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72–281 2011

EXPIRING MEDICARE PROVIDER PAYMENT POLICIES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

SEPTEMBER 21, 2011

Serial No. 112–HL6 

Printed for the use of the Committee on Ways and Means 

( 


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SUBCOMMITTEE ON WAYS AND MEANS 

CHAIRMAN WALLY HERGER, California 

SAM JOHNSON, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

DAVE REICHERT, Washington 

PETER ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

FORTNEY PETE STARK, California 

MIKE THOMPSON, California 

RON KIND, Wisconsin 

EARL BLUMENAUER, Oregon 

BILL PASCRELL, JR., New Jersey 

JON TRAUB, Staff Director 

JANICE MAYS, Minority Staff Director 


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C O N T E N T S 

Page 

Advisory of September 21, 2011, announcing the hearing ................................... 2 

WITNESSES 

Rich Umbdenstock President, American Hospital Association Testimony ......... 6 

Stephen Williamson President, American Ambulance Association Testimony .. 16 

Robert Wah, MD Chairman, Board of Trustees, American Medical Association 

Testimony ............................................................................................................. 24 

Justin Moore Vice President of Government Affairs, American Physical Therapy Association Testimony .................................................................................. 31 

A. Bruce Steinwald President, Steinwald Consulting Testimony ........................ 41 

SUBMISSIONS FOR THE RECORD 

American Association of Retired Persons, AARP, Statement .............................. 66 

American Clinical Laboratory Association, ACLA, Statement ............................ 69 

American Occupational Therapy Association, Statement .................................... 70 

American Psychological Association Practice Organization, Statement ............. 74 

American Speech Language Hearing Association, Statement ............................. 77 

Arizona Hospital and Healthcare Association, Statement ................................... 81 

Center for Fiscal Equity, Statement ...................................................................... 85 

College of American Pathologists, CAP, Statement .............................................. 89 

Federation of American Hospitals, Statement ...................................................... 93 

Focus on Therapeutic Outcomes, Inc., Statement ................................................. 97 

Gundersen Lutheran, Statement ............................................................................ 101 

Medicare Modernization Act, MMA, Statement .................................................... 104 

National Association for the Support of Long Term Care, NASL, Statement .... 108 

National Rural Health Association, NRHA, Statement ....................................... 113 

PTPN, Statement ..................................................................................................... 117 

Rural Hospital Coalition, Statement ...................................................................... 123 

West Michigan Medicare Equity Coalition, WMMEC, Statement ....................... 129 


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EXPIRING MEDICARE PROVIDER 

PAYMENT PROVISIONS 

WEDNESDAY, SEPTEMBER 21, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The subcommittee met, pursuant to call, at 2:01 p.m., in Room 

1100, Longworth House Office Building, Honorable Wally Herger 

[Chairman of the Subcommittee] presiding. 

[The advisory of the hearing follows:] 


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HEARING ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

Chairman Herger Announces Hearing on Expiring 

Medicare Provider Payment Policies 

September 21, 2011 

House Ways and Means Health Subcommittee Chairman Wally Herger (R–CA) 

today announced that the Subcommittee on Health will hold a hearing to examine 

certain expiring Medicare provider payment provisions. The hearing will take 

place on Wednesday, September 21, 2011, in 1100 Longworth House Office 

Building, beginning at 2:00 P.M. 

In view of the limited time available to hear from witnesses, oral testimony at 

this hearing will be from invited witnesses only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for 

consideration by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

There are a number of Medicare provider payment policies that expire on or before December 31, 2011. Many of these policies have been extended multiple times 

over several years, even if they were initially contemplated to be short-term or even 

one-time payment changes. The provisions touch many parts of the Medicare program. Often, Congress has simply changed the expiration date without actually 

closely examining whether the policy is still necessary or appropriate. 

In light of the ongoing need to reduce the country’s deficit, it is important to examine these payment policies to determine if further extensions are warranted. This 

hearing will allow provider groups to explain the impact each of the payment policies has and offer suggestions for improvements. 

In announcing the hearing, Chairman Herger stated, ‘‘With a likely price tag 

of a one year extension totaling more than $2.5 billion, the Subcommittee 

must ensure that taxpayers’ money will be spent wisely. As Members of the 

Subcommittee on Health, we have an obligation to examine Medicare’s payment policies to determine whether they are sound and justified.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on certain expiring Medicare provider payment provisions 

and the impact these provisions have on health care providers. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you 

would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance 

with the formatting requirements listed below, by the close of business on Wednesday, October 5, 2011. Finally, please note that due to the change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office 

Buildings. For questions, or if you encounter technical problems, please call (202) 

225–1721 or (202) 225–3625. 


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FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov

f 

/. 

Chairman HERGER. The subcommittee will come to order. 

Today, we are going to hear about a number of Medicare provider 

payment provisions that will soon expire unless Congress intervenes. But just because Congress must act does not mean it should 

do so blindly. 

This hearing offers us, and more importantly the American people, a chance to consider whether Congress should spend more than 

$2 billion to reauthorize these additional payments for another 

year. Just as importantly, it affords interested parties the opportunity to make their case as to whether or not these payments 

should continue. 

In undertaking this review, I am hopeful that we can learn 

whether or not these payment policies, some of which are more 

than a decade old, are in need of reform or can be allowed to expire 

and become the temporary policies they were originally intended to 

be. 

When these policies were created, many were billed as shortterm or one-time payment adjustments. However, Congress has extended most of them on an annual basis for the last decade. In 

most cases, the payments have simply been extended five times or 

more without any changes to the underlying policy. Often Congress 

has reauthorized these provider payments in the ‘‘doc fix’’ bills 

which, unfortunately, more often than not pass late in the year, afVerDate Mar 15 2010 07:35 Jan 26, 2012 Jkt 072281 PO 00000 Frm 00007 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\72281.XXX GPO1 PsN: 72281

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fording us little time to examine the policies and determine if they 

are still serving their intended purpose. 

It is my hope that by beginning to closely study these provisions 

now, Members of the Subcommittee will have ample time to learn 

about these policies and whether they are worthwhile for providers 

and beneficiaries. 

The witnesses appearing before us this afternoon are well positioned to explain these provisions, as they represent the very providers who benefit from these additional payments. In some cases, 

the witnesses themselves continue to work as providers in their 

given field. I welcome their testimony and trust it will offer members an in-depth look at each of the expiring provisions and its impact on the affected provider groups. 

I am encouraged that some members of our panel will offer a recommendation for ways Congress can improve these policies. And I 

thank them for being forward thinking. I believe such reforms are 

long overdue, given that some of these policies date back to 1997 

and have never been updated. I am especially pleased that several 

witnesses will share their ideas as to how Congress could offset the 

cost of extending these policies. 

We will also hear from a former GAO official who will encourage 

members to consider whether these additional payments actually 

benefit Medicare beneficiaries. It is important that we hear this 

side of the story as well because at the end of the day, we must 

ensure that the policies we support have a positive impact on seniors, especially since many of them result in higher premiums. 

It is important to keep in mind that extending these provisions 

cost money, more than $2 billion every year they are reauthorized. 

As Members of Congress, we have been entrusted with the enormous responsibility of being good stewards of the taxpayers’ hardearned dollars. A $100 million extension may not seem expensive 

in the context of a Medicare program that spends more than onehalf trillion dollars every year, but it is a large sum of money nonetheless. History shows that Congress has continued to extend these 

policies year in and year out, which raises the question: Given that 

these additional payments do not appear to be temporary, isn’t the 

true cost of the annual $2 billion extender package actually $25 billion when measured over Congress’ standard 10-year budget window? 

Today more than ever, Congress must show fiscal responsibility 

both in what is passed and how it is passed. We simply cannot afford to continue spending money we do not have in a program that 

is going bankrupt. 

Before recognizing Ranking Member Stark, I ask unanimous consent that all members’ written testimony be included in the record. 

Without objection, so ordered. 

I now recognize Ranking Member Stark for 5 minutes for the 

purpose of his opening statement. 

Mr. STARK. Thank you, Chairman Herger, for holding this hearing to review the provider extenders. I would note that there are 

a couple of provisions that help low-income people that also need 

extension at a cost of a couple of billion dollars and is not part of 

today’s meeting. 


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But looking at the entire package, some of those provisions, like 

therapy cap exception and the continuation of the QI program, ensure critical access to needy Medicare beneficiaries. Other provisions were enacted to address a perceived payment problem for a 

particular provider at a particular time. And I look forward to 

hearing our witnesses’ thoughts on which of these provisions fit 

into which categories. 

