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HEARING ON MEDICARE’S REIMBURSEMENT CUTS:

THE POTENTIAL IMPACT ON SOLO

AND SMALL GROUP PRACTITIONERS

AND THE BUSINESSES THEY RUN

SUBCOMMITTEE ON REGULATIONS, 

HEALTH CARE & TRADE 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

NOVEMBER 8, 2007

Serial Number 110-59

Printed for the use of the Committee on Small Business

(

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

HOUSE COMMITTEE ON SMALL BUSINESS

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

BRIAN HIGGINS, New York 

MAZIE HIRONO, Hawaii 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

SUBCOMMITTEE ON REGULATIONS, HEALTH CARE & TRADE

CHARLES GONZA ́ LEZ, Texas, Chairman

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Gonza ́lez, Hon. Charles ........................................................................................... 1

Westmoreland, Hon. Lynn ...................................................................................... 2

WITNESSES 

PANEL I: 

Burgess, Hon. Michael, Member of Congress ........................................................ 4

PANEL II: 

Fedderly, Dr. Brad, American Academy of Family Physicians ............................ 12

Harris, Dr. Jeffrey P., MD, FACP, American College of Physicians ................... 14

Rother Allen, D.O., Dr. Melinda, American Osteopathic Association ................. 16

Noller, MD, MS, Dr. Kenneth L., American College of Obstetricians and 

Gynecologists ........................................................................................................ 18

Whitlow O.D., Dr. John, American Optometric Association ................................ 20

APPENDIX 

Prepared Statements: 

Gonza ́lez, Hon. Charles ........................................................................................... 30

Westmoreland, Hon. Lynn ...................................................................................... 32

Altmire, Hon. Jason ................................................................................................. 33

Braley, Hon. Bruce .................................................................................................. 34

Burgess, Hon. Michael, Member of Congress ........................................................ 36

Fedderly, Dr. Brad, American Academy of Family Physicians ............................ 40

Harris, Dr. Jeffrey P., MD, FACP, American College of Physicians ................... 49

Rother Allen, D.O., Dr. Melinda, American Osteopathic Association ................. 58

Noller, MD, MS, Dr. Kenneth L., American College of Obstetricians and 

Gynecologists ........................................................................................................ 74

Whitlow O.D., Dr. John, American Optometric Association ................................ 79

(III) 

(1)

HEARING ON MEDICARE’S REIMBURSEMENT 

CUTS: THE POTENTIAL IMPACT ON SOLO 

AND SMALL GROUP PRACTITIONERS 

AND THE BUSINESSES THEY RUN 

Thursday, November 8, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON REGULATIONS, HEALTH CARE & TRADE

Washington, DC. 

The Subcommittee met, pursuant to call, at 11:26, a.m., in Room 

2360, Rayburn House Office Building, Hon. Charlie 

Gonza ́lez[Chairman of the Subcommittee] Presiding. 

Present: Representatives Gonza ́lez, Westmoreland, Fallin, and 

Jordan. 

OPENING STATEMENT OF CHAIRMAN GONZA ́ LEZ 

ChairmanGONZA ́LEZ. I now call this hearing to order on Medicare’s Reimbursement Cuts: The Potential Impact on Solo Practitioners and the Businesses they Run. I have some preliminary remarks. It looks like we are going to have a vote in about 15 minutes. My apologies to the witnesses that we started late and we are 

going to continue being a little late. So we appreciate your patience, but your testimony is quite vital to the work that we are 

trying to do here. The practice of medicine is changing. With the 

rise in managed care, increased insurance consolidation, and growing paperwork, small health providers face many challenges. Complicating matters is that the physician graduate of today faces a 

much different business environment than in the past. 

Today’s hearing will address one of the next great challenges 

that could affect the small medical practice. In 2008, Medicare is 

scheduled to cut physician payment rates by 10 percent. These reductions will continue annually, and it is predicted that the total 

cuts will be about 40 percent by 2016. That could have a devastating impact on the operation of small medical practices. The 

potential impact of these cuts must be considered in light of the 

fact that these medical practices function like any other small business, and face low profit margins. 

Physicians are responsible for expenses like rent, payroll, employee health insurance, and malpractice insurance. Beyond the 

Medicare cuts, these general business costs are expected to increase 20 percent in the next 9 years. Some may find the link between medicine and money objectionable, but the truth is that the 

current business model for the practice of medicine is not sustainVerDate 0ct 09 2002 14:29 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39380.TXT LEANN
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able. At a time when more and more baby boomers are approaching 

the age of 65, some physicians have simply stopped accepting Medicare patients. Already, some practices lose money every time a 

Medicare patient is seen. The problem of access to care will only 

grow if the Medicare cuts are not stopped. Some seniors are already faced with calling 20 to 30 providers in the desperate hope 

that someone will accept Medicare. 

According to a recent survey by the American Medical Association, 60 percent reported that they would have to limit the number 

of new Medicare patients they treat due to next year’s cuts. Half 

would reduce their staff. Fourteen percent would completely get out 

of patient care. That means these cuts in physician payments will 

affect everyone, not just Medicare patients. It is unlikely that the 

primary care shortage will improve in the near future, as Medicare 

reimbursement rates continue to be a primary driver of physician 

salaries. Medical students, already burdened with an average debt 

in excess of $100,000, are clearly gravitating towards specialties. 

According to the Center For Study and Health System Change, 

incomes of primary care physicians fared among the worst in keeping pace with inflation between the years of 1995 and 2003, while 

medical specialists fared the best. The report concludes that with, 

′′the diverging income trends between these specialties and primary 

care,′′ the result is likely to be an imbalance in the physician workforce, and perhaps a future shortage of primary care physicians. 

The facts are clear. Medicare reimbursement cuts are a barrier 

to the successful operation of solo and small group practices. For 

many small practices, Medicare is the single most important source 

of revenue, and is often used to extend or supplement charitable 

care to the uninsured and underinsured. Cutting Medicare’s low reimbursement rates would result in many practitioners denying or 

limiting access to charitable care. Medicare is an important component in American’s health care system. It provides source revenue 

for decisions to invest in capital projects like Health IT, computers, 

and to expand and offer necessary tests like mammography services and other preventative screenings. It also enables small practices, particularly in rural and underserved communities, to extend 

the scope of their charitable services. 

Without it, many of our Nation’s most vulnerable populations 

would receive no care. The question is how can we reform the system to keep the small medical practice viable. There must be a 

careful consideration to how those rates are developed and their 

impact on small practices. The panel before us today knows firsthand these challenges. Unfortunately, they may be put in a situation where they must deny access to care in order to keep their 

businesses open and running. I would now yield to the ranking 

member, Congressman Westmoreland, for his opening statement. 

OPENING STATEMENT OF MR. WESTMORELAND 

Mr.WESTMORELAND. Thank you, Mr. Chairman, for that statement and for holding this hearing today. I would also like to thank 

all the witnesses for their participation. And I am sure today’s testimony will prove to be very helpful in any decisions that we would 

make in trying to fix a problem. Medicare’s Physician Payment 

3

Program is an issue of great concern, not only in my district, but 

all over the country. 

Mr. Chairman, I know that you and I agree that the Sustainable 

Growth Rate, the SGR, specifically is a system that needs to be examined carefully. And I hope the testimony today will give us some 

direction in how to do that. With an issue as complex as this, I 

think it is important to lay out all the facts. We know that the SGR 

system was designed to respond to concerns that the fee schedule 

would not adequately control overall increase in physicians’ services. Also, we know that the SGR is a formula targeted for cumulative spending. Unfortunately, we also know that in the past few 

years, expenditures have been significantly above the formula’s target, causing cuts to physician payments. Congress has attempted 

to treat the symptoms by placing legislative Band-Aids on the problem and overriding the reductions. 

However, we have yet to fully treat the illness, and I believe that 

our work here today is a step towards that goal. It is important 

that we have an honest and frank discussion about the situation 

that we now face. There is a growing, and, in my opinion, real concern that physicians may be unable to absorb continued payment 

cuts. I know that the fallout of such a scenario is something that 

we all want to avoid. My wife had surgery, Mr. Chairman, Monday. 

And as I was talking to the surgeon, he said that his daughter had 

come to him and talked to him about going into the medical field. 

And he had to give her advice that she may want to reconsider 

what she was doing. I think that is a real shame to that profession. 

But I welcome these distinguished panels today and thank you for 

your willingness to have this hearing and their willingness to testify. 

ChairmanGONZA ́LEZ. And I thank the ranking member. The first 

witness—and first of all, of course, the first witness knows the 

rules, but for the benefit of the witnesses that will be following Dr. 

Burgess, you will be given 5 minutes within which to present your 

testimony. You have submitted a written statement that will become part of the record. We will refer to it, as well as staff, as resource. And then, of course, you may be able to follow up on that 

which you didn’t think you could cover in your 5 minutes in the 

question and answer period. And I think we are going to have plenty of time. And again, I seek your indulgence and your patience, 

because I think we will have a vote in a few minutes. 

Panel one consists of one witness. But I am proud to introduce 

our first witness, the Honorable Michael Burgess from Texas. Congressman Burgess was elected to Congress in 2002 to represent the 

26th Congressional District from the great State of Texas. Before 

heading to Congress, Congressman Burgess practiced as an OBGYN for more than 21 years, delivering 3,000 babies. 1,501 of those 

babies turned out to be Democrats. I added that. That is not true. 

He is the founder—

Mr.BURGESS. They are still young. 

ChairmanGONZA ́LEZ. —of Obstetrics and Gynecological Associates of Lewisville. Our colleague—and I want to tell our audience, 

because I was sharing this with Lynn, I saw Michael on the floor 

as we were voting, and I said get ready for a real grilling, Mr. WitVerDate 0ct 09 2002 14:29 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39380.TXT LEANN
4

ness. He said get ready for my answers. So my pleasure to introduce Congressman Michael Burgess.

