extending the connections, increasingly recruiting physicians
to their marketing efforts.
Leaders of the profession have done little to counter a
trend in which the profession has become increasingly beholden
to industry. Most professional organizations have published
ethical guidelines, but they allow physicians to receive gifts
and meals and are silent on the appropriateness of physicians
as consultants on marketing, promotion of off-label drugs and
membership on speakers bureaus. These activities, in my view,
should be eliminated. The public, and many in the profession,
are becoming increasingly exercised about the profession's tilt
to industry. Extracting medicine completely from this financial
magnet may be difficult, but I believe it must start. If the
profession fails to act, I believe Congress should.
[The prepared statement of Dr. Kassirer follows:]
Statement of Jerome P. Kassirer, M.D., Professor, Tufts University
School of Medicine, Boston, Massachusetts
I am Jerome P. Kassirer, M.D., Distinguished Professor at Tufts
University School of Medicine in Boston, Adjunct Professor of Medicine
and Bioethics at Case Western Reserve University School of Medicine in
Cleveland, former Editor-in-Chief of the New England Journal of
Medicine, and sole author of the book, ``On The Take: How Medicine's
Complicity With Big Business Can Endanger Your Health,'' published nine
months ago by Oxford University Press. I represent no institution or no
medical professional organization. I am here to offer the findings of
my research into the consequences of perverse financial incentives in
medicine. I will assert that the medical profession has become
excessively dependent on the largesse of the pharmaceutical industry,
that these financial connections have a negative influence on the
quality and cost of patient care and the trust of the public, and that
the profession's response to these threats has been inadequate. I
appreciate the opportunity to share these concerns with you.
American doctors train for many years, and many go into massive
debt to become physicians. They then work long hours, struggling in a
complex health care delivery system to reduce the burden of illness.
There is no other country where I would prefer to get care for my
family or myself. Our physicians, hospitals, medical centers and
medical professional organizations are respected around the world.
But doctors are human, and like the rest of us they respond to
financial incentives. I need not remind any of you what a struggle it
has been to try to eliminate physician self-referral of patients to
privately owned health care facilities. But the magnitude of self-
referral pales compared with the enormous financial incentives
generated for physicians by the pharmaceutical, biotechnology, and
medical device industries.
As you watch the pharmaceutical ads on television, you are likely
to conclude that the drug industry is spending most of its promotional
money to get you to ask your doctor whether Cialis or Nexium is right
for you, but in fact, over 80% of the more than $20 billion yearly
advertising expenses of the industry is directed at doctors and other
health care professionals. There is nothing fundamentally wrong with
advertising products, but when financial incentives yield inappropriate
or dangerous care, when they inordinately raise the cost of care, and
when their effect is to damage the trust of patients in the profession,
they have gone too far.
It is too easy to lay the blame on the companies, though there is
plenty of blame to go around. By themselves, the companies are
powerless, but they have willing accomplices, namely thousands of
physicians in academic medical centers and in private practice. We need
not delve into ancient history to find striking examples in which
questionable or flawed medical decisions have been attributed to
financial incentives from industry. A few weeks ago we learned that an
FDA panel recommended to allow Vioxx to return to the market by a
narrow margin despite its recognized cardiovascular toxicity. The 10
panel members who had financial arrangements with industry voted 9:1 to
bring the drug back; panel members with no such arrangements voted 12:
8 against. If none of the conflicted members had voted, the drug's
return would have been rejected. In the past few weeks we've also heard
that state Medicare managers have become alarmed about the burgeoning
use of Natrecor, a drug estimated to reach sales of almost $700 million
this year. The drug was approved by the FDA for patients with acute
episodes of heart failure, but it is widely being given by infusion
routinely and repeatedly in many doctors' offices instead. The
financial incentive for routine office use? A Medicare payment for each
visit of $500--$600. Unfortunately, according to expert cardiologists,
there are no data that routine use is beneficial, and there is
increasing evidence that the drug damages the kidneys and may even
increase the death rate. Despite this information, many physicians
continue to prescribe the drug.
This is as good a time as any to explore physician motivation, and
the continued use of Natrecor despite lack of evidence of efficacy and
in the face of toxicity provides an excellent example. Heart failure is
a common condition, and infusing only one patient a day could yield
$150,000 a year to a physician's bottom line. The first and most
obvious conclusion is that the doctors who use the drug by routine
infusion are motivated by greed. Perhaps some are, but this explanation
is much too simplistic. Some physicians probably first use the drug on
one or two patients, were impressed with the results, and because they
are free to use any drug off-label, began to use it on others. The
reimbursement for the procedure may have played no role in their
decision, or at best it had only a subconscious influence. The problem
with conflict of interest is that we are unable to fathom financially
conflicted individuals' motivations; psychologists tell us that people
themselves might not even know their motives. What we do know is that a
powerful financial incentive exists to exploit the reimbursement
system.
Influence on FDA advisory boards and the kinds of perverse
incentives in day to day practice represent only a small part of the
ways that physicians' financial involvement with industry can affect
clinical care and costs. Last October I reported in the Washington Post
about efforts of pharmaceutical companies to enlist physicians in their
marketing efforts. Drug companies are precluded by the FDA from
promoting off-label uses of drugs, but physicians have no such
prohibitions, and many, through their industry interactions, are in
essence becoming the modern drug reps. Industry implements physician
marketing by a number of approaches. One is the funding of product--
promoting front organizations such as the National Anemia Action
Council and the Council for Hormone Education. These organizations are
funded by industry and are comprised of many financially conflicted
physicians. Prominent academics head them, and they hire academic
physicians to collect and edit medical content, which is distributed
with the avowed purpose of educating doctors and improving patient
care. The material looks like medical content that doctors might find
in journals, but it does not undergo peer review. Although some of the
content may be worthwhile, some is overtly biased in favor of the
sponsors' products. Industry cannot do this kind of marketing without
the willing partnership with doctors. I am quick to point out that off-
label drug use by physicians is not only legal, but in some instances a
drug approved only for one particular condition is found to work quite
well for others. At the same time, off-label use can have disastrous
effects, especially if the drug is widely used and only shows serious
toxicity after widespread use. Our experiences with phen-fen is a sorry
reminder of this scenario.
Industry-funded educational lectures constitute still another major
source for flawed drug use and increased expense, and the number of
physicians appointed to drug company speaker's bureaus is growing. Last
week the Wall Street Journal reported that in 2004, the number of
pharmaceutical company-sponsored meetings and talks that featured
doctors as speakers had grown to nearly 240,000, a four fold increase
over the previous six years. At present, industry pays for well over
half of the expense of doctors' continuing medical education; virtually
all the continuing education departments in hospitals, medical centers,
and medical schools rely on drug-company funding. Drug companies also
pay individual doctors to speak at national meetings, medical center
conferences, and restaurant back rooms. Companies recruit speakers
known to be sympathetic to their products and give them further
training. Although the speakers are usually told that they are not
obliged to mention the sponsor's drugs, there is a natural sense of
obligation to reciprocate for the $750 to $4,000 honorarium. Some
physicians say they feel subtle pressure to promote products because
they want to stay on the speakers list; others hold back from
criticizing companies whose fees they receive. Harking back to the
issue of the cardiovascular complications of Vioxx, we learned that
several physicians on Merck's speaker's bureau were threatened by a
Merck senior vice president to stop telling their audiences about the
risks of Vioxx; big brother had been listening in on their lectures.
Even when speakers honestly believe that they are not promoting
products, the presence of drug company representatives and drug
brochure handouts at a dinner lecture exposes the feigned attempt at
objectivity. There is little doubt that company-sponsored lectures
increase the use of drugs mentioned in the lecture; given that the
drugs mentioned are usually the newest, most expensive agents and
certainly not the generics, the physician lecturers are contributing to
the increased, and increasing, cost of medical care. Whether the recent
attempts of the organization responsible for accrediting physicians'
educational programs, the Accreditation Council for Continuing Medical
Education (ACCME) to sanitize speakers' presentations by applying
increasingly stringent regulations on financially conflicted speakers
will succeed is not yet known.
Even more worrisome than the effect of bias on the part of
individual speakers is the potential effect of financial conflict of
interest in the development of clinical practice guidelines, the
professional society advice to practicing doctors about the treatment
of certain conditions. Similar to the broad influence of FDA decisions
on drug use, a statement from the American College of Physicians or the
American Neurological Association on the treatment of migraine, for
example, would have a major impact on the use of the drugs recommended
in a guideline report. Both the public and the profession paid close
attention one year ago when a clinical practice guideline issued by
three prestigious organizations, the American Heart Association, the
American College of Cardiology, and the National Institutes of Health,
unveiled guidelines for cholesterol levels so stringent that millions
of Americans at risk of heart disease would have to take costly statin
drugs to meet the proposed low limits. What the three organizations
didn't reveal was that most panel members who helped write the
recommendations had financial ties to the pharmaceutical companies that
stood to gain enormously from increased use of statins. The extent of
the connections was stunning: Of the nine members of the panel that
wrote the guidelines, six had each received research grants, speaking
honoraria or consulting fees from at least three and in some cases all
five of the manufacturers of statins; only one had no financial links.
In response to criticism of the panel composition, the Heart
Association said that the policy had been reviewed by many others, not
just formulated by nine people, yet they did not disclose the conflicts
of any other reviewers. Even if they had, such disclosures would tell
us little about the objectivity of the statin recommendations.
Professional societies rely heavily on financial support from the
drug industry, and nowhere are society-industry connections more
evident than at yearly national meetings. Companies can purchase
attendance lists replete with the attendees demographic information;
they can pay for cocktail parties, free e-mail kiosks, tote bags,
meals, trinkets, and buses to ferry people from hotels to convention
centers. What the companies get in return is well shrouded, but company
logos on official society slides and publications reflect a minimal
visible evidence of sponsorship. Especially problematic at these
meetings are company-sponsored talks by company-paid speakers. Some are
held only outside of the official program (but still approved by the
society) and in other meetings are blatantly interspersed in the
official scientific program. Once again, the drug companies are not
only to blame. Many medical societies solicit drug company support with
flagrant come-ons that tout the benefits to the companies of reaching
their elite professional members.
Any consideration of loosening the ties between the profession and
industry must take into account the extent of the involvement. While we
have little definitive information on the pervasiveness of these
arrangements, we have hints that they are widespread. Medical journal
editors complain that they are unable to find non-conflicted experts to
serve on their editorial boards or to write editorials and review
articles; financial connections of study authors listed in journal
articles disclose as many as 10-15 companies for a single author. And
the statement by the Washington Legal Foundation, an organization
devoted in part to protecting the pharmaceutical industry from
excessive regulation by the FDA and the ACCME issued the following
statement, ``It is widely acknowledged that most of the top medical
authorities in this country, and virtually all of the top speakers on
medical topics, are employed in some capacity by one or more of the
country's pharmaceutical companies.'' If we take this statement at face
value, which would certainly be appropriate given the close
relationship of this organization to the drug industry, it suggests
that industry has successfully co-opted an exceptionally high fraction
of the most authoritative and influential members of the profession.
And what have leaders of the profession done to counter a trend in
which the profession has become increasingly beholden to industry, at
times to the detriment of the public that they have pledged to serve?
Not much. Most professional organizations, including the American
Medical Association and the American College of Physicians have
published ethical guidelines but they allow physicians to receive gifts
and meals and are silent on the appropriateness of membership on
speaker's bureaus. Most have no proscription against members'
involvement as consultants to industry for marketing or for the
development of educational materials. Most professional organizations
have no rules about what constitutes an ethical lapse, how they monitor
their members' conflicts, or how they deal with a member who violates
an ethical precept.
I do not underestimate the achievements of the pharmaceutical,
biotechnology, and device industries. Neither do I want to stop the
highly effective collaborations between academic scientists and these
companies. In my recent book, I made this comment, ``Thousands of
physicians effectively collaborate with the pharmaceutical,
biotechnology, and device industries to develop new diagnostic tools,
prostheses, and medications. . . . I am not opposed to big business, to
capitalism, or to making money. Viewed from a long-term perspective,
these industries have produced medications that have extended life,
prevented serious illnesses, and improved the quality of life of
millions of people. The companies are also a vigorous engine that
accounts, in part, for our country's phenomenal economic growth. Even
if we were unwilling to overlook some of the inappropriate behavior of
drug, device, and biotechnology companies, we would have to conclude
that overall, the companies have produced a great many products that
benefit us.''
This brief description covers only a small fraction of the
consequence of medical-industry financial connections. Flaws in
research study design, bias in reporting of research, and risk to
patients in clinical trials constitute other serious consequences, and
a constant promotion of expensive drugs through free samples adds to
the cost of care. I hope it is clear that the concerns I raised at the
outset are real, namely that the medical profession has become
excessively dependent on the largesse of the pharmaceutical industry,
that these financial connections have a negative influence on the
quality and cost of patient care and the trust of the public, and that
the profession's response to these threats has been weak. By making
tenacious financial connections with physicians, industry has tainted
the very profession that it relies on to appropriately use its
products, and, if anything, the companies are trying to tighten and
extend the connections, increasingly recruiting physicians to their
marketing efforts.
During the height of managed care, the public became aware of the
influence of payment incentives on the kind of care they were
receiving. They began to appreciate that they might be subjected to
excessive testing when physicians were paid on a fee-for-service basis
and denied testing when physicians were working in a capitated system.
Survey studies show that the public is wary of physician involvement
with industry, but nothing is a better guide to public awareness of
physician-industry connections than the media. Already, episodes of
inappropriate behavior by financially conflicted physicians have
appeared in the comics in Dilbert and other cartoons and on television
on ER and the Simpsons. Already there seems to have been a public
devaluation of medicine: instead of medical experts arguing scientific
issues in the public domain, the press now publishes debates about
psychiatry between prominent Hollywood film actors, and commentaries
about the toxicity of vaccines and the cause of autism by environmental
lawyers.
I believe that the public will become increasingly exercised about
the profession's tilt to industry. Given the extensive involvement,
extracting medicine from industry's financial magnet will be extremely
difficult, but I believe it must be done. Needless to say, Congress has
the clout to set new rules, yet I continue to favor vigorous action by
the profession. Such action will be painful, but probably less painful
than inappropriate and more costly medical care or the opprobrium of a
disenchanted public. I believe that if the profession fails to act,
Congress should.
Contact information: Jerome P. Kassirer, M.D., Tufts University
School of Medicine, 136 Harrison Ave., Boston MA 02111. Phone 617-636-
6523; Cell 617-306-9788.
E-mail [email protected].
Chairman JOHNSON OF CONNECTICUT. Thank you very much. Dr.
Kassirer, your testimony is very interesting. It is very
relevant to a consideration of how the FDA functions, and the
responsibility of government to follow the experience of an
approved drug. That experience, once it is population-wide is
going to be very different than the experience in a clinical
trial no matter how good that clinical trial. It is not
directly relevant to how we implement pay for performance,
except that as we get better and better at looking at quality
of care, and what physician services support quality now,
remember quality is going to be based on specialty groups,
protocols, expert's opinion about what works and what should be
done when, and if you do it at this point, what will be the
outcome.
As we are able to hold the system more and more accountable
for those kinds of early actions, and as we ourselves are able
to gather the information and pay more attention to what is the
outcome, we will have a better and better physician payment
system, and I think that it will affect our use of drugs. One
of the problems is that we approve drugs on the basis of rather
narrow clinical trials, and then we use them more broadly and
sometimes, as you know, their off-label use turns out to be
more important than the uses for which they were approved.
So, I appreciate the problem of drugs and the costs of
producing new drugs in today's level of science, and I think
all of those things are important. In our instance, ironically
every time a doctor recommends a part B drug, he is, in a
sense, sealing his own reduction in payment for the office
visit. We count drugs under this global amount. It cuts his
cost. As drugs get to be $1,000, $2,000 average use many years,
in the 60-, 70,000--it actually works against him. We do not
want that disincentive anymore than we want the incentive that
you point to as a real danger of overutilization or
inappropriate utilization of a drug.
