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FULL COMMITTEE HEARING ON

MEDICARE PHYSICIAN FEE CUTS:

CAN SMALL PRACTICES SURVIVE?

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

MAY 8, 2008

Serial Number 110-92

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

BRIAN HIGGINS, New York 

MAZIE HIRONO, Hawaii 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

STANDING SUBCOMMITTEES 

Subcommittee on Finance and Tax

MELISSA BEAN, Illinois, Chairwoman 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

VERN BUCHANAN, Florida, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa

Subcommittee on Contracting and Technology

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma

(II) 

Subcommittee on Regulations, Health Care and Trade

CHARLES GONZA ́ LEZ, Texas, Chairman 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida

Subcommittee on Rural and Urban Entrepreneurship

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

MARY FALLIN, Oklahoma, Ranking 

LYNN WESTMORELAND, Georgia

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1

Chabot, Hon. Steve .................................................................................................. 2

WITNESSES

PANEL I: 

Kuhn, Honorable Herb B., Deputy Administrator, Centers for Medicare and 

Medicaid Services ................................................................................................. 4

PANEL II: 

Reimers, Ms. Mona, Director of Revenue Services of Orthopaedics North 

East, President, Medical Group Management Association Indiana Chapter, 

On behalf of the Medical Group Management Association .............................. 19

DiAngelis, Mr. Tom, PT, President and Co-owner, Comprehensive Physical 

Therapy Center, Inc., On Behalf of the American Physical Therapy Association and its Private Practice Section .................................................................. 21

Wilson, Dr. Cecil B., MD, Immediate Past Chair, Board of Trustees, American 

Medical Association .............................................................................................. 23

Dale, Dr. David C., President, American College of Physicians .......................... 25

Mabry, Dr. Charles, MD, FACS, Board of Regents, American College of Surgeons ...................................................................................................................... 27

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 40

Chabot, Hon. Steve .................................................................................................. 42

Altmire, Hon. Jason ................................................................................................. 43

Braley, Hon. Bruce .................................................................................................. 44

Kuhn, Honorable Herb B., Deputy Administrator, Centers for Medicare and 

Medicaid Services ................................................................................................. 46

Reimers, Ms. Mona, Director of Revenue Services of Orthopaedics North 

East, President, Medical Group Management Association Indiana Chapter, 

On behalf of the Medical Group Management Association .............................. 57

DiAngelis, Mr. Tom, PT, President and Co-owner, Comprehensive Physical 

Therapy Center, Inc., On Behalf of the American Physical Therapy Association and its Private Practice Section .................................................................. 62

Wilson, Dr. Cecil B., MD, Immediate Past Chair, Board of Trustees, American 

Medical Association .............................................................................................. 69

Dale, Dr. David C., President, American College of Physicians .......................... 77

Mabry, Dr. Charles, MD, FACS, Board of Regents, American College of Surgeons ...................................................................................................................... 88

Statements for the Record: 

American Optometric Association .......................................................................... 102

American Academy of Family Physicians .............................................................. 104

(V) 

(1)

FULL COMMITTEE HEARING ON MEDICARE 

PHYSICIAN FEE CUTS: CAN SMALL 

PRACTICES SURVIVE? 

Thursday, May 8, 2008

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:00 a.m., in Room 

1539 Longworth House Office Building, Hon. Nydia Vela ́zquez 

[chairwoman of the Committee] presiding. 

Present: Representatives Vela ́zquez, Gonza ́lez, Grijalva, Ellsworth, Sestak, Chabot, Akin, Davis, Fallin, and Buchanan. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

Chairwoman VELA ́ ZQUEZ. Good morning. I call this hearing to 

order on ‘‘Medical Physician Fee Cuts: Can Small Practices Survive?’’ Our health care system is facing many challenges today that 

are not only affecting patients but also medical providers. One of 

the greatest obstacles confronting small health care practices is the 

fiscal problem in the Medicare program. 

With the baby boomer generation entering retirement, Medicare 

spending will increase exponentially over the next ten years. Efforts are underway to ensure access to health care remains while 

also meeting the long-term financial issues facing the program. 

One of the top priorities in the upcoming months is addressing 

the scheduled cuts in physician fee payments. On July 1st, physician payments for Medicare services are scheduled to be reduced by 

10.6 percent. Without option, these cuts will continue annually. 

And it is predicted that the total reduction will be about 41 percent 

by 2016. 

Practitioners have warned that cutting doctor payments will undermine the physician foundation of Medicare for current and future generations of seniors, creating unnecessary barriers to care 

for older Americans. An AMA survey found that 60 percent of doctors believe this year’s cut alone will force them to limit the number of new Medicare patients they can treat. 

This hearing today will examine how any solution must account 

for small health care practices. In crafting a fix, the unique circumstances of small health care providers must not be ignored. 

It is clear that they could be the most severely affected. Doctors 

surveyed by the American College of Physicians said cuts will force 

them to postpone purchases for their practice and to reconsider 

plans to upgrade health information technology. 

2

Other providers went further, saying they will reduce their staff 

or get out of patient care altogether. Unfortunately, the administration has taken the position that the cuts are necessary, even if it 

could mean loss of access for our seniors. 

In finding a solution to this problem, CMS must be an active participant, which is why the Committee has invited CMS here today. 

The Committee looks forward to CMS’ testimony on what they are 

doing to work with the physician community. It is critical they hear 

the concerns of medical professionals here today and across the 

country on the potential implementation of the cuts as well as ways 

to mitigate their impact. 

This includes reducing the paperwork burden and providing regulatory relief to help physicians reduce costs associated with operating a practice. With the cuts a little more than a month away, 

there are steps being taken to avoid this problem. The question 

simply becomes, how should it be done? And what does it mean for 

physicians? 

The Senate has outlined a plan that will delay the Medicare physician payment cuts for 18 months. I support their effort to address 

this problem in the near term, but I also believe we should be 

working to finding a more permanent fix to Medicare’s physician 

fee cuts, one that reflects the cost increases inherent in practicing 

medicine and preserves access to coverage for seniors. 

Any fix needs to address the needs of small physician practices. 

A solution that doesn’t meet this goal could mean that patients 

could face problems in accessing health care in the future. 

I hope that during today’s hearing, our witnesses will shed light 

on the steps they believe should be taken. It is also my hope that 

the panelists will provide insight on the short, long-term impact 

the cuts could have on the provider community. 

In many ways, the physicians’ community interests are aligned 

with those of the seniors that receive care. The Committee wishes 

to hear these concerns and how we can work together for a proper 

remedy. 

I look forward to today’s testimony. And I thank all of the witnesses for their participation and now yield to Mr. Chabot for his 

opening statement. 

OPENING STATEMENT OF MR. CHABOT 

Mr. CHABOT. Thank you, Madam Chair. And good morning to everyone. And thank you for holding this hearing on Medicare physician fee rates and cuts, et cetera. 

This Committee and our nation recognize that small medical 

practices are critical to the country’s overall physical and mental 

health and, like all other small businesses, essential to our economic well-being. I would like to extend a special thanks to each 

of our witnesses who have taken the time to come here and who 

will be providing testimony here this morning. 

I especially want to welcome Dr. Charles Mabry, who is testifying on behalf of the American College of Surgeons. I am sure that 

we will find his testimony and all of the witnesses especially helpful. And I also want to especially thank Tom DiAngelis, who is 

from the greater Cincinnati area, who will also be testifying this 

morning. 

3

Data on medical practice size show that physicians and patients 

continue to prefer small practice settings. The small setting allows 

the physician to have control of medical decision-making and is 

most conducive to the relationship of trust and confidence between 

physician and patient. 

The practical preference of a small practice setting suggests that 

any Medicare physician fee system must be feasible and easily operable in a small practice setting. The managed care backlash is 

also driving the insurance industry toward traditional insurance 

principles that instruct insurers, like Medicare, to manage financial 

risk and allow providers to manage care. 

The insurers forays into disease management emphasize this 

change in behavior with only cautious and limited outreach to physicians. The current Medicare physician fee schedule is clearly 

flawed. 

Since its inception in 2002, the sustainable growth rate formula 

has required the government to reduce physician fees. Since 2003, 

Congress has passed and the President has signed laws that have 

prevented the reductions from actually taking place. The current 

system rewards the physician for seeing as many patients as possible and sometimes performing excessive services. 

An example of this practice is the use of a CAT scan sometimes, 

rather than an X-ray, for example. Several studies have confirmed 

that expensive or excessive services do not necessarily lead to better quality outcomes. 

As physicians, costs go up. And their Medicare reimbursements 

drop or are unrealistically low. They are engaged in a vicious cycle 

that forces them to see more and more patients to take in the same 

amount of money. 

Medicare pays its providers based on quantity without rewarding 

those providers who improve quality. In fact, Medicare pays more 

when poor care results sometimes in preventable services. This 

needs to be changed. 

Today access remains good for beneficiaries accessing current 

physicians and for those seeking new physicians. Continued efforts 

to monitor and protect Medicare beneficiary access are warranted. 

The Medicare physician fee schedule should be restructured to 

place a greater value on the quality of care and the efficient use 

of resources. 

Attention should also be given to improved health IT efforts. 

Making electronic Medicare records available to patients’ physicians will cut down on unnecessary tests, help doctors provide better care, and offer economic benefits to taxpayers and the federal 

budget. 

We have an excellent panel of witnesses, as I mentioned before, 

here today. And I look forward to hearing their thoughts. I want 

to thank the Chair again for holding this important hearing. And 

I yield back the balance of my time.

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Chabot. 

And now I welcome the honorable Herb Kuhn. Mr. Kuhn is the 

Deputy Administrator of the Centers for Medicare and Medicaid 

Services. Most recently, he served as the Director of the Center for 

Medicare Management. As CMM Director, Mr. Kuhn was responVerDate 0ct 09 2002 12:56 Jun 17, 2008 Jkt 033615 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40862.TXT LEANN
4

sible for the development of the regulations and reimbursement 

policies for Medicare, which covers 43 million elderly and disabled 

Americans. 

Welcome, sir. 

STATEMENT OF HONORABLE HERB B. KUHN, DEPUTY ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES 

Mr. KUHN. Thank you, Chairwoman Vela ́zquez, Mr. Chabot, distinguished members of the Committee. Thank you for inviting me 

today to discuss Medicare physician payment. 

Continued improvement in quality and access of health care for 

Medicare beneficiaries and all Americans requires the active participation of physicians. And in order to ensure that participation, 

Medicare needs to appropriately compensate physicians for the 

services they provide to people with Medicare. But how we pay also 

matters. 

We need a payment system that will support high-quality care 

and avoid preventable costs to the program and to society. Simply 

adding expensive payment updates to the current system would be 

extremely expensive from a financing standpoint and would not 

promote better quality or more efficient care. 

The current system has the effect of directing more resources to 

care that is not of the highest quality, such as duplicative tests and 

services or hospital readmissions. And it doesn’t do as good a job 

as possible in treating those with chronic conditions. That is why 

payment reform is also so critical for Medicare beneficiaries, who 

are impacted in several ways. Not only are they impacted by access 

issues, but they also are threatened by rapid growth and expenditures that could make services unaffordable. 

Growing physician costs directly impact Medicare beneficiaries 

through increased Part B premiums, coinsurance, and premiums 

for supplemental coverage. The current Medicare Part B premium 

stands at $96.40 per month. 

As MedPAC recently noted, over the 1999 through 2002 time period, the Part B premium grew by an average of 5.8 percent per 

year while cost of living increases for Social Security benefits averaged just 2.5 percent per year. 

Since 2002, the Part B premium has increased even faster, by 

13.5 percent in 2004, 17.4 percent in 2005, 13.2 percent in 2006, 

and 5.6 percent in 2007. Right now 29 percent of an individual’s 

Social Security check is applied to paying Medicare premiums, coinsurance, and deductibles. 

The recent Medicare Trustees Report notes that the Medicare 

Part A trust fund will be insolvent by 2019. That is 11 years from 

now. That means if you are 54 years old today, the trust fund will 

be insolvent the day you are eligible for Medicare. For Medicare 

Part B, the Trustees Report noted an annual spending growth rate 

of 9.6 percent for the past 5 years per year. 

This kind of course in uncertainty for Medicare beneficiaries and 

physicians is why CMS has been working with Congress and the 

physician community over the past several years to provide a better way to pay physicians. Our work centers around new concepts 

in the area of value-based purchasing with a goal of transforming 

5

CMS from its current role of a passive payer of services into an active purchaser of high-quality, efficient care. 