STATEMENT OF THE HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr.BURGESS. Thank you, Chairman, and Ranking Member Westmoreland, for giving me the opportunity, extending me the courtesy 

of allowing me to talk about this on this morning. As you know, 

from knowing me for the past 5 years, I will talk about this issue 

literally at the drop of a hat anywhere at any time. So I am happy 

to be here talking to your Subcommittee and taking some time to 

highlight this so that the decision-makers can get a greater understanding of a very serious issue that faces medicine. Most of us, unless we are in our first term, we have been through a couple of 

these in the past. And when I say these, I mean, what happens between Thanksgiving and New Year’s Eve, when we deal with the 

proposed physician payment cuts that have now been set by the 

Centers for Medicaid and Medicare Services on November 1st. 

And I believe they were assessed this time at a 10.1 percent cut 

this year unless Congress acts. Every year that I have been in Congress, Congress has acted before that final date except for 2005, 

when doctors were delivered an at that time I think it was a 5 to 

6 percent reduction, and my fax went wild over New Year’s weekend, with doctors all over the country saying, okay, you have done 

it now, let me show you the letter that I am sending out to my patients. They were leaving the practice of Medicare in droves. 

I can promise you if it was that bad at 5 percent, it is going to 

be even worse at 6 percent. It is not that my fax machine can’t 

handle it, but I worry if the practice of medicine can. We usually 

act in Congress, but when we act, we not only are not fixing the 

underlying problem, but we are making the ultimate fix of the underlying problem that much worse. And it is for that reason I am 

really ambivalent about what happens this year, whether it is a 1-

year or 2-year fix. And we hear both being talked about over at 

Senate Finance. I haven’t heard much talked about on this side of 

the Capitol. But whatever we do, whether it is a 1-year or 2-year 

fix, we are just delaying the pain and we are making the ultimate 

solution that much harder. 

When I first thought about running for Congress in December of 

2001, the first Medicare cut came to the house of medicine in this 

country at a time the budget was in surplus. And quite frankly, 

many of us at the AMA House of Delegates that year just frankly 

could not understand why it was necessary to do that. And we were 

told don’t worry, Congress will fix the problem. 

Indeed, they did not in 2001, so the year 2002, my last year of 

active practice, Medicare reimbursement declined 5.4 percent. As a 

consequence, most of the doctors who practice my specialty in my 

part of the county discontinued taking Medicare from their practices. I continued because my mother told me I had to. But as a 

consequence, when I left to Congress it was quite a vacuum that 

was left behind for that patient population. 

Now, in the last Congress, in the 109th Congress, I introduced 

a bill, 5866, and perhaps relatively naively said let us just repeal 

5

the SGR formula, find a way to pay for it, we are people of good 

will, we can figure this out at the Committee level, and no one has 

to actually have the individual target on their back, but I was 

wrong. Even failing to delineate payfors, I did attract a lot of negative energy with the introduction of that bill. But the reality was 

we need to do something. Now no sooner was the ink dry on the 

fix that we did at the end of last year, on the tax extender bill, 

than I knew we had to work on this. Mr. Chairman, we have really 

got to approach this from a short-term, a mid-term, and a longterm strategy. 

And that is really what has been lacking, and in all candor, when 

my party was in charge the first two terms that I was here, but 

it still seems to be lacking today. We need that short-term, midterm, and long-term strategy to deal with this. So in 2006, December of 2006, we tried to reframe the problem that would dispose of 

the Sustainable Growth Rate formula and replace it with the Medicare Economic Index, but I also proposed that we do that over a 

transition period that would take some time to do that. We had a 

lot of discussions, and I am grateful to the input from the American Medical Association, the American College of Surgeons, American Osteopathic Association, my colleagues, the American College 

of OB-GYN, that laid out some principles that would lay the foundation for legislation that eventually came to be known as 2585. It 

was introduced earlier this year. 

I believe that these principles are transformational in nature, 

and will help this House avoid solutions that are merely transactional or cosmetic and make the problem worse. Number one, the 

SGR formula, Sustainable Growth Rate, it is insufficient to meet 

the cost of physicians or even a methodology that allows the physician to plan for the future. So it must be repealed. Medicare reimbursement must fairly compensate physicians to provide the services. 

Any new Medicare payment system must be able to adjust for 

growth in service, but agile enough to determine what constitutes 

appropriate growth in service volume. Any future cost containment 

device must be delinked to trends in the economy, unlike the SGR. 

Quality reporting should encompass a variety of options, and 

should be voluntary. Implementation of health information technology should be rewarded, but also should remain voluntary. The 

solution is actually extremely simple. It is so simple we forget 

about it sometimes. The solution is stop the cuts, repeal the formula. And that is the concept on which I based the legislation that 

I introduced, 2585, in this Congress. It eliminates the SGR formula 

in 2 years’ time. What happens to the doctors in 2008 and 2009? 

Is the SGR formula in fact going to result in these 10 percent cuts? 

You can actually readjust the baseline, reset the baseline. And that 

was done in the legislation that I introduced. And it scored from 

the CBO as about just bit little less than an MEI update for 2008, 

and a little under that for 2009, but still positive updates, and nowhere near the 10 percent cut that has been proposed for this year. 

And then in 2010, the formula is repealed outright. I would love 

to go into Part A to take the money to just pay for the repeal of 

the SGR, but I am not allowed to do that. 

6

So all of the savings that we are achieving in Medicare currently, 

and we are achieving some savings in Medicare. Remember the 

Trustees report that came out in June of this year said the bad 

news is Medicare is going broke, but the good news is it is going 

to go broke a year later than we told you last year. 

So that year of savings, if you will, although it is savings that 

accrues to Part A, because now Part A trust fund is not going to 

be into bankruptcy until a year later than we told you last year, 

but really that savings occurred in Part B. But Part B still got 

charged for that money. Why not give that money or sequester that 

money or hold that money for Part B and then let us pay for the 

repeal of the SGR with that money that we have held, the lock box 

from 2000 that no one is using anymore. 

Let us bring that lock box out and put those savings in the lock 

box—I don’t think Al Gore needs it anymore—and we will hold this 

money to repeal the SGR formula. Now we really do have to be 

careful with some of the things we do because we all know we have 

a problem with disparities in this country. And we don’t want to 

make the issue of disparities worse by creating new problems with 

the SGR formula. 

Let me just wrap up with this: During his last days on Capitol 

Hill, Alan Greenspan was doing a couple victory laps around the 

Capitol, came to talk to a group of us one morning. And the question inevitably came up after his talk, well, Mr. Greenspan, what 

are we going to do about Medicare? What are we going to do this 

unfunded liability? And he thought for a minute and he said it is 

going to be very hard, but I think when the time comes Congress 

will make the correct decisions about what to do to keep Medicare 

solvent. And then he stopped for a minute, he thought, and he said 

what concerns me more is are you going to have anyone there to 

deliver the services when you require them? And that hit me like 

a ton of bricks. 

So that is why I have focused on this issue for the last 2 years, 

and why it is my overarching consideration for if I get nothing else 

done in Congress, if I can get this system changed, it is incumbent 

upon me to do that. Finding a solution is going to be the key to 

the problem that we face with physician workforce issues in this 

country. And we are coming up on some serious ones. 

I had two companion pieces of legislation that I won’t go into 

today, but they dealt with the student contemplating a career in 

health care and they dealt with the individual who is in residency 

programs today. Everything for me comes down to this when I 

think about health care policy in this Congress. What is the fundamental unit of production of the American medical machine? If the 

American medical machine was cranking out a widget, what would 

that widget look like? It would look like the doctor-patient interaction in the treatment room. 

Anything that we do that delivers value to that doctor-patient 

interaction in the treatment room is something I will look at and 

something that bears giving a careful assessment to. Anything that 

detracts from value is really not something that I am interested in 

pursuing. Well, you cannot, I will submit you cannot deliver value 

to the doctor-patient interaction in the treatment room if you have 

no doctor there in the first place. So this becomes central to again, 

7

to everything that I do as I spend my time here in Congress. The 

fact is no doctor can continue to practice with what we are asking 

them to do. I ran a medical practice. Yes, it is a small business. 

What is the biggest cost when you are in a small business? It is 

the cost of capital. Usually that is for hiring a new doctor or buying 

a piece of equipment. We can’t plan because we don’t know what 

Congress is going to do to us in the future. 

If we come up with a formula for getting rid of the 10 percent cut this year the price tag of the $268 billion to repeal SGR over 

10 years time next year becomes over $300 billion. Every year we 

delay we make it worse. If we had taken this approach, short-term, 

mid-term, long-term when I first arrived here and we did the first 

omnibus in 2003. 

The fact is we would be pretty much past this problem now and 

we could all argue about something else. And wouldn’t we be happy 

doing that? I know I have gone a little bit long, and I thank you 

for your indulgence, and I will yield back my time. 

[The prepared statement of Mr. Burgess may be found in the Appendix on page 36.]

ChairmanGONZA ́LEZ. Thank you very much, Congressman Burgess. I am going to suggest—it is one vote. That is my understanding. It is one vote. Why don’t we get over there, vote real 

quick, make sure we all get back at the same time. And then we 

will open it up and have some questions for you. 

Mr.BURGESS. Very good. 

ChairmanGONZA ́LEZ. And we will stand in recess until we get 

this vote out of the way. Again, to the other witnesses, thank you 

for your patience. We will be right back. 

[Recess.] 

ChairmanGONZA ́LEZ. The Committee will reconvene. We were 

going to wait for Mr. Westmoreland, and he is on his way. However, I am going to go ahead and pose a question to Dr. Burgess, 

our first witness. And I will explain to the other members if they 

get here, of course, that we are going to limit ourselves to the fiveminute rule. 

Dr. Burgess, I guess the question, and it is a mystifying formula 

for doctors, but even more so for Members of Congress. And I am 

just going to read from the memo that has been provided and prepared by our staff. And this is how confusing it can be to us. 