So, I would also remind you that this is the Subcommittee
that proposed, in the Medicare Modernization Act, that we go to
electronic prescribing in 2 years, because that gets rid of--
that looks at drug interactions, it looks at appropriateness,
and it has some potential to weed out overuse and to reform the
way we actually think about the treatment regimens that we are
recommending. So, I do you thank you for your very
knowledgeable statement. As to both of the other witnesses from
the AMA and the American College of Surgeons, first of all,
thank you for your collaboration and your discussion with us
over many months, and with the Administration, and with the
other specialty groups, because we could not have gotten to
where we are without your input. We cannot go forward unless we
continue to think and evaluate the process that has been
developed so far.
I want to be sure that we are as serious about it as we
need to be. I thought, Dr. Hedberg, your comments about the
lack of family practitioners and the unwillingness of young
students to go into these areas, absolutely true. Unless we can
reward quality practice at that level, they will not come in,
and the current system disadvantages them; because the more
tests they run, the more they look at prevention, the more they
have you come back to be sure that you are sticking to the
regimen, the more likely they are to suffer a payment cut. So,
it is a perfect example of how desperately we need to turn
things around. Now, let me just make a last comment, and then I
will give Pete a chance to ask questions and I will come back
later.
This issue of team, of the new payment model that rewards
team-based care. We had direct experience with that in
reforming the oncology payment system. The reason we had to
change the practice expense so much is that delivering oncology
care as a team issue, the doctor is not there all of the time.
The doctor is essential to it, but it is the doctor and his
whole team that delivers it. When you look at prevention,
particularly in some of the more complicated diseases and
complex cases, it is a team effort. It is you, your nurse, you
may even have to hire someone who does nothing but oversees and
manages and provides the management component that we know is
useful to good care. We just passed a bill we were all proud
of, $25 million for care managers just in cancer, because we
know it is hard to manage, to navigate the system; because it
is not just about the treatment, it is getting exercise, it is
right diet, it is all of those things, and compliance means
better health and lower health care costs.
So, we do not, in the proposal that we will make available
to circulate now--we are waiting until after this hearing--you
will see, we do not get there, but we do allude to it. I do not
know yet how to look at team medicine in anything other than
the narrow world of oncology care delivery, but you are
absolutely right, and I want to work with you. I do not want to
jump into bundled payments; that can be a nightmare. So, thank
you for bringing it up and for acknowledging its importance.
For those of you who have been so helpful in us making this
first step, it is only a first step, but if we can repeal the
SGR and put in place something--a fair payment system that
gives us the power that Pete is very concerned with, to control
volume growth, I am convinced we can reduce the rate of growth
in part B premiums, by better analyzing and having better
opportunity to look at every one of the factors, sort of
encompassed under the SGR, and properly managing their growth.
So, let me turn to Pete now and see what he has.
Mr. STARK. Well, we have heard of a lot of testimony about
paying doctors and not very much about helping patients, which
I guess is a concern of many of us. Dr. Armstrong, representing
an agency or a group, AMA, whose membership has been declining
for the past 5 years, you now represent less than a quarter of
the doctors in the country, it used to be two-thirds, somebody
had suggested, Dr. Wolf, that you have not been doing a very
good job. Your statement that you staunchly are committed is
wonderful. I do not know who wrote that for you, but, as
somebody said, you follow the money. I think that was the guy
from the Federal Bureau of Investigation, Deep Throat, who said
follow the money.
Well, $5 million over 5 years. Once you spent $600,000
trying to defeat me and Andy Jacobs and we got higher
percentages that year than we ever did. I am so proud of you;
$5 million or $1 million a year for quality. In the same 5
years, you spent $65 million on lobbying firms. So, that shows
you; $65 million to mostly lobby us to pay you more, and $5
million on quality. This last June though, you just broke the
bank, and I think this is spectacular. A $60 million program--
this is $60 million a year that you are going to start to
improve your image and portray doctors as every-day heroes.
Now, I think that is what this country needs. I hope those
television shows of you doctors driving around in those Porsche
convertibles with your lances out there going after the
dragons--I just think $60 million a year, that is $300 million,
$65 million on lobbyists, that is $365 million, and all of the
time you are spending $1 million a year on quality.
I think for the AMA and its members, that says it all. So,
now we go to this question, and through all of the testimony,
Dr. Hedberg, yours, Dr. Armstrong, everybody says, you got to
reward us, you cannot penalize us. You do not want us to tell
anybody who does not live up to the standard, you want more
money, and you resist in here the fact that we might cut the
pay for doctors who are lousy performers. Now, Dr. Kassirer,
have you seen the working draft of the recommended starter sets
of clinical performance measurements for ambulatory care?
Dr. KASSIRER. No.
Mr. STARK. Let me go through a few of these just real
quickly: breast cancer screening, colorectal cancer screening,
cervical cancer screening, tobacco use, advising smokers to
quit, inoculations for few vaccinations, pneumonia
vaccinations, drug therapy for lowering cholesterol, and I go
on and on and on, diabetes management. Have you ever seen, or
do you know of any medical school, including that famous school
in Grenada, that could graduate as a medical doctor who would
not know this as rote hornbook medical care? Is there anything
in there that the rawest recruit out of medical school would
not know even before they did their internships?
Dr. KASSIRER. Well, Mr. Stark, these are really very common
indices of health outcomes.
Mr. STARK. Pretty standard, are they not?
Dr. KASSIRER. I would say so.
Mr. STARK. Would you say that any graduate of any medical
would not know about this stuff?
Dr. KASSIRER. I would not go quite that far, Mr. Stark, but
at Tufts, it is certainly something that everybody should know.
Mr. STARK. All right. Now, why in God's name we should pay
extra to people for doing what they know they ought to do--and,
in fact, I think somewhere they took an oath that they would,
and I hope in California that they had to pass a licensure test
that says that they can understand this. On the other hand,
what about saying we will raise everybody's pay? That is what
the two gentlemen to your right are here for; they do not care
much about patients, they care about getting more money.
Dr. KASSIRER. Oh, I doubt that.
Mr. STARK. Come on. If we raised their pay, what about
saying we raise everybody's pay, but anybody who does not
adhere to these things gets dropped from the program, or
penalized or sent to jail, I do not care what. In other words,
what is wrong with turning it around and saying, okay, we will
pay you more, but we penalize people who do not perform.
Dr. KASSIRER. Well, Mr. Stark, I think this is a
fundamental question about what is an important financial
incentive to physicians. The answer is, that there are all
kinds of financial incentives, and what you would like to do is
put the incentives in the right place. Coming back to your
comment, Madam Chairman, I would say the same thing. The
question is, where are the incentives? Are in they in the right
place or the wrong place? With respect to some of the Medicare
reimbursements, they are clearly in the wrong place. As I
mentioned in my testimony, and as Dr. McClellan mentioned
before, with respect to cancer care, they are in the wrong
place. With respect to Natrecor, they are in the wrong place.
That is the sort of thing that needs to be fixed.
Chairman JOHNSON OF CONNECTICUT. Right. Thank you. Mr.
Hulshof.
Mr. HULSHOF. Thank you, Madam Chair. Mr. Stark has made
some interesting comments. Let me ask just, first of all, Dr.
Armstrong, do you care about patients?
Dr. ARMSTRONG. Personally, and on behalf of the AMA and our
246,000 members, we care about patients first and foremost.
Mr. HULSHOF. Dr. Hedberg, I have got to ask you the same
question. Do you, sir, actually care for patients?
Dr. HEDBERG. I was born into the family of an internist,
and have spent all of my life hearing about and caring about
patients. That is the most important thing in the world to me.
Mr. HULSHOF. Let us really then get to the crux, and I
referenced this with Dr. McClellan, and it was more of--it was
not specific, but, certainly, as the subject of this hearing is
the SGR formula, and under the current Medicare system
encouraging beneficiaries to utilize more physician services,
and yet at the same time attempting to control the volume of
physician services. Let me pick up on the thread that the
gentleman from California has raised, and Dr. Hedberg, let us
go to you, because the American College of Physicians has been
one of the founding members with the Ambulatory Care Quality
Alliance. What say you then about this challenge, if you will,
that you know any resident knows that this 26-measure starter
set, that this is a no-brainer? What do you say to that?
Dr. HEDBERG. Well, I would say this: it is hard to believe,
but the figures that are taken out of practices and have been
used in the ``Crossing the Quality Chasm'' report from the
Institute of Medicine (IOM) show the chasm of quality. The
figures that have been done in the ambulatory care areas where
some medications, some on this list are used, show that they
are used less than 50 percent of the time than they should be.
We have a whole spectrum of doctors out there; we have older
doctors, middle-aged doctors, younger doctors. I would think
that, in this day and age, they would all know these things,
but, when you go and look, you become amazed at what is going
on, and I think we need quality improvement.
I would like to comment, too, at some point on what
Chairman Johnson said about the change in the practice of
medicine for chronic care, how that is changing and how
prevention is becoming so important. This data, these first 26
performance measurements actually speak to the long-range care
of patients, which goes beyond next year's budget. The diabetic
is prevented from blindness, heart attacks, renal failure,
neuropathies in the legs, and much more, by the care that is
done on a week-to-week, month-to-month basis in the doctor's
office. We don't necessarily know about this, if we don't have
quality improvement data through using electronic health
records, which are expensive to purchase for our offices. The
money that Mr. Stark was talking about that I crave, as he
alluded to, is really so that we can get these electronic
health records and machines and computers into our offices,
because, how do we know if we are doing poorly unless we can
measure it? That is the revolution in medicine; we have to
measure these things to know if we are doing it right. The
figures show we have got a long way to go.
Mr. HULSHOF. Well, let me amplify something you said,
because speaking of common sense and what we would expect the
most basic general practitioner or resident to know, folks back
home, going back to my first term of Congress on this Committee
back in the Balanced Budget Act 1997--I know it is a four-
letter word to many that are here in the room--but nonetheless,
it took an act of Congress for us to actually focus on
preventive screenings, early screenings for colorectal cancer,
pap smears, Type II diabetes, test strips, mammograms in
problem cases; it actually took an act of Congress for us to
come up with these commonsense ideas to focus not just on the
fiscal health of Medicare, but more importantly, the personal
health of the beneficiary. So, I appreciate you responding to
that. Madam Chair, thanks for letting me go out of order, given
the other matters I have got going on.
Dr. HEDBERG. Thanks for the opportunity because this is
germane to the whole picture
Chairman JOHNSON OF CONNECTICUT. Absolutely, very germane.
Mr. Lewis.
Mr. LEWIS. Thank you very much, Madam Chair.
Dr. Kassirer, you asserted in your book and in your
testimony today that there is much waste in the system because
of this maybe unholy alliance between pharmaceuticals and
physicians. As Members of Congress, we watch television, we
listen to the radio, we read the newspaper, we see the weekly
magazines, we see all of these commercials, we see all of these
ads. I thought for a long time, when a patient went in to
confer with a physician, they would say, Doctor, I saw this, I
saw that, why don't you try this, give me this prescription.
You are telling us that it is not really geared toward the
consumer so much, but it is geared toward reaching the medical
community, the physicians?
Dr. KASSIRER. Well, Mr. Lewis, direct consumer advertising
is only a modest fraction of the total budget of advertising of
the pharmaceutical, device and biotechnology industry. They
spend about $4.5 billion on direct consumer advertising. When
you are sitting in your living room listening to why you should
be taking Cialis or Viagra, what you don't appreciate is the
overwhelming fraction of the $20 billion or more that is spent
by the pharmaceutical and device industries is going to doctors
to influence doctors to make one decision or another. I think
it is quite clear that the public is beginning to appreciate
the problems with the connection between physicians and
industry. We have already seen cartoons in Dilbert. We have
seen other cartoons. We have also seen television programs,
like ``ER'' and ``The Simpsons,'' where doctors collaborating
with industry are shown doing some pretty nasty things. So, the
public is getting fed up with these complex relations between
doctors and industry. If the profession doesn't do something
about it soon, it is going to seriously harm the relationship
between doctors and patients.
Mr. STARK. Would the gentleman yield for just a second?
Mr. LEWIS. I yield.
Mr. STARK. In an attempt to keep the AMA from portraying me
as the antihero in these ads, I want to commend them because,
as I understand, one of the principles that they put forth at
their recent convention was to restrict or limit these direct
consumer ads for prescriptions, and they are to be commended
for that position.
Mr. LEWIS. Dr. Kassirer, how will you go back correcting
this? What will you recommend? Should there be action on the
part of this Committee, on the part of the Congress?
Dr. KASSIRER. I would prefer that Congress stay out of it
for now, quite frankly, yes.
Mr. LEWIS. I am not a physician, not a person of medicine
like Dr. Stark----
Dr. KASSIRER. Well, I can make you a doctor very easily
just by calling you it. I believe the profession needs to do
something about it. I think bringing the attention of the
public to it more, as I tried to do in my book, and talking
about it more, getting much more widespread disclosure of how
frequent these relationships are, how serious they are, is
something that needs to be done first before, I hope, Congress
does anything.
Mr. LEWIS. Thank you. Thank you, Madam Chair. I yield back.
Chairman JOHNSON OF CONNECTICUT. Thank you very much. Dr.
Hedberg, you talk about the quality standards that you have
developed. What would be the impact of those quality standards
on office services?
Dr. HEDBERG. Well, I think two things. First, by knowing
what your personal profile is on these things, we know that if
doctors are given performance measurements results, compared
with the rest of the country, that they will get better. Most
doctors want to be good. They want to do their best, as Dr.
McClellan said. It is hard to improve unless you have the data.
Once you show that, of the hundred diabetics I have, too many
of them have a hemoglobin A-1C, which is a blood-sugar
measurement over a period of time, over the value of nine, that
is not good. There is a certain desirable percentage. There are
tough cases, and there are easy cases to do this with, and you
should be able to tell from your own figures how you are doing.
If you have a hundred patients with diabetes, you don't know
until you collect the data. You will improve; your quality will
improve. Furthermore, you will save, not only now but into the
future, a lot of money because the patients won't come back
needing amputations, needing retinal surgeries, needing cardiac
bypasses. It is a very simple concept, but it stretches out
over years, and the savings are going to be enormous.
I heard recently that just by putting in health information
technology and totally connecting interoperable communications
between doctors, which are very deficient in our country, and
the communications between doctors, laboratories and hospitals
we will probably save over $100 billion a year. So, the savings
are there.
Chairman JOHNSON OF CONNECTICUT. Well, I couldn't agree
with you more that the savings in the electronic potential--
concerning a solid electronic interoperable system is going to
save us lots of money, eliminate errors, improve the quality
for patients. In the 26 measures starter set, for instance,
some of those measures are screenings for cancer, flu and
pneumonia vaccines, diabetes patients' blood levels,
cholesterol levels; now, those are all things that go on in the
doctor's office. If we do all that, it is true we will save the
system care, but under the current system, the doctor's
payments will be cut. Now this hearing----
Dr. HEDBERG. Well, doctors don't share in those savings;
that is for sure.
Chairman JOHNSON OF CONNECTICUT. That is the irony. Well,
if we get good practice under the current law, we get poor
payments. So, my colleague from California said, I haven't
heard much about payments in this hearing--speaking about
patients in this hearing but only about doc payments--this is
all about patients, because if you deliver the care you need to
deliver, you are going to improve the quality of health care
and save them a lot of suffering and us a lot of cost.
On the other hand, under the current system, ironically, if
you deliver that care, then we will have 10 years of 5 percent
cuts rather than 7 years of 5 percent cuts. That is really a
very, very big problem, because in the past years,
reimbursement rates have gone up either not at all or very well
below inflation. We know what happens when that happens because
we have done it in Medicaid. It is not as if this country
doesn't know what happens when you don't pay people for the
work they provide; they stop participating in your system. So,
in many parts of the country, it is very hard for patients to
find a doctor who will care for them under Medicaid.