Nobody disputes the fact that there are problems with the current statutory formula for calculating annual physician payment 

updates. To date, we have seen short-term fixes instead of a comprehensive strategy for long-term reform. The problem with this 

approach is that it runs up the tab and makes the next scheduled 

cut even larger. 

Case in point. As people have noted already, this July the law 

requires doctors’ fees to be cut by 10.6 percent. Physicians face another five percent cut on January 1, 2009, and every year thereafter for the next decade. 

We at CMS are very concerned by this tremendous uncertainty 

and what this Band-Aid approach causes in terms of physicianlevel participation in the program, particularly for the small practice, as the Chairwoman noted. 

In order to move forward with physician payment reform, we 

have embarked on the following initiatives. First, we are addressing the inappropriate payment rates for certain individual services 

in the physician setting. In 2006, we completed the third 5-year review of physician payments. This resulted in a major rebalancing 

that provides for higher payments to primary care physicians. 

Second, we are looking at creating larger bundles of payment for 

care across the entire episode of care. We and others believe this 

holds real promise for higher quality, particularly in the area of 

hospital readmissions and greater efficiencies. 

Third, we have a shared savings demonstration that rewards 

physician practices for achieving higher-quality outcomes and savings. The demonstration is already showing impressive results. 

And we soon will be launching new electronic health record and 

medical home demonstrations. 

Fourth, we are looking at better ways to measure physician resource use with actual reports being issued to physicians on how 

they compare with similar physicians in terms of their resource 

use. 

And, then, finally, we have the physician quality reporting initiative up and running. Physicians are beginning to report on evidence-based quality measures. And the first payments under this 

system will be made to physicians this summer. The program is an 

important building block towards a value-based system for physicians. 

To be sure, none of the steps that I and others will be presenting 

today represent the proverbial silver bullet everyone is looking for 

to address physician payment reform. If this were easy, it certainly 

would have been done long ago. 

While many of these issues are technically complex, they represent the best thinking we and others have at this time. And, importantly, there was a growing consensus among all stakeholders 

that this was the right direction for the Medicare program. 

So thank you again for the opportunity to testify on Medicare 

physician payments. CMS appreciates this Committee’s review of 

this issue. And we look forward to continuing to work with you and 

Congress on this very important issue. 

6

[The prepared statement of Deputy Administrator Kuhn may be 

found in the Appendix on page 46.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Kuhn. And the Chair 

recognizes Mr. Ellsworth. 

Mr. ELLSWORTH. Thank you, Madam Chair. Thank you, Mr. 

Kuhn. 

You pretty much answered my question there when you said I 

don’t have the silver bullets in my last five bullet points. Maybe 

you can address if those aren’t the silver bullets that are going to 

fix this system because I agree with the Chairwoman and Mr. 

Chabot that this is something that we keep Band-Aiding and BandAiding and Band-Aiding 6 months, 18 months. It is not long 

enough. And it is not going to work. And our doctors and physician 

health care system needs it fixed. And we keep hearing that the 

next president. 

And I continue to say we can’t afford to keep waiting for the next 

president to do something. You know, this is going to be a tough 

debate and a lot of tough questions we have to ask ourselves. It is 

going to hurt. And it is going to take all of the stakeholders to talk 

about this. 

Some of the things I heard from a medical professional last week. 

Sixty-two percent of all medical costs occurred in the last two 

weeks alike. If that is true, I would like to know that. And then 

that sparks a debate. 

Nobody really wants to talk about this, but how do we deal with 

end-of-life issues? And are we going to change things in that arena? 

That is going to take I think generations of this country in how we 

deal with that. 

We hear a lot about tort reform. I don’t think you mentioned that 

in your statement. How much of it is really about liability and tort 

reform? Is that one of the silver bullets that needs to be added in 

there? 

And then comparing apples to apples, I don’t know if I have a 

question, but if you could address any of these things that—you 

know, who is giving what health care when I go in a standard of 

care? And I don’t know what I am really asking, but we have got 

to start comparing apples to apples here. 

I look at maybe it is a tier system. We have got to be able to talk 

out loud without getting your head chopped off for bringing these 

issues up. But, you know, the one person’s insurance policy or 

health care policy is the same as the next person’s and a standard 

across systems but maybe in those first ones about end-of-life 

issues, tort reform, maybe that helps. 

Mr. KUHN. A lot of good thoughts there. And I think you are kind 

of swirling around the area where all of us have been kind of grappling with on these issues because if you really look at the current 

physician system, an economist would say you get what you pay 

for. 

So nobody should be surprised that we have this great volume 

in this intensity of services for physician payment because when 

you really step back and look at it, it is a piecework system. You 

know, it is a fee schedule and we pay on 7,000 different codes in 

the system. And what are all the economic incentives in a piecework system? It is to do more. 

7

And then you have this SGR cap on top of that, which basically 

penalizes all physicians equally. So if you are a physician that is 

practicing in an efficient way and someone else is practicing inefficiently, you get hit just as hard as the guy who is inefficient. So 

it is really kind of unfair in that regard as to how it looks forward. 

So a lot of things that we are doing on our demonstrations and 

some of the programs that we have already started to build, infrastructures start to get at that. One is dealing with this issue in 

terms of cost variation around the country. Folks up at Dartmouth, 

Elliott Fisher and Dr. Winberg, have done some wonderful work 

about looking at great variations around the country and a lot of 

it about end-of-life care. 

And we see sometimes a three- or four-fold difference in terms 

of spending in different parts of the country, as you indicated, with 

no material difference in terms of the outcome of care. 

So one of the things we are really working with—pretty collaboratively with the physician community—is really to measure because if you really don’t measure, you can’t really improve. And so 

we are looking at new measurement outcomes, new quality measures, efficiency measures, where we can start to measure this and 

where physicians can compare themselves one to another to see 

how they are performing to see if we can get rid of some of this 

variation out there. 

So there are a lot of different swirling activities out there, but 

I think you are asking the right questions. How do we fundamentally begin to look at what the gaps are in care, address those gaps, 

and improve? And part of that fundamental foundation of what we 

are doing is measurement so in the future we can start paying for 

outcomes, not just pay for services. 

Mr. ELLSWORTH. That is all I had, Madam Chair. Thank you. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Buchanan? 

Mr. BUCHANAN. Thank you, Madam Chair. 

I want to compliment my colleague from Indiana. I think he has 

got it right. This is a huge, serious problem. I am in a district, in 

a country, number one, as a member of Congress, with the most 

seniors, 65 and over, 176,000 according to groups. We have got the 

baby boomers this year first turning 62, talk to doctors, head of our 

medical society, Dr. Patel. 

Since 1991, they have looked at continued cuts, but, yet, 90 to 

95, 85 percent of their practice is Medicare. Their expenses continue to go up in terms of taxes, insurance, MedMEL, and all of 

these other things. And I know at the end of the year, a lot of them 

felt they were going to go out of business if they had that cut. 

So when we are talking about these additional cuts that we are 

talking about—and I think there was some thought early on with 

Medicare that it would be 20 or 30 percent of your practice. But 

in areas like Florida and my area, I am sure different parts of the 

country, it has evolved, 85-90 percent of the government. They are 

basically working for the government. 

So the bottom line, I just don’t see. They can’t attract a new doctor to our area. I think they have had one in a 300,000-population 

county, they were telling me, one medical society. They can’t atVerDate 0ct 09 2002 12:56 Jun 17, 2008 Jkt 033615 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40862.TXT LEANN
8

tract new physicians to even come to the area because it doesn’t 

make any sense. 

So I guess I want to get back to the whole point of what are we 

going to do or what are the answers as you see it to these cuts. 

And I think, as my colleague from Indiana says, it is tough to deal 

with this, but we have really got to be truthful with the American 

people and put all of these things on the table across the board because, again, the first baby boomers are turning 62 and you have 

got 78 million to follow. We need to get real about that and right 

now. 

Mr. KUHN. Those are very good points. And I think probably 

what you see in your district, as much or more than anybody else 

because of the numbers you laid out, is the fact that for the Medicare program to be successful, to really serve the seniors in this 

country, we need the active participation of physicians. 

It is interesting. There was a GAO report that came out last year 

that said basically 80 percent of all health care spending is driven 

by physicians because they are the ones that order tests. They are 

the ones that admit patients. They are the ones that discharge. So 

we have to have active participation by physicians to be part of this 

program. 

As you well-indicated, depending on the physicians’ specialty, 

their part of the Medicare payer mix could be very low to very 

high, almost 100 percent of their business. But the way that we 

guarantee active participation by physicians is to have predictability and stability in the payment system. And we have neither 

right now. So I can understand that uncertainty that your physicians are feeling and others that are out there. 

And, quite frankly, these are professionals that ought to be treated better by all of us as we go forward. And so what we can do 

with this program to try to manage that to get better as we go forward is going to be absolutely key. 

One of the things that we are really trying to deal with with 

some of our other demonstrations here is really trying to look more 

thoughtfully in terms of the overall payment system in the Medicare program. 

You know, right now when you look at Medicare Part B, it is 

pretty much siloed. You know, physicians spend more to try to care 

for a patient more effectively. They see their payments cut as a result of the SGR because spending exceeds the target. 

But, yet, because they might be managing someone with diabetes 

much more effectively, they might spend a little bit more to manage it more effectively, but they save that trip to the emergency department. They save that hospitalization. The overall system costs 

come down as a result of that. 

How do they be accounted for that? How do we reward them for 

that? And we are looking at new ways to do that. I think that is 

a good effort for the future in where we need to be going with this 

program. And I think we are getting some good support by the physician community to help us think those issues through. 

Mr. BUCHANAN. I had one other quick question. I know we have 

got to go vote. But one of my doctors called me in reaching out to 

the community and said a lot of these young physicians are coming 

out with hundreds of thousands of dollars of debt out of medical 

9

school. And then they are trying to pick up a practice and additional debt to set up an office. And, again, he said, how in the 

world do you expect anybody to go into this profession with the realities they are dealing with? 

So it is a follow-on question but somewhat maybe just what you 

covered. But I do want to—

Mr. KUHN. I think that is a good point and a real concern as well 

because what we really need right now in health care is more primary care physicians. And if they are looking at that kind of debt, 

they are probably going to choose specialties that are not primary 

care. And that is going to be a problem in terms of access in the 

future. 

So we have got to make sure our payment systems are fair, that 

they reward physicians across the board, and that we don’t create 

incentives where people are abandoning primary care and moving 

into specialties, which I think could be one of the worst outcomes 

we could possibly see here. 

Mr. BUCHANAN. Thank you, Mr. Kuhn. 

Chairwoman VELA ́ ZQUEZ. Well, we have five votes. So the Committee will stand in recess. And we will resume right after the 

votes. 

[Recess.] 

Chairwoman VELA ́ ZQUEZ. The Committee is called to order. Mr. 

Kuhn, Congress is working on a physician fee fix that works for all 

health care providers. By what date does CMS need a Medicare bill 

signed into law to ensure physicians receive the proper payments 

on July 1st? 

Mr. KUHN. In order for us to be able to work with our contractors 

to get all the programs put into place, probably mid-June would 

give us ample time and be ready to go on July 1 for a seamless 

transition so there would be no interruption in payments. 

Chairwoman VELA ́ ZQUEZ. And can you talk to us about the steps 

CMS has taken to prepare for either a reduction or the possibility 

of a congressional change to the formula? 

Mr. KUHN. We will certainly be working very closely with Congress to make sure that if there is a reduction, it is hard-wired into 

the system now. And that would go forward. If there is a change 

by Congress, we would hopefully be able to anticipate that, again 

to make it as seamless a transition as possible. So, either way, we 

hope to be prepared and to implement the laws Congress determines for us to implement. 

Chairwoman VELA ́ ZQUEZ. The Medicare economic index is the 

government’s measure of increases in physician practice costs. Most 

importantly, this index serves as CMS starting point for each 

year’s physician payment update. Unfortunately, the way that MEI 

is calculated has not changed in nearly 35 years. Is there any reason why CMS hasn’t attempted to reevaluate the MEI and bring 

it to the Twenty-First Century? 

Mr. KUHN. That is a good question. And our Office of the Actuary 

and our head actuary, Rick Foster, has looked at the Medicare economic index, or the MEI, on a regular basis. And they believe that 

continues to be a good indicator for growth in this area at this 

time. If there is new information that they can be looking at and 

10

new information the physician community and others can bring forward—

Chairwoman VELA ́ ZQUEZ. Who is that person? 