Extenders are generally written on legislation preventing a pending cut in physician payment due to the broken Medicare payment 

formula, or SGR, as it has been called here. I would be curious also 

to hear from the witnesses today their thoughts on the role of the 

new supercommittee for deficit reduction and what role they will 

play as we work to resolve SGR and other extenders. 

I would argue that the Medicare savings that we are able to find 

should first go to fix shortcomings in Medicare and not just get 

dumped into the general pot. Paying physicians fairly is important 

to the future of the program. There may be specific extenders needed to preserve beneficiary access. So we need to learn exactly what 

payment changes to the delivery system before we take more 

money out of the system and we need to resolve Medicare savings 

before the savings leave the program. 

I will ask each of the witnesses in their remarks for their comments on what we should do with these savings. 

I thank you again. I thank the witnesses for joining us today. 

I yield back the balance of my time. 

Chairman HERGER. Thank you, Mr. Stark. 

Today, we are joined by five witnesses who will discuss the details of each of the expiring Medicare provider payment policies. 

We will hear both the pros and the cons of extending these policies. 

Our witnesses in the order they will testify are Rich Umbdenstock, 

president, American Hospital Association; Steven Williamson, 

president, American Ambulance Association; Dr. Robert Wah, 

chairman, Board of Trustees, American Medical Association; Justin 

Moore, vice president of Government Affairs, American Physical 

Therapy Association; and Bruce Steinwald, president, Steinwald 

Consulting. 

You will each be recognized for 5 minutes. 

Mr. Umbdenstock, will you begin, please. 


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STATEMENT OF RICH UMBDENSTOCK, PRESIDENT, AMERICAN 

HOSPITAL ASSOCIATION, WASHINGTON, D.C. 

Mr. UMBDENSTOCK. Thank you very much. 

Good afternoon, Chairman Herger, Ranking Member Stark, distinguished Members of the Subcommittee. I am Rich Umbdenstock, 

president and CEO of the American Hospital Association. On behalf of our more than 5,000 hospital members, health systems, and 

other health care organizations, and our 42,000 individual members, the AHA appreciates the opportunity to testify regarding certain expiring Medicare provider payment provisions and their importance to Medicare beneficiaries. And we applaud the committee 

for holding this meeting. 

Over the years, Congress has enacted several provisions to address the special challenges rural hospitals encounter in delivering 

health care services to the communities they are committed to 

serve. The AHA urges the committee to recognize that the circumstances that made those provisions necessary still exist. And so 

does the need for these provisions. 

I would like to focus on three areas in particular: Section 508 

hospital classifications, outpatient hold harmless provisions, and 

lab services for rural hospitals. 

First, the area wage index is greatly flawed in many respects. It 

is highly volatile from year to year; self-perpetuating, in that hospitals with low-wage indices cannot increase wages to become competitive in the labor market; and they are based on unrealistic geographic boundaries. Section 508 of the Medicare Prescription Drug 

Improvement and Modernization Act of 2003 allows about 100 

qualifying hospitals to receive wage index reclassifications and assignments that provide them with the resources to attract and retain the workforce they need to best serve their beneficiaries. Its 

provisions will expire October 1 of this year, and we believe it 

should be extended. 

Second, Congress made certain rural hospitals with 100 or fewer 

beds eligible to receive an additional payment known as hold harmless transitional outpatient payments, or TOPs. TOPs were meant 

to ease these hospitals’ transition from the prior reasonable costbased payment system to the outpatient prospective payment system. Concerned about the financial stability of these small rural 

hospitals, Congress extended the provision each year and has also 

expanded it to vulnerable sole-community hospitals. Hospitals that 

receive TOPs have Medicare payments averaging only about 82 

percent of their costs. If this provision expires, that figure will go 

down to 75 percent of their costs. We urge Congress to extend and 

make these payments permanent before they expire at the end of 

this year. 

Third, despite their small size and smaller patient base, hospitals in qualified rural areas, or so-called super rural communities, still have to maintain a broad range of basic services to meet 

the health care needs of their communities. These include laboratory services. And hospitals may be the only source of these critical 

services for many miles. The Medicare Modernization Act of 2003 

included a provision requiring reasonable cost reimbursement for 

outpatient clinical laboratory tests furnished by hospitals with 

fewer than 50 beds in these qualified rural areas. The Accountable 


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Care Act and the Medicare and Medicaid Extenders Act reintroduced and extended these provisions, but they are now due to expire on June 30, 2012. 

In the absence of these provisions, reimbursement for hospital 

outpatient clinical lab services in these super rural communities 

would revert to rates under the clinical laboratory fee schedule. 

The AHA recommends that Congress permanently extend the application of reasonable cost reimbursement methodology for hospital outpatient clinical laboratory services in these communities. 

We also support allowing independent laboratories to continue to 

bill separately for the technical component of physician pathology 

services furnished to patients in hospitals with existing ‘‘grandfathered’’ agreements with independent laboratories. These hospitals would otherwise have to set up expensive and burdensome 

billing arrangements in order to pay the independent labs directly 

for their services, despite the fact that the Medicare hospital payments do not incorporate payment for these kinds of technical component services. 

More detail on each of these requests and recommendations and 

additional areas of concern to the AHA is provided in my testimony. I thank the committee for your attention today. I hope you 

will recognize the unique challenges of delivering quality health 

care in rural areas by extending these expiring Medicare provider 

payment provisions. 

Thank you very much. 

[The prepared statement of Mr. Umbdenstock follows:] 


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f 

Chairman HERGER. Thank you. 

Mr. Williamson for 5 minutes. 


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STATEMENT OF STEPHEN WILLIAMSON, PRESIDENT, 

AMERICAN AMBULANCE ASSOCIATION, MCLEAN, VA 

Mr. WILLIAMSON. Chairman Herger, Ranking Member Stark, 

and members of the House Ways and Means Subcommittee on 

Health, I greatly appreciate the opportunity to provide testimony 

today on the need to extend current Medicare ambulance relief. My 

name is Stephen Williamson. I am president of the American Ambulance Association. I am also president and CEO of Emergency 

Medical Services Authority for Tulsa and Oklahoma City. 

Ambulance services are a crucial component of our local and national health care system. Ambulance service providers provide 

health care to patients regardless of their ability to pay. When 

there is an accident at home and a loved one is in need of medical 

care, we know to dial 911 and an ambulance will be on its way. 

In many smaller communities, the ambulance service provider is 

the only readily available access to emergency medical care. 

Ambulance service providers are facing significant financial difficulty due in part to a Medicare ambulance fee schedule that is 

underfunded. In May of 2007, the Government Accountability Office found that ambulance service providers are paid 6 percent 

below cost and 17 below cost in remote areas to provide ambulance 

services to Medicare patients. 

This is primarily the result of a structural flaw in the design of 

Medicare ambulance fee schedule. This error was especially damaging for the sector in which Medicare patients make up approximately 50 percent of the total patients served. Additionally, since 

the GAO report was released, Medicare reimbursement has been 

reduced by another 2 percent through a reduction in our inflation 

update and policy changes to CMS regarding payment for fractional mileage. 

From the patient care side, ambulance service providers are rendering more sophisticated care. This improves patient outcomes 

and saves the Medicare program money but increases the cost to 

the ambulance service provider, which are not reimbursed. 

Congress has recognized the challenges facing ambulance service 

providers and implemented Medicare ambulance relief. Ambulance 

service providers currently receive a temporary 2 percent Medicare 

increase for ground ambulance services that originate in an urban 

area; 3 percent in a rural area; and a 22.6 percent bump to the 

base rate in extremely remote or super rural areas. These increases 

have been crucial for an industry made up predominantly of small 

businesses that operate only slightly above the break-even point 

under the best of circumstances. 

Medicare ambulance relief has meant that a majority of ambulance service providers can continue to provide quality health care. 

Medics are receiving training and new technologies and enhanced 

procedures that can make dramatic difference in the initial hours 

of critical care. Without relief, a number of providers will have to 

cut back on the number of medics, scale back their service area, or 

discontinue service. The immediate result is longer response times. 

The American Ambulance Association recognizes the significant 

difficult financial decisions facing policymakers. Our association 

has taken a number of steps to ensure ambulance service providers 

are providing quality, efficient care to Medicare beneficiaries. 


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While our industry has one of the lowest payment error rate percentages, we are helping CMS to identify and root out waste and 

abuse in the Medicare program. We acknowledge that systematic 

reforms must also be considered to ensure the continued viability 

of the Medicare program and help reduce the deficit. 

The American Ambulance Association notes the recent proposal 

released by the Health Care Leadership Council as worthy of consideration. It identifies the type of changes that are necessary to 

help achieve significant savings within Medicare which could be 

primarily used to offset ambulance and other provider relief. Two 

recommendations, the implementation of medical liability reform 

and the creation of Medicare exchange, have particular promise. 