One of the reasons I have introduced legislation and am
determined to introduce legislation, in spite of the barriers
of the supposed make-believe costs, to repeal one system and
replace it with another that I think will be more accountable
on the issues of quality and volume, is because if we don't do
it, it isn't rocket science what will happen. It is
predictable. It is simple, and it is inevitable. Reimbursements
will fall, and professionals will either not join the
specialties we need, or not join the programs we want. Now, if
any one of you disagrees with that, you better tell me, but
then I have one other question I want to ask. So, anyone
disagree with that?
Then the last thing I want to ask you is, the IOM's
studies, which were really the incentive for all of this--the
quality chasm incentive, and what it told you was something we
have known a long time. We just didn't do anything about it.
You can make this analogy in public education. I first heard
this as a freshman Member of Congress in the eighties, that it
took 15 years from the time we thought up a new weapon system
to the time we decided to do it. We produced it. We trained. We
integrated it into frontline. That is unacceptable. That is
what the IOM study said, too. It is 15 years from the time we
invented a new treatment to the time we got compliance out
there. In today's world, that is simply unacceptable. The rate
at which new diagnostic capabilities are developing, new
treatment capabilities, new pharmaceutical options, we can't do
it that way anymore.
So, I think the importance of what all of you have said is
that we have to move to a new system, and we have to back it
with the educational and technological components to make it
work. The drugs, you have to provide help for the physicians to
understand how some of these new very complicated and different
types of drugs are going to work and what to watch for. How we
do that, whether the old system, pharmaceutical agents
visiting--certainly the old system of annual meetings isn't
going to work; it is not equal to the task. Advertising at
least lets consumers know that you might want to ask about
this, but it is driving inappropriate care. So, we have a big
job cut out for us if we are going to create a system in which
we deliver the right care at the right time to get the maximum
quality of life for people who either have short-term or long-
term illnesses.
So, it is a huge challenge. I look forward to your input as
we go through the process of developing this bill. When
anything starts out like this in the House and the Senate, it
has a long road to travel, and I invite you all to participate.
I would mention to you, Dr. Kassirer, you probably aren't aware
of this--I wasn't aware of this--but the direct to consumer
voluntary guiding principles have received preliminary approval
from the board, so your book has apparently hit home. I will be
interested in your feedback on that issue. Thank you for being
with us at this time.
Mr. STARK. I would like to ask the panel this----
Dr. KASSIRER. Excuse me, Mr. Stark. Could I be excused? I
have to leave----
Chairman JOHNSON OF CONNECTICUT. You certainly can. Thank
you for being here and for your testimony.
Mr. STARK. I would ask the remaining panelists this: There
has to be an incentive, I presume, in the fees. I have
contended that, with the cuts we are talking about, physician
income hasn't dropped that much, totally. Per procedure fee has
dropped, but the gross payments have either gone up or remained
the same. In my district, half the people, not half the
insured, but half the people in my district, somewhere over
300,000, receive their medical care from physicians who are
paid on a salary. What do I do with them? Can I not, if I were
running--half my constituents are in Kaiser Permanente, so do I
just say, Doc, your salary gets cut if you don't live up to
this? Or what do we do there?
Dr. HEDBERG. Who are you asking?
Mr. STARK. Either of you.
Dr. HEDBERG. Well, I spent half my career in private
practice and half of it being in a university, so I have been
under both systems. The pressure in the university system--and
that is a salaried doctor you are talking about--is that the
payments are the same as in private practice. If you are
coding, you send in your charges; your secretaries take care of
it, but you get the same amount. The dean of the medical school
can then say your costs are too high. So, you have a middle
man, but you are still responsible to be fiscally sound in most
salaried positions. You are still responsible for productivity.
So, I think you just go ahead with the total package, and
the middle man has to deal with it back at the university, and
you still have to deal with it to be productive for the people
you are working for. I haven't found too much difference
hanging by my fingernails to keep my private office practice
going, or hanging by my fingernails to see enough patients to
keep my salary going. I think that is the way it is working
now, and I think it is pretty much the same for private
practice and salaried physicians. By the way, when you are in a
system that is as good as Kaiser Permanente, you have a lot of
quality performance help, too.
Mr. STARK. Yes, we do, but I would presume that they would
lay this tablet down before their physician group and say----
Dr. HEDBERG. Oh, they do.
Mr. STARK. Ladies and gentlemen, these are our procedures,
and if salaries are adjusted, that would be something else
again.
Dr. HEDBERG. It is very common now, in salaried positions,
to adjust them for the amount of patients you see.
Mr. STARK. Also for your productivity.
Dr. HEDBERG. Exactly.
Dr. ARMSTRONG. Regardless of the practice setting, there
needs to be viable practice economics.
Mr. STARK. Then it could be an increase in the overall
payment with a penalty for not performing really; could it not?
The physicians could come out pretty much the same way. You are
suggesting, I believe, both of you, that we shouldn't penalize
the physician who doesn't voluntarily prescribe to these new
benefits. I am saying, why not say all physicians have to do
this, and we will raise the pay?
Dr. HEDBERG. You mean like performance measurements----
Mr. STARK. As in, if you don't do it, we will then penalize
you.
Dr. HEDBERG. Well, sure. All of us now have to do
performance measurements within our employment.
Mr. STARK. Like I said, it could have worked either way.
I'm not sure Armstrong would agree.
Dr. ARMSTRONG. I don't think we do well when we penalize. I
think we do much better to provide a viable practice economics
as a framework upon which to build system-wide quality
improvement efforts, and incentives go a long way toward doing
that. We have to remember that quality improvement is a system-
based effort. We have to think of everybody involved in the
care of patients and focus on those linkages across the system.
Chairman JOHNSON OF CONNECTICUT. Would the gentleman yield?
Mr. STARK. I thank the Chair.
Chairman JOHNSON OF CONNECTICUT. In the hospital arena, we
provide a full market basket if you meet all the criteria, and
less than that if you don't. That is the model that is in my
proposed bill, full Medicare Economic Index (MEI) if you meet
all the criteria; MEI minus 0.5 if you don't. Now, that is not
a lot of penalty, but it should be enough to get people's
attention. I think that that is easier than the other way,
which given our budget constraints would be everybody gets MEI
minus 0.5, and then if you achieve it, you get MEI, which is
really the same thing. So, I don't want it to be seen as
punitive, but there does need to be a differential between one
or the other. Now, the last question I forgot to ask you was
profiling. You both have had experience in profiling. The
Administration intends to profile according to claims data.
Insurance companies frequently do this. Others have said to me,
it is not adequate, claims data. What do you each think about
that? What do we need to profile effectively and honestly?
Dr. ARMSTRONG. You need the right data, and you need data
that reflects accountability for the care that has been
provided, data that can be easily collected, data that is
evidence-based.
Chairman JOHNSON OF CONNECTICUT. Presumably, we will have
that, if we set these measures correctly, because we are
conscious, and we would say in the law that they have to be
evidence-based and they have to be easily collected. So, is
that going to be adequate?
Dr. ARMSTRONG. That is a step in the right direction, but
the larger issue, after one gets the data, is how one actually
reports this data. We want to make sure that, in the process of
reporting data, particularly on individuals, understanding that
quality of care is a system issue, we want to be very careful
that we do not create disincentives to care for the sickest
patients, the most vulnerable patients in our society.
Chairman JOHNSON OF CONNECTICUT. For the least compliant,
for one reason or another.
Dr. HEDBERG. I was going to say a risk adjustment is
extremely important here because you have disparities in care
that comes from different socioeconomic populations. You don't
want to have doctors who are taking care of people who are
disadvantaged or are noncompliant penalized because patients
can't afford to get to the doctor for one reason or another. We
have courageous physicians who spend all their time on that,
and their profiling may not look too good because the patients
aren't as compliant and, for very good reasons having to do
with their socioeconomic environment, can't participate in
their own care.
Particularly people in poverty. We know they don't do well.
If the doctor's lab data is looked at for not having done this
and that and they haven't come in, well, he can be seen as a
poor physician, and I think that is not fair. So, I think
doctors are very cognizant of this, and they want to be sure
when this profiling is done, that it is adjusted for that. We
don't have good risk adjustments now, particularly in primary
care. It might be a little easier to do in surgery, but we
don't have them in primary care. We have to work on that.
Chairman JOHNSON OF CONNECTICUT. Well, it might be useful
if you would give us something in writing on this subject
because this is the most difficult subject.
Dr. HEDBERG. It is really.
[The information was not received at the time of printing.]
Chairman JOHNSON OF CONNECTICUT. While we do recognize it
all in our draft, over time, we do need to kind of----
Dr. HEDBERG. Actually, the scheme that you are working on
and what we have been very interested in, as this process
unfolds over the next 3 to 4 years and fully comes in--the full
pay-for-performance in the year 2009 gives us time to work on
adjustment like this that are really important.
Chairman JOHNSON OF CONNECTICUT. We may want to specify
certain things that need to be focused on during that time
period because some of these issues are very, very hard, and we
just don't know. So----
Dr. HEDBERG. I'm appreciable to your appreciation of that.
Chairman JOHNSON OF CONNECTICUT. That would be an
improvement, thank you. Thank you all. The hearing is
concluded, and I thank the Members who stayed.
[Whereupon, at 3:28 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of Jack Ebeler, Alliance of Community Health Plans
The Alliance of Community Health Plans (ACHP) commends the Ways and
Means Health Subcommittee for convening a hearing on the opportunities
for Medicare to use value-based purchasing of physician services to
improve quality. We are pleased to have the opportunity to share our
perspective.
ACHP is a leadership organization of non-profit and provider-
sponsored health plans that are among America's best at delivering
affordable, high-quality coverage and care to their communities. Today,
ACHP member plans serve more than one million Medicare beneficiaries--
about 20 percent of current Medicare Advantage members.
ACHP has a proud legacy of leadership on quality improvement and
was formed more than twenty years ago to help innovative health plans
share best practices. One of the earliest products of this
collaboration was the creation of the Health Plan Employer Data and
Information Set (HEDIS), which has now become the standard for
assessing health plan performance in the commercial and public sector.
Through the National Committee for Quality Assurance (NCQA)--which
today manages and updates the HEDIS measurement process--
employers, Medicare, Medicaid and other payers regularly monitor and
evaluate health plan quality.
Health plan measures assess plans' performance in areas such as
cancer and heart disease screening and prevention, control of diabetes
risk factors, and how well patients feel the plan and their physician
listen to them. To help Medicare beneficiaries make informed decisions
about their health plan choices, CMS makes comparative information
about plan performance available on-line through www.medicare.gov and
in printed publications. Together, the HEDIS clinical
quality reporting process, coupled with the CAHPS survey of
patient satisfaction, provide a vital and meaningful assessment of
health plan performance for beneficiaries and for public and private
payers.
Quality Matters
A 2003 comprehensive, peer-reviewed RAND Health assessment of
health care quality published in the New England Journal of Medicine
found that Americans received recommended health care only about half
of the time. NCQA's 2004 State of Health Care Quality report documented
that the gap between the quality of care delivered through the nation's
best health plans and the care most Americans receive results in an
estimated 42,000 to 79,000 premature deaths each year. Yet, as the
Medicare Payment Advisory Commission (MedPAC) has said, the Medicare
program is largely neutral or negative towards health care quality.
Medicare providers are paid the same regardless of the quality of
service provided and, at times, are paid more when quality is worse.
To address the quality chasm in health care, the Institute of
Medicine (IOM) has called for realigning financial incentives to
achieve better patient outcomes. MedPAC also has recommended the
introduction of quality incentive payment policies in Medicare for
health plans, physicians, hospitals, dialysis facilities and home
health agencies.
Having led the way in establishing health plan performance
measures, ACHP echoes the IOM and MedPAC's assessment that pay-for-
performance is an idea whose time has come. We share the Subcommittee's
commitment to advancing the use of quality measures in fee-for-service
Medicare. For beneficiaries to make well-informed health care choices,
they need to be able to make ``apples-to-apples'' comparisons between
the quality of care in Medicare Advantage plans--which they can
evaluate through publicly reported data on a range of quality
measures--and the care offered by fee-for-service Medicare providers--
for which public reporting is just beginning. Today's hearing is an
important step in advancing this goal.
Next Steps
Mark McClellan, M.D., Ph.D., Administrator of the Centers for
Medicare and Medicaid Services (CMS), indicated in his June letter to
Ways and Means Committee Chairman Bill Thomas that CMS has been working
with physician groups and other stakeholders on the development and use
of quality measures for physician-related services. Many of the
measures under consideration are drawn from the HEDIS
measure set that has been developed and refined through health plan
use. We are pleased that the lessons learned from health plans'
experiences with quality measurement are helping to inform the
evolution of physician measurement. We look forward to serving as a
resource to the Subcommittee as it continues its work on this issue.
In addition, as the Subcommittee moves forward in its consideration
of value-based purchasing for physicians, we encourage you to consider
the opportunities offered by introducing value-based purchasing in
Medicare Advantage. Having spent considerable time examining how
Medicare could help beneficiaries receive higher quality health care,
MedPAC's June 2003 assessment of where and how to begin pay-for-
performance in Medicare pointed to health plans as a likely starting
point. MedPAC noted that Medicare Advantage plans are good candidates
for quality incentives because ``they meet, in whole or part, all of
the criteria for successful implementation.'' Medicare Advantage plans
have:
Standardized, credible measures of performance and
customer satisfaction that are reported annually to CMS;
Data collection capacity and mechanisms to report on
quality measures already in place;
Leverage to improve performance across the variety of
settings with which they contract; and
Opportunities to improve coordination of care across
settings in a way that is ``not possible through provider-specific
efforts.''
ACHP and Pay-for-Performance
ACHP believes that adopting pay-for-performance for Medicare
Advantage plans would be an important initial step in moving Medicare
toward a more performance-driven system, while also helping to advance
the development of measures and mechanisms for using incentives with
physicians, hospitals and the other health care sectors.
ACHP's work on value-based purchasing is informed by our key
principles for pay-for-performance. They include the following:
Payment-for-performance incentives should eventually
apply to all Medicare providers, including fee-for-service and Medicare
Advantage. Given health plans long record of reporting on standardized
measures of quality, it is reasonable to begin with Medicare Advantage
plans, including HMOs and PPOs.
Pay-for-performance incentives should be based upon
standards of excellence and improvement.
Measures to evaluate both fee-for-service Medicare and
Medicare Advantage plans should be developed. In the interim,
incentives should be based on existing measures and should emphasize
clinical effectiveness.
To ensure successful implementation and sustainability,
pay-for-performance incentives should be financed with a new, dedicated
stream of funding.
We share your strong commitment to ensuring that Medicare
beneficiaries have access to quality information about all of their
Medicare options and applaud the Subcommittee for its ongoing efforts
to examine value-based purchasing models for physicians. We agree with
MedPAC's assessment that health plans are a logical place to begin
using quality payment incentives and that Medicare should aggressively
work to develop quality measures for other sectors, including fee-for-
service settings such as physician offices.
Thank you for the opportunity to share our views. We look forward
to working with the Subcommittee on this and other issues of mutual
interest.
Statement of Michael Fleming, American Academy of Family Physicians,
Leawood, Kansas
Introduction
This statement is submitted on behalf of the 94,000 members of the
American Academy of Family Physicians to the House Ways and Means
Subcommittee on Health as part of its hearing on Medicare Physician
Reimbursement Issues, scheduled for Thursday, July 20, 2005. The AAFP
greatly appreciates the work that this subcommittee has undertaken to
examine how Medicare pays for physician services and we share the
subcommittee's concerns that the current system is unproductive. This
is why the AAFP supports the restructuring of Medicare payments to
reward quality and care coordination. This restructuring must be built
on a fundamental reform of the underlying fee-for-service system.
AAFP currently has over 57,000 members in active practice, the vast
majority of whom are in small and medium size practices, not large
groups. We anticipate that this will be the typical construct of family
medicine well into the future. Most people in this country receive the
majority of their care from physicians in small and medium size
ambulatory care settings. Currently about a quarter of all office
visits in the U.S are to family physicians, and the average family
practice has about a quarter of patients who are Medicare
beneficiaries. Implementing value based purchasing or pay for
performance in the Medicare program has tremendous implications for
millions of patients and for the specialty of family medicine, and AAFP
is therefore committed to involvement in the design of a new pay-for-
performance program that meets the needs of patients and physicians.
