U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

28–477—PDF 2005

S. HRG. 109–486

IMPROVING QUALITY IN MEDICARE:

THE ROLE OF VALUE - BASED PURCHASING

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

JULY 27, 2005

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

(II)

(III)

C O N T E N T S

OPENING STATEMENTS

Page

Grassley, Hon. Charles E., a U.S. Senator from Iowa, chairman, Committee

on Finance ............................................................................................................ 1

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 3

WITNESSES

Kuhn, Herb, Director, Center for Medicare Management, Centers for Medicare and Medicaid Services (CMS), Washington, DC ....................................... 5

Miller, Dr. Mark, Executive Director, Medicare Payment Advisory Commission (MedPAC), Washington, DC ........................................................................ 6

Thames, Byron, M.D., board member, AARP, Washington, DC .......................... 29

Nielsen, Nancy H., M.D., PhD, Speaker of the House of Delegates, American

Medical Association, Washington, DC ................................................................ 30

Brideau, Leo P., president and CEO, Columbia St. Mary’s, Milwaukee, WI ..... 32

Mongan, James J., M.D., president and CEO, Partners HealthCare, Boston,

MA ......................................................................................................................... 33

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

Opening statement ........................................................................................... 3

Prepared statement .......................................................................................... 43

Brideau, Leo P.:

Testimony .......................................................................................................... 32

Prepared statement .......................................................................................... 45

Responses to questions from committee members ......................................... 52

Grassley, Hon. Charles E.:

Opening statement ........................................................................................... 1

Kuhn, Herb:

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 56

Responses to questions from committee members ......................................... 73

Kyl, Hon. Jon:

Prepared statement with attachment ............................................................. 86

Miller, Dr. Mark:

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 96

Responses to questions from committee members ......................................... 108

Mongan, James J., M.D.:

Testimony .......................................................................................................... 33

Prepared statement .......................................................................................... 114

Responses to questions from committee members ......................................... 119

Nielsen, Nancy H., M.D., PhD:

Testimony .......................................................................................................... 30

Prepared statement .......................................................................................... 121

Responses to questions from committee members ......................................... 143

Thames, Byron, M.D.:

Testimony .......................................................................................................... 29

Prepared statement .......................................................................................... 153

Responses to questions from committee members ......................................... 162

Page

IV

COMMUNICATIONS

Advanced Medical Technology Association (AdvaMed) ........................................ 167

Alliance of Community Health Plans (ACHP) ...................................................... 173

American College of Obstetricians and Gynecologists .......................................... 177

American College of Physicians .............................................................................. 181

American College of Surgeons ................................................................................ 191

National Association for Home Care and Hospice ................................................ 199

Premier, Incorporated ............................................................................................. 205

(1)

IMPROVING QUALITY IN MEDICARE:

THE ROLE OF VALUE - BASED PURCHASING

WEDNESDAY, JULY 27, 2005

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC.

The hearing was convened, pursuant to notice, at 10:05 a.m., in

room SD–215, Dirksen Senate Office Building, Hon. Charles E.

Grassley (chairman of the committee) presiding.

Present: Senators Hatch, Kyl, Thomas, Baucus, and Wyden.

Also present: Republican staff: Kolan Davis, staff director and

chief counsel; Ted Totman, deputy staff director. Democratic staff:

Pat Boulisman, Bill Dauster, Kate Kahan and Janellen Duffy.

OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S.

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. Good morning, everybody. I want to honor four

staff people before we start our hearing. We have four of our committee staff who have achieved 20 years of service to the U.S. Senate.

If they would stand, I would appreciate it: Kolan Davis, staff director and chief counsel; Ted Totman, deputy staff director; Carla

Martin, our chief clerk; and Mark Blair, our hearing clerk.

It is very unusual for staff to meet this sort of benchmark of 20

years, especially since it is so easy to go out into the private sector

in this area of the country and make a lot more money.

It shows how dedicated these people are to public service, and we

owe them very much a debt of gratitude. So, I thank all of them

for their service.

[Applause.]

The CHAIRMAN. Today’s hearing will focus on improving quality

and improving value in the Medicare program. I am a stickler for

getting the most out of every tax dollar spent, and right now we

are not achieving that in Medicare. That is not just my judgment,

that is the judgment of a lot of the experts in the country, and especially those who are before us today.

The Sunday Washington Post article, ‘‘Bad Practices Net Hospitals More Money,’’ highlighted this issue. The article describes

the Medicare reimbursement system as being ‘‘upside down. Hospitals and doctors who order unnecessary tests get more money

than those who provide efficient, high-quality medicine.’’

Right now, Medicare pays the same amount regardless of quality.

As this article stated, it appears to actually reward the delivery of

poor-quality health care. So, something is wrong when delivering

2

low-quality care leads to greater revenue for providers. It is the

exact opposite of what we want and what we need for Medicare,

the taxpayers, and the beneficiaries.

Of course, our Nation is blessed with millions of dedicated and

qualified health care providers. These individuals care deeply about

the quality of care that they provide.

What we have is a systemic failure of the Medicare payment system to reward quality and to provide incentives to invest more in

health care information technology. Until we pay providers more

for providing better quality care, we are not going to see any improvements.

The Institute of Medicine, in its report, ‘‘Crossing the Quality

Chasm,’’ set forth a broad strategy to improve quality. The Institute of Medicine stated that, among other steps, we need to ‘‘better

align the payment system to promote quality and achieve greater

value.’’

The Medicare Value of Purchasing Act, which Senator Baucus

and I introduced, creates such a framework for linking Medicare

payments to quality. The Medicare Value of Purchasing Act builds

on small steps taken in the prescription drug bill of 2003.

That legislation required hospitals to report 10 quality measures

in order to receive full payment. Now, almost 99 percent of our hospitals are reporting that data. The Center for Medicare Services is

tracking improvements in quality among participating hospitals.

We also wanted to make sure that beneficiaries can view the

quality information about their hospital and their health care provider.

Finally, I want to recognize the progress the private sector has

made in developing and adopting quality measures. There are several value-based purchasing projects under way around the country. We do not want to reinvent the wheel. Instead, we want Medicare to learn from and build on these initiatives.

Now, some will ask why Medicare should take the lead. Well,

Medicare spends more than $300 billion a year. Medicare happens

to be the largest purchaser of health care in our country. It is like

the old E.F. Hutton commercial. We know from the past that, when

Medicare talks, the health care community listens. Senator Baucus

and I believe that adopting quality payments in Medicare can, and

in fact will, influence the level of quality in all of the health care,

not just to Medicare beneficiaries.

In just a few days, Medicare will celebrate its 40th anniversary,

a tremendous milestone. It has positively affected the lives of millions of seniors and disabled citizens.

We set a goal for ourselves 40 years ago to improve access to

care. Providers and policymakers came together to make that goal

a reality. It is time now, after 40 years, to set a new goal to ensure

that Medicare beneficiaries, and all Americans, get the best possible care, and that we as a Nation get the highest value for our

health care dollars.

The committee appreciates the expertise on this issue offered by

today’s witnesses. The witnesses and their organizations here today

will play a large role in helping to accomplish our goal.

Senator Baucus?

3

OPENING STATEMENT OF HON. MAX BAUCUS,

A U.S. SENATOR FROM MONTANA

Senator BAUCUS. Thank you, Mr. Chairman.

This is a hearing that, frankly, is long overdue. I think it is going

to be one of the more far-reaching, and almost benchmark eras in

American health care. That is, we now are beginning to reward

quality as opposed to rewarding or paying for whatever health care

is provided.

Today, Medicare, the largest purchaser of health care, reimburses according to what the health care services are, irrespective

of outcomes, whether the outcome is good or the outcome is bad.

Clearly, that is a bit wasteful.

We are here today, beginning to change, I think in a monumental

way, in a dramatic way, almost, the way Medicare reimburses providers, doctors, hospitals. It is beginning to be based much more on

the quality of health care, not on just health care, generally.

We pay, today, whether the outcomes are good or bad. We want

to move toward paying for outcomes that are good and not paying

as much for outcomes that are bad. This is a revolutionary concept,

frankly, one that is necessary and is needed. It is not going to be

easy to implement, obviously, but we must begin. We must set

about finding a way to get this done.

We know all kinds of instances where many hospitals, regrettably, have very, very high rates of infection, even in a doctor’s office. One of the biggest problems in hospitals, generally, is infection. Whenever somebody is ill in the hospital, again, that person

gets reimbursed, if it is a Medicare patient, under Medicare. We

want to change that.

A major change in the beginning, here, is more reporting. With

a lot more data, we are going to be in a better position to then address outcomes. We just need to have the data. What are the outcomes? What are the procedures that hospitals and/or doctors’ offices are providing?

Beta blockers for heart patients, lots of different kinds of standards that should be addressed here. That is really the question

here, and that is getting the data to know what hospitals are or

are not doing.

Then once we get the data and once we begin to reimburse hospitals more according to whether they are providing the data—that

was a provision in the 2003 Medicare bill. That is, all right, hospitals. We are going to start paying you more, or at least not paying you less, if you begin to provide data on outcomes. Just the

data. Not whether the outcomes are good or bad, just the data.

That is a start. That is a beginning.

Then once we have done that, the next step is, all right, we are

going to start reimbursing you not only on whether or not you provide the data, but on what your outcomes are.

Once you start providing good outcomes and your data shows

that you are providing good outcomes, we are going to start paying

you, under Medicare, more for those good outcomes than just paying you irrespective of the outcome. That is what we are trying to

do here.

I, frankly, believe, Mr. Chairman, that this is very important in

so many ways. One, it is going to help reduce health care bills.

4

That is clear. It is also going to avoid unnecessary taxpayer dollars

being paid under Medicare.

But more than that, it can start to set the ethic in our health

care system even more, that we are going to focus even more on

quality and quality of care. In so doing, I think we will then begin

to address a competitive problem that we Americans have with respect to other companies overseas. That is, our health care costs

today are so high, it is a competitive disadvantage for American

companies compared with other countries’ companies. What is it, Mr. Chairman? It is like, $1,500 from each car goes to pay for General Motors’ health care. That is $1,500 a car.

I think the Chinese cars that are coming off the line now and

going over to Europe, the average health care bill attributable to

that car is about $500 for a Toyota. For new Chinese cars, clearly,

it is much less.

I am not saying that this new, revolutionary method of reimbursing Medicare is going to completely solve that problem. It is not,

of course. But I am saying it is going to start us down the road of

better health care that is based more on quality and start to root

out some of the inefficiencies, unnecessary costs in health care,

which we can no longer afford in this country, either from a taxpayer’s point of view or from a competitive point of view.

So, I am very pleased, Mr. Chairman. I have joined with you,

and you and I are writing this bill, and also with the Health Committee. They are making a lot of progress here, too. But this is exciting. We are going to make something happen here, and I am just

very pleased.

Also, I am particularly pleased to have the witnesses here who

know a lot more about all this than we. They can help guide us

and steer us through all of this, tell us what they think is going

to work, tell us what pitfalls to avoid. This will obviously be a work

in progress as we move forward.

I want to thank both witnesses for starting out in this journey

here today, because we are going to continue working with you and

with others as we do our very best to make this happen.

So, thank you, Mr. Chairman.

The CHAIRMAN. Yes. Thank you.

We welcome our team that is here, our first panel.

Senator BAUCUS. I have a statement I would like to have put in

the record, if I might.

The CHAIRMAN. Yes. The entire statement will be put in the

record.

Senator BAUCUS. Thank you.

[The prepared statement of Senator Baucus appears in the appendix.]

The CHAIRMAN. Any other members who want a statement in the

record, they will be received.

Senator BAUCUS. It is much more articulate than what I said, so

I want to put it in the record.

The CHAIRMAN. All right.

Herbert Kuhn is Director of the Center for Medicare Management at the Centers for Medicare and Medicaid Services; and Mark

Miller is Executive Director of the Medicare Payment Advisory

Commission.

5

These two witnesses and their teams have been interested in improving quality in the Medicare system for a long period of time,

and we welcome you.

So, we will start with you, Mr. Kuhn.

STATEMENT OF HERB KUHN, DIRECTOR, CENTER FOR MEDICARE MANAGEMENT, CENTERS FOR MEDICARE AND MEDICAID SERVICES (CMS), WASHINGTON, DC

Mr. KUHN. Thank you, Chairman Grassley, Senator Baucus, and

distinguished members of the committee. I appreciate the opportunity to testify on value-based purchasing for Medicare.

CMS is committed to establishing payment systems that reward

and promote quality outcomes and superior performance, and this

will be one of the most important issues we face in the Medicare

program.