The current temporary Medicare ambulance relief is working exactly as intended. It is allowing the majority of ambulance service 

providers to maintain current levels of high-quality critically needed emergency and nonemergency ambulance service. The loss of relief, compounded by additional recent cuts in reimbursement, 

would change the delicate balance and negatively impact access to 

care, especially in the super rural areas. Extension of relief will result in better patient care and ensuring that an ambulance will respond quickly when you call 911. 

I appreciate this opportunity to testify and would be happy to answer any questions you may have for me. Thank you. 

[The prepared statement of Mr. Williamson follows:] 


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Chairman HERGER. Thank you. 

Dr. Wah is recognized. 


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STATEMENT OF ROBERT WAH, MD, CHAIR, BOARD OF TRUSTEES, AMERICAN MEDICAL ASSOCIATION, WASHINGTON, D.C. 

Dr. WAH. Thank you, Mr. Chairman, Ranking Member Stark, 

and Members of the Committee. My name is Robert Wah. I am the 

chair of the American Medical Association Board of Trustees and 

a reproductive endocrinologist and obstetrician/gynecologist. I practice and teach at the Walter Reed National Medical Center in Bethesda and the National Institutes of Health. 

The AMA, the largest physician organization, and our patients, 

thanks the chair and Members of the Subcommittee for your leadership in examining the extension of Medicare payment policies for 

various expiring provisions. I will address four provisions that the 

subcommittee is examining today. 

First is the physician work GPCI, which adjusts payments for geographic differences in the cost of providing services for physician 

work. In other words, this is a cost-of-living adjustment related to 

the physician’s locality. Adjustments to the GPCIs are required by 

law to be budget neutral, which means that increasing the GPCI 

for one set of localities would lead to cuts in all other localities. The 

AMA has long advocated that the adjustments to the work GPCI 

should not be constrained by budget neutrality requirements. 

The Institute of Medicine, or IOM, is in the process of studying 

how to improve the accuracy of the data sources and methods used 

for making geographic adjustments in provider payments. The first 

of these three IOM reports was released in June. It is critical that 

changes to the GPCI component be based on the most current, 

valid, and reliable data. 

The AMA believes that once all three reports are released, they 

should serve as a starting point for Congress to examine geographic adjustments for physician work and practice expenses and 

ensure that an equitable policy is implemented. 

Next, Congress has also intervened on numerous occasions to extend a 5 percent increase in payments for certain Medicare mental 

health services. These payments have been very important for ensuring access to mental health services by our patients. The AMA’s 

CPT Editorial Board is reviewing descriptions of all psychological 

services. Following that, the AMA/Specialty Society RVS Update 

Committee, or RUC, will review the valuation of these services and 

make related recommendations to CMS. We will share those results with the subcommittee to assist you in your evaluation. 

Next, Congress has, with bipartisan support, also intervened to 

extend the ability of independent laboratories under certain conditions to bill Medicare directly for the technical component of pathology services provided to hospital patients. Without this grandfather provision, Medicare beneficiaries and our patients could experience limited access to surgical services, especially in rural 

areas, due to the lack of availability of tissue analysis taken out 

at surgery done by these labs. Bipartisan legislation to make the 

grandfather provision permanent is currently pending before Congress. We urge congressional consideration of that legislation. 

Finally, Congress has intervened to increase Medicare payments 

for DXA scans for osteoporosis of bones. CMS has asked the AMA 

RUC to review the valuation of DXA scans as well, which is likely 

to occur in January 2012. We will share the results of this review 


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with the committee to guide your further consideration of this 

issue. 

The AMA appreciates the subcommittee’s concern about the costs 

associated with extending expiring provisions. Additional funding 

that has been allocated for many of these services, however, has 

been necessary in the absence of a complete overhaul of the Medicare physician payment system. To avoid coming back year after 

year, Congress needs to undertake comprehensive reform of the 

Medicare physician payment system, beginning with the immediate 

and full repeal of the SGR, the granddaddy of the extender problem. Until then, extender payments for these expiring provisions 

are needed to maintain access to these important services. 

New policies for the expiring provisions should be included as 

part of the new Medicare physician payment system, for which the 

AMA recommends a three-pronged approach. We have previously 

shared these recommendations with the subcommittee, and we 

would be happy to work with you as you try to make them a reality. 

The AMA is eager to continue to work with Members of the Subcommittee and Congress to lay the groundwork for Medicare physician payment reform. And we are grateful to Chairman Herger and 

the subcommittee for calling this important hearing today. 

Thank you. And I am happy to answer any questions. 

[The prepared statement of Dr. Wah follows:] 


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Chairman HERGER. Thank you. 

Mr. Moore, you are recognized for 5 minutes. 


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STATEMENT OF JUSTIN MOORE, VICE PRESIDENT OF 

GOVERNMENT AFFAIRS, AMERICAN PHYSICAL THERAPY 

ASSOCIATION, ALEXANDRIA, VA 

Mr. MOORE. Chairman Herger, Ranking Member Stark, and 

members of the Health Subcommittee, on behalf of the American 

Fiscal Therapy Association and its 82,000 members, thank you for 

the opportunity to provide testimony on expiring Medicare provider 

payment policies. 

I am Justin Moore, a licensed physical therapist and currently 

the Vice President of Government Affairs at APTA. Several of the 

expiring payment policies under Medicare impact physical therapists, including the sustainable growth rate, rural payment policies, and the Medicare cap on outpatient physical therapy, occupational therapy, and speech/language pathology. We will focus today’s testimony on the therapy caps by providing the background 

of this policy, its impact on patient and providers, and a potential 

solution to this issue. 

In addition to our membership and the patients we serve, APTA 

is also working in coordination with the Therapy Cap Coalition, an 

advocacy community of over 50 patient and professional organizations whose common objective is to permanently repeal the caps. 

This coalition appreciates the current leadership of Representative 

Gerlach and Javier Becerra to repeal the therapy caps. 

The therapy caps are primarily a beneficiary issue and secondly 

a payment policy issue for therapists. As part of the Balanced 

Budget Act, Congress authorized a $1,500 cap on outpatient therapy services under Medicare Part B. From 1999 to 2006, Congress 

passed three moratoriums on the therapy caps. In 2006, Congress 

reformed the moratorium policy by authorizing an exceptions process to the therapy cap that initially decreased its cost. Congress 

has extended this exceptions process five times. And the current 

exceptions process is valid through the end of this year. 

If Congress allows the exceptions process to expire, beneficiaries 

will not receive the services that are medically necessary unless 

they seek treatment from a hospital outpatient department or pay 

out of pocket for their care. Without the exceptions, it has been estimated that 15 percent of the beneficiaries that access therapy 

services, or 640,000 Medicare beneficiaries, would reach that cap 

and have their access to therapy services reduced or eliminated. 

In particular, the therapy cap has a disproportionate impact on 

older, more chronically ill beneficiaries and those from underserved 

areas. Without the exceptions process, these patients would likely 

regress in their health status and create additional Medicare expenditures to address their health care needs. 

Congress has long known that allowing the therapy caps to go 

into effect would have a profound impact on patient care. The pattern of yearly extensions without an exit plan is not in the best interest of patients, physical therapists, or the Medicare program. 

APTA believes the therapy cap exceptions process must be extended in 2011 but further recommends that reforms to the payment system and the benefit are needed for the long-term fiscal 

health of the program. 

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ally replace those caps. APTA proposes to Congress that we extend 

a refined exceptions process for 2012, 2013, and 2014, and instruct 

CMS to develop a per-visit payment system for outpatient therapy 

services that controls the growth of therapy utilization, with implementation by January 1, 2015. 

APTA has begun work on a reform patient system for outpatient 

physical therapy services that we believe would strike the balance 

between ensuring access to services while improving payment accuracy for therapist services under Medicare. 

APTA is developing a reform payment system that would transition the current system to a per-visit system based on the severity 

of the patient and the intensity of the therapist’s clinical work and 

judgment. The therapy evaluation would provide a prediction of the 

episode of care and the estimated rehab potential for the patient. 

APTA is working with stakeholders in the therapy and rehabilitation community to refine this system. 

We believe the system has potential long-term cost savings 

through increased compliance with other areas of payment policy 

under the Medicare therapy benefit, advancing efforts toward quality reporting and the adoption of health information technology, 

standardization of practice patterns through assessment tools and 

registries, and a diminished potential for fraud and abuse. 