Physicians and Pay for Performance
The AAFP supports moving to pay for performance in the Medicare
program with the goal of continuously improving care of patients. As we
recently stated in a joint letter to Congress with our colleague
organizations ACP, AAP and ACOG, ``we believe that the medical
profession has a professional and ethical responsibility to engage in
activities to continuously improve the quality of care provided to
patients--Our organizations accept this challenge.'' We have committed
to work toward transformation of medical practice, to strengthen the
infrastructure of medical practice to support pay for performance, and
to engage in development and validation of performance measures. While
several specific issues remain that must be addressed in implementing
pay for performance in Medicare, AAFP has a framework for a phased in
approach for Medicare.
AAFP is involved in several efforts that are fundamental to moving
toward a pay for performance system.
First of all, we know that the development of valid, evidence-based
performance measures is imperative for a successful program to improve
health quality. The AAFP participates actively in the development of
performance measures through the Physician Consortium for Performance
Improvement. We believe that multi-specialty collaboration in the
development of evidence-based performance measures through the
consortium has yielded and will continue to yield valid measures for
quality improvement and ultimately pay for performance.
The AAFP was the first medical specialty society to join the
National Quality Forum (NQF). And along with ACP, AHIP and AHRQ, the
AAFP is a founding organization of the Ambulatory care Quality Alliance
(AQA). However, it is important to distinguish between the role of the
NQF and that of AQA. With its multi-stakeholder involvement and its
explicit consensus process, the NQF provides essential credibility to
the measures that it approves--measures developed by the Physician
Consortium, NCQA and others. The AQA's purpose is to determine which of
the measures approved through the NQF consensus process should be
implemented initially (the starter set), and which should then be added
so that there is a complete set of measures, including those relating
to efficiency, sub-specialty performance, and patient experience.
Having a single set of measures that can be reported by a practice to
different health plans with which the practice is contracted is
critical to reducing the reporting costs borne by medical practices.
Measures that ultimately are utilized in a Medicare pay-for-performance
program should follow this path.
Information Technology in the Office Setting
Health information technology effectively utilized in the
physician's office is necessary to the success of quality improvement
and pay-for-performance programs. We have learned from the Integrated
Healthcare Association's (IHA) experience in California that physicians
and practices that invested in EHRs and other electronic tools to
automate data reporting were both more efficient and achieved better
quality results, and did so at a more rapid pace than those that lacked
advanced HIT capacity. The AAFP created the Center for Health
Information Technology (CHiT) in 2003 to facilitate adoption and
optimal use of health information technology with the goal of improving
the quality and safety of medical care and increasing the efficiency of
medical practice. We now estimate that over 20 percent of family
physicians are utilizing EHRs in their practices, which is twice the
number from this time last year. Through a practice assessment tool on
the CHiT website, physicians can assess their readiness for EHRs. We
know from the HHS-supported EHR Pilot Project conducted by the AAFP
that practices that had a well defined implementation plan and analysis
of workflow and processes had greater success in implementing an EHR.
We also know that cost can be a barrier to IT adoption and have
worked aggressively with the vendor community through our Partners for
Patients Program to lower the price point. The AAFP's Executive Vice
President serves on the Certification Commission for Health Information
Technology (CCHIT) which certifies EHRs. The AAFP sponsored the
development of the Continuity of Care Record standard, now successfully
balloted through the American Society for Testing and Materials (ASTM).
We initiated the Physician EHR Coalition, now jointly chaired by ACP
and AAFP, to engage a broad base of medical specialties to advance EHR
adoption in small and medium size ambulatory care practices. Our Board
of Directors has set an ambitious goal of having 50 percent of family
physicians using EHRs by the end of 2005. We are committing our
organizational resources to assist our members achieve this goal.
The AAFP quality initiatives span efforts to emphasize measures
like quality improvement, office redesign, and integration of the
chronic care model. Here are two examples. Through our Practice
Enhancement Program, teams of physicians and their office staff
participate in an intense educational experience accompanied with pre
and post course work to acquire the practical tools, skills and
knowledge to implement the planned care model into their everyday
practices. Through the web-based METRIC (Measuring, Evaluating and
Translating Research into Care) program, family physicians assess their
systems in practice, review charts and enter patient data, receive
feedback on their performance, implement a quality improvement plan,
re-measure and reassess. Two module topics currently are available:
diabetes and coronary artery disease.
The AAFP takes seriously the responsibility to work with our
members to continuously improve their clinical care and office
infrastructure to better meet the needs of their patients.
Current Payment Environment
While these innovations are exciting and hold great promise, the
environment in which physicians practice is challenging at best. And it
will come as no surprise that family physicians, while they enjoy
caring for their patients, are not enthusiastic about the Medicare
program. This program has a history of disproportionately low payments
to family physicians, largely because it is based on a reimbursement
scheme that is designed to reward volume and to discourage innovations
in the provision of care. In general, the prospect of annual cuts in
payment is discouraging. The regulatory approach is punitive, and
physicians live in fear of violating rules they don't even know about.
In the current environment, physicians know that they will face a 4.3-
percent cut in January 2006, and that without Congressional action to
repeal the Sustainable Growth Rate formula and create a structure for
sustainable financing, they face steadily declining payments into the
foreseeable future, even while their practice costs are increasing. To
overlay a pay-for-performance program in Medicare, therefore, poses a
unique set of challenges and it must be done thoughtfully and carefully
because of its size and complexity.
Our consistent message to Congress is that if it is not done well,
a value-based purchasing program will not only fail to improve health
care quality but could unravel the preparation and progress that
medical specialty societies have carefully undertaken.
``Doing it well'' means phasing in a value-based purchasing program
that provides incentives for structural and system changes, that
encourages reporting of data on performance measures and ultimately
rewards continual improvements in clinical performance. Yet, moving the
Medicare program in this direction cannot be accomplished in an
environment of declining physician payment; Congress must take steps to
stabilize physician payment through positive updates, as proposed by
MedPAC. Furthermore, because of its financing structure with Part A and
Part B, we believe it is important that Congress require a report on
Medicare program savings resulting from Part B quality improvement
efforts so that physicians are not penalized into the future.
A Framework for Pay for Performance
The following is a proposed framework for phasing in a Medicare
pay-for-performance program for physicians that is designed to improve
the quality and safety of medical care for patients and to increase the
efficiency of medical practice.
Phase 1:
All physicians would receive a positive update in 2006, based on
recommendations of MedPAC, reversing the projected 4.3-percent
reduction. Congress should establish a floor for such updates in
subsequent years.
Phase 2:
Following completion of development of reporting mechanisms and
specifications, Medicare would encourage structural and system changes
in practice, such as electronic health records and registries, through
a ``pay for reporting'' incentive system such that physicians could
improve their capacity to deliver quality care. The update floor would
apply to all physicians.
Phase 3:
Assuming that physicians have the ability to do so, Medicare would
encourage reporting of data on evidence-based performance measures that
have been appropriately vetted through mechanisms such as the National
Quality Forum and the Ambulatory Care Quality Alliance. During this
phase, physicians would receive ``pay for reporting'' incentives; these
would be based on the reporting of data, not on the outcomes achieved.
The update floor would apply to all physicians.
Phase 4:
Contingent on repeal of the SGR formula and development of a long
term solution allowing for annual payment updates linked to inflation
plus funds to provide incentives through pay for performance programs,
Medicare would encourage continuous improvement in the quality of care
through incentive payments to physicians for demonstrated improvements
in outcomes and processes, using evidence-based measures such as the
provision of preventive services, performing HbA1c screening and
control, prescribing aspirin to diabetics, etc. The update floor would
apply to all physicians.
This sort of phased-in approach is crucial for appropriate
implementation. While there is general agreement that initial
incentives should foster structural and system improvements in
practice, decisions about such structural measures, their reporting,
threshold for rewards, etc. remain to be determined. The issues
surrounding collection and reporting of data on clinical measures are
also complex. For example, do incentives accrue to the individual
physician or to the entire practice, regardless of size? In a health
care system where patients see multiple physicians, to which physician
are improvements attributed?
The program must provide incentives--not punishment--to encourage
continuous quality improvement. For example, physicians are being asked
to bear the costs of acquiring and using health information technology
in their offices, with benefits accruing across the health care
system--to patients, payors, insurance plans, etc. Appropriate
incentives must be explicitly integrated into a Medicare pay-for-
performance program if we are to achieve the level of infrastructure at
the medical practice to support collection and reporting of data.
The AAFP appreciates the opportunity to share our enthusiasm for,
yet caution about, a Medicare pay-for-performance program.
American College of Obstetricians and Gynecologists
Washington, DC 20024
July 22, 2005
The Honorable Nancy Johnson
Chair, Health Subcommittee
Ways and Means Committee
1136 Longworth House Office Building
Washington, DC 20515
Dear Mrs. Johnson:
On behalf of the American College of Obstetricians and
Gynecologists (ACOG), representing 49,000 physicians and partners in
women's health, thank you for the extraordinary leadership and
commitment you've shown in your effort to correct a serious problem in
the Medicare program by repealing the flawed Sustainable Growth Rate
(SGR) formula and putting in place a system that works for physicians,
and helps ensure access to high-quality care for our patients.
ACOG has long been dedicated to maintaining the quality of care
provided by obstetricians and gynecologists and has a robust ongoing
process where we provide women's health physicians and providers with
current, quality information on the practice of obstetrics and
gynecology. For nearly two decades, ACOG's Committee on Quality
Improvement and Patient Safety has regularly reviewed practice and
patient safety issues and encouraged our members to incorporate ACOG's
recommendations into their practices. ACOG's Practice Committees
regularly publish practice guidelines developed by committees of
experts and reviewed by leaders in our specialty and the College. Each
of these guidelines is reviewed periodically and reaffirmed, updated,
or withdrawn based on new clinical evidence to ensure continued
appropriateness to practice.
In 2004, in cooperation with the American Board of Obstetrics and
Gynecology (ABOG), an independent, non-profit organization that
certifies obstetricians and gynecologists in the United States, ACOG
created Road to Maintaining Excellence, an initiative to allow ob-gyns
to evaluate their own practice activities, reinforce best practices and
assist in improving others. Road to Maintaining Excellence requires
ACOG Fellows to complete questionnaire-based modules that focus on a
single aspect of clinical practice, like prevention of early-onset
group B Streptococcal disease in newborns and prevention of deep vein
thrombosis and pulmonary embolism. As Fellows complete each module,
data is summarized and compiled by ACOG, and periodically reported to
our members.
ACOG has been working collaboratively with our primary care
colleagues, as well as our colleagues in specialty and surgical care,
to be supportive of moving toward value-based physician payments,
linked with fixing the SGR. As Congress moves forward in establishing
quality incentives in Medicare, ACOG believes that certain principles
should be kept in mind, many of which are reflected in your discussions
of pay-for-performance and your draft legislation.
All physicians should receive a positive Medicare payment
update as a floor for additional reporting or performance incentives.
Under the current SGR formula, physicians will receive unsustainable
payment cuts of nearly 30 percent over the next six years. Some
performance measures may involve additional office visits, lab tests,
imaging exams or other physician interventions that would only
exacerbate the current volume formula. Physicians must not be penalized
for any volume increase resulting from compliance with performance
measures. To ensure an equitable accounting of the costs and savings
generated from pay-for-performance, Medicare should account for savings
to Part A generated by Part B performance improvements.
The new payment system should be phased in, beginning
with an administratively simple ``pay-for-reporting'' period that
provides information about the quality and safety processes physicians
are engaged in and assesses the availability of health information
technology. Quality and safety process measures used in the Medicare
system should have widespread acceptance in the medical community. One
such process measure in obstetrics could involve use of a prenatal
flowsheet, a performance tool developed by ACOG that was recommended
for use by an ACOG-led prenatal workgroup of the American Medical
Association's Physician Consortium for Performance Improvement. In ob-
gyn surgery, ACOG supports the procedural measures laid out in the
first phase of the American College of Surgeons Framework for Surgical
Care, including confirmation of operative site and side marking, pre-
operative ``time out,'' immediate post-operative documentation, post-
operative pain management and appropriate post-operative care.
Clinical performance measures should be developed by each
specialty in a transparent process that considers scientific evidence,
expert opinion and administrative feasibility of each measure. Measures
should be appropriately risk-adjusted to account for a variety of
factors, including patient compliance and complexity. Increased quality
should be the goal of efficiency measures, and these measures, too,
should be driven by data-based clinical evidence and expert opinion
when data are lacking.
Health information technology is prohibitively expensive
for some small practices, particularly for the 23 percent of ob-gyns in
solo practice, but is a necessary efficiency and a vital component of
pay-for-performance. Acquisition of this technology should be
encouraged with federal financial assistance for the purchase of
hardware and software and for system training. National standards for
health information technology would facilitate physician adoption of
these systems, by reassuring physicians that the technology they invest
in would not become obsolete. Because use of health information
technology may be among the elements of the early ``pay-for-reporting''
system, it is vital that these steps be taken promptly.
Congress needs to address the universe of legal issues
surrounding data reporting. Information collected by CMS must be
protected from use in medical liability litigation against physicians
or as a basis for negligent hiring or retention claims. This may
necessitate specifically exempting physician data from Freedom of
Information Act requests. Care should be taken to avoid other
unintended and unfortunate consequences of public data reporting, such
as physician selection of patients with the fewest medical risk factors
or the best history of compliance with instructions. This is essential
to ensure continued access to care for low-income and minority
populations who tend to enter the health care system at an acute stage
of disease and illness and suffer worse outcomes regardless of the
quality of care they receive.
We recognize the challenges in creating a quality improvement
program for Medicare that leads us to meaningful clinical measures and
improved quality for beneficiaries. We applaud your leadership and your
commitment to this effort and we sincerely thank you for your
willingness to work cooperatively with ACOG and the medical community
in these important discussions. ACOG stands ready to work with you as
we embark on this historic change in Medicare.
Sincerely,
Michael T. Mennuti, MD, FACOG
President
American College of Surgeons
Washington, DC 20007
July 20, 2005
The Honorable Nancy L. Johnson
Chair, Subcommittee on Health
Ways and Means Committee
U.S. House of Representatives
Washington, DC 20515
Dear Mrs. Johnson:
The undersigned surgical specialty organizations are grateful for
your leadership in developing and promoting reforms to the Medicare
physician payment system. In particular, we appreciate your efforts to
balance calls for restructuring current physician payment incentives
with the need to eliminate the sustainable growth rate system that has
destabilized the program and now threatens the financial viability of
physician practices and patient access to care.
As the Ways and Means Health Subcommittee continues to review these
issues, especially the many practical concerns involved in developing a
meaningful value-based purchasing program, it is important to keep in
mind the diversity of physician practices and services. In particular,
it seems that much of the discussion to-date has focused on ambulatory
services such as chronic disease management and preventive care, with
little acknowledgement of the very different concerns associated with
acute care procedures or hospital-based care. Even within surgery,
there are substantial differences between hospital and ambulatory
services that must be taken into account. The implications and the
strengths associated with such diversity must be assessed carefully if
the changes that are being considered for the Medicare physician
payment system are truly aimed at improving the quality and processes
of patient care.
With that in mind, surgery offers the attached framework for
consideration if Congress is to develop a broad-based quality
improvement program for Medicare. Like your draft legislation, this
framework envisions a phased approach that begins with broadly
applicable and relevant measures that can be reported by physicians
through administratively simple means. The starter set of five
potential surgical measures addresses key patient safety goals and can
be implemented promptly. Over time, more complex specialty--and service
site-specific measures and systems--including but not limited to those
described in the document--can be developed to ensure broad
applicability and participation across specialties and across sites of
service.
Thank you again for your leadership and your support. We all look
forward to working with you further on developing effective Medicare
payment system reforms.