I am pleased that all of us are working together. At a time when

we are bringing Medicare’s benefits up to date and when we have

more opportunities than ever to help seniors and people with disabilities to live longer and better lives, we need to support the participation and leadership of physicians and other providers through

our payments as they seek to make the necessary investments to

improve the quality of health care they supply.

Health care providers are in the best position to know what can

work most effectively to improve their practices, and their expertise, coupled with their strong professional commitment to quality,

means that any solution to the problems of health care quality and

affordability must involve their leadership.

A fundamental problem with many of the Medicare payment systems is that they reimburse providers on a per-service basis. The

more services provided, the greater the reimbursement. There is

not necessarily a financial incentive built into our payment systems

to provide the best care.

For example, a physician who calls or e-mails a diabetic patient

to help them promptly change their insulin dosage to keep their

blood sugar under control gets no financial support from Medicare,

but we will pay a lot more if the physician requires the patient to

come all the way into the office, even though this approach uses

more resources and may lead to worse sugar control.

We pay oncologists much more to give patients with metastatic

cancer additional chemotherapy drugs than we pay to help a patient and his or her family understand the prognosis and achieve

more comfort and a better quality of life.

As another example, 21 percent of our beneficiaries who are hospitalized with heart failure are readmitted within 30 days. Studies

show that about half of these readmissions are preventable. Yet,

Medicare pays much less when physicians take steps to prevent

these readmissions.

There are too many examples like these where we pay more

when patients have higher costs and worse results. It is time to

provide better support to the provider community.

Linking a portion of Medicare payments to clinically valid measures of quality and of effective use of health care resources would

give physicians and other providers more financial support to take

6

steps that actually result in improvements in the value of care that

people with Medicare receive.

In the fiscal year 2006 budget, the President recognized the need

for payment reforms to improve the value of care delivered to people with Medicare. By building on the current administration efforts to pay for better quality, MedPAC has made many recommendations to implement measures of quality and efficiency and

to pay for value.

CMS is engaged with the provider community on a number of

fronts to establish quality measures that can begin moving us forward in a pay-for-performance environment.

Using these quality measures, CMS is conducting a number of

demonstrations and pilots of payment reforms to pay more for better quality, better patient satisfaction, and lower overall health

care costs in the Medicare fee-for-service program.

Mr. Chairman, it has taken a lot of collaborative work to get us

where we are today, to see a payment system that everybody talks

about changing, to find a better alternative to rapid and costly increases in the volume of services on the one hand, and the continuing threats of lower payments, even if the quality of care is better. It will take more work together to make the payment system

transitions, but it is time to move forward in this direction.

We look forward to working with you, and others in Congress

and the medical community to develop a system that ensures appropriate payments for providers, while also promoting the highest

quality of care, without increasing overall Medicare costs. I look

forward to answering your questions.

The CHAIRMAN. Thank you, Mr. Kuhn.

[The prepared statement of Mr. Kuhn appears in the appendix.]

The CHAIRMAN. Dr. Miller?

STATEMENT OF DR. MARK MILLER, EXECUTIVE DIRECTOR,

MEDICARE PAYMENT ADVISORY COMMISSION (MedPAC),

WASHINGTON, DC

Dr. MILLER. Chairman Grassley, Senator Baucus, distinguished

members of the committee, the Commission has been working on

pay-for-performance, that is, linking Medicare payments to the

quality of care, for a couple of years now. With my allotted time,

I want to walk you through some of the thinking and the recommendations that we have brought to Congress.

The Commission believes that Medicare payment systems must

change. They do not promote quality. They are, at best, neutral,

and in some instances negative, towards quality.

What is needed is a new generation of reimbursement strategies

that differentiate among providers based on the quality of care that

they provide. Furthermore, the Commission believes that Medicare

must lead in this area.

It is obviously a large purchaser, as mentioned in some of the

opening statements, but also our extensive discussions with the

private sector repeatedly pointed to the need for Medicare to lead

in this area in order to effect broad-based change.

A few years ago, the Commission embraced a principle of linking

Medicare provider payments to quality, and that started a process

over the last 2 years where we reviewed available measure sets for

7

different types of providers—hospitals, physicians, managed care

plans—and tried to evaluate whether there was enough critical

mass and validity in these measure sets to begin to link payment

to performance. We also consulted with quality experts and quality

organizations.

We had a set of principles we were trying to maximize: were the

measures well-accepted? For example, meaning, is there clinical

evidence to link them to quality? Are they validated by independent experts? Are they familiar to providers?

We wanted to be sure that plans and providers could improve.

Does that mean that this part of their care is under their control,

for example, as part of what they do?

Some measures need to be risk-adjusted for the complexity of the

patient. Measures that are used that reflect that, need to be adjusted. But I would also point out that there are measures that do

not need to be adjusted: they are good medicine regardless of how

sick a patient is.

Finally, we wanted to be clear, or at least cognizant, of the burden that we are imposing on both providers and on CMS in undertaking this endeavor. We recognize that this is a big change. It will

impose burden. But we think the cost of doing nothing is greater

than moving forward.

So, this brought us to our March, 2004 report and our March,

2005 report, in which we made a set of recommendations of what

areas of Medicare are ready to move forward on pay-for-performance.

So, at this point in our process, we have looked at measure sets

and believe that there are enough initial measures to start, and

here are the areas that we have made recommendations on: physicians and facilities who serve dialysis patients; Medicare managed

care plans; home health agencies; hospitals; and physicians.

For dialysis, managed care plans, and home health agencies,

Medicare is collecting data, either through the claims process or

other processes, that allow these areas to move forward. I am not

going to say more about those, but I am happy to take questions

on them.

I would like to focus for a couple of minutes on hospitals and

physicians. We also think that there are sufficient measures to

move forward on hospitals and physicians.

Right now, there are more than 20 process measures for hospitals that have either been passed as part of the MMA legislation

that was referenced in the opening statements, or have been endorsed by quality organizations since then.

So, we think there is a set of process measures, and by that I

mean things like beta blockers after a heart attack, or giving antibiotics to prevent surgical infection, that could move forward now

in the hospital area.

We also think there is a selected set of safe practice measures

that have been endorsed by various quality experts and that involve things like verbal order read-back or a pressure ulcer prevention program, those types of things. Finally, we think there are a

few outcome measures in the hospital setting that could be ready

to go.

8

For physicians, it is a little bit more complex. Medicare does not

have as much data and experience in this area. There is much

more highly specialized services and specialties, and certainly more

physicians.

But physicians are central to pay-for-performance in improving

quality, and they need to be involved in any effort. To navigate this

complexity, the Commission has a two-step idea here.

The first is to incent physician practices on IT functionality. The

notion here is, reward them if they can do things like produce patient registries or patient notification systems, those types of

things.

I want to make clear here, the Commission’s view on this is that

you incent what you want IT to do, as opposed to pay for the purchase of IT. Again, I can discuss that if there are questions about

it.

That also positions you for the second phase of pay-for-performance, which is for Congress to set a date certain that Medicare

would pay on process measures in the physician setting. There are

process measures available for physicians that cover a wide range

of conditions that Medicare beneficiaries have. However, more complete measure sets are needed.

Through our research, we believe that through a consultation

process, perhaps run by the Secretary with specialty societies and

quality organizations, a broader range of process measures could be

identified and be ready in another 2 to 3 years.

So, in summary, for physicians, anyway, it would be two steps:

incent IT functionality, and move to process measures in a couple

of years.

I want to comment, briefly, on our policy design principles. We

think that a policy like this should reward both attainment and improvement. So attainment, whether you meet or exceed a benchmark, and improvement, if you significantly improve on that benchmark.

We believe that we should give providers every opportunity to

get performance payments, and we think that this is the way to effect broad-based change in beneficiaries’ quality of care.

The second principle is to begin with a small percentage of dollars, 1 to 2 percent. I want to be clear, this is from existing dollars.

This is a budget-neutral policy. We think that this is small enough

not to be disruptive to providers’ revenue streams, but large

enough to begin to effect change.

The Commission’s view is that this percentage should increase

over time as providers in the program become more familiar with

pay-for-performance. We assume that this pool is redistributed. It

is not held back. It goes back to providers.

Then the last principle that I will mention is that there needs

to be a process for maintaining and updating measures. You need

an independent, inclusive entity to pull together payors, providers,

quality organizations and CMS for the purposes of making recommendations for Medicare pay-for-performance measures. So this

is new measures, retiring old measures, making adjustments as

necessary.

One other function: to coordinate private and public efforts, to effect the broadest change and streamline burden for providers.

9

In closing, I have two comments. Some people also include efficiency or resource use measurement as part of pay-for-performance.

I want the committee to know that this is part of MedPAC’s agenda to look at these types of measures. We have made one recommendation to the Secretary on this point.

We have called for measuring physician resource use and confidentially feeding that data back to physicians so that they can become aware of their practice styles relative to their peers and begin

a process whereby the program and physicians can collaborate on

looking at resource measurement.

In closing, the Commission recognizes that pay-for-performance

is a large change, and it surfaces issues and complications, but the

Commission believes that the problem is urgent and supports going

forward. The status quo, where we pay the same for both good and

bad quality, is not acceptable.

I would like to thank the committee for their leadership in this

area, and thank you for asking for the Commission’s views on this.

I look forward to your questions.

[The prepared statement of Dr. Miller appears in the appendix.]

The CHAIRMAN. Yes. Thanks to both of you for your testimony.

We will have 5-minute rounds. The order will be: Grassley, Kyl,

Wyden, Thomas, and Hatch, at this point.

I am going to start with Mr. Kuhn. CMS has been conducting

several demonstrations—you have referred to these—in the hospital arena. It is my understanding that CMS has partnered with

Premier, a nationwide organization of not-for-profit hospitals, and

is rewarding top-performing hospitals by increasing their Medicare

payments.

In the physician arena, a physician group practice demonstration

for physicians in large practices tests a hybrid methodology for paying physicians that combines Medicare payments with a bonus pool

derived from savings achieved through improvement in the management of care and services. In addition, CMS is developing other

demonstrations for physicians.

So my question to you is, what are the results of the above-mentioned demonstrations? Have they shown that linking payment to

performance is an effective way to improve quality of care?

Mr. KUHN. Thank you, Mr. Chairman, for that question. Let me

start with the physician group practice demonstration. That one

began on April 1, so we do not have any of the results yet. But our

findings thus far, in terms of building that demonstration, give

some pretty good indicators on three important areas.

One is how we collect the data, and how we do that in a way that

is as seamless to the physicians as possible so we can collect it in

a manner that is not burdensome or costly to their practice.

The second was the development of the measures. We are using

a set of 32 measures for that particular demonstration.

Finally, on that demonstration, we have been able to look at

what kind of payment methodology might work. So, those are three

early findings from that demonstration before we have even harvested the information.

On the Premier demonstration, there are about 300 hospitals

across the country, looking at 34 indicators in 5 disease categories.

We have not yet audited the data that they have shared with us,

10

but thus far, we have received 4 quarters of the data, and I understand they have the fifth quarter.

What we are seeing, at least in the release of the information

they have, is exactly what we would all hope to see, real performance improvement by that cohort of hospitals.

Not only is the entire group of hospitals improving their quality

of care across all the indicators, but the entire group, from the top

decile to the bottom decile, are moving closer together, so the variation among the best performers and those at the lower end is not

as great.

So, that particular demonstration is showing the results that we

all want to see, and what we have all talked about at this hearing

thus far is real improvement, and real quality improvement for the

beneficiaries.

The CHAIRMAN. Too often, we think spending more money on

something might give better care, in this case, health care. A recently-published article in Health Affairs, called ‘‘Medicare Spending, Physician Workforce, and Beneficiaries’ Quality of Care,’’ concluded that more money does not necessarily bring better care.

Then we have a document, The Dartmouth Atlas of Health Care.

This one is not quite as recent, but back in 1999 it reports, ‘‘Improving the overall quality of care in the Medicare program cannot

be achieved by spending more. The task is to improve quality of

clinical science, the quality of clinical decision making, and the

quality of resource allocation.’’

Then we had the Washington Post article, pointing out that there

are striking variations in the amount that Medicare pays for care

across the different States.

What is your reaction to these studies that suggest more money

is not necessarily a solution to the potential problems with the

quality of health care in America, and how would you recommend

making sure taxpayers get more value for their health care dollars?

Mr. KUHN. Let me just make a couple of observations on that.

First, I think we would all agree here that medical decision making

should be based on the science, and hopefully not on the various

payment systems out there.

But I think, as evidenced by the information that has already

been presented here today, and certainly by numerous studies, that

payments do drive practice.