And I guess I want you to sort of explain it, but also the difference of what you are proposing and what you think might be the 

answer. What does the Sustainable Growth Rate mechanism do? 

The SGR system sets spending targets for physician services and 

adjusts payment rates as needed to bring spending back in line 

with those targets. Which kind of puts you on notice that we are 

probably going to have problems, right? 

The SGR target for total spending is based on spending in an initial or base year and the estimated growth in real per capita GDP 

each year and three other factors that affect overall spending on 

physician services: The changes and cost of inputs used to produce 

physician services such as measured by the Medicare Economic 

Index, the MEI, the number of Medicare beneficiaries in the traditional fee-for-service program, and expenditures that result from 

8

changes in laws or regulations. The spending target for physician 

payments is applied by incorporating it into the adjustment to the 

conversion factor that determines the payment amount per service. 

The conversion factor is determined annually by adjusting the 

previous year’s conversion factor by the change in the MEI to account for the cost of inputs for physician services and adjusting this 

product on the basis of the relationship between the cumulative 

SGR target and Medicare physician spending. The conversion factor update is greater than the MEI when physician spending has 

been below the targets and is less than the MEI when the physician spending has been higher. 

Does that make sense to you? Do you understand it? And if you 

do, can you decipher it? But truly, the serious question is whether 

there a real life application of this to what the physician faces 

today in their practice? 

Mr.BURGESS. You want the theory or the application? 

ChairmanGONZA ́LEZ. I think application. The practical—you 

know, theory is good, but the practice is what counts. 

Mr.BURGESS. From a perspective of a practicing physician, this 

formula is fantasy. It is fiction. It is made up. 

ChairmanGONZA ́LEZ. Is your mike on? 

Mr.BURGESS. From the standpoint of the practicing physician, 

the formula is fantasy, it is fiction, it is made up. We don’t understand why how in reality the GDP in this country for the short 

time that I have been in Congress has actually done pretty well. 

Heaven help the doctors of the world if we had a couple quarters 

that we were in recession because it would have hurt worse. From 

the perspective of someone who spent now the last 5 years as sort 

of an amateur health policy person, yeah, I spent some time studying the formula and studying the various relationships. 

Some things make sense, some things don’t. But you got down 

to it at the end of your discussion about the allocation based upon 

the conversion factor. And where we really get hurt is with what 

is called the conversion factor of the prior year times the conversion factor update. The update is then one plus the MEI over a 

hundred times one plus the UAF. The UAF is the bad actor here. 

The update adjustment factor makes actual expenditures and target expenditures equal, which I believe you alluded to in the first 

couple sentences of what you addressed. That is not based on reality. And Medicare has never, ever paid enough to equal what the 

commercial insurance will pay. They just never have. 

And I think—I can’t speak to it, because I wasn’t here, but I 

think the philosophy was that if a doctor takes Medicare we will 

pay them just enough so that they go broke slowly, and they are 

able to continue in their business for a number of years and provide care for our patients. But the reality is if you construct a practice that is primarily Medicare, even in the heady days of the late 

1980s and early 1990s, you were still hard put upon to make that 

practice go, because nothing in what the economists who figure this 

stuff and figure out the numbers for relative work values, it is always figured on the cost of delivering care, and it never figures in 

an amount for what do you pay the physician at the end of the 

day? There is never an amount in there for the doctor actually 

9

making a salary. So even back in the old days, it was never a formula that was based on reality. 

And unfortunately over time, because of the influence of the 

what we call the update adjustment factor, we compound the problem over time such that this year we face a 10.1 percent cut if we 

legislatively don’t do something. So we will do something. I will 

predict that we will do something. That something will be we spend 

$40 billion to prevent that 10 percent cut. But now what happens 

when I say the cost of repealing the SGR, the CBO scores it at 

$260 billion over 10 years time, since we added $40 billion to the 

price tag, the $40 billion doesn’t come off the top of the SGR, it is 

added to the end of the out year. 

So the next 10-year moving budgetary window the cost is that 

much more. And again, as I said in my opening statement, I suspect it will be over $300 billion. And it becomes a hill too far. No 

one want to take it on. I am not supposed to say this, but in my 

mind the money has already been spent. You have already paid 

these fine doctors for the business that they conducted on your behalf. 

So the money has already been spent. We just haven’t accounted 

for it on the books. So we just play this little shell game. And year 

over year, we kind of hold this money off the books because we are 

going to recoup it from the doctors by and by putting into play the 

SGR formula. But the reality is the money is not sitting there in 

the Federal Treasury waiting to go to the doctors. It went to the 

doctors. They provided the care. They paid their overhead. That 

money has been spent and is gone. 

That is why I would like for us to take the type of long-term 

strategy that gets us past this point. Because eventually we will be 

in a hole so deep that we just simply can’t do anything about it and 

we are locked in forever. These guys won’t continue to practice. 

Younger guys will look at it and say, you know, and ladies, will 

look at it and say that I don’t know that it is worth it going into 

medicine anymore. And we will irreparably harm the profession. 

And is that bad? I submit that it is, because we are on the cusp 

of a time when medicine is going to deliver in ways I didn’t think 

possible when I started medical school. We are on the cusp of a 

transformational change in medicine the likes of which we have 

never seen. 

The era of personalized medicine, the value of cracking the genetic code and the work that has been done on the human genome. 

Look what happened last Monday Francis Collins got the Medal of 

Freedom by the President. That was a significant event. And the 

reason he got that medal was because of his work on breaking the 

genetic code and because of the promise that genetic medicine is 

going to play in the future, very personalized medicine. A year ago, 

when we were having our NIH reauthorization hearing, the doctor 

from Johns Hopkins, and right now I am blocking out his name, 

talked about the fact they have decoded the genetic sequence for 

the 20 genes involved in colon cancer. What a powerful tool to puts 

in the hands of researchers. We are probably just a few steps away 

from actually stopping that disease. 

ChairmanGONZA ́LEZ. I have exceeded my 5 minutes, and I do 

need Lynn to—and I know that you are looking to the future, and 

10

I appreciate that. And the question is, you know, the Federal Government has basically invested in health care with the Medicare 

Act of 1965. And we have to figure out how we are going to deal 

with it. But I appreciate your response. And at this time I would 

recognize my colleague, the ranking member, Mr. Westmoreland. 

Mr.WESTMORELAND. Thank you, Mr. Chairman. And Congressman Burgess, I know that you talk about the fix, and the BandAids that have continually been put on. And I believe there are 

several bills that have been introduced that do a fix to the SGR, 

where yours does away with it in some gradual steps. Do you think 

that there is any way it can be fixed for a short-term, or do you 

see the only real solution to this as just doing away with the SGR 

completely? 

Mr.BURGESS. Well, I think I said that in my testimony. The ultimate solution is stop the cuts, repeal the SGR. And how we get to 

that point is really the rest of the argument. I have proposed a fix 

that is postponed. I did that because simply trying to repeal the 

SGR in one fell swoop didn’t seem to gain a lot of traction. What 

does gain a lot of traction, and in fact, the doctors and their groups 

do a good job of educating members of Congress that we have got 

to do something. 

So we get to the end of the year and we play it out every year, 

just really predictable, sometime between Thanksgiving and New 

Year’s Eve, we will have something delivered to us. I cannot believe 

going into an election year we are going to allow this to be an unresolved issue. No one wants that. This will be our last—you know, 

obviously 2008 is the election year, but this is our last chance to 

do something to protect the physician community in this country 

before the November ’08 elections, because anything that is done 

next year will obviously be done after election day. So this is our 

chance to show some resolve to our physician community, to our 

health care community. And I hope we take that up and do it. 

I am not saying we have got the perfect answer. But I think the 

problem has gotten so large that while it is still fixable it is going 

to take an approach where you divide it up and you get some now 

and you get some later. And quite honestly, that was the discomfiture. I know the American Medical Association, the American 

Academy of Family Practice, the American Association of Physicians had some difficulty with the concept that they were going to 

go back to their members and say, hey, we are supporting a plan 

that repeals the SGR, but it doesn’t do it for a couple years. That 

is pretty untenable. You can imagine walking into the House of 

Delegates at the AMA and having to give that sort of report. That 

is why I tried to build in some protections for the doctors for the 

next 2 years. There is the mid-term strategy that we have to employ, because if we drive everyone out of medicine in the next 2 

years, it doesn’t matter that we have repealed the SGR. 

Mr.WESTMORELAND. Well, Congressman, let me ask you this. The 

SGR, when it was put in place, it was kind of destined to fail anyway, was it not, because it was not indexed for inflation? And anybody that doesn’t believe that your cost is going to go up, you know, 

is not being very realistic. So was the SGR put in as—I hate to say 

this—but kind of some of the smoke and mirrors we have seen in 

this Congress as a payfor for the Medicare? 

11

Mr.BURGESS. I don’t know. I can’t speak to it because I wasn’t 

here. Obviously, I was on the receiving end, and it was a way to 

control growth. And the other term for controlling growth is a way 

to ration care. And we would ration it in the treatment room. That 

way people sitting on the Committee didn’t have to ration the care, 

the people who administer over at CMS didn’t have to ration the 

care, it would be the doctors who would ration the care because 

after all, in our American healthcare system—

Mr.WESTMORELAND. Did the AMA not see this coming? 

Mr.BURGESS. I don’t think they have ever endorsed the SGR, not 

that I recall during my tenure with the AMA. But the reality was 

in the early years, right after the Balanced Budget Act was passed, 

and I don’t want to put it all on the Balanced Budget Act because 

I don’t remember the three letter acronyms, but there were precursors to the SGR that were essentially the same philosophical trajectory. And this is not a problem that is owned by one party or another. It is a problem that is owned by Congress in general. 

Mr.WESTMORELAND. I wasn’t here either, but it seems to me like 

this was some kind of gimmick pay for that has had some unintended consequences when it comes to the health care for the people in this country. 