American Academy of Ophthalmology
American Academy of Otolaryngology--Head and Neck Surgery
American Association of Neurological Surgeons
American Association of Orthopaedic Surgeons
American College of Surgeons
American Society of Cataract and Refractive Surgery
American Society of General Surgeons
American Society of Plastic Surgeons
American Urological Association
Congress of Neurological Surgeons
Society for Vascular Surgery
Society of American Gastrointestinal and Endoscopic Surgeons
Society of Gynecologic Oncologists
Society of Surgical Oncology
The Society of Thoracic Surgeons
______
DEVELOPING A QUALITY IMPROVEMENT
FRAMEWORK FOR SURGICAL CARE
Surgical organizations have long stood for quality and safety. They
were among the first to champion peer review reporting in morbidity and
mortality conferences, and were at the forefront of developing
standards for the facilities in which surgical care is provided.
Although surgeons continue to advance evidence-based care, surgical
specialists and the research and processes they have developed have
largely been omitted from recent debates on ways to report and measure
healthcare quality in a Medicare pay-for-performance program. Instead,
the focus has been principally on public health and primary care
services, and on processes that are relatively simple to measure
through ambulatory service claims. If policymakers begin to pursue the
development of pay-for-performance, surgical participation is vital.
It is important to highlight key distinctions in surgical quality
improvement from preventive and chronic care quality measures. For
example, surgery is more episodic and less focused on chronic disease
management, preventive services, and screening. In surgery, the
ultimate outcome produced by a specific intervention is much more
immediate and clear than disease management strategies that may span
many years. As a result, surgery lends itself much more readily to
rigorous clinical outcome measurement. And, while it is typical for
generalist physicians to see a wide array of patients, surgeons tend to
have more focused areas of practice that make it difficult to apply
broad quality measurement sets. Administrative records other than the
operative report--such as claims records--provide much less useful
information about processes of care because of the way surgery is
packaged and billed. Finally, successful patient management in a
primary care setting generally results in increased utilization of
preventive services. In surgery, ``more'' rarely means ``better'' care.
For surgery, the best measures focus on elaborate decision-making
processes that call for direct action to determine the right
procedures, at the right time, for the right patient. Surgical quality
initiatives limit acute complications and provide immediate cost
savings, with enhanced outcomes and improved operational efficiencies
through process development.
Of course, individual physicians and specialties are in different
stages of preparedness for participation in meaningful pay-for-
performance programs. Some individuals do not have access to
sophisticated information technology that facilitates participation,
and some specialties have yet to develop the rigorous clinical evidence
that is needed to identify processes of care that improve patient
outcomes. Nonetheless, there is general consensus among leading
surgical societies on an overall framework for any program intended to
promote high-quality surgical care.
We envision a phased approach that will afford a process of
continuous improvement in the overall quality of surgical patient care
while allowing further progress on the development, testing, and
refinement of new measures.
First Phase
Phase I would essentially implement a ``pay for reporting'' system
focusing on administratively simple, self-reported information about
processes that are widely accepted and promoted for their contribution
to improving patient safety and advancing the principle of patient-
centered care--which are among the aims included in the Institute of
Medicine's framework for improving the health care system, Crossing the
Quality Chasm. In this phase, which can be implemented through claims-
based reporting, we envision a set of standards that assures the
surgeon's role in improving quality and safety. These standards might
include the following:
Confirmation of Operative Site and Side. While rare,
wrong-site or wrong-patient operations do occur. A wide range of
physician organizations and specialty societies, along with other
provider groups, payers, and accreditation organizations have not only
called on surgeons but also on surgical team members and patients to
ensure that the operative site is appropriately signed and confirmed by
either the patient or a representative for the patient. So-called
``sign your site'' programs have been endorsed by the Joint Commission
on the Accreditation of Healthcare Organizations (JCAHO), Agency for
Healthcare Research and Quality (AHRQ), Department of Veterans Affairs
(VA), American Academy of Orthopaedic Surgeons, American College of
Surgeons (ACS), and other national organizations representing surgical
specialists and perioperative nurses.
Pre-Operative ``Time-Out.'' When errors do occur in the
operating room, poor communication among surgical team members is often
cited as a key cause. In addition, after signing the site for surgery,
a variety of circumstances, such as a change in scheduling or operating
rooms, can occur and potentially lead to a wrong-site or wrong-patient
procedure, or to an operation for which the surgical team lacks the
necessary tools or equipment. For these reasons, a broadly-endorsed
technique known as the surgical ``time-out''--a checklist type process
based on airline safety practices--should occur prior to making the
surgical incision. This process is currently endorsed and promoted by
JCAHO, AHRQ, the VA, and a variety of national organizations
representing members of the operating room team, including ACS.
Immediate Post-Operative Documentation. In addition to
improving communication through a pre-operative time-out for the
surgical team prior to surgery, an important aspect of patient care is
to prevent so-called ``hand-off'' errors by ensuring that those who
provide post-operative care have essential information about the
patient's condition. Prompt documentation in a brief post-operative
report by the surgeon that includes any specific directives for care
can help ensure that the post-operative health care team is prepared
for potential complications that may need to monitored or addressed.
This practice fulfills one of JCAHO's 2006 National Patient Safety
Goals across various care settings.
Post-Operative Pain Management. Pain management is an
important but sometimes neglected component of a patient's treatment
and important in speeding recovery. Surgeons need to incorporate into
their post-operative care processes discussions with their patients
about the level of their pain, followed by appropriate pain management.
The Centers for Medicare and Medicaid Services (CMS) included pain
management in its demonstration project for cancer patients undergoing
chemotherapy; in addition, the CMS and AHRQ Hospital CAHPS venture
surveys patients regarding the management of pain provided by their
hospital.
Appropriate Post-Operative Care. As important as the care
the patient receives in the hospital is the care and the directives for
care that the patient receives upon discharge. These follow-up steps
may include: 1) scheduling post-operative visits with the surgeon or
other relevant providers; 2) prescribing medications with the necessary
instructions; 3) counseling for particular patient lifestyle choices,
such as smoking cessation; 4) directives for patient representatives
regarding care for the patient at home; and 5) any other directives
appropriate to the patient's condition, such as wound care.
These measures are broadly applicable across surgical specialties
and across sites of services, and should be reportable through
relatively straightforward administrative mechanisms. In addition, they
are likely to have an immediate positive impact on the quality of care
and, taken as a group, will produce little if any increase in service
utilization. Indeed, collectively they may well produce system cost
savings by preventing complications.
Second Phase
Phase II of Medicare's pay-for-performance program could call more
directly for surgeons to ``pay for participation,'' and involve
targeted goals that rely on more complex process and outcomes measures
that are applicable to broad service categories. For surgical care
provided in the hospital setting, a widely endorsed set of measures
that is applicable to most surgical specialties is incorporated into
the Surgical Care Improvement Program (SCIP). SCIP addresses the
following surgery-related quality and safety issues:
Surgical site infections (SSIs) account for 14 to 16
percent of all hospital-acquired infections and are a common
complication of care, occurring in 2 percent to 5 percent of patients
after clean extra-abdominal operations and up to 20 percent of patients
undergoing intra-abdominal procedures. Among surgical patients, SSIs
account for 40 percent of all hospital acquired infections. By
implementing projects to reduce SSIs, hospitals could recognize a
savings of $3,152 and reduction in extended length of stay by seven
days on each patient developing an infection. Among the practices known
to prevent surgical site infections are timely administration and
proper duration of antibiotics, glucose control, and proper hair
removal.
Adverse cardiac events are complications of surgery
occurring in 2 to 5 percent of patients undergoing non-cardiac surgery
and as many as 34 percent of patients undergoing vascular surgery.
Certain perioperative cardiac events, such as myocardial infarction,
are associated with a mortality rate of 40 to 70 percent per event,
prolonged hospitalization, and higher costs. Current studies suggest
that appropriately administered beta-blockers reduce perioperative
ischemia, especially in patients considered to be at risk. It has been
found that nearly half of the fatal cardiac events could be preventable
with beta-blocker therapy.
Deep vein thrombosis (DVT) occurs after approximately 25
percent of all major surgical procedures performed without prophylaxis,
and pulmonary embolism (PE) occurs in 7 percent of operations conducted
without prophylaxis. More than 50 percent of major orthopaedic
procedures are complicated by DVT, and up to 30 percent by PE, if
prophylactic treatment is not instituted. Despite the well-established
efficacy and safety of preventive measures, studies show that
prophylaxis is often underused or used inappropriately.
Postoperative pneumonia has been associated with high
fatality rates, according to the Centers for Disease Control and
Prevention (CDC). Postoperative pneumonia occurs in 9-40 percent of
patients and has an associated mortality rate of 30-46 percent. Studies
have found that many of the factors that can lead to post-operative
pneumonia respond favorably to medical intervention and so are
preventable. A conservative estimate of the potential savings from
reduced hospitalization due to postoperative pneumonia is $22,000 to
$28,000 per patient per admission. Again, SCIP proposes tests that can
be applied to test whether prevention strategies for postoperative
pneumonia have been followed.
The SCIP measures were proposed in a partnership that includes CMS,
AHRQ, CDC, VA, JCAHO, ACS, and other national organizations
representing members of the surgical team.
Employing the SCIP criteria in a pay-for-performance program would
involve coordinated efforts with hospitals and with Medicare's quality
improvement organizations. Indeed, since hospital adherence to the SCIP
protocols depends on surgical leadership, one way to align hospital and
physician incentives in the payment system would be to pay ``bonuses''
to surgeons who refer their patients to hospitals participating in the
SCIP.
Of course, because SCIP measures focus on hospital care, other
widely-accepted and clinically relevant goals, processes, and measures
must be developed that are appropriate for physicians and surgeons
whose practice is narrower in scope and those who practice in non-
hospital settings. Participation by the relevant professional
organizations is key to this effort, as is adequate time for pilot
testing and implementation.
Third Phase
Phase III, the most forward reaching effort, would place greater
emphasis on the outcomes of surgical care. Such quality initiatives
will require large infrastructures to house and analyze data and to
provide the professional expertise to define, refine, and report on
quality and outcomes. This phase will also involve professional review
of outcomes data that, in turn, will produce new performance processes
that will further improve care. It may be possible during this stage to
benchmark performance of individual surgeons for the purpose of public
reporting.
Surgery generally accepts the principle that reporting on outcomes
provides the first step in a multi-step process toward quality
improvement. Once risk-adjusted outcomes are identified, we can define
opportunities for improving care and even highlight areas of
exceptional care, and then use expert panels of clinicians to identify
the processes that are involved in high-quality care delivery.
Various patient databases can be used to launch this effort,
including some developed in the private sector by surgical
organizations such as ACS and the Society of Thoracic Surgeons (STS).
The National Surgical Quality Improvement Program (NSQIP), developed
first by the VA and now under development in the private sector by ACS,
as well as the STS National Database for cardiac surgery, hold promise
for providing the data and measures needed to identify the processes
that improve patient care.
Again, it is important to keep in mind that specialties are in
various stages of preparedness in developing and adopting such systems,
and this must be accounted for in any pay-for-performance framework
that is ultimately adopted. This is particularly true for office-based
practices and those in smaller communities where resources are more
limited. Further, adequate time for developing and pilot testing new
measures and processes is essential, because of the considerable risks
associated with implementation of poorly constructed data collection
and reporting systems.
For this phase, in particular, the administrative investments will
be significant and the potential for Medicare program costs savings
outside the physician fee schedule can be substantial. So, alternative
means of financing performance awards (e.g., shifting unspent funds
from Medicare Part A to Part B, broader allowance of so-called gain-
sharing, and so forth) must be developed.
Pay-for-Performance
It will be challenging to produce payment incentives that are fair
for all physicians and across specialties and service settings.
Nonetheless, surgery generally agrees that a Medicare performance-based
payment system should incorporate the following principles:
The primary goal of pay-for-performance programs must be
improving health quality and safety.
Physician participation in pay-for-performance programs
must be voluntary, and a non-punitive audit system should be
implemented to ensure the accuracy of data.
Because of differences across specialties and in the
federal government's ability to collect and analyze meaningful data,
any Medicare pay-for-performance program must be pilot tested across
settings and specialties and phased-in over an appropriate period of
time.
Practicing physicians and their professional
organizations must be involved in the design of Medicare pay-for-
performance measures and programs.
Physician performance measures used in Medicare pay-for-
performance programs must be evidence-based, broadly accepted, and
clinically relevant. The metrics must be fair and balanced across
specialties and developed using evidence-based work or consensus panels
of expert physicians. They must also be kept current to reflect changes
in clinical practice.
Physician performance data must be fully adjusted for
case-mix composition including factors of sample size, age/sex
distribution, severity of illness, number of co-morbid conditions, and
other features of physician practice and patient population that may
influence the results. The program should foster the patient-physician
relationship, and must not discourage physicians from treating patients
with significant health problems or complications out of fear that they
will have a negative influence on quality scores and reimbursement.
There also must be a mechanism for exceptions to pay-for-performance
compliance metrics for clinical research protocols, and in situations
where measures are in conflict with sound clinical judgment.
Performance measures should be scored against both
absolute values and relative improvement in values, as appropriate.
Medicare must positively reward physician participation
in pay-for-performance programs, including physician use of electronic
health records and decision support tools. Pay-for-performance programs
must also compensate physicians for any administrative burden for
collecting and reporting data.
Pay-for-performance programs must not be budget neutral
within the Medicare physician payment system or be subject to
artificial Medicare payment volume controls such as the sustainable
growth rate mechanism. Pay-for-performance programs should not penalize
physicians for factors beyond their control.
For surgical procedures performed in the hospital
setting, the processes that improve care frequently involve a surgeon-
led team approach. Many of these processes are directed toward
preventing costly complications, reducing length of stay, and avoiding
readmissions, which substantially reduce hospital costs covered under
Medicare Part A reimbursements. Mechanisms must be established to allow
performance awards for physician behaviors in hospital settings that
produce cost savings outside the physician fee schedule.
Physicians must have the ability to review and correct
performance data, and those data must remain confidential and not
subject to discovery in legal proceedings.
Selma, California 93662
July 20, 2005
Dear Congresswoman Johnson, Congressman Thomas, and Congressman Nunes,
First, please accept my gratitude for your interest in the issue of
access to health care for women with breast cancer. The ability of
patients in California (particularly those in rural areas) to find care
is inextricably linked to Medicare policy. I hope that your colleagues
share your concern; the stakes for my patients are high.
I am a solo practice general surgeon in rural South Fresno County.
I am the only Spanish-speaking surgeon in a region where over 80% of
the population is Hispanic. As a woman who specializes in the treatment
of breast cancer, I have found that many women, particularly the
religious Catholic women I serve, prefer to be treated by a woman for
reasons of modesty.
It is incredibly difficult to attract qualified doctors to this
area. It is more difficult, still, for the patients with few resources
to find the specialists they need. As a surgeon in Selma, California, I
am referred patients from as far north as Oakhurst and Coarsegold, and
as far south as Earlimart. This is a 70-mile radius around Selma, and
these patients travel over an hour for their appointments. There simply
aren't enough specialists who accept patients covered by the State's
Medi-Cal system, and this has a ripple effect on patients covered by
Medicare.
Prior to my establishing my practice in 2003, the only procedure
performed locally for the treatment of breast cancer was Mastectomy.
Additionally, all breast cancer diagnoses were obtained with Open
Surgical Biopsy, a procedure performed in the hospital, which
necessitates anesthesia and a noticeable scar. Because of my training
as a surgical resident, I learned to offer Breast Conservation, a set
of techniques which allows many women to avoid the pain and
disfigurement of losing their breast. Additionally, I perform Minimally
Invasive Biopsies for the diagnosis of breast abnormalities. Using
local anesthetic and advanced technology in my office (including
Ultrasound guidance and computerized probes), a woman with a breast
lump can be given a diagnosis (whether benign of malignant) with
minimal discomfort and a \1/8\-inch scar. Because surgery is not used
for diagnosis, the results are available within days of a woman first
identifying her breast lump or being told of an abnormal mammogram, and
the method is more cost-effective than if a hospital procedure were
required. This is an incredibly stressful time for any woman, and any
delay just prolongs her and her family's anxiety.