As a result, we see great variation in different parts of the country, variation as a result of the number of specialists in an area,

the number of hospitals, and the kind of behaviors that are out

there.

I saw recently some information that was presented by the Agency for Health Care Research and Quality that looked at hospital

payments. This was for 2003. Seven hundred and fifty billion dollars, from Medicare, private payors, et cetera, is how much is spent

for hospital care in this country.

But if you look at that in the top three areas—heart attacks, coronary artery disease and congestive heart failure—$100 billion is

spent.

If we began to make some improvements in those areas, such as

dealing with some of the surgical areas in terms of not only overVerDate 11-MAY-2000 14:43 Oct 03, 2006 Jkt 095484 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 28477.000 SFIN1 PsN: SFIN1
11

use of surgery, but, importantly, in terms of infection rates and readmissions, we could begin to gather savings.

So, my point is, I do not know that the answer is that more

money is necessary. I think it really is a redistribution issue here.

We can get better savings if we get better efficiency here where we

are.

The CHAIRMAN. I am going to go to Senator Baucus now, because

my time is up. But I will have a question for you, Dr. Miller, on

the second round.

Senator BAUCUS. Thank you very much, Mr. Chairman.

First, I very much commend you, Mr. Kuhn and Dr. Miller, both

MedPAC and CMS. You have done a lot of good work. You have

obviously thought a lot about this and are trying to help.

Dr. Miller, our legislation has certain dates for various groups,

hospitals, physicians, health plans, et cetera, dates for pay-for-reporting, and dates for pay-for-performance. We have heard from

some of these groups that they feel that the timeline is a little

tight, a little short. Surprise, surprise.

I am curious what you think. I do not know if you have had a

chance to see the dates themselves under the matrix for reporting

and for performance, but I would like you to tell us what you can.

When do you expect the groups that you have listed in your

MedPAC analysis to report data on quality to CMS, and when is

it feasible to begin tying those payments to quality?

Dr. MILLER. Our entire objective, and what I tried to touch on

in the short opening statement, was to identify measures where

you could move forward as quickly as possible. I would like to reemphasize a couple of points, just to make them clearer.

For example, in managed care plans, dialysis, and home health

agencies, the data that we looked at that we think is robust enough

to begin to link payment, is being collected now by Medicare, either

through the claims process—for example, dialysis claims come in,

and in addition to the claim they have the results of certain tests,

hematocrit levels, adequacy of dialysis.

Those can actually be captured now and used to measure the

performance of a dialysis facility. Managed care organizations report HEDIS process measures and patient satisfaction measures.

In hospitals, as I said, I think there is a set of 20 measures that

I think people agree upon now that could be used, and then I have

identified some other measures that have been validated, but are

not necessarily being collected, but we think are within easy reach

to be collected.

The physician area is a little bit more complex. We laid out a

two-step process, and so we think you could, in the short-term, very

immediately, begin to collect information on how a physician office’s IT works.

That, we think, could be immediately collected. If you needed

broad-based process measures for the physician world, we think

that is a couple of years away, and that is why we set up a second

step.

We recognize within the Senate bill you do have this kind of twostep process. So what I would say, and I think this represents the

Commission, there is a set of measures across all of these areas

that we have talked about now that can start immediately within

12

the next year or so. Then there is certainly some evolution, in addition, of measures that have to happen.

Senator BAUCUS. So we are just trying to get a sense of how

strong to push, how much to push, and how much not. Do you

think the dates and the deadlines here are about right or are they

a little bit too aggressive in some areas, a little too lenient in others? I am just trying to get a sense here.

Dr. MILLER. I am not sure I have the matrix of dates all organized into my head completely. But my sense is, you are moving

forward on reporting within the next couple of years.

Senator BAUCUS. Right.

Dr. MILLER. And then the pay-for-performance, a few years after

that.

Senator BAUCUS. I will just tell you, for reporting, for hospitals

it is ongoing, for physicians, 2007. Again, this is all just pay-forreporting. It is not for performance, just for reporting. Health plans

already report that dialysis already; home health, 2007; skilled

nursing, 2009. That is for reporting.

Now, under the heading of pay-for-performance, hospitals, 2007;

physicians, 2008; health plans, 2009; dialysis, 2007; home health,

2008; and for skilled nursing, we do not have anything here because apparently MedPAC did not have a recommendation.

Dr. MILLER. That is correct. My sense is that most of that is

achievable. I think our greatest reservation is how fast a full range

of process measures can come online for physicians.

Senator BAUCUS. How can we help, in terms of resources?

Dr. MILLER. Particularly in the physician area or more broadly?

Senator BAUCUS. It is your call.

Dr. MILLER. All right. We will do both.

Senator BAUCUS. All right.

Dr. MILLER. I should not say this principle is specific to physicians. This principle was articulated also in our work, the notion

of paying for IT functionality as one of the places that you want

to start.

You might have a measure set that includes some process measures, because they are already agreed upon and endorsed by various quality organizations, and a set of IT functionality measures,

so you are going for the low-hanging fruit on the process measures

and then making payments to the provider on the basis of their IT

functions. You have created that pressure for them to invest in IT,

which gives you the ability then to collect your process measures.

So if you are asking us, our point would be, the strategy is to

grab the easy process measures that are available now, start

incenting on IT functionalities for physicians and other providers,

and that will give you the critical mass to get more measures.

Senator BAUCUS. Just on a percentage basis, how much of the

fruit is low-hanging currently today?

Dr. MILLER. I am not sure.

Senator BAUCUS. Just a rough guess. Is this peanuts or is this

real?

Dr. MILLER. I do not think I could really give you a good answer.

I really do not know the answer to that.

Senator BAUCUS. Thank you.

The CHAIRMAN. Thank you.

13

Now, Senator Kyl. After that, Senators Wyden and Thomas.

Senator KYL. Thank you very much, Mr. Chairman.

Part of the reason for this exercise, of course, is that since the

government is the big payor here, there is always a tension between our desire to ensure the best quality of care for those who

participate in government programs and to be concerned about the

cost of the programs, because we are using taxpayer dollars.

I think everyone agrees that practices can be improved. Physicians, for example, are constantly trying to keep up with best practices. Theoretically, the approach that is being recommended here,

as I understand it, is to attach payment to quality, to identify better practices and better outcomes and to pay more for those.

But looking at the real impact of the bill rather than its theoretical concept here starting out, we actually reduced payments by

the withholding. We withhold 2 percent, for example, from some

physicians. This is starting out.

I had thought that there was a consensus that the reimbursement to physicians was going to have to be addressed by this committee later this year because it was inadequate because of the

market basket measurements that are deficient. I thought there

was a fairly clear consensus on that.

I would like to get both of you to comment on that. Dr. Miller,

you in particular said it was your view that this would be just fine

because of your opinion that the withholding was small enough not

to affect physicians. I doubt that you can find very many physicians that will agree with that. I would be curious about what data

you have.

I will tell you, I am really worried about a lot of the physicians

in Arizona, where we already have a shortage of physicians, especially in rural areas. I think this will be perceived as an enormous

problem.

Dr. MILLER. I understand your question, and I understand your

concerns. In an opening statement, you can only cover so much

ground, so let me back up and clarify this for you.

What the Commission does, in addition to pay-for-performance

and a bunch of other things that we are asked to do, is every year

we assess the adequacy of payment for different provider groups

and make a recommendation to Congress. We look at a whole

range of things: access to care, growth in volume, supply of providers, whether the capital markets are looking at these providers.

Senator KYL. Do not filibuster me here. Just kind of get to my

point of view question. I asked your opinion.

Dr. MILLER. We look at a whole set of factors, including how well

Medicare payments cover the cost of providers, and we make a recommendation to Congress on what to pay. You have to understand

our proposal in that context.

We made a recommendation, if you are talking about physicians

specifically this year, that there should be an update for physician

payments. It is in that context that we are talking about pay-forperformance.

Senator KYL. So that if we followed your recommendations and

increased the reimbursement for physicians first, are you suggesting then that the 2 percent would come out of that increased

amount?

14

Dr. MILLER. And that is the strategy that we are talking about

overall here. You make a decision on adequacy overall, and then

do the pay-for-performance and redistribute among providers.

Senator KYL. So, you are, first of all, encouraging us to make the

readjustments, and only after that is done, then to provide for this

withholding.

Dr. MILLER. I am encouraging, in all instances, that Medicare

should pay adequately. Absolutely.

Senator KYL. Of course. We all agree with that.

The question is, do you assume that we will have put into place

the recommendations for improvements in the reimbursement before the withholding would take effect so that it would be a net,

rather than a gross, amount?

Dr. MILLER. The Commission’s position is that there should be

an update for the physicians, and then pay-for-performance.

Senator KYL. Fine. Thank you.

Mr. Kuhn?

Mr. KUHN. Senator, the current SGR system, the sustainable

growth rate, is not sustainable. Nobody can sit here with a straight

face and say that these cuts as far as the eye can see for physicians

are right and appropriate and would lead to good care. But pouring

more money into the old system, because the old system does not

work, is not right either.

So what we are talking about here is linkage between these two.

There is a pivot here, as we begin to look at pay-for-performance

and value-based purchasing, concerning how we begin to transition

toward paying physicians and other providers in this new way, and

how we do it so that it is seamless for physicians so they do not

take a hit on payments next year, the following year, or the year

after.

Transitions in the Medicare program from one payment system

to another are issues that we have to continue to work through.

Currently, we do not have any detailed recommendations on that

transition, but I think you have hit the key issue here, the transition, and can we make it right, and can we make sure that beneficiaries do not lose the care they need and the providers are paid

appropriately.

Senator KYL. All right. So then both of you do agree with what

I had assumed was the consensus, that the reimbursements today

are inadequate, they are going to have to be improved. What you

are both saying is, in the course of doing that, pay-for-performance

should be one of the elements in the payment methodology.

Mr. KUHN. That is correct.

Senator KYL. A key element for it.

Mr. KUHN. That is right.

Senator KYL. All right.

Mr. Chairman, thank you.

The CHAIRMAN. Next, is Senator Wyden.

Senator WYDEN. Thank you very much, Mr. Chairman.

I want to thank both of you as well for your good work. I want

to ask you about Medicare and end-of-life care, because I think we

all understand that much of the spending in Medicare takes place

in the last 6 months of a senior citizen’s life.

15

What the best doctors and best hospitals are always saying is

that often they can spend enormous sums of money and not do anything to improve quality or be medically effective. It seems to me

that we have to do more with hospice and the comfort and care

area.

I want to ask you about two areas. One is to assess your ideas

with respect to linking pay-for-performance for doctors and hospitals to this whole issue of hospice and comfort care.

The reason I asked about that is, if your doctor does not tell you

about hospice and you have a terminal illness, you might not be

likely to get into hospice soon enough to take advantage of the full

benefit and you might be more likely to use more hospital services,

again, because you are not in the hospice program.

So, what can be done to link folks into hospice sooner in order

to promote this idea of hospital and physician pay-for-performance?

Mr. KUHN. Mr. Wyden, I think those are awfully good thoughts.

Particularly, I think the example I used in my testimony of someone with metastatic cancer, where the incentives right now are to

continue chemotherapy treatments versus trying to get more comfort and a better quality of life for the patient, illustrate why we

must begin to move that process forward.

The linkage of pay-for-performance into payments for the doctors,

the hospitals, and the entire post-acute care setting, whether it is

home health, whether it is skilled nursing, whether it is hospice

and the others, is something that I think we have to look through

in this transitional process.

The agency has begun to do a lot of thinking about post-acute

care, and whether there are better ways that we can do better assessments of the patients, and as a result of that, put in the quality indicators and move the patient to the right setting at the right

time so they can get the care they need.

I think this is an area that is ripe for work. It is one we started

to think about overall in post-acute care. We have not drilled down

to the level, I think, in terms of what you are talking about there.

But it is an important one, and I think it does really enhance the

quality of life of the patient, and make sure that they and the family get the comfort and the care that they need at this time.

Senator WYDEN. I hope the Department would fund demonstration projects in two areas. The first would be in this question of

linking, what happens with doctors and hospitals with hospice and

comfort care.

Second, we need some demonstration projects just on this question of quality of care in hospices. In other words, people are going

to need to know more about the quality in those individual hospices. I would like to see you both working in that area.

Mark, do you want to get into this?

Dr. MILLER. The only thing I was going to add, because I agree

that there is a need to develop measures that help the providers

focus on this, but also, to the extent that you move to patient satisfaction and patient experience measures, you can also include

measures as to whether the provider has provided a complete

range of discussion with the patient on what their options are, and

try and get movement that way as well.