APTA stands ready to work with the committee to reform the 

payment system for therapy services and refine the benefit to ensure the integrity of these services. We commend the committee for 

this hearing on expiring Medicare policies and encourage an extension of the therapy cap exceptions process, a movement to a reformed payment statement, and refinements to the therapy benefit. 

Thank you. 

[The prepared statement of Mr. Moore follows:] 


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Chairman HERGER. Thank you, Mr. Moore. 

Mr. Steinwald is recognized for 5 minutes. 


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STATEMENT OF BRUCE STEINWALD, PRESIDENT, STEINWALD 

CONSULTING, WASHINGTON, D.C. 

Mr. STEINWALD. Thank you, Chairman Herger. 

Mr. Stark, nice to see you again. 

Members, thank you for having me here today. 

I might as well get it right on table; my role is to be the skunk 

at the picnic. But I welcome the opportunity, because I am very 

concerned about Medicare’s financial situation and the 

unsustainable trend line that it is on. 

I became a health economist in the1960s, about the time that 

Medicare was enacted, and now I am a Medicare beneficiary myself. 

It has been well established by the Congressional Budget Office 

and others how the Medicare spending problem is not only a Medicare problem, but it is a deficit problem and a national debt problem. And for those reasons, I think that any discussion of health 

policy and Medicare issues, including the issue before the committee today, ought to have affordability as one of the principal criterions that you apply when you consider whether you should extend some of these expiring provisions. 

There are three reasons I think that Congress should be very 

skeptical about these extensions. One, Mr. Chairman, you mentioned yourself, is they are costly in their own right. They are deceptively costly. They don’t look like they are all that expensive, 

taken one at a time, but if you looked at them, as you do, in a 

package over a 10-year budget window, they would be on the order 

of $25 billion. And even that is an underestimate considering that 

many of these provisions have a lifetime of more than 10 years. 

There are two other reasons, though, that I think are equally important. One is, when you make exceptions, you undermine the integrity of Medicare’s payment systems. Congress worked very hard 

since 1983 when it put in the inpatient prospective payment system to move away from inflationary cost reimbursement and in the 

direction of a reimbursement system that allows providers to understand what they will be paid for a given service and therefore 

manage their cost to that payment. When you make exceptions, 

you undermine that incentive. You encourage providers to seek exceptions rather than to seek efficiencies. And, of course, you create 

a constituency for the continuation of the exceptions and for other 

providers to say, where is my exception, if they are not so blessed. 

A third reason is, we all know that the incentives of fee-for-service payment lead to more volume and more complex services. And 

that is a major contributor to spending. Again, once you make exceptions, it tends to undermine some of the limited checks and balances that the Medicare program has to make sure that the services that it pays for are reasonable and necessary for patient care. 

Exceptions tend to undermine that. 

I included a number of examples in my written statement. Let 

me touch on one or two of them. I serve on the Institute of Medicine committee that Dr. Wah mentioned in his statement. That 

committee is looking at Medicare’s geographic payment adjustments for hospital and physician services. Fully 37 percent of hospitals are currently paid for under some kind of exception to the 

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tions, but it is not limited to that. There are other kinds of exceptions as well. 

It needn’t be that way. There are ways to improve the payment 

formulas for hospitals and physicians and other Medicare providers. But, once again, it dilutes some of the energy to finding 

those payments if you are expending your energy finding exceptions and getting them extended as opposed to improving the payment system. 

Many of the rural provisions seem to—they prop up rural payments, but they also create exceptions that have the same problems that I have already mentioned. I especially don’t like floors in 

either the inpatient or the physician payment systems, floors on 

the geographic adjustments. It perpetuates this idea of a Lake 

Wobegone world in which no one can be below average. And it has 

the effect of messing up payments for all providers, not just a limited few. 

In order to not take any more time, let me just say, I am sorry 

to play this role, but I do think that Congress should be very, very 

cautious about extending these provisions. It should set a very high 

bar. There should be compelling evidence of a beneficiary need for 

any of these extensions. And Congress should think about whether 

we want the exception to be extended or whether or not we want 

an improvement in the payment formula. 

That ends my oral statement. I am happy to answer any questions. 

[The prepared statement of Mr. Steinwald follows:] 


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Chairman HERGER. Thank you. 

Mr. Umbdenstock, it is my understanding that hospitals that go 

through the standard wage reclassification program must reapply 

every 3 years. As part of this process, hospitals must prove to CMS 

that they have increased their wages and are paying wages that 

are similar to those of nearby hospitals. 


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I have had a case in my own district where a hospital lost its 

reclassification and millions of dollars in Medicare payments because its wages did not meet the required threshold. Is it fair that 

Section 508 hospitals do not have to reapply like other hospitals do 

and are simply given the higher wage rate if Congress extends the 

policy? 

Mr. UMBDENSTOCK. Thank you, Mr. Chairman. 

I do think that it is important to understand that the original 

reason for Section 508 was because these were areas and hospitals 

in areas near higher-paid areas that failed to qualify in that criteria, kind of near-miss situations. So they have already demonstrated that they are close to the wages—more similar to the 

wages in the areas into which they are reclassified than the one 

in which they are presently residing. So, under this program, it 

does fill that kind of gap for them. 

Now, as this provision moves along, we certainly do want to see 

it extended once again to take care of that problem. But it is their 

first intention to go through the regular wage process, wage adjustment process, to see if they can qualify there before they turn to 

this. 

Chairman HERGER. Is it fair that Section 508 hospitals do not 

have to prove that they are in fact using extra money to increase 

wages to nurses and other patient care and staff? 

Mr. UMBDENSTOCK. Well, that is—the wage and benefits are 

two-thirds of a hospital’s annual budget. And it is the hardest place 

for them to keep up now because of shortages of personnel and increasing market competition for those people. So that is where 

moneys are going for the average hospital. They are all facing significant shortages and use this money for that purpose. 

Chairman HERGER. Again, unlike these other hospitals, they 

don’t have to prove it. That it is something that has been automatic. Is that not correct? 

Mr. UMBDENSTOCK. I would have to ask my staff to doublecheck me before I give an answer. 

That is correct; they do not. Thank you. 

Chairman HERGER. You testified also that there are 258 rural 

hospitals that benefit from the outpatient hold harmless payment. 

But according to CMS, there are more than 900 rural hospitals 

that are potentially eligible for the hold harmless payment but 

have not received it because their aggregate outpatient PPS reimbursement is higher than their costs. Can you explain why the outpatient PPS is sufficient for some similarly situated rural hospitals 

but not for others? 

Mr. UMBDENSTOCK. No, I don’t think that there is a particular 

across-the-board explanation for that or rule of thumb. I think 

these are situations where they find their costs to be significantly 

more than the payment and need that type of assistance in order 

to try to narrow that gap; 258 is the number of hospitals as of 2010 

that have qualified for that. But I would have to get back to you, 

sir, on exactly why—if there were major reasons why the others 

were not—were so much more above that. 

Chairman HERGER. Thank you. I would appreciate it. If you 

would do that, please. 


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Mr. Steinwald, you note in your testimony that Congress should 

be cautious about extending these payment policies. By what criteria should each extender be judged, in your estimation? 

Mr. STEINWALD. Yes, Mr. Chairman. Thank you. I would say 

three criteria: The one I mentioned before is affordability, the extent to which an extension might contribute to Medicare’s financial 

spending problem. 

And let me say offsets are nice. I appreciate you have asked the 

witnesses to think about offsets to the extension of expiring provisions, but Medicare needs savings, Mr. Chairman. I wouldn’t let 

the availability of offsets reduce your skepticism about the need to 

extend these expiring provisions. 

Then I think there ought to be a compelling beneficiary need at 

the foundation of an extension. And I think you ought to be looking 

at whether or not an exception is the way to address it or an improvement in the payment system is a better way. 

Chairman HERGER. Thank you. 

Mr. Stark is recognized for 5 minutes. 

Mr. STARK. Thank you, Mr. Chairman. 

First of all, I think you all heard this before, but I am charged 

with asking you that if there is anybody among you who feels that 

any savings that we get should first go toward strengthening the 

Medicare program and not go to the general deficit reduction. Anybody disagree with that on the panel? 

Let the record show, Mr. Chairman—you disagree with that, Mr. 

Steinwald? 

Mr. STEINWALD. Well, when you said any savings should 

strengthen the Medicare program. 

Mr. STARK. The Medicare savings. 

Mr. STEINWALD. I would disagree with the blanket statement 

that any savings should strengthen. I think Medicare does need 

savings that contribute to reducing the deficit. 

Mr. STARK. You would pick and choose. 