Mr. KUHN. Rick Foster, our actuary. 

Chairwoman VELA ́ ZQUEZ. So Mr. Foster really believes that the 

way health care practices operate today is not different from how 

health care practices were operated 35 years ago? 

Mr. KUHN. No. I don’t think I would characterize it that way, 

Madam Chair. I think it is rather in terms of it is a reasonable 

proxy for determining the inflation increase. 

But I would absolutely agree with you that practices have 

changed over time. And, as a result of that, through the RBRVS 

system and through the American Medical Association’s Relative 

Value Update Committee, also known as the RUC, in terms of trying to get the values between physician work, physician practice, 

expense, and ultimately malpractice, those are changed on a regular—

Chairwoman VELA ́ ZQUEZ. Does the physician community agree 

with you on that assessment? 

Mr. KUHN. On the MEI, perhaps maybe they do not. 

Chairwoman VELA ́ ZQUEZ. Why is that? 

Mr. KUHN. They may think that there are other inputs that 

ought to be considered as part of the process. 

Chairwoman VELA ́ ZQUEZ. And CMS believed that there is no 

other input that should be considered. 

Mr. KUHN. I don’t believe that we have seen any evidence in 

terms of new survey information that would indicate that that 

would be changed at this time. 

Chairwoman VELA ́ ZQUEZ. So you are telling me that the way 

medicine is practiced today is not very different from how medicine 

was practiced 35 years ago and that the cost that a person, medical 

practitioner, incurs today in terms of new technology is not different and yet you want to link health care, quality health care, to 

new technology, IT, and so on, and so none of that is counted. 

Mr. KUHN. Well, I think there are two parts to this puzzle. One 

is the MEI, which is the inflation update. The real work is done 

with the RBRVS system and the relative value updates that are 

valuated by the RUC, the Relative Value Update Committee of the 

American Medical Association. That is where the real activity is in 

terms of what payments are out there in terms of new technology, 

the work that physicians put in in terms of the services. Those are 

changed on a regular basis. 

And what we did, actually, in 2006, we did a 5-year review. The 

statute requires, of course, every 5 years to review the codes, to 

work with the AMA and other physician specialties to do that. 

Then they made a number of substantial changes to that. And we 

accepted all of those. 

So it is as accurate as we can possibly be for this time for the 

real activity for the payment schedule. In terms of the inflationary 

update, I think the factors that go into that continue to be consistent. But the rates that are paid are as accurate as they can possibly be. 

11

Chairwoman VELA ́ ZQUEZ. Well, I just can’t buy that the Medicare 

economic index for the last 35 years has been unchanged. It doesn’t 

make sense to me. 

Mr. KUHN. If there is new information that our actuary ought to 

be looking at, we would be interested to see that. 

Chairwoman VELA ́ ZQUEZ. Mr. Kuhn, CMS has stated that Medicare spending on physician services is out of control, in part due 

to rapid utilization. However, the 2008 Medicare Trustees report 

indicates just the opposite. According to that report, the annual 

growth in the volume of Medicare physician services for 2005 and 

2006 was just 3.6 percent, which is only about half the growth rate 

projected in their 2006 report. 

Is the administration’s position on physician fee payments reflective of MedPAC’s finding? 

Mr. KUHN. What we saw between about 2002 to about 2005-

2006, is double digit increases in physician payment. And it has 

begun to level off—this last report—in terms of the volume of services that are out there. But it is still growing at rates that are 

much greater than other parts of the Medicare program and certainly growing at rates that are far higher than overall inflation. 

So it continues to be a cause of concern for us as well as MedPAC. 

Chairwoman VELA ́ ZQUEZ. Let me ask you again, sir. Is the administration’s position on physician fee payments reflective of 

MedPAC’s finding? 

Mr. KUHN. Well, I guess I would need to know specifically what 

MedPAC’s findings were on that. If you could restate that, then, 

please? 

Chairwoman VELA ́ ZQUEZ. I am sorry? 

Mr. KUHN. What specifically were MedPAC’s findings? 

Chairwoman VELA ́ ZQUEZ. Well, according to that report, the annual growth in the volume of Medicare physician services for 2005 

and 2006 was just 3.6 percent, which is only about half the growth 

rate projected in their 2006 report. So you are talking about, you 

know, this out of control. Yet, the MedPAC’s finding doesn’t reflect 

it. 

Mr. KUHN. I would need to check with our actuary to see if the 

recent information in the trustee’s report, the Medicare Trustees 

report, matches up with MedPAC’s findings. 

Chairwoman VELA ́ ZQUEZ. So let me ask you this question. Is 

CMS winning to refine its position on the physician fee issue, if utilization drops? 

Mr. KUHN. I would think that where we are right now in terms 

of trying to change the way we pay physicians is not the debate 

that is before us. I think the real issue before us is how we go 

about making those changes. 

I think everybody within organized medicine, certainly most in 

Congress, believe that it is time to have a change in the way we 

pay, to start paying for value, not volume of services. So even if we 

are seeing lower growth rates over the last couple of years, I don’t 

think that should stop us or deter us from trying to find a better 

way to get better value and better quality in terms of our health 

care system. 

Chairwoman VELA ́ ZQUEZ. I don’t think that anyone, no one here, 

is saying the opposite. The problem is when you say that we need 

12

to attract more primary doctors to serve the senior community that 

is growing and, as Mr. Buchanan pointed out to you, the problem 

is that incentives are not there for these people to come and serve 

those communities. 

And so you need to take into account the new economic reality 

of the new physicians and the type of incentives that you are providing to attract those physicians to enroll into the Medicare CMS 

services. 

Mr. KUHN. I would agree with your statement there that we do 

need to make sure that this program, this particular physician fee 

schedule, continues to evolve. And I think it has over the last several years as we move forward. 

And particularly on the issue of primary care physicians, again, 

in 2006, when we did the 5-year review, the RUC came forward 

with extraordinary recommendations in order to change values for 

what we call E/M codes, evaluation of management codes, which 

are primarily the codes used by primary care physicians. It is the 

time that physicians spend with patients, mostly in primary care. 

Many of those codes went up 20-30 percent. We accepted all of 

those. And so we are working hand-in-glove with the physician 

community to try to make those changes and make them as accurately as we possibly can. 

Chairwoman VELA ́ ZQUEZ. Okay. I have another question, and I 

will come back on a second round. 

Mr. KUHN. Thank you. 

Chairwoman VELA ́ ZQUEZ. Mr. Chabot? 

Mr. CHABOT. Thank you, Madam Chair. 

I guess on behalf of the Committee, we want to I guess express 

our sympathies for both the witnesses and the audience for having 

to wait so long in between when we started and taking this up 

again. 

Obviously it was out of our control. We had votes on the floor. 

It is very common to get interrupted in Committee meetings with 

votes on the floor. Typically it is 45 minutes, maybe an hour, unfortunately. Two hours is what you all had to wait. The Chair and I 

obviously have no control over that, but I know how that can wreak 

havoc in your schedules for today and how long you think you 

might have to be here and that sort of thing. So our sympathies 

for you having to put up with that inconvenience. 

Speaking of convenience, Mr. Kuhn, relative to Congress and the 

way we have dealt with a reimbursement issue and the cost for reimbursing physicians over the year with respect to Medicare, how 

inconvenient is it and how detrimental to doctors and others who 

depend upon this and the patients as well when year after year we 

have a tendency and the cuts are out there reflected in either the 

President’s budget or perhaps our budget but by the end of the 

year, the fix comes very late? And so people don’t know what it is 

going to be. And for planning purposes and everything else, I am 

sure that there is some negative impact. 

Could you discuss that and what kind of problem that is? 

Mr. KUHN. Sure. You are absolutely right, Congressman, that it 

probably is very disruptive for physicians because if they want to 

make plans in terms of their practice, whether it is to buy a new 

piece of equipment or invest in, say, an electronic health record or 

13

something like that, the fact that they don’t have predictability and 

stability in their payment system to know how they would amortize 

that out over the years in the future does create real disruption 

that is out there. 

Also, I think it is disruptive in terms of Medicare beneficiaries 

to know whether a physician might take someone who now becomes age 65 and want to take on additional Medicare beneficiaries 

as patients or whether a physician may want to participate in the 

Medicare program that is out there. 

So I think for any business person in this country, regardless 

whether it is health care or anything else, they need predictability 

and stability. And under the current physician fee schedule and the 

payment system we have now, they are not getting that. 

Mr. CHABOT. Right. And we have, unfortunately, seen that that, 

the fact that this delay that is in the system, occurs year after 

year. Whether it was in Republican control or Democratic control 

now, it seems to be not really a political thing. It is just the way 

it works up here in Congress or doesn’t work. And I think, really, 

Congress needs to get its act together. So people can depend upon 

things to come and be able to plan in advance. 

What can we do about rewarding efficiency and, therefore, encouraging more of it? 

Mr. KUHN. One of the best ways that we have really looked at 

is that we really need to measure in this area. And we really need 

to get this set of quality measures as well as resource use measures 

so that we can really kind of look at efficiency. 

If you look at the Medicare payment system now, at least for 

physicians, we pay on volume. We don’t pay for value. And we don’t 

really know what kind of outcomes that we are getting as a result 

of that. And that is why we see this great variation in terms of care 

across the country and in a lot of cases great inefficiency in the system that is out there. 

So I think one area is the development of measures. And the 

physician community, I think particularly led by the American 

Medical Association’s consortium, is doing a very good job of developing new quality measures, thinking about efficiency measures as 

we go forward. But it is more than just measuring it. It is really, 

then, do you attach payment to it to really kind of drive the incentive as we go forward? 

I think that is the next hill we all have to cross, but I think we 

are doing a very good job of building the infrastructure to get the 

measures in place. The next question is, then, how do we deploy 

those measures? And, ultimately, do we make those publicly available? Because that is part of the accountability as well as transparency is part of this, too. 

Mr. CHABOT. Thank you. 

What was the participation rate in the physician quality reporting initiative in 2007? And what percentage of participation was 

from office-based small practices; in other words, six physicians or 

less? 

Mr. KUHN. That is a good question. Under PQRI, which began 

in July of ’07, our current indication is about 16 to 17 percent of 

physicians participated in that first 6-month launch of the program. Some people have looked at that and said, ‘‘Boy, that is not 

14

a very high number,’’ but a couple of observations about that are 

worth noting. 

One is, when it was authorized, it was only authorized for 6 

months. So if you are a physician and you are trying to decide 

whether to train staff how to operate in this new program or to 

make the investment, if it is only for 6 months, you might want 

to think twice about that. So I think 16 percent with that level of 

uncertainty was pretty good. 

The second thing is physicians, when it comes to these kinds of 

programs, sometimes are slow adopters to the program. We have 

the participating physician program. A physician would be either 

participating or nonparticipating in the Medicare program. And 

that has a differentiation in payment. 

When that first started, physician participation was about 25 

percent. And then over the next decade, it grew to about 95 percent. So I think the early start of this program looks good. 

In terms of the breakdown of the smaller physician offices, I 

don’t know if we have that number broken down that way. We 

have it more by specialties, whether it was ophthalmologist or others, but in terms of practice size, anecdotally the information I hear 

from our medical officers in CMS is that it looked like physicians 

across the spectrum, both small and large, participated. 

And that seems to make sense because when you look at physician practices overall, about 50 percent are physicians in practices 

of 2 or 3 or less. So I think we would have had good representation 

by smaller offices as a result. 

Mr. CHABOT. Thank you. 

Madam Chair, I yield back. 

Chairwoman VELA ́ ZQUEZ. Mr. Gonza ́lez? 

Mr. GONZA ́LEZ. Thank you very much, Madam Chair. And welcome, Mr. Kuhn. 

First of all, thank you for your candid responses. Many times we 

will get witnesses, of course, and you are the messengers generally. 

And you know what we do to messengers. And so sometimes they 

are very careful in their responses. 

And even with Secretary Leavitt in another committee hearing 

with Energy and Commerce, I just could not get him to answer 

whether he thought the SGR was the way to go. And I even had 

that transcribed so I could read it to all of my physician groups 

back home. He gave me a very Alan Greenspan answer. And Alan 

Greenspan is infamous for actually remarking to a senator, ‘‘If you 

understood me, I must have misspoken.’’

[Laughter.] 

Mr. GONZA ́LEZ. But that is really what we have been receiving. 