16

Senator WYDEN. Now, one other long-term care issue. Senator

Smith and I have introduced S. 708, the Long Term Care Quality

and Consumer Information Act, so as to start linking this whole

pay-for-performance to the nursing home area. Of course, the nursing home industry collects more data than most other providers on

patients and quality.

What do you think about the idea of a bipartisan effort in the

long-term care area? Because, since there is so much data on it,

would this not be a pretty good place to start as we get into payfor-performance?

Mr. Kuhn?

Mr. KUHN. I could not agree more. I think the area of long-term

care is a good area. Through the minimum data set, a good amount

of data are collected. We have already posted 15 of those measures

on our website now publicly, so we have reporting. It is time to

move to the next step of pay-for-performance.

In our current regulation that we have out for skilled nursing facilities, we ask this very question from the stakeholder community:

give us thoughts, how should we begin to move in that next area?

So we, as an agency, are thinking about that, and we would love

to work with you as we move forward in this area, because it is

an area that I think is ready. I think we can get some real improvement in this area.

Dr. MILLER. If I could just add a couple of things. One issue

within the skilled nursing facility setting, specifically, is the notion

of delineating between short-term and long-term patients, because

Medicare patients have very distinct experiences. We think, if you

are going to develop measures and link pay-for-performance, there

are probably some sub-populations you need to focus on there.

The only other thing I would say is, to the extent that your comments reach broadly across long-term care, we went through a

process just recently in which we were trying to see whether there

could be common assessment instruments so that when you looked

across this population you would have uniform measures, as opposed to what we have now, which are measures tied to each setting.

There are some real issues that, off-line, we should talk about,

about how to build that kind of common assessment instrument.

There are some real difficulties there.

Senator WYDEN. Thank you, Mr. Chairman.

Senator BAUCUS. Thank you, Senator.

Senator Thomas?

Senator THOMAS. Thank you, Mr. Chairman.

Thank you, gentlemen. This is certainly an area that I think everyone agrees they like the idea, it is how you implement it, and

the difficulty there.

I presume, in the private sector—in any sector—choice has something to do with it, does it not: where you go, what kind of a provider you go to? What about competition? Is there not any effort

in the private sector to do some of this, ‘‘I do it differently than you

do,’’ to do it a little less expensively? Is that a function? I do not

know.

17

Mr. Kuhn, you were fairly general in your opening statement.

Give me one or two ideas specifically on how you measure performance.

Mr. KUHN. There is a level of specificity in how we measure performance. In the hospital area, with the Hospital Quality Alliance

and the HQI, the Hospital Quality Initiative, currently we have 17

indicators of quality.

That information is posted on our website, and it looks mostly at

process measures, that is, the process that the institution goes

through to deliver better care, and not necessarily outcomes.

Under the Premier demonstration, we have 5 disease categories

and 34 indicators where we have a combination of both process and

outcome, so you get even more granularity in terms of how you look

at the patient and the experience that is out there.

Another dimension of quality that we hope to be able to measure

soon is patient satisfaction. So that if you get the quality measures

that are out there with process outcomes, and then ultimately

move towards a patient satisfaction survey, you can get a pretty

good representation of the overall patient experience in that facility, and that, too, we hope to make public.

So you put all those things together and you can begin to connect

the dots and get a better picture of quality and what is being delivered at those facilities.

Senator THOMAS. I see. So, outcome is not the only component of

a measurement.

Mr. KUHN. That is right. Both process and outcome are absolutely key. Others are structural measures that you can look at: do

they have things in place like the IT systems, et cetera? Then, ultimately, patient satisfaction. So, I think those 4 dimensions are all

areas that you can use to measure, to record, and make public.

Senator THOMAS. Sure.

Dr. Miller, I presume different providers have different procedures. So if you measure procedures as opposed to outcome, or in

addition to outcome, do different providers have the flexibility to do

different procedures that they think are more effective than others?

Dr. MILLER. Yes. If I understand your question, I think that part

of the process, and the process that we went through and the process that we would envision the program going through, would be

a collaboration among the providers and the program quality organizations of identifying the measures that capture the dimensions

of care for a specific set of providers.

So in the hospital, it may be giving a beta blocker after a heart

attack. In a physician’s office, it is, did you run the HC–1A for your

diabetics? The process measures would be specifically identified for

the providers in question and, indeed, for potentially different categories of patients.

Senator THOMAS. So you are suggesting that everyone follow

pretty much the same procedures.

Dr. MILLER. No. I think what I am saying—now I think I have

a better sense of what you are going after here—is that there are

process measures for each of the different settings we are talking

about where there is widespread agreement that, when a patient

comes in, this should be done.

Senator THOMAS. I see.

18

Dr. MILLER. So it is not sort of a cookbook, you have to go A, B,

C.

Senator THOMAS. Right.

Dr. MILLER. But you see my point.

Senator THOMAS. Yes, I do.

Just generally, are there providers, physicians on your Commission?

Dr. MILLER. Oh, yes. There are five, if I am not mistaken. Well,

there are five physicians. There are people who run hospitals, people who run post-acute, those types of things.

Senator THOMAS. Yes.

Now, we have State programs, Mr. Kuhn, that I understand are

fairly into this whole process.

Mr. KUHN. Yes. There are a lot of other areas where innovation

is occurring in this area. Some of it is going on with the Medicaid

programs, and we are trying to understand what the Medicaid programs are doing. Can we learn from them in terms of better ways

to do things, and can we also share that with other States so they

can move in that area?

Senator THOMAS. Good.

Dr. MILLER. Likewise, the private sector is way ahead of us in

this area. We are looking at their programs and are working with

them as well.

I think the real key issue here, and we heard it in the opening

statements, and time and time again, is that this is something that

everybody agrees ought to be done, and it is a real collaborative effort. That makes it much more easy to move forward.

Senator THOMAS. So we are not imposing something new on everybody. This is already in place.

Dr. MILLER. This is in place in many, many areas. That is correct.

Senator THOMAS. Do we need legislation to accomplish this job?

Mr. KUHN. Right now, under our current authority, we think we

can move in a lot of areas so far where we are. We are continuing

to evaluate, and we hope to be able to have some stuff out later

this year where we can talk about, do we need some additional authority to move forward? We feel pretty comfortable with some of

the authority we have right now, but we may need additional authority as we move forward in these payment systems.

Senator THOMAS. Any comment on that?

Dr. MILLER. The Commission’s view is that there is a very significant change in authority that is needed through law, which is

the ability to pay differentially across providers in Medicare payment systems, and, with many of the recommendations, the assumption is that that would take legislative authority.

Senator THOMAS. I see. Thank you.

The CHAIRMAN. Senator Hatch?

Senator HATCH. Well, thank you, Mr. Chairman.

I appreciate the testimony of both of you. You are very, very good

servants of the people, as far as I am concerned.

But as far as pay-for-performance is concerned, Mr. Kuhn, why

should we be paying Medicare providers more money for that

which they should do anyway, and what type of impact will payfor-performance have on rural providers, like we have in all of our

19

States, and in my home State of Utah? From your perspective,

what has been the reaction of the providers when it comes to payfor-performance? I would be happy to hear from both of you on

that.

Finally, how will CMS’s work on quality coincide with the quality

of performance work that is being done in the private sector?

Mr. KUHN. A lot of good points there; things to raise. In terms

of the providers, the private sector, we hope it will be complementary to and help support things that they are doing, and then hopefully the things that we do will support what they are doing.

We are not out trying to reinvent the wheel and create and erect

new kinds of incentives out there that would be inconsistent with

what is going on in terms of evidence-based efforts that are already

going on.

The last thing we would want to do is for a clinician or a hospital

to say, well, this is private pay and we have to do this for them,

and this is Medicare, we have to do something different. We want

everybody pushing and pulling in the same direction as we go forward.

Your first question, however, I think is a good one in terms of,

why should we pay differentially when we should be getting quality

care that is already out there? I do not think it is so much paying

for higher-quality care. It is to a degree, but right now, the way the

current system is designed, we do not really enable providers to deliver the quality care that is out there.

Senator HATCH. I take it you do not have the incentives, you are

feeling.

Mr. KUHN. That is right. The incentives are not aligned right.

Take, for example, a group of physicians who are dealing with patients who have chronic conditions; diabetics, for example. They

really invest in those patients. They deliver high-quality care.

As a result, they reduce the number of hospitalizations and overall the Medicare program saves money. What happens to the physicians? They actually lose money because they do not get paid for

those other interventions. Therefore, because the patient is not

going to the hospital or needing additional care, it costs them at

the end of the day.

So the incentives are to deliver more care, more redundant care,

reward complications, errors, things like that. Instead, if we pay in

order for them to invest in quality systems and invest to deliver

higher quality of care, yes, it is paying for them to deliver higher

quality care, but I think the incentives are driven in a more

aligned, more appropriate way.

Senator HATCH. Dr. Miller?

Dr. MILLER. Just a couple of reactions. First of all, I completely

agree that the incentive structures are wrong. I mean, it is do

more, and it is also, if you have money to invest, invest in some

kind of technology that generates revenue as opposed to electronic

medical records or decision support systems.

To your rural question, there are a couple of issues that I think

need to be addressed there. One is, you always want to be very conscious in these measures that you have enough ‘‘N’’, enough sample

size, enough cases, in order to robustly evaluate a given provider.

20

In the rural setting, if we have a very small hospital or physicians’ practice, one way to overcome that problem is to combine

years, to take multiple years to develop your measure, whereas, in

an urban area you may be able to work with 1 year.

Another thing to think about in the rural area is, sometimes

rural providers have very specific functions. There are hospitals

that are just designed to stabilize patients and move them out. So,

you may want to emphasize certain measures or a more narrow

measure set for those kinds of providers in evaluating them.

We do not think this should not go forward in rural areas, but

we think there is probably some tailoring that needs to be dealt

with in order to address a couple of specific issues in the rural setting. Maybe I will stop there.

Senator HATCH. Thank you.

Let me just ask a series of questions about the Washington Post

articles. They have run a series of articles on Medicare that has

been highly critical of the program, at least the way I view it. So,

let me ask these questions: what is the agency’s response to some

of the points that were raised, Mr. Kuhn?

Do you think they were justified? How can things be improved

in the agency to ensure that Medicare beneficiaries are receiving

the best care possible? I am specifically interested in how those organizations that actually review quality of performance of Medicare

providers develop their criteria. Last, but not least, does CMS review the work of these organizations on a periodic basis?

Mr. KUHN. A very good question. Two areas. One, let me start

a little bit with the Joint Commission, because that was one area.

Then let me talk about the quality improvement organizations.

We have already initiated three things to improve in that area,

and I would like to share that with the committee. First, one of the

issues that was raised in the article is the sample size and how we

go about validating whether the Joint Commission is doing good

work in terms of accrediting these facilities. We are moving to increase the sample size that is out there, and we think that is appropriate.

The second area is really the complaint data. A lot of follow-up

investigations of hospitals and other providers are based on complaints. But are there some indicators in those complaints that can

give us some signals that might indicate that there are problems

in other institutions?

Complaints could be a flare that we are not seeing very well, and

we need to recognize that. So, we have a contractor working to help

us understand that.

Then, finally, the issue had to do with a disparity. That is, when

we go back and we look at what the State surveyors found versus

what the Joint Commission found in terms of accreditation, whether the facilities were meeting their conditions of participation, we

are going to go back, perhaps, and look at some regulatory changes

on how we look at those levels of disparities and how we can work

with the Joint Commission to make changes. So, I think that is an

important area.

In terms of the quality improvement organizations, as characterized in the paper, these are enforcement agencies, but they really

are not. They truly are quality improvement organizations and

21

their role is designed to have interventions with providers to help

them improve the quality of care.

So, the focus was looking at them as kind of a ‘‘got-you’’ system,

as an entity that could go after an organization, but, in fact, their

role is to help providers improve the level of care and to work with

them in a collaborative way, and an educational way, to make

changes.

The important thing about these organizations is that they really

are a change over the last decade from what we saw previously in

terms of health care. Early on, what we had in a regulatory mode

was an effort to kind of count and punish.

That is, let us count the number of errors, count the number of

problems that were going on with providers, then let us punish

them, whether they be nurses, physicians, facilities, or whatever.

But a decade ago, we began to pivot. We said what we really

need to do is begin thinking about educational opportunities, helping these facilities improve. Yes, where there are bad actors, let us

catch them, let us deal with them.

But more and more, it is, let us get a level of improvement. Let

us work with these institutions to help them provide better care.

That is the change that you see here in the quality improvement

organizations, and we think, quite frankly, they have been pretty

effective in terms of doing that.