Dr. Wah, as I understand it—you mentioned the GPCI issue— 

physicians are paid, one, for the medical procedure and, two, generally for office expense, in other words, the cost of rent, malpractice insurance, help in the office, and so forth. Is there any reason that a physician should be paid, let’s say, for a tonsillectomy 

any more or less in New York than in Wapakoneta, Ohio? Same 

procedure. Same training. I would assume that that part of the 

physician reimbursement should be standard across the country. 

Dr. WAH. I believe—thank you for that question. I think what 

you are asking, in the current environment, because we have a 

resourced-based payment system, what you are describing is essentially the basis for the way we are doing it. In other words, what 

resources does it take to deliver the service? 

Mr. STARK. No, that is a separate payment. I am just saying 

that a doctor is trained and I presumed licensed to perform a procedure. Pick whichever one you want; removing a plantar wart or 

whatever. Is there any reason that that shouldn’t be the same payment across the country? 

Dr. WAH. If we could isolate that part out. 

Mr. STARK. Oh, we do that now. 


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Dr. WAH. I know there is a number of attempts to try to do that 

accurately, but there are some problems with that. So there are— 

there is the belief that if we could just get to the part where, as 

you say, taking off the wart or taking out the tonsil is the same, 

regardless where in the country it is, we should reimburse that exactly the same. I think that is what you are advocating. 

Mr. STARK. I don’t think there is any reason that it would be 

different. 

Now, the cost of operating the practice, as I said before, insurance, rent, that differs all over the country. We have attempted to 

adjust that for the physicians. But I just wanted, if we could establish somehow that for a particular procedure across the country, 

pay the same. Then we get to the issue of facilitating the physician’s ability to provide that procedure, depending on geographic 

conditions or economic conditions or if they are in a rural area and 

a whole host of issues. It seems to me that with that, we kind of 

have to push you guys to get your RUC ideas back as quickly as 

you can so we know what those should be. But the practice expense 

is the big gorilla that we have to wrestle with. 

From my experience, this is largely an accounting question. It 

does cost more for rent, I am sure, in some areas that are rural 

areas or in rural areas where somebody has to cover a host of different places. So if we could encourage the AMA to help us to set 

the payment on the procedures, then I think we could get a long 

way toward properly reimbursing physicians, not necessarily with 

desired payment but maybe with reasonable payments. 

Dr. WAH. And to be clear, the AMA does not set payments. We 

wish we did. But we don’t. This is not our job in this process, Congressman. CMS sets the actual payment. What we have done is set 

up a process by which we relatively weigh the various procedures. 

Mr. STARK. And you are in the process of revising that now, are 

you not? 

Dr. WAH. We are always constantly reviewing this relative value 

scale by which we have been working for a number years. And we 

bring together experts from around the country to do that. The 

AMA does that without costing the taxpayer any money. We do 

that on our own expense. But we believe it is important physicians 

do that as opposed to some other entity that may not understand 

the nuances of health care as well as physicians. I just want to be 

clear, we are not setting payment. 

Mr. STARK. We look forward to your next report. 

Dr. WAH. Now the GPCIs are important because, as you pointed 

out, there are wide variations in practice expenses. Also, as most 

everyone knows in the country, those expenses are not going down, 

most are going up. Whether they be rent or salaries or insurance, 

all of those factors are being increased. That is why it is important 

that we have the ability to see those things increase. 

Mr. STARK. Thank you. 

Chairman HERGER. The gentleman from Texas is recognized, 

Mr. Johnson, for 5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Mr. Steinwald, I appreciate your testimony and the questions 

you feel Congress needs to ask before extending some of these policies. 


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In looking at pathology in particular, you note in your testimony 

that Medicare should not pay twice for the same service. Can you 

explain how this can occur under the pathology services exception 

that GAO studied? 

Mr. STEINWALD. Yes, sir. 

When we looked at this I believe in around 2003, what was happening at the time is that many hospitals were outsourcing certain 

tests to be performed by independent laboratories. Those independent laboratories were permitted to bill Medicare directly and 

get paid directly. 

Well, under the inpatient prospective payment system, the DRG 

payment is supposed to cover all of the patient’s care, including 

any testing. And so when I say it is paying for it twice, what I 

mean is the hospital is getting paid a DRG payment, a single payment for the entire care of the patient, and at the same time, these 

outsourced medical tests are being billed and paid for separately. 

Mr. JOHNSON. Thank you. 

Dr. Wah and Mr. Umbdenstock, outside of labs and certain facilities, no other supplier can bill Medicare directly for services provided in the hospital setting. How can Medicare be sure it is not 

paying twice for pathology service under both IPPS and by allowing 

independent labs to directly bill? He just talked to that. 

Dr. WAH. I think we are not talking about all laboratory services. Pathology services are those that examine tissue that is taken 

out at the time of surgery, some sort of tissue analysis. And in 

many hospitals, those facilities are not available in the hospital. So 

they need to essentially go outside the hospital for those services. 

Mr. JOHNSON. How many hospitals don’t have that ability? All 

the ones in Dallas that I have been to do have it. 

Dr. WAH. I have to leave that detail to—I want to be clear we 

are not talking all laboratory services or even all pathology services. It is those where the hospital does not already have that ability within the hospital itself, so it is going outside to get those. 

Mr. JOHNSON. We should be sure they are not billing twice. 

No, we can’t. You are right. You answered it. 

If that provision were to expire, would the patients experience a 

gap in care that didn’t previously exist. 

Mr. UMBDENSTOCK. If I may take a pass at the first question 

as well. For many times over now, those costs, at the direction of 

HCFA and then CMS, have not been included in the hospital’s calculations. So they were not built into the rate. It was expected that 

they were going to be billed separately. 

Now, to how many hospitals would not provide the service if this 

was not allowed, I really can’t answer—I think that was your second question, sir—I can’t answer that. I can’t project that. But we 

do know that many of them have gone out for independent services 

because they don’t have the volume or in some cases can’t afford 

to maintain the staff and the service. And so they have contracted 

out to someone who can service a lot of hospitals and put that volume together and make it economically worthwhile to do so. 

So we know that that was the original reason. And it would only, 

in my mind, it would only stand to reason that more would opt out 

because they couldn’t afford to do this on their own. They couldn’t 


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afford the building systems and so on. So I think it would further 

exacerbate the problem. 

Mr. JOHNSON. Thank you. 

Mr. Williamson, thank you for being here. Can you provide some 

insight into the figures you mentioned in your testimony, such as 

the 22.6 percent addition to the base payment rate for ambulance 

services to remote areas, and how are those numbers generated, 

and do you feel a fixed-rate adjustment is appropriate for a service 

that seems to be variable in regards to time and distance? 

Mr. WILLIAMSON. The issue of how that was derived was from 

the study from the GAO office. The reason for the drastic difference 

in cost is, of course, the geographic area, which the ambulance— 

super rural ambulance service covers, and the population density. 

There is so much fixed cost and readiness cost involved in providing ambulance service on a timely fashion, that geographic density plays a huge part. So it was determined from those cost studies in the GAO report how much that should be and why it was 

so drastically more than urban or a less rural area. 

Mr. JOHNSON. Okay. I am not sure I know why the difference 

is there. But thank you for your testimony. 

I yield back. 

Chairman HERGER. Thank you. 

Mr. Thompson is recognized for 5 minutes. 

Mr. THOMPSON. Thank you, Mr. Chairman. 

Thank you to all of you for being here to testify. 

Mr. Moore, I appreciate your comments on the therapy cap. I 

think that has been a huge issue, and it has really prevented a lot 

of folks from getting treatment that they really needed to get. I am 

glad that you raised that issue. 

Mr. Steinwald, you mentioned that we really need to take a close 

look at these extenders. Were you talking about all of the extenders? Because the SGR issue, I think that is pretty universally accepted that we need to figure out a better way to deal with that. 

That is something that not only puts providers in a bind, but patients as well. Do you classify that the same as all of the other? 

Mr. STEINWALD. It is the big dog, for sure. 

Mr. THOMPSON. I know it is the big dog, in more ways than 

one. 

Mr. STEINWALD. I was asked in my statement to exclude any 

comments about Medicare Advantage and also SGR. So I would be 

happy to talk with you at length about SGR in another setting. 

Mr. THOMPSON. You weren’t including that with the long list 

of extenders that we may or may not be talking about today. 

Mr. STEINWALD. No. But by excluding it, I don’t mean to imply 

that I think you should just repeal it. 

Mr. THOMPSON. We should just—— 

Mr. STEINWALD. Repeal SGR. 

Mr. THOMPSON. I wasn’t talking about repealing it. I was talking about addressing the issue of payments to providers and the 

impact that has, not only on them as providers but also the people 

that rely on medical services. 