I brought Sentinel Lymph Node Biopsy to my rural hospital. This is
another minimally invasive technique for staging breast cancer which
spares many women the pain and complications associated with removal of
all of the underarm glands (which used to be the only way to stage
breast cancer, and led to severe permanent arm swelling in a large
number of women).
Financially, my practice is failing. The reasons for this are clear
below. It is likely that in the absence of a change, I will be forced
to close my practice and leave the San Joaquin Valley (and probably the
State of California) within TWO YEARS.
The negative consequences for me personally and for my patients
will be significant. My husband's family has lived in this area for
generations, and we had hoped to spend our lives here. My patients will
be forced to travel even longer distances for breast cancer diagnosis
and treatment, which will cause dangerous delays as they struggle to
find doctors who are willing to care for them.
THE PROBLEMS:
MEDICARE
1. Because of planned reimbursement cuts, the current Medicare
system is on a collision course with disaster. Although physicians in
the San Joaquin Valley (as the Centers for Medicare and Medicaid
Services call us, ``Area 99'') are currently the LOWEST reimbursed in
the state, we will be hit equally hard by the impending cuts. Coastal
and urban areas, which have fewer difficulties attracting doctors,
provide the highest reimbursement rates. The San Joaquin Valley has 25%
fewer Primary Care doctors, 50% fewer Specialists and 75% fewer Mental
Health providers than the rest of California.
2. Without action by Congress, Medicare reimbursement to physicians
will be cut an additional 4.3% in 2006 and between 4 and 5% ANNUALLY
between 2006 and 2013. This despite the fact that for certain surgical
procedures, my colleagues who practiced in the 1980s now are reimbursed
less than HALF of what they were paid then. For younger doctors like
me, we have no cushion to soften the fall. We will simply have to stop
taking care of patients insured by Medicare or close our practices. IT
IS UNACCEPTABLE TO FORCE WOMEN IN THE CENTRAL VALLEY TO UNDERGO
UNNECESSARY MASTECTOMIES SIMPLY BECAUSE SURGEONS WHO PERFORM BREAST
CONSERVATION CANNOT AFFORD TO PRACTICE HERE. I AM WILLING TO SERVE, BUT
I WILL BE PUT OUT OF BUSINESS BY PLANNED REIMBURSEMENT CUTS.
3. The problem of declining Medicare reimbursement doesn't affect
only the elderly. The vast majority of private health insurance
companies base their payments to physicians AS A PERCENTAGE OF MEDICARE
REIMBURSEMENT RATES. So a cut in Medicare cuts payments across the
board, making a difficult situation even worse. For those of us who
accept Medi-Cal (despite the financial hemorrhage it creates in our
practices--in mine, it is the only health coverage for up to 60% of my
patients), the problem is multiplied. The financial viability of my
practice, already tenuous, will be gone.
THE SOLUTIONS:
MEDICARE
1. SPONSOR OR CO-SPONSOR THE ``PRESERVING PATIENT ACCESS TO
PHYSICIANS ACT OF 2005.'' Senators Jon Kyl and Debbie Stabenow, and
Representatives Clay Shaw and Ben Cardin have introduced this
legislation as S. 1081 and H.R. 2356. This legislation will help ensure
Medicare payments to allow Medicare patients continued access to needed
surgical services, and provides an alternative to the upcoming
reimbursement cuts that will decimate the Medicare program.
2. OVERHAUL MEDICARE'S FLAWED ``GPCI'' FORMULA. As it stands, the
``Geographic Physician Cost Index'' is a way of skewing Medicare
payments toward physicians who choose to practice in geographically-
desirable areas (such as the Central Coast or San Francisco) and away
from those of us in rural areas, including the San Joaquin Valley. This
``unequal pay for equal work'' is supposedly based on factors such as
physician expenses to practice in a particular area. But it totally
ignores facts like the skyrocketing housing costs faced by Valley
residents, and the very different patient population whom we serve
compared with other parts of the State. We have TWICE the poverty
level, more than THREE TIMES the unemployment rate, and $14,000 less
per year in per capita income than the averages for counties better
reimbursed by Medicare. Our percentage of Medi-Cal patients far exceeds
that of our more affluent neighbors.
3. STUDENT LOAN DEBT FORGIVENESS. As a surgeon, I spent thirteen
years training to practice my profession. Although I worked throughout
my education and earned scholarships to help relieve the financial
burden (like most of us, my family couldn't provide unlimited resources
to send me to school), I incurred nearly $200,000 in student loan debt
by the end of my five-year residency training. At the age of 35, when
most of my friends were well established in their careers, I was just
starting. Despite the fact that the only debt my husband and I have is
our mortgage (we don't have expensive habits; I drive a pickup truck
and our last vacation was a stay with family in Big Creek, CA), we are
struggling to meet my student loan payments and still keep our house. I
am willing to serve as a specialist in an area with perpetual physician
shortages, where it takes years to recruit even one physician. Perhaps
this service has enough value to merit helping with the investment it
took to get me here, so that I may stay and continue my work.
4. CONSIDER THE IMPLICATIONS OF VALUE-BASED PURCHASING ON
PHYSICIANS IN SOLO AND SMALL PRACTICES. I would gladly and willingly
participate in a program which encourages better health care for
patients by rewarding those who provide high quality care. I believe in
my ability to provide such care; I would leave my profession if I
couldn't meet the standards which my patients deserve. But PROVIDING
HIGH QUALITY CARE IS A DIFFERENT MATTER THAN DOCUMENTING IT. As a solo
practice rural surgeon, my ``bottom line'' would be devastated by
having to come up with $15,000 or more for Information Technology in
addition to the high overhead I already struggle to pay.
As a solo practice physician, I have ONE employee, and not because
I wouldn't like to hire more. I am the secretary, the bookkeeper, the
medical assistant, the receptionist, the cashier, the laboratory
manager, the equipment technician, the computer ``guy,'' and often the
housekeeper. Oh, yes . . . I am the surgeon, too. I answer the phones
at my office and do my own copying not because I prefer it to being a
doctor; it's a financial necessity to keep my practice viable. Please
consider the burden that a complicated, expensive reporting system
would place on those of us who want to do good work but are limited in
resources and staff to document it.
Thank you, Muchas Gracias and Obrigado on behalf of my patients. G-
d bless you for your interest.
Sincere regards,
Linda Halderman, M.D.
General Surgeon
Statement of Sandi Palumbo, Kern County Medical Society, Bakersfield,
California
Madam Chairman Johnson, distinguished Subcommittee members,
honorable members of the House Committee on Ways and Means, the Kern
County Medical Society (KCMS) appreciates this opportunity to submit
comments for the record related to value-based purchasing for
physicians under Medicare.
Movement towards a process dependent upon investment in health IT
infrastructure that ties increases in physician reimbursement to
enhanced outcomes is of concern to Kern County Medical Society and
physicians practicing in Kern County and the San Joaquin Valley
communities.
Key Concern: Development of risk-adjustment techniques
Taking into consideration the disparities facing both providers and
residents of the San Joaquin Valley, of key concern is testimony
provided by AMA noting, ``Currently, there is no reliable method for
risk-adjustment, which has grave consequences for purposes of
determining a fair comparison of physician performance, payment and
public reporting.''
Low health literacy and language barriers add to this concern. The
lack of education, low literacy and language barriers compound
difficulty related to comprehension of basic medical information. Yet,
programs must be implemented to enhance and provide appropriate
information to patients to enable them to make educated decisions about
their health care needs. It is extremely important that physicians are
not penalized for adverse consequences in the case of patients with
certain ethnic, racial, socioeconomic or cultural characteristics that
make them less or non-compliant.
Exhibit A includes background related to the demographics,
socioeconomic indicators, health access barriers and health disparities
applicable to our region; providing a better understanding for our
concern.
Key Concern: Availability and Cost of Health IT
In the telecommunications arena, government and business--with
support from the non-profit sector--have partnered to provide many
Americans with quality telecommunication services. However, a closer
look reveals a disparity between rural and urban/suburban communities,
particularly in regards to highspeed Internet access.
In California's rural areas, specifically in the Central Valley,
home to most of the state's fastest growing communities, highspeed
Internet access remains limited. In the 21st Century, this lack of
access impedes participation in the global economy, as well as
educational and health-related opportunities.
In recognition of these issues the Great Valley Center with support
from SBC, Surewest Communications, Verizon, Global Valley Networks,
Pac-West Telecomm, UC Merced, and the California State Association of
Counties, convened a summit on August 25, 2004 to discuss obstacles and
opportunities related to rural telecommunications in the Central
Valley. The participants included service providers (both large and
small), non-profit and community-based organizations, educational
institutions, and policymakers.
Exhibit B outlines recommendations developed as a result of the
August 25, 2004 Summit.
While the use of IT in physicians' offices potentially can improve
quality and reduce costs, implementation is costly because of up-front
investments in capital, training and integrating IT systems with
existing administrative and clinical processes. The business case for
physician implementation of IT to improve health care quality is still
being made, since the benefits of lower costs and improved health are
uncertain and generally accrue more directly to health plans, employers
and patients than to physicians. As a result, many physician practices
may be reluctant to introduce IT beyond administrative and management
systems that directly affect revenues.
As noted in Issue Brief No. 89--Limited Information Technology for
Patient Care in Physician Offices by Marie C. Reed and Joy M. Grossman,
September 2004, Center for Studying Health System Change:
Practice Size Matters
There is significant variation in the availability of information
technology across practice settings. The almost 70 percent of
physicians in traditional settings--solo, small groups with up to 50
physicians or practices owned by hospitals--were least likely to be in
practices using information technology, with IT adoption rates ranging
between 8 percent and 50 percent
Physicians in traditional practice settings less likely to be in
practices with IT support for multiple functions. Just 7 percent of
physicians in small practices reported having IT support, compared with
20 percent of physicians in large groups and medical schools and more
than 50 percent of those in staff/group HMOs. Readier access to capital
and administrative support staff, the ability to spread acquisition and
implementation costs among more physicians, and active physician
leadership may explain why larger practices are more likely to adopt IT
to support patient care.
Policy Options
Because barriers to IT adoption appear to be greatest for smaller
traditional physician practices, policy makers may need to design
policies specifically aimed at these physicians. While some of the
approaches to speed IT adoption, particularly those addressing
financial barriers, may provide incentives for smaller practices,
others are less likely to be successful, especially in the near term.
Programs that focus on performance targets offer only indirect
motivation--adopting IT may improve the practice's ability to meet the
quality targets. Such quality initiatives are unlikely to address the
financial barriers to IT adoption for smaller practices. IT investments
typically must be made up-front, while incentive payments from a given
quality initiative program are small, accrue incrementally on a per-
patient basis, and apply to a limited portion of a practice's patient
base. In fact, until major health plans or Medicare offer practices
significant financial incentives, quality initiatives are not likely to
stimulate substantial IT adoption in smaller practices.
Key Concern: Increased Administrative Burden/Cost
Any value-based purchasing program needs to ensure that physicians
are not burdened with additional administrative costs, especially for
information technology systems that are needed to participate in the
program. Physicians cannot continue to absorb unfunded government
mandates, and value-based payments for participation in the program
should not be undermined by administrative costs.
Many solo and small group San Joaquin Valley physicians find it
increasingly hard to maintain a viable practice while providing
appropriate care at low or less than optimal rates of reimbursement for
high percentages of patients covered by government-funded programs or
lacking coverage and the ability to pay for care. Some solo physicians
find it necessary to serve in multiple business capacities related to
managing their practice as limited revenue prohibits hiring additional
staff. Compounding administrative burdens and costs for these
physicians may ultimately force them to relocate their practices to
higher reimbursed areas, thereby increasing access problems for areas
already disadvantaged by lower numbers of physicians.
Low Federal Expenditure per Capita
As reported in February 2005, preliminary results of a CRS study of
the San Joaquin Valley and its counties noted the rate for the San
Joaquin Valley was over $2,000 less per capita than the $6,814 per
capita federal expenditure rate for the United States. Data showed that
all San Joaquin Valley counties were less than the per capita rate of
spending for the United States as a whole. Most counties were
substantially below the national per capita rate of $6,814, ranging
between approximately $1,200 to $2,800 per capita less.
Exhibit C, excerpts from the February 5, 2005 Memorandum addressed
to San Joaquin Valley Congressional Representatives by Tadlock Cowan,
Coordinator, CRS Analyst in Rural and Regional Development Policy
Resources, Science, and Industry Division, provides more detail related
to low federal expenditure per capita for our region.
Additional Concerns
In addition to the above addressed concerns, we wish to emphasize
and echo the following overall factors raised by AMA for consideration
as you move forward in developing value-based purchasing legislation
for physicians:
(i) physician practices are vastly different in size and type
across the country, and, in stark contrast to hospitals, which
are fairly homogenous, one size does not fit all;
(ii) the number of patients needed to achieve a statistically
valid sample size;
(iii) the desire to keep the data collection burden low, while
at the same time maintaining accuracy of the data;
(iv) level of scientific evidence needed in establishing
appropriate measures;
(v) the ability to trace a performance measure back to one or
many physicians involved in a patient's care; and
(vi) the complexities of distributing payments when multiple
physicians are involved in a patient's care, and
(vii) without violating any fraud and abuse laws and
regulations.
We commend Chairman Johnson and House Ways and Means Chairman Bill
Thomas for your continued efforts related to the difficult task of
addressing flaws associated with the current Medicare physician
reimbursement formula and appreciate your interest and understanding of
factors impacting this matter. We look forward to a new payment system
for physicians that keeps pace with the cost of practicing medicine
while enhancing the care provided Medicare beneficiaries.
______
EXHIBIT A
San Joaquin Valley Socioeconomic & Health Indicators
The San Joaquin Valley is located in the southern portion of the
Central California Region and stretches almost 300 miles from just
south of Sacramento to north of Los Angeles, bordered on the east and
west by the Coastal and Sierra Nevada mountain ranges. The Valley
comprises 17% of California's landmass. It is one of the largest rural
and agricultural areas in the nation and is also one of the most
culturally diverse.
The San Joaquin Valley has grown faster than the rest of the state,
and as of the 2000 U.S. Census was home to 3.3 million residents,
approximately 10.3% of California's population. The Valley has become
more ethnically and linguistically diverse in the 10 years between the
1990 and the 2000 U.S. Census. In comparison to statewide demographics,
the residents of the Valley have remained much poorer, with lower
educational attainment.
Unemployment has remained high and per capita income low. In
contrast, since 1990, California as a whole has seen much greater
improvements in areas such as income than has the Valley.
Although the Valley enjoys agricultural riches, many of its
residents endure very serious health problems.
The dire health conditions of the residents of the San Joaquin
Valley were first documented in 1996 in Hurting in the Heartland:
Access to Care in the San Joaquin Valley. Eight years later, the
report, Health in the Heartland: The Crisis Continues was published to
provide an update on conditions related to the health status of the
residents of the San Joaquin Valley. Data on over 60 health-related
indicators was presented for the eight San Joaquin Valley counties
(Fresno, Kern, Kings, Madera, Merced, San Joaquin, Stanislaus, and
Tulare), comparing them to each other and to California as a whole.
The Valley continues to have high rates of disease, poor community
health, and lacks an adequate provider network. The Valley still leads
the state in infant mortality, teen births, and late access to prenatal
care. Some residents have a harder time than do other Californians in
finding care due to lack of health insurance, a scarcity of providers,
and language and cultural barriers.
In the Valley, 10.2% of the population does not speak English
``well or at all.'' Much research has documented the adverse impact on
access to health care imposed by language barriers. Providers have
difficulty communicating with patients and patients have trouble
understanding providers, following directions, and obtaining insurance.
Policies need to be developed that enable compliance with standards for
limited-English-proficient patients, such as certification of
interpreters and establishing an adequate delivery and reimbursement
system for interpreter services.