Senator HATCH. All right.

Dr. Miller?

Dr. MILLER. I cannot speak to the QIO issue. But I would say

that the Washington Post article really captured issues and problems that the Commission and others have been speaking about for

years, this dramatic variation in the utilization of services which

has no clear linkage to quality, at least at a population level, the

incentive structures in the program that just promote the wrong

type of care or promote more services, or investing in certain types

of services as opposed to others.

So my view, when I picked up the paper on Sunday, was that it

was pretty consistent with messages that we have been trying to

get out, and policy directions that we have been trying to promote

to address some of those issues.

Senator HATCH. Thank you, Mr. Chairman.

The CHAIRMAN. Dr. Miller, Senator Baucus and I, in developing

our bill, wanted to be budget neutral, and that was recommended

by MedPAC. I ask this question because we have a lot of attention

given to putting more money into the program.

So could you elaborate, for my colleagues who are not familiar

with the Commission’s deliberations on this issue, why the Commission endorsed a budget-neutral approach?

Dr. MILLER. Again, I may have not handled this question particularly well from Senator Kyl. We, on an annual basis, assess

adequacy of payment, looking at a whole series of factors.

So, the Commission makes a decision—or at least makes a recommendation, let us put it that way—to the Congress about how

much payments need to flow to a provider in order to assure access

and to get quality of care.

But then within that, the concern was that they wanted something budget neutral that was redistributive in nature, so that it

22

is not for a provider that does not provide high-quality care. It is

not business as usual.

For a provider that, in fact, does provide high-quality care, they

can actually be rewarded and benefitted from this system. We

think that begins to reverse or change this incentive that is in

place right now, which is the same for everybody, regardless of

what you do.

So we think that that is pretty key. But to Senator Kyl’s and

your questions, we do assume that there is an adequate set of payments out there to start. I think, actually, Herb nailed it: we really

see the updating process and the payment adequacy process and

the pay-for-performance process as one package.

So I think that was our thinking about that. To be blunt, we also

wanted to be fiscally responsible. We have a fairly tough budget environment, so that was certainly something to think about. So, I

guess that is my take on that.

The CHAIRMAN. All right.

Then another point about Senator Baucus’s and my consideration

of the bill as we were putting it together: we were aware of the fact

that there are lots of data already being collected in this area.

We clearly do not want to over-burden providers with reporting

requirements and have CMS unnecessarily inundated with a lot of

data. That is why we want measures to develop by consensus, with

consideration given to measures already available.

So, considering what we have done, what other steps do you

think that we need to take to make sure that we do not over-burden providers and CMS?

Dr. MILLER. I think that there are a couple of key things, and

I do not know that these are additional steps. I think, number one,

which I think you have just referred to, is the notion of having this

collaborative process where there is an agreement with providers

and other actors on what are the relevant measures that are key

to the care that they provide, and come to consensus on those

measures.

Second, within that process, to coordinate with the private sector

so that you do not have two different streams headed off in different directions. Once again, that would streamline some burden.

I would like to emphasize that there are information systems collecting much of this data now, and some of those information systems could be enhanced in a way that does not necessarily involve

a significant new burden, but sort of rides on the current systems

to enhance those data systems.

One other thing I would say is, if you get outside claims systems

for the purposes of collecting data and ask beneficiaries to respond

specifically, the private sector uses web-based response mechanisms, which is another way to reduce some of the burden.

The CHAIRMAN. All right.

The last question goes to Mr. Kuhn. The road map that CMS

issued this week stresses the importance of having valid, reliable

quality measures. It also stressed that that be done collaboratively

with outside groups.

Why is this collaboration important? In our bill, Senator Baucus

and I worked hard to promote this collaboration. So, can you offer

23

a qualitative judgment of whether or not you think that is on target, and do you have suggestions for improvements to that process?

Mr. KUHN. Thank you, Senator. I think Mark mentioned this as

well, that collaboration is really the key, and the linchpin to make

this work, because you have to have measures that providers understand and that they believe in, and believe that they can work

toward in order to make real improvement.

So, we need an inclusive process. What this collaborative effort

also does is bring out the leadership in the provider community

and all the other stakeholders.

Then, finally, it brings about the experts who know this. If you

can bring them all together in a consensus process to get a product

out there, and one that they believe in, it just makes the effort to

achieve the objective that much easier, but also it makes sure that

everybody understands what those measures are and that providers are moving aggressively to try to hit those new metrics.

The CHAIRMAN. Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman.

I wondered what the role of hospital accreditation might be here.

There are a lot of ways to get at that, but one thought is that accreditation might be somewhat conditioned on some actions that

the hospitals should or should not be taking here.

Your thoughts?

Mr. KUHN. Yes. The Joint Commission is already collecting a lot

of quality information from hospitals right now. I think MedPAC

might have had in one of its charts a comparison of the various

measures that are used by different groups, and I think the Joint

Commission’s was part of that.

So, an opportunity to try to synch all that up and to make sure

everybody is looking at the same measures and we are all working

collectively to move the hospitals and their care patterns in the

same way, is a good suggestion and something that we are already

trying to do right now in the current process.

Senator BAUCUS. I understand part of it, though, is some people

think that JCAHO has got a bit of a cozy relationship with some

hospitals and there is not quite the independence there that a lot

would like to see. That is an ancillary part of all this. But it just

seems to me there ought to be some independent review here.

Mr. KUHN. Yes. I think the efforts, as we talked earlier, to increase the sample size in terms of our validation surveys will be

to make sure that they are doing the job right.

But to give you a bit of data that I think helps drive this home,

we get complaints from beneficiaries who ask us to go in and look

at what happened to them in a hospital, an experience they might

have had.

When we go back into facilities where the Joint Commission has

been, I think the rate that we are finding in terms of problems

with the conditions of participation are in the 1- to 2-percent range.

When we go into facilities that are not Joint Commission accredited, it is in the 10-percent range.

So, I think one thing is, that data point shows that they are

doing a pretty good job in terms of the accreditation process in the

facilities. But as we move forward to look at our sample size, as

24

we look at some of these other regulatory things we have been talking about here, I think that could help improve the process.

Senator BAUCUS. I read something. I do not know what it is.

Vista.

Mr. KUHN. Yes.

Senator BAUCUS. It is software that some hospitals use, as I recall.

Mr. KUHN. That is correct.

Senator BAUCUS. What is all that?

Mr. KUHN. Sure. It is a system used by the VA. It is electronic

health records.

Senator BAUCUS. That is what it was. Yes. Right.

Mr. KUHN. And we have made note that we are excited about

this. We are excited about electronic health records within providers overall.

You heard Mark talk about, one of their recommendations is to

really begin to move the IT systems, because it can help with prescribing, it can help with patient notifications, and it can help with

decision support with the physicians. So, there is a lot of real value

with IT systems.

Anything that we can do to improve quality and to reduce costs,

we want to move in this direction. So we have begun discussions

with the VA and others. Is there an opportunity to take this public

domain software and begin to make it more available to physicians

in smaller offices that might want to use it? So, it is something

that we will have more announcements on soon, but it is a project

that we are excited about and hope to be able to roll out soon.

Senator BAUCUS. This might be a little too esoteric, but any

thoughts on open-source technology development versus non-opensource, that is, Microsoft versus Linux kinds of approaches here in

developing software development in this area?

Mr. KUHN. That is a good question. I do not know if I can answer

that completely. What I do know is that hopefully when we have

the information for Vista, we can answer some more of those questions.

But the key here is that there is an opportunity for vendors and

others to support these software packages and add features to

them. But this is something that has already been developed. Many

people are using it. If there is a way to get it out to others, we hope

to be able to look at those opportunities.

Senator BAUCUS. Can you just comment a little bit on standards,

interoperability, and private sector initiatives? How do you see the

Senate getting together so that the right hand knows what the left

hand is doing, kind of thing?

Mr. KUHN. Yes. Our focus right now is in the ambulatory care

setting with physicians. In the MMA, we had the authority to move

for e-prescribing and get standards out there to deal with the Stark

law and try to move to try to get some more standardization on

interoperability.

What we have recognized is, the marketplace has changed a lot

in the last 2 years. No longer do software packages for e-prescribing stand alone. They are more embedded in terms of EHR,

the electronic health records.

25

So we hope to have a proposed rule very soon that begins to address that issue, because we want to make it current. We want to

make it so that it is relevant to what the current marketplace is,

because the marketplace in this area is changing so rapidly.

So what we think is one of the best ways to move aggressively

in the ambulatory care setting is to get physicians on board, because they drive what is going on in the hospital, and they drive

what will be in the skilled nursing facility, and that is where the

focus is right now. We must make sure we get some standardization in terms of the Stark rule, but also interoperability. That is

where the focus is with the agency.

Senator BAUCUS. My time has expired. Thank you.

Senator HATCH. As I understand it, Senator, you have no further

questions.

Senator THOMAS. No, Mr. Chairman.

Senator HATCH. All right. If I could just ask a couple of questions. I will not keep you much longer.

Dr. Miller, how did you determine which providers should be

analyzed on pay-for-performance? Do you believe other Medicare

providers should be eligible for pay-for-performance, like hospice or

skilled nursing facilities? Should pay-for-performance be limited to

just certain Medicare providers?

I agreed with several of the points raised about developing quality measurement standards for the hospice industry, by the way.

So, I would just kind of like to have your view on those.

Dr. MILLER. Yes. That is a completely fair question. There are

two parts to the answer. One is that we had a process that we

went through for different areas, and we established a set of criteria to determine whether there were measures available that

were robust enough to move forward on. We did that over a 2-year

period.

As we satisfied ourselves that the measures were available, logical, linked to quality, endorsed by others, they did not represent

a significant burden, standards like that, we would say, this area

is ready to go. We did two in March of 2004 and three more in

March of 2005.

This gets to the second part of the answer. No, we do not think

that there are some areas where you should and you should not.

We are not a gigantic operation. We are just kind of working

through as we can review measures, saying, all right, we think this

area is ready to go, and the next area.

Skilled nursing facilities is one that we looked at and did not feel

was quite ready, but we are still working on it. The questions that

you and Senator Wyden asked about hospice, we are completely

open to those kinds of things and working through those areas. We

are just not there yet.

Senator HATCH. In your testimony, you talk about the four criteria that MedPAC used to evaluate each setting. Now, I just wanted to ask a little bit about data collection.

How do we ensure that the data collection is not unduly burdensome for the Medicare providers and for CMS? I get complaints all

the time from almost everybody in the health care field, that they

are just over-burdened with paperwork.

26

Some of them do not even want to take Medicare beneficiaries

because of that. I think that has to be one of the most difficult hurdles to overcome when measuring quality. How would risk adjustments or outcome measures be determined?

Mr. KUHN. I will let Mark talk about some of the risk adjustment

issues. But in terms of data collection, you are absolutely right. Not

only do we have to utilize measures that physicians understand

and believe in, but we have to make it easy for them and other providers to share those data with us.

So in the physician group practice demonstration and others, we

are learning about how we can use the claims data that they give

us already for us to pay a claim, and use these data to get further

information for quality purposes.

Are there other ways, in terms of medical charts and chart abstraction, that we can collect data from? Because we cannot make

this burdensome or else it is just not going to work.

So, we are looking at new ways of reporting, trying to find different ways that we can collect information that is already out

there, but use the information in a different way to move in this

area. But I could not agree with you more, it has got to be easy

or else we are going to have problems.

Dr. MILLER. Let me pick up there. I think there are a couple of

things. I would just restate that, particularly for some of the areas

that we have said we are ready to go on, the data that are being

collected now are enough to start with.

It may not be where you want to end up in 5 or 10 years, but

there is enough to start with now that Medicare is already collecting. To Herb’s point, we think that there are streams of data

that can be enhanced so that there is at least no significant additional burden.

You asked about risk adjustment. I think with certain measures,

there is a significant amount of research and analysis that needs

to go into adjusting certain kinds of measures. So our point is, they

should not be used until that research is done and well-accepted.

In some instances it is, but I would just take you back to, there

are other measures that should be done regardless of the illness

state of the patient, and those are process measures, patient experience, and those you can start with and not have such a risk adjustment problem. So, the notion would be to try to build on existing data streams to the extent possible.

Then to the extent that you impose new ones, or new ones are

imposed, the idea would be to try to tailor it to their work practices, like allowing them to respond through web-based types of

surveys and that kind of thing.

Senator HATCH. One last question. That is, have you had the opportunity to review other countries’ payment policies and whether

or not other countries reward good performance of providers? Is

there anything we can learn from the experiences of other countries?