Mr. Williamson, thank you for raising the issue of the 22.6 percent super rural add-on payment. I know that in my district, I 

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cause this was done in a way—done retroactively, and folks had to 

wait a long time to get their payment. And it really put them in 

an economic bind. Some of the providers in my district actually had 

to take out loans in order to keep their business afloat while they 

were waiting for the reimbursement that they were certainly entitled to that. 

I just want to hear from you exactly the impact that that has 

had on the people that you represent as well as the people that 

they service. 

Mr. WILLIAMSON. Well, it, actually, was a devastating situation for many services, some of which had to close. In other situations where they had to reduce staff, it forced other services to 

cover a larger area, which then means the patient received a longer 

response time. So it had a major effect also on enhancement of the 

services, whether it be more medics or newer equipment. That 

short period of time set them back longer than the 3 months it took 

to receive the funds. It stopped all planning and anticipated 

growth. 

Mr. THOMPSON. I just think we need to pay particular attention to that because the whole idea of retroactive payments, this is 

a real clear case of how it hurts providers. But it is across the 

board. Any of the folks that you represent at this dais today, when 

they are dealing with retroactive payments, it makes it very, very 

tough. 

Mr. Williamson, does your organization include firefighters, county health departments, and public hospitals? 

Mr. WILLIAMSON. Yes. We represent all facets of the industry. 

Mr. THOMPSON. I was a little surprised to hear that you kind 

of tout the Health Care Leadership Council’s Medicare proposals. 

I think you said they were worthy of consideration. Part of that 

proposal includes some pretty drastic changes in Medicare and 

some would say actually pave the way for the Ryan voucher program that we have had hearings on. Is this something that your 

membership supports? Has this been vetted through your membership? 

Mr. WILLIAMSON. No, it has not. We haven’t formally endorsed 

that program—those recommendations—but we thought several of 

those had merit and that it should be looked at and studied. 

Mr. THOMPSON. Why did you feel compelled to tell the committee that you thought that this move toward voucher was an appropriate way to go? 

Mr. WILLIAMSON. Well, we didn’t mention the particular aspect of that program that talked about vouchers. We talked 

about—also, we brought up the legislative reform as far as the 

court issues. And then on the Medicare programs, where they could 

competitively shop for a better service, we thought that was a plausible position to look at for reduction. 

Mr. THOMPSON. Thank you. 

Chairman HERGER. Thank you. 

Mr. Buchanan is recognized for 5 minutes to inquire. 

Mr. BUCHANAN. Thank you, Mr. Chairman, for this important 

hearing. 

I would also like to thank all of our witnesses. 


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We have touched on extenders a little bit. I want to talk, mention 

to Mr. Umbdenstock, I think I read in your testimony you had 

mentioned that you are encouraging Congress to enact robust medical liability reform to eliminate a lot of frivolous lawsuits. I know 

in our area in Florida, when I talk to doctors or hospitals or anybody that is involved in the medical field, they just feel like that 

is the low-hanging fruit, and it can make a big difference. I know 

that Texas has a cap of $250, and they just got loser pay I think 

September 1st. That will make a big difference. 

We have a lot of doctors or people going to medical school. They 

are going to look at where they have got the best opportunity. If 

know I have a neurosurgeon in my area that suggests that he is 

paying $200,000 a year for med mal liability insurance. 

I was just wanting to know, from your standpoint, what kind of 

savings do you think we would get? I guess there are two aspects— 

the immediate savings, but also in terms I hear a lot from the doctors about defensive medicine, doing a lot of unnecessary tests that 

they wouldn’t have to do otherwise. 

Mr. UMBDENSTOCK. Yes. To that, we have long supported liability reform at the American Hospital Association and continue 

to do so. I think it is a very important area for a lot of reasons, 

not the least of which certainly in dollar terms is the whole issue 

of defensive medicine and how that drives up utilization, drives up 

costs. But it also would have an indirect benefit, too, of helping out 

to the physician side and the hospital side of lowering their expenses, lowering the overall costs of the Medicare program. So we 

think there are both direct and indirect benefits to it. 

It has been scored up in the $60 billion range over 10 years. We 

think that is a very important source of money to put to better use 

across the system. 

Mr. BUCHANAN. Again, that is what I hear every day any time 

I meet. We have medical societies in each of our communities. That 

is their biggest issue. 

Dr. Wah, what is the AMA’s position today on medical reform, 

tort reform, legal reform, getting rid of junk lawsuits, frivolous lawsuits. What is the position of the AMA? 

Dr. WAH. Thank you for bringing up that important issue. Clearly, medical liability reform is an important reform that we believe 

needs to happen in this country for our physicians but also for our 

patients. Mr. Umbdenstock talked about the $60 billion the CBO 

scores for that. We are hoping the supercommittee in their deficit 

reduction process looks at that $60 billion as a way to get towards 

their $1.2 trillion. 

But also, let me just point out for our patients, beyond the cost 

of the additional tests, the unnecessary tests to get done in defensive medicine, there is a human cost as well. Everyone knows it is 

not easy to go get an extra blood test, an extra x-ray, or another 

kind of exam. So there is more than just the financial cost that we 

are concerned about here. Those tests have a human total as well. 

And there are increased risks when they have the additional procedures and tests. So we are very concerned about that. It seems to 

us that there are a lot of dollars that get spent in this area that 

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viding some sort of defensive process against frivolous lawsuits, as 

you pointed out. 

Mr. BUCHANAN. When the AMA throws out a number of $55 

billion or $60 billion, does that include—are you estimating defensive medicine in there as part of that? 

Dr. WAH. That number is actually I think from CBO, not from 

us. I am just saying what CBO scored. I think it is $63 billion of 

potential savings. 

Mr. BUCHANAN. Does that include defensive medicine? 

Dr. WAH. A lot of that part is defensive medicine, yes. 

Mr. BUCHANAN. Mr. Steinwald, do you want to comment on 

tort reform, legal reform? 

Mr. STEINWALD. The CBO estimates, the way you get savings 

is they estimated there would be one-half of 1 percent effect on 

spending under Medicare with this reform. Now, for years, they 

were reluctant to come up with an estimate like that. But they did 

so recently. 

So you get less Medicare spending. You also get added revenues 

because the estimate would then cause private employers to spend 

less for their health care benefits for their employees and therefore 

divert more money into taxable wages. 

Mr. STEINWALD. So you get a spending reduction, and you also 

get some additional revenue. I don’t know that—— 

Mr. BUCHANAN. You mention affordability. Do you have a 

sense of a number or a thought on that in terms if we had material 

tort reform like Texas seems to be moving towards, savings that we 

would have? 

Mr. STEINWALD. Well, I would go with CBO. I mean, they are 

the ones who have the wherewithal to make these estimates. 

And, once again, I would say if there are savings to be had, they 

don’t necessarily have to be used in order to pay for extending expiring provisions. 

Mr. BUCHANAN. Thank you. I yield back. 

Chairman HERGER. Thank you. 

Mr. Kind is recognized for 5 minutes. 

Mr. KIND. Thank you, Mr. Chairman, and thank you for holding 

this important hearing. 

I want to thank all the witnesses for your testimony here today. 

It is very helpful. 

Let me just ask you all just a general question. Because I happen 

to believe and I am kind of a disciple of the Dartmouth Atlas studies that come out in regards to utilization practice of health care 

throughout the country. I believe if we are ever going to get a grip 

on the rising cost of health care, especially the impact it is having 

on both public and private budgets alike, we are going to have to 

change the way we pay for health care in this system in this country. We have got to move away from the fee-for-service system, paying for tests, procedures, things being done, and instead move to 

a fee-for-value payment system. 

Mr. Steinwald, I want to thank you for serving on the first IOM 

panel. I know you have been tasked to do a lot in upgrading the 

Medicare reimbursement formula with the two phases. The second 

one I understand will be released next week. 


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But many of us who pushed for those studies to come out, for 

this one in particular, viewed it as just a bridge to the second IOM 

study. That second IOM study is tasked to change the fee-for-service system under Medicare to a fee-for-value reimbursement system, and they are supposed to present an actionable plan to IPAB 

and also the Congress on how this can be done. 

I think that ultimately needs to be the goal when it comes to 

health care reform so we can get out of the SGR problem. We can 

get out of hearings like this talking about tweaking the reimbursement for procedures, for particular exceptions that you have talked 

about and written about. Otherwise, we will be here years later 

having these same type of hearings without making any real meaningful payment reform. 

Dr Wah, I know the physicians of the country, too, have embraced more quality measurements and outcome-based practice. 