Mr.BURGESS. If I may, it was a reaction to the reality that paying on a fee-for-service basis in Medicare, even though it was vastly 

less than what other fee-for-service payment models were, it was 

still Medicare was growing faster than anyone ever thought possible. And I mean we know that from looking at our history books. 

The number, who would have believed that we would be spending 

over $300 billion a year on Medicare. 

Mr.WESTMORELAND. I understand. But rather than cutting doctors’ pay, you know, we have expanded so many of the services and 

really broadened those people that can get the service. To me that 

was, you know, not very well thought out. 

Mr.BURGESS. It is a disconnect. And I have heard people suggest 

that maybe congressional pay ought to be run through the SGR formula, and then maybe that would improve our resolve for getting 

it done. 

Mr.WESTMORELAND. Thank you. 

ChairmanGONZA ́LEZ. I will make sure I tell the other members 

of Congress, Michael, what you are proposing. 

Mr.BURGESS. Take two of those and call me in the morning. 

ChairmanGONZA ́LEZ. Thank you very much, Dr. Burgess, for your 

testimony. 

Mr.BURGESS. Thank you. 

ChairmanGONZA ́LEZ. We are going to set up for the next panel. 

And as we are sitting up I am going to remind the witnesses that 

they have 5 minutes. And I know that Dr. Burgess went over his 

5 minutes, but that was some sort of a professional courtesy, I 

guess. And again, though, and the reason is I want to get your testimony in before we have the next round of votes and get a couple 

of questions in. And I would be very curious, and I am sure that 

Congressman Westmoreland may be curious as to how you view 

Dr. Burgess’s testimony and his suggested solution. 

The other thing that I want to explain to the witnesses is that 

you are before the Small Business Committee of the U.S. House of 

12

Representatives. And you may wonder, you know, how do we play 

a role? Because we think of you, of course, as practitioners out 

there as small businesses. And so that our policies impact your 

ability to conduct business. But you are the last standing profession in the United States also. But you are still a business. The 

Chairwoman Nydia Vela ́zquez meets every week with the Chairs—

and please, if the witnesses will take their places at this time—

Nydia Vela ́zquez meets with the Chairs of all other committees 

once a week, and they have a discussion of shared concerns. That 

is why your appearance today is very important, because she will 

be discussing what transpires here today with the chairs of the 

Committees on Ways and Means and Energy and Commerce. And 

we all have a shared jurisdiction. 

So we will get our voice heard. And we are hoping that through 

us your voices will be heard. What I am going to do is introduce 

the witnesses as they testify. So it is my pleasure to welcome Dr. 

Brad Fedderly. Dr. Fedderly serves on the board of directors of the 

American Academy of Family Physicians, AAFP. AAFP is the national association representing family doctors, and one of the Nation’s largest medical organizations, with more than 94,000 members throughout the United States. Dr. Fedderly practices with the 

Wheaton Franciscan Medical Group, a full service primary care 

large group practice in South Milwaukee, Wisconsin. He earned his 

medical degree from the University of Wisconsin, and completed 

his residency at the University of Massachusetts family practice 

residency in Worcester.

STATEMENT OF BRAD FEDDERLY, ON BEHALF OF THE 

AMERICAN ACADEMY OF FAMILY PHYSICIANS 

ChairmanGONZA ́LEZ. At this time I welcome the testimony of Dr. 

Fedderly. You may proceed, sir.

Dr.FEDDERLY. Chairman Gonza ́lez, Representative Westmoreland, and members of the Subcommittee, I am Dr. Brad Fedderly, 

as you just heard, a member of the board of directors of the AAFP. 

I am pleased to provide testimony on behalf of nearly 94,000 members who provide medical care for 50 million of your constituents. 

The Academy commends the Subcommittee for your consistent efforts to ease the burdens of small businesses in this country. Family physicians share the Subcommittee’s concerns that the current 

payment system is inaccurate and outdated. Therefore, AAFP supports the restructuring of Medicare payments to reward care coordination and quality and to prevent expensive and duplicative 

tests and procedures. About 25 percent of all office visits in the 

United States are to family physicians, nearly half of whom work 

in small and medium-sized practices of five physicians or less, 

small business practices that operate with tight financial margins. 

Medicare beneficiaries comprise about a quarter of the typical family medicine practice. Therefore, an accurate and more contemporary Medicare physician payment method is key. AAFP appreciates past Congressional action that avoided a 5 percent payment 

reduction in the Medicare fee schedule for 2007. Nevertheless, reimbursement rates for physician services are lower today than they 

13

were in 2001. Moreover, if Congress does not act in the next 7 

weeks, reimbursement for family physicians will decline 10.1 percent in 2008, and 5 percent more in 2009. 

In fact, scheduled cuts of nearly 40 percent over the next 9 years 

will render the operation of small business medical practices 

unsustainable. From the outset, the Medicare program has based 

physician payment on a fee-for-service system. This system rewards individual providers for ordering more tests and performing 

more procedures. This system does not pay physicians to coordinate 

the patient’s care generally, and has resulted in an expensive, fragmented Medicare program. 

AAFP recommends that Medicare incorporate a fee for physicians 

who coordinate the care of Medicare patients. This should be a 

blended model that combines fee-for-service with a monthly care coordination payment. Such compensation will go to the physician 

practice chosen by the patient. And any physician practice prepared to provide care coordination should be eligible to serve as a 

patient’s personal medical home. Patients who select a personal 

medical home should be rewarded with reduced copays and reduced 

deductibles. This model has already been proven effective. North 

Carolina has employed the Medical Home model in its Medicaid 

program, and saved taxpayers more than $231 million in fiscal 

years 2005 and 2006. 

Effective care coordination requires affordable health information 

technology in the form of an electronic health record in the physician’s office. Using HIT also reduces errors and allows for ongoing 

care assessment and quality improvement in the practice setting, 

two additional goals of the recent Institute of Medicine reports. But 

cost continues to be a significant barrier. 

AAFP joins the Institute of Medicine in encouraging Federal 

funding for physicians to install HIT systems, which according to 

HHS, will save billions. Funding must be directed to the systems 

that will provide the best return on investment. We, therefore, encourage Congress to consider funding in the form of grants or low 

interest loans for those small group and solo medical practices committed to integrating health information technology in their practice. In closing, AAFP urges Congress to modernize Medicare by 

embracing the patient-centered Medical Home model as an integral 

part of the program and to reform the payment system in the following three ways. 

First, enact a 2-year positive update to the payment rate and use 

the time to develop a replacement for the dysfunctional SGR formula. This new formula must consider and reflect the change in 

the costs for small business medical practices to provide care. 

Second, adopt the patient-centered medical home and give beneficiaries incentives to use this model with reduced copays and 

deductibles. The physician designated by the patient as the medical 

home shall receive a monthly payment for the non-face-to-face services associated with care coordination. 

And third, provide health information technology grants and low 

interest loans to solo and small group medical practices that provide a patient-centered medical home to Medicare beneficiaries. 

AAFP commends the Subcommittee for its commitment to identify 

a more accurate and contemporary Medicare payment methodology 

14

for physician services, one that recognizes and fosters the important small business model used by thousands of family doctors 

across America. Thank you for the opportunity to speak today, and 

I look forward to your questions. 

ChairmanGONZA ́LEZ. Thank you very much, Dr. Fedderly. 

[The prepared statement of Dr. Fedderly may be found in the Appendix on page 40.]

ChairmanGONZA ́LEZ. The next witness is Dr. Jeffrey P. Harris. 

Dr. Harris is the president-elect and former chair of the Board of 

Governors of the American College of Physicians’ American Society 

of Internal Medicine. The ACP is the Nation’s largest medical specialty society. Its membership comprises more than 115,000 internal medicine physicians and medical students. Dr. Harris has practiced internal medicine and nephrology in Winchester, Virginia, 

since 1977. He is a clinical associate professor at the University 

Virginia School of Medicine. Thank you very much, Dr. Harris, and 

you may proceed,

STATEMENT OF JEFFREY HARRIS, M.D., FACP, PRESIDENTELECT, AMERICAN COLLEGE OF PHYSICIANS 

Dr.HARRIS. Good morning, Mr. Chairman, and members of the 

Committee. As you have heard, I am Jeff Harris, president-elect of 

the American College of Physicians. I have been a general internist 

for 3 decades. As clinical associate professor of medicine at the University of Virginia School of Medicine, I have been involved a bit 

in community-based teaching for third year medical students. The 

College is the largest medical subspecialty society in the United 

States, representing 124,000 internal medicine physicians and student members. Among our members involved with direct patient 

care after training, approximately 20 percent are in solo practice, 

and approximately 50 percent are in practices with five or fewer 

physicians. Until recently, I have practiced in a town in Virginia 

with a population, as you heard, of about 50,000. 

My practice focused on the delivery of primary care and nephrology. We routinely saw overhead expenses which exceeded 60 percent. As a community small business, we discovered firsthand the 

financial struggles of an uncertain and low Medicare reimbursement and the effect it had on our practice. We greatly appreciate 

Subcommittee Chairman Gonza ́lez for his focus of the attention on 

the impact of the Medicare’s flawed physician reimbursement formula and the effect it has on small and solo practitioners. 

These are the practices that are the least able to absorb the uncertainty of annual payment decreases and the below inflationary 

adjustments Congress has grown accustomed to making. The College offers three points for the Committee to consider. Number one, 

the College believes that the Medicare payment policies are fundamentally dysfunctional and do not serve the interests of Medicare patients. These policies have an especially negative impact on 

solo and small practices. 

In particular, Medicare payment policies discourage primary care 

physicians from organizing care processes to achieve optimal results for patients. Research shows that health care, managed and 

15

coordinated by a patient’s personal physician, using a system of 

care centered on the patient’s needs can achieve better outcomes 

for patients and potentially lower the cost by reducing complications and hospitalizations. The American College of Physicians, 

joined by the American Academy of Family Physicians, the American Osteopathic Physicians, and other physician groups have 

adopted the concept of care delivery called the patient-centered 

medical home. 