Dr. MILLER. I would prefer Herb to take this. [Laughter.] But

since he just turned to me, the only thing I can tell you is, we had

a physician in from the U.K. who talked about the system that

they use for their primary care physicians.

27

They have an incredible list of detailed types of measures that

they go through which affects the payment that they get. I would

be very hard-pressed to walk through it with you, but we did at

least have that exercise that we went through.

Mr. KUHN. We have been meeting recently with a number of

Ministers of Health from different countries who have been coming

to the United States for a variety of reasons, but sitting down and

talking to them about some of the changes that we are bringing

about in our health care system as a result of the MMA, sharing

with them some of the things that we are doing in terms of evidence-based medicine and what we are doing to try to do pay-forperformance.

They, too, are beginning to share information that they are trying to experiment, but they are trying to learn from us as much

as we are trying to learn from them. So, those discussions are ongoing.

Senator HATCH. Well, thank you.

Do you have anything further?

The CHAIRMAN. We thank you very much for your testimony. Oh.

We have some more questions from Senator Baucus.

Senator BAUCUS. Well, both of you kind of sit back a little bit

and just kind of give a little perspective here. We clearly all want

this to work. So the real question is, what is your advice, on the

positive side? What would the incentives be, and from where—here

in Congress, or wherever—to help make this really work?

Second, or maybe the other side of the same coin, what are some

of the pitfalls, some of the things we have to watch out for and help

keep us on track? Just things to avoid.

Mr. KUHN. Yes. A couple, three things I would just share here.

One, we just kind of finished talking about. One of the pitfalls

would be if we made this thing excessively burdensome, and we

just cannot do that because I think that would just create all kinds

of problems.

Also, we need to make sure that we do not create a system that

would create a situation where providers would not want to take

riskier patients, because if they are paid for performance and they

have a patient who is either non-compliant, does not want to follow

their rules, or because they are higher risk, we want to make sure

that we risk-adjust and we do that right so they will take riskier

patients.

Then, finally, we really need to make sure that the measures are

evidence-based. They have to be credible. So, I think those would

be three things that I would just share with you in response to

your question.

Dr. MILLER. I really do not have a lot to add. I was writing as

you were speaking, but I think, in addition to what Herb said, to

be sure that the process is consultative.

Pull people together and get consultation from the providers,

from payors, from quality organizations, so that, when measures

are rolled out and used in this system, there is widespread agreement in the validity of things, like whether they have been riskadjusted, whether they capture the care, are they within the control of the provider, those types of things. You have a critical mass

28

of people, experts, saying this is the right way to go, and it includes

the provider group themselves.

From the Congress, I think it is very important that if the Congress feels that this is the change to make, it is important that,

legislatively, Medicare be allowed to pay providers differentially.

To the administrative actions, there are definitely things that

Herb has already cranked through in this conversation on demonstrations that can be helpful to the process, and we have also

made a recommendation on reviewing physician resource use and

confidentially feeding back to physicians.

The point I am trying to make is, there are legislative changes

that we will push and there are administrative changes which will

also work in behind this. But the pitfalls that Herb went through

were my list as well.

Senator BAUCUS. What are some of the carrots that kind of help

physicians and hospitals really want to do this so they are not just

pushed into it, but they are sort of incented to really want to do

it?

Mr. KUHN. I would say, if a provider thinks a measure is a good

idea, putting some money behind it is certainly going to speed the

quality improvement that is out there.

Dr. MILLER. Yes.

Mr. KUHN. I think the evidence is there if you look at what has

happened with the hospitals. This whole effort of the reporting by

the hospitals was doing pretty well voluntarily. You were getting

a pretty good number of hospitals. But as soon as you all passed

the MMA and you put 40 basis points behind that, you had nearly

100 percent of reporting.

Senator BAUCUS. Right. Ninety-eight percent, I think.

Mr. KUHN. Yes. So I think what that shows us is that incentives

do work. But you do not have to have a very big incentive. I think

that is one thing on the MedPAC recommendations. The incentives

do not have to be great, but they can change behavior rather quickly, and for the good, as we have seen here.

Senator BAUCUS. All right. Good. Thanks.

Dr. MILLER. The money was where I was going. I thought it was

a trick question. [Laughter.]

Senator BAUCUS. No, it was legitimate. Thank you.

Thank you, Mr. Chairman.

The CHAIRMAN. Besides saying thank you, Senator Baucus and

I will be calling on you in the next 3 months as we work on our

legislation. We expect that to be part of our final package this fall.

Mr. KUHN. Very good.

The CHAIRMAN. Thank you both very much.

Mr. KUHN. Thank you.

Dr. MILLER. Thank you.

Senator BAUCUS. Thank you very much.

The CHAIRMAN. Our next panel is Dr. Byron Thames, board

member of the AARP; Dr. Nancy Nielsen, Speaker of the House of

Delegates of the American Medical Association; Mr. Leo Brideau,

president and CEO of Columbia St. Mary’s, Milwaukee; and Dr.

James Mongan, president and CEO of Partners HealthCare in Boston.

29

We thank you for your testimony. If I mispronounced anybody’s

name, please correct me.

We are going to start with you, Dr. Thames.

STATEMENT OF BYRON THAMES, M.D., BOARD MEMBER,

AARP, WASHINGTON, DC

Dr. THAMES. Thank you, Mr. Chairman.

Mr. Chairman and members of the committee, my name is Byron

Thames. I am a physician and a member of the board of directors.

The CHAIRMAN. Let me interrupt you. I asked my staff how to

pronounce your name, and they were wrong.

Dr. THAMES. Well, Senator, when I was in England, with the

courtesy of the U.S. Air Force, when they called me ‘‘Temz,’’ I accepted it. It is not a problem, sir.

The CHAIRMAN. All right.

Dr. THAMES. I am a physician and I am a member of AARP’s

board of directors. We want to thank you for inviting us to testify

on the need to link health care payments to quality performance.

Linking Medicare payment to the quality of care that beneficiaries receive is a critical step for our Nation’s health care system. AARP, therefore, strongly supports the Medicare Value Purchasing Act sponsored by Chairman Grassley and Senator Baucus.

This legislation lays out an appropriate and reasonable framework for achieving vitally needed quality improvement. Today,

America spends more per capita on health care than any other nation in the world.

Health insurance premiums are rising much faster than general

inflation. Last year alone, the Medicare Part B premium grew 17.5

percent, in large part due to reimbursement increases for providers. Steep increases are projected again for next year.

Despite these high and rising costs, quality is often lacking. We

have a health care system in which hospital-based medical errors

cause an estimated 98,000 preventable deaths each year.

At the same time, patients are receiving recommended health

care services only about half the time. Clearly, we are not getting

our money’s worth. Medicare beneficiaries who live in higherspending parts of the U.S. receive more care than those in lowerspending areas, but they do not have better health outcomes or

greater satisfaction with care.

Medicare payment policies now do not promote better performance. Physicians and other providers are paid whether or not they

provide good care. In fact, a hospital is paid more if it does not prevent a preventable, life-threatening infection because longer stays

and more serious conditions automatically place patients in higher

payment categories.

This situation is of particular concern to AARP members because, as we all age, we tend to use the health care system more.

Older Americans are, thus, more vulnerable to preventable errors

and other quality lapses.

Medicare program resources must be used to obtain real value

for the dollars spent for care. We can no longer simply pay the bills

for health care without using those payments as an incentive to improve the quality of care.

30

The time has come to improve our approach to paying doctors,

hospitals, and other Medicare providers. Offering rewards for high

quality, quality improvement, and the use of health information

technology simply makes good sense. The Medicare Value of Purchasing Act will point us in the right direction to achieve this goal.

We want to thank you again for the opportunity to testify today,

and I will be happy to answer any questions.

The CHAIRMAN. Thank you, Dr. Thames.

[The prepared statement of Dr. Thames appears in the appendix.]

The CHAIRMAN. Now, Dr. Nielsen?

STATEMENT OF NANCY H. NIELSEN, M.D., PhD, SPEAKER OF

THE HOUSE OF DELEGATES, AMERICAN MEDICAL ASSOCIATION, WASHINGTON, DC

Dr. NIELSEN. Thank you. The pronunciation is right.

The CHAIRMAN. Thank you. I come from Sioux Falls, Iowa. We

have a lot of Danes around there.

Dr. NIELSEN. Chairman Grassley, Ranking Member Baucus, and

members of the committee, thank you very much. I am Speaker of

the American Medical Association’s House of Delegates, and I am

a practicing internist in Buffalo, NY.

We would like to commend you, Mr. Chairman and Senator Baucus, and your committee, for your efforts to improve quality by introducing S. 1356.

We also appreciate your repeated efforts in pressing CMS to

make administrative changes to the physician payment formula, or

the SGR, which would lower the cost of enacting a new payment

system, especially your most recent communication to OMB Director Bolton, signed by 89 members of the Senate, including all members of this committee.

We urge CMS to use its administrative authority to remove

drugs from the SGR retroactively and to include in the payment

formula increased spending due to national coverage decisions and

government health promotion policies.

We also commend Senators Kyl and Stabenow and their co-sponsors of S. 1081, which would set positive updates in 2006 and 2007.

Today we are here to discuss value-based purchasing. The AMA

and its member physicians are staunchly committed to quality improvement. Over the past 5 years, we have dedicated over $5 million in convening the Physician Consortium for Performance Improvement for the development of performance measures.

As a result of the Consortium efforts, CMS is now using these

measures in demonstration projects on pay-for-performance, authorized by the Medicare Modernization Act.

In June, our House of Delegates adopted principles and guidelines for pay-for-performance programs, and they are attached to

our written testimony.

We are pleased that several key elements for quality measures

under S. 1356 are consistent with those principles and guidelines.

For example, your bill would require quality measures to be evidence-based, reliable, and valid, as well as feasible to collect and

report. They also would be developed by the medical specialty societies.

31

We want to work further with the committee to address some

areas of concern. First, value-based purchasing and the SGR are on

a collision course. While S. 1356 recognizes the need to address the

SGR, it must go a step further and replace it.

Value-based purchasing may save dollars for the program as a

whole by reducing hospitalizations, but the majority of measures,

such as those focused on prevention and chronic disease management, ask physicians to deliver more care.

The SGR penalizes volume increases that exceed a target. If the

SGR is retained, the so-called reward for physicians will be additional pay cuts, on top of the projected 26 percent in cuts over the

next 6 years, beginning in January. This is antithetical to the desired outcome of value-based purchasing and would only compound

an ongoing, serious problem.

A recent AMA survey shows that if significant cuts occur, more

than a third of physicians would decrease the number of new Medicare patients they accept; a third will discontinue rural outreach

services; more than half would defer the purchase of information

technology that is necessary to make the volume-based purchasing

work; and a majority will be less likely to participate in Medicare

Advantage. So, the SGR must be replaced.

Our second concern is about efficiency measures. There is not

currently broad-based consensus regarding what constitutes appropriate levels of care. Measures of efficiency should not simply reward the lowest-cost provider.

On the other hand, physicians understand fully that over-use,

under-use, or misuse of services is not in anybody’s best interests.

We are committed to developing efficiency measures that meet the

same evidence-based standards as quality measures. They also

must be vetted through a transparent, multi-stakeholder endorsement process.

Third, there needs to be a reliable method for risk adjustment.

Without that, you do not get an adequate reflection of a physician’s

performance.

Fourth, we have some concerns about public reporting. Patients

are served only if they are provided accurate and relevant information. Data collection must recognize that some factors are out of a

physician’s control. Sometimes patients are non-compliant for a variety of reasons.

Fifth, physicians should be fairly reimbursed for their administrative costs, particularly for information technology systems that

will be necessary to collect and transmit accurate quality data.

Sixth, pilot testing is imperative prior to full implementation to

flush out any unintended consequences.

Seventh, value-based purchasing programs must be phased in to

allow all physician specialties the opportunity to participate.

Last, as opposed to a withhold pool, we urge that S. 1356 adopt

a differential payment structure that provides a positive update for

all physicians, with an additional payment for meeting quality

goals.

Thank you very much for the opportunity to appear today.

The CHAIRMAN. Thank you, Dr. Nielsen.

[The prepared statement of Dr. Nielsen appears in the appendix.]

The CHAIRMAN. Now, Mr. Brideau?

32

STATEMENT OF LEO P. BRIDEAU, PRESIDENT AND CEO,

COLUMBIA ST. MARY’S, MILWAUKEE, WI

Mr. BRIDEAU. Thank you, Mr. Chairman, Senator Baucus, and

distinguished members of the committee. I am Leo Brideau, president and CEO of Columbia St. Mary’s Health System in Milwaukee. On behalf of AHA’s 4,800 hospital, health system, and

other health care organization members and our 33,000 individual

members, we appreciate the opportunity to appear before you

today.