How important do you think will it be for us to convert fee-for-service under Medicare to an outcome-based reimbursement system? 

Dr. WAH. Thank you for that question. 

I 100 percent agree with you that what we need to do is revamp 

the Medicare payment system, in particular the physician payment 

system. As I said before, all of these patches that you are talking 

about, all of these extenders—and I have used the example with 

our staff—it is like all the little patches you have on a leaking boat. 

What you really need is a new boat. You can’t take the patches off 

the boat, because it will leak even worse. So you are, unfortunately, 

stuck with all the extenders because of the problems you have got 

with the boat. But what is really needed is a new boat. 

The other way to put it for the physicians in the audience is we 

have get a lot of symptoms here that we are treating but not the 

underlying disease. The underlying disease is we need a new system. 

I would say as a physician what we need to talk about first is 

a new way to deliver health care. So it is delivery reform first and 

payment reform second. What you should do is have an ideal delivery reform and then find a payment system that facilitates that 

ideal delivery, and that is what we are looking to do here. 

Mr. KIND. It seems—— 

Dr. WAH. Before we do that, we have to get rid of the SGR. As 

somebody said, a dog or a big dog or any kind of dog, it is clearly 

what has to be done first. That has to be removed. 

Mr. KIND. I would agree with you on that. 

Dr. WAH. Then we have to then go back and have some stability 

while we figure out what the ideal delivery system is. As I said before—— 

Mr. KIND. The SGR—you are right—has been patently unfair to 

the practicing physicians around the country. For them to be held 

hostage year after year expecting a patch or something to be 

worked out in the eleventh hour, it is just too much unpredictability and angst within the medical profession. 

But it sounds like you just described the Affordable Care Act, 

trying to do system delivery reform and then also payment reform 

in future years. Because we all understand we are not going to 

change the way you pay for one-fifth of the entire U.S. economy 

overnight. It is going require a period of transition. 


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Yet my fear with the Super Committee and all this deficit reduction pressure that we have around here is we are in a race against 

time right now for just draconian, across-the-board cuts in Medicare or health care spending generally, regardless of the consequences, regardless of the implications that it will leave patients 

throughout the country, rather than allowing these reforms to 

move forward on how health care is delivered but ultimately how 

we pay for it. 

Mr. Umbdenstock, let me ask you in regards to some of the exceptions with rural providers, because the margin for my hospitals 

in rural western Wisconsin are very thin to begin with. What 

would happen if the exception for rural reimbursements were to be 

eliminated overnight? 

Mr. UMBDENSTOCK. Oh, I am very fearful because of the situation that you describe about those thin margins. We know they 

take care of a very small population basis. We know they are very 

essential because of the great distances to other services. So, yes, 

I think it would put an already strained system under much greater strain; and I agree with the leaky boat analogy. We are living 

with these now because the fundamental system is flawed. 

To your first question, sir, I, too, would agree, the American Hospital Association agrees, we have got to move toward a value-oriented system. The challenge is to learn how to get there and to do 

it right while maintaining the current delivery system that we 

have, make sure it is viable in that transition period, but on a principled basis get to a point where pay for performance is fully supported. Exactly what the measures are and exactly how they get 

used and how we account for differences in different population 

segments, yet to be worked out. 

Mr. KIND. I agree with that. 

Thank you, Mr. Chairman. 

Chairman HERGER. Dr. Price is recognized for 5 minutes. 

Mr. PRICE. Thank you, Mr. Chairman; and I want to thank the 

panelists as well for their testimony. 

I think it is important to appreciate what we all want is the 

highest quality of care to be able to be delivered to the citizens of 

this great country, and I would suggest that every exception that 

has been put into place was an attempt to get a higher quality of 

care to the patient. So there was a rationale behind each and every 

exception. Obviously, this has gotten way out of hand, as the testimony of all of you demonstrates. 

Can we agree that the Medicare payment system is broken? 

Everybody agrees the Medicare payment system is broken. 

All right. I want to touch on a couple of specific—which means 

we have to reform the Medicare system completely. I want to touch 

on a couple of issues and then ask a couple of specific questions. 

First, lawsuit abuse was touched on, the practice of defensive 

medicine. CBO scores it, says that if you fix it, it will save $60 billion. There are quality studies to demonstrate the practice of defensive medicine is in fact greater than $60 billion, in fact, in the hundreds of billions of dollar range if in fact you reform the lawsuit 

abuse issues in responsible ways. So I think there is a lot more 

savings there. 


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Secondly, this pay for value sounds wonderful. It sounds just 

grand. But as a practicing physician I can tell you that what is of 

value to one patient may be different than what is of value to another patient. And so having us in Washington decide what is of 

value is very, very troubling to me; and I think we need to keep 

that quality care for each individual patient at the heart of what 

we are talking about. 

Mr. Steinwald, you talked about, in response to a question on 

what criteria we ought to use to continue an exception, you mentioned affordability being one of them. I assume you are talking 

about the Medicare program. If the Medicare doesn’t program 

doesn’t have enough money to provide a certain service, do you believe that a Medicare patient ought to be able to privately contract 

with a physician for that service if Medicare can’t afford it? 

Mr. STEINWALD. Let me think about that for the next 2 weeks. 

Mr. PRICE. Great. Free decision between one citizen and another 

citizen to contract for a service, you are not certain about. 

Mr. STEINWALD. No, I am not sure that one would need to go 

that far in order to make an improvement. 

Mr. PRICE. But in principle, in principle. 

Mr. STEINWALD. I am not so sure. I can see the arguments on 

both sides. 

Mr. PRICE. Dr. Wah, I want to get right to the issue of the fundamental reform that is necessary. All of these exceptions, as I 

mentioned, I think were trying to provide a higher quality care for 

patients. But what you mentioned I think is incredibly important 

for us to concentrate on. That is that the system is broken and 

needs to be reformed. Is it your position or the position of the AMA 

that if we have a reasonable, responsible payment system that 

none of these exceptions would be necessary? 

Dr. WAH. Thank you, Dr. Price. 

Obviously, what I said before is I think we have got a problem 

with the entire system; and that system that is broken has led to 

all these patches that we are talking about today. So, yes, absolutely, we believe the Medicare payment system has to be redone. 

But we need stability while we are redoing it, because it can’t be 

redone overnight. That is why in that three-pronged part that I 

talked about in my testimony, first we need to repeal the SGR, just 

flat out repeal it. And then there has to be some period of some 

5 years, we have estimated, of stability while we develop a new 

system that does in fact deliver high-quality care in a cost-effective 

manner to as many patients as possible. 

And so we think that 5 years of stability, with recognition that 

costs are going to increase, as the chairman said. There the cost 

of your rent, your insurance, your personnel. We need to have escalators that cover those increasing costs. But 5 years of stability in 

the system while we develop the new system. 

And then develop a new system that is equitable for all participants in the system, and that is what we are looking for. I think 

if we did that we wouldn’t come back year after year for this exact 

kind of hearing where we are looking at this huge number of little 

patches on the leaky boat. 

Mr. PRICE. So if I am hearing you correctly, what you are saying 

is if we have a system that is flexible enough and responsive 


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enough to patients and physicians, then these kind of exceptions 

could go away. 

Dr. WAH. Absolutely. 

Mr. PRICE. I just want to have you respond, if you would, to the 

same question I asked Mr. Steinwald. That is, if we are going to 

confine what Medicare patients can receive based upon the amount 

of money available, which is a reasonable thing to do from the Federal Government’s standpoint, if a Medicare patient is told they 

can’t receive a service in that program because there is not enough 

money, do you believe as a physician and as a representative of the 

AMA that that patient ought to be able to contract with that physician for that service? 

Dr. WAH. Absolutely. There is AMA policy supporting that. I 

mean, I support it as a physician. I support it as an American that 

believes in such fundamental freedom that we ought to have the 

ability to contract for our services in a way that everybody else can 

in this country. 

I appreciate your efforts in this regard in the bill you have already put in. So, obviously, we are very supportive of your bill and 

the companion in the Senate; and we are looking for cosponsors 

wherever we possibly can. 

Mr. PRICE. Mr. Chairman, I yield back. 

Chairman HERGER. Mr. Pascrell for 5 minutes. 

Mr. PASCRELL. Thank you, Mr. Chairman. 

In response to the last series of questions, I would conclude myself, Dr. Wah, that those that can afford it might look for private 

assistance but not the majority of those on Medicare. So you can 

deal, I think, with the majority or you could ignore them that will 

not go to seek other care if Medicare is not there. I think you would 

agree with me on that, wouldn’t you? 