And I know it is the tail end of the administration and Secretary 

Leavitt’s tenure and such. 

Does anyone over in CMS or HHS believe that the SGR is an accurate means or manner in which to base reimbursement to physicians? 

Mr. KUHN. I think that the consensus would be that it is a pretty 

blunt instrument and that it is time to move on to find a better 

way to pay physicians. 

Mr. GONZA ́LEZ. Okay. And as we speak, do you see that effort 

being undertaken, either by people over at HHS, CMS? I know we 

15

are trying to do certain things in Congress. I know Dr. Bird just 

has his bill out there. 

What do we have as we speak in a serious ongoing effort to find 

something in the way of a substitute? 

Mr. KUHN. I think the real good news here is that over the last 

2 or 3 years, there have been some great collaborations between 

CMS, the physician community, and I think Congress to a large extent, to really find a better way to pay physicians, to really think 

about paying for outcomes, to pay for quality, pay for better safety 

of care, instead of the volume of care that is out there right now. 

So in that regard, we have got some wonderful demonstrations 

underway that are showing some great promise. It is a chance for 

us to prove a concept through a demonstration. I think there is a 

lot of good work in terms of collaboration between us and the AMA 

Physician Consortium for development of measures so we can actually measure what is going on out there. It is working very well. 

And then, finally, some real good work with this PQRI program 

that Mr. Chabot mentioned in terms of really building the base to 

find a way for us to get that information from physicians so we can 

measure and know what the quality information is out there. 

So some good start. Do I wish we were further along than we are 

now? Absolutely. But I think we have got a pretty good stake in 

the ground to get us going. 

Mr. GONZA ́LEZ. And as we come into a new administration, we 

are hoping that we are going to be much more aggressive. And I 

do believe it really is imperative that Congress leads the way. I 

really believe that, regardless of who wins the election, who is 

going to be there. And hopefully we will have people that are going 

to be sensitive to it and such. 

I am going to read from the memorandum prepared by staff, 

‘‘The law specifies a formula for the annual update to the physicians’ fee schedule. Part of the update is based on whether spending in a prior year has exceeded or fallen below a spending target. 

It is calculated using the sustainable growth rate, SGR, a cumulative one for Medicare spending growth over time. If spending is 

in excess of the target, the update for a future year is reduced. The 

goal is to bring spending back in line.’’

I think that is the fundamental principle of the SGR. It is not 

reality-based. Whether it is Congress, whether it is the President, 

or whatever, we figure what we want to spend in a particular year. 

And then we make things fix. 

If we say we are only going to have $10 to reimburse physicians, 

even though the cost of providing the service is $15, we are still 

going to do $10. And we may torture different numbers and formulas, but I think that is why we are all in agreement. 

So then we come over to your testimony. And it says, ‘‘But in 

every year since 2002, Congress has overridden the statutory cost 

growth control, the sustainable growth rate. The problem with this 

recent approach is that it runs up a tab that makes the next schedule cut even larger. And, you know, we have been addicted to that 

kind of behavior. And it is really bad. It is stopgap. 

But I guess the message really to CMS, to the physician community, and to Congress that, indeed, it is broken. It is not working. 

I have never had anyone really say that the SGR is the way to go. 

16

Now, Secretary Leavitt may have danced around it, but I think 

in the final analysis, he was talking about pay for performance and 

how we do that. We have heard from the governors of the States 

of Minnesota and Pennsylvania regarding their universal health 

coverage and how they pay for performance. But then that opens 

up another can of worms. 

So I hope before we go there, I am going to leave you with one 

last thought that I hope that you are very cognizant of and I think 

that you are. Everyone in the audience is. Whatever CMS says 

something is worth, that is adopted in the private sector. So everything that government does, then that basis is the predicate for 

what an insurance company is going to reimburse a physician. 

So if we have got problems with Medicare, can you imagine the 

spillover? And so now that is cumulative, but it presents great 

challenges. We want to work with you, but we want absolutely 

straight answers. 

If we are going to make this thing, it is going to be tortured logic 

to make it fit a budget, then we need to be saying that. And that 

is never going to work. I think that is going to be the biggest obstacle and challenge for all of us. 

Again, I appreciate what you do and, again, your candid remarks 

today. And I yield back, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Do you want to respond? 

Mr. KUHN. Thank you, Madam Chair. Absolutely. I would just 

say that all of your points—I don’t think I would necessarily disagree with many of your observations you made, Congressman. 

And, you know, if you really think about the Medicare program and 

the evolution it goes through, when it started in 1965 and then we 

paid physicians on this thing called customary prevailing and reasonable charges that were out there, after about a decade and a 

half, everybody realized that was very inflationary and very problematic. 

And so then came the RBRVS system, the current payment system that we have. That has been in place now 15, almost 20 years. 

And I think it is time to change to something else. And the change 

that we are all talking about here is value-based purchasing and 

how we move in that direction. 

The good news continues to be that the collaboration between us 

and the physician community and the Congress and other stakeholders on this is there. And it is working, but it is slow work because you want to get it right as we go forward. 

But you are right. It needs to be done. It is work worth doing. 

But I think, above all else, I’ll just leave you with this point, that 

in terms of getting answers from us at CMS, as we move forward 

in this direction, I think we have to have some guiding principles 

that drive us forward. 

One, I think we have to have investigative integrity in all that 

we do in driving forward on this change. I think second, and utmost, is that we have to have transparency in all that we do, not 

only with you all up here but with the physician communities and 

others, because this kind of change, I don’t think you can order this 

kind of change on physicians and others. I think it has to be they 

have to believe in it, they have to help us develop it, and have to 

17

be incentivized to drive it forward. That is where I think that we 

will get the success as we go forward. 

Mr. GONZA ́LEZ. Thank you very much. 

Chairwoman VELA ́ ZQUEZ. Mr. Grijalva? 

Mr. GRIJALVA. Thank you very much, Madam Chair. 

And I want to say that the comments that my colleagues have 

made to you, sir, are very important comments. And we are talking 

about change. I really appreciated the last statement you made 

that as we go through this very laborious and difficult process, that 

there have to be guiding principles and practices. And I couldn’t 

agree more about the transparency and the buy-in factor from the 

physician community. 

I represent a district in which I have under-served communities 

in the urban part, and I have big patches of rural communities that 

primarily rely on small practices for their health delivery system 

and for their Medicare services. And it is that access, particularly 

primary care for the elderly, that is getting more and more difficult 

in the rural areas of my district. 

I wanted to ask you a question. One of the things that I hear 

from those physicians in those small practices is the issue of—I 

want to say duplicity, but I don’t think it is—with Medicare Advantage, that there is no uniformity to the identification card. And 

what CMS has suggested to these physician practices is: why don’t 

you call in to make that verification? 

It is disruptive to the practice. It is disruptive to the quality time 

that you need to spend with your patient. And my question to you 

would be; would CMS oppose congressional intervention, for lack of 

a better word, to require one standard of MA card for patient ID 

cards? 

Mr. KUHN. We have, my understanding through our marketing 

guidelines, some pretty good standardization right now in terms of 

ID cards that are supposed to be provided to Medicare beneficiaries. Furthermore, the terms and conditions and other aspects 

of the Medicare Advantage product need to be posted publicly on 

Web sites for easy access by everyone. 

But I would like to go back and spend some more time with staff 

understanding the actual standardizations we have now and further needs that your constituents are talking about that. So I 

would kind of defer a final answer on that until I have some more 

information. 

Mr. GRIJALVA. That is fine. 

Mr. KUHN. But it is something that we would be happy to go 

back and then come back and talk to you and your staff about. 

Mr. GRIJALVA. Thank you. Madam Chair, I yield back. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Kuhn, I am concerned that there is inadequate oversight of 

Medicare Advantage by the states or by CMS. One issue, in particular, that challenges health care providers is the ‘‘all products’’ 

clauses. These contract provisions require providers to accept all of 

a health plan’s sponsor contracts. Though a number of states have 

worked to outlaw such provisions, Medicare Advantage plans are 

exempted. 

18

My question is, would CMS oppose congressional intervention to 

outlaw the use of all product clauses for Medicare Advantage products? 

Mr. KUHN. I would think in terms of the—well, two aspects of 

that. One is, actually, this morning, we issued a new regulation to 

deal with marketing aspects of Medicare Advantage plans. And so 

many of the issues that have been raised in the past in terms of 

marketing, problems with brokers and agents, we think we are getting a pretty good handle on that. And we have got some new information out there. 

I think on the second issue that you raise here in terms of the 

deeming requirements and the operation of the MA plans, particularly the private fee-for-service plans, I would like to hear more information in terms of the problems that it is creating for individual 

providers because right now I think with, again, our marketing 

standards that we have now, with the terms and conditions that 

are posted that providers are able to access, I would like to know 

what other things that perhaps we could do administratively first 

before we turn to legislation. 

Chairwoman VELA ́ ZQUEZ. Sir, you will have an opportunity this 

afternoon because some of the witnesses that will be testifying will 

be discussing that very same issue. So, for the record, I would like 

to know if you have any staff that will remain in here. 

Mr. KUHN. Of course, we will make someone available to participate in the rest of the hearing. Thank you for asking. 

Chairwoman VELA ́ ZQUEZ. Mr. Chabot, do you have another question? 

[No response.] 

Chairwoman VELA ́ ZQUEZ. Well, then the gentleman is excused. 

And I really thank you for being here this morning. 

Mr. KUHN. Thank you all very much. 

Chairwoman VELA ́ ZQUEZ. And I will ask the second panel to 

please come forward and take your seats. Welcome, and I really appreciate your cooperation and understanding about the fact that we 

spent so much time this morning trying to have five to seven votes 

on the House floor. Sometimes we have members from both sides 

acting out. 

[Laughter.] 

Chairwoman VELA ́ ZQUEZ. And the whole thing—

Mr. CHABOT. Yes, more one side than the other. 

Chairwoman VELA ́ ZQUEZ. Yes, to my left. To my left. 

[Laughter.] 

Chairwoman VELA ́ ZQUEZ. Anyway, I know that some people are 

trying to take some flights later on this afternoon. So our first witness is Ms. Mona Reimers. Ms. Reimers is the Director of Revenue 

Services for Orthopaedics North East practice located in Fort 

Wayne, Indiana. She is President of the Indiana Medical Group 

Management Association and a member of the Medical Group Management Association. MGMA has more than 20,000 members, who 

manage more than 13,500 organizations, in which almost 270,000 

physicians practice. 

You are welcome. And you have five minutes to make your presentation. 

19

STATEMENT OF MS. MONA REIMERS, DIRECTOR OF REVENUE 

SERVICES OF ORTHOPAEDICS NORTH EAST, PRESIDENT, 

MEDICAL GROUP MANAGEMENT ASSOCIATION INDIANA 

CHAPTER ON BEHALF OF THE MEDICAL GROUP MANAGEMENT ASSOCIATION 

Ms. REIMERS. Madam Chair and members of the Committee, my 

name is Mona Reimers. And I am a practice administrator of a 26-

physician orthopaedic practice in Fort Wayne, Indiana. Our practice has 12 locations, which serves patients in 30 counties from 3 

states. 

Medicare regulations significantly impact physician practices. 

And, as the President of the Indiana Medical Group Management 

Association, I wanted to express my concerns on behalf of my national association. Thank you for having me here today. 

I echo the concerns of my fellow panel members regarding the 

flawed sustainable growth rate formula. Stopping the 10.6 percent 

physician payment cut scheduled to occur on July 1st should be a 

congressional priority. Our physicians are committed to our Medicare patients. We currently accept new Medicare patients; however, 

we are considering significantly trimming back our acceptance of 

Medicare Advantage patients. 

If the 10.6 percent cut were to take effect, we would be forced 

to consider another operational change, such as reducing the number of traditional Medicare patients we accept. Some of the practices in Indiana are already managing the demand of Medicare patients in their offices by keeping only a few appointments per day 

available to Medicare patients. Therefore, these double digit cuts 

clearly threaten high-quality care to Medicare beneficiaries. 

My local experience is reflected in recent MGMA national research for more than 1,100 group practices, representing nearly 

29,000 physician respondents. As a result of the six-month financial uncertainty, nearly 24 percent of practices have begun limiting 

new Medicare patients. And nearly 50 percent indicated that an 

additional 10.6 percent cut will force them to stop accepting and/

or limiting the number of Medicare beneficiaries their practices 

treat. 