Columbia St. Mary’s consists of four hospitals, a large employed

physician group in 26 medical clinics, and a College of Nursing that

serves southeastern Wisconsin with 155 years of history serving

our community. In fact, we have the oldest hospital ever founded

in the State of Wisconsin.

We are also part of Ascension Health, the largest faith-based and

the largest not-for-profit health system in America. We are deeply

involved in work to improve quality, both locally and nationally. I

chaired a special committee of the AHA’s board of trustees that explored future forms of payment for hospitals, physicians, and other

providers.

The committee concluded that the payment system must more

fully promote quality initiatives like pay-for-performance, and

America’s hospitals support the notion that payment incentives

should be among the efforts to encourage improvement in health

care quality.

In 2003, the AHA supported the provision in the Medicare Modernization Act that made part of the hospital inpatient update contingent on the reporting of 10 quality measures.

At that time, more than 2,000 hospitals were already reporting

the data as part of the Hospital Quality Alliance. In addition to the

AHA, the successful public/private collaboration includes CMS,

AHRQ, the National Quality Forum, and a number of other organizations representing health care and consumers.

The AHA took the lead on this because every hospital we represent shares a mission that can be summed up in two words: patients first. Part of putting patients first is getting them the information they need to make important decisions about their care,

and the centerpiece in our collaboration is Hospital Compare, a

new website that resides at the DHHS web address.

Seventeen measures are reported on treatments for three conditions: heart attack, heart failure, and pneumonia. These measures

are attached to my statement. They have gone through extensive

testing for validity and reliability.

Patient information will also be gathered through the HCAPS

survey, which will give the public information on aspects of quality

that are best captured by asking patients themselves questions

like, did the doctor or nurse speak to you in ways you could understand, did you get all the information you needed, was the call button answered in a timely fashion, and so on.

We also plan to add information on whether hospitals have taken

steps that have proved effective in preventing serious complications

of major surgery, and we are incorporating measures around preventing surgical wound infection. By 2007, we will augment that

33

with information on the prevention of serious blood clots, peri-operative heart attack, and post-operative pneumonia.

Senator Grassley, Senator Baucus, we congratulate you for your

legislation that can impact Medicare payment through pay-for-performance. It is a concept we support very strongly. This bill is an

important first step in moving our payment system forward to embrace the concept of pay-for-performance.

We would like to make a couple of suggestions that we think

could strengthen the bill. First, we urge you to amend the hospitalrelated provisions to specify that it is the Hospital Quality Alliance

measures that are to be used.

While quality measurement is not in place for other sectors of

health care addressed in the bill, hospital quality measurement is

under way and should be the foundation of pay-for-performance

legislation.

We are also concerned that the bill ties payment to issues like

efficiency. Pay-for-performance should focus solely on quality improvement. There is no common definition of efficiency of care for

hospitals, and more work must be done to define what should be

encouraged in terms of efficient care before it is incorporated into

legislation that will dramatically affect the care patients receive.

Finally, Mr. Chairman, two thoughts on funding. We are proud

that more than 99 percent of hospitals are reporting quality indicators based on the current incentive of market basket minus 0.4 percentage points.

With this participation rate, we see no reason to increase the

penalty to 2 percentage points for those not participating. This likely would hit hospitals that are the most strapped for resources.

Also, we worry about ultimately imposing a 2 percentage point

reduction in the standardized amount to fund this first broad Medicare experiment in rewarding excellence. We support a smaller pool

of funding, and we would like to work with you to explore other

funding sources.

In closing, we believe that an effective pay-for-performance program must focus solely on quality measurements, adhere to the

best science, and have as a foundation the successful work being

done by the Hospital Quality Alliance. We look forward to working

with you toward our shared goal of improving care for all Americans.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Mr. Brideau.

[The prepared statement of Mr. Brideau appears in the appendix.]

The CHAIRMAN. Now, Dr. Mongan?

STATEMENT OF JAMES J. MONGAN, M.D., PRESIDENT AND

CEO, PARTNERS HEALTHCARE, BOSTON, MA

Dr. MONGAN. Mr. Chairman and Senator Baucus, I am Dr. Jim

Mongan, president of Partners HealthCare in Boston, a health system founded by the Brigham and Women’s Hospital and Massachusetts General Hospital.

I always appreciate the opportunity to come before the Senate Finance Committee, where I began my career 35 years ago as comVerDate 11-MAY-2000 14:43 Oct 03, 2006 Jkt 095484 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 28477.000 SFIN1 PsN: SFIN1
34

mittee staff for 7 years, working both for Senator Russell Long and

Senator Wallace Bennett.

These leaders and their colleagues then were grappling, just as

you are 35 years later, with the difficult task of balancing the enormous benefits Medicare and Medicaid bring to our elderly and poor

against the significant cost of these programs to the Federal budget

in our society.

The initiatives you are considering today fall squarely within this

tradition, as pay-for-performance reimbursement, especially when

coupled with the development of information technology, will maximize the value we receive as a Nation in health care.

Let me start with a word about our aspirations at Partners regarding quality and cost, and then make three key points about the

legislation.

At Partners, we have a set of five initiatives, which we call our

Signature Initiatives, to improve quality, efficiency, and value

across our system. The first is to build out an electronic medical

record with embedded decision support across our system to support evidence-based medicine.

The second is to ensure safety in drug delivery through computerized order entry, which was pioneered at the Brigham and Women’s Hospital.

The third is to use our electronic data to measure quality and reliability across our system.

The fourth is to use our data to identify our sickest patients and

construct disease management programs to assist in their care.

The fifth is to use electronic prescribing and test ordering to assure the selection of only high-quality and cost-effective drugs and

imaging procedures.

Now, we were among the first providers in the country to begin

pay-for-performance contracting 5 years ago, with over 500,000 patients. We have $88 million, or about 10 percent of our reimbursement at risk, based upon our ability to improve efficiency and quality.

With the benefit of 5 years’ of experience, there are three points

that I would make relevant to the proposed legislation. First, we

agree that the thoughtful use of financial incentives can help drive

improvement in health care.

During the past 5 years, we have seen steady and measurable

improvement in the quality of care that we provide to our diabetics,

asthmatics, and our patients with heart attacks and heart failure.

We attribute at least some of this improvement to our initiatives

supported by our pay-for-performance contracts.

Second, we strongly support the principles of Medicare value purchasing in the proposed legislation. The phased-in approach, in

particular, will be helpful, both in the development of quality measures and the development of provider understanding.

The devil will be in the details, and the committee should understand that a Consumer Reports for health care will likely never be

fully realized.

Anyone who has been a doctor or a patient knows that health

care is not a product like a car or a television set. It is a series

of interactions between at least two people, often many more.

35

Measuring the quality of health care is more like evaluating a

marriage than evaluating an automobile. We all know that there

are good husbands and bad husbands, and that some doctors are

better than others. But coming up with measures that use administrative data to distinguish between them is quite difficult.

Pay-for-performance at this stage of development works best in

measuring large groups or large hospitals and less well on the individual physician level, so we should embark on this era of transparency with appropriate humility.

Third, and finally, I wholly agree with the legislation’s emphasis

on health information technology. Currently, about 90 percent of

our academic physicians have these systems, while only 20 percent

of our community network physicians are connected.

Unfortunately, the Stark and anti-kickback laws prevent us from

providing these tools to our network physicians. That is why a

broad exception from these laws for this purpose needs to be an essential part of any legislation. I have provided more specific views

to the committee in a separate statement.

In conclusion, I would urge your support for spreading information technology more broadly and for appropriately designed payfor-performance systems. Both would be consistent with the Senate

Finance Committee’s 40-year record of support for, and responsible

stewardship of, our critical health financing programs for the poor

and the elderly.

Thank you for the opportunity to testify.

[The prepared statement of Dr. Mongan appears in the appendix.]

The CHAIRMAN. Thank you, Dr. Mongan.

I am going to start with you for the first question, Dr. Thames.

AARP has a lot of experience in educating seniors about health

care and a lot of other things.

Now, we have a problem of quality, of getting out information on

quality. But we also have the challenge of providing beneficiaries

with information that is easily understandable. So, given your experience, could you offer some suggestions that might be helpful in

this area?

Dr. THAMES. Thank you, Mr. Chairman. I think maybe we can.

Our experience in educating our members about things like Social

Security and other issues certainly lets us start with making the

beneficiary knowledgeable that quality is important and that it is

a real problem.

Here in DC, these last 3 days of articles are certainly going to

make the public in general, in this area, know that quality is an

important issue. But I am not sure that the beneficiaries throughout the Nation are aware that, both in hospital care and physician

care, medical errors and poor quality of care are important to them.

They need the information you are asking.

Now, specifically, we believe that you have to identify the quality

measures that are going to be most meaningful to the lay person.

You have to identify what it is you want to tell them.

Second, you have to put it in language that they can understand.

It cannot be medicalese, where they cannot understand what the

problem is.

36

Third, you are going to have to translate it, sometimes, into more

than the English language.

There is a large proportion of people who are Hispanic in this

country. You are going to need to at least be bilingual as far as providing that material, and in some areas of the country you may

have to have other languages to produce that material.

You need to use, wherever possible, magazines, bulletins, and the

web. On the other hand, among our members, a lot of older seniors

are web savvy, but a good many of them are not.

So, you are going to have to look at a toll-free telephone number

or some way that they can ask the question, particularly those who

have vision and hearing problems so they have difficulty in writing

the letters and getting an answer back that they can read and understand.

And, last, you are going to have to target groups. Now, we have

been most effective by using our membership and our board of directors. As you know, we speak on issues, with invitations throughout the country, to different groups.

But we also organize our own group events in which we educate

volunteers to talk knowledgeably about the issues, and we use our

Area Agency on Aging contacts, and others, to get large groups of

our members and seniors who are interested in issues to come to

those where they can ask questions of live people. I suggest that

all of those would be necessary for you to get the best information

out to beneficiaries.

The CHAIRMAN. Thank you very much.

Now, Dr. Nielsen, Senator Baucus and I, in writing our bill, feel

that it is time to move forward very quickly, moving towards permanency in payment for performance.

We have had ample testimony in the first panel, particularly

from Mr. Kuhn, stating that we have had plenty of demonstration

projects, both in the public sector and the private sector.

You have made an argument to us about continuing pilot programs. So, I think I need to have you, with all this other testimony

we have, justify why AMA feels that we still need to continue pilots

or demonstrations.

Dr. NIELSEN. Yes, sir. Thank you, Mr. Chairman. I think the answer to that is that anybody who is worried about not doing harm

wants to make sure that any unintended consequences are flushed

out. So where there are pilot projects that have shown a result, go

forward.

Where there are areas that have not yet developed performance

measures, for example, develop them, study them, and then implement them. That is really the only reason. It is not to be a laggard.

It is absolutely to be sure that we have, in fact, done our homework

with all parts of the sector.

The CHAIRMAN. Would that be partly because, within medicine,

there are so many specialties, some have been working on this and

others have not? Is that where you are coming from?

Dr. NIELSEN. Yes, sir. That is correct. That is partly correct. For

example, in the Consortium which we convened, we have a variety

of specialties—over 65—that participate in that initiative.

But most of the performance measures that have been developed

by us, and also by NCQA, deal with chronic conditions that are

37

mostly seen by primary care physicians and the specialists to

whom they refer. There are some, for surgical specialties; for example, in my home State of New York, the Cardiac Surgery Outcomes

Measures have been around for years.

But in a variety of other specialties, performance measures have

not yet been developed. They need to be developed. We hope that,

through the Consortium and other venues, we can assist those specialties to get there pretty quickly.

The CHAIRMAN. All right.

Senator Baucus and I do not preclude the necessity of helping

and understanding the development of these standards and working with various subspecialties that might not have them. We know

we have to have that foundation, I guess is the way to put it.

Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman.

The CHAIRMAN. When he gets done, I have three more questions.

Senator BAUCUS. Thank you, Mr. Chairman.

First, Dr. Mongan, welcome back.

Dr. MONGAN. Thank you.

Senator BAUCUS. Please give our best to your nephew, Mike.

Dr. MONGAN. Will do.

Senator BAUCUS. Is he here? Oh, there he is. There is Mike.

Great. I will say, we really valued your work, Mike, a lot. You were

just aces on this committee, as you know.

You are kind of a pioneer, Doctor, in all of this. You mentioned

you have been working at this for 5 years. Sometimes providers

will say, gosh, we want to provide care, but we are kind of worried

about the bottom line here, too.