Perhaps the biggest challenge to Valley health is the quality of
the air. The Valley has some of the worst air quality in the nation,
which has severe impacts on the health of residents, the economy of the
region, and the overall quality of life.
The data demonstrate that poor health access and health status in
San Joaquin Valley exist in the context of communities with high rates
of poverty, low educational attainment, a high number of female
householder families, and a larger percentage of immigrants and non-
English speakers. Although many of the San Joaquin Valley's health
issues can potentially be explained by demographics, the economy also
has an impact. The Valley's low-wage agricultural industry has left
many Valley residents without health insurance and with fewer resources
to improve their health. The demand for low-wage labor has fueled the
immigration of new residents, mostly from Latin America, to work in the
fields. Those who provide health services to these newly arriving
workers struggle with limited public resources.
Despite advances in medical care across the state, many Valley
residents lack the most basic of services. The rising costs of
treatment for chronic disease and continued reliance on state and
federal funding in a climate of budgetary deficits will lead to further
erosion in the health care delivery system and further economic
decline.
If current trends continue, the Valley will be less and less able
to adequately care for its needy residents.
ACCESS TO CARE
Access to health care directly affects the well being of the population
Every society requires adequate health care services to screen for
and prevent disease, manage chronic conditions, and treat injuries and
illness. Access to services that provide primary care, mental health
care, and oral health care are essential.
The health care delivery system in the San Joaquin Valley remains
inadequate to serve the growing population. Provider shortages,
hospital closures, and low reimbursement rates for services continue to
plague the Valley. Clinics remain indispensable to the system for
providing health care for diverse Valley populations. In the San
Joaquin Valley, provider shortages are prevalent across the entire
health care workforce, including physicians, dentists, nurses and
mental health professionals. The San Joaquin Valley has one of the
lowest ratios of physicians to population, whereas coastal, urban areas
such as the San Francisco Bay Area have the highest ratios.
Hospitals are also facing severe challenges. Closures,
bankruptcies, and the financial deterioration of rural hospitals have
affected the acute care delivery system in the San Joaquin Valley. Low
reimbursement rates from public and private payers; shortages of
nurses, pharmacists, and other personnel; implementation of nurse
staffing standards; the burden of updating substandard facilities; the
cost of compliance with the 2008 seismic standards; and a lack of
capital have all contributed to the declining viability of vulnerable
rural hospital facilities.
High rates of uninsured in the San Joaquin Valley
Uninsured Californians are not all the same; they differ widely
according to age group, ethnicity, and income, as well as in attitudes
towards health insurance and reasons for not having coverage. If they
are feeling well, many people do not perceive the need to see their
primary care physician. However, many common health conditions do not
cause people to have noticeable symptoms until they have had the
condition for a number of years. In many cases, if a condition is
diagnosed early (e.g. breast cancer and diabetes), treatments can be
given that can significantly reduce mortality and morbidity that is
otherwise associated with the condition if it is diagnosed after a
prolonged period following its onset.
High Poverty Rate
Lack of insurance is not simply restricted to the poor.
Approximately 40% of the uninsured in California have a family income
level at least twice that of the federal poverty level. Poverty is also
a factor for many without sufficient access to health care.
Primary care physician shortages
Primary care physicians play an important role in care. Yet, often
there are not enough to treat the population. Medicare reimbursement
for San Joaquin Valley physician is among the lowest in the state.
Medicare physician reimbursement rates impact upon more than services
provided to Medicare beneficiaries as many private carriers use
Medicare rates to establish their respective rates applicable to
physician reimbursement. In spite of the bonus incentives provided by
Medicare by means of primary care health manpower shortage designation
or physician scarcity designation, known as having some of the lowest
reimbursement rates in California San Joaquin Valley communities
experience difficulty in recruiting and retaining an adequate supply of
physician providers.
Recent data show that the San Joaquin Valley had approximately 24%
fewer primary care physicians and approximately 50% fewer specialists
serving Valley residents than the residents of California as a whole.
In 2000, there were 51.2 primary care physicians per 100,000 persons in
the Valley, compared to 67.4 in California. There were only 73.2
specialists per 100,000 persons in the Valley, compared to 122.2 for
California. Areas of shortage of primary care physicians have been
designated in every San Joaquin Valley County (See Exhibit D).
Why is this important?
Primary care physicians are primarily responsible for the
prevention, early detection, and treatment of common chronic
conditions. These efforts are critical to reducing mortality and
morbidity.
When there is a limited availability of physicians in a
community, people are less likely to seek preventive care and more
likely to go to a local emergency room or urgent care center for acute
symptoms and/or health conditions.
The Rural Health Care Work Environment
While it is generally accepted that the working conditions in the
health care field are difficult and often are risk factors for the
negative effects of professional quality of life, working in a rural
community adds another layer of complexity. The issues faced by any
provider may lead to burnout and work-related traumatization. These
professional quality of life risk factors, briefly discussed below, are
often increased in number and intensity for those working in rural and
isolated environments.
Many rural health professionals work as sole providers isolated by
geography, distance, weather, and/or time. Often, because of community
size, the people they treat are also friends, causing stresses on
personal/professional relationships. They are required to be
generalists, addressing a wide range of issues, effectively becoming
'mini-specialists' to treat patients' specific conditions. In addition
to needing individualized specialty knowledge, the overall frequency of
seeing any one condition can be low, making it hard to maintain a
broad, current level of knowledge and best practices.
Beyond the typical rural clinical issues, it is difficult for
professionals to find training time and funding. Coverage for
professional leave is often nonexistent; in addition, time taken for
leave is not reimbursed, causing a drop in income. Finally, traveling
to access professional education can be hard. Many rural providers must
drive one to three hours to reach a community large enough to provide
the needed education or access to an airport to fly to a conference. To
access continuing education, rural providers can easily lose two
productive days of caregiving just in travel alone.
HEALTH STATUS
More seniors living on their own with disabilities in the San Joaquin
Valley than in other regions.
The San Joaquin Valley has a higher (worse) level of senior
disability when compared to California. Nearly half of non-
institutionalized seniors in the San Joaquin Valley live with
disabilities. Seniors with disabilities require more specialized care,
yet their independence is still very important to their well being.
Access to care can be a greater issue for this population compared to
seniors without disabilities.
Why is this important?
People with disabilities tend to report more anxiety,
pain, sleeplessness, and days of depression and fewer days of vitality
than do people without activity limitations.
People with disabilities also have other disparities,
including lower rates of physical activity and higher rates of obesity.
Valley wide, the rate of coronary heart disease deaths is slightly
above that of the state
Many deaths could be prevented because coronary heart disease is
related to certain lifestyle-related risk factors. These include high
blood pressure, high blood cholesterol, smoking, diabetes, obesity, and
physical inactivity--all of which can be controlled.
One in five people without previous symptoms of coronary heart
disease die suddenly from an arrhythmia or heart attack. The majority
of people go on to live their lives affected by conditions such as
shortness of breath, difficulty walking short distances, or difficulty
with performing simple activities of daily living (i.e. preparing a
meal). These symptoms contribute significantly to disability associated
with coronary heart disease.
High incidence of cerebrovascular disease
The Central Valley has the second highest cerebrovascular disease
death rate at 67 per 100,000 people when compared to the San Francisco
Bay Area (69), California (63), and the Los Angeles Region (61). Within
the Central Valley, the San Joaquin Valley (64.5) is slightly higher
than the state average (63).
Death rate from diabetes highest in the San Joaquin Valley
Overall, the risk for premature death among people with diabetes is
about two times that of people without diabetes.
Hispanic/Latino Americans are almost twice as likely to have
diabetes than non-Hispanic whites of similar age.
The San Joaquin Valley has a higher Asthma prevalence rate than the
state average
Although asthma affects Americans of all ages, races, and ethnic
groups, children, low income, and minority populations are particularly
affected. Asthma adversely affects the quality of life of both the
person with asthma and his or her family. It often causes restrictions
of many activities in which they participate, many nights of lost
sleep, a disruption in daily routines, and is frequently associated
with lost days of school and work.
SOCIAL INDICATORS
Unlike the previous measures, social indicators rely primarily on
behavioral changes to improve the health of the region. The emotional
and related effects of these health-related issues can extend beyond
those directly involved, with devastating effects on families and
communities.
Cigarette smoking can lead to numerous health problems,
not the least of which is lung cancer. Smoking prevalence is highest in
the Valley when compared to other California regions and the state.
Domestic violence victims are most often women. The
Valley is just above the state rate for both hospitalizations and
homicides due to domestic violence.
Long-term heavy drinking can lead to heart disease,
cancer, alcohol-related liver disease, and pancreatitis. Aside from the
effects that heavy alcohol use has on the body, it is also associated
with abuse of loved ones, sexually transmitted diseases, and other
social problems. Heavy alcohol use and alcohol abuse is strongly
associated with motor vehicle accidents, homicides, suicides, and
drowning. The Valley rate for alcohol abuse is higher than the
California rate.
Drug abuse in the San Joaquin Valley, where drug-related
misdemeanor convictions exceed that of all Central Valley sub-regions,
is higher than in other regions in the state.
______
EXHIBIT B
Great Valley Rural Telecommunications Summit
Rural Highspeed Access--Obstacles & Opportunities
Designing Regulatory, Economic, and Policy Recommendations for Rural
Highspeed Access
August 25, 2004--Sacramento, California
Conclusion/Recommendations
As published in the position paper providing a summary of the
Summit, recommendations can be grouped into the following areas
identified for improvement:
1) Easing the process of extending communications infrastructure
into rural areas by providing tax credits to providers, expediting the
approval process for use of rights-of-way and permit requests,
encouraging appropriate building and zoning codes, and creating an
investment climate that is attractive to Internet service providers.
2) Addressing the issue of unused bandwidth in rural areas through
spectrum reform and anchor tenancy. These concepts capitalize on
existing broadband infrastucture not being used to its capacity and
have the potential to lower costs and speed deployment to rural areas.
3) Developing a comprehensive policy on broadband use in rural
areas which assures residents, providers, and investors of the State's
commitment to providing broadband access to all residents.
4) Increasing and improving funding for communications
infrastructure, education and training available through both state and
federal channels.
Summit participants believe, by making changes in these areas,
steps can be made toward achieving greater parity in highspeed access
between rural and urban/suburban communities, which will have positive
effects on participation in the global economy, as well as access to
educational and health-related opportunities.
______
Summit Participants
Sharon Avery, California Telemedicine and eHealth Center
Gretchen Beyer, Technology Network (TechNet)
Lisa Bickford, InReach Internet
Keith Boggs, County of Stanislaus
Merita Callaway, CA State Association of Counties
Carol Chamberlain, Prosper Magazine
Mark Cowart, County of Kings
Mark Crase, CA State University Long Beach
MaryLiz DeJong, SBC
Ron Dibelka, National Exchange Carriers Association
Jim Dolgonas, Corporation for Education Network Initiatives
Thomas Dorr, U.S. Department of Agriculture
Joel Effron, Pac-West Telecomm
Patrick Enright, Kronick Moskovitz
Seth Fearey, Joint Venture Silicon Valley Network
Margaret Felts, California Telephone Association
Douglas Garrett, Cox Communications
Susan Gonzales, Comcast
James Gordon, Communications Workers of America
Kathy Halsey, SBC
Allen Hammond, Santa Clara University School of Law
Peter Hayes, SBC
Yvette Hogue, SBC
Sheila Hurst, Great Valley Center
Sue Hutchinson, Global Valley Networks
Richard Jantz, County of Stanislaus
Stuart Jeffery, Wireless Communication Alliance
Eric Johnson, SBC
Barbara Johnston, California Telemedicine and eHealth Center
Susan Kennedy, CA Public Utilities Commission
Ross LaJeunesse, CA Public Utilities Commission
Pat Lanthier, Rivera Lanthier & Associates
Sarah Lapachet, Congressman Richard Pombo
Lesla Lehtonen, California Cable & Telecommunications Association
Scott Lindsay, Rural Broadband Coalition
Carolyn Lott, Great Valley Center
Mike Lynch, Great Valley Center
Jamie Malone, SBC
Timothy McCallion, Verizon
Camden McEfee, California Strategies
Bill Moreno, Fire2Wire
Baldwin Moy, California Rural Legal Assistance
Stephen Myers, Sacramento ACORN Del Paso Chapter
Dan Nguyen, CA State University Sacramento
Barbara O'Connor, CA State University Sacramento
Ted Olson, OACYS Technology
Colin Patheram, SBC
Robert Pepper, Federal Communications Commission
Bob Pickard, County of Mariposa
Daniel Roix, Great Valley Center
Duane Severson, Fire2Wire
John Sumpter, Pac-West Telecomm
Don Vial California, Foundation on Environment & Economy
Loretta Walker, SBC
Mark Welch, SBC
Carol Whiteside, Great Valley Center
Jeff Williams, California State Association of Counties
Ileana Winterhalter, SBC
______
EXHIBIT C
Excerpts: February 5, 2005 Memorandum to San Joaquin Valley
Congressional Representatives
by Tadlock Cowan, Coordinator
CRS Analyst in Rural and Regional Development Policy Resources,
Science, and Industry Division
San Joaquin Valley vs. the United States: Per capita federal direct
expenditures and obligations to the San Joaquin Valley were $4,736 for
FY2002. The rate for the San Joaquin Valley was over $2000 less per
capita than the $6,814 per capita federal expenditure rate for the
United States. Data showed that all San Joaquin Valley counties were
less than the per capita rate of spending for the United States as a
whole. Most counties were substantially below the national per capita
rate of $6,814, ranging between approximately $1,200 to $2,800 per
capita less.
San Joaquin Valley vs. California: All San Joaquin Valley counties
had a lower rate than the direct federal expenditures and obligations
rate of California, although the gap was somewhat less than that
between the San Joaquin Valley and the United States. California's per
capita rate of federal direct expenditures ($6,094) was also lower than
that of the United States. With the exception of the category of
federal salary and wages in two counties, all San
Joaquin Valley counties had a per capita federal expenditure level
below the national per capita rate in all of the established categories
of federal spending (retirement and disability, other direct payments
to individuals and others, grants, procurement contracts, and salaries
and wages). The per capita rates of federal spending for most San
Joaquin counties for each category were also lower than California's
per capita rates.
Metro vs Non-metro: With the exception of Kings County, the 8
counties comprising the San Joaquin Valley are metro counties as
defined by the U.S. Bureau of the Census. Metro counties in the United
States, on average, receive higher per capita federal expenditure rates
than the national rate. This was not the case in the San Joaquin
Valley. Kern County had the highest per capita rate of direct federal
expenditures ($5,667) followed by Kings County ($5,550), a non-metro
county. Kern County had the second largest 2000 population after Fresno
County while Kings County had the second lowest population in the San
Joaquin Valley.
San Joaquin Valley vs. the ARC Area: In 2002, the San Joaquin
Valley received $1,295 per capita less (21%) than the Appalachian
Regional Commission region in direct federal expenditures and
obligations. The ARC region received $783 less than the national per
capita rate while the San Joaquin Valley received $2,078 less than the
national per capita rate. Only 6 of the 13 ARC state Appalachian
regions, however, matched or exceeded the ARC region's per capita rate.
Individual ARC counties within the 13 states that comprise the ARC
region may also receive lower per capita rates than their respective
state rates. In only one state's ARC counties (Georgia) was the per
capita rate of direct federal expenditures lower than that of the San
Joaquin Valley.
Adjacent County Comparison: Two rural counties adjacent to the San
Joaquin Valley, Mariposa and Tuolumne, received higher direct federal
expenditures and obligations per capita in 2002 than did the San
Joaquin Valley. Per capita rates for these two counties, however, were
also lower than the national per capita rates, and Tuolumne County's
per capita rate was lower than the state's per capita rate.
Population Growth in the San Joaquin: The San Joaquin Valley has
experienced significantly higher population growth rates between 1990
and 2003 than California or the United States (30.6% vs. 19.2% and
16.9% respectively).