The second point we would make is that the dysfunctional Medicare payment policies have resulted in a dwindling workforce of 

primary care physicians at a time when the aging population is 

growing and more Americans are living with chronic diseases. As 

a community-based teacher for the University of Virginia, I have 

had the pleasure of teaching third-year medical students in our office setting. These youngsters are uniformly excited about the 

unique challenges and the opportunities of being a patient’s primary care physician. But when it comes to choosing a career path, 

very few see a future in primary care. 

Now medical students are acutely aware that Medicare and other 

payers undervalue primary care and overvalue subspecialty medicine. With the national average student debt of $150,000, by the 

time they graduate from medical school, students feel that they 

have no choice but to go into more specialized fields and practices 

that are better remunerated. The precipitous decline in young people entering the fields of primary care is occurring at the same 

time we are witnessing the fact that only 35 percent of the nation’s 

internists, 35 percent of them are over the age of 50, with increasing numbers retiring from practice early due to frustration with 

practice difficulties like the SGR. Coincident with this declining 

number of internists, our country has an aging population, with a 

growing incidence of chronic disease, who will need more primary 

care physicians to take care of them. 

As you know, within 10 years, 150 million Americans will have 

one or more chronic diseases. And the population over the age of 

85 between the years 2000 and 2010 will increase by 50 percent. 

Our final point is that Congress must take immediate steps to 

avert the 10.1 percent reduction and work towards eliminating the 

SGR. It is essential that Congress act this year to avert more SGR 

cuts. But we urge Congress not to simply enact another temporary 

fix without moving in a direction of replacing the underlying formula. The so-called Sustainable Growth Rate is simply not sustainable. The College recognizes and appreciates that with the support 

of this Subcommittee the House passed legislation under the 

CHAMP Act to reverse this 10.1 percent cut in Medicare payments 

scheduled to take place January the 1st, and proposed to replace 

it with a .5 percent increase in 2008 and 2009. 

Unfortunately, the future of the legislation remains uncertain. 

We request the House to work with your Senate colleagues to ensure that the following elements of the CHAMP Act are enacted 

into law and that these steps will lead to a total repeal of SGR, 

guarantee at least 2 years of positive updates, pay for the updates 

in a way that doesn’t make the problem worse in the future, and 

implement expanded pilots of the medical home to facility physician-guided care coordination. In conclusion, the College commends 

16

Chairman Gonza ́lez and the members of this Committee for holding this important hearing to shine a spotlight on how the SGR is 

impacting solo and small physician practices. Medicare patients deserve the best possible medical care, but they also deserve a physician payment system that will help physicians deliver the best possible care. Thank you, and I look forward to answering your questions. 

[The prepared statement of Dr. Harris may be found in the Appendix on page 49.]

ChairmanGONZA ́LEZ. Thank you very much, Dr. Harris. At this 

time, for the purpose of the introduction of the next witness, the 

chair is going to recognize my colleague, Congresswoman Mary 

Fallin. 

Ms.FALLIN. Thank you, Mr. Chairman. And it is a great pleasure 

to be here today to hear this important testimony. And let me just 

say thank you to all of our panelists who are providing good information for us to consider on this legislation. I had the opportunity 

this week to have what is called a tele-town hall meeting in my office and to be able to visit with constituents back in my district. 

And I was surprised to find that a large portion of my constituents 

in my district were complaining about the lack of access to doctors 

because of the Medicare reimbursement rate, and how they were 

having a hard time finding anyone to take care of them. Now you 

might expect that to happen in the rural areas, which I do have 

a couple rural counties in my district, but I was actually talking 

to constituents in the metropolitan area of Oklahoma City. 

So this is a very important topic I know not only for physicians 

and doctors and hospitals, but also for access to care and quality 

care for our constituents back in our district. And today I am very 

pleased to welcome one of our fellow Oklahomans, Dr. Melinda 

Allen. And she and I had the opportunity to visit earlier this morning about some of the things that she finds in her practices. She 

is a doctor in internal medicine, and she is also chief of staff of the 

Ponca City Hospital Medical Center, which has 140 beds in northern Oklahoma. She also serves as the medical director of the Ponca 

City Nursing Home, and so she coordinates and manages care for 

over 70 residents of the elderly. She also serves as a Qualified Veterans Physician, contracting with the Veterans Administration. So 

I think she has well-rounded experience not only with folks out in 

our community, but our seniors and our veterans. So Doctor, we 

appreciate you coming today, and I am looking forward to hearing 

your testimony. Welcome.

STATEMENT OF MELINDA ROTHER ALLEN, D.O. ON BEHALF 

OF THE AMERICAN OSTEOPATHIC ASSOCIATION 

Dr.ALLEN. Thank you, Congresswoman. I think my testimony 

today will reflect the feelings of Dr. Harris and Dr. Fedderly. Mr. 

Chairman, Ranking Member Westmoreland and members of the 

Subcommittee, my name is Melinda Allen. I am an osteopathic internal medicine physician in solo private practice in Ponca City, 

Oklahoma. I am honored to be here today on behalf of the American Osteopathic Association and the Nation’s 61,000 osteopathic 

17

physicians practicing in all specialties and subspecialties of medicine. The AOA and our members appreciate the efforts of this Committee to raise awareness regarding the devastating impact current 

Medicare reimbursement policies are having upon beneficiary access to care and on physician practices, especially those like mine. 

Nowhere do Medicare beneficiaries experience access issues more 

severely than in rural communities. These communities are often 

medically underserved, as Congresswoman Fallin had said, and are 

home to seniors who will enter my practice with multiple conditions due to lack of care. Sadly, many seniors in these areas find 

the physicians serving in these communities have no room in their 

practices for new Medicare patients. Upon graduation from medical 

school, there were multiple opportunities presented to me. Although taking a position with a hospital or in a private practice in 

a larger city would have allowed much more financial stability, I 

was determined to return to my roots in rural Oklahoma. A partner and I opened Internal Medicine Associates in Ponca City in 

June of 2002. We purchased a small building and renovated it for 

use as a medical practice. But despite our best efforts, my partner 

could not support his family, manage his medical school debt, and 

sustain his portion of the practice. Just 18 months after opening 

our practice, he filed for bankruptcy and left Ponca City, leaving 

me with a practice and a staff to support. In my first year of practice, Medicare physician payments were cut 5.4 percent. While Congressional actions over the past 5 years to avert additional cuts are 

greatly appreciated, I operate today at approximately the same 

level of compensation I received when I opened my practice over 5 

years ago. Unlike any other small business, I am forced to comply 

with regulations that limit my ability to recover overhead through 

fees. This is an impossible way to sustain any business. As a result, 

in 2006, I reluctantly curtailed my participation in the Medicare 

program. But since that time I estimate that I turn away about six 

to eight Medicare beneficiaries every day that call my office looking 

for new physicians. However I do accept new Medicare payments 

through attrition, my patients are getting older, through hospital 

admissions, and nursing home admissions. I see approximately 

5,000 patients, 25 percent of whom are enrolled in Medicare. However, Medicare beneficiary visits total over 40 percent of my daily 

routine. And I estimate that approximately 60 percent of my time 

is spent caring for these 25 percent Medicare patients that I have. 

This not only includes the individual visit for which I am compensated, but also many hours of follow-up and coordination, time 

for which physicians are not compensated. 

I am a small business owner. I own my own building and I employ a staff of six, one of whom really provides services specifically 

to my Medicare patients. I provide my employees with annual cost 

of living increases. My office is open for an estimated 235 days per 

year. This allows for a week of vacation, a week of continuing education, and 10 holidays. And if you notice, there are no sick days. 

I never get sick. We are not allowed to get sick. Generally, I average 22 to 25 patients per day during a 60-hour work week. My estimated practice costs in 2007 will be approximately $265,000. As 

evidenced by the chart in my written statement on page five and 

six, I have a flow chart of costs. If the scheduled Medicare payVerDate 0ct 09 2002 14:29 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39380.TXT LEANN
18

ments cuts are realized, sustaining my practice, which is comprised 

of only 25 Medicare and 75 percent private insurance will be impossible. By 2015, I will be operating at a $65,000 annual loss. If 

I chose to see only Medicare patients over the next 5 years, I would 

lose $122,000 annually. These numbers indicate the real impact 

that the Medicare physician payment cuts have on a small business 

owner. The modest increases in annual operational costs do not include major maintenance or repairs, hiring new staff, investing in 

health information technology, or any other challenges facing a solo 

practitioner. Without any real adjustment to the system, many 

physicians like myself that are called to serve in these rural communities will be unable to do so, compounding existing health disparities, and leading to a true access crisis for my patients. Any future Medicare physician payment formula should provide annual 

positive updates that reflect increases in practice costs for all physicians participating in the program. Additionally, those of us 

choosing to participate in pay-for-reporting programs, implement 

health information technology systems, or provide patient-centered 

care coordination services should receive bonus payments above the 

annual payment updates for their participation and investment. I 

would like to express my gratitude to the Committee for focusing 

its attention on this often overlooked segment of our nation’s small 

business community. I implore you to take the appropriate steps to 

ensure that I can continue to serve my patients, and I look forward 

to answering any questions. Thank you. 

[The prepared statement of Dr. Allen may be found in the Appendix on page 58.]

ChairmanGONZA ́LEZ. Thank you very much, Dr. Allen. Our next 

witness is Dr. Kenneth L. Noller. Dr. Noller is testifying here today 

on behalf the Alliance of Specialty Medicine as well as the American College of Obstetricians and Gynecologists. He is currently the 

president of the ACOG, which has over 49,000 members, with its 

members representing over 90 percent of the United States’ boardcertified OB-GYNs. The Alliance of Specialty Medicine is a coalition 

of 11 national medical specialty societies, representing more than 

200,000 physicians. Dr. Noller is chair of the OB-GYN department, 

and a professor in the Department of Family and Community Medicine at Tufts University in Boston, and the gynecologist and chief 

at Tufts New England Medical Center. Welcome Dr. Noller, and 

you may start your testimony.