MGMA research also showed that more than half of responding 

practices are reducing administrative and clinical staff. Two-thirds 

described how information technology and clinical equipment investments are also sacrificed or postponed indefinitely. However, 

Medicare’s challenges are not solely caused by the annual SGR 

struggle. 

For the past two and a half years, we have encountered continued and growing frustration associated with the Medicare Advantage program. In 2005, Medicare Advantage was 3.6 percent of my 

practice’s Medicare charges and has grown to 24 percent in 2007. 

Our Medicare Advantage patients share our practice’s frustrations. 

They don’t know the rules. 

Practices like mine are bogged down trying to help patients understand their plans and navigate the many administrative complexities. My practice has been forced to hire two full-time staff 

just to deal with the avalanche of beneficiary questions and additional paperwork associated with Medicare Advantage, and even 

that is not enough. 

20

MGMA has fielded countless practice inquiries and concerns regarding Medicare Advantage and has, therefore, developed four 

simple requests that if enacted would greatly improve the operational aspects associated with Medicare Advantage as well as improve provider and patient understanding about the program. 

In recent MGMA research, over 56 percent of respondents said 

they could not accurately identify Medicare Advantage patients, 

with 90 percent of respondents indicating that patient insurance 

cards provided ineffective identification. 

Because patients do not know what coverage they have, I have 

had to direct my staff to contact Medicare or the Medicare Advantage plan each time the Medicare patient walks through the door. 

This administrative burden could be avoided with the standardization of Medicare Advantage ID cards. 

If standardized cards were issued, we could quickly identify the 

type of Medicare Advantage plan the patient is enrolled in and we 

could then know precisely where to bill the claim and what contact 

information to use for further follow-up information. These ID 

cards should be required to contain a toll-free number meant for 

providers to be able to get answers to questions and quickly check 

eligibility and/or claim status, just like traditional Medicare. 

Our second request is the elimination of deeming in Medicare 

Advantage. Doing so would allow practices a fair opportunity to review, negotiate, and understand contracts with plans. Deeming allows a Medicare Advantage plan to consider a physician as accepting their contract if the patient presents a Medicare Advantage 

card prior to service. 

Often we are essentially forced to sign the last page of a contract 

without knowing what the rest of the lengthy and non-negotiable 

contract says. For example, every day we treat arthritic patients 

who are driven to their appointments by family members that took 

time off work. 

They present one of 100 nonstandardized identification cards 

upon arrival at the front desk. At that moment, we must decide 

whether we will treat this patient. It is cruel to delay or deny 

treatment because it is just impractical to review a contract while 

a patient is awaiting services. Yet, being denied the opportunity to 

review and negotiate the terms and conditions prior to rendering 

services is completely contrary to fair contracting principles. 

Our third request is the elimination of ‘‘all products’’ clauses in 

plan contracts. Most states already outlaw these clauses, in order 

to protect physician practices from accepting all patients in all variations of insurance products offered by a given insurer. For any 

contract to be binding, there must be a quid pro quo, meaning both 

parties have received something from the other. But this does not 

exist for Medicare Advantage plans and the physician if contracting 

by default occurs. 

Some states, like Indiana, have addressed this practice. The 

Medicare Advantage plans are exempt from these state laws. We 

urge Congress to prohibit the use of ‘‘all products’’ clauses in the 

Medicare Advantage program. 

Our final recommendation is that Congress apply and enforce the 

same timely payment provisions to all Medicare Advantage products that exist for traditional Medicare. Traditional Medicare does 

21

a great job paying promptly and accurately. But my office’s accounts receivable for Medicare patients is 50 percent higher than 

it was in 2005. This is primarily due to Medicare Advantage. 

We currently spend triple the workforce to collect what is due for 

Medicare Advantage payers than what we use to collect from traditional Medicare. In following up on unpaid claims with traditional 

insurance payers, we have avenues available to us such as the Department of Insurance and federal agencies for ERISA plans. 

With Medicare Advantage, there is no comparable resource. Our 

Region V office from CMS has heard plenty from us and has offered 

some help, but it has been ineffective in causing any root change 

to the behavior of the payers. Applying the traditional Medicare 

prompt payment law to Medicare Advantage plans would be both 

logical and fair. Addressing our recommendations would greatly 

improve the medical community’s perception of and willingness to 

participate with Medicare Advantage plans; therefore, strengthening the program overall for beneficiaries as well. 

Thank you for this opportunity and I am happy to address your 

questions if you have any. 

[The prepared statement of Ms. Reimers may be found in the Appendix on page 57.]

Chairwoman VELA ́ ZQUEZ. Thank you, Ms. Reimers. 

And now the Chair recognizes Mr. Chabot for the purpose of introducing our next witness. 

Mr. CHABOT. Thank you very much, Madam Chair. 

I would like to introduce Tom DiAngelis, who is a fellow Buckeye. And not only is he that, but he is a fellow Cincinnatian. Although he doesn’t live in my congressional district, he lives in 

Loveland, Ohio, which is actually in Jean Schmidt’s district, he is 

close. 

Tom graduated with honors from Northeastern University in 

Boston, Massachusetts. He is President and co-owner of Comprehensive Physical Therapy Center, Inc., which is an outpatient 

physical therapy provider located in suburban Cincinnati. 

Tom also is currently Vice President of the American Physical 

Therapy Association, Private Practice Section. Tom has served as 

the Reimbursement Chairperson for the Ohio Chapter of the American Physical Therapy Association. He is a member of the Physical 

Therapy Advisory Committee to United Healthcare. And he is a 

representative for the American Physical Therapy Association before payment policy organizations and committees. And we welcome them here this morning. 

Thank you. 

STATEMENT OF MR. TOM DiANGELIS, PT, PRESIDENT AND COOWNER, COMPREHENSIVE PHYSICAL THERAPY CENTER, 

INC. ON BEHALF OF THE AMERICAN PHYSICAL THERAPY ASSOCIATION AND ITS PRIVATE PRACTICE SECTION 

Mr. DIANGELIS.Chairwoman Vela ́zquez, Ranking Member 

Chabot, and members of the House Committee on Small Business, 

thank you for the opportunity to address the House Committee on 

Small Business and provide a small business owner and clinician’s 

22

perspective on the pending cuts to payments under the Medicare 

physician fee schedule. 

I am Tom DiAngelis, a practicing physical therapist and co-owner 

of a small physical therapist practice in the greater Cincinnati, 

Ohio area. We currently employ 24 individuals in 3 clinics and 

serve approximately 180 patients per week with musculoskeletal 

impairments. Our goal is to return these individuals to the highest 

level of function and productivity in their homes and in their communities. 

Thriving in this payment environment is a challenge for small 

businesses in physical therapy. The physical therapist small business climate in Cincinnati has seen this firsthand. In the past 3 

years, 14 clinics have closed their office doors due to the negative 

pressure on payment. My partner and I have personally reduced 

our salaries, eliminated our advertising budget, and seen significant increases in administrative and operating costs. 

Today I represent the American Physical Therapy Association 

and their Private Practice Section, which advances small business 

ownership among physical therapists. If Congress does not act by 

July 1st, 2008, payments under the Medicare physician fee schedule will be cut by 10.6 percent. This would begin a series of payment reductions under the fee schedule, leading to an overall reduction in payment to health care providers of 40 percent by 2016. 

APTA supports efforts to avoid the 10.6 percent cut in payments 

under the Medicare physician fee schedule and to replace the 

flawed sustainable growth rate formula with a more accurate indicator of health care inflation. 

Payment cuts under the Medicare physician fee schedule will 

have significant ramifications on the ability of physical therapists 

to serve individuals who have suffered from stroke, had joint replacements, or chronic diseases that impair their ability to move, 

walk, and perform their daily tasks. 

Physical therapy continues to be a critical need for Medicare 

beneficiaries. A recent Center for Medicare and Medicaid Services 

study indicated that 8.5 percent of Medicare beneficiaries utilize 

outpatient physical therapy services, resulting in 3.9 million patients in 2006. 

The demand for high-quality rehabilitation services by physical 

therapists will only increase as baby boomers age and people seek 

the services of physical therapists to keep active and productive. 

The impact of the pending cuts on physical therapists’ small 

businesses can be summarized by three points. First, beginning 

July 1st, in addition to a 10.6 percent reduction in payment, physical therapists will also be subject to a $1,810 per beneficiary per 

year therapy cap on outpatient services. This would limit patient 

access to needed physical therapy by not considering the patient’s 

condition, the diagnosis, or other contributing factors. This represents, in essence, a cut upon a cut and would make the viability 

of physical therapists’ small business a significant challenge. 

APTA recommends the passage of the Medicare Access to Rehabilitation Services Act, H.R. 748, legislation to repeal the therapy 

caps. Second, physical therapists in private practice have significant limitations on how patients may access their services and 

marketplace. 

23

Currently Medicare requires that the patient be under the care 

of a physician as a prerequisite for payment of therapy services. If 

the payment cuts go into effect and physicians stop taking Medicare patients, then access to physical therapy services will be impacted as a ripple effect. 

APTA advocates for the passage of the Medicare Patient Access 

to Physical Therapists Act, H.R. 1552, as a strategy to improve patient access to physical therapists. 

As physician practices struggle with the payment cut, the incentive to develop additional sources of revenue increases. This puts 

physical therapist small businesses at a competitive disadvantage 

since patients cannot directly choose their physical therapy provider and are often directed to clinics in which referral sources 

have financial interests. APTA advocates for stronger self-referral 

provisions in federal law to ensure the integrity of the health care 

delivery services. 

Third, physical therapists and small businesses are subject to 

burdensome administrative and regulatory requirements that add 

to the cost of providing health care. These administrative burdens 

complicate physical therapists’ practice, direct the physical therapists away from patient care, and make it difficult to sustain physical therapists’ small business over the long term. 

The compounding effect of payment cuts under the Medicare physician fee schedule along with limitations on patient access, a competitive marketplace, and regulatory burdens makes it difficult to 

sustain physical therapy small businesses. Congress must move beyond the issue of temporary payment reprieves and look at the 

health of the Medicare physician fee schedule for the long term. 

The health care delivery system needs physical therapist small 

businesses to meet patients’ rehabilitation needs. 

In closing, I and the American Physical Therapy Association and 

their Private Practice Section want to thank the House Committee 

on Small Business and its leadership for holding this hearing. 

Thank you. 

[The prepared statement of Mr. DiAngelis may be found in the 

Appendix on page 62.]

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. DiAngelis. 

And it is my pleasure to introduce our next witness, Dr. Cecil B. 

Wilson. Dr. Wilson is the immediate past Chair of the Board of 

Trustees for the American Medical Association and has been on the 

Board of Delegates since 1992. The AMA is the largest medical association in the United States. Dr. Wilson has been in the private 

practice of internal medicine in central Florida for 30 years. 

Welcome. 

STATEMENT OF DR. CECIL B. WILSON, M.D., IMMEDIATE PAST 

CHAIR, BOARD OF TRUSTEES, AMERICAN MEDICAL ASSOCIATION 

Dr. WILSON. Thank you, Madam Chairwoman. 

My name is Cecil Wilson. I am the immediate past Chair of the 

Board of the American Medical Association Board of Trustees. I am 

also an internist in practice. 

24

The AMA would like to thank the Chairwoman Vela ́zquez and 

Ranking Member Chabot and the members of the Committee for 

your leadership efforts to address the fatally flawed Medicare physician payment formula called the sustainable growth rate, the 

SGR. 

Due to fundamental defects of the SGR, a 10.6 percent cut in 

Medicare physician payment rates is scheduled for July 1. And on 

top of that, another cut of five percent is projected for January 1, 

2009 and even more cuts through 2016, totaling 40 percent, during 

a time that physician practice costs would increase merely 20 percent. And that’s according to the government’s own conservative estimates. 

Since 2002, the physician community has had to work with Congress each year to achieve eleventh hour interventions to ward off 

steep payment cuts and preserve patients’ access to care. 

Moreover, Congress has used a financing mechanism in the last 

two legislative interventions that has resulted in deeper projected 

cuts for each subsequent year, making each year’s legislative fix 

more costly than the previous one. 

We urge the Committee and Congress to take immediate action 

to advert the July 1 physician payment cut, replace it with 18 

months of positive updates, updates that do not increase the size 

or duration of cuts that must be fixed in future years. If Congress 

allows the projected cuts to go into effect, this could adversely affect millions of patients, physicians, and individuals employed by 

physicians’ offices, and related businesses across the country. 