Total county federal expenditures to the San Joaquin for 2003,
based on 2003 population figures, show that the same general patterns
as noted above persist. Although the per capita federal expenditure
rates for some San Joaquin Valley counties in 2003 were somewhat higher
than in 2002, they were still lower relative to the 2003 per capita
rates of the United States and California. For the Valley as a whole,
however, the per capita rate fell $117 in 2003 while the population
grew by approximately 280,000.
Madera County: Madera County, which had one of the 10 lowest per
capita income levels for any metropolitan area in the United States in
2002, had a per capita decrease in federal expenditures of
approximately $150 in 2003 compared to 2002. At the same time, the
population of the county grew by over 10,000 (8.4%) between 2000 and
2003. Madera also had the highest population growth rate in the San
Joaquin Valley between 1990 and 2003 (51.5%) and between 1980 and 1990
(39.6%). Population growth in the San Joaquin Valley is projected to
grow by over twice the national rate between 2003 and 2020 and, in some
counties, by over three times the national average between 2003 and
2020. In contrast, growth in the adjacent counties of Mariposa and
Tuolumne is projected to grow at about the national average between
2003 and 2020 and less than the California average
Socioeconomic Characteristics of the San Joaquin Valley
Population: The San Joaquin Valley population is growing rapidly.
Each of the San Joaquin Valley counties exceeded the national rate of
population growth between 1980-1990, 1990-2000, and 1990-2003. While
California has also had relatively higher growth rates then the
national average, each San Joaquin Valley county substantially outpaced
the growth of California in the previous two decades. The adjacent
counties of Mariposa and Tuolumne have also had generally higher growth
rates than either California or the United States over the past 2
decades. San Joaquin and Stanislaus counties now have population
densities considerably higher than the California average. With the
high proportion of federal land in Mariposa and Tuolumne, these
counties have had relatively stable population densities.
Population Projections: In addition to documenting population
changes over time, the U.S. Bureau of the Census also makes population
projections. The San Joaquin Valley population is projected to grow by
14.3% between 2003 and 2010 compared to projected growth rates of 10.6%
for California and 6.2% for the United States. Projected population
growth for the San Joaquin Valley between 2003 and 2020 is 39.0%
compared to a growth rate of 15.5% for the United States and 23.6% for
California. Population growth between 2003-2020 for Mariposa and
Tuolumne counties is projected to be about the same as the national
average but less than California.
Poverty and Income: Socioeconomic conditions in the San Joaquin
Valley as measured by a range of variables including per capita income,
poverty and unemployment rates, and median household income reveal an
area that falls significantly below national and California averages.
The 2000 poverty rate for the San Joaquin Valley (20.5%), for example,
was significantly higher than the national rate (12.4%), California
(14.2%), and the Appalachian Regional Commission area (13.6%). While
the Valley's poverty rate was somewhat closer both to the national and
California averages in the 1980s, during the 1990s, the San Joaquin
counties saw significant increases in their poverty rates. All San
Joaquin Valley counties were below the 2000 national median family
income level ($50,046) or that of California ($53,025). With the
exception of Stanislaus and San Joaquin counties, the Valley's counties
were substantially below these national and California median family
levels. The two adjacent counties (Mariposa and Tuolumne) had 2000
poverty rates of 14.8% and 12.4% respectively, although their median
family income levels were lower than both California's and the national
rate. In contrast, poverty rates for the ARC region, 1980-2000 were
significantly lower than those of the San Joaquin counties, although 4
Social data tables prepared by Gerald Mayer, Analyst in Public Finance
that of some Appalachian states was comparable to the Valley. ARC rates
were slightly greater than the United States during those decades,
although ARC poverty rates did vary by state.
Immigration: Immigration plays a significant role in the
demographic characteristics of the San Joaquin Valley and California,
and this is likely to continue. Since 1995, the Central Valley as a
whole has received substantially more migrants from other parts of
California than they send to the rest of California. The counties of
Madera, Fresno, Kings, Tulare, and Kern have received the most
international migrants of any area of the Central Valley. These
counties are economically dominated by industrial agriculture and they
also are characterized by high rates of poverty among immigrants, who
also have generally low education levels and limited English language
skills. These characteristics present challenges to the region's social
services, especially health and education providers.
Statement of Cherrill Farnsworth, National Coalition for Quality
Diagnostic Imaging Services
Chairwoman Johnson, we are pleased to have this opportunity to
provide testimony for the record to the House Ways and Means
Subcommittee on Health at a hearing on ``Value-Based Purchasing for
Physicians under Medicare.'' NCQDIS is comprised of more than 2,400
outpatient imaging centers and departments in the United States. The
coalition promotes ``best industry practices,'' strategies for
healthcare cost savings and advocates for public and private sector
standards for quality and safety in diagnostic imaging services.
Advances in diagnostic imaging have led to great strides in patient
care: from reducing the need for invasive surgical procedures to early
detection of life-threatening diseases. NCQDIS and its members are at
the forefront of medical technology, providing physicians and patients
with the most state-of-the-art innovations, techniques and procedures
available in diagnostic imaging.
We are pleased to have this opportunity to comment to the House
Ways and Means Subcommittee on Health on efforts to promote delivery of
quality health care services and tie physician payments to quality
performance. We believe that implementing quality standards for
diagnostic imaging services is central to addressing quality issues in
the Medicare program. Medicare currently pays the same amount for
imaging services regardless of the quality of the service performed.
Medicare payment does not take into account the quality of the imaging
equipment used, the skill level of the technician facilitating the
test, or the physician's proficiency in interpreting the images. In
essence, Medicare pays the same amount for a test conducted on state-
of-the-art imaging equipment by a world-renowned radiologist as it does
for an untrained physician conducting a test on obsolete diagnostic
imaging equipment. The cost of diagnostic imaging to the Medicare
program is significant. Imaging services accounted for over $10.1
billion in Medicare Part B allowed charges in 2003, and implementing
quality standards for complex diagnostic imaging services would result
in Medicare savings in the range of $1.6--$4.8 billion over 10 years.
As you can see, diagnostic imaging is one of the most obvious areas
in which tying quality standards to payment for services can almost
immediately increase the quality and safety of services provided to
Medicare patients and maximize Medicare dollars for services rendered.
NCQDIS is actively promoting legislative options that would increase
the quality of care to Medicare patients while addressing the
committee's cost concerns about the physician payment system. Today,
many of the policies and standards supported by NCQDIS have been
implemented by private payers to successfully reduce costs and improve
patient safety and quality. The coalition believes that the same
policies and programs that are working in the private sector should be
available to protect Medicare beneficiaries and safeguard the Medicare
Trust Fund.
Protecting Beneficiaries And The Trust Fund Requires Medicare Take A
Closer Look At Use Of Imaging
As you know, data from MedPAC and the GAO have raised concerns
about the growth of diagnostic imaging performed by non-radiologists.
MedPAC found that imaging services increased by 9% between 1999 and
2002.\1\ Other research has defined the growth in imaging services
between 1993-2002 as 49% by non-radiologists. Interestingly, services
provided by radiologists who typically have no incentive to self-refer
have grown only by 7%. In addition, the growth in Medicare payments for
radiology services grew by 72% for radiologists and by 119% for non-
radiologists.\2\
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\1\ Report to the Congress: Medicare Payment Policy, MedPAC, March
2003, page 77.
\2\ Levin DC, Intenzo CM, Rao VM, Frangos AJ, Parker L, Sunshine
JH. Comparison of recent utilization trends in radionuclide myocardial
perfusion imaging among radiologists and cardiologists. J Am Coll
Radiol, in press.
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Medicare Should Incorporate The Innovations Of The Private Sector
Empirical evidence demonstrates that private sector management
strategies promote high quality care. For example, Tufts Health Plan
uses an Imaging Privileging Program to address quality and utilization
issues for non-emergency, outpatient diagnostic imaging provided by
non-radiologists. Services are covered when providers meet standards to
perform specialty-appropriate imaging procedures; otherwise, imaging
procedures must be provided by a radiologist or imaging facility.
Miriam Sullivan, representing Tufts Health Plan, has testified to
MedPAC that by expanding the use of freestanding imaging facilities and
increasing competition, physician groups have less desire to purchase
equipment and more incentives to use Tufts' quality and evidence-based
guidelines.\3\
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\3\ Medicare Payment Advisory Commission, Meeting Transcript, March
18-19, 2004, page 53
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We firmly believe that private sector quality standards should also
be available to Medicare beneficiaries. Highmark uses guidelines where
imaging facilities must have a documented Quality Control Program,
Radiation Safety Program, and As Low As Reasonably Achievable (ALARA)
Program. Highmark providers must be appropriately licensed and meet the
physician specialty criteria in the plan's privileging guidelines.\4\
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\4\ http://icael.org/icael/reimbursement/highmark_press.htm
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States have also become concerned payers of diagnostic imaging
services and are increasingly taking action at the state level to limit
physician self-referral of services. The State of Maryland passed
legislation in 2000 that is similar to the federal Stark ban on
physician self-referral, except that Sec. 1-301(k)(2) of the law
specifically excludes magnetic resonance imaging services, radiation
therapy services, and computer tomography scan services from the in-
office ancillary services exception. The Maryland Attorney General
released a legal opinion on January 5, 2004, stating that this law bars
a non-radiologist physician from referring patients for tests on an MRI
machine or CT scanner owned by that practice. Medicare should have the
same opportunities to increase quality and contain unnecessary
utilization that are being implemented at the state level.
Medicare Beneficiaries Should Be Assured Of Access To The Highest
Quality Imaging Services
Like private payors, Medicare should only pay for imaging services
that meet quality standards. Medical literature shows that imaging
equipment and facilities operated by non-radiologists is often sub-
optimal. One private sector imaging site inspection program revealed
that over \1/3\ of imaging facilities operated by non-radiologist
physicians had one or more significant quality deficiencies, while only
1% of facilities operated by radiologists had such deficiencies.\5\
Quality standards for equipment and facilities would reduce the need
for duplicate scans or expensive therapy from incomplete images or
misdiagnosis.
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\5\ Orrison & Levin, Radiology 2002; 225(P):550
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We are especially concerned that non-radiologists' offices are less
likely to become accredited. Though the ACR has full accreditation
programs for many diagnostic procedures, non-radiologist physician
offices are not required to become accredited to provide these
services. ACR began an MRI accreditation program in 1997, including
standards for equipment and for qualifications of technologist's
performing the test. Though non-radiologists may voluntarily become
accredited, most do not. Almost all accredited entities are
freestanding MRI centers owned by radiologists or hospitals, or are
contracted with radiologists. NCQDIS believes that all physician
offices providing imaging services should be accredited.
In addition, the recycling of obsolete diagnostic imaging equipment
should be curtailed by implementing strong equipment standards. Dr.
Thomas Ruane, BC/BS of Michigan, testified to MedPAC that, ``The
diagnostic equipment that becomes somewhat obsolete in our tertiary
medical centers often does not go to the Third World. It often goes
down the street to another doctor's office where it lives another
life.'' \6\ NCQDIS believes that Medicare patients deserve better.
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\6\ Medicare Payment Advisory Commission, Meeting Transcript, March
18-19, 2004, page 34.
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NCQDIS Promotes The Appropriate Use Of Diagnostic Imaging By Trained
Specialists
Proper training is essential to accurate interpretation of
diagnostic images, particularly when dealing with complex diagnostic
imaging procedures like MRI, CT, and PET. Radiologists spend 4-6 years
in residency training to learn imaging techniques and interpretation.
Physicians in other specialties get limited amounts of training in
certain areas of imaging; however, sometimes that training may be
informal and may not meet defined standards. Most troubling is that
many non-radiologist physicians utilizing diagnostic imaging have
limited or no formal training in image interpretation. To protect
patient safety and reduce medical errors, Medicare should only
reimburse for imaging services conducted by physicians that meet
certain training and education standards.
Evidence also demonstrates that quality of care is improved if
properly trained specialists read diagnostic images. In 2000, one
research group used a standardized set of chest radiographs to compare
the accuracy of interpretation of radiologists and non-radiologists.
The composite group of board-certified radiologists demonstrated
performance far superior to that of non-radiologist physicians. Even
radiology residents in training out-performed non-radiologist
physicians.\7\
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\7\ Potchen, RADIOLOGY 2000; 217:456.
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It should be noted that radiologists and IDTFs serve an important
role in providing quality diagnostic services to patients and
practitioners. Radiologists working with other clinicians provide an
important second opinion in clinical diagnosis, helping to minimize
medical errors. Radiologists also serve as an important second opinion
in clinical diagnosis, treatment, and management of patients needing
diagnostic imaging services. IDTFs serve a similar role in patient
treatment, and imaging centers owned by radiologists and IDTFs do not
create any artificial demand for imaging services. Business is
independently referred to imaging centers from third party physicians
who determine that a patient needs a diagnostic imaging test.
Therefore, radiologists and IDTFs are limited in their ability to
generate business outside of that which is referred.
NCQDIS Recommends That Medicare Take Steps Now to Protect Medicare
Beneficiaries
NCQDIS is pleased to submit its recommendations to the House Ways
and Means Subcommittee on Health on the best way to promote quality of
care in diagnostic imaging. Congress has the opportunity to act now to
address this important issue and protect Medicare beneficiaries.
1. Congress should expand the term ``diagnostic services'' under
the definition of ``medical and other health services'' to create a
separate category of diagnostic services, called ``complex diagnostic
imaging services.'' This term would statutorily include include
particular procedures (at a minimum: computed tomography, magnetic
resonance, positron emission tomography) that must be ``furnished by or
under the supervision of a physician in compliance with qualification
criteria'' that include educational certification for physicians and
technicians and quality and safety requirements. This provision makes
``complex diagnostic imaging services'' a covered ``medical and health
service'' only when the additional conditions are met.
2. Congress should then require the Secretary to establish
qualification criteria for the provision of complex diagnostic services
that include: (1) quality measures for diagnostic imaging equipment;
(2) education and certification requirements for technicians; and (3)
education and certification requirements for physicians. This provision
will require that any party seeking reimbursement for complex
diagnostic services will have to comply with the quality and safety
standards as developed by the Secretary. Physicians and practitioners
that do not meet these standards cannot be reimbursed through Medicare
for the complex diagnostic imaging services provided.
3. NCQDIS also suggests that legislation create a ``phase-in''
period between enactment of the new definition of ``complex diagnostic
imaging services'' and publication of a final rule establishing the
quality standards required by the Act. This provision will allow
radiologists to continue to perform these services while the Secretary
conducts the appropriate rulemaking to establish education and quality
standards for other appropriately trained specialists.
4. NCQDIS supports updating payment billing systems to align with
changes in technology.
5. Finally, NCQDIS understands that implementing quality standards
for additional diagnostic imaging services will take a significant
amount of time to develop. Therefore, NCQDIS recommends that Medicare
be authorized to implement a broader quality standards program through
a demonstration project to be implemented one year from the date of
enactment of the complex diagnostic imaging quality standards. This
policy should detail by medical specialty those imaging tests permitted
by the specialty.
The framework of the NCQDIS proposal directly parallels the
existing quality requirements embodied in the Medicare statute for
coverage of mammograms. The definition of ``diagnostic services''
mentioned above also establishes that Medicare Part B covers diagnostic
x-ray tests including diagnostic mammography if conducted by a facility
that has a certificate under the Public Health Service Act. The
regulations accompanying that Act require interpreting physicians and
technicians to (1) engage in extensive education and training, and (2)
use equipment that meets stringent quality standards in order to
receive and maintain a certificate to furnish mammograms. Hence,
Medicare pays for mammograms only if the provider or supplier is
certified by the FDA to perform the types of mammography for which
payment is sought and uses properly maintained and certified equipment.
The NCQDIS proposal described above simply attaches similar education
and quality standards to ``complex diagnostic imaging services.'' This
approach will improve quality, protect Medicare beneficiaries, and
safeguard precious Medicare Trust Fund dollars.
Again, we appreciate this opportunity to present our views to the
House Ways and Means Subcommittee on Health. We would be pleased to
provide the Subcommittee with additional details about our proposal,
and to discuss any views and concerns that may be raised with regard to
it.