STATEMENT OF KENNETH NOLLER, M.D., PRESIDENT, AMERICAN COLLEGE OF OBSTETRICIANS AND GYNECOLOGISTS 

Dr.NOLLER. Thank you. Mr. Chairman and members of the Subcommittee, thank you for holding this hearing on the effect on solo 

and small practitioners of the 10.1 percent Medicare physician payment cut. It is important and appropriate that this Subcommittee 

consider the impact of the cut on these small businesses. ACOG 

and the Alliance appreciate the leadership of the House Ways and 

Means, and the Energy and Commerce Committees in addressing 

the physician payment cut in the CHAMP Act. We strongly support 

a 2-year reprieve from payment cuts, and look forward to a permaVerDate 0ct 09 2002 14:29 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39380.TXT LEANN
19

nent solution to this crippling problem. We urge Senate action to 

end the uncertainty facing small medical practices. These practices 

remain the backbone of the U.S. health care system, but financial 

and regulatory burdens are making it hard for these practices to 

stay open. For example, OB-GYNs in solo practice fell from 34 percent in 1991 to 23 percent today. Often this means that a small 

community lost its local doctor. Patients must now travel farther 

to see an OB-GYN, or they may receive no medical care at all. If 

Congress does not enact a long-term solution soon, physicians serving Medicare patients will see cuts year after year, eventually totaling 40 percent. No small business can remain solvent with such 

drastic reductions in its revenues, while at the same time office 

rent, salary increases, medical supplies, medical liability insurance 

costs all increase. Medicare cut payments in 2002, increased them 

less than inflation in 2003, 4 and 5, and froze payments in 2006 

and 7. Is it any wonder that more and more physicians will no 

longer see Medicare patients? Under today’s flawed formula that 

determines Medicare physician payments, the payments are tied to 

gross domestic product instead of the cost of providing medical 

care. 

Physicians are penalized for skyrocketing increases in the costs 

of in-office prescription drugs, and physicians are required to offer 

services that are beyond their control. These include such things as 

new benefits authorized by legislation, increased regulation, new 

technology, and growing patient demand. The bottom line is that 

Medicare cuts cause patient access problems and hurt patients 

throughout the health care system. 

Here are four examples: Elderly patients in fee-for-service Medicaid are the first to lose their doctors as physicians are forced to 

restrict the number of new beneficiaries they can see. Secondly, 

TRICARE, the health care system for our military families, uses 

the Medicare fee schedule, thus diminishing access for these families. Thirdly, many private insurers follow Medicare’s lead, cutting 

or freezing physician payments. And lastly, as Medicare and private insurance payments decline, practices often have to make the 

hard choice to stop caring for patients of their lowest payer, Medicaid, creating access problems for those patients. 

Community clinics serving low-income patients have difficulty recruiting physicians, and have to cut back on care. These cuts will 

be felt by rural areas first. The loss of even one small practice in 

a rural area means that patients must travel further for routine 

care, and further still if they need specialty care. And recruiting 

physicians to rural areas has become very difficult, if not impossible. It is simply too risky for a young physician with 150 or 

$200,000 in debt to open a practice in these areas. Falling and unpredictable payment rates also make it very difficult for small practices to buy expensive new technology such as HIT, even though 

such systems can probably improve patient safety. 

Dr.NOLLER. A few of us entered medicine to become businessmen, we entered medicine to care for our patients, but no matter 

your business sense, it is clear the payment cuts of 10 percent in 

2008 and a total of 40 percent over the next decade will make it 

impossible for the private practice of medicine to survive. 

20

As advocates for patients and physicians, ACOG and the Alliance 

of Specialty Medicine applaud the House for acting to prevent these 

cuts. We call on the Senate to do the same and very much appreciate your leadership in continuing to highlight this critically important issue. I thank you. 

ChairmanGONZA ́LEZ. Thank you very much, Doctor. 

[The prepared statement of Dr. Noller may be found in the Appendix on page 74.]

ChairmanGONZA ́LEZ. I am going to recognize the Ranking Member Mr. Westmoreland for the purpose of introducing the next witness. 

Mr.WESTMORELAND. Thank you, Mr. Chairman. 

Before I introduce Dr. Whitlow, I want to recognize Tom 

Spatonik from Georgia also who made the trip up here. 

Mr. Chairman, it is my pleasure to introduce my constituent, Dr. 

John Whitlow, who serves as president of the Georgia Optometric 

Association. Dr. Whitlow also practices at the West Georgia Vision 

Center, which he and his wife, Dr. Donna Whitlow, founded in 

1993, a true small business, mom-and-pop operation. An active 

member of his professional association, Dr. Whitlow has held several leadership positions with the Georgia Optometric Association. 

In the legislative arena he has worked to promote insurance for 

quality, and in 2001 received the GOA Legislative Service Award 

for his efforts. Dr. Whitlow has been a member of the Troup County Chamber of Commerce for 14 years. He has been an effective 

member of the LaGrange community. 

I thank Dr. Whitlow for his willingness to share his thoughts and 

look forward, as I am sure we all do, in hearing his testimony. 

STATEMENT OF JOHN WHITLOW, ON BEHALF OF THE 

AMERICAN OPTOMETRIC ASSOCIATION 

Dr.WHITLOW. Thank you. Good afternoon. Thank you, Ranking 

Member Westmoreland for those kind words. 

As he said, my name is John Whitlow, president of the Georgia 

Optometric Association and a doctor of optometry from LaGrange, 

Georgia. 

It is an honor to represent the American Optometric Association 

and its 34,000 doctors this afternoon. We appreciate the opportunity to provide the House Small Business Subcommittee on Regulations, Healthcare and Trade with our views and recommendations concerning the current state of Medicare payments to physicians, especially doctors of optometry and other health care providers. 

As a small business owner of a private optometric practice, and, 

again, as Ranking Member Westmoreland alluded to, truly a small 

business, most days I am the doctor there; a lot of days I am the 

office manager; then there are days where I am the plumber; then 

there are days that I am the electrician; and then there are days 

that I am even the dish washer. So it is a truly small, small practice. 

But it is my pleasure to testify before you today regarding the 

disheartening effect that Medicare reimbursement is having on efficient and high-quality health care, including the delivery of eye 

21

and vision care that I provide to over 1,200 Medicare patients that 

I see personally. 

The SGR formula currently used to determine Medicare payments is producing dire results for all health care providers, especially those in the small and rural communities. As the primary 

eye care providers in over 6,500 communities across this Nation, 

my colleagues and I are very well aware of the many obstacles that 

health care providers face as they strive to provide care to an everincreasing number of Medicare patients. Access to quality care is 

increasingly at risk because of the strains on the current system 

that threaten the ability of providers to deliver needed care. 

We are often the only eye care providers available in the rural 

communities and underserved areas and, like other providers, are 

struggling to serve America’s children, America’s seniors, and 

America’s underserved while keeping pace with the standard of 

care and rising costs. 

When reimbursement rates are pegged at artificially low levels 

that do not reflect genuine practice costs, patient access suffers because clinicians will be financially unable to serve many patients. 

The impact of Medicare physician payment cuts affects the entire 

health care community, including the non-MD/DO community. 

PARCA, a coalition of organizations representing the interest of 

millions of patients and clinicians, applauds the efforts put forth by 

Members of Congress and the congressional staff as they work to 

address Medicare payment reform. PARCA supports congressional 

efforts to bring forward legislation that will provide multiyear positive updates to bring stability to the Medicare payment system. 

The American Optometric Association in concert with other 

health care provider organizations asserts that the SGR payment 

formula has produced disastrous results for both doctors and the 

patients. None of the factors in the SGR take into account Medicare spending due to technological advances or where utilization 

has increased because of new Medicare coverage policies and expanding preventive services. 

The AOA gratefully acknowledges the recent efforts by Congress 

to provide some temporary fixes; however, a permanent solution 

must be found and is needed to resolve a full-blown meltdown of 

the Medicare system that looms on the horizon. The AOA urges the 

Subcommittee and Congress to work with the CMS to avert future 

cuts by enacting a system that produces rational health care provider payments and accurately reflects increases in practice costs. 

The SGR should be repealed and replaced with a payment update 

system that reflects these increases in practice costs. 

Congress must at the very least first establish some sort of transition, some sort of pathway to allow us to have the complete elimination of the SGR; and second, to stabilize payments in the short 

term for a minimum of 2 years by providing positive baseline updates to all health care providers consistent with the Medicare Payment Advisory Commission’s recommendation. A scheduled cut of 

10 percent in 2008 should be replaced with an increase of 1.7. 

As a small business owner of a private practice, I, along with the 

AOA, appreciate the opportunity to provide our views to the Subcommittee on these critical matters. We look forward to working 

with the Small Business Committee and Congress to pass immeVerDate 0ct 09 2002 14:29 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39380.TXT LEANN
22

diate legislation that preserves access, averts the next 2 years of 

payment cuts, and provides a positive update that reflects optometric practice costs. Thank you. 

ChairmanGONZA ́LEZ. Dr. Whitlow, thank you very much. 

[The prepared statement of Dr. Whitlow may be found in the Appendix on page 79.]

ChairmanGONZA ́LEZ. It is the Chair’s intention to get at least one 

round of questions. The Members will be restricted to 5 minutes. 

Taking into account the Ranking Member’s schedule this afternoon, 

because I am afraid we will go and vote, he may not be able to 

make it back or stay very long if we do, I am going to defer to the 

Ranking Member in allowing him to pose his questions at this 

time. 

Mr.WESTMORELAND. Thank you, Mr. Chairman. 

Dr. Harris, you mentioned the CHAMP Act and 5 percent increase in the reimbursement. That was just a temporary fix, 

though, correct? That did not deal with the real problem of the 

SGR. 

Dr.HARRIS. No. The CHAMP Act, as you know, is a new proposal. 