An 18-month fix would allow time to implement a new physician 

payment system that reflects increases in medical practice costs. 

This we think is especially important as the baby boomers begin 

enrolling in 2011. 

A stable system consistent with the goals of the Medicare program is needed to ensure the promise of high-quality health care 

to beneficiaries. The SGR undermines the Medicare program. 

First, patient access will be impaired if projected cuts go into effect. The vast majority of physician practices are small businesses. 

In fact, 50 percent of physician practices have less than five physicians. And they account for 80 percent of our patient visits. Physician practices as small businesses cannot absorb the steep losses 

projected under the SGR. 

No small business could survive under a business model that dictates steep cuts year after year. In fact, in an AMA survey, 60 percent of responding physicians said they would have to limit the 

number of new Medicare patients they would treat if this year’s 

pay cut is not stopped. 

And the SGR will exacerbate physician shortages. We are predicting a shortage of 85,000 physicians by year 2020 without any 

of these cuts. And we know that physician pay cuts would force 

many practicing physicians over the age of 55 to weigh early retirement, exacerbating the shortage. This will impact all beneficiaries 

of Medicare. 

In addition, the SGR is incompatible with physician adoption of 

health information technology and quality improvement initiatives. 

The reason is that quality initiatives, which rely on the use of 

health information technology, resulting in greater utilization of 

25

physician services, including aggressive strategies to manage diseases, to increase physician visits, imaging/lab tests, and drug 

therapies. 

This can reduce more expensive hospital admissions under Medicare Part A, but it increases spending under the SGR Medicare 

Part B, leading to additional payment cuts for physicians. And the 

payment cuts make it impossible for physicians to make the significant financial investment needed for health information technology. 

So the SGR has trapped physicians and policy-makers in a vicious 

cycle. 

So the AMA asks Congress to ensure that physicians also are 

treated like hospitals and other providers, whose payment updates 

keep pace with inflation. And we again urge Congress to take immediate action to avert the July 1 cut, replace it with 18 months 

of positive physician payment updates, updates that reflect increases in medical practice costs. This will allow time to repeal the 

SGR. 

Thank you again for the opportunity to be here today. 

[The prepared statement of Dr. Wilson may be found in the Appendix on page 69.]

Chairwoman VELA ́ ZQUEZ. Thank you, Dr. Wilson. 

Our next witness is Dr. David C. Dale. Dr. Dale is President of 

the American College of Physicians. He became a fellow at ACP in 

1976 and was elected to the Board of Regents in 2001. 

ACP is the largest medical specialty organization and the second 

largest physician group in the United States. Members include 

124,000 internal medicine physicians, related subspecialists, and 

students. 

Welcome. 

STATEMENT OF DR. DAVID DALE, M.D., FACP, PRESIDENT, 

AMERICAN COLLEGE OF PHYSICIANS 

Dr. DALE. Thank you. Thank you, Chairwoman Vela ́zquez and 

Ranking Member Chabot, for allowing me to share my thoughts on 

this subject with you today. 

I am David Dale, President of the American College of Physicians, the ACP. And I am an internist, professor of medicine, and 

former dean of the School of Medicine in Seattle. Our school focuses on training primary care physicians for the Northwest, for 

Alaska, Montana, Idaho, Washington, and Wyoming. 

ACP is the largest medical specialty society, as mentioned. And 

about 20 percent of our ACP members are in solo practice. And, as 

mentioned with the AMA statistics, nearly half of our members are 

in practices of five physicians or fewer. 

During my year as President of ACP, I have met with many of 

our members as I have traveled the country. Many of them are in 

businesses which are at a breaking point, due in large part to the 

problems with the Medicare payment system, just not keeping pace 

with practice expenses. 

In fact, I have become extremely concerned about doctors across 

the country, particularly in smaller communities, where the departure of a single physician because the doctor moves to town, retires, 

or dies and has no replacement creates a major community probVerDate 0ct 09 2002 12:56 Jun 17, 2008 Jkt 033615 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40862.TXT LEANN
26

lem. There is simply no elasticity in the system other than for 

small town folk to drive further. And, of course, the whole community suffers when this occurs. 

These practices are small businesses, where much of their revenue is tied directly to Medicare’s flawed reimbursement rates and 

formulas under the sustainable growth rate formula. Application of 

this flawed system and its scheduled payment reductions over the 

last six years has created a genuine problem for physicians. 

Earlier this year the ACP surveyed its members to measure the 

impact of pending Medicare payment cuts on their practices and on 

their patients. Although not designed as a scientific sample, almost 

2,000 internists responded and provided a firsthand account of the 

effects of these cuts. 

Thirty percent of our survey respondents noted that they have already taken steps in their practice to anticipate the scheduled 

Medicare payment cuts in July 1, 2008 and January 1st, 2009, such 

as limiting the number of new Medicare patients that they will accept. 

Eighty-six percent of ACP respondents reported that they would 

be forced to make changes if Congress does not avert the ten percent cut scheduled for July. The most commonly mentioned matter 

is to reduce the number of Medicare patients they see. 

ACP members have expressed heartfelt concern for the impact of 

these changes on their patients. A Texas internist told us ‘‘The 

practice of medicine is a calling. And, as such, my colleagues and 

I have endured far more unfair revenue cuts than most businesses 

would endure. 

‘‘Yet, a medical practice is also a small business. We are now at 

the point where further cuts are not survivable. Just like any small 

business, our revenue has to exceed costs in order to survive. Despite everything that I have done to cut costs, the margin of profit 

is now thin and the proposed greater than ten percent cuts will put 

us out of business. 

‘‘The only option will be to downsize the practice and stop seeing 

Medicare patients. I would hate to do this, but it will be the only 

option I have if Congress does not reverse the proposed cuts.’’

As an educator, I have also encountered hundreds of young people, our students, who are excited about the challenges and opportunities of becoming a patient’s personal physician. However, when 

it comes to choosing a career path, very few see a future in primary 

care and being this kind of a doctor. 

The numbers are startling. In 2006, only 26 percent of third year 

internal medicine residents planned to practice general internal 

medicine, down from 54 percent only 8 years earlier. Only 13 percent of first year internal medicine residents plan to go into primary care. The percentage of medicine school seniors choosing general internal medicine has dropped from 12 percent in 1999 to 4 

percent in 2004. 

ACP’s survey asks if Medicare payments are an important factor 

in medical students’ selection of a specialty. Sixty-three percent responded that this issue is extremely or very important. 

A resident at Case Western Reserve in Cleveland commented, 

‘‘When I entered medical school, I had always planned to become 

a general internist in primary care. Seeing the current deterioVerDate 0ct 09 2002 12:56 Jun 17, 2008 Jkt 033615 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40862.TXT LEANN
27

rating funding environment has cemented in my mind not to go 

into primary care.’’

The ACP has conducted its survey in a number of other ways. 

And a key feature is the accelerated retirement of older physicians 

with a high percentage expressing an interest in retiring very soon, 

in fact, if the payment system isn’t changed. 

The college is very interested in the patient-centered medical 

home concept, which holds great promise for choosing better outcomes for patients, potentially lowering costs and reducing complications and avoiding hospitalization. We also believe it will attract new physicians to general medicine and family medicine, the 

key specialties in deficit. 

We see an urgent need to address this problem for many reasons. 

And I am pleased that this Committee is interested in this problem 

and is addressing it today. 

Thank you. 

[The prepared statement of Dr. Dale may be found in the Appendix on page 77.]

Chairwoman VELA ́ ZQUEZ. Thank you, Dr. Dale. 

Our next witness is Dr. Mabry. Dr. Charles Mabry is a general 

surgeon in private practice in Pine Bluff, Arkansas. In addition to 

being a general surgeon, Dr. Mabry serves on the Board of Regents 

of the American College of Surgeons. The American College of Surgeons currently has over 70,000 members, making it the largest organization of surgeons in the world. 

Welcome. 

STATEMENT OF DR. CHARLES MABRY, M.D., FACS, BOARD OF 

REGENTS, AMERICAN COLLEGE OF SURGEONS 

Dr. MABRY. Thank you, Madam Chairman and Ranking Member 

Chabot. I appreciate the opportunity to be here today. And I will 

simply echo the statements of the other presenters today that there 

is no question that the SGR is broken and we are in dire straits. 

We are really grateful to have this opportunity to present before 

you because I am an example of a small business person. I am a 

general surgeon. I live in a town of around 60,000. There are seven 

of us in town that take the general surgery call. 

It is important for the members to understand that we all are 

in our own businesses. We have to hire employees. We have to buy 

from other small businesses in our community. And so what happens to us affects all small businesses. And, vice versa, what affects small businesses in our community affects us. 

Now, it is interesting that the American College of Surgeons is 

composed of many different surgical specialties, but I am going to 

refine and constrain my comments to general surgery, which is 

about 40 percent of our membership. 

It turns out that of the general surgeons around, 70 percent are 

in private practice. So it’s a high percentage that are small business people. And of those, around 40 percent or so derive their income from Medicare. So Medicare is one of our larger payers. And, 

therefore, what happens to Medicare is very, very important. 

The average general surgeon has in a practice of around 4 to 5 

people around 15 employees. And they have a payroll of around 

28

$130,000. So it is like a regular business. And part of our concern 

is that we don’t know when to depend upon the next pay cut. We 

can’t make our budget. We can’t project our expenses, not knowing 

what is going to happen with the SGR. 

Now, the other thing that sets surgeons apart from other physicians to some extent is the fact that we are paid on a global payment scale. We are paid a 90-day global payment for most of our 

major surgical procedures. Major surgical procedures really have 

not risen much in the last five to ten years. We are at about a 

three percent growth rate. But our payment is a lump sum payment for everything we deliver in 90 days. 

Now, for many different reasons, payment being one of them, we 

are running out of general surgeons. And the general surgeon, as 

you very well may know, is the surgeon that is in charge in your 

hospital, your local hospital, for emergent surgery and trauma surgery. 

There are only 1,000 general surgeons that come out of residency 

every year. And of those general surgeons, only around 300 elect 

to go into true general surgery. Others subspecialize, go into 

laparoscopic surgery and other things. So the number of general 

surgeons available to be emergent surgeons and trauma surgeons 

is dropping dramatically. 

When you look at the big numbers, HRSA release a study in October of ’06. There are only 21,000 active practicing general surgeons in America. Now, that is a small number. And when you put 

on top of that the drop in the number of surgeons we project, it is 

really going to become critical to the local hospitals for trauma care 

and emergent care. 

As small business people, though, however, the general surgeon 

has also an effect on the local hospital. As we heard, if a surgeon 

retires and a physician retires, often times we can’t find replacements to fill the slot. For a general surgeon, if he or she retires, 

the hospital has roughly 18 months—if that is the only general surgeon—to replace that surgeon or the hospital will have to dramatically reduce its services or have to close. So the loss of a general 

surgeon has an impact not just on the local physician practice but 

also on the small business practices that rely upon that hospital. 

We have seen a drop in our physicians that go into private officebased practice of about 18 percent in the last 5 years. So this is 

not just a hypothetical thing. We are actually seeing this drop in 

general surgery today. 

Well, I have gone on a long time about this. What evidence do 

we have that this is really occurring? There are two studies I have 

included in my written comments, and I will just highlight those. 

In North Carolina, from 1995 to 2005, 47 North Carolina counties 

experienced a decline in the number of general surgeons. And four 

completely lost all general surgery coverage. 

I was intrigued by that. So I looked at the data from Arkansas. 

Between 1997 and 2004, 12 Arkansas counties experienced this 

same decline. We have 21 counties that have no general surgeon. 

And of the seven counties that lost general surgeons, two hospitals 

closed. And five hospitals had to decrease their services dramatically. So this has an impact not just on the surgeons but on the 

community itself. 

29

Our proposal and one of the things that we are trying to discuss 

with others, the American Osteopathic Association and we have an 

alternative proposal for the SGR, which is broken. Our proposal is 

the service category growth rate. It is a proposal to divide physician services into six unique service categories, not by surgical or 

medical specialties but by the type of practice or service: preventative and primary care; other evaluation management services; 

major procedures, which involves what we as surgeons do; minor 

procedures; imaging services; and then diagnostic tests. 

We feel that this will allow Congress and the administration to 

better control the management of individual services—much like 

operating with a scalpel, instead of a broad ax. Right now, with the 

SGR, we just have a large ax to perform surgery with because one 

cut takes care of everyone. We propose having a much more refined 

solution. 