Dr. WAH. I don’t think it is an either/or, sir. I think it is an option that acts a little bit as a safety valve on a process that clearly 

is not working today where there is not adequate payment for some 

of these services. It allows the physician and the patient to form 

a companion contract to make up that difference. 

Mr. PASCRELL. But do you think the majority of Medicare patients fit into that particular group of people that we are talking 

about? 

Dr. WAH. I don’t know about majority. I think there are a number of examples where, just like anywhere else in our economy, 

there are patients that want to procure services and they are willing to pay for it, but they are currently precluded from using their 

Medicare benefit which they paid into their entire life because of 

these rules that don’t allow for them to have any kind of additional 

contracting outside the Medicare agreement that is with the physician. 

Mr. PASCRELL. Do you think that the Super Committee looking 

at many—the Medicare problems that we have to address, such as 

you just talked about it, the physician fix—— 

Dr. WAH. Well, actually, sir, it is the SGR fix. Physicians are 

fine. We don’t need fixing. 

Mr. PASCRELL. How does that contribute to the deficit, Dr. 

Wah? 


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Dr. WAH. I think the SGR is becoming—as you all realize, for 

10 years, Congress has had to go back and patch the SGR system, 

freeze payments, and they never finance it. They never paid for it 

in an accounting way. They never really accounted for it on the 

books. So, right now, there is about $300 billion that are hiding in 

the books; and that is really not honest accounting. 

Mr. PASCRELL. How would you suggest we—— 

Dr. WAH. I think the deficit reduction committee, the Super 

Committee we are talking about, really has an opportunity here to 

bring forward honest accounting and account for this 10 years of 

kicking the can down the road and making the problem bigger. In 

2005, the SGR could have been fixed for about $48 billion. 

Mr. PASCRELL. Correct. 

Dr. WAH. Now we are talking just $300 billion, and in 2016 we 

are looking at probably $600 billion to fix our problem. None of 

that is showing up on the books. 

Mr. PASCRELL. Well, we tried to do that. Dr. Wah, as you remember the debate that went back and forth, we tried to do that 

at that time. 

I want you to make clear to me, what do you think that Medicare 

savings, those that were reported to happen and those we hope to 

happen, I think that they should first go towards fixing these Medicare problems we have been talking about, not to outside programs. 

Would you agree? 

Dr. WAH. Certainly as a physician taking care of patients—— 

Mr. PASCRELL. You think that would be a good idea, Dr. Wah? 

Dr. WAH [continuing]. High priority, yes, absolutely. 

That is not my call. I think that is your call to decide where 

those savings go. But certainly from my standpoint I think patient 

care is very important, and Medicare provides a system that gives 

care to a large population. That is important as well. 

Mr. PASCRELL. Mr. Moore, one quick question—thank you, Doctor—about traumatic brain injury. As the co-chair of the Congressional Brain Injury Task Force, can you tell me how important it 

is for those patients to be able to access therapy and how these 

therapy caps negatively affect brain injury patients? 

Mr. MOORE. Thank you, and appreciate all your leadership on 

that issue. 

The patient with traumatic brain injury is a great example of a 

patient that would be adversely affected by these arbitrary financial limits, those patients with complex, high-need, high-rehabilitation-need diagnoses, especially if they need multiple services. As we 

said, the therapy cap is currently a shared cap between PT and 

speech language pathology. An individual with brain injury would 

need both those distinct professional services. And so that is one 

of the key diagnosis that benefits from having care above that cap. 

Mr. PASCRELL. Thank you very much. 

Thank you, Mr. Chairman. I yield back. 

Chairman HERGER. Thank you. 

Mr. Gerlach is recognized for 5 minutes. 

Mr. GERLACH. Thank you, Mr. Chairman. I am going to try to 

be quick with my questions, given where we are with votes over in 

the Capitol. 


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First, Mr. Umbdenstock, real quick question with regard to Section 508. I have a situation in my district a few years ago where 

Reading Hospital in the City of Reading, about 60 miles from the 

City of Philadelphia, had an application in for hospital wage reclassification, because of the fact that it competes so heavily in that 

metropolitan statistical area for all the hospital staff. So they are 

competing with Philadelphia-area hospitals every day for good 

quality staff, and they were successful in getting a wage reclassification, which is a good thing. 

And yet there seems to be examples, too, one in Burlington, 

Vermont, which is 216 miles away from Boston, that also got a reclassification even though it is probably not likely that someone 

from Burlington is going to travel 432 miles every day to go to 

work in Boston on a round-trip basis. 

So what would your suggestion be if we are looking at the extension or continuation of the reclassification system? What would be 

a good way from a geographical proximity standpoint to tighten up 

how that reclassification determination is made? 

Mr. UMBDENSTOCK. Yes, Congressman. Actually, the American Hospital Association has now under way a task force on the 

area wage index. We will be studying it with 20 or 22 of our members very closely over the coming year to come up with exactly 

those recommendations. 

I think in the example you cite, certainly 60 miles is a commutable distance in the common labor market, but 240 or 250 

miles may not be commutable but it is in terms of attempting to 

attract and recruit and retain staff at a level for that particular 

medical center. So there may be a very high-intensity type of organization that recruits in the greater Boston teaching hospital, 

greater New York teaching hospital types of markets. 

So our markets in health care, when you get to the advanced 

level of service, really becomes even more than regional. It becomes 

national. So it isn’t necessarily by zip code or by county or even by 

urban area. The competition and the recruitment goes on nationally. 

Mr. GERLACH. Mr. Moore, thank you for your help on the therapy cap legislation, a very important piece of legislation to move 

forward and consider. Because, as you said, it is an artificial cap 

on the ability of very needy patients to get the care they need, if 

they happen to need care a little bit more than $1,870 a year. 

So as you continue to work on that issue and all of you gentlemen continue to work on these issues and whether the reimbursements are right or not, what we are not talking enough about either, it seems to me, is the current waste and fraud in the system. 

That if you identify that, deal with that, and then therefore save 

those dollars from being wasted or fraudulently taken away, it can 

be used to better fund the kind of services, Mr. Steinwald, you say 

should be funded, even though it might be more costly to the system. 

There is legislation in the Senate by Senator Kirk and Senator 

Wyden, Senate Bill 1551, I would appreciate if you take a look at 

and get back to the committee on your position on it. It would set 

up a common access card for Medicare patients as well as for the 

providers, creating a biometric system for the providers to assure 


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that the providers are really the ones who ought to be providing 

Medicare services to that beneficiary, the beneficiary having like a 

debit card, a number card with a pin, to make sure that person is 

the right person to be receiving those services. 

It is estimated that in 2010 by the Office of Management and Budget there was $48 billion in improper payments in the Medicare system in 1 year, $48 billion. Now it seems to me that is a 

lot of money that could be used to make sure people are getting the 

therapy they need, physicians are getting proper reimbursements 

for services they provide, hospitals the same, ambulance services. 

So we ought to be talking more not just about the amount of reimbursement but why there is so much waste and abuse and fraud 

in this system that we don’t have the dollars to do really what 

should be done in getting care to patients. So if you gentlemen 

could take a look at that legislation and get back to the committee, 

it would certainly be appreciated. 

With that, I yield back. Thank you, Mr. Chairman. 

Chairman HERGER. Thank you. 

And I want to thank each of our witnesses for your testimony 

and your insight, your participation was integral to helping us understand the history of these expiring provisions and the impact 

they have on providers. I know the information we learned from 

this hearing will be a good starting point from which to further assess each of these expiring provisions before the end of the year. 

As a reminder, any member wishing to submit a question for the 

record will have 14 days to do so. If any questions are submitted, 

I ask that the witnesses respond in a timely manner. 

With that, the subcommittee is adjourned. 

[Whereupon, at 3:24 p.m., the subcommittee was adjourned.] 

[Submissions for the Record follow:] 


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American Association of Retired Persons, AARP, Statement 


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American Clinical Laboratory Association, ACLA, Statement 

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American Occupational Therapy Association. Statement 


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American Psychological Association Practice Organization, Statement 


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American Speech Language Hearing Association, Statement 


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Arizona Hospital and Healthcare Association, Statement 


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Center for Fiscal Equity, Statement 


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College of American Pathologists, CAP, Statement 


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Federation of American Hospitals, Statement 


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Focus on Therapeutic Outcomes, Inc., Statement 


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Gundersen Lutheran, Statement 


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Medicare Modernization Act, MMA, Statement 


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National Association for the Support of Long Term Care, NASL, Statement 


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National Rural Health Association, NRHA, Statement 


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PTPN, Statement 


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Rural Hospital Coalition, Statement 


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West Michigan Medicare Equity Coalition, WMMEC, Statement 


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Æ 


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