What we would much prefer is for the CHAMP Act to avert the cut 

and impose these positive updates, but even then that it is only for 

2 years, and we are back to where we started. 

Mr.WESTMORELAND. It would be better in the long run to go 

ahead and let us get this thing worked out, and suffer whatever 

we are going to suffer now and fix it. It is like Dr. Burgess said, 

it will only continue to get more and more expensive the further 

down the road we get. 

Dr.HARRIS. It is. And it is hard to exaggerate the magnitude of 

the effect of this. It is devastating to small practices. 

If I just interject, I am absolutely persuaded that SGR was a 

major factor in something which I experienced last July. Our practice, 40 years old, imploded. It is over with. We had started—I was 

a nephrologist/internist with another internist, and we practiced 

for about three decades. Along the way we added another 

nephrologist, who eventually, a very bright guy, after about 18 

years returned to teaching at Chapel Hill. We went on to add other 

young internists who were comfortable, but we began encountering 

these pressures where it was so difficult with a 60 percent overhead. 

We brought specialists, consultants in on two occasions who told 

us exactly the same thing: Our overhead was the best we could do. 

And our choices were simply leave the hospital earlier in the morning after rounds to get there, stay in the office longer, and make 

evening rounds later, or see more patients per unit time. And we 

did that as fast as we could, but it still didn’t spare us. 

We finally added a young woman, a very bright young woman, 

from the University of Virginia who joined us. But most medical 

school classes now are 50 percent women and, like most young people, would like to also start their families. So this young woman 

knew that, and she knew it would mean working part time. But 

if you think it is difficult to practice under these circumstances full 

time, it is terribly difficult part time, and so we lost her. Virginia 

offered her a part-time job at an outpatient community. 

23

We have since then had a terrible time attracting new young internists now because they can go and become hospitalists, inpatient 

physicians. It pays 16 percent more. All of this effect makes it terribly difficult at a time when the Nation needs more primary care 

physicians. And the SGR bears a tremendous responsibility for this 

current situation. 

Mr.WESTMORELAND. Dr. Whitlow, following up on that, in your 

written testimony you indicate that access to care may be jeopardized by the current Medicare payments, that they don’t meet the 

practice costs. Can you elaborate on that access problem we are 

going to inherit, and how far down the road do you see this getting 

to a critical stage if it is not already there? 

Dr.WHITLOW. Well, in any private practice, especially when you 

start looking at being basically a primary care frontline physician, 

looking at new technology that is coming out, looking at when you 

have that technology, a lot of times needing to ask staff people to 

help you with that technology, looking on further down the road 

with electronic health records that is also looming there, all of 

these things start adding up into costs that somehow has to be absorbed into the practice. And with that comes your decision whether you can accept payment. When I say accept payment, as far as 

with an insurance company, and, of course, talking about Medicare, 

whether Medicare is paying us enough to accept that. 

But taking that even a step further, being on the front line, I 

may have a patient that I see because I am accepting the insurance, but I may need to refer that patient to a secondary or even 

a tertiary care doctor, and it is getting more difficult to find a doctor to refer the patient to. 

One of the examples that keeps running through my mind right 

at this moment, what is happening with Medicaid right now in the 

State of Georgia is basically, I think, a precursor to what I see that 

is happening with Medicare now. They have just constantly cut 

fees and produced more red tape for doctors to not only accept the 

patient, but then even filing the claims, more and more red tape 

so it gets more cumbersome. 

To make it short, these doctors are dropping out of the Medicare 

system. So I may have a patient that needs care, and it is getting 

extremely difficult to find the doctor to refer that patient to, and 

especially somebody that is fairly local, without a patient driving 

50, 60, 70 miles to have to do that, because, again, when you start 

talking about Medicare, we are speaking mostly about the elderly 

patients of our Nation. 

Mr.WESTMORELAND. Yes, sir.

Let me just ask, if I could, a quick question. I know Dr. Allen 

mentioned that she has limited her Medicare patients. In your 

practices, do you limit your Medicare patients, and if you do, what 

percentage would that be? 

Dr.FEDDERLY. I currently do not limit my Medicare patients in 

my practice. 

Dr.HARRIS. Since beginning this role with American College, I 

have slowed down appreciably in the last year, but my former partners, I believe they do limit it. I don’t know the percentage. 

Dr.NOLLER. We do not limit it at this time. 

Dr.WHITLOW. Not yet. 

24

Mr.WESTMORELAND. Okay. Thank you very much. 

ChairmanGONZA ́LEZ. You noticed that the bells have gone, and 

we have another vote. We are within 5 minutes, but what I would 

like to do, because I am not real sure about other Members’ schedules—m definitely coming back, so I will again ask for your patience and indulgence because I have some questions. 

Congresswoman Fallin, if you would like to pose your question, 

just if you have something that you feel we need to put out there? 

Even if we can’t take the complete response, I want to give you 

that opportunity. 

Ms.FALLIN. Thank you, Mr. Chairman. 

As I mentioned, I had the opportunity to visit with Dr. Allen beforehand, and one of the things I was concerned about that she expressed to me was the time with the rules, the regulations, the systems, the expenses that doctors have to buy to try to manage their 

practice, and their access to care, and their quality of care for their 

patients. But she told me that she receives about 60 phone calls 

by noon a day from various patients trying to just talk about an 

illness, or schedule an appointment, or calling in about a prescription, just the amount of time. 

We were talking about how if that was an attorney, that if she 

talked to them for 5 minutes, she would be paying probably 150 or 

$200 an hour. But the doctors don’t get paid for their phone call 

time. 

We talk about access to care and being able to see lower-paid patients. It is hard for the doctors, it seems, to be able to make the 

income that they need to make while they are investing in the intellectual properties that they need to have for their practices. So 

we were visiting about a nationwide system to where they could 

share information about their patients and their records. 

So I guess my comments are I hope we can continue to work on 

this issue and see what we can do to help create better access to 

care. 

Dr.ALLEN. And as a comment, we have been looking at adding 

electronic medical records to systems to our office. There are 400 

systems out there. How do I know that the one that I pick will be 

the one that is chosen several years down? 

ChairmanGONZA ́LEZ. Dr. Allen, we will be able to enlighten you 

on that, because we do have something. We will stand in recess so 

I make sure I don’t have my colleagues missing votes, and I shall 

return. If they can make it back, they will be back, and we may 

be joined by other Members, but we definitely will resume. We 

stand in recess. 

[Recess.] 

ChairmanGONZA ́LEZ. Thank you very much. We will reconvene 

the hearing. Obviously I want to get more than 5 minutes, so I appreciate it very much. 

First of all, I need to express the regrets of Congressman Westmoreland. He has to be at another hearing. The hearing that he 

will be attending deals with the drought, and I think, Dr. Whitlow, 

you know exactly the circumstances there and why he is needed at 

that hearing. 

I am going to start off with general observations. As Republicans, 

Democrats, we all try to come up with some answer to this. The 

25

bottom line will always be how we pay for it, and there will be a 

disagreement on how we pay for things. But I think everyone acknowledges a few things; maybe we can all agree on something. It 

will cost more in all probability, but if we do it right, we can save 

money down the road and make up for some of that cost, and I am 

going to touch on that. But it is interesting if we could agree on 

some things. 

I am going to request this, and I say this to all my doctors and 

to all the specialists in the group, and I see some of the representatives out there, is for the medical profession to try to get on the 

same page on the overall approach. Dr. Burgess’s approach, obviously you wouldn’t really have a replacement of the SGR for a period of 2 years. Well, believe it or not, I heard from a lot of doctors 

and a couple of associations that it was not sufficient or adequate. 

They wanted an immediate fix. So we need to make a determination, one, do we bridge or transition into it? Some of you have already indicated we probably should, and maybe have 2 years as we 

go into it with some predictability so that you know you will be reimbursed, and it keeps up with inflation and so on. 

The next thing I think we should all agree on is if we index reimbursement rates, they have to reflect the increased cost of providing the service, which SGR is pretty blind to. That is fundamental, so that is one thing. 

What we replace it with is probably more difficult, but I think 

we are getting into some areas where maybe we can reach greater 

agreement on this, too, and that is managing disease. I know that 

it has been approached, and I want to make sure that I get the 

exact description of it, and that is how you have a center of care 

or a health care home, more or less, which is very important, and 

which will be accommodated, and then we get into the next issue 

of health information technology. 

I will ask Dr. Fedderly and Dr. Harris, when you describe this 

to me, it sounds like managing disease, making sure you keep 

track of the patient and so on. So there’s a lot of prevention. And 

if I had my notes a little more clearly, I could tell you exactly how 

each of you described it, but I think both of you may have used a 

centered or home, to that effect. Is that akin to what Secretary 

Leavitt has been talking about in the way of pay for performance? 

And how does it fit in to what has been proposed, this pay for performance? 

I will start with Dr. Fedderly. 

Dr.FEDDERLY. Thank you. 

It is part of that. Pay for performance is part of the patient-centered medical home, and the idea is that if the care is more efficient and better provided, and if people are kept healthier, then 

that is a better performance marker, so there is compensation in 

the form of better performance and for better quality of care provided to our patients. 

The patient-centered medical home idea is that a patient will 

have a central location or one place, first call shopping, if you will, 

to know where to go to deal with particular issues. So it is not only 

a preventive health care mechanism, but if a person feels ill, she 

or he knows where to go to obtain their medical care. And if the 

26

physicians in their medical home can’t provide that care, then they 

certainly know where that care will be best obtained. 

ChairmanGONZA ́LEZ. Dr. Harris? 

Dr.HARRIS. I think the key phrase is patient—

ChairmanGONZA ́LEZ. I am sorry, go ahead. 

Dr.HARRIS. The key phrase is ′′patient-centered.′′ When you ask 

patients what they want, they obviously want access to a physician. 

Two, they would like someone who knows them well and longitudinally over a period of years, if not decades. And they want to be 

able to access them easily, perhaps by phone or e-mail in addition 

to office visits. This patient-centered medical home is built around 

that. 