In conclusion, we propose that the current SGR itself needs to be 

fixed immediately. We agree with everyone here, and we would ask 

for also attention to some alternatives, such as a separate category 

growth rate. 

On behalf of the American College of Surgeons, I really appreciate your time and effort today. Thank you. 

[The prepared statement of Dr. Mabry may be found in the Appendix on page 88.]

Chairwoman VELA ́ ZQUEZ. Thank you, Dr. Mabry. 

Dr. Wilson, if I may, I would like to direct my first question to 

you. I was deeply dissatisfied with Mr. Kuhn’s response concerning 

the Medicare economic index. Clearly the MEI does not reflect the 

current practice of medicine. What do you believe are the problems 

if there is any problem with MEI? And what alternative assumptions do you believe the MEI should include? 

Dr. WILSON. Well, thank you, Madam Chair. 

We do believe that the medical economic index does provide an 

inflation measurement of the inputs that are sort of the market 

best that is there. 

Our intention is the market best components, the inputs, are not 

the same as they were back in the 1970s, that staffing requirements, positions are much higher. So we believe that other inputs 

need to be added to that medical economic index, which would 

more accurately reflect practice as it is. 

In essence, the amount of contention for us is the productivity 

adjustment that is put in the medical economic index, which suggests that if you have an inflation-adjusted increase, then physicians and others will compensate for that by doing more procedures. And so you account for that by an adjustment. 

We believe that that is not the case. And we also believe that if 

that is going to be a part of it, it ought to be applied to everyone 

else. At this time, that inflation adjustment or that adjustment is 

only applied to physician practices and physician payments. 

So we believe that a comprehensive look at the MEI to see if 

there are some other things that need to be measured, in essence, 

makes a lot of sense. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Are those contained in the MedPAC findings? 

30

Dr. WILSON. I will confess, Madam Chair, I do not know that. 

Chairwoman VELA ́ ZQUEZ. Okay. Dr. Mabry, you spoke about that 

the American College of Surgeons has been working on an alternative mechanism for calculating Medicare updates. Can you talk 

to us a little bit more about how it differs from some of the approaches currently being considered? 

Dr. MABRY. Yes, ma’am. I will do my best. You know, it is a very 

technical issue. And I really would defer to more people expert 

than me. Basically, the concept would be that we would divide the 

large spectrum of services provided into discrete categories of services. 

In each one of those categories, Congress and the administration, 

would have the capacity to adjust the amount of money that is put 

in that bucket to spend in that given year. And if the need arises, 

for instance, for the patient-centered medical home or for more primary care payments, Congress would have that ability to do that. 

On the other hand, if there is an over-utilization of services and 

it was the wisdom that those payments should be reduced, then 

that would allow you a much finer tool to reduce those payments 

for over-utilization. And, therefore, it would be more successful, we 

think. 

Chairwoman VELA ́ ZQUEZ. Do any of the other witnesses have any 

opinion on the proposal made by the American College of Surgeons? Dr. Wilson? 

Dr. WILSON. Yes. Madam Chair, actually, MedPAC did at least 

look at some options related to what they would call many SGRs 

that might be based on specialty or service, as you just heard, from 

the surgeons or maybe even based on geography. 

I guess our concern at the AMA is that having had a global SGR, 

which clearly has not worked, has not been able to distinguish between good growth and bad growth, as you have heard, really is 

a meat ax, where a surgical scalpel is needed, we would have some 

concerns and think that to look at, in essence, having many SGRs, 

which one might characterize this as, would need careful study to 

be sure it didn’t just compound the problem. 

We believe that the critical thing is to move away from this system, which says we are going to decide ahead of the year how 

many people are going to get sick. And if more people get sick that 

year, then we are going to dock the physician’s pay. And we believe 

that in terms of the payment, we ought to be looking at the increased cost of providing care. 

And we also need to be looking at accountability and quality and 

performance and the kinds of things that you did hear Mr. Kuhn 

talk about and that the AMA has been working with CMS on. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Dr. Dale? 

Dr. DALE. Yes. It is an important issue. And I think we would 

be strongly in favor of careful study of proposals like this. We can 

see some pluses and minuses to it. Really, the bigger problem is 

since the beginning of Medicare, there have been lots of changes. 

And, in particular, the relationship between hospitals, doctors, 

and pharmaceuticals has changed enormously. And it would really 

be much more important to study the global costs of health and 

then the partitioning of the funds to pay for it. 

31

Chairwoman VELA ́ ZQUEZ. Thank you. 

Ms. Reimers, the pending Medicare physician cuts could affect 

the ability of practices to make needed capital purchases. This is 

officially true in the current economic environment, when it is even 

more difficult and costly to get a loan. 

In your opinion, will these cuts affect ability of practices to purchase needed health information technology and medical equipment? 

Ms. REIMERS. Absolutely. And I believe that it already has. I 

mean, we really haven’t had a raise in the last seven years. So 

imagine working for seven years without ever a pay increase but 

only your expenses going up. And so there is absolutely no reason 

to believe that they haven’t already had an effect. 

There are many people who are still struggling to try to find creative ways to make purchases of this kind of equipment. So it is 

happening but just not at the rate that the nation would like to 

move to have integrated health information systems. 

Chairwoman VELA ́ ZQUEZ. Any other member of the panel would 

like to—

Dr. WILSON. Well—

Mr. DIANGELIS. No, go ahead. 

Dr. WILSON. Okay. Well, thank you, Madam Chairwoman. 

I would just emphasize that I am in solo practice of general internal medicine. And 75 percent of my practice is Medicare. So it 

is actually a challenge for me to replace existing equipment in the 

office and with this uncertainty, much less to consider other newer 

things, which have benefits and are very positive and I would like 

to have, but it is just out of the realm of possibilities. 

Chairwoman VELA ́ ZQUEZ. Let me ask you. Some members of Congress has suggested paying higher reimbursement rates for practicing investing in health information technology. Do you think 

that the fee structure should be used as an incentive to encourage 

information technology adoption? 

Dr. WILSON. We believe that there need to be incentives. You 

know, one of the realities is at this point only 11 percent of the 

benefits of going to health information technology actually accrue 

to the provider. The other 79 percent go to payers and insurance 

companies and managed care companies. 

So we believe that assistance will be needed. And we are supporting things that Congress can do in terms of tax deductions and 

credits and loans and incentives. We are also asking Congress to 

consider looking at the anti-kickback laws and antitrust laws that 

might be able to be tweaked so that physicians can enter into relationships with hospitals and insurers to help finance this change. 

Chairwoman VELA ́ ZQUEZ. Thank you. Dr.—Mr. Chabot? Dr. 

Chabot. 

Mr. CHABOT. Dr. Chabot. Yes. Thank you. 

[Laughter.] 

Mr. CHABOT. Great. Ms. Reimers, if I could begin with you? I 

think you mentioned that 24 percent of your patients are Advantage. Is that correct? 

Ms. REIMERS. Twenty-four percent of our Medicare patients are 

now Medicare Advantage. 

32

Mr. CHABOT. Okay. And is the treatment that they receive any 

different from a person that’s under regular Medicare versus a person that might have some sort of private health care versus is 

there anybody that still pays for it out of their own pocket in your 

practice or do they all have one of those coverages? 

Ms. REIMERS. We do have an Amish community around us who 

pays cash. And so yes, we do have self-pay patients and a few uninsured. 

Mr. CHABOT. So the question would be, how is the care? 

Ms. REIMERS. In our mind, when they get back to see the doctor, 

there is no change. There is no directive to not see a patient in a 

certain manner or care for them in any way differently. 

Mr. CHABOT. And as a business person, do you have any preference amongst the four different categories that we talked about? 

Ms. REIMERS. Well, I certainly would like to see an insured patient who I know the rules, rather than an insured patient who I 

don’t know the rules, because this patient may have to be directed 

to a particular hospital. This patient may have to have certain 

services done before they will be approved for surgery. So there 

could be a variety of reasons why I need to have information prior 

to. 

Currently the way our practice operates, the physician would 

probably know what kind of insurance the person has. So that he 

might, for instance, say, ‘‘Well, I see that you have to be done at 

this particular hospital. So I go there on Wednesdays,’’ that kind 

of thing. But other than that, we do not do anything differently. 

We have a few instances, too, where we have to get prior permission from a patient to do services on Medicare or Medicare Advantage patients. They have to sign a release, very rare but occasional. 

And so we have to be cognizant of that. 

Mr. CHABOT. Thank you. 

Dr. Wilson, I think you had mentioned the eleventh hour intervention. And going back to the question that I had asked in the 

previous panel about how disruptive is it, how inconvenient is it 

that Congress doesn’t act so we don’t tell you ahead of time what 

the rules are going to be, when you are going to get the money, 

how much is it going to be? How disruptive is that when you are 

practicing medicine? 

Dr. WILSON. Well, first let me thank you for the question you 

asked because it was good to hear that CMS does think there is 

a time certain that they could make those changes. It was chilling, 

though, to realize that the cuts are already locked in the computer. 

So we hope something will happen in time for that to be changed. 

Clearly small businesses cannot plan for the future unless they 

have some way of estimating what their income is going to be. So 

your estimate of what the income is going to be, what is certain 

is that there could be a ten percent cut, you can’t plan for that future. You are really planning for survival. 

So to think that one can add new technology in the way of health 

information technology or other medical technology which comes 

across the way, those uncertainties for any small business are exaggerated in physician practices. 

Mr. CHABOT. Okay. Thank you. 

33

Dr. Mabry, you had mentioned that you are a small business and 

so you face the small challenges that other small businesses do, 

even outside the medical profession. Is it accurate that also in the 

other challenges that you face, they would include things like energy costs and how they have been going through the roof? And so 

you are paying those same costs as well. 

In fact, even in the products that you have to purchase, with diesel being as high as it is right now, the inflationary factors in all 

the things, if you buy a chair for your office, for example, so, in 

other words, even, say, the federal inheritance death tax, when one 

has to plan for the future, so you face all of those same problems 

that other businesses would face as well. Is that correct? 

Dr. MABRY. Yes, sir. I think all the practices have to bear the 

burden and the brunt of any inflationary increases from their suppliers. And this goes without saying. 

Another thing that we have not talked about today but that is 

certainly a very true phenomenon is the increase in health insurance premiums that small businesses have to shoulder. We are 

health care providers, but we have no control over the cost of 

health insurance, which is going up, and it is harder to get. So that 

is another inflationary cost. 

And, as Dr. Wilson pointed out, it’s not just small things, such 

as tongue blades. In our practice, our endoscopes that we use to do 

screening colonoscopy for colon cancer, they are getting old. My 

partner and I were trying to decide when and if we can buy those 

or not. Well, we don’t know. We don’t know what the next six 

months are going to hold. 

So those sorts of things are real-life examples of how it is becoming more and more difficult to practice medicine. It is hard enough 

to practice medicine in surgery, but now we have to worry about 

the business aspects of it. And that just adds more to the problem. 

Mr. CHABOT. Thank you. 

And then for all of the doctors, does it continue to be a problem 

or something that you have in your mind, the potential of having 

a lawsuit filed against you and the challenges that one faces, sometimes frivolous suits but, nonetheless, you still have to defend 

them? Is that still an issue that resonates that you think should 

be dealt with, either at the state level or at the federal level? I invite any of the doctors. 

Dr. WILSON. Well, it is a part of the real world, and it is never 

far from the surface. It is a fair observation to say that a lot of 

those premiums that have arisen have tapered in the last year. 

They have stopped rising as fast, but they are at unconscionable 

levels. So that if you are an ob/gyn in Miami, Florida and paying 

$247,000 a year, that is a constant financial reminder of those challenges. 

And then I think the thing that you alluded to—and that is, the 

apprehension about taking that trip, even if you are acquitted, if 

you are sued, taking that trip, and the hassles of that are what 

drives a lot of what we call euphemistically defensive medicine, 

which we know. And, actually, I guess the CBO offices indicated 

add to another $120 billion to the cost of health care in this country. So we are still very concerned. 

Chairwoman VELA ́ ZQUEZ. Would the gentleman yield? 

34

Mr. CHABOT. I would be happy to yield. 

Chairwoman VELA ́ ZQUEZ. Doctor, is insurers’ consolidation an 

issue that is in your mind? 

Dr. WILSON. Absolutely and not just in terms of liability but particularly in terms of health insurance. 

Chairwoman VELA ́ ZQUEZ. But it is not only tort reform and liability issues one of the biggest issues that you have to confront but 

also the insurer consolidation? So it has to be coupled with insurance reform? 