As we move and implement many more quality measures, that

might reduce our readmissions rate, which is good for the patients

and so forth, but financially it might put us in a little bit of a bind.

Now, my understanding is that you have focused on this very

point and have done pretty well with providers, namely, your readmission rate is down in certain areas, and your testimony mentioned how you focused on the sickest patients. Yet it has not, as

I understand it, adversely affected your financial condition.

Could you just talk to us a little bit about what you have done,

as you are working to address quality and pay-for-performance in

a way that has also not put you out of business?

Dr. MONGAN. Sure. I would love to say a word about that. I guess

I should begin with a qualifier, that our institutions have been running pretty full, so we are not in any need of readmissions in order

to meet our financial budgets, if you will. Consequently, we have

not been in quite the exquisite bind that some might be.

Having said that, I believe that when a fuller analysis is done,

that concern is over-stated. The percent of avoidable readmissions

are not that high as a total percent of admissions, number one.

And number two, they do not tend to be the DRGs that hospitals

are making substantial margin on.

Senator BAUCUS. Could you expand on that a bit, please?

Dr. MONGAN. Yes.

Senator BAUCUS. Which DRGs are there that hospitals are not

making a substantial margin on?

38

Dr. MONGAN. I would say—and again, this varies hospital by hospital—the most common readmissions tend to be the chronic medical conditions, like heart failure being one of the most classic of

them.

I think, as you look at the data across the country, it is not those

chronic medical DRGs where you do best financially, it is the surgical DRGs where you do a little better.

So I think, if the full analysis were done in the round, there is

not as much of a financial issue as people might be concerned

about. But, importantly, to just go one step beyond that, all of us

need a margin to support our mission.

Our mission is not just to make a margin. Basically, we should

all size ourselves to provide the amount of care that the population

we serve needs. If there is a reduction in readmissions, fine. We

can close a few beds and continue to operate in an appropriate

fashion.

Senator BAUCUS. But you say that is somewhat a function of size.

Is that the number of beds that are occupied or is that the size of

the institution? I do not quite understand. Or does it matter?

Dr. MONGAN. Well, no, it does not matter. Basically, that algorithm would apply at either a large hospital or a smaller hospital.

I mean, you should be sized, staffed and budgeted not to take care

of unnecessary business or readmissions that you could have avoided, but care for the patients who have real need of that care, provided on a quality basis.

Senator BAUCUS. And why did you set up this separate operation

focusing on the sickest patients? What is all that about?

Dr. MONGAN. We are believers that there are three important

things to getting a handle on costs consistent with quality. We are

talking about two of them here today: information technology and

pay-for-performance reimbursement.

We also believe that disease management, even though it earned

a bad name in the past decade, usually meaning we are not going

to pay the bill, if done properly, we believe that there is power to

disease management.

You just look at the simple numbers, that 10 percent of the people account for 70 percent of costs, 3 percent account for 50 percent, we believe if we focus in on those sickest patients and provide

them extra supportive services, it will be better quality and enhanced efficiency.

We are demonstrating that in the case of heart failure, where we

have, as I have said, reduced our readmissions and increased our

quality. So, we think that is a sentinel example of what can be

done.

We are doing an experiment with our thousand sickest Medicaid

patients, working with the State, having special call centers to support their care. It is too early to give you data on that, but we believe that disease management, done appropriately, is a third leg

of an important stool, and you are addressing two of the other ones.

Senator BAUCUS. I appreciate that. Yes. So what legitimate concerns do hospitals have as to whether paying for performance

might reduce their bottom line? If you talk about what you are

doing with providers, you have thought a lot about the subject, as

well as other subjects, what legitimate concerns do you think other

39

hospitals or providers might have, and what would you say to

them, or what would you say to us?

Dr. MONGAN. To be candid, Senator, as I have talked to hospital

and physician people in our State, I think the bigger concern is not

the damage to the bottom line from no more readmissions.

I really do not find much of that. I think the biggest concern,

frankly, is a concern about whether this can be implemented in a

fashion that is fair and accurate and not misleading. I go back to

the old bromide, and the exquisite balance you all have to work

with, that we should not let the perfect be the enemy of the good.

And we should not. Lots of my colleagues will say, we are not

ready to measure, it is not perfect, we cannot do it. We should not

let the perfect be the enemy of the good. We should move forward.

However, we should do everything we can to guarantee that the

good is adequate, because if what we are going forward with really

is not an adequate measurement, then you are going to mislead

people about quality and you are going to be unfair to some providers.

So, I think the real concern is, are we ready? Where are we on

that spectrum of perfect, to good, to adequate? Our belief is that

we are in a place where we can go forward cautiously, with more

focus on the larger institutions. But I think, as I said in my testimony, we should be humble as we go forward and be constantly

looking at where we are.

Senator BAUCUS. Can you be a little bit more precise on where

a hospital administrator or a physician might be legitimately concerned?

Dr. MONGAN. Sure, Senator. I can give you some examples where

the statisticians talk about face validity. I will just rank a few.

These anecdotes circle in the field. Up in our own State, for Massachusetts General, my own hospital and a very nearby community

hospital I will not name, rankings came out in the paper.

It said that the nearby community hospital was the best place to

go for a heart attack. Now, people looked at that and thought, that

does not seem quite consistent with what we understand.

Well, when you look into it, that community hospital has a

signed contract with Massachusetts General to send all of the sickest patients to Massachusetts General. It was not appropriately

risk-adjusted. One anecdote like that does a lot of damage, if you

will.

Senator BAUCUS. Yes.

Dr. MONGAN. I could go on with two or three others, but those

are the things we have to be careful about.

Senator BAUCUS. I really appreciate that. Thank you very much,

all of you, in your pioneering efforts here. I really appreciate it.

Thank you.

The CHAIRMAN. Thank you, Senator Baucus.

Mr. Brideau, Senator Baucus’s and my bill would set aside 1 percent of the Medicare payments into quality payment pools. For hospitals, these funds would come from a reduction to the inpatient

base rate or standardized amount.

While our bill directs the Secretary to determine how the funds

would be redistributed within certain guidelines, we could see this

program working in a number of ways.

40

For example, that 1 percent of money taken from all hospitals

could be redistributed so that one-third of the hospitals do not get

any of the money back, one-third would get about 1 percent they

contributed, and one-third would get back about 2 percent because

they are high-quality facilities.

In your statement, you indicated that your association would like

to work with the committee to explore other sources of funding for

pay-for-performance. What other options would you consider, and

what would be some of the advantages or disadvantages of these

options?

Mr. BRIDEAU. Thank you, Senator. The concern that we would

have, is really two-fold. One is, any method that basically creates

a system of winners and losers, that is, a third would get no

money, a third would get the same, and a third would get more,

we believe we would be better served to basically set the bar, and

set the bar high, and say, if you meet these process and these outcome targets, everybody who meets them then gets incentive payments above it, and if you do not meet it, you do not get the incentive payments, as opposed to creating this dichotomy of winners

and losers within the health care system.

In terms of other sources for funding, I mean, effectively, earlier,

there was a question of, should hospitals be paid more for doing the

right thing? In fact, this does not propose to pay hospitals more,

it proposes to pay us less unless we do the right thing, in which

case it proposes to pay us the same, or perhaps in your exmaple,

more.

We think a couple of sources of additional funding for this might

be, one, the changes that are being proposed to the outlier payment

system may produce some dollars that could be fed back into incentive pools for this.

The other is, we believe that it is pretty clear, to the extent we

are able, through this kind of pay-for-performance mechanism, to

drive quality improvement further than we have so far, that ultimately the cost of care should go down. I think all of us who have

worked a lot in quality improvement understand that, as you drive

quality up, you tend to drive costs down.

Our hope would be that a portion of the dollars that are saved,

in terms of saving dollars, could funnel back in as incentive payments to hospitals so that it continues to feed this.

Certainly, the incentive to improve quality is not solely driven by

money. That is pretty clear. In fact, my view is that public reporting drives the incentive even more than the kinds of dollars we are

talking about here.

But, nonetheless, rather than penalizing hospitals, we believe

there are ways—creative ways—to both save taxpayer dollars on

the one hand, improve quality on the other, and provide incentives

to the provider community to do just that.

The CHAIRMAN. All right.

Dr. Mongan, Senator Baucus and I have vetted the language of

our bill with various stakeholders to better understand their concerns. One of the primary concerns that we heard from groups is

on the financing part of our value-based purchasing programs.

In our bill, we take 1 percent out of the total payments and increase that to 2 percent of total payments over 5 years. This money

41

is then given back to providers that improve quality or reached certain targets of quality.

Now, in your testimony you mention that $88 million, about 10

percent of your reimbursement, is risk-based upon the ability to

improve efficiency and quality. This is much higher than the 1 to

2 percent that we are proposing.

What has been your experience in working with provider groups

when so much of the money is put at risk under your model? From

what I know, I generally feel it is working right, but I want to hear

you talk about it.

Dr. MONGAN. Ten percent is a significant number, Senator. We

had substantial dialogue with the providers within our organization. There is, of course, a trade-off between where the standards

are set and how much is at risk. If the bar were really, really, really high, we would have a lot of push-back at 10 percent.

This bar was set reasonably high. It was not, as some cynical

providers said, tying your shoelaces. It was a significantly set bar.

In fact, we are to meet the 90th percentile of standards for the

treatment of heart conditions, asthma, and diabetes.

We felt confident enough that we were close enough to meeting

those standards, and we had systems in place, predominantly with

the electronic medical record that was well-distributed through our

system, that we felt confident at going at risk at that level for the

conditions that are cited in our contracts.

The CHAIRMAN. All right.

Back to you, Mr. Brideau. It is not our intent to create legislation

that would reinvent the wheel. I want to make that very clear, and

I did in my opening statement.

Now, you mentioned, the Hospital Quality Alliance has brought

together individuals, consumers, purchasers, providers, and the

government to provide information about hospital quality to the

public. Obviously that is an effort that we applaud. We want to

make sure that this type of collaboration continues.

The bill takes great steps to do just that. It specifically calls for

a separate process to ensure proper implementation of the measurement system. Specifically, it calls upon the Secretary to consult

with entities that have joined together to develop strategies for

quality measuring, and then reporting.

So the question is, could the current Hospital Quality Alliance be

this entity and help implement the measurements of the bill we

have proposed?

Mr. BRIDEAU. Yes, Mr. Chairman. We would support the Hospital Quality Alliance being that entity. We think it has the right

members to it. We might want to look to see if it needs to be broadened any, but we think it is a very broad-based organization, and

we would support that because it would reduce the kind of duplication we are beginning to see.

If I might, Mr. Chairman, just add a comment on the question

of how much is enough to put at risk? Certainly, Dr. Mongan leads

one of the most prestigious institutions in the country and has very

sophisticated systems to manage the kind of work he described.

In our case, we are implementing a complete electronic health

record across our entire system, including all of our physician clinVerDate 11-MAY-2000 14:43 Oct 03, 2006 Jkt 095484 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 28477.000 SFIN1 PsN: SFIN1
42

ics. We are in the middle of that now, and it is going to take another 2 years or so.

The point I would make is, even for a modest-sized health system

such as ours, four hospitals and 26 clinics, our investment over the

next 3 years in that is $75 million in capital, plus an additional

$12 million per year, ongoing forever, in operating expenses in

order to do this.

But we believe this is the price of admission for any size health

care system. We are able to do that, and we are fortunate to be

able to make that investment, and we believe our patients will benefit from it.

We are also concerned, however, about some of the smaller hospitals, rural hospitals, who really just have great difficulty in making that kind of investment, as well as the complexity of tying in

with our independent physicians who are not employed by us, because there are laws that really prevent us doing what we think

would be in the best interests of quality and tying them into our

information system as well, sir.

The CHAIRMAN. All right.

That is the last of my questioning. Obviously, I associate myself

with the remarks of Senator Baucus complimenting you and your

willingness to continue to work with us.

In this kind of crunch time now, we have August off here. But

when we come back in September and October, things like this will

move very quickly. So, anything you want to input, make sure our

respective staffs know that. Thank you all very much.

[Whereupon, at 12:10 p.m., the hearing was concluded.]

(43)

A P P E N D I X

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

136

137

138

139

140

141

142

143

144

145

146

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

162

163

164

165

(167)

COMMUNICATIONS

168

169

170

171

172

173

174

175

176

177

178

179

180

181

182

183

184

185

186

187

188

189

190

191

192

193

194

195

196

197

198

199

200

201

202

203

204

205

206

207

208

209

210

211

212

213

214

Æ