The notion is that the physician also accepts responsibility for 

helping patients navigate a very complex health care system, 

whether it is getting them to a subspecialist or helping them communicate between what happens in and out of hospitals or to and 

from nursing homes. It is all united by a health information technology so there is a smooth connection, and everyone knows what 

is going on in that patient’s medical life, and it is done appropriately, but all while treating preventive care, acute and chronic 

care and end-of-life care. 

We believe that there are a number of payment mechanisms that 

will make it happen, one of which is pay for performance. The college believes that paying for quality, tracking quality is a healthy 

thing to do, beginning with pay for reporting, but ultimately with 

pay for performance. 

We believe that there are three other pieces, though, that go with 

pay for performance. One is a fee for helping overcome this enormous cost of the health information technology, about 30- to 

$50,000 per doctor. Two is a fee for coordinating the care, when you 

are managing all the people that it is going to take to make this 

work successfully. And lastly is the traditional fee-for-service system. 

ChairmanGONZA ́LEZ. Doctor, to all of you in a minute I am going 

to ask you the question in your practice—and some of you may 

have responded already, but I want to take a roll on it—if you utilized health information technology. And I know electronic health 

records, on the Hill we call it HIT, and there are proposals out 

there. Obviously Dr. Gingrey and I have introduced a piece of legislation that would assist the physicians, and it will be the small 

practices by way of the tax treatment, of course, but that will not 

be enough, so we go into grants, but that would be limited. So we 

go into loans, which obviously would be subsidized, which would be 

of some assistance, but also has a Medicare payment aspect to it 

where you are rewarded, in essence, for it. So we will see where 

that goes. We are attempting to do that. 

My concern is, of course, it may be easier for larger entities to 

do this, such as the HMOs and so on. I am just real concerned 

about the small business application, and not to leave you out of 

that equation, because I think in the future it would put you at a 

real disadvantage. 

I will just go down the road and just ask do you utilize health 

information technology, electronic health records? Dr. Fedderly. 

27

Dr.FEDDERLY. Yes, we use electronic technology. And your comments are right on target in terms of the need for small businesses 

to be able to afford this, because it is fairly certain that large businesses can afford it and can have the staff and infrastructure to 

keep it up and running, but it is the small businesses that are 

going to have the greatest deal of difficulty handling this. So that 

would be a very good key to your suggestion. 

ChairmanGONZA ́LEZ. Dr. Harris, do you utilize it? 

Dr.HARRIS. As I mentioned before, in the last year I have been 

involved with a college almost full time, but, yes, the individuals 

with whom I—they are subsequently involved in other practices, 

but they are all converting to an electronic medical record. It is terribly expensive and a steep learning curve. 

ChairmanGONZA ́LEZ. Dr. Allen. 

Dr.ALLEN. Yes, I am familiar with them at the hospital. I use the 

CPR system that the Veterans Administration gives, but I do not 

have a system in place in my office for my patients, and the reason 

is simply because there are 400 systems out there. How do I know 

that the one that I pick won’t be the DOS that is now outdated 5 

years from now? How do I know that the system I pick will coordinate with my pharmacies and my hospital? 

It doesn’t do any good for each one of us to have a different system that doesn’t talk to each other. We definitely need some forward movement on this, especially from Congress, at helping us select a system, helping a system come to the forefront so that when 

we make that investment, that investment is sound and will be 

with us 10 or 20 years from now, and then my patients will also 

benefit from one system. Again, it doesn’t help if the cardiologist 

across town does not coordinate with my system, or my pharmacy 

doesn’t, or my hospital doesn’t. 

ChairmanGONZA ́LEZ. There is some good news. I believe it is 

good news. 

Dr. Noller. 

Dr.NOLLER. Yes. Our biggest concern is the same as Dr. Allen, 

is that the system that we have now are going to be not the one 

that is chosen nationally, not the one that is going to interface with 

others. In the city of Boston, there must be 100 different systems, 

and when a patient moves from one doctor’s office to another, that 

electronic record won’t fit in that computer. So even if she takes 

the disk with her, it doesn’t work in the other system. So coordination is a big one. 

ChairmanGONZA ́LEZ. And Dr. Whitlow. 

Dr.WHITLOW. We are presently looking at it. We do not use it 

now for some of the reasons that have been mentioned as far as 

waiting to see what is coming on the horizon as far as which one 

could we choose. The other has been the cost issue. 

The other issue is going back to the learning curve that Dr. Harris referred to. A lot of the practitioners that are on my level are 

saying that they have to decrease the number of patients that they 

are seeing per day in order to get the records entered properly; either that, or you are going to have to hire more staff. It is not only 

the start-up cost, but getting the whole process going. 

ChairmanGONZA ́LEZ. The news is, of course, as we try to introduce a system where we assist you—and that is going to be the 

28

carrot, of course, because there will probably be a penalty if you 

don’t down the road. I really believe that is going to happen. So I 

think the medical profession needs to be prepared. We owe you a 

responsibility, Dr. Allen and others, to make sure whatever you 

utilize will obviously not be outmoded or outdated and so on. 

So there will be conditions. There will be criteria. We have someone at HHS who is putting it all together, but definitely there will 

be a certification process, and so that we do have interoperability 

and so on. We will not leave you hanging out there with old systems, because it is going to cost the Federal Government money 

then. 

We are hoping that by assisting you, how does this all play in? 

Well, you know, we get back to the SGR, and it will be part of 

whatever we replace it with is going to have, in my opinion, HIT 

components. So we need to be ready for that, and with good reason. 

You need to survive in the modern world and the competition that 

awaits anybody who doesn’t make that particular transition. 

The other thing that I wish the medical profession would just get 

out there and somehow help Congress with the news that we have 

to find streams of revenue to finance some of this. 

Dr. Harris, I think you probably mentioned the CHAMP Act 

more than anybody else, but, you know, we were paying for that 

out of the House with a decreasing payment to the Medicare Advantage. We just met a firestorm, decrease in payments on some 

imaging from the radiologists. And, of course, just tax on cigarettes, 

we are still running into problems with that. And that is all we are 

doing now is a reduced package financed by cigarette tax. But we 

have the administration that now is coming up and saying that is 

a tax increase, and we will not approve a tax increase. We could 

have a veto of the SCHIP bill, which no longer has the 10 percent 

reduction fix or any of that. 

But you really do have to let your Member of Congress know that 

you understand that it will not be free, and we have to pay for it 

somehow. All the choices are bad, but some are worse than others. 

And so the cigarette tax seemed like the least doing harm to the 

greatest number of American citizens and taxpayers. Of course, 

Medicare Advantage didn’t appreciate it much, but I think there 

was some room for improvement on the payment that we made to 

them to deliver their particular service. 

The last question I will leave you with before we adjourn and 

conclude the hearing, we hear that doctors are taking fewer Medicare patients, some are not, but we have conflicting news or reports. On one hand, I know I have constituents who are saying 

they are making those 30 phone calls, trying to find someone to 

take them. That is the reality. And yet we have studies that show 

that accessibility by Medicare beneficiaries to physicians is not 

really being impacted, and that there is still sufficient, maybe even 

an increasing number of physicians available to Medicare recipients. So we are getting kind of cross messages. I am not sure. 

Maybe it depends where you live. If it is a metropolitan area or a 

rural area, it may be that takes care of some of the figures. But 

if you all have any opinions as to why we are getting conflicting 

messages on the availability of physicians. 

29

The last observation I have is, Dr. Allen, you pointed out something so important. You did reduce your patient load of Medicare 

beneficiaries. You still accepted those that come through your 

church or other referrals, but they still represented more than 40 

percent of your practice, of your time that you spend, and that 

should be an easy conclusion to reach because it is an older population. But I don’t think we really think of that. We may say, this 

is your percentage of Medicare patients, but it is an inordinate 

amount of time and service that you are providing them. So I 

thank you very much for bringing it up. 

The last question, though, is the conflicting messages that we are 

getting. Is there any explanation, in your opinion, whether we really are suffering a decrease in the number of doctors treating the 

Medicare patients? And we will just go in order. 

Dr.FEDDERLY. The reason you are getting a conflicting message 

is because it is by virtue of what we do as physicians. We have 

trouble saying no, and we—oftentimes by the time you are forced, 

like Dr. Allen is forced, to restrict her Medicare patient load, you 

are often far beyond the desperate measure. 

I think that the best description is that especially as primary 

care physicians, we feel like we are hamsters on the wheel, and we 

are making the wheel go faster and faster and faster to try to accommodate everybody. Where this system will break down is in the 

quality of care that is provided, so that if I see 25 patients in a 

day, but in turn I am accepting more Medicare patients, then I am 

going to try to squeeze in 30, 32, 34 and think about how the individual Medicare beneficiaries then are going to get less of my face, 

less of my time, less of my ability to coordinate the multiple issues 

they have. 

Now, if I have more of my practice in healthy young people that 

don’t require a lot of care and a lot of coordination, sometimes you 

can make that happen. But as the baby boomer population is aging 

and hitting Medicare age, there are more and more of them out 

there, and there is fewer and fewer doctors, yet there’s not that 

many doctors who are willing to say no. We are just doing our best 

to try to make the wheel spin. 

ChairmanGONZA ́LEZ. I always say you are the last standing profession in the United States. 

I am going to apologize to the remaining witness. That question 

is out there for your response. Julie Hart, to my left, is my medical 

issues individual, if you could provide her with that information as 

to the conflict. I think it is very important; quantity versus quality 

is so important. At this time, and again with my apologies, I cannot 

miss this vote. 

I ask unanimous consent that the members of the Committee 

have 5 legislative days to enter statements and supporting materials into the record, and, without objection, it is so ordered. 

ChairmanGONZA ́LEZ. This hearing at this time is adjourned. 

Thank you very much. 

[Whereupon, at 1:40 p.m., the Subcommittee was adjourned.]

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