Dr. WILSON. Our plate is full. 

Chairwoman VELA ́ ZQUEZ. Yielding back. 

Mr. CHABOT. Okay. Thank you. 

And reclaiming my time, just one last question. Also, the marginal tax rates, income taxes, on everyone was reduced somewhat 

over the last few years. And capital gains taxes were reduced and 

those types of things. Those tax cuts were not permanent, unfortunately, because we didn’t have the votes in the Senate to make 

them permanent. So they are going to go back up in a couple of 

years unless Congress does something to make those tax cuts permanent. 

Is that a concern to the members of the panel or do you want 

to have your taxes go up? 

[Laughter.] 

Chairwoman VELA ́ ZQUEZ. An easy one. 

Mr. CHABOT. Anybody want to take? Mr. DiAngelis, since I 

hadn’t talked to you? 

Mr. DIANGELIS. The idea of taxes increasing I don’t think excites 

anybody at the table. So it is a concern. You know, anything that 

is going to increase our expenses for the small physical therapist 

practice has the potential to be extremely detrimental because we 

are literally right now working in a survival mode. 

An example, Dr. Mabry just brought up that his health insurance 

goes up every year. I just got my renewal notice for our small company. And this year it goes up in June. And they are proposing a 

49.5 percent increase in my premiums. I don’t know how that is 

justified, but I know that it is something that we cannot afford. 

And so we are in a situation where we really live paycheck to 

paycheck in the small business. And so anything that is going to 

increase expenses anywhere we are not going to be able to make 

it, quite frankly. 

Chairwoman VELA ́ ZQUEZ. Okay. Thank you. 

Dr. Dale? 

Dr. DALE. I will comment because I think doctors are interested 

both in the cost and in the revenue side of government. I would say 

that doctors are good citizens. They pay their taxes. And they pay 

them as happily as anyone else. And I think that in terms of paying for Medicare, that we have been happy participants on both 

sides. And in talking to physicians, they appreciate the value of 

Medicare to the public but also to themselves. 

Mr. CHABOT. Thank you very much. I thank the entire panel and 

yield back my time. 

Chairwoman VELA ́ ZQUEZ. Mr. Gonza ́lez? 

Mr. GONZA ́LEZ. Thank you very much, Madam Chair. 

35

And, again, thank you for your testimony today. And I also join 

my colleagues in expressing regrets that it has been such a delay. 

But it has just been a tough week. 

First and foremost, I think everyone agrees that the SGR is, in 

fact, broken, for whatever reason. Maybe it is not such a bad vehicle or manner in which to arrive, but obviously the elements, the 

factors, and everything else, maybe we’re not getting the right information, one. 

Two, we are also working within fiscal constraints. We are going 

to make it work, whether we have the right information or not. 

And that is the scary thought. 

My question goes to your efforts of having your voices heard as 

we work through this problem. I do want to touch on—and I am 

sure the Chairwoman and Ranking Member may have something 

to say—we don’t know what is going to happen other than we are 

not going to let the ten percent cut go into effect. But is it going 

to be a six-month fix? 

This is an election year. You know, dump it on the new administration and see what happens. And every year we have been doing 

this since 2002. And, to be honest with you, in the final analysis, 

I think health care providers are just happy that the cuts weren’t 

effectuated. But we still don’t fix the underlying problem, which is 

never good. And we have gone over the consequences of that. 

You heard Mr. Kuhn say something to the effect that there is a 

collaboration with the medical community, ongoing. And that was 

his testimony. So my question all the way down the line because 

each of you represent an organization or an association, is your 

voice being heard? What form does it take? I am really starting to 

wonder. 

Whether it is the Texas Medical Association, my local medical society, the different specialist associations, I don’t get the message 

that there is a huge collaborative going on. 

So, you know, I will start with the first witness. Is it Ms. 

Reimers? 

Ms. REIMERS. I guess I will, first of all, say from an administrative standpoint, getting the job done, paying us when we send in 

the claim—you know, we submit a bill. They pay us. Traditional 

Medicare is doing a very good job, as opposed to a number of years 

ago where there were all kinds of administrative struggles and 

timeliness of payment was a severe issue. 

I do not feel that CMS has done enough to oversee Advantage 

payers’ behavior after the claim is submitted. They are working 

pretty hard to try to straighten out beneficiary issues, but I do not 

feel that they have done much to support physicians. 

And, to that end, there is not, to my knowledge—and I have tried 

to ask a lot of people. There is no apparent method to review an 

unpaid claim or a claim that is not paid correctly. If the Advantage 

payer sends you a $10 check for something that should be $100, 

there is no mandated way that a deemed provider can make the 

Advantage payer review that claim and resubmit and possibly pay 

correctly. They sometimes will and sometimes won’t. 

Mr. GONZA ́LEZ. Thank you. 

36

Ms. REIMERS. So I would say CMS is doing a great job on traditional Medicare, maybe hasn’t worked out the kinks on the Medicare Advantage. 

Mr. GONZA ́LEZ. Mr. DiAngelis? 

Mr. DIANGELIS. On your specific question, if I understand you 

correctly, you know, is our voice being heard by CMS in this, I will 

defer some to our national organization, ask them to follow up with 

you since I am not on the inside day to day with the association. 

However, from the discussions that I have had, my understanding is there is dialogue there and fairly consistent dialogue. 

So I see that as a positive. However, I cannot state specifically how 

well the voice is being heard. But I will be happy to have somebody 

follow up with you on that. 

Mr. GONZA ́LEZ. Dr. Wilson? 

Dr. WILSON. Thank you, Congressman. It is a yes and no answer. 

And the first thing to do is to agree with Mr. Kuhn that in those 

areas related to quality and performance improvement, the whole 

area that the AMA has been involved with along with all of the 

specialty societies since 2000, the Physician Consortium for Performance Improvement, which has developed now in excess of 213 

performance measures; that is, physicians deciding how physicians 

out to measure their work product, we are pleased that CMS is 

using, I think it is, like 85 percent of the measures they are using 

and the physician quality reporting initiative are AMA Consortium 

performance measures. 

So we believe that is a positive. We are using real science the 

physicians have adopted. So we have been very pleased. We do believe that our voice is being heard. 

The other side of the coin does have to do with the issue we are 

talking about here today. And that is the SGR. We have felt for a 

long time that the administration had some options. And we suggested some along the way. They might have been more helpful in 

addressing the problem of the cuts. There may have been some 

wiggle room there. 

Now, their attorneys have suggested to them otherwise, but we 

believe that they have said—and I think you heard that, that it is 

at the Congress to do that. And so we don’t think that that part 

of the concern has been heard well. 

Well, the other concern we have, of course, is the continued emphasis on volume, not always appreciating that that doesn’t distinguish between good volume and bad volume. 

Mr. GONZA ́LEZ. Thank you. 

Dr. Dale? 

Dr. DALE. I guess I will make three brief points. One is the ACP 

has really been interested in the initiative, the patient-centered 

medical home, as a new framework for thinking about the organization of medical services, which, as I mentioned, may save costs, 

provide more patient satisfaction, and also make the field of being 

a generalist more attractive. 

We would like to urge Congress to enact legislation that would 

initiate a pilot testing of this idea. There is a limited demonstration 

project that has been funded but hasn’t gotten started. I guess our 

basic feeling is it has been awfully slow in getting started. 

37

The other two things I would briefly mention are we have testified before before Congress about relative effectiveness of treatments and tests. And we think the government, CMS, should be investing more in looking at the relative value of things that we pay 

for. And, second, we have an initiative also to look at the cost-benefit of things we pay for. And we need to be both more imaginative 

and more critical and put more effort into really analyzing what we 

are doing. 

Mr. GONZA ́LEZ. Thank you. 

Dr. Mabry? 

Dr. MABRY. Thank you. 

I would echo what was said. The three things that I would like 

to talk about that the American College of Surgeons has been very 

engaged with and with the both the administration as well as the 

other societies has been in the search for quality. If you are going 

to give us a dollar to deliver care, then we owe it to you to show 

that we are delivering good care. And that is what all of us have 

said. 

The College has the National Surgical Quality Improvement 

Project, which actually measures surgical outcomes in hospitals. 

And that is a very important we think risk-justified program. And 

we are trying to spread that throughout the hospitals. 

The other is the Surgical Quality Alliance that comes up with 

new measures to measure the actual quality of surgery that is 

being delivered. Are you getting a good operation? Are your complication rates low? What are you doing to prevent problems? Those 

things are very important. 

I think the third thing in this, probably the most important as 

far as the dollar impact, is we would like to see the agency ask 

what I would call the tough questions. An 80-year-old man who has 

pancreatic cancer, do they really need an aggressive chemotherapy 

when their life expectancy is short anyway? If they do need that, 

what sort of aggressive therapy do they need? 

The outcome effect of this is very critical. That is where we are 

going to tell the difference between money that is wasted and 

money that is well-invested in a patient. 

And those tough issues, those tough questions, that is what we 

need to be asking: How we are going to spend our money and can 

we spend it well? 

Mr. GONZA ́LEZ. And, real quick, just kind of a final thought. The 

Chairwoman will have these early breakfasts, like 8:00 in the 

morning. And we have these roundtable discussions. And we have 

had them with, of course, health care providers. And it has been 

very interesting. 

And I think one of the most interesting aspects is that we have 

had individuals that are representative of either your associations, 

organizations at the table. And they have been able to identify specific individuals within the CMS who are very responsive. 

And I would say that you all need to start looking at that and 

saying, ‘‘Okay. Who does listen to us?‘‘ because this next administration is probably going to be looking for some guidance and from 

the different professional organizations as to who gets the promotion, who remains, and so on. 

38

We are going to have to have someone that is incredibly sensitive 

and is going to be listening to you. You have to be very organized, 

though, in your approach because bureaucracy has a way of just either waiting you out or wearing you out. And we have to fight that. 

I can assure you that we are very, very vested on the small business aspect. And most of the practitioners are small businessmen 

and women. 

Thank you very much. 

Chairwoman VELA ́ ZQUEZ. Mr. DiAngelis, I want to ask my last 

question to you. And maybe, Ms. Reimers, you might want to comment. Many health policy leaders are discussing ways to further integrate and promote efforts in information technology, quality improvement, and outcomes measurement in Medicare. 

What do you believe the challenges will be for small practices attempting to integrate this initiative into their practice? 

Mr. DIANGELIS. I think the first challenge is any technological 

requirements that would require an investment up front. We would 

like to right now be moving towards electronic medical records and 

be able to capture some data that way, but, quite honestly, we just 

can’t do that. 

The expense is too high. And with the uncertainty of where we 

are going, we are hesitant to take on any more debt load and move 

forward in that area. So I see that probably the biggest limitation 

for a practice like ours would be the up-front expense of what we 

would have to do there. 

I think that there might be some ways to capture certain data 

through billing mechanisms and things of things of that nature 

that we already do. And that is why I think getting everybody to 

the table and trying to figure out how we do that would be critical 

in sorting through that. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Ms. REIMERS. I would initially say, first of all, the up-front cost. 

But once you get past that, you do have with so many businesses 

involved, whether it be hospitals, doctors, physical therapists, audiologists—you know, the list goes on and on—you are going to have 

a great need to figure out which pieces of discrete data you are 

benchmarking and what makes good quality, especially with an elderly population who, by definition, are going to decline.

So I would say that the process to measure is going to be a 

lengthy one. And maybe just picking certain measures, as in PQRI, 

is a good start, but I see that the definition of each discrete data 

field may have a lengthy two-page definition to it. So I think that 

defining each element you are trying to measure would be an issue. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Anyone else would like to comment? 

[No response.] 

Chairwoman VELA ́ ZQUEZ. Okay, Mr. Chabot. Well, again I want 

to thank all of you. You know, I participate every week with the 

Democratic leadership, regarding legislation that will be brought 

up to the floor. We will continue to monitor this issue as it moves 

from the Senate into the House. I will voice the concerns of the 

small business community when it comes to physician cuts forVerDate 0ct 09 2002 12:56 Jun 17, 2008 Jkt 033615 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\40862.TXT LEANN
39

mula. And we hopefully get a resolution soon, before the summer 

gets here. 

With that, I thank all of you for participating. And I ask unanimous consent that members will have five days to submit a statement and supporting materials for the record. Without objection, so 

ordered. 

This hearing is now adjourned. 

[Whereupon, at 2:05 p.m., the foregoing matter was concluded